FIRST PRAIRIE DIVERSIFIED ASSET FUND
PROSPECTUS
The First National Bank of Chicago
INVESTMENT ADVISER
The Dreyfus Corporation
ADMINISTRATOR
Dreyfus Service Corporation
DISTRIBUTOR
Prospectus begins on page one.
<PAGE>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
PROSPECTUS-February 8, 1994
First Prairie Diversified Asset Fund (the "Fund") is an
open-end, diversified, management investment company, known as a
mutual fund. Its primary goal is the maximization of current
income; a secondary but nonetheless important goal is capital
appreciation.
By this Prospectus, Class A and Class B shares of the
Fund
are being offered. Class A shares are subject to a sales charge
imposed at the time of purchase and Class B shares are subject to
a contingent deferred sales charge imposed on redemptions made
within six years of purchase. Other differences between the two
Classes include the services offered to and the expenses borne by
each Class and certain voting rights, as described herein. The
Fund offers these alternatives to permit an investor to choose
the method of purchasing shares that is most beneficial given the
amount of the purchase, the length of time the investor expects
to hold the shares and other circumstances.
The First National Bank of Chicago (the "Adviser")
serves as
the Fund's investment adviser.
The Dreyfus Corporation (the "Administrator") serves as
the
Fund's administrator. Dreyfus Service Corporation (the
"Distributor"), a wholly-owned subsidiary of the Administrator,
serves as the Fund's distributor.
The Fund's shares are not deposits or obligations of,
or
guaranteed by, the Adviser or any of its affiliates or any banks,
and are not federally 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 share price
and investment return fluctuate and are 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 February 8, 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.
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.
TABLE OF CONTENTS
Fee Table . . . .. . . .
Condensed Financial Information . . . . . . . . . . . . . . . . .
Highlights. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alternative Purchase Methods. . . . . . . . . . . . . . . . . . .
Description of the Fund . . . . . . . . . . . . . . . . . . . . .
Management of the Fund. . . . . . . . . . . . . . . . . . . . . .
How to Buy Fund Shares. . . . . . . . . . . . . . . . . . . . . .
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . .
How to Redeem Fund Shares . . . . . . . . . . . . . . . . . . . .
Distribution Plan and Shareholder
Services Plan . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . .
Performance Information . . . . . . . . . . . . . . . . . . . . .
General Information . . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
CLASS A
CLASS B
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)
4.50%
none
Maximum Deferred Sales Charge Imposed
on Redemptions (as a percentage of the
amount subject to charge)
none
4.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees .65%
.65%
12b-1 Fees none
.75%
Service Fees .25%
.25%
Other Expenses .88%
.88%
Total Fund Operating Expenses 1.78%
2.53%
EXAMPLE
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5% annual
return and (2) except where noted, redemption
at the end of each time period:
CLASS A CLASS B CLASS B*
1 YEAR $62 $66 $26
3 YEARS $99 $109 $79
5 YEARS $137 $155 $135
10 YEARS** $245 $251 $251
______________
* Assuming no redemption of Class B shares.
** Ten-year figures assume conversion of Class B shares to
Class A shares at end of sixth year following the date of
purchase.
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%.
The purpose of the foregoing table is to assist
investors in
understanding the various costs and expenses that investors will
bear, directly or indirectly, the payment of which will reduce
investors' return on an annual basis. For Class A shares, Other
Expenses are based on the data for the Fund's fiscal year ended
December 31, 1992. Long-term investors in Class B shares could
pay more in 12b-1 fees than the economic equivalent of paying a
front-end sales charge. Prior to February 8, 1994, Class A
shares were subject to 12b-1 fees but no service fees and Total
Fund Operating Expenses were 1.88% for the fiscal year ended
December 31, 1992. For Class B shares, Other Expenses are
estimated based on expenses incurred by Class A shares. The
information in the foregoing table does not reflect any fee
waivers or expense reimbursement arrangements that may be in
effect. The Adviser, affiliates of the Adviser 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 "Distribution Plan and Shareholder
Services Plan."
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited
(except where indicated) by Ernst & Young, the Fund's independent
auditors, whose report thereon appears in the Statement of
Additional Information. Further financial data and related notes
are included in the Statement of Additional Information,
available upon request. Class B shares had not been offered as
of the date of the financial statements and, accordingly, no
financial data are available for Class B.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data
for
a Class A share of beneficial interest outstanding, total
investment return, ratios to average net assets and other
supplemental data for each period indicated. This information
has been derived from information provided in the Fund's
financial statements.
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended
June 30, 1993
PER SHARE DATA: 1986(1) 1987 1988 1989 1990 1991 1992 (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period. . . . $10.00 $ 10.75 $ 9.73 $ 10.66 $ 11.54 $ 10.79 $ 12.56 $ 12.68
INVESTMENT OPERATIONS:
Investment income--net .63 .70 .78 .88 .86 .83 .79 .37
Net realized and unrealized
gain (loss) on investments .70 (.85) .92 1.10 (.54) 1.77 .26 .32
TOTAL FROM INVESTMENT
OPERATIONS . . . . . . . 1.33 (.15) 1.70 1.98 .32 2.60 1.05 .69
DISTRIBUTIONS:
Dividends from investment
income--net. . . . . . . . (.58) (.77) (.74) (.89) (.88) (.83) (.77)
(.30)
Dividends from net realized
gain on investments. . . . -- (.10) (.03) (.21) (.19) -- (.16) --
TOTAL DISTRIBUTIONS (.58) (.87) (.77) (1.10) (1.07) (.83) (.93)
(.30)
Net asset value, end of
period . . . . . . . . . . $ 10.75 $ 9.73 $ 10.66 $ 11.54 $ 10.79 $ 12.56 $ 12.68 $ 13.07
TOTAL INVESTMENT RETURN 13.59%(2) (1.73%) 17.78% 19.08% 2.94% 24.87% 8.68%
5.50%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets . . . . -- -- -- -- -- -- .02% .17%(2)
Ratio of net investment
income to average net
assets . . . . . . . . . . 5.90%(2) 6.61% 7.38% 7.74% 7.71% 7.04% 6.24%
2.86%(2)
Decrease reflected in above
expense ratios due to
undertakings by the Adviser
and Administrator (limited
to the expense limitation
provision of the Investment
Advisory and Administration
Agreements). . . . . . . . 1.41%(2) 2.69% 2.62% 2.96% 2.58% 2.16% 1.86%
.63%(2)
Portfolio Turnover Rate 15.19%(2) 23.99% 15.71% 49.46% 29.97% 26.02% 22.14%
4.88%(2)
Net Assets, end of period
(000's Omitted). . . . . . $2,212 $4,989 $5,900 $7,407 $8,950 $14,038 $34,262 $46,124
____________
</TABLE>
(1) From January 23, 1986 (commencement of operations) to
December 31, 1986.
(2) Not annualized.
Further information about the Fund's performance is
contained in the Fund's annual report, for the fiscal year ended
December 31, 1993, which will be available approximately in
March, 1994, and may be obtained without charge by writing to the
address or calling the number set forth on the cover page of this
Prospectus.
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 mutual fund.
INVESTMENT OBJECTIVES. The Fund's primary goal is the
maximization of current income. A secondary but important goal
is capital appreciation.
MANAGEMENT POLICIES. The Fund attempts to achieve its goals by
investing primarily in marketable securities of established
companies which provide reasonable income and which, where
consistent with this objective, may have capital appreciation
potential.
This includes investment grade bonds, preferred stocks,
dividend paying common stocks, securities convertible into common
stock and securities with warrants attached. In addition, the
Fund may invest in U.S. Government securities, high-grade
commercial paper, bank obligations of domestic and foreign banks,
and short-term money market instruments.
The proportion of assets invested in each type of
security
will vary from time to time depending on market and economic
conditions. The Fund may emphasize fixed-income investments for
protracted periods of time if the Fund deems it advisable.
The Fund also may lend its portfolio securities, write
covered call options and purchase put and call options in respect
of specific securities.
INVESTMENT ADVISER. The First National Bank of Chicago is the
Fund's investment adviser. The Fund has agreed to pay the
Adviser a monthly fee at the annual rate of .65 of 1% of the
value of the Fund's average daily net assets.
ADMINISTRATOR. The Dreyfus Corporation assists in all aspects of
the Fund's operations other than providing investment advice.
The Fund has agreed to pay the Administrator a monthly fee at the
annual rate of .30 of 1% of the value of the Fund's average daily
net assets.
ALTERNATIVE PURCHASE METHODS. The Fund offers investors two
methods of purchasing Fund shares; an investor may choose the
Class of shares that best suits the investor's needs, given the
amount of purchase, the length of time the investor expects to
hold the shares and any other relevant circumstances. Each Class
A and Class B share represents an identical pro rata interest in
the Fund's investment portfolio.
Class A shares are sold at net asset value per share
plus a
maximum initial sales charge of 4.50% of the public offering
price imposed at the time of purchase. The initial sales charge
may be reduced or waived for certain purchases. See "How to Buy
Fund Shares--Class A Shares." Class A shares are subject to an
annual service fee at the rate of .25 of 1% of the value of the
average daily net assets of Class A.
Class B shares are sold at net asset value per share
with no
initial sales charge at the time of purchase; as a result, the
entire purchase price is immediately invested in the Fund. Class
B shares are subject to a maximum 4% contingent deferred sales
charge ("CDSC"), which is assessed only if the Class B shares are
redeemed within six years of purchase. See "How to Redeem Fund
Shares--Contingent Deferred Sales Charge--Class B Shares."
Class B shares also are subject to an annual service fee at the
rate of .25 of 1% of the value of the average daily net assets of
Class B. In addition, Class B shares are subject to an annual
distribution fee at the rate of .75 of 1% of the value of the
average daily net assets of Class B. The distribution fee paid
by Class B will cause such Class to have a higher expense ratio
and to pay lower dividends than Class A. Approximately six years
after the date of purchase, Class B shares automatically will
convert to Class A shares, based on the relative net asset values
for shares of each Class, and will no longer be subject to the
distribution fee.
See "Alternative Purchase Methods."
HOW TO BUY FUND SHARES. Orders for purchases of Fund shares may
be placed through a number of institutions including the Adviser,
affiliates of the Adviser, including First Chicago Investment
Services, Inc. ("FCIS"), a registered broker-dealer, the
Distributor and 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 ($250 for
IRA's and
other personal retirement plans). 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, Automatic Withdrawal Plan, Dividend Sweep
Privilege and TeleTransfer Privilege. (Certain services and
privileges may not be available through all Service Agents.)
HOW TO REDEEM FUND SHARES. Generally, investors should contact
their representatives at the Adviser or appropriate Service Agent
for redemption instructions. Investors who are not clients of
the Adviser or a Service Agent may redeem Fund shares by written
request, by wire or telephone, or through the TeleTransfer
privilege.
See "How to Redeem Fund Shares."
MONTHLY DIVIDENDS. The Fund declares and pays dividends from net
investment income monthly. Distributions from net realized
securities gains, if any, generally are declared and paid once a
year. Investors may choose whether to receive dividends in cash
or to reinvest in additional Fund shares of the same Class at net
asset value.
RISKS AND SPECIAL CONSIDERATIONS. The value of the Fund's shares
is not fixed and can be expected to fluctuate.
Certain securities purchased by the Fund, including
those
rated Baa by Moody's Investors Service, Inc. ("Moody's") and BBB
by Standard & Poor's Corporation ("S&P"), are subject to greater
market fluctuation than certain lower yielding, higher rated
fixed-income securities and also may be affected by changes in
the credit rating or financial condition of the issuing entities.
Debt securities rated Baa by Moody's and BBB by S&P, while
considered investment grade obligations, lack outstanding
investment characteristics and may have speculative
characteristics as well.
Since the Fund's portfolio may contain securities
issued by
foreign banks, the Fund may be subject to additional investment
risks that are different from those incurred by a fund which
invests only in U.S. domestic securities.
See "Description of the Fund--Risk Factors."
ALTERNATIVE
PURCHASE METHODS
The Fund offers investors two methods of purchasing
Fund
shares; an investor may choose the Class of shares that best
suits the investor's needs, given the amount of purchase, the
length of time the investor expects to hold the shares and any
other relevant circumstances. Each Class A and Class B share
represents an identical pro rata interest in the Fund's
investment portfolio.
Class A shares are sold at net asset value per share
plus a
maximum initial sales charge of 4.50% of the public offering
price imposed at the time of purchase. The initial sales charge
may be reduced or waived for certain purchases. See "How to Buy
Fund Shares--Class A Shares." These shares are subject to an
annual service fee at the rate of .25 of 1% of the value of the
average daily net assets of Class A. See "Distribution Plan and
Shareholder Services Plan--Shareholder Services Plan."
Class B shares are sold at net asset value per share
with no
initial sales charge at the time of purchase; as a result, the
entire purchase price is immediately invested in the Fund. Class
B shares are subject to a maximum 4% CDSC, which is assessed only
if Class B shares are redeemed within six years of purchase. See
"How to Buy Fund Shares--Class B Shares" and "How to Redeem Fund
Shares--Contingent Deferred Sales Charge--Class B Shares." These
shares also are subject to an annual service fee at the rate of
.25 of 1% of the value of the average daily net assets of Class
B. In addition, Class B shares are subject to an annual
distribution fee at the rate of .75 of 1% of the value of the
average daily net assets of Class B. See "Distribution Plan and
Shareholder Services Plan." The distribution fee paid by Class B
will cause such Class to have a higher expense ratio and to pay
lower dividends than Class A. Approximately six years after the
date of purchase, Class B shares automatically will convert to
Class A shares, based on the relative net asset values for shares
of each Class, and will no longer be subject to the distribution
fee. Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted on
a pro rata basis together with other Class B shares, in the
proportion that a shareholder's Class B shares converting to
Class A shares bears to the total Class B shares not acquired
through the reinvestment of dividends and distributions.
An investor should consider whether, during the
anticipated
life of the investor's investment in the Fund, the accumulated
distribution fee and CDSC on Class B shares prior to conversion
would be less than the initial sales charge on Class A shares
purchased at the same time, and to what extent, if any, such
differential would be offset by the return of Class A. In this
regard, investors qualifying for reduced initial sales charges
who expect to maintain their investment for an extended period of
time might consider purchasing Class A shares because the
accumulated continuing distribution fees on Class B shares may
exceed the initial sales charge on Class A shares during the life
of the investment. Generally, Class A shares may be more
appropriate for investors who invest $100,000 or more in Fund
shares.
DESCRIPTION OF THE FUND
[For left margin side bar: The Fund's primary goal is
the
maximization of current income. Its secondary goal is capital
appreciation.]
INVESTMENT OBJECTIVES. The Fund's primary goal is the
maximization of current income; the Fund's secondary goal is
capital appreciation. The Fund's investment objectives 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 objectives will be achieved.
[For left margin side bar: The Fund invests primarily
in
marketable securities of established companies which provide
reasonable income and may have capital appreciation potential.]
MANAGEMENT POLICIES. The Fund attempts to achieve its goals by
investing primarily in marketable securities of established
companies which provide reasonable income and which, where
consistent with this objective, may have capital appreciation
potential. This includes investment grade bonds rated at least
Baa by Moody's or at least BBB by S&P, preferred stocks, dividend
paying common stocks, securities convertible into common stock
and securities with warrants attached. Bonds rated Baa by
Moody's are considered medium grade obligations which lack
outstanding investment characteristics and in fact have
speculative characteristics as well, while those rated BBB by S&P
are considered as having an adequate capacity to pay principal
and interest. See "Risk Factors" below, and "Appendix" in the
Statement of Additional Information. The proportion of the
Fund's assets invested in each type of security will vary from
time to time depending on market and economic conditions, and the
Fund may emphasize fixed-income investments for protracted
periods of time if the Fund deems it advisable in that capital
appreciation is not compatible with the production of income at
that time.
[For left margin side bar: The proportion of assets
invested in each type of security will vary from time to time
depending on market and economic conditions.]
The Fund may invest up to 15% 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 objectives. Such securities may include securities
that are not readily marketable, such as certain securities that
are 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 the Fund deems representative
of their value, the value of the Fund's net assets could be
adversely affected. When purchasing securities that have not
been registered under the Securities Act of 1933, as amended, and
are not readily marketable, the Fund will endeavor to obtain the
right to registration at the expense of the issuer. Generally,
there will be a lapse of time between the Fund's decision to sell
any such security and the registration of the security permitting
sale. During any such period, the price of the securities will
be subject to market fluctuations. However, if a substantial
market of qualified institutional buyers develops pursuant to
Rule 144A under the Securities Act of 1933, as amended, for
certain unregistered 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
Adviser 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 investments during such period.
The Fund may invest up to 5% of its net assets in
warrants,
except that this limitation does not apply to warrants acquired
in units or attached to securities. A warrant is an instrument
issued by a corporation which gives the holder the right to
subscribe to a specified amount of the corporation's capital
stock at a set price for a specified period of time.
The Fund may invest in U.S. Government securities;
investment grade corporate bonds; high-grade commercial paper;
certificates of deposit, time deposits and bankers' acceptances
issued by domestic banks, foreign subsidiaries of domestic banks,
foreign branches of domestic banks and domestic and foreign
branches of foreign banks; and other short-term instruments,
including fixed, floating and variable rate corporate notes and
bonds, participation interests in such obligations and repurchase
agreements. The Fund will not invest more than 25% of its total
assets in securities issued by foreign banks.
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 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. Principal and 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. The
commercial paper purchased by the Fund will consist only of
direct obligations which, at the time of their purchase, are (a)
rated not lower than Prime-2 by Moody's or A-2 by S&P, (b) issued
by companies having an outstanding unsecured debt issue currently
rated at least Aa3 by Moody's or at least AA by S&P, or (c) if
unrated, determined by the Adviser to be of comparable quality to
those rated obligations which may be purchased by the Fund. The
Fund may purchase floating and variable rate notes and bonds
issued by corporations. Floating and variable rate notes and
bonds include variable amount master demand notes, which are
obligations that permit the Fund to invest fluctuating amounts at
varying rates of interest pursuant to direct arrangements between
the Fund, as lender, and the borrower. These obligations permit
daily changes in the amounts borrowed. As mutually agreed
between the parties, the Fund may increase the amount under the
notes at any time up to the full amount provided by the note
agreement, or decrease the amount, and the borrower may repay up
to the full amount of the note without penalty. 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, plus accrued interest, at any time.
Accordingly, where these notes 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. In connection with floating
and variable demand obligations, the Adviser will consider, on an
ongoing basis, earning power, cash flow and other liquidity
ratios of the borrower, and the borrower's ability to pay
principal and interest on demand. Such obligations frequently
are not rated by credit rating agencies, and the Fund may invest
in them only if at the time of an investment the borrower meets
the criteria set forth above for other commercial paper issuers.
Certificates of deposit are negotiable certificates
evidencing 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 (in no event
longer than seven days) at a stated interest rate. The Fund will
invest in time deposits of banks that have total assets in excess
of one billion dollars. 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
FDIC.
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. The other short-term obligations may include
uninsured, direct obligations bearing fixed, floating or variable
interest rates.
A participation interest gives the Fund an undivided
interest in the security in the proportion that the Fund's
participation interest bears to the total principal amount of the
security. These instruments will be purchased from financial
institutions and may have fixed, floating or variable rates of
interest with remaining maturities of one year 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 herein, or the payment obligation otherwise
will be collateralized by U.S. Government securities, or, in the
case of an unrated instrument, the Adviser must have determined
that the instrument is of comparable quality to instruments in
which the Fund may invest.
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 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 one billion dollars 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 Adviser and/or the Administrator 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 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.
[For left margin side bar: The Fund may use various
investment techniques which may enhance its performance; their
use involves certain risks.]
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, dividends
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 Fund.
To earn additional income on its portfolio, the Fund
may
write covered call option contracts on securities it owns to the
extent of 20% of the value of its net assets at the time such
option contracts are written. In addition, the Fund may invest
up to 5% of its assets, represented by the premium paid, in the
purchase of put and call options in respect of specific
securities. A call option gives the purchaser of the option the
right to buy, and obligates the writer to sell, the underlying
security at the exercise price at any time during the option
period. Conversely, a put option gives the purchaser of the
option the right to sell, and obligates the writer to buy, the
underlying security at the exercise price at any time during the
option period. A covered call option sold by the Fund, which is
a call option with respect to which the Fund owns the underlying
security, exposes the Fund during the term of the option to
possible loss of opportunity to realize appreciation in the
market price of the underlying security or to possible continued
holding of a security which might otherwise have been sold to
protect against depreciation in the market price of the security.
As a fundamental policy, the Fund is permitted to
borrow
money to the extent permitted under the Investment Company Act of
1940. However, the Fund currently intends to borrow money, 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.
[For left margin side bar: The Fund has adopted
certain
fundamental policies intended to limit the risk of its investment
portfolio. These policies cannot be changed without approval by
a majority of shareholders.]
CERTAIN FUNDAMENTAL POLICIES. The Fund may (i) borrow
money to the extent permitted under the Investment Company Act of
1940; (ii) invest up to 5% of the value of its total assets in
the securities of any one issuer, except that up to 25% of the
value of the Fund's total assets may be invested, and obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities may be purchased, without regard to any such
limitation; and (iii) invest up to 25% of its total assets in any
single industry, provided that, when the Fund has adopted a
temporary defensive posture, there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. 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 Objectives and Management Policies--
Investment Restrictions" in the Statement of Additional
Information.
CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES. The Fund may (i)
purchase securities of any company having less than three years'
continuous operation (including operations of any predecessors)
if such purchase does not cause the value of its investments in
all such companies to exceed 5% of the value of its total assets;
(ii) pledge, hypothecate, mortgage or otherwise encumber its
assets, but only to secure permitted borrowings; and (iii) invest
up to 15% of its net assets in repurchase agreements providing
for settlement in more than seven days after notice and in other
illiquid securities. See "Investment Objectives and Management
Policies--Investment Restrictions" in the Statement of Additional
Information.
[For left margin side bar: The Fund may be subject to
risks
that are different from those incurred by a fund which invests
only in U.S. debt securities.]
RISK FACTORS. Since the Fund's portfolio may contain securities
issued by foreign branches of domestic banks, foreign
subsidiaries of domestic banks, and domestic and foreign branches
of foreign banks, the Fund may be subject to additional
investment risks with respect to these securities that are
different in some respects from those incurred by a fund which
invests only in debt obligations of U.S. domestic issuers. Such
risks include possible future political and economic
developments, the possible imposition of foreign withholding
taxes on interest income payable on the securities, the possible
establishment of exchange controls or the adoption of other
foreign governmental restrictions which might adversely affect
the payment of principal and interest on these securities and the
possible seizure or nationalization of foreign deposits.
[For left margin side bar: Certain securities
purchased by
the Fund are subject to greater market fluctuation than higher-
rated fixed income securities.]
Certain securities purchased by the Fund, such as those
rated Baa by Moody's and BBB by S&P, while considered investment
grade obligations, are subject to greater market fluctuation than
certain lower yielding, higher rated fixed-income securities and
also may be affected by changes in the credit rating or financial
condition of the issuing entities. Bonds which are rated Baa are
neither highly protected nor poorly secured, and are considered
by Moody's to have speculative characteristics. Bonds rated BBB
by S&P are regarded as having adequate capacity to pay interest
and repay principal, and while such bonds normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this
category than in higher rated categories. Once the rating of a
portfolio security has been changed, the Fund will consider all
circumstances deemed relevant in determining whether to continue
to hold the security. See "Appendix" in the Statement of
Additional Information.
OTHER INVESTMENT CONSIDERATIONS. The Fund's portfolio
turnover rate may vary from year to year, as well as within a
year. The Adviser believes that the annual portfolio turnover
rate should not ordinarily exceed 100%, but the amount of
portfolio turnover will not be a limiting factor when making
portfolio decisions.
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 Adviser. However, if
such other investment companies or managed accounts are prepared
to invest in, or desire to dispose of, securities of the type in
which the Fund invests 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
[For left margin side bar: 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 $11.8 billion of investment assets.]
INVESTMENT ADVISER. The Adviser, located at Three First National
Plaza, Chicago, Illinois 60670, is the Fund's investment adviser.
The Adviser, 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 December 31, 1993, 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 ($52.5 billion) and in terms of
deposits ($28.1 billion). As of December 31, 1993, the Adviser
provided personal investment management services to portfolios
containing approximately $11.8 billion in assets. The Adviser
serves as investment adviser for the Fund pursuant to an
Investment Advisory Agreement dated as of December 16, 1985 (as
revised October 1, 1993). Under the Investment Advisory
Agreement, the Adviser, 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 Adviser is responsible for making investment
decisions for the Fund, placing purchase and sale orders and
providing research, statistical analysis and continuous
supervision of the investment portfolio. The Adviser provides
these services through its Investment Management Department. The
investment advisory services of the Adviser are not exclusive
under the terms of the Investment Advisory Agreement. The
Adviser 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 Adviser has advised the Fund that in
making its investment decisions the Adviser does not obtain or
use material inside information in the possession of any other
division or department of the Adviser or in the possession of any
affiliate of the Adviser.
The Adviser 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 Adviser 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 "Distribution
Plan and Shareholder Services Plan."
Under the terms of the Investment Advisory Agreement,
the
Fund has agreed to pay the Adviser a monthly fee at the annual
rate of .65 of 1% of the value of the Fund's average daily net
assets. For the fiscal year ended December 31, 1992, no
investment advisory fee was paid by the Fund pursuant to an
undertaking by the Adviser.
The Fund's primary portfolio manager is Arthur P.
Krill. He
has held that position since the Fund's inception, and has been
employed by the Adviser since June 1973. The Adviser also
provides research services for the Fund as well as for other
funds it advises through a professional staff of portfolio
managers and security analysts.
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 Adviser are permitted to purchase and sell
securities upon the order and for the account of their customers.
The Adviser has advised the Fund of its belief that it may
perform the services for the Fund contemplated by the Investment
Advisory Agreement and this Prospectus without violating the
Glass-Steagall Act or other applicable banking laws or
regulations. The Adviser has pointed out, however, that there
are no cases deciding whether a bank such as the Adviser may
perform services comparable to those performed by the Adviser 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 Adviser from
continuing to perform such services for the Fund. If the Adviser
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 Adviser and consider taking all actions necessary in the
circumstances.
[For left margin side bar: The Dreyfus Corporation,
which
manages or administers approximately $78 billion in mutual fund
assets, serves as the Fund's administrator.]
ADMINISTRATOR. The Administrator, located at 200 Park Avenue,
New York, New York 10166, serves as the Fund's administrator
pursuant to an Administration Agreement with the Fund. Under
this Agreement, the Administrator generally assists in all
aspects of the Fund's operations, other than providing investment
advice, subject to the overall authority of the Fund's Trustees
in accordance with Massachusetts law. The Administrator was
formed in 1947 and as of December 31, 1993, managed or
administered approximately $78 billion in assets for more than
1.9 million investor accounts nationwide.
Under the terms of the Administration Agreement, the
Fund
has agreed to pay the Administrator a monthly fee at the annual
rate of .30 of 1% of the value of the Fund's average daily net
assets. For the fiscal year ended December 31, 1992, no
administration fee was paid by the Fund pursuant to an
undertaking by the Administrator.
[For left margin side bar: The Shareholder Services
Group, Inc. keeps the Fund's records.]
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.
EXPENSES. All expenses incurred in the operation of the Fund are
borne by the Fund, except to the extent specifically assumed by
the Adviser and/or the Administrator. 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 Adviser or the
Administrator, Securities and Exchange Commission fees, state
Blue Sky qualification fees, advisory and administration 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, without limitation,
telephone and personnel expenses), costs of shareholders' reports
and meetings and any extraordinary expenses. Class A and Class B
shares are subject to an annual service fee for ongoing personal
services relating to shareholder accounts and services related to
the maintenance of shareholder accounts. In addition, Class B
shares are subject to an annual distribution fee for advertising,
marketing and distributing Class B shares pursuant to a
distribution plan adopted in accordance with Rule 12b-1 under the
Investment Company Act of 1940. See "Distribution Plan and
Shareholder Services Plan."
From time to time, the Adviser and/or the Administrator
or
any of their affiliates may waive receipt of their fees and/or
voluntarily assume certain expenses of the Fund, which would have
the effect of lowering the overall expense ratio of the Fund and
increasing yield to investors at the time such amounts are waived
or assumed, as the case may be. The Fund will not pay the
Adviser and/or the Administrator or their affiliates at a later
time for any amounts which may be waived, nor will the Fund
reimburse the Adviser and/or the Administrator or their
affiliates for any amounts which may be assumed.
HOW TO BUY FUND SHARES
[For left margin side bar: The Fund offers a number of
convenient ways to purchase shares.]
INFORMATION APPLICABLE TO ALL PURCHASERS. The Fund's distributor
is Dreyfus Service Corporation, a wholly-owned subsidiary of the
Administrator, 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 Adviser and
therefore are not insured by the FDIC.
When purchasing Fund shares, an investor must specify
whether the purchase is for Class A or Class B shares. Fund
shares may be purchased by all clients of the Adviser and its
affiliates, including qualified custody, agency and trust
accounts, through their accounts with the Adviser and its
affiliates, or by clients of certain other 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. The Fund reserves the right to reject any
purchase order.
[For left margin side bar: You can open an account
with as
little as $1,000 ($250 for IRAs or other retirement plans).
Subsequent investments can be as little as $100.]
The minimum initial investment for each Class is
$1,000.
However, for IRAs and other personal retirement plans, the
minimum initial purchase is $250. All subsequent investments
must be at least $100. The initial investment must be
accompanied by the Fund's Account Application. The Adviser 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.
If an order is received by the Transfer Agent by the
close
of trading on the floor of the New York Stock Exchange (currently
4:00 p.m., New York time) on any business day (which, as used
herein, shall include each day the New York Stock Exchange is
open for business, except Martin Luther King, Jr. Day, Columbus
Day and Veterans Day), Fund shares will be purchased at the
public offering price (i.e., net asset value plus the applicable
sales load set forth below) determined as of the close of trading
on the floor of the New York Stock Exchange on that day.
Otherwise, Fund shares will be purchased at the public offering
price determined as of the close of trading on the floor of the
New York Stock Exchange on the next business day, except where
shares are purchased through a dealer as provided below.
[For left margin side bar: Net asset value is
determined at
the close of trading on the floor of the New York Stock Exchange
(currently 4:00 p.m., New York time) on each business day.]
Fund shares are sold on a continuous basis. Net asset
value
per share is determined as of the close of trading on the floor
of the New York Stock Exchange (currently 4:00 p.m., New York
time), on each business day. Net asset value per share of each
class is computed by dividing the value of the Fund's net assets
represented by such Class (i.e., the value of its assets less
liabilities) by the total number of shares of such Class
outstanding. The Fund's investments are valued each business day
using available market quotations or at fair value which may be
determined by one or more independent pricing services approved
by the Board of Trustees. Each pricing service's procedures are
reviewed under the general supervision of the Board of Trustees.
For further information regarding the methods employed in valuing
Fund investments, see "Determination of Net Asset Value" in the
Fund's Statement of Additional Information.
Federal regulations require that investors 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").
Orders for the purchase of Fund shares received by
dealers
by the close of trading on the floor of the New York Stock
Exchange on any business day and transmitted to the Distributor
by the close of its business day (normally 5:15 p.m., New York
time) will be based on the public offering price per share
determined as of the close of trading on the floor of the New
York Stock Exchange on that day. Otherwise, the orders will be
based on the next determined public offering price. It is the
dealers' responsibility to transmit orders so that they will be
received by the Distributor before the close of its business day.
[For left margin side bar: Class A shares are sold
with a
maximum sales load of 4.50%. There are several ways to reduce or
eliminate the sales load.]
CLASS A SHARES. The public offering price for Class A
shares is the net asset value per share of that Class plus a
sales load as shown below:
<TABLE>
<CAPTION>
TOTAL SALES LOAD
Dealer's
As a % of As a % of Reallowance
offering net asset as a % of
price per value per offering
Amount of Transaction share share price
<S> <C> <C> <C>
Less than $50,000 4.50 4.70 4.25
$50,000 to less than $100,000 4.00 4.20 3.75
$100,000 to less than $250,000 3.00 3.10 2.75
$250,000 to less than $500,000 2.50 2.60 2.25
$500,000 to less than $1,000,000 2.00 2.00 1.75
$1,000,000 to less than $3,000,000 1.00 1.00 1.00
$3,000,000 to less than $5,000,000 .50 .50 .50
$5,000,000 and above .25 .25 .25
</TABLE>
Full-time employees of NASD member firms and full-time
employees of other financial institutions which have entered into
an agreement with the Distributor pertaining to the sale of Fund
shares (or which otherwise have a brokerage-related or clearing
arrangement with an NASD member firm or other financial
institution with respect to sales of Fund shares), their spouses
and minor children, and accounts opened by a bank, trust company
or thrift institution, acting as a fiduciary, may purchase Class
A shares for themselves or itself, as the case may be, at net
asset value, provided that they have furnished the Distributor
appropriate notification of such status at the time of the
investment and such other information as it may request from time
to time in order to verify eligibility for this privilege. This
privilege also applies to full-time employees of financial
institutions affiliated with NASD member firms whose employees
are eligible to purchase Class A shares at net asset value. In
addition, Class A shares may be purchased at net asset value for
Fund accounts registered under the Uniform Gifts to Minors Act or
Uniform Transfers to Minors Act which are opened through FCIS.
Class A shares are also offered at net asset value to employees
and directors of First Chicago Corporation, or any of its
affiliates and subsidiaries, retired employees of First Chicago
Corporation, or any of its affiliates and subsidiaries, Board
members of a fund advised by the Adviser, including members of
the Fund's Board, or the spouse or minor child of any of the
foregoing.
Class A shares will be offered at net asset value
without a
sales load to employees participating in qualified or
nonqualified employee benefit plans or other programs where
(i) the employers or affiliated employers maintaining such plans
or programs have a minimum of 250 employees eligible for
participation in such plans or programs or (ii) such plan's or
program's aggregate initial investment in the Fund, certain other
funds advised by the Adviser and certain other funds advised by
the Administrator exceeds one million dollars ("Eligible Benefit
Plans"). The determination of the number of employees eligible
for participation in such a plan or program shall be made on the
date that the Class A shares are first purchased by or on behalf
of employees participating in such plan or program and on each
subsequent January 1st.
In fiscal 1992, FCIS, an affiliate of the Adviser,
retained
$43,565 from sales loads on Class A shares. The dealer
reallowance may be changed from time to time but will remain the
same for all dealers.
CLASS B SHARES. The public offering price for Class B
shares is the net asset value per share of that Class. No
initial sales charge is imposed at the time of purchase. A CDSC
is imposed, however, on certain redemptions of Class B shares as
described under "How to Redeem Fund Shares." FCIS may compensate
certain Service Agents for selling Class B shares at the time of
purchase from its own assets. Proceeds of the CDSC and
distribution fees payable to FCIS, in part, would be used to
defray these expenses.
[For left margin side bar: Contact your investment
representative or Service Agent to learn how to purchase shares.]
PURCHASING SHARES THROUGH ACCOUNTS WITH THE ADVISER OR A SERVICE
AGENT. Investors who desire to purchase Fund shares through
their accounts at the Adviser 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 Adviser 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
Shareholder Services Plan or advisory fees received by the
Adviser under the Investment Advisory Agreement. Each Service
Agent has agreed to transmit to its clients a schedule of such
fees. In addition, Service Agents and the Adviser receive
different levels of compensation for selling different classes of
shares and may impose minimum account and other conditions,
including conditions which might affect the availability of
certain shareholder privileges described in this Prospectus. It
is the responsibility of the Adviser 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 Adviser,
certain affiliates of the Adviser 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 indicating the
Class of shares being purchased. 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 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. An investor should request his bank to transmit
immediately available funds by wire to The Bank of New York, DDA
#8900052082/First Prairie Diversified Asset Fund--Class A shares,
or DDA #8900115386/First Prairie Diversified Asset Fund--Class B
shares, as the case may be, for purchase of shares in the
investors name. The wire must include the investor's account
number (for new accounts, include the investor's TIN instead),
account registration and dealer number, if applicable. 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 instructions must
specify the investor's Fund account registration and the
investor's Fund account number preceded by the digits "1111."
[For left margin side bar: Reduced sales loads for
Class A
shares apply to combined purchases of $50,000 or more of this
Fund and other eligible First Prairie funds.]
RIGHT OF ACCUMULATION--CLASS A SHARES. Reduced sales loads apply
to any purchase of Class A shares where the dollar amount of
shares being purchased plus the value of Fund shares, shares of
certain other funds advised by the Adviser purchased with a sales
load or acquired by a previous exchange of shares purchased with
a sales load, and shares of certain other funds advised by the
Administrator which are sold with a sales load (hereinafter
referred to as "Eligible Funds") held by an investor and any
related "purchaser" as defined in the Statement of Additional
Information, where the aggregate investment, including such
purchase, is $50,000 or more. If, for example, an investor
previously purchased and still holds Class A shares of the Fund,
or of any other Eligible Fund or combination thereof, with an
aggregate current market value of $40,000 and subsequently
purchases Class A shares of the Fund or an Eligible Fund having a
current value of $20,000, the sales load applicable to the
subsequent purchase would be reduced to 4.00% of the offering
price (4.20% of the net asset value). All present holdings of
Eligible Funds may be combined to determine the current offering
price of the aggregate investment in ascertaining the sales load
applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of a
purchase an investor or his Service Agent must notify the
Distributor if orders are made by wire, or the Transfer Agent if
orders are made by mail. The reduced sales load is subject to
confirmation of an investor's holdings through a check of
appropriate records.
[For left margin side bar: You can purchase additional
shares by telephone after you supply the necessary information on
your Account Application.]
TELETRANSFER PRIVILEGE. An investor may purchase Fund shares
(minimum $500, maximum $50,000) by telephone if he has checked
the appropriate box and supplied the necessary information on the
Fund's Account Application or has filed an Optional Services Form
with the Transfer Agent. The proceeds will be transferred
between the checking, NOW or bank money market deposit account
(as permitted) designated in one of these documents and the
investor's Fund account. Only such an 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.
Investors who have selected the TeleTransfer Privilege
may
request a TeleTransfer purchase by calling 1-800-227-0072 or, if
calling from overseas, 1-401-455-3309.
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.
[For left margin side bar: You can exchange your
shares for
shares of other eligible First Prairie funds.]
EXCHANGE PRIVILEGE. The Exchange Privilege enables an investor
to purchase, in exchange for Class A or Class B shares of the
Fund, shares of the same Class of certain other funds advised by
the Adviser or shares of the same Class of certain funds advised
by the Administrator, 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 Adviser. 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.
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 Adviser,
certain affiliates of the Adviser 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 Optional Services Form is on
file with the Transfer Agent. 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, Redemption by Wire or Telephone, TeleTransfer
Privilege and the dividend/capital gain distribution option
(except for the Dividend Sweep Privilege) 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 of Class A shares into funds sold with a sales load.
No CDSC will be imposed on Class B shares at the time of an
exchange; however, Class B shares acquired through an exchange
will be subject on redemption to the higher CDSC applicable to
the exchanged or acquired shares. The CDSC applicable on
redemption of the acquired Class B shares will be calculated from
the date of the initial purchase of the Class B shares exchanged.
If an investor is exchanging Class A shares 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.
[For left margin side bar: You can automatically
exchange
Fund shares for shares of certain other First Prairie mutual
funds at regular intervals which you select.]
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 Class A or Class B
shares of the Fund, in shares of the same Class of certain other
funds in the First Prairie Family of Funds or certain funds
advised by the Administrator of which he is currently an
investor. The amount an investor designates, which can be
expressed either in terms of a specific dollar or share amount
($100 minimum), will be exchanged automatically on the first
and/or fifteenth of the month according to the schedule 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 of Class A shares into funds
sold with a sales load. No CDSC will be imposed on Class B
shares at the time of an exchange; however, Class B shares
acquired through an exchange will be subject on redemption to the
higher CDSC applicable to the exchanged or acquired shares. The
CDSC applicable on redemption of the acquired Class B shares will
be calculated from the date of the initial purchase of the Class
B shares exchanged. See "Shareholder Services" in the Statement
of Additional Information. The right to exercise this Privilege
may be modified or canceled 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
FCIS, or 1-800-645-6561 if Fund shares were purchased through the
Distributor.
[For left margin side bar: You can purchase shares
automatically at regular intervals which you select.]
AUTOMATIC ASSET BUILDER. Automatic Asset Builder permits an
investor to purchase Fund shares (minimum of $100 per
transaction) at regular intervals selected by the investor. Fund
shares are purchased by transferring funds from the checking, NOW
or bank money market deposit account (as permitted) designated by
an investor. At the investor's option, the 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 Adviser, certain affiliates of the Adviser or
certain Service Agents. An investor may cancel 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 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.
[For left margin side bar: Many Federal payments are
eligible for full or partial direct deposit into your Fund
account to purchase shares.]
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 Adviser, certain affiliates of the Adviser 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.
[For left margin side bar: You can withdraw a
specified
dollar amount from your Fund account every month or quarter.]
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 Adviser, certain affiliates of the Adviser or certain Service
Agents. The Automatic Withdrawal Plan may be ended at any time
by the investor, the Fund or the Transfer Agent.
Class B shares withdrawn pursuant to the Automatic
Withdrawal Plan will be subject to any applicable CDSC.
Purchases of additional Class A shares where a sales load is
imposed concurrently with withdrawals of Class A shares generally
are undesirable.
[For left margin side bar: You can "sweep" your
dividends
and capital gain distributions into certain other First Prairie
mutual funds.]
DIVIDEND SWEEP PRIVILEGE. The Dividend Sweep Privilege enables
an investor to invest automatically dividends or dividends and
capital gain distributions, if any, paid by the Fund in shares of
the same Class of another fund in the First Prairie Family of
Funds or certain funds advised or administered by the
Administrator 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 CDSC, the shares purchased
will be subject to the CDSC, if any, applicable to the purchased
shares. See "Shareholder Services" in the Statement of
Additional Information. For more information concerning this
Privilege and the funds eligible to participate in the Privilege,
or to request a Dividend Sweep Authorization 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
FCIS, or 1-800-645-6561 if Fund shares were purchased through the
Distributor. To cancel this Privilege, 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. To select a new fund after cancellation, the
investor or the investor's Service Agent must submit a new
authorization form to the Transfer Agent. Enrollment in or
cancellation of this Privilege is effective three business days
following receipt by the Transfer Agent. This Privilege is
available only for existing accounts and may not be used to open
new accounts. Minimum subsequent investments do not apply. The
Fund may modify or terminate this Privilege at any time or charge
a service fee. No such fee currently is contemplated. Shares
held under Keogh Plans, IRAs or other retirement plans are not
eligible for this Privilege.
[For left margin side bar: By signing a Letter of
Intent to
purchase additional Class A shares within 13 months, you become
eligible for any reduced sales charges applying to the total
purchase.]
LETTER OF INTENT--CLASS A SHARES. By signing a Letter of Intent
form, available from the Distributor, the Adviser, certain
affiliates of the Adviser or certain Service Agents, an investor
becomes eligible for the reduced sales load applicable to the
total number of Eligible Fund shares purchased in a 13-month
period pursuant to the terms and under the conditions set forth
in the Letter of Intent. A minimum initial purchase of $5,000 is
required. To compute the applicable sales load, the offering
price of shares the investor holds (on the date of submission of
the Letter of Intent) in any Eligible Fund that may be used
toward "Right of Accumulation" benefits described above may be
used as a credit toward completion of the Letter of Intent.
However, the reduced sales load will be applied only to new
purchases.
The Transfer Agent will hold in escrow 5% of the amount
indicated in the Letter of Intent for payment of a higher sales
load if the investor does not purchase the full amount indicated
in the Letter of Intent. The escrow will be released when the
investor fulfills the terms of the Letter of Intent by purchasing
the specified amount. If the investor's purchases qualify for a
further sales load reduction, the sales load will be adjusted to
reflect the investor's total purchase at the end of 13 months.
If total purchases are less than the amount specified, the
investor will be requested to remit an amount equal to the
difference between the sales load actually paid and the sales
load applicable to the aggregate purchases actually made. If
such remittance is not received within 20 days, the Transfer
Agent, as attorney-in-fact pursuant to the terms of the Letter of
Intent, will redeem an appropriate number of Class A shares held
in escrow to realize the difference. Signing a Letter of Intent
does not bind the investor to purchase, or the Fund to sell, the
full amount indicated at the sales load in effect at the time of
signing, but the investor must complete the intended purchase to
obtain the reduced sales load. At the time an investor purchases
Class A shares, he must indicate his intention to do so under a
Letter of Intent.
HOW TO REDEEM FUND SHARES
[For left margin side bar: You can redeem Fund shares
at any time.]
GENERAL. An investor may request redemption of his Class A or
Class B 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 as described below.
If an investor holds Fund shares of more than one Class, any
request for redemption must specify the Class of shares being
redeemed. If an investor fails to specify the Class of shares to
be redeemed or if an investor owns fewer shares of the Class than
specified to be redeemed, the redemption request may be delayed
until the Transfer Agent receives further instructions from the
investor or his Service Agent.
The Fund imposes no charges (other than any applicable
CDSC
with respect to Class B shares) 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, depending upon the Fund's
then-current net asset value.
The Fund ordinarily will make payment for all shares
redeemed within seven days alter 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 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 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 45 days' written notice
if the account's net asset value is $500 or less and remains so
during the notice period.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES. A CDSC payable
to FCIS and other Service Agents is imposed on any redemption of
Class B shares which reduces the current net asset value of an
investor's Class B shares to an amount which is lower than the
dollar amount of all payments by the investor for the purchase of
Class B shares of the Fund held by the investor at the time of
redemption. No CDSC will be imposed to the extent that the net
asset value of the Class B shares redeemed does not exceed (i)
the current net asset value of Class B shares acquired through
reinvestment of dividends or capital gain distributions, plus
(ii) increases in the net asset value of an investor's Class B
shares above the dollar amount of all the investor's payments for
the purchase of Class B shares of the Fund held by the investor
at the time of redemption.
If the aggregate value of Class B shares redeemed has
declined below their original cost as a result of the Fund's
performance, a CDSC may be applied to the then-current net asset
value rather than the purchase price.
In circumstances where the CDSC is imposed, the amount
of
the charge will depend on the number of years from the time the
investor purchased the Class B shares until the time of
redemption of such shares. Solely for purposes of determining
the number of years from the time of any payment for the purchase
of Class B shares, all payments during a month will be aggregated
and deemed to have been made on the first day of the month. The
following table sets forth the rates of the CDSC:
CDSC as a
% of Amount
Year Since Invested or
Purchase Payment Redemption
Was Made Proceeds
[C]
First . . . . . . . . . . . . . . . . . . . 4.00
Second. . . . . . . . . . . . . . . . . . . 4.00
Third . . . . . . . . . . . . . . . . . . . 3.00
Fourth . . . . . . . . . . . . . . . . . . 3.00
Fifth . . . . . . . . . . . . . . . . . . . 2.00
Sixth . . . . . . . . . . . . . . . . . . . 1.00
In determining whether a CDSC is applicable to a
redemption,
the calculation will be made in a manner that results in the
lowest possible rate. It will be assumed that the redemption is
made first of amounts representing shares acquired pursuant to
the reinvestment of dividends and distributions; then of amounts
representing the increase in net asset value of Class B shares
above the total amount of payments for the purchase of Class B
shares made during the preceding six years; then of amounts
representing the cost of shares purchased six years prior to the
redemption; and finally, of amounts representing the cost of
shares held for the longest period of time within the applicable
six-year period.
For example, assume an investor purchased 100 shares at
$10
a share for a cost of $1,000. Subsequently, the shareholder
acquired five additional shares through dividend reinvestment.
During the second year after the purchase the investor decided to
redeem $500 of his or her investment. Assuming at the time of
the redemption the net asset value had appreciated to $12 per
share, the value of the investor's shares would be $1,260 (105
shares at $12 per share). The CDSC would not be applied to the
value of the reinvested dividend shares and the amount which
represents appreciation ($260). Therefore, $240 of the $500
redemption proceeds ($500 minus $260) would be charged at a rate
of 4% (the applicable rate in the second year after purchase) for
a total CDSC of $9.60.
WAIVER OF CDSC. The CDSC will be waived in connection with (a)
redemptions made within one year after the death or disability,
as defined in Section 72(m)(7) of the Internal Revenue Code of
1986, as amended (the "Code"), of the shareholder, (b)
redemptions by Eligible Benefit Plans, (c) redemptions as a
result of a combination of any investment company with the Fund
by merger, acquisition of assets or otherwise, (d) a distribution
following retirement under a tax-deferred retirement plan or upon
attaining age 70-1/2 in the case of an IRA or Keogh plan or
custodial account pursuant to Section 403(b) of the Code, and
(e) redemptions by such shareholders as the Securities and
Exchange Commission or its staff may permit. If the Fund's
Trustees determine to discontinue the waiver of the CDSC, the
disclosure in the Fund's prospectus will be revised
appropriately. Any Fund shares subject to a CDSC which were
purchased prior to the termination of such waiver will have the
CDSC waived as provided in the Fund's prospectus at the time of
the purchase of such shares.
To qualify for a waiver of the CDSC, at the time of
redemption the investor must notify the Transfer Agent or the
investor's Service Agent must notify the Distributor or FCIS.
Any such qualification is subject to confirmation of your
entitlement.
[For left margin side bar: The Fund offers a number of
convenient ways to access your investment.]
PROCEDURES. An investor who has purchased shares through his
account at the Adviser 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,
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 Agents for delivery of the required
application(s) to the Transfer Agent. It is the responsibility
of the Adviser 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. Investors are
urged to consult their Service Agents for instructions concerning
redemption of Fund shares held in IRAs or other personal
retirement plans. Other investors may redeem shares by using the
regular redemption procedure through the Transfer Agent, by wire
or telephone, or through the TeleTransfer Privilege, as described
below.
An investor's redemption request may direct that the
redemption proceeds be used to purchase shares of other funds
advised by the Adviser or advised or administered by the
Administrator that are not available through the Exchange
Privilege. The applicable CDSC will be charged upon the
redemption of Class B shares. The investor's redemption proceeds
will be invested in shares of the other fund on the next business
day. Before making such a request, the investor must obtain and
should review a copy of the current prospectus of the fund being
purchased. Prospectuses may be obtained from the Adviser, the
Distributor or certain Service Agents. The prospectus will
contain information concerning minimum investment requirements
and other conditions that may apply to the investor's purchase.
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 an Optional 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 the 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. During the delay, the
Fund's net asset value may fluctuate.
[For left margin side bar: Shares may be redeemed by
written request.]
REGULAR REDEMPTION. Under the regular redemption procedure, an
investor may redeem shares by written request, indicating the
Class of shares being redeemed, mailed to The First Prairie
Family of Funds, P.O. Box 9671, Providence, Rhode Island
02940-9671. Redemption requests must be signed by each
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.
[For left margin side bar: You can redeem shares by
wire or
telephone if you check the appropriate box on your Account
Application.]
REDEMPTION BY WIRE OR TELEPHONE. An investor may redeem shares
by wire or telephone if he has checked the appropriate box and
supplied the necessary information on the Fund's Account
Application or has filed an Optional Services Form with the
Transfer Agent. The redemption proceeds may be wired ($1,000
minimum) to the investor's bank account or paid by check.
Investors can redeem shares by telephone 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 wire or
telephone and may limit the amount involved or the number of
telephone redemptions. 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 redeeming shares by wire.
[For left margin side bar: Call 1-800-227-0072 for
TeleTransfer transactions.]
TELETRANSFER PRIVILEGE. An investor may redeem Fund shares
(minimum $500, maximum $50,000) without charge by telephone if he
has checked the appropriate box and supplied the necessary
information on the Fund's Account Application or has filed an
Optional Services Form with the Transfer Agent. The proceeds
will be transferred between the investor's Fund account and the
checking, NOW or bank money market deposit account (as permitted)
designated in one of these documents. Only such an account
maintained in a domestic financial institution which is an
Automated Clearing House member may be so designated. Redemption
proceeds will be on deposit in the investor's account at an
Automated Clearing House member bank ordinarily two days after
receipt of the redemption request. 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.
Investors who have selected the TeleTransfer Privilege
may
request TeleTransfer redemptions by calling 1-800-227-0072 or, if
calling from overseas, 1-401-455-3309.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
Class A and Class B shares are subject to a Shareholder
Services Plan and Class B shares only are subject to a
Distribution Plan.
DISTRIBUTION PLAN--Under the Distribution Plan, adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays for advertising, marketing and distributing Class B shares
at an annual rate of up to .75 of 1% of the value of the average
daily net assets of Class B. Under the Distribution Plan, the
Fund may make payments to Service Agents, including FSCI and the
Distributor, in respect of these services. The Fund determines
the amounts to be paid to Service Agents. Service Agents receive
such fees in respect of the average daily value of Class B shares
owned by their clients. From time to time, Service Agents may
defer or waive receipt of fees under the Distribution Plan while
retaining the ability to be paid by the Fund under the
Distribution Plan thereafter. The fees payable to Service Agents
under the Distribution Plan for advertising, marketing and
distributing Class B shares are payable without regard to actual
expenses incurred.
SHAREHOLDER SERVICES PLAN--Under the Shareholder Services Plan,
the Fund pays Service Agents, including FSCI and the Distributor,
for the provision of certain services to the holders of Class A
and Class B shares a fee at the annual rate of up to .25 of 1% of
the value of the average daily net assets of Class A and Class B.
The services provided may include personal services relating to
shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information,
and services related to the maintenance of shareholder accounts.
The Fund determines the amounts to be paid to Service Agents.
Each Service Agent is required to disclose to its clients any
compensation payable to it by the Fund pursuant to the
Shareholder Services Plan and any other compensation payable by
their clients in connection with the investment of their assets
in Class A or Class B shares.
DIVIDENDS, DISTRIBUTIONS AND TAXES
[For left margin side bar: The Fund declares and pays
dividends from net investment income monthly. You may choose
whether to receive dividends in cash or to reinvest in additional
shares.]
The Fund ordinarily declares and pays dividends from
net
investment income monthly. Investors may choose whether to
receive dividends in cash or to reinvest in additional Fund
shares at net asset value.
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 shares
of the same Class at net asset value. If an investor redeems all
shares in his account at any time prior to the payment of
dividends, all dividends to which such investor is entitled will
be paid to him along with the proceeds of the redemption. All
expenses are accrued daily and deducted before declaration of
dividends to investors. Dividends paid by each Class will be
calculated at the same time and in the same manner and will be of
the same amount, except that the expenses attributable solely to
Class A or Class B will be borne exclusively by such Class.
Class B shares will receive lower per share dividends than Class
A shares because of the higher expenses borne by Class B. See
"Fee Table."
Dividends derived from net investment income, together
with
distributions of net realized short-term securities gains and all
or a portion of any gains from the sale or other disposition of
certain market discount bonds, paid by the Fund to U.S.
shareholders generally are taxable as ordinary income whether
received in cash or reinvested in additional Fund shares.
Distributions from net realized long-term securities gains of the
Fund generally are taxable to U.S. shareholders as long-term
capital gains regardless of how long the shareholder has held his
Fund shares and whether such distributions are received in cash
or reinvested in additional Fund shares. 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%.
Dividends and distributions may be subject to certain state and
local taxes.
Only a relatively small portion of the dividends paid
by the
Fund is likely to qualify for the dividends received deduction
allowable to certain U.S. corporations.
The Code provides for the "carryover" of some or all of
the
sales load imposed on Class A shares if an investor exchanges his
Class A shares for shares of certain other funds advised by the
Adviser, or for shares of certain funds advised by the
Administrator, within 91 days of purchase and the other fund
reduces or eliminates its otherwise applicable sales load charge
for the purpose of the exchange. In this case the amount of the
investor's sales load for the Fund's Class A shares, up to the
amount of the reduction of the sales load charge on the exchange,
is not included in the basis of the investor's Fund Class A
shares for purposes of computing gain or loss on the exchange,
and instead is added to the basis of the fund shares received in
the exchange.
Dividends derived from net investment income, together
with
distributions from net realized short-term securities gains and
gains from the sale or other disposition 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
as well as the proceeds of any redemptions from a foreign
investor's account, regardless of the extent to which gain or
loss may be realized, 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.
[For left margin side bar: 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, distributions
and redemption proceeds.]
Federal regulations generally require the Fund to
withhold
("backup withholding") and remit to the U.S. Treasury 31% of
dividends, distributions from net realized securities gains and
the proceeds of any redemption, regardless of the extent to which
gain or loss may be realized, 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 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.
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.
Management of the Fund believes that the Fund qualified
for
the fiscal year ended December 31, 1992 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.
Each investor should consult his tax adviser regarding
specific questions as to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class
is
calculated on several bases, including current yield, average
annual total return and/or total return. These total return
figures reflect changes in the price of the shares and assume
that any income dividends and/or capital gains distributions made
by the Fund during the measuring period were reinvested in shares
of the same Class. Class A total return figures include the
maximum initial sales charge and Class B total return figures
include any applicable CDSC. These figures also take into
account any applicable service and distribution fees. As a
result, at any given time, the performance of Class B should be
expected to be lower than that of Class A. Performance for each
Class will be calculated separately.
[For left margin side bar: "Current yield" is the
Fund's
net investment income over a 30-day period, expressed as an
annual percentage and assuming all income is reinvested.]
Current yield refers to the Fund's annualized net
investment
income per share over a 30-day period, expressed as a percentage
of the maximum offering price per share in the case of Class A or
the net asset value per share in the case of Class B at the end
of the period. For purposes of calculating current yield, the
amount of net investment income per share during that 30-day
period, computed in accordance with regulatory requirements, is
compounded by assuming that it is reinvested at a constant rate
over a six-month period. An identical result is then assumed to
have occurred during a second six-month period which, when added
to the result for the first six months, provides an "annualized"
yield for an entire one-year period. Calculations of the Fund's
current yield may reflect absorbed expenses pursuant to any
undertaking that may be in effect. See "Management of the Fund."
Average annual total return is calculated pursuant to a
standardized formula which assumes that an investment in the Fund
was purchased with an initial payment of $1,000 and that the
investment was redeemed at the end of a stated period of time,
after giving effect to the reinvestment of dividends and
distributions during the period. The return is expressed as a
percentage rate which, if applied on a compounded annual basis,
would result in the redeemable value of the investment at the end
of the period. Advertisements of the Fund's performance will
include the Fund's average annual total return of Class A and
Class B for one, five and ten year periods, or for shorter time
periods depending upon the length of time during which the Fund
has operated.
[For left margin side bar: "Total return" combines the
income and principal changes for a specified period, assuming all
dividends and distributions are reinvested.]
Total return is computed on a per share basis and
assumes
the reinvestment of dividends and distributions. Total return
generally is expressed as a percentage rate which is calculated
by combining the income and principal changes for a specified
period and dividing by the maximum offering price per share in
the case of Class A or the net asset value per share in the case
of Class B at the beginning of the period. Advertisements may
include the percentage rate of total return or may include the
value of a hypothetical investment at the end of the period which
assumes the application of the percentage rate of total return.
Total return may also be calculated by using the net asset value
per share at the beginning of the period instead of the maximum
offering price per share at the beginning of the period for Class
A shares or without giving effect to any applicable CDSC at the
end of the period for Class B shares. Calculations based on the
net asset value per share do not reflect the deduction of the
sales load which, if reflected, would reduce the performance
quoted.
[For left margin side bar: As of the date of this
Prospectus, the Fund was rated 5-star (Highest) by Morningstar,
Inc. Performance varies from time to time and past results are
not necessarily representative of future results.]
As of the date of this Prospectus, the Fund was rated
5-Star
(Highest) by Morningstar, Inc. This rating represents
Morningstar's measure of the Fund's risk-adjusted performance.
Morningstar's ratings are based on its overall assessment of a
fund's risk level and historical total return, net of expenses
and sales loads, as compared to other funds in its class.
Performance will vary from time to time and past results are not
necessarily representative of future results. Investors should
remember that performance is a function of portfolio management
in selecting the type and quality of portfolio securities and is
affected by operating expenses. Performance information, such as
that described above, may not provide a basis for comparison with
other investments or other investment companies using a different
method of calculating performance.
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., Standard & Poor's 500
Composite Stock Price Index, Standard & Poor's MidCap 400 Index,
the Dow Jones Industrial Average, Morningstar, Inc. and other
industry publications.
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 January 23,
1986. The Fund is authorized to issue an unlimited number of
shares of beneficial interest, par value $.01 per share. The
Fund's shares are classified into two classes--Class A and Class
B. Each share has one vote and shareholders will vote in the
aggregate and not by class except as otherwise required by law or
when class voting is permitted by the Board of Trustees.
However, holders of Class A and Class B shares will be entitled
to vote on matters submitted to shareholders pertaining to the
Shareholder Services Plan and only holders of Class B shares will
be entitled to vote on matters submitted to shareholders
pertaining to the Distribution Plan.
On January 31, 1994, shareholders approved a proposal
to
change certain of the Fund's fundamental policies and investment
restrictions, among other things, to increase (i) the amount the
Fund may borrow, (ii) the amount of assets that the Fund may
pledge to secure such borrowings, (iii) the percentage of Fund
assets which may be invested in illiquid securities and make such
policy non-fundamental and (iv) the amount of portfolio
securities which the Fund may lend.
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 Adviser, or by writing to the Fund at the
address shown on the front cover or by calling the appropriate
telephone number.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR
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.
<PAGE>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
CLASS A AND CLASS B SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
February 8, 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 Diversified Asset Fund
(the "Fund"), dated February 8, 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 "Adviser")
serves as
the Fund's investment adviser.
The Dreyfus Corporation (the "Administrator") serves as
the
Fund's administrator.
Dreyfus Service Corporation (the "Distributor"), a
wholly-
owned subsidiary of the Administrator, is the distributor of the
Fund's shares.
TABLE OF CONTENTS
Page
[C]
Investment Objectives and Management Policies . . . . . . . . . .
B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . .
B-8
Investment Advisory and Administration Agreements . . . . . . . .
B-10
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . .
B-13
Distribution Plan and Shareholder Services Plan . . . . . . . . .
B-14
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . .
B-16
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . .
B-18
Determination of Net Asset Value. . . . . . . . . . . . . . . . .
B-21
Performance Information . . . . . . . . . . . . . . . . . . . .
B-22
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . .
B-24
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . .
B-24
Information About the Fund. . . . . . . . . . . . . . . . . . . .
B-27
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors. . . . . . . . . . . . .
B-27
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B-28
Financial Statements. . . . . . . . . . . . . . . . . . . . . . .
B-31
Report of Independent Auditors. . . . . . . . . . . . . . . . .
B-49
INVESTMENT OBJECTIVES 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."
Portfolio Securities
Bank Obligations. Domestic commercial banks organized
under
Federal law are supervised and examined by the Comptroller of the
Currency and are required to be members of the Federal Reserve
System and to have their deposits insured by the Federal Deposit
Insurance Corporation (the "FDIC"). Domestic banks organized
under state law are supervised and examined by state banking
authorities but are members of the Federal Reserve System only if
they elect to join. In addition, state banks whose certificates
of deposit ("CDs") may be purchased by the Fund are insured by
the Bank Insurance Fund administered by the FDIC (although such
insurance may not be of material benefit to the Fund, depending
upon the principal amount of the CDs of each bank held by the
Fund) and are subject to Federal examination and to a substantial
body of Federal law and regulation. As a result of Federal or
state laws and regulations, domestic branches of domestic banks
whose CDs may be purchased by the Fund, among other things,
generally are required to maintain specified levels of reserves,
are limited in the amounts they can loan to a single borrower and
are subject to other regulations designed to promote financial
soundness. However, not all of such laws and regulations apply
to foreign branches of domestic banks.
Obligations of foreign branches of domestic banks,
foreign
subsidiaries of domestic banks and foreign branches of foreign
banks, such as CDs and time deposits ("TDs"), may be general
obligations of the parent banks in addition to the issuing
branches, or may be limited by the terms of a specific obligation
and governmental regulation. Such obligations are subject to
different risks than are those of domestic banks. These risks
include foreign economic and political developments, foreign
governmental restrictions that may adversely affect payment of
principal and interest on the obligations, foreign exchange
controls and foreign withholding and other taxes on interest
income. Foreign branches and subsidiaries are not necessarily
subject to the same or similar regulatory requirements that apply
to domestic banks, such as mandatory reserve requirements, loan
limitations, and accounting, auditing and financial recordkeeping
requirements. In addition, less information may be publicly
available about a foreign branch of a domestic bank or about a
foreign bank than about a domestic bank.
Obligations of United States branches of foreign banks
may
be general obligations of the parent banks in addition to the
issuing branches, or may be limited by the terms of a specific
obligation and by Federal or state regulation as well as govern-
mental action in the country in which the foreign bank has its
head office. A domestic branch of a foreign bank with assets in
excess of $1 billion may be subject to reserve requirements
imposed by the Federal Reserve System or by the state in which
the branch is located if the branch is licensed in that state.
In addition, Federal branches licensed by the
Comptroller of
the Currency and branches licensed by certain states ("State
Branches") may be required to: (1) pledge to the regulator, by
depositing assets with a designated bank within the state, a
certain percentage of their assets as fixed from time to time by
the appropriate regulatory authority; and (2) maintain assets
within the state in an amount equal to a specified percentage of
the aggregate amount of liabilities of the foreign bank payable
at or through all of its agencies or branches within the state.
The deposits of Federal and State Branches generally must be
insured by the FDIC if such branches take deposits of less than
$100,000.
In view of the foregoing factors associated with the
pur-
chase of CDs and TDs issued by foreign branches of domestic
banks, by foreign subsidiaries of domestic banks, by foreign
branches of foreign banks or by domestic branches of foreign
banks, the Adviser carefully evaluates such investments on a
case-by-case basis.
The Fund may purchase CDs issued by banks, savings and
loan
associations and similar thrift institutions with less than $1
billion in assets, the deposits of which are insured by the FDIC,
provided the Fund purchases any such CD in a principal amount of
not more than $100,000, which amount would be fully insured by
the Bank Insurance Fund or the Savings Association Insurance Fund
administered by the FDIC. Interest payments on such a CD are not
insured by the FDIC. The Fund will not own more than one such CD
per such issuer.
Management Policies
The Fund engages in the following practices in
furtherance
of its objectives.
Options Transactions. The Fund may engage in options
transactions, such as writing covered call options. The
principal reason for writing covered call options is to realize,
through the receipt of premiums, a greater return than would be
realized on the Fund's portfolio securities alone. In return for
a premium, the writer of a covered call option forfeits the right
to any appreciation in the value of the underlying security above
the strike price for the life of the option (or until a closing
purchase transaction can be effected). Nevertheless, the call
writer retains the risk of a decline in the price of the
underlying security. The size of the premiums that the Fund may
receive may be adversely affected as new or existing
institutions, including other investment companies, engage in or
increase their option-writing activities.
Options written ordinarily will have expiration dates
between one and nine months from the date written. The exercise
price of the options may be below, equal to or above the market
values of the underlying securities at the time the options are
written. In the case of call options, these exercise prices are
referred to as "in-the-money," "at-the-money" and "out-of-the-
money," respectively. The Fund may write (a) in-the-money call
options when the Adviser expects that the price of the underlying
security will remain stable or decline moderately during the
option period, (b) at-the-money call options when the Adviser
expects that the price of the underlying security will remain
stable or advance moderately during the option period and (c)
out-of-the-money call options when the Adviser expects that the
premiums received from writing the call option plus the
appreciation in market price of the underlying security up to the
exercise price will be greater than the appreciation in the price
of the underlying security alone. In these circumstances, if the
market price of the underlying security declines and the security
is sold at this lower price, the amount of any realized loss will
be offset wholly or in part by the premium received. Out-of-the-
money, at-the-money and in-the-money put options (the reverse of
call options as to the relation of exercise price to market
price) may be utilized in the same market environments that such
call options are used in equivalent transactions.
So long as the Fund's obligation as the writer of an
option
continues, the Fund may be assigned an exercise notice by the
broker-dealer through which the option was sold, requiring the
Fund to deliver, in the case of a call, or take delivery of, in
the case of a put, the underlying security against payment of the
exercise price. This obligation terminates when the option
expires or the Fund effects a closing purchase transaction. The
Fund can no longer effect a closing purchase transaction with
respect to an option once it has been assigned an exercise
notice.
While it may choose to do otherwise, the Fund generally
will
write only those options for which the Adviser believes there is
an active secondary market so as to facilitate closing
transactions. There is no assurance that sufficient trading
interest to create a liquid secondary market on a securities
exchange will exist for any particular option or at any
particular time, and for some options no such secondary market
may exist. A liquid secondary market in an option may cease to
exist for a variety of reasons. In the past, for example, higher
than anticipated trading activity or order flow, or other
unforeseen events, at times have rendered certain clearing
facilities inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain
types of orders or trading halts or suspensions in one or more
options. There can be no assurance that similar events, or
events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not
be possible to effect closing transactions in particular options.
If as a covered call option writer the Fund is unable to effect a
closing purchase transaction in a secondary market, it will not
be able to sell the underlying security until the option expires
or it delivers the underlying security upon exercise or it
otherwise covers its position.
The Fund may purchase put and call options for the
purpose
of increasing its current return or avoiding adverse tax
consequences that could reduce its current return. The Fund also
may purchase call options to acquire the underlying security.
The Fund may enter into closing sale transactions with respect to
such options and may permit them to expire. The Fund will not
purchase options for leveraging purposes.
The Fund will purchase put and call options only to the
ex-
tent permitted by the policies of state securities authorities in
states where shares of the Fund are qualified for offer and sale.
These authorities may impose further limitations on the Fund's
ability to purchase options.
Lending Portfolio Securities. To a limited extent, the
Fund
may lend its portfolio securities to brokers, dealers and other
institutional investors, 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
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 dividends,
interest or other distributions payable on the loaned securities,
and any increase in market value; (5) the Fund may pay only
reasonable custodian fees in connection with the loan; and (6)
while voting rights on the loaned securities may pass to the
borrower, the Fund's Board of Trustees must terminate the loan
and regain the right to vote the securities if a material event
adversely affecting the investment occurs. These conditions may
be subject to future modification.
Investment Restrictions. The Fund has adopted
investment
restrictions numbered 1 through 10 as fundamental policies.
These restrictions cannot be changed without approval by the
holders of a majority (as defined in the Investment Company Act
of 1940, as amended (the "Act")) of the Fund's outstanding voting
shares. Investment restrictions numbered 11 through 18 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 the value 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, or its agencies or instrumentalities may be
purchased, without regard to any such limitation.
2. Hold more than 10% of the voting
securities of any
single issuer. This Investment Restriction applies
only
with respect to 75% of the Fund's total assets.
3. Invest more than 25% of its assets in
investments
in any particular industry or industries, provided
that,
when the Fund has adopted a temporary defensive
posture,
there shall be no limitation on the purchase of
obligations
issued or guaranteed by the U.S. Government, its
agencies or
instrumentalities.
4. Invest in commodities, except that the
Fund may
purchase and sell options, forward contracts, futures
contracts, including those relating to indexes, and
options
on futures contracts or indexes.
5. Purchase, hold or deal in real estate, or
oil, gas
or other mineral leases or exploration development
programs,
but the Fund may purchase and sell securities that are
secured by real estate or issued by companies that
invest or
deal in real estate.
6. Borrow money, except to the extent
permitted under
the Act. For purposes of this Investment Restriction,
the
entry into options, forward contracts, futures
contracts,
including those relating to indexes, and options on
futures
contracts or indexes shall not constitute borrowing.
7. Make loans to others, except through the
purchase
of debt obligations or 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.
8. Act as an underwriter of securities of
other
issuers, 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.
9. Issue any senior security (as such term
is defined
in Section 18(f) of the Act), except to the extent the
activities permitted in Investment Restriction Nos. 5,
6, 10 and 13 may be deemed to give rise to a senior security.
10. Purchase securities on margin, but the
Fund may
make margin deposits in connection with transactions in
options, forward contracts, futures contracts,
including
those relating to indexes, and options on future
contracts or indexes.
11. Purchase securities of any company
having less than three years' continuous operations (including
operations of any predecessor) if such purchase would
cause the value of the Fund's investments in all such
companies to
exceed 5% of the value of its total assets.
12. Invest in the securities of a company
for the
purpose of exercising management or control, but the
Fund
will vote the securities it owns in its portfolio as a
shareholder in accordance with its views.
13. Pledge, mortgage or hypothecate 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 writing covered put and call options
and the
purchase of securities on a when-issued or forward
commitment basis and collateral and initial or
variation
margin arrangements with respect to options, forward
contracts, futures contracts, including those relating
to
indexes, and options on futures contracts or indexes.
14. Purchase, sell or write puts, calls, or
combinations thereof, except as described in the Fund's
Prospectus and Statement of Additional Information.
15. Enter into repurchase agreements
providing for
settlement in more than seven days after notice or
purchase
securities which are illiquid, if, in the aggregate,
more
than 15% of the value of the Fund's net assets would be
so
invested.
16. Invest in securities of other investment
companies
except to the extent permitted under the Act.
17. Purchase or retain the securities of any
issuer if
the officers or Trustees of the Fund or the officers or
directors of the Adviser who individually own
beneficially
more than 1/2 of 1% of the securities of such issuer
together own beneficially more than 5% of the
securities of
such issuer.
18. Purchase warrants in excess of 5% of its
net
assets; however, no more than 2% of the value of the
Fund's
net assets may be invested in warrants which are not
listed
on the New York or American Stock Exchange. For
purposes of
this restriction, such warrants shall be valued at the
lower
of cost or market, except that warrants acquired by the
Fund
in units or attached to securities shall not be
included
within this 5% restriction.
If a percentage restriction is adhered to at the time
of in-
vestment, a later increase in percentage resulting from a change
in values or assets will not constitute a violation of such re-
striction.
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 the Administrator,
Executive Vice President and a Director of the
Distributor
and an officer, director or trustee of other investment
companies advised or administered by the Administrator.
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. Dean and Distinguished Service Professor
of Economics of the University of Chicago Graduate
School of
Business. Since 1988, a Director of Vulcan Materials
Company, a chemical manufacturer and producer of
construction aggregates. Since 1986, Director of
Argonne-Chicago Development Corporation, an affiliate
of,
and the entity responsible for commercializing the
technology of, both the University of Chicago and
Argonne
National Laboratory. Since 1986, he also has served as
a
Director of DFA Investment Dimensions Group, a series
mutual
fund. His address is 1101 East 58th Street, Chicago,
Illinois 60637.
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 Money Market Fund,
First Prairie Tax Exempt 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 Tax Exempt Bond
Fund, Inc.
The Fund does not pay any remuneration to its officers
and
Trustees other than fees and expenses to Trustees who are not of-
ficers, directors, employees or holders of 5% or more of the out-
standing voting securities of the Adviser or the Administrator,
or any affiliate of either of them, which totaled $5,375 for the
fiscal year ended December 31, 1992 for such Trustees, as a
group.
Trustees 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 plans described in the
section
captioned "Distribution Plan and Shareholder Services Plan"
remain 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 the Administrator, Secretary of the
Distributor
and an officer of other investment companies advised or
administered by the Administrator.
JEFFREY N. NACHMAN, Vice President-Financial. Vice President-
Mutual Fund Accounting of the Administrator and an
officer
of other investment companies advised or administered
by the
Administrator.
JOHN J. PYBURN, Treasurer. Assistant Vice President of the
Administrator and an officer of other investment
companies
advised or administered by the Administrator.
PAUL R. CASTI, JR., Controller. Senior Accounting Manager of the
Fund Accounting Department of the Administrator and an
officer of other investment companies advised or
administered by the Administrator.
MARK N. JACOBS, Secretary. Secretary and Deputy General Counsel
of the Administrator and an officer of other investment
companies advised or administered by the Administrator.
ROBERT I. FRENKEL, Assistant Secretary. Senior Assistant General
Counsel to the Administrator and an officer of other
investment companies advised or administered by the
Administrator.
CHRISTINE PAVALOS, Assistant Secretary. Assistant Secretary of
the Administrator, the Distributor and other
investment
companies advised or administered by the Administrator.
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 January 20, 1994.
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS
The following information supplements and should be
read in
conjunction with the section in the Fund's Prospectus entitled
"Management of the Fund."
Investment Advisory Agreement. The Adviser provides
management services to the Fund pursuant to the Investment
Advisory Agreement (the "Advisory Agreement") dated December 16,
1985 (as revised December 6, 1989) with the Fund. The Advisory
Agreement 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 Adviser, by vote cast in person at a
meeting called for the purpose of voting on such approval.
Shareholders last approved the Advisory Agreement on September
28, 1987 and the Board of Trustees, including a majority of the
Trustees who are not "interested persons" of any party to the
Advisory Agreement, last voted to renew the Advisory Agreement at
a meeting held on December 10, 1993. The Advisory 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 Adviser. The Advisory Agreement will terminate
automatically in the event of its assignment (as defined in the
Act).
As compensation for the Adviser's services to the Fund,
the
Fund has agreed to pay the Adviser a fee, computed daily and paid
monthly, at an annual rate of .65 of 1% of the value of the
Fund's average daily net assets. For the fiscal years ended
December 31, 1990, 1991 and 1992, no fees were paid due to an
undertaking by the Adviser.
The Fund has agreed that neither the Adviser nor the
Admini-
strator will 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 Adviser's or the Administrator's respective
agreement with the Fund relates, except for a loss resulting from
wilful misfeasance, bad faith or gross negligence on the part of
the Adviser or the Administrator, as the case may be, in the
performance of its obligations or from reckless disregard by it
of its obligations and duties under its respective agreement with
the Fund.
Administration Agreement. Pursuant to the
Administration
Agreement (the "Administration Agreement") dated December 16,
1985 (as revised December 6, 1989) with the Fund, the Adminis-
trator 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 in all aspects of the Fund's operation,
other than providing investment advice. The Administrator bears
all expenses in connection with the performance of its services
and pays the salaries of all officers and employees who are
employed by both it and the Fund.
The Administration Agreement 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 Fund's outstanding voting
securities, 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
Administrator, by vote cast in person at a meeting called for the
purpose of voting on such approval. Shareholders last approved
the Administration Agreement on September 28, 1987 and the Board
of Trustees, including a majority of the Trustees who are not
"interested persons" of any party to the Administration
Agreement, last voted to renew the Administration Agreement at a
meeting held on December 10, 1993. The Administration 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 Administrator. The Administration Agreement will
terminate automatically in the event of its assignment (as
defined in the Act).
As compensation for the Administrator's services to the
Fund, the Fund has agreed to pay the Administrator a fee, compu-
ted daily and paid monthly, at an annual rate of .30 of 1% of the
value of the Fund's average daily net assets. For the fiscal
years ended December 31, 1990, 1991 and 1992, no fees were paid
due to an undertaking by the Administrator.
In addition to the persons named as such in the section
entitled "Management of the Fund," the following persons are
officers and/or directors of the Administrator: Howard Stein,
Chairman of the Board and Chief Executive Officer; Julian M.
Smerling, Vice Chairman of the Board of Directors; Alan M.
Eisner, Vice President and Chief Financial Officer; David W.
Burke, Vice President and Chief Administrative Officer; Robert F.
Dubuss, Vice President; Elie M. Genadry, Vice President--
Institutional Sales; Peter A. Santoriello, Vice President; Robert
H. Schmidt, Vice President; Kirk V. Stumpp, Vice President--New
Product Development; Philip L. Toia, Vice President; Katherine C.
Wickham, Assistant Vice President; Maurice Bendrihem, Controller;
and Mandell L. Berman, Alvin E. Friedman, Lawrence M. Greene,
Abigail Q. McCarthy and David B. Truman, directors.
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 Adviser and/or the Administra-
tor. The expenses borne by the Fund include: 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 Adviser or the
Administrator, Securities and Exchange Commission fees, state
Blue Sky qualification fees, advisory and administration 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. Class A and Class
B shares are subject to an annual service fee for ongoing
personal services relating to shareholder accounts and services
related to the maintenance of shareholder accounts. In addition,
Class B shares are subject to an annual distribution fee for
advertising, marketing and distributing Class B shares pursuant
to a distribution plan adopted in accordance with Rule 12b-1
under the Act. See "Distribution Plan and Shareholder Services
Plan."
The Adviser and the Administrator have agreed that if
in any
fiscal year the aggregate expenses of the Fund (including fees
pursuant to the Advisory Agreement and the Administration
Agreement, but excluding taxes, brokerage, interest on borrowings
and, with the prior written consent of the necessary state
securities commissions, extraordinary expenses) exceed the ex-
pense limitation of any state having jurisdiction over the Fund,
the Fund may deduct from the fees to be paid to each of the Ad-
viser and the Administrator, or the Adviser and the Administrator
will bear, approximately 70% and 30%, respectively, of such
excess expense, to the extent required by state law. Such deduc-
tion or payment, if any, will be estimated daily and reconciled
and effected or paid, as the case may be, on a monthly basis.
The aggregate of the fees payable to the Adviser and
the
Administrator 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 the Administrator, its parent, sponsors the
Fund and provides it with administrative services. If current
restrictions preventing a bank from legally sponsoring, organiz-
ing, controlling or distributing shares of an investment company
were relaxed, the Fund expects that the Adviser would consider
the possibility of offering to perform some or all of the ser-
vices now provided by the Administrator 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
Adviser 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
dis-
tributor 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.
Sales Loads--Class A. The scale of sales loads applies
to
purchases of Class A shares made by any "purchaser," which term
includes an individual and/or spouse purchasing securities for
his, her or their own account or for the account of any minor
children, or a trustee or other fiduciary purchasing securities
for a single trust estate or a single fiduciary account
(including a pension, profit-sharing, or other employee benefit
trust created pursuant to a plan qualified under Section 401 of
the Internal Revenue Code of 1986, as amended (the "Code"))
although more than one beneficiary is involved; or a group of
accounts established by or on behalf of the employees of an
employer or affiliated employers pursuant to an employee benefit
plan or other program (including accounts established pursuant to
Sections 403(b), 408(k), and 457 of the Code); or an organized
group which has been in existence for more than six months,
provided that it is not organized for the purpose of buying
redeemable securities of a registered investment company and
provided that the purchases are made through a central
administration or a single dealer, or by other means which result
in economy of sales effort or expense.
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 Shareholder Services Group, Inc.,
the Fund's transfer and dividend disbursing agent (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 Optional
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.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
The following information supplements and should be
read in
conjunction with the section in the Fund's Prospectus entitled
"Distribution Plan and Shareholder Services Plan."
Class A and Class B shares are subject to a Shareholder
Services Plan and Class B shares only are subject to a
Distribution Plan.
Distribution Plan. Rule l2b-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. The Fund's Board of Trustees has
adopted such a plan (the "Distribution Plan") with respect to
Class B shares pursuant to which the Fund pays for advertising,
marketing and distributing Class B shares. Under the
Distribution Plan, the Fund may make payments to the Adviser, its
affiliates, including First Chicago Investment Services, Inc.,
the Distributor or certain securities dealers, financial
institutions and other financial industry professionals
(collectively, "Service Agents") in respect of these services.
The Fund's Board of Trustees believes that there is a reasonable
likelihood that the Distribution Plan will benefit the Fund and
holders of its Class B shares. In some states, certain 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
Distribution Plan, and the purposes for which such expenditures
were incurred, must be made to the Trustees for their review. In
addition, the Distribution Plan provides that it may not be
amended to increase materially the costs which holders of Class B
shares may bear for distribution pursuant to the Distribution
Plan without the approval of the holders of Class B shares and
that other material amendments of the Distribution 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 Distribution Plan or in any agreements entered into in
connection with the Distribution Plan, by vote cast in person at
a meeting called for the purpose of considering such amendments.
The Distribution Plan is subject to annual approval by such vote
of the Trustees cast in person at a meeting called for the
purpose of voting on the Distribution Plan. The Distribution
Plan was approved by the Fund's Board of Trustees, including a
majority of the Trustees who are not "interested persons," at a
meeting held on October 1, 1993. The Distribution Plan is
terminable 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 Distribution Plan or
in any agreements entered into in connection with the
Distribution Plan, or by vote of the holders of a majority of
Class B shares.
Shareholder Services Plan. The Fund has adopted a
Shareholder Services Plan, pursuant to which the Fund pays
Service Agents for the provision of certain services to the
holders of Class A and Class B shares.
A quarterly report of the amounts expended under the
Shareholder Services Plan, and the purposes for which such
expenditures were incurred, must be made to the Trustees for
their review. In addition, the Shareholder Services Plan
provides that it may not be amended without approval of 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 Shareholder
Services Plan or in any agreements entered into in connection
with the Shareholder Services Plan, by vote cast in person at a
meeting called for the purpose of considering such amendments.
The Shareholder Services Plan is subject to annual approval by
such vote of the Trustees cast in person at a meeting called for
the purpose of voting on the Shareholder Services Plan. The
Shareholder Services Plan was so approved on October 1, 1993.
The Shareholder Services Plan is terminable at any time by vote
of a majority of the Trustees who are not "interested persons"
and who have no direct or indirect financial interest in the
operation of the Shareholder Services Plan or in any agreements
entered into in connection with the Shareholder Services Plan.
Prior Rule 12b-1 Plan. As of February 8, 1994, the
Fund
terminated its then existing Rule 12b-1 plan, which provided for
payments to be made to Service Agents for advertising, marketing
and/or distributing Class A shares and servicing holders of Class
A shares. During the fiscal year ended December 31, 1992, no
payments were made under the prior Rule 12b-1 plan by the Fund
pursuant to various undertakings in effect.
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."
Redemption by Wire or Telephone. 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 next
business day after receipt by the Transfer Agent of a redemption
request in proper form. Redemption proceeds will be transferred
by Federal Reserve wire only to the commercial bank account
specified by the investor on the Account Application or Optional
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. Holders of jointly registered Fund or
bank accounts may redeem by wire only up to $50,000 within any
30-day period. Proceeds of less than $1,000 will be paid by
check and mailed to the investor's address.
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 transmissions:
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 qualify to use this 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 the Optional Services Form. If the
proceeds of a particular redemption are to be wired to an account
with any other bank, the request must be in writing and
signature-guaranteed.
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 Agent 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 up 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 Class A or Class B of the Fund, shares of the same
Class of certain other funds advised by the Adviser, or shares of
the same Class of certain funds advised by the Administrator, on
the basis of relative net asset value per share at the time of
the exchange, as follows:
A. Class A shares of funds purchased without a
sales load
may be exchanged for Class A shares of other
funds sold
with a sales load, and the applicable sales
load will
be deducted.
B. Class A shares of funds purchased with or
without a
sales load may be exchanged without a sales
load for
Class A shares of other funds sold without a
sales
load.
C. Class A shares of funds purchased with a
sales load,
Class A shares of funds acquired by a
previous exchange
from Class A shares purchased with a sales
load, and
additional Class A shares acquired through
reinvestment
of dividends or distributions of any such
funds
(collectively referred to herein as
"Purchased Shares")
may be exchanged for Class A 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.
D. Class B shares of any fund may be exchanged
for Class B
shares of other funds without a sales load.
Class B
shares of any fund exchanged for Class B
shares of
another fund will be subject to the higher
applicable
contingent deferred sales charge ("CDSC") of
the two
funds and, for purposes of calculating CDSC
rates and
conversion periods, will be deemed to have
been held
since the date the Class B shares being
exchanged were
initially purchased.
To accomplish an exchange under item C 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 and signature-guaranteed
Telephone Authorization 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. Auto-Exchange permits an
investor
to purchase, in exchange for Class A or Class B shares of the
Fund, shares of the same Class of certain other funds in the
First Prairie Family of Funds or certain funds advised by the
Administrator. 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.
Optional 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.
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 Adviser, certain affiliates of the
Adviser or certain Service Agents. Automatic Withdrawal may be
terminated at any time by the investor, the Fund or the Transfer
Agent. Class B shares withdrawn pursuant to the Automatic
Withdrawal Plan will be subject to any applicable CDSC.
Dividend Sweep Privilege. The Dividend Sweep Privilege
enables investors to invest automatically dividends or dividends
and capital gain distributions, if any, paid by the Fund in
shares of the same Class of another fund in the First Prairie
Family of Funds or certain funds advised or administered by the
Administrator of which the investor is a shareholder. Shares of
the same Class 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 with respect
to Class
A shares by a fund may be invested without
imposition
of a sales load in Class A shares of other
funds that
are offered without a sales load.
B. Dividends and distributions paid with respect
to Class
A shares by a fund which does not charge a
sales load
may be invested in Class A shares of other
funds sold
with a sales load, and the applicable sales
load will
be deducted.
C. Dividends and distributions paid with respect
to Class
A shares by a fund which charges a sales load
may be
invested in Class A 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 with respect
to Class
B by a fund may be invested without
imposition of any
applicable CDSC in Class B shares of other
funds and
the Class B shares of such other funds will
be subject
on redemption to any applicable CDSC.
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."
Valuation of Portfolio Securities. Substantially all
of the
Fund's investments (excluding short-term investments) are valued
each business day by an independent pricing service (the
"Service") approved by the Board of Trustees. Securities valued
by the Service for which quoted bid prices in the judgment of the
Service are readily available and are representative of the bid
side of the market are valued at the mean between the quoted bid
prices (as obtained by the Service from dealers in such
securities) and asked prices (as calculated by the Service based
upon its evaluation of the market for such securities). Other
investments valued by the Service are carried at fair value as
determined by the Service, based on methods which include
consideration of: yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions. Short-term investments
are not valued by the Service and are carried at amortized cost,
which approximates value. Other investments that are not valued
by the Service are valued at the average of the most recent bid
and asked prices in the market in which such investments are
primarily traded, or at the last sales price for securities
traded primarily on an exchange or the national securities
market. In the absence of reported sales of investments traded
primarily on an exchange or the national securities market, the
average of the most recent bid and asked prices is used. Bid
price is used when no asked price is available. Expenses and
fees, including the investment advisory and administration fees
(reduced by the expense limitation, if any), and expenses under
the Shareholder Services Plan with respect to the Class A and
Class B shares, and fees pursuant to the Distribution Plan with
respect to the Class B shares only, are accrued daily and are
taken into account for the purpose of determining the net asset
value of Fund shares. Because of the difference in operating
expenses incurred by each Class, the per share net asset value of
each Class will differ.
Restricted securities, as well as securities or other
assets
for which market quotations are not readily available, or are not
valued by the Service, are valued at fair value as determined in
good faith by the Board of Trustees. The Board of Trustees will
review the method of valuation on a current basis. In making
their good faith valuation of restricted securities, the Trustees
generally will take the following factors into consideration:
restricted securities which are, or are convertible into,
securities of the same class of securities for which a public
market exists usually will be valued at market value less the
same percentage discount at which purchased. This discount will
be revised periodically by the Board of Trustees if they believe
that it no longer reflects the value of the restricted
securities. Restricted securities not of the same class as
securities for which a public market exists usually will be
valued initially at cost. Any subsequent adjustment from cost
will be based upon considerations deemed relevant by the Board of
Trustees.
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.
PERFORMANCE INFORMATION
The following information supplements and should be
read in
conjunction with the section in the Fund's Prospectus entitled
"Performance Information."
Class B shares had not been offered as of the date of
the
financials and, accordingly, no performance data are available
for Class B.
The Fund's current yield for Class A for the 30-day
period
ended June 30, 1993 was 5.16%, which reflects 1.10% of absorbed
expenses pursuant to expense limitations in effect. See
"Management of the Fund" in the Prospectus. Had expenses not
been absorbed, the Fund's current yield for the same period would
have been 4.06%. Current yield is computed pursuant to a formula
which operates as follows: The amount of the Fund's expenses
accrued for the 30-day period (net of reimbursements) is
subtracted from the amount of the dividends and interest earned
(computed in accordance with regulatory requirements) by the Fund
during the period. That result is then divided by the product
of: (a) the average daily number of shares outstanding during
the period that were entitled to receive dividends, and (b) the
maximum offering price per share in the case of Class A or the
net asset value per share in the case of Class B on the last day
of the period less any undistributed earned income per share
reasonably expected to be declared as a dividend shortly
thereafter. The quotient is then added to 1, and that sum is
raised to the 6th power, after which 1 is subtracted. The
current yield is then arrived at by multiplying the result by 2.
The Fund's average annual total return for Class A for
the
1, 5 and 7.44 year periods ended June 30, 1993 was 6.40%, 11.81%
and 11.21%, respectively. Average annual total return is
calculated by determining the ending redeemable value of an
investment purchased with a hypothetical $1,000 payment made at
the beginning of the period (assuming the reinvestment of
dividends and distributions), dividing by the amount of the
initial investment, taking the "n"th root of the quotient (where
"n" is the number of years in the period) and subtracting 1 from
the result. A Class's average annual total return figures
calculated in accordance with such formula assume that in the
case of Class A the maximum sales load had been deducted from the
hypothetical initial investment at the time of purchase or in the
case of Class B the maximum applicable CDSC has been paid upon
redemption at the end of the period.
Total return is calculated by subtracting the amount of
the
Fund's maximum offering price per share in the case of Class A or
the net asset value per share in the case of Class B at the
beginning of a stated period from the net asset value per share
at the end of the period (after giving effect to the reinvestment
of dividends and distributions during the period), and dividing
the result by the maximum offering price per share in the case of
Class A or the net asset value per share in the case of Class B
at the beginning of the period. Total return also may be
calculated based on the net asset value per share at the
beginning of the period instead of the maximum offering price per
share at the beginning of the period for Class A shares or
without giving effect to any applicable CDSC at the end of the
period for Class B shares. In such cases, the calculation would
not reflect the deduction of the sales load which, if reflected,
would reduce the performance quoted. The Fund's total return for
Class A for the period January 23, 1986 to June 30, 1993, based
on maximum offering price per share, was 120.39%. Based on net
asset value per share, the Fund's total return for Class A was
130.75% for this period.
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 comparisons of the Fund's performance with historical rates of
inflation or may describe how an investment in the Fund may be
used to fund retirement costs or other economic goals.
PORTFOLIO
TRANSACTIONS
The Adviser supervises the placement of orders on
behalf of
the Fund for the purchase or sale of portfolio securities.
Allocation of brokerage transactions, including their frequency,
is made in the best judgment of the Adviser and in a manner
deemed fair and reasonable to shareholders. The primary
consideration is prompt execution of orders at the most favorable
net price. Subject to this consideration, the brokers selected
include those that supplement the Adviser's research facilities
with statistical data, investment information, economic facts and
opinions. Information so received is in addition to and not in
lieu of services required to be performed by the Adviser and the
Adviser's fee is not reduced as a consequence of the receipt of
such supplemental information. Such information may be useful to
the Adviser in serving both the Fund and other clients which it
manages and, conversely, supplemental information obtained by the
placement of business of other clients may be useful to the
Adviser in carrying out its obligation to the Fund. Brokers also
are selected because of their ability to handle special
executions such as are involved in large block trades or broad
distributions, provided the primary consideration is met. Large
block trades may, in certain cases, result from two or more
clients the Adviser might advise being engaged simultaneously in
the purchase or sale of the same security. Portfolio turnover
may vary from year to year, as well as within a year. The
overall reasonableness of brokerage commissions paid is evaluated
by the Adviser based upon its knowledge of available information
as to the general level of commissions paid by other
institutional investors for comparable services.
When transactions are executed in the over-the-counter
market, the Fund will deal with the primary market makers unless
a more favorable price or execution otherwise is obtainable.
For its portfolio securities transactions during the
fiscal
years ended December 31, 1990, 1991 and 1992, the Fund paid total
brokerage commissions of $3,351, $6,656 and $29,818,
respectively, none of which was paid to the Distributor. There
were no spreads or concessions on principal transactions in
fiscal 1990, 1991 and 1992.
DIVIDENDS,
DISTRIBUTIONS AND TAXES
The following information supplements and should be
read in
conjunction with the section in the Fund's Prospectus entitled
"Dividends, Distributions and Taxes."
Management believes that the Fund qualified as a
"regulated
investment company" under the Code in fiscal 1993 and the Fund
intends to continue to so qualify if such qualification is in the
best interests of its shareholders. To qualify as a regulated
investment company, the Fund must distribute at least 90% of its
net income (consisting of net investment income and net
short-term capital gain) to its shareholders, must derive less
than 30% of its annual gross income from gain on the sale of
securities held for less than three months, and must meet certain
asset diversification and other requirements. Accordingly, the
Fund may be restricted in the selling of securities held for less
than three months, and in the utilization of certain of the
investment techniques described in the Prospectus. The Code,
however, allows the Fund to net certain offsetting positions
making it easier for the Fund to satisfy the 30% test. The term
"regulated investment company" does not imply the supervision of
management or investment practice or policies by any government
agency.
Any dividend paid shortly after one purchase of Fund
Shares
may have the effect of reducing the aggregate net asset value
below their acquisition cost. Such a dividend or distribution
would be a return on investment in an economic sense, although
taxable as stated above. In addition, the Code provides that if
a shareholder holds shares of the Fund for six months or less and
has received a capital gain dividend with respect to such shares,
any loss incurred on the sale of such shares will be treated as a
long-term capital loss to the extent of the capital gain dividend
received.
Depending upon the composition of the Fund's income, a
portion of the dividends from net investment income may qualify
for the dividends received deduction allowable to qualifying U.S.
corporate shareholders ("dividends received deduction"). In
general, dividend income of the Fund distributed to the Fund's
qualifying corporate shareholders will be eligible for the
dividends received deduction only to the extent that the Fund's
income consists of dividends paid by U.S. corporations. However,
Section 246(c) of the Code provides that if a qualifying
corporate shareholder has disposed of Fund shares not held for
more than 46 days and has received a dividend from net investment
income with respect to such shares, the portion designated by the
Fund as qualifying for the dividends received deduction will not
be eligible for such shareholder's dividends received deduction.
In addition, the Code provides other limitations with respect to
the ability of a qualifying corporate shareholder to claim the
dividends received deduction in connection with holding Fund
shares.
Ordinarily, gains and losses realized from portfolio
transactions will be treated as capital gains and losses.
However, a portion of the gain or loss realized from the
disposition of certain non-U.S. dollar denominated securities may
be treated as ordinary income or loss under Section 988 of the
Code. In addition, all or a portion of the gain realized from
the disposition of market discount bonds will be treated as
ordinary income under Section 1276. Finally, all or a portion of
the gain realized from engaging in "conversion transactions" may
be treated as ordinary income under Section 1258. "Conversion
transactions" are defined to include certain option and straddle
transactions, transactions marketed or sold to produce capital
gains, or transactions described in Treasury regulations to be
issued in the future.
Under Section 1256 of the Code, any gain or loss the
Fund
realizes from certain options transactions will be treated as 60%
long-term capital gain or loss and 40% short-term capital gain or
loss. Gain or loss will arise upon exercise or lapse of such
options as well as from closing transactions. In addition, any
such options remaining unexercised at the end of the Fund's
taxable year will be treated as sold for their then fair market
value, resulting in additional gain or loss to the Fund
characterized in the manner described above.
Offsetting positions held by the Fund involving options
may
constitute "straddles." Straddles are defined to include
"offsetting positions" in actively traded personal property. The
tax treatment of straddles is governed by Sections 1092 and 1258
of the Code, which, in certain circumstances, overrides or
modifies the provisions of Sections 1256 and 988. As such, all
or a portion of any short- or long-term capital gain from certain
"straddle" and/or conversion transactions may be recharacterized
as ordinary income.
If the Fund is treated as entering into "straddles" by
reason of its engaging in certain financial forward, futures or
option transactions, such straddles will be characterized as
"mixed straddles" if the futures, forward or option contracts
comprising a part of such straddles were governed by Section 1256
of the Code. The Fund may make one or more elections with
respect to "mixed straddles." If no election is made, to the
extent the straddle and the conversion rules apply to positions
established by the Fund, losses realized by the Fund will be
deferred to the extent of unrealized gain in any offsetting
positions. Moreover, as a result of the straddle rules, short-
term capital loss on straddle positions may be recharacterized as
long-term capital loss, and long-term capital gain may be
recharacterized as short-term capital gain or ordinary income.
Investment by the Fund in securities issued at a
discount or
providing for deferred interest or for payment of interest in the
form of additional obligations could, under special tax rules,
affect the amount, timing and character of distributions to
shareholders. For example, the Fund could be required to
recognize annually a portion of the discount (or deemed discount)
at which such securities were issued and to distribute such
portion in order to maintain its qualification as a regulated
investment company. In such case, the Fund may be required to
dispose of securities which it might otherwise have continued to
hold in order to generate cash to satisfy these distribution
requirements.
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. Shares have no preemptive or subscription rights
and are freely transferable.
The Fund sends annual and semi-annual financial
statements
to all its shareholders and sends statements of shareholder
accounts quarterly.
On March 15, 1989, the Fund's name was changed from
First
Lakeshore Diversified Asset Fund to First Prairie Diversified
Asset 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 portfolio 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.
<PAGE>
APPENDIX
Description of certain ratings assigned by Standard &
Poor's
Corporation ("S&P") and Moody's Investors Service, Inc.
("Moody's"):
S&P
Bond Ratings
AAA
Bonds rated AAA have the highest rating assigned by
S&P.
Capacity to pay interest and repay principal is extremely strong.
AA
Bonds rated AA have a very strong capacity to pay
interest
and repay principal and differ from the highest rated issues only
in small degree.
A
Bonds rated A have a strong capacity to pay interest
and
repay principal although they are somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than obligations in higher rated categories.
BBB
Bonds rated BBB are regarded as having an adequate
capacity
pay interest and repay principal. Whereas they normally exhibit
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this
category than for bonds in higher rated categories.
Plus (+) or minus (-): The ratings from AA to BBB may
be
modified by the addition of a plus or minus sign to show relative
standing within the major ratings categories.
Commercial Paper Rating
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.
Moody's
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.
A
Bonds which are rated A possess many favorable
investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa
Bonds which are rated Baa are considered as medium
grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Moody's applies the numerical modifiers 1, 2 and 3 to
show
relative standing within the major ratings categories, except in
the Aaa 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.
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.
Issuers (or related supporting institutions) rated
Prime-2
(P-2) have a strong capacity for repayment of short-term
promissory obligations. This will normally 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.
<PAGE>
<TABLE>
<CAPTION>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF INVESTMENTS DECEMBER 31, 1992
PRINCIPAL DIVERSIFICATION OF
AMOUNT BONDS AND NOTES 42.8% VALUE $10,000 OF NET ASSETS
AUTOMOTIVE .6%
<S> <C> <C> <C>
$ 200,000 Ford Capital BV. Deb
9 1/2%, 2010 $ 213,806 $ 63
BANKING 6.1%
750,000 BARCLAYS AMERICAN CORP., DEB.,
9 1/8%, 1997 826,792 242
CITICORP:
250,000 9 3/4%, 1999 268,303 78
350,000 8 5/8%, 2002 354,249 104
350,000 NATIONSBANK CORP., SUB NOTES
8 1/8%, 2002 360,550 105
250,000 WESTPAC BANKING CORP., SUB. DEB.,
9 1/8%, 2001 261,231 76
2,071,125 605
BASIC INDUSTRIES 1.1%
365,000 GEORGIA PACIFIC CORP., DEB.,
9 1/8%, 2022 370,072 108
ENERGY 3.0%
250,000 BURLINGTON RESOURCES,
8 1/2%, 2001 265,289 77
400,000 OCCIDENTAL PETROLEUM, SR. NOTES
11 1/8%, 2010 490,211 143
250,000 SHELL CANADA CORP., DEB
7 3/8%, 1999 256,052 75
1,011,552 295
FINANCE 5.3%
200,000 ASSOCIATES CORP. OF NORTH AMERICA,
MED TERM SR NOTES,
8 3/4%, 1996 216,624 63
250,000 DISCOVER CREDIT CARD CORP., NOTES
8.37% 261,348 76
GENERAL MOTORS ACCEPTANCE
CORP., DEB
400,000 8.65% 1996 417,892 122
250,000 7 3/4, 1997 245,351 72
250,000 KFW INTERNATIONAL FINANCE
MORTGAGE GUARANTEED NOTES,
8.85%, 1999 275,665 80
400,000 WELLS FARGO & CO., SUB NOTES
8 3/8%, 2002 400,063 117
1,816,943 530
FOOD AND BEVERAGES 5.6%
250,000 GRAND METRO INVESTMENT CORP., DEB
9%, 2011 273,700 80
PHILIP MORRIS CORP., DEB.
500,000 8 5/8% 1999 538,498 157
250,000 7 1/8% 2004 244,688 72
RJR NABISCO GUARANTEED SR NOTES
500,000 8.30%, 1999 511,875 149
350,000 8 5/8%, 2002 356,599 104
1,925,360 562
RETAIL 2.2%
470,000 DAYTON HUDSON, DEB
8.80%, 2022 491,893 144
250,000 MAY DEPARTMENT STORES, NOTES
9.45%, 1999 275,828 80
767,721 224
TECHNOLOGY 1.5%
500,000 DIGITAL EQUIPMENT, DEB.
8 5/8%, 2012 514,600 150
UTILITIES 7.1%
100,000 ALABAMA POWER, FIRST MORTGAGE
9 3/8%, 2016 107,171 31
250,000 COMMONWEALTH EDISON
FIRST MORTGAGE SER 81
8 5/8%, 2022 254,134 74
250,000 GTE NORTH SER A
9.60, 2021 275,450 80
100,000 GENERAL TELEPHONE SOUTH
FIRST MORTGAGE SER EE
11%, 2017 108,667 32
500,000 HYDRO-QUEBEC, DEB SER HK
9 3/8%, 2030 562,791 164
300,000 LONG ISLAND LIGHTING NOTES
9%, 2022 306,874 90
500,000 PACIFIC BELL NOTES
7%, 2004 497,637 145
100,000 PACIFIC GAS & ELECTRIC
FIRST & REFUNDING MORTGAGE
SER 86-F
9 1/8% 2019 104,215 31
100,000 SOUTHWESTERN BELL TELEPHONE DEB
9 1/4%, 2015 104,962 31
100,000 WISCONSIN BELL, DEB
8%, 2014 100,710 29
2,422,611 707
U.S. GOVERNMENT AND AGENCIES 10.3%
100,000 FEDERAL HOME LOAN BANKS, NOTES
8 1/4%, 1996 107,906 32
FEDERAL NATIONAL MORTGAGE
ASSN., DEB
400,000 7.60%., 1997 424,500 124
500,000 8.35%, 1999 545,310 159
200,000 STUDENT LOAN MARKETING ASSN
ECU/YEN REVERSE PRINCIPAL EXCHANGE
RATE LINKED SECURITIES
10 3/8% 1995 158,000 46
U.S. TREASURY BONDS
100,000 8 5/8%, 1993 104,234 30
1,000,000 7 1/2% 2016
1,004,531 293
U.S. TREASURY NOTES
100,000 8 1/2% 1997 109,906 32
500,000 8 1/8% 1998 542,969 159
500,000 8% 2001 541,562 158
3,538,918 1,033
TOTAL BONDS AND NOTES
(COST $14,239,450) $14,652,708 $4,277
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS DECEMBER 31, 1992
SHARES EQUITY RELATED SECURITIES 36.5% VALUE DIVERSIFICATION OF
$10,000 OF NET ASSETS
(COMMON STOCKS AND
CONVERTIBLE SECURITIES)
COMMON STOCKS 24.2%
BANKING 2.9%
<S> <C> <C> <C>
7,000 BankAmerica................ $ 325,500 $ 95
8,000 First Union................ 349,000 102
6,412 NationsBank................ 329,416 96
1,003,916 293
DRUGS AND HEALTH CARE--5.2%
9,500 Bristol-Myers Squibb...... 640,063 187
15,000 Glaxo Holdings PLC A.D.R... 356,250 104
7,500 Johnson & Johnson.......... 376,875 110
5,500 Pfizer..................... 398,750 116
1,771,938 517
ENERGY--3.0%
3,000 Atlantic Richfield......... 344,250 100
8,000 British Petroleum PLC A.D.S. 366,000 107
5,500 Texaco..................... 328,625 96
1,038,875 303
FINANCE--.9%
13,000 American Express........... 323,375 95
FOOD AND BEVERAGES--1.8%
8,000 Philip Morris Cos.......... 616,000 180
HOSPITAL RELATED--2.1%
31,000 National Health Investors.. 709,125 207
TECHNOLOGY--1.3%
9,000 International Business Machines 453,375 132
UTILITIES--7.0%
13,000 GTE........................ 451,750 132
13,000 General Public Utilities... 359,125 105
15,000 Long Island Lighting....... 386,250 113
18,000 Sprint..................... 459,000 134
8,000 Texas Utilities............ 340,000 99
10,000 U.S. West.................. 383,750 112
2,379,875 695
TOTAL COMMON STOCKS........ 8,296,479 2,422
CONVERTIBLE PREFERRED STOCKS--9.3%
AUTOMOTIVE--2.4%
6,000 Ford Motor, Ser.A, Cum., $4.20. 468,000 137
10,000 General Motors, Ser.A, Cum., $4.20 371,250 108
839,250 245
Banking--3.3%
6,000 BankAmerica, Ser.G, Cum., $3.25 361,500 106
25,000 Citicorp 431,250 126
5,000 National City, Cum., $4.00 340,000 99
1,132,750 331
FOOD AND BEVERAGES--1.5%
50,000 RJR Nabisco Holdings, Cum., $2.00 512,500 149
INSURANCE--1.4%
10,000 Aon, Ser.B, Cum., $3.04.... 465,000 136
RETAIL--.7%
5,000 Kmart, Ser.A, Cum., $3.41.. 248,125 72
TOTAL CONVERTIBLE PREFERRED STOCKS 3,197,625 933
PRINCIPAL
AMOUNT CONVERTIBLE SUBORDINATE DEBENTURES--3.0%
BANKING--1.2%
$ 275,000 Bank of New York,
7 1/2%, 2001............. 412,500 120
RETAIL--1.8%
350,000 Hechinger,
5 1/2%, 2012............. 253,750 74
350,000 Price,
6 3/4%, 2001............. 351,750 103
605,500 177
TOTAL CONVERTIBLE
SUBORDINATED DEBENTURES.. 1,018,000 297
TOTAL EQUITY-RELATED SECURITIES
(Cost $11,317,935)....... $12,512,104 $ 3,652
SHORT-TERM
INVESTMENTS--18.3%
COMMERCIAL PAPER:
AMERICAN EXPRESS CREDIT CORP.,
$2,400,000 3.40%, 1/6/93............ $2,400,000 $ 701
Ford Motor Credit Corp.,
2,660,000 3.60%, 1/5/93............ 2,660,000 776
General Electric Capital Corp.,
1,200,000 3.68%, 1/5/93............ 1,220,000 356
TOTAL SHORT-TERM INVESTMENTS
(Cost $6,280,000)........ $6,280,000 $ 1,833
TOTAL INVESTMENTS
(Cost $31,837,385)....................... 97.6% $33,444,812 $ 9,762
CASH AND RECEIVABLE (NET).................. 2.4% $ 817,036 $ 238
NET ASSETS.................................100.00% $34,261,848 $ 10,000
See notes to financial statements.
</TABLE>
<PAGE>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
Statement of Assets and Liabilities December 31, 1992
ASSETS:
Investments in securities, at value
(cost $31,837,385)--see statement $33,444,812
Cash 643,070
Receivable for shares of beneficial
interest subscribed 578,047
Dividends and interest
receivable 358,142
Prepaid expenses 14,576
Due from administrator 136,498
35,175,145
LIABILITIES:
Payable for investment securities
purchased $744,572
Payable for shares of beneficial
interest redeemed 117,533
Accrued expenses 51,192 913,297
NET ASSETS $34,261,848
REPRESENTED BY:
Paid-in capital $32,479,730
Accumulated undistributed
investment income--net 56,449
Accumulated undistributed net
realized gain on investments 118,242
Accumulated net unrealized
appreciation on investments--
Note 3 1,607,427
NET ASSETS at value applicable to
2,702,264 outstanding shares of
Beneficial Interest, equivalent to
$12.68 per share (unlimited number
of $.01 par value shares authorized) 34,261,848
Statement of Operations year ended December 31, 1992
INVESTMENT INCOME:
Income:
Interest $951,796
Cash dividends (net of $587
foreign taxes withheld
at source) 444,269
Total Income $ 1,396,065
Expenses:
Investment advisory fee--
Note 2(a) 144,907
Administration fee--Note 2(a) 66,880
Shareholder servicing
costs--Note 2(b) 95,157
Auditing fees 36,937
Prospectus and shareholders'
reports--Note 2(b) 21,483
Registration fees 21,017
Legal fees 11,573
Custodian fees 10,637
Trustees' fees and expenses--
Note 2(c) 5,375
Miscellaneous 6,111
420,077
Less--expense reimbursement from
Adviser and Administrator due to
undertaking--Note 2(c) 415,166
Total Expenses 4,911
INVESTMENT INCOME--NET 1,391,154
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on investments--
Note 3 $179,839
Net unrealized appreciation on
investments 343,006
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS 522,845
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 1,913,999
See notes to financial statements
FIRST PRAIRIE DIVERSIFIED ASSET FUND
Statement of Changes in Net Assets
Year Ended December 31,
1991 1992
OPERATIONS:
Investment income--net $22,757,425 $ 1,391,154
Net realized gain on investments 329,535 179,839
Net unrealized appreciation on
investments for the year 1,315,337 343,006
Net Increase In Net Assets
Resulting From Operations 2,402,297 1,913,999
NET EQUALIZATION CREDITS--Note 1(e) 7,267 51,331
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net (766,529) (1,385,188)
Net realized gain on investments -- (279,770)
Total Dividends (766,529) (1,664,958)
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold 4,400,599 20,593,226
Dividends reinvested 16,038 1,264,046
Cost of shares redeemed (971,444) (1,933,539)
Increase In Net Assets From
Beneficial Interest Transactions 3,445,193 19,923,733
Total Increase in Net Assets 5,088,228 20,224,105
NET ASSETS:
Beginning of years 8,949,515 14,037,743
End of year [including distributions
in excess of investment income--net;
($848) in 1991 and undistributed
income--net; $56,449 in 1992] $14,037,743 $34,261,848
Shares Shares
CAPITAL SHARE TRANSACTIONS
Shares sold 370,121 1,637,986
Issued for dividends reinvested 1,369 100,550
Shares redeemed (83,022) (153,827)
Net Increase In Shares Outstanding 288,468 1,584,709
See notes to financial statements.
FIRST PRAIRIE DIVERSIFIED ASSET FUND
Condensed Financial Information
Selected data for a share of beneficial interest outstanding
throughout each year.
Year Ended December 31,
1968 1989 1990 1991 1992
PER SHARE DATA:
Investment income $ .78 $ .88 $ .86 $ .83 $ .79
Expenses -- -- -- -- --
Investment income--net $ .78 $ .88 $ .86 $ .83 $ .79
Net realized and
unrealized gain (loss)
on investments .92 1.10 (.54) 1.77 .26
Net increase in net asset
value resulting from
operations 1.70 1.98 .32 2.60 1.05
Dividends from invest-
ments income--net (.74) (.89) (.88) (.83) (.77)
Dividends from net
realized gain on
investments (.03) (.21) (.19) -- (.16)
Net increase (decrease)
in net asset value .93 .88 (.75) 1.77 .12
Net asset value:
Beginning of year 9.73 10.66 11.54 10.79 12.56
End of year $10.66 $11.54 $10.79 $12.56 $12.58
RATIOS TO AVERAGE NET ASSETS:
Investment income 7.38% 7.74% 7.71% 7.04% 6.26%
Expenses -- -- -- -- .02
Investment income--net 7.38 7.74 7.71 7.04 6.24
Net realized and
unrealized gain (loss)
on investments 8.58 9.25 (4.85) 15.30 2.35
Net increase in net
asset value resulting
from operations 15.96% 16.99% 2.86% 22.34% 8.59%
Decrease reflected in
above expense ratios due
to undertakings by the
Adviser and Administrator
(limited to the expense
limitation provision of
the Investment Advisory
and Administration
Agreements) 2.62% 2.96% 2.58% 2.16% 1.86%
PORTFOLIO TURNOVER RATE 15.71% 49.46% 29.97% 26.02% 22.14%
THOUSANDS OF SHARES
OUTSTANDING AT END OF YEAR 553 642 829 1,118 2,702
See notes to financial statements.
<PAGE>
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 ("Adviser") serves
as the Fund's investment adviser. The Dreyfus Corporation
("Administrator") serves as the Fund's administrator. Dreyfus
Service Corporation ("Distributor"), a wholly-owned subsidiary
of the Administrator, acts as the distributor of the Fund's
shares.
(A) PORTFOLIO VALUATION: Most debt securities (excluding
short-term investments) are valued each business day by an
independent pricing service ("Service") approved by the Board of
Trustees. Debt securities for which quoted bid prices in the
judgement of the Service are readily available and are
representative of the bid side of the market are valued at the
mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated
by the Service based upon its evaluation of the market for such
securities). Other debt securities are carried at fair value as
determined by the Service, based on methods which include
consideration of: yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to values
from dealers; and general market conditions. Short-term
investments are carried at amortized cost, which approximates
value. Other securities are valued at the average of the most
recent bid and asked prices in the market in which such
securities are primarily traded, or at the last sales price for
securities traded primarily on an exchange or the national
securities market. In the absence of reported sales of
securities traded primarily on an exchange or the national
securities market, the average of the most recent bid and asked
prices is used. Bid price is used when no asked price is
available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded on a trade date basis.
Realized gain and loss from securities transactions are recorded
on the identified cost basis. Dividend income is recognized on
the ex-dividend date and interest income, including, where
applicable, amortization of discounts on investments, is
recognized on the accrual basis.
(C) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on
the ex-dividend date. Dividends from investment income-net are
declared and paid monthly. Dividends from net realized capital
gain 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. This
may result in distributions that are in excess of investment
income-net and net realized gain on a fiscal year basis. To the
extent that net realized capital gain can be offset by capital
loss carryovers, if any, it is the policy of the Fund not to
distribute such gain.
On January 29, 1993 the Board of Trustees declared a cash
dividend of $.059 per share from undistributed investment
income-net, payable on February 1,1993 (ex-dividend date) to
shareholders of record as of the close of business on January
29, 1993.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to
continue to qualify as a regulated investment company, if such
qualification is in the best interests of its shareholders, 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 taxable income
sufficient to relieve it from all, or substantially all, Federal
income taxes.
(E) EQUALIZATION: The Fund follows the accounting practice
known as "equalization" by which a portion of the amounts
received on issuances and paid on redemptions of Fund shares is
allocated to undistributed investment income-net so that
undistributed investment income-net per share is unaffected by
Fund shares issued or redeemed.
NOTE 2-INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER
TRANSACTIONS WITH AFFILIATES:
(A) Fees payable by the Fund pursuant to the provisions of
an Investment Advisory Agreement with the Adviser and an
Administration Agreement with the Administrator are payable
monthly based on annual rates of .65 of 1% and .30 of 1%,
respectively, of the average daily value of the Fund's net
assets. The agreements further provide that if in any full year
the aggregate expenses of the Fund, excluding 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
Adviser and the Administrator, or the Adviser and the
Administrator will each bear, such excess expense in proportion
to their respective fees. 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.
The Adviser and the Administrator had undertaken from
January 1, 1992 through December 1, 1992 to reimburse all fees
and expenses of the Fund and thereafter had undertaken to reduce
the Advisory fee and the Administration fee paid by, and
reimburse such excess expenses of 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. Pursuant to such undertaking,
the Adviser and the Administrator reimbursed the Fund $144,907
and $270,259, respectively.
First Chicago Investment Services, Inc., an affiliate of
the Adviser, retained $43,565 during the year ended December 31,
1992 from commissions earned on sales of Fund shares.
(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 Adviser, the Administrator 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 .30 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, 1992, the
Fund was charged $79,082 pursuant to the Plan, but these amounts
were not paid by the Fund pursuant to undertakings in effect
(see Note 2(a)).
(C) Certain officers and trustees of the Fund are
"affiliated persons," as defined in the Act, of the Adviser or
the Administrator. Each trustee who is not an affiliated
person" receives an annual fee of $1,500 and an attendance fee
of $250 per meeting.
NOTE 3--SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment
securities, other than short-term securities, during the year
ended December 31, 1992 amounted to $19,217,574 and $3,928,752,
respectively.
At December 31, 1992, accumulated net unrealized
appreciation on investments was $1,607,427, consisting of
$1,909,565 gross unrealized appreciation and $302,138 gross
unrealized depreciation.
At December 31, 1992, 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).
<PAGE>
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
FIRST PRAIRIE DIVERSIFIED ASSET FUND
We have audited the accompanying statement of assets and
liabilities of First Prairie Diversified Asset Fund, including
the statement of investments, as of December 31, 1992, 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 condensed financial information for
each of the years indicated therein. These financial statements
and condensed financial information are the responsibility of
the Fund's management. Our responsibility is to express an
opinion on these financial statements and condensed financial
information 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 condensed financial information 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, 1992 by correspondence
with the custodian and brokers. 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 condensed financial
information referred to above present fairly, in all material
respects, the financial position of First Prairie Diversified
Asset Fund, at December 31, 1992, 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 condensed
financial information for each of the years indicated therein,
in conformity with generally accepted accounting principles.
ERNST & YOUNG
New York, New York
January 29, 1993
<PAGE>
<PAGE>
<TABLE>
FIRST PRAIRIE DIVERSIFIED ASSET FUND STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1993
(UNAUDITED)
BONDS AND NOTES--42.3%
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
AUTOMOTIVE--.5% Ford Capital BV, Deb.,
9 1/2%,2010 $ 200,000 $242,525
BANKING--5.9% Barclays American Corp., Deb.,
9 1/8%, 1997 750,000 846,793
Chemical Banking Corp., Sub. Notes,
7 5/8%, 2003 500,000 532,197
Citicorp
9 3/4%, 1999 250,000 292,638
8 5/8%, 2002 350,000 389,996
NationsBank Corp., Sub. Notes,
8 1/8%, 2002 350,000 386,149
Westpac Banking Corp., Sub. Deb.,
91/8%, 2001 250,000 288,327
------------
2,736,100
BASIC INDUSTRIES--3.1% Georgia Pacific Corp., Deb.,
9 1/8%, 2022 365,000 398,706
USX-Marathon Group,
6 3/8%, 1998 500,000 500,000
Weyerhaeuser Co., Deb.,
7 1/2%, 2013 500,000 513,979
1,412,685
ENERGY--2.3% Burlington Resources,
81/2%, 2001 250,000 283,387
Occidental Petroleum, Sr. Notes,
11/8%, 2010 400,000 518,819
Shell Canada Corp., Deb.,
7 3/8%, 1999 250,000 268,828
1,071,034
ENTERTAINMENT--1.1% Time Warner, Notes,
7.95%, 2000 500,000 526,250
FINANCE--7.6% Associates Corp. of North America,
Med.-Term Sr. Notes,
8 3/4%, 1996 200,000 220,192
Discover Credit Card Corp., Notes,
8.37%, 1999 250,000 271,722
General Motors Acceptance
Corp., Deb.:
8.65%, 1996 400,000 433,596
7 3/4%, 1997 250,000 265,491
7%, 2000 500,000 509,510
International Lease Finance Corp., Notes,
8.35%, 1998 500,000 553,620
</TABLE>
<PAGE>
<TABLE>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1993 (UNAUDITED)
<CAPTION>
BONDS AND NOTES (CONTINUED)
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
FINANCE (CONTINUED) KFW International Finance,
Mortgage Guaranteed Notes,
8.85%, 1999 $ 250,000 $ 286,619
Salomon, Sr. Notes,
7 1/2%, 2003 500,000 522,881
Wells Fargo & Co., Sub. Notes,
8 3/8%, 2002 400,000 439,180
3,502,811
FOOD AND BEVERAGES--5.7% Grand Metro Investment
Corp., Deb.,
9%, 2011 250,000 294,555
Philip Morris Corp., Deb.:
8 5/8%, 1999 500,000 562,735
7 1/8%, 2004 250,000 258,750
RJR Nabisco Guaranteed Sr. Notes:
8.30%, 1999. 750,000 780,000
8 5/8%, 2002 700,000 731,781
2,627,821
RETAIL--1.8% Dayton Hudson, Deb.,
8.80%, 2022 470,000 526,517
May Department Stores, Notes,
9.45%, 1999 250,000 286,980
813,497
TECHNOLOGY--1.2% Digital Equipment, Deb.,
8 5/8%, 2012 500,000 557,399
UTILITIES--5.1% Commonwealth Edison,
First Mortgage, Ser. 81,
8 5/8%, 2022 250,000 269,209
GTE North, Ser. A,
9.60%, 2021 250,000 305,623
General Telephone South,
First Mortgage Ser. EE,
11%, 2017 100,000 108,224
Hydro-Quebec, Deb., Ser. HK,
9 3/8%, 2030 500,000 600,464
Long Island Lighting, Notes,
9%, 2022 300,000 334,426
Pacific Bell, Notes,
7%, 2004 500,000 525,900
Pacific Gas & Electric,
First & Refunding Mortgage
Ser. 86-F,
9 1/8%, 2019 100,000 103,562
Wisconsin Bell, Deb.,
8%, 2014 100,000 103,562
2,350,970
</TABLE>
<PAGE>
<TABLE>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1993 (UNAUDITED)
BONDS AND NOTES (CONTINUED)
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT AND AGENCIES--8.0%
Federal Home Loan Banks, Notes,
8 1/4%, 1996 $ 100,000 $ 110,279
Federal National Mortgage
Assn., Deb.:
7.60%, 1997 400,000 436,824
8.35%, 1999. 500,000 574,718
Student Loan Marketing Assn.,
ECU/YEN Reverse Principal Exchange
Rate Linked Securities,
10 3/8%, 1995 200,000 115,250
U.S. Treasury Bonds:
8 5/8%, 1993 100,000 101,969
7 1/2%, 2016 1,000,000 1,095,469
U.S. Treasury Notes:
8 1/2%, 1997 100,000 113,156
8 1/8%, 1998 500,000 564,766
8%, 2001 500,000 576,640
3,689,071
TOTAL BONDS AND NOTES
(cost $18,247,836) $19,530,163
</TABLE>
<TABLE>
EQUITY-RELATED SECURITIES--41.5%
(COMMON STOCKS AND CONVERTIBLE SECURITIES)
COMMON STOCKS--24.9%
<CAPTION>
SHARES
<S> <C> <C>
BANKING--3.9% BankAmerica 12,000 $543,000
First Union 13,000 630,500
NationsBank 11,912 591,133
1,764,633
BASIC INDUSTRIES--.9% Union Camp 10,000 425,000
DRUGS AND HEALTH CARE--6.0% Bristol-Myers Squibb 17,000 983,875
Glaxo Holdings PLC A.D.R 20,000 337,500
Johnson & Johnson 11,000 453,750
Pfizer 15,000 1,005,000
2,780,125
ENERGY--3.9% Atlantic Richfield 3,500 406,875
British Petroleum PLC A.D.S. 9,000 506,250
Occidental Petroleum 20,000 415,000
Texaco 7,500 474,375
1,802,500
FOOD AND BEVERAGES--1.8% Philip Morris Cos 17,000 822,375
</TABLE>
<PAGE>
<TABLE>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1993 (UNAUDITED)
EQUITY-RELATED SECURITIES (CONTINUED)
COMMON STOCKS (CONTINUED)
<CAPTION>
SHARES VALUE
<S> <C> <C>
HOSPITAL RELATED--2.1% National Health Investors 35,500 $980,688
TECHNOLOGY--1.0% International Business Machines 9,000 444,375
UTILITIES--5.3% GTE 14,000 504,000
Long Island Lighting 15,000 408,750
Sprint 20,000 702,500
Texas Utilities 8,000 366,000
U.S. West 10,000 460,000
2,441,250
TOTAL COMMON STOCKS 11,460,946
CONVERTIBLE PREFERRED STOCKS--12.8%
AUTOMOTIVE--3.0% Ford Motor, Ser. A, Cum., $4.20 8,000 722,000
General Motors, Ser. A, Cum., $3.31 15,000 678,750
1,400,750
BANKING--3.8% BankAmerica, Ser. G, Cum., $3.25 6,000 360,000
Citicorp, Cum., $1.22 25,000 478,125
Citicorp, Cum., $5.375 6,000(a) 582,000
National City, Cum., $4.00 5,000 342,500
1,762,625
ENERGY--.8% Snyder Oil, Cum., $6.00 13,500 379,687
FOOD AND BEVERAGES--1.9% Conagra,
Ser. E, Cum., $1.69 11,000 336,875
RJR Nabisco Holdings, Cum., $2.00 80,000 530,000
866,875
INSURANCE--2.3% Aon, Ser. B, Cum., $3.04 11,000 533,500
Conseco, Ser. D, Cum., $3.25 8,600 516,000
1,049,500
RETAIL--1.0% Kmart, Ser. A, Cum., $3.41 10,000 438,750
TOTAL CONVERTIBLE PREFERRED STOCKS 5,898,187
CONVERTIBLE SUBORDINATE DEBENTURES--3.8%
PRINCIPAL
AMOUNT
BANKING--1.0% Bank of New York,
7 1/2%, 2001 $ 275,000 459,594
ENERGY--.6% Swift Energy,
6 1/2%, 2003 300,000 309,000
ENTERTAINMENT--.8% Time Warner,
8 3/4%, 2015 350,000 371,875
</TABLE>
<PAGE>
<TABLE>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1993 (UNAUDITED)
EQUITY-RELATED SECURITIES (CONTINUED)
CONVERTIBLE SUBORDINATE DEBENTURES (CONTINUED)
<CAPTION>
AMOUNT VALUE
<S> <C> <C>
RETAIL--1.4% Hechinger,
5 1/2%, 2012 $ 350,000 $ 269,500
Price,
6 3/4%, 2001 350,000 358,750
628,250
TOTAL CONVERTIBLE
SUBORDINATED DEBENTURES 1,768,719
TOTAL EQUITY-RELATED SECURITIES
(cost $17,863,952) $ 19,127,852
SHORT-TERM INVESTMENTS--15.9%
COMMERCIAL PAPER; Ford Motor Credit Corp.:
3.12%, 7/1/93 $ 5,225,000 $5,225,000
3.18%, 7/1/93 2,115,000 2,115,000
TOTAL SHORT-TERM INVESTMENTS
(cost $7,340,000) $ 7,340,000
TOTAL INVESTMENTS (costs $43,451,788) 99.7% $ 45,998,015
CASH AND RECEIVABLE (NET) .3% $ 125,937
NET ASSETS 100.0% $ 46,123,952
</TABLE>
NOTE TO STATEMENT OF INVESTMENTS;
(a) Security exempt from registration under Rule 144A of the
Securities Act of 1933. This security may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At June 30, 1993, this security
amounted to $582,000 or 1.26% of net assets.
<PAGE>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1993 (UNAUDITED)
ASSETS:
Investments in securities, at value
(cost $43,451,788)--see statement $45,998,015
Cash 137,925
Dividends and interest receivable 482,583
Receivable for shares of Beneficial
Interest subscribed 212,023
Prepaid expenses 14,777
Due from administrator 4,250
46,849,573
LIABILITIES:
Payable for investment securities
purchased $ 603,607
Payable for shares of Beneficial Interest
redeemed 85,304
Accrued expenses 36,710 725,621
NET ASSETS $46,123,952
REPRESENTED BY:
Paid-in capital $43,133,258
Accumulated undistributed investment
income--net 310,369
Accumulated undistributed net realized gain on
investments 134,098
Accumulated net unrealized appreciation on
investments--Note 3 2,546,227
NET ASSETS at value applicable to 3,529,752
outstanding shares of Beneficial Interest,
equivalent to $13.07 per share (unlimited
number of $.01 par value shares authorized) $46,123,952
See notes to financial statements.
<PAGE>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30,
1993 (UNAUDITED)
INVESTMENT INCOME: INCOME:
Interest $ 835,680
Cash dividends (net of
$2,684 foreign taxes withheld at source) 410,033
TOTAL INCOME.
$1,245,713 EXPENSES:
Investment advisory fee--Note
2(a)... 132,505
Administration fee--Note
2(a) 61,156
Shareholder servicing costs--Note
2(b). 85,589
Professional fees 16,092
Prospectus and shareholders'
reports--Note 2(b) 9,842
Registration fees.. 9,738
Custodian fees 8,714
Trustees' fees and expenses--Note
2(c). 2,303
Miscellaneous 4,477
330,416
Less--expense
reimbursement from Adviser and Administrator due to
undertaking--Note 2(a) 259,067
TOTAL EXPENSES 71,349
INVESTMENT
INCOME--NET 1,174,364
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on
investments--Note 3..... $ 15,856
Net unrealized appreciation on
investments 938,800
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 954,656
- -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS....... $ 2,129,020
- ----------- See notes to financial statements.
<PAGE>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1993
1992 (UNAUDITED)
OPERATIONS:
Investment
income--net $ 1,391,154 $ 1,174,364
Net realized gain on
investments 179,839 15,856
Net unrealized appreciation on
investments for the period 343,006 938,800
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS 1,913,999 2,129,020
NET EQUALIZATION CREDITS--Note
1(e) 51,331 41,419
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net (1,385,188 ) (961,863)
Net realized gain on
investments (279,770 ) --
TOTAL
DIVIDENDS (1,664,958 ) (961,863)
BENEFICIAL INTEREST
TRANSACTIONS:
Net proceeds from shares
sold 20,593,226 11,686,467
Dividends reinvested....... 1,264,046 886,532
Cost of shares
redeemed (1,933,539 ) (1,919,471)
INCREASE IN NET ASSETS
FROM BENEFICIAL INTEREST
TRANSACTIONS 19,923,733 10,653,528
------------
TOTAL INCREASE IN NET
ASSETS 20,224,105 11,862,104
NET ASSETS:
Beginning of
period 14,037,743 34,261,848
End of period (including
undistributed investment income--net:
$56,449 in 1992 and
$310,369 in 1993) $34,261,848 $46,123,952
Shares Shares
CAPITAL SHARE TRANSACTIONS:
Shares sold 1,637,986 908,165
Shares issued for
dividends reinvested 100,550 68,443
Shares
redeemed (153,827) (149,120)
NET INCREASE IN SHARES
OUTSTANDING 1,584,709 827,488
See notes to financial statements.
<PAGE>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
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 period indicated.
This information has been derived from information provided in
the Fund's financial statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
<S> <C> <C> <C> <C> <C> <C> JUNE 30, 1993
PER SHARE DATA: 1988 1989 1990 1991 1992 (UNAUDITED)
Net asset value,
beginning of
period.......... $ 9.73 $10.66 $11.54 $10.79 $12.56 $12.68
INCOME FROM
INVESTMENT OPERATIONS:
Investment
income--net .. .78 .88 .86 .83 .79 .37
Net realized and
unrealized gain (loss)
on investments .92 1.10 (.54) 1.77 .26 .32
TOTAL INCOME FROM
INVESTMENT OPERATIONS 1.70 1.98 .32 2.60 1.05 .69
DISTRIBUTIONS:
Dividends from investment
income--net....... (.74) (.89) (.88) (.83) (.77) (.30)
Dividends from net
realized gain on
investments........ (.03) (.21) (.19) -- (.16) --
TOTAL
DISTRIBUTIONS. .. (.77) (1.10) (1.07) (.83) (.93) (.30)
Net asset value, end of
period.............. $10.66 $11.54 $10.79 $12.56 $12.68 $13.07
TOTAL INVESTMENT
RETURN 17.78% 19.08% 2.94% 24.87% 8.68% 5.50%*
RATIOS /SUPPLEMENTAL DATA:
Ratio of expenses
to average net assets -- -- -- -- .02% .17%*
Ratio of net investment
income to average
net assets 7.38% 7.74% 7.71% 7.04% 6.24% 2.86%*
Decrease reflected in
above expense ratios due to
undertakings by the
Adviser and Administrator
(limited to the
expense limitation
provision
of the Investment
Advisory and
Administration
Agreements)........ 2.62% 2.96% 2.58% 2.16% 1.86% .63%*
Portfolio
Turnover Rate....... 15.71% 49.46% 29.97% 26.02% 22.14% 4.88%*
Net Assets, end of
period (000's Omitted) $5,900 $7,407 $8,950 $14,038 $34,262 $46,124
<FN>- *Not annualized.
</TABLE>
See notes to financial statements.
<PAGE>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 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 ("Adviser") serves as the Fund's investment adviser.
The Dreyfus Corporation ("Administrator") serves as the Fund's
administrator. Dreyfus Service Corporation ("Distributor"), a
wholly-owned subsidiary of the Administrator, acts as the
distributor of the Fund's shares. (A) PORTFOLIO VALUATION:
Most debt securities (excluding short-term investments) are
valued each business day by an independent pricing service
("Service") approved by the Board of Trustees. Debt securities
for which quoted bid prices in the judgement of the Service are
readily available and are representative of the bid side of the
market are valued at the mean between the quoted bid prices (as
obtained by the Service from dealers in such securities) and
asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). Other debt
securities are carried at fair value as determined by the
Service, based on methods which include consideration of: yields
or prices of securities of comparable quality, coupon, maturity
and type; indications as to values from dealers; and general
market conditions. Short-term investments are carried at
amortized cost, which approximates value. Other securities are
valued at the average of the most recent bid and asked prices in
the market in which such securities are primarily traded, or at
the last sales price for securities traded primarily on an
exchange or the national securities market. In the absence of
reported sales of securities traded primarily on an exchange or
the national securities market, the average of the most recent
bid and asked prices is used. Bid price is used when no asked
price is available.
(B) SECURITIES TRANSACTIONS AND
INVESTMENT INCOME: Securities transactions are recorded on a
trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Dividend
income is recognized on the ex-dividend date and interest income,
including, where applicable, amortization of discounts on
investments, is recognized on the accrual basis.
(C) DIVIDENDS TO SHAREHOLDERS: Dividends are recorded on
the
ex-dividend date. Dividends from investment income-net are
declared and paid monthly. Dividends from net realized capital
gain 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. This may
result in distributions that are in excess of investment
income-net and net realized gain on a fiscal year basis. To the
extent that net realized capital gain can be offset by capital
loss carryovers, if any, it is the policy of the Fund not to
distribute such gain. On June 30, 1993, the Board of
Trustees declared a cash dividend of $.062 per share from
undistributed investment income-net, payable on July 1, 1993
(ex-dividend date) to shareholders of record as of the close of
business on June 30, 1993.
(D) FEDERAL INCOME TAXES: It is
the policy of the Fund to continue to qualify as a regulated
investment company, if such qualification is in the best
interests of its shareholders, 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 taxable income sufficient to relieve it from
all, or substantially all, Federal income taxes.
(E) EQUALIZATION: The Fund follows the accounting
practice known as
"equalization" by which a portion of the amounts received on
issuances and paid on redemptions of Fund shares is allocated to
undistributed investment income-net so that undistributed
investment income-net per share is unaffected by Fund shares
issued or redeemed.
<PAGE>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED) NOTE 2--INVESTMENT ADVISORY FEE, ADMINISTRATION FEE
AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Fees payable
by the Fund pursuant to the provisions of an Investment Advisory
Agreement with the Adviser and an Administration Agreement with
the Administrator are payable monthly based on annual rates of
.65 of 1% and .30 of 1%, respectively, of the average daily value
of the Fund's net assets. The agreements further provide that if
in any full year the aggregate expenses of the Fund, excluding
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 Adviser and the Administrator, or the Adviser
and the Administrator will each bear, such excess expense in
proportion to their respective fees. 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.
The Adviser and the
Administrator has currently undertaken to reduce the Advisory fee
and the Administration fee paid by, and reimburse such excess
expenses of the Fund to the extent that the Fund's aggregate
expenses (excluding certain expenses as described above) exceed
an annual rate of .35 of 1% average daily net assets. Pursuant to
such undertaking, the Adviser and the Administrator reimbursed
the Fund $132,505 and $126,562, respectively. First
Chicago Investment Services, Inc., an affiliate of the Adviser,
retained $22,216 during the six months ended June 30, 1993 from
commissions earned on sales of Fund shares.
(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 Adviser, the Administrator
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 .30 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 six months
ended June 30, 1993, the Fund was charged $67,087 pursuant to the
Plan, but these amounts were not paid by the Fund pursuant to
undertakings in effect (see Note 2(a)).
(C) Certain
officers and trustees of the Fund are "affiliated persons," as
defined in the Act, of the Adviser or the Administrator. Each
trustee who is not an "affiliated person" receives an annual fee
of $1,500 and an attendance fee of $250 per meeting.
<PAGE>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED) NOTE 3--SECURITIES TRANSACTIONS:
The
aggregate amount of purchases and sales of investment securities,
other than short-term securities, during the six months ended
June 30, 1993 amounted to $12,172,647 and $1,639,598,
respectively. At June 30, 1993, accumulated net unrealized
appreciation on investments was $2,546,227, consisting of
$3,715,240 gross unrealized appreciation and $1,169,013 gross
unrealized depreciation. At June 30, 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).
