LETTER TO SHAREHOLDERS
Dear Shareholder:
The complexion of the stock and bond markets changed markedly starting in
February, when the Federal Reserve Board initiated a series of increases in
interest rates in order to curb the possibilities of inflation.
In this new atmosphere, the Fund provided an annualized distribution rate
per share of 5.68% for the six-month period for Class A shares and 5.88%
since inception through June 30, 1994 for Class B shares.*
Prices of securities, however, were affected. For the six-month period
ended June 30, 1994, the total return of the Standard & Poor's 500 Composite
Stock Price Index was -3.38%.** The widely followed Lehman Brothers
Government/Corporate Bond Index reported a decline of -4.34%. The total
return of the First Prairie Diversified Asset Fund, Class A shares for this
six months was -4.29% and for Class B shares from inception through June 30,
1994 was -4.53%.
Your Fund's primary objective is to maximize income through a mixture of
income-producing securities, with capital appreciation a secondary
consideration. As of June 30, 1994 the allocation of net assets was as
follows:
Bonds and Notes........................................ 33%
Convertible Bonds and Preferreds....................... 22%
Common Stocks.......................................... 42%
Cash and Cash Equivalents.............................. 3%
CHANGES IN THE PORTFOLIO
During the first half of this year we increased the common stock and
convertible holdings by 13 percent (reducing cash by a
like amount), seeking to increase portfolio income and take advantage of
lower stock prices at good value. We added to these current holdings:
Electric Utility, Drug, Bank, R.E.I.T., and Technology holdings,
specifically, Detroit Edison, Texas Utilities, Long Island Lighting, Entergy,
United Illuminating, Warner-Lambert, Bank of Boston, Amli Residential
Properties, and convertible bonds of Seagate Technology and California
Microwave.
The Fund's investment performance during these six months was hurt by the
rise in interest rates, which had a substantial negative effect on bonds as
well as electric utility stocks. In addition, drug stocks were poor
performers. However, bank stocks did well during this period.
Fortunately, late last year, as discussed in our year-end letter, we
substantially reduced the bond holdings and the portfolio duration.
EFFECTS OF FED STRATEGY
Subsequently, the Federal Reserve began a series of interest rate hikes.
Fed Board Chairman Alan Greenspan wants the bond market to know that he has
been and will be an inflation hawk. Although we expect some more short-term
rate hikes in the future, the bond market, we believe, has already discounted
most of this expectation. As a result, the economy has responded, as
expected, by slowing growth. All of this, along with a weaker dollar, has had
a negative effect on the stock market which retreated about 10% from its
high, the first significant pull-back since the Gulf War (1990). Rising
corporate profits and dividend levels will buoy the stock market in the
future.
As always, we will continue to monitor economic, political and market
events during the months ahead, ready to take action to maintain portfolio
income and value for our shareholders.
Sincerely,
(logo signature)
T. Scott McCartan
Chief Investment Officer
First Prairie Diversified Asset Fund
July 16, 1994
New York, N.Y
* Annualized distribution rate per share is based upon dividends per
share declared from net investment income during the
period, divided by the maximum offering price per share at the end of the
period in the case of Class A shares, or the net asset value per share at
the end of the period in the case of Class B shares.
** SOURCE: LIPPER ANALYTICAL SERVICES, INC. - Reflects the
reinvestment of income dividends and, where applicable, capital gain
distributions. The Standard & Poor's 500 Composite Stock Price Index is a
widely accepted unmanaged index of stock market performance.
SOURCE: LEHMAN BROTHERS -- Lehman Brothers Government/Corporate
Bond Index is a widely accepted, unmanaged index of
Government and Corporate bond market performance and consists of all
public obligations of the U.S. Treasury, all publicly traded issued debt
of U.S. Government agencies and quasi-federal corporations, corporate
debt guaranteed by the U.S. Government and all publicly issued fixed
rate, nonconvertible investment grade, dollar denominated, SEC-registered
corporate debt and debt issued by foreign sovereign governments,
municipalities, or governmental agencies, or international agencies.
Total return represents the change during the period in a hypothetical
account with dividends reinvested, without taking
into account the maximum initial sales charge in the case of Class A
shares, or the applicable contingent deferred sales charge imposed on
redemptions in the case of Class B shares.
<TABLE>
<CAPTION>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF INVESTMENTS JUNE 30, 1994 (UNAUDITED)
PRINCIPAL
BONDS AND NOTES-33.1% AMOUNT VALUE
--------------- -----------
<S> <C> <C> <C>
AUTOMOTIVE-1.0% Hertz, Sub. Notes,
6 5/8%, 2000................... $ 500,000 $ 472,113
-------------
BANKING-5.3% BarclaysAmerican, Notes,
9 1/8%, 1997................... 750,000 794,350
Chemical Banking, Sub. Notes,
7 5/8%, 2003................... 500,000 487,101
Citicorp, Sub. Notes:
9 3/4%, 1999................... 250,000 272,223
8 5/8%, 2002................... 350,000 362,379
NationsBank, Sub. Notes,
8 1/8%, 2002................... 350,000 352,853
Westpac Banking, Sub. Deb.,
9 1/8%, 2001................... 250,000 265,338
-------------
2,534,244
-------------
BASIC INDUSTRIES-1.0% USX-Marathon Group, Notes,
6 3/8%, 1998................... 500,000 471,485
-------------
ENERGY-3.2% Burlington Resources, Notes,
8 1/2%, 2001................... 250,000 256,837
Coastal, Sr. Deb.,
10 1/4%, 2004.................. 500,000 547,500
Occidental Petroleum, Sr. Notes,
11 1/8%, 2010.................. 400,000 470,980
Shell Canada, Deb.,
7 3/8%, 1999................... 250,000 250,883
-------------
1,526,200
-------------
ENTERTAINMENT-1.0%. Time Warner, Notes,
7.95%, 2000.................... 500,000 494,375
-------------
FINANCE-7.7% Associates Corp. of North America,
Med.-Term Sr. Notes,
8 3/4%, 1996................... 200,000 207,528
Discover Credit Card, Med.-Term
Notes,
8.37%, 1999.................... 250,000 257,930
General Motors Acceptance:
Med.-Term Notes,
8.65%, 1996................ 400,000 413,488
Notes:
7 3/4%, 1997............... 250,000 252,732
7%, 2000................... 500,000 482,830
International Lease Finance,
Notes,
8.35%, 1998.................... 500,000 514,880
KFW International Finance,
Guaranteed Notes,
8.85%, 1999.................... 250,000 266,118
Progressive, Notes,
6.60%, 2004.................... 500,000 449,375
Salomon, Notes,
7 1/2%, 2003................... 500,000 471,371
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1994 (UNAUDITED)
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
------------ --------------
FINANCE (CONTINUED)Wells Fargo & Co.,
Sub. Notes,
8 3/8%, 2002................... $ 400,000 $ 408,302
-------------
3,724,554
-------------
FOOD AND BEVERAGES-4.8% Grand Metro Investment, Gtd. Deb.,
9%, 2011....................... 250,000 263,040
Philip Morris Cos., Notes:
8 5/8%, 1999................... 500,000 514,440
7 1/8%, 2004................... 250,000 225,282
RJR Nabisco Holdings:
Gtd. Notes,
8.30%, 1999................ 750,000 700,176
Notes,
8 5/8%, 2002............... 700,000 610,033
-------------
2,312,971
-------------
RETAIL-.5% May Department Stores, Med.-Term Notes,
9.45%, 1999.................... 250,000 265,933
-------------
TECHNOLOGY-.8% Digital Equipment, Notes,
8 5/8%, 2012................... 500,000 391,555
-------------
UTILITIES-2.0% Commonwealth Edison,
First Mortgage, Ser. 81,
8 5/8%, 2022................... 250,000 233,308
Long Island Lighting, Deb.,
9%, 2022....................... 300,000 253,666
Pacific Bell, Notes,
7%, 2004....................... 500,000 474,468
-------------
961,442
-------------
U.S. GOVERNMENT AND AGENCIES-5.8%
Federal Home Loan Banks, Notes,
8 1/4%, 1996................... 100,000 103,668
Federal Home Loan Mortgage,
Multiclass Mortgage
Participation Ctfs., Ser. 98,
8 1/4%, 2010................... 500,000 510,325
Federal National Mortgage Assn., Deb.:
7.60%, 1997.................... 400,000 409,932
8.35%, 1999.................... 500,000 523,940
Student Loan Marketing Assn.,
ECU/YEN Reverse Principal Exchange
Rate Linked Securities,
10 3/8%, 1995.................. 200,000 103,000
U.S. Treasury Notes:
8 1/2%, 1997................... 100,000 105,172
8 1/8%, 1998................... 500,000 522,578
8%, 2001....................... 500,000 522,422
-------------
2,801,037
-------------
TOTAL BONDS AND NOTES
(cost $16,672,807)............. $15,955,909
=============
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1994 (UNAUDITED)
EQUITY-RELATED SECURITIES-64.3%
(COMMON STOCKS AND CONVERTIBLE SECURITIES)
COMMON STOCKS-41.9% SHARES VALUE
------------- -------------
AUTO RELATED-1.6% General Motors 14,886 $ 748,022
-------------
BANKING-5.5% Bank of Boston................... 21,000 517,125
BankAmerica...................... 10,000 457,500
First Union ..................... 21,000 968,625
NationsBank...................... 13,912 714,729
-------------
2,657,979
-------------
DRUGS AND HEALTH CARE-9.9%
Bristol-Myers Squibb.............. 20,000 1,072,500
Johnson and Johnson.............. 17,000 728,875
Pfizer........................... 19,000 1,199,375
Schering-Plough.................. 18,000 1,102,500
Warner-Lambert................... 10,000 660,000
-------------
4,763,250
-------------
ENERGY-3.3% Atlantic Richfield............... 5,000 510,625
British Petroleum PLC, A.D.S..... 9,000 645,750
Texaco........................... 7,500 452,813
-------------
1,609,188
-------------
FINANCE-1.6% American Express................. 20,000 790,000
-------------
FOOD AND BEVERAGES-2.1% Philip Morris Cos................ 20,000 1,030,000
-------------
HOSPITAL RELATED-3.4% National Health Investors........ 61,000 1,662,250
-------------
REAL ESTATE-1.7% Amli Residential Properties...... 37,000 795,500
-------------
UTILITIES-12.8% British Telecommunications, A.D.S. 10,000 383,750
Detroit Edison................... 20,000 495,000
Entergy.......................... 20,000 495,000
GTE.............................. 26,000 819,000
Long Island Lighting............. 33,000 585,750
PECO Energy...................... 25,000 659,375
Sprint........................... 20,000 697,500
Texas Utilities.................. 30,000 941,250
United Illuminating.............. 14,000 460,250
U.S. West........................ 15,000 628,125
-------------
6,165,000
-------------
TOTAL COMMON STOCKS.............. 20,221,189
-------------
CONVERTIBLE PREFERRED STOCKS-15.8%
AUTOMOTIVE-3.2% Ford Motor, Ser. A, Cum., $4.20.. 9,000 873,000
General Motors, Ser. C, Cum., $3.25 12,000 676,500
-------------
1,549,500
-------------
BANKING-4.0% BankAmerica, Ser.G, Cum., $3.25 7,000 394,625
Citicorp, Cum., $1.22............ 25,000 490,625
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1994 (UNAUDITED)
EQUITY-RELATED SECURITIES (CONTINUED)
CONVERTIBLE PREFERRED STOCKS (CONTINUED) SHARES VALUE
------------ --------------
BANKING (CONTINUED) Citicorp, Cum., $5.375 6,000 (a) $ 673,500
National City, Cum., $4.00....... 6,000 394,500
-------------
1,953,250
-------------
ENERGY-1.1% Snyder Oil, Cum., $6.00.......... 20,000 507,500
-------------
FINANCE-1.2% First USA, Cum., 6.25% .......... 15,000 560,625
-------------
FOOD AND BEVERAGES-1.8% ConAgra, Ser. E, Cum., $1.69 11,000 353,375
RJR Nabisco Holdings, Cum., $2.00 80,000 500,000
-------------
853,375
-------------
INSURANCE-3.2% Aon, Ser. B, Cum., $3.04.......... 19,000 907,250
Conseco, Ser. D, Cum., $3.25..... 14,000 628,250
-------------
1,535,500
-------------
RETAIL-1.3% K mart, Ser. A, Cum., $3.41........ 20,000 627,500
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS 7,587,250
-------------
PRINCIPAL
CONVERTIBLE SUBORDINATED DEBENTURES-6.6% AMOUNT
-------------
ENERGY-.6% Swift Energy,
6 1/2%, 2003................... $ 300,000 $ 298,875
-------------
ENTERTAINMENT-.5% Time Warner,
8 3/4%, 2015................... 248,000 248,930
-------------
HOSPITAL MANAGEMENT-1.0% Genesis Health Ventures,
6%, 2003....................... 400,000 488,000
-------------
INDUSTRIAL-3.8% California Microwave,
5 1/4%, 2003................... 500,000 481,250
Seagate Technology,
5%, 2003....................... 500,000 467,500
Starbucks,
4 1/2%, 2003................... 500,000 476,250
Toll,
4 3/4%, 2004................... 500,000 396,875
-------------
1,821,875
-------------
RETAIL-.7%. Price,
6 3/4%, 2001................... 350,000 338,625
-------------
TOTAL CONVERTIBLE
SUBORDINATED DEBENTURES 3,196,305
-------------
TOTAL EQUITY-RELATED SECURITIES
(cost $31,036,136)............. $31,004,744
=============
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF INVESTMENTS (CONTINUED) JUNE 30, 1994 (UNAUDITED)
PRINCIPAL
SHORT-TERM INVESTMENTS-1.9% AMOUNT VALUE
------------ --------------
COMMERCIAL PAPER; Ford Motor Credit Corp.,
4.223%, 7/5/1994
(cost $900,000)................ $ 900,000 $ 900,000
=============
TOTAL INVESTMENTS (cost $48,608,943) ............................. 99.3% $47,860,653
======== =============
CASH AND RECEIVABLES (NET)........................................ .7% $ 357,860
======== =============
NET ASSETS................................................... 100.0% $48,218,513
======== =============
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, 1994, this security amounted to
$673,500 or 1.4% of net assets.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1994 (UNAUDITED)
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $48,608,943)-see statement...................................... $47,860,653
Cash.................................................................... 18,000
Dividends and interest receivable....................................... 571,079
Receivable for shares of Beneficial Interest subscribed................. 31,517
Prepaid expenses........................................................ 37,991
Due from administrator.................................................. 9,155
-------------
48,528,395
LIABILITIES:
Payable for shares of Beneficial Interest redeemed...................... $261,392
Accrued expenses........................................................ 48,490 309,882
------------ ----------
NET ASSETS ................................................................ $48,218,513
===========
REPRESENTED BY:
Paid-in capital......................................................... $48,477,256
Accumulated undistributed investment income-net......................... 378,976
Accumulated undistributed net realized gain on investments.............. 110,571
Accumulated net unrealized (depreciation) on investments-Note 3......... (748,290)
-------------
NET ASSETS at value......................................................... $48,218,513
===========
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.01 par value shares of Beneficial Interest authorized) 3,868,021
===========
Class B Shares
(unlimited number of $.01 par value shares of Beneficial Interest authorized) 64,522
===========
NET ASSET VALUE per share:
Class A Shares ($47,428,805 / 3,868,021 shares)......................... $12.26
=======
Class B Shares ($789,708 / 64,522 shares)............................... $12.24
=======
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1994 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME:
INCOME:
Interest.............................................................. $ 805,062
Cash dividends (net of $2,485 foreign taxes withheld at source)....... 754,743
------------
TOTAL INCOME...................................................... $ 1,559,805
EXPENSES:
Investment advisory fee-Note 2(a)..................................... 163,045
Administration fee-Note 2(a).......................................... 75,252
Shareholder servicing costs-Note 2(b,c)............................... 93,272
Legal fees............................................................ 42,791
Prospectus and shareholders' reports-Note 2(b)........................ 19,455
Auditing Fees......................................................... 16,007
Registration fees..................................................... 14,582
Custodian fees........................................................ 8,441
Trustees' fees and expenses-Note 2(d)................................. 2,941
Distribution fee (Class B shares)-Note 2(b)........................... 1,634
Miscellaneous......................................................... 4,204
------------
441,624
Less-expense reimbursement from Adviser and Administrator due
to undertaking-Note 2(a).......................................... 314,571
------------
TOTAL EXPENSES.................................................. 127,053
------------
INVESTMENT INCOME-NET........................................... 1,432,752
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized gain on investments-Note 3................................. $ 41,522
Net unrealized (depreciation) on investments............................ (3,733,466)
------------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS............... (3,691,944)
------------
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...................... $(2,259,192)
============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, 1994
1993 (UNAUDITED)
--------------- -------------
<S> <C> <C>
OPERATIONS:
Investment income-net............................................ $ 2,500,971 $ 1,432,752
Net realized gain on investments................................. 625,561 41,522
Net unrealized appreciation (depreciation) on investments for the period 1,377,749 (3,733,466)
--------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 4,504,281 (2,259,192)
--------------- -------------
NET EQUALIZATION CREDITS-Note 1(e)................................... 59,053 2,562
--------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares................................................. (2,506,116) (1,156,902)
Class B shares................................................. --- (9,793)
Net realized gain on investments:
Class A shares................................................. (674,754) ---
Class B shares................................................. --- ---
--------------- -------------
TOTAL DIVIDENDS............................................ (3,180,870) (1,166,695)
--------------- -------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares................................................. 17,738,182 3,790,177
Class B shares................................................. --- 814,043
Dividends reinvested:
Class A shares................................................. 2,955,407 809,841
Class B shares................................................. --- 5,389
Cost of shares redeemed:
Class A shares................................................. (4,752,158) (5,363,355)
Class B shares................................................. --- ---
--------------- -------------
INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 15,941,431 56,095
--------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS.................. 17,323,895 (3,367,230)
NET ASSETS:
Beginning of period.............................................. 34,261,848 51,585,743
--------------- -------------
End of period (including undistributed investment income-net:
$110,357 in 1993 and $378,976 in 1994)......................... $51,585,743 $48,218,513
================ =============
</TABLE>
<TABLE>
<CAPTION>
SHARES
--------------------------------------------------------
CLASS A CLASS B
---------------------------------------- ---------------
YEAR ENDED SIX MONTHS ENDED PERIOD ENDED
DECEMBER 31, JUNE 30, 1994 JUNE 30, 1994
1993 (UNAUDITED) (UNAUDITED)(1)
----------- ------------ -----------
<S> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold.................................. 1,371,296 295,517 64,088
Shares issued for dividends reinvested....... 226,486 64,165 434
Shares redeemed.............................. (365,489) (426,218) ---
----------- ------------ -----------
NET INCREASE (DECREASE) IN SHARES OUTSTANDING 1,232,293 (66,536) 64,522
========== =========== ============
(1) From February 8, 1994 (commencement of initial offering) to June 30, 1994.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
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 the Fund's financial statements.
CLASS A SHARES CLASS B SHARES
------------------------------------------------------------------ ---------------
SIX MONTHS ENDED PERIOD ENDED
YEAR ENDED DECEMBER 31, JUNE 30, 1994 JUNE 30, 1994(1)
----------------------------------------------
PER SHARE DATA: 1989 1990 1991 1992 1993 (UNAUDITED) (UNAUDITED)
------ ------ ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period................ $10.66 $11.54 $10.79 $12.56 $12.68 $13.11 $13.05
------ ------ ------ ------ ------ ------- -------
INVESTMENT OPERATIONS:
Investment income-net...... .88 .86 .83 .79 .72 .36 .24
Net realized and unrealized gain
(loss) on investments.... 1.10 (.54) 1.77 .26 .61 (.92) (.83)
------ ------ ------ ------ ------ ------- -------
TOTAL FROM INVESTMENT
OPERATIONS........... 1.98 .32 2.60 1.05 1.33 (.56) (.59)
------ ------ ------ ------ ------ ------- -------
DISTRIBUTIONS:
Dividends from investment
income-net............... (.89) (.88) (.83) (.77) (.72) (.29) (.22)
Dividends from net realized
gain on investments...... (.21) (.19) -- (.16) (.18) -- --
------ ------ ------ ------ ------ ------- -------
TOTAL DISTRIBUTIONS...... (1.10) (1.07) (.83) (.93) (.90) (.29) (.22)
------ ------ ------ ------ ------ ------- -------
Net asset value, end of period $11.54 $10.79 $12.56 $12.68 $13.11 $12.26 $12.24
======= ====== ====== ====== ====== ======= =======
TOTAL INVESTMENT RETURN (2) 19.08% 2.94% 24.87% 8.68% 10.70% (4.29%)(3) (4.53%)(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets............... -- -- -- .02% .39% .25%(3) .54%(3)
Ratio of net investment income to
average net assets....... 7.74% 7.71% 7.04% 6.24% 5.54% 2.83%(3) 2.02%(3)
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) 2.96% 2.58% 2.16% 1.86% 1.26% .62%(3) .49%(3)
Portfolio Turnover Rate.... 49.46% 29.97% 26.02% 22.14% 16.40% 9.20%(3) 9.20%(3)
Net Assets, end of period
(000's Omitted).......... $7,407 $8,950 $14,038 $34,262 $51,586 $47,429 $790
(1) From February 8, 1994 (commencement of initial offering) to June 30, 1994.
(2) Exclusive of sales load.
(3) Not annualized.
See notes to financial statements.
</TABLE>
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.
On October 1, 1993 the Fund's Board of Trustees classified the Fund's
existing shares into Class A shares and authorized an unlimited number of
$.01 par value Class B shares. The Fund began offering both Class A and Class
B shares on February 8, 1994. 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 at the time of redemption 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.
(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 are readily available and are representative of the bid
side of the market in the judgement of the Service 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. 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, 1994, the Board of Trustees declared a cash dividend of $.074
per share with respect to the Class A shares (consisting of $.005 from
long-term capital gains and $.069 from investment income-net) and a cash
dividend of $.066 per share with respect to Class B shares (consisting of
$.005 from long-term capital gains and .061 from investment income-net)
payable on July 1, 1994 (ex-dividend date) to shareholders of record as of
the close of business on June 30, 1994.
FIRST PRAIRIE DIVERSIFIED ASSET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(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 applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income taxes.
(E) EQUALIZATION: Prior to February 8, 1994, the Fund followed the
accounting practice known as "equalization" by which a portion of the amounts
received on issuances and paid on redemptions of Fund shares was allocated to
undistributed investment income-net so that undistributed investment
income-net per share is unaffected by Fund shares issued or redeemed.
Effective February 8, 1994, with the commencement of the initial offering of
Class B shares, the Fund ceased following the accounting practice of
equalization.
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 21/2% of the first $30 million, 2% of the next $70 million and 11/2%
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 .50
of 1% average daily net assets. Pursuant to such undertaking, the Adviser and
the Administrator reimbursed the Fund $163,045 and $151,526, respectively.
First Chicago Investment Services, Inc., an affiliate of the Adviser,
retained $22,216 during the six months ended June 30, 1994 from commissions
earned on sales of the Fund's Class A shares.
No amounts were retained by the Distributor during the period ended June
30, 1994 from contingent deferred sales charges imposed upon redemptions of
the Series' Class B shares.
(B) Under the Distribution Plan ("Class B Distribution Plan") adopted
pursuant to Rule 12b-1 under the Act, effective February 8, 1994, the Fund
pays for advertising, marketing and distributing Class B shares, at an annual
rate of .75 of 1% of the value of the Fund's Class B shares average daily net
assets. Under the Distribution Plan, the Fund may make payments to Service
Agents, including FCIS 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.
FIRST PRAIRIE DIVERSIFIED ASSET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
Prior to February 8, 1994, the Fund's Service Plan ("prior Service Plan")
provided that the Fund pay for 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 Advisor, 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 Funds
average daily net assets. The prior Service Plan also provided 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 fiscal year.
During the period ended June 30, 1994, $16,654 was charged to the Fund
pursuant to the prior Service Plan and $1,634 was charged pursuant to the
Class B Distribution Plan.
(C) Under the Shareholder Services Plan, effective February 8, 1994, the
Fund pays Service Agents (which may include the Adviser, the Administrator
and the Distributor), at an annual rate of up to .25 of 1% of the value of
the Fund's average daily net assets of Class A and Class B shares for
servicing shareholder accounts. 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. For the period
ended June 30, 1994, $48,287 and $545 were charged to the Class A and Class B
shares, respectively, pursuant to the Shareholder Services Plan.
(D) 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.
(E) On December 5, 1993, Dreyfus entered into an Agreement and Plan of
Merger (the "Merger Agreement") providing for the merger of Dreyfus with a
subsidiary of Mellon Bank Corporation ("Mellon").
Following the merger, it is planned that Dreyfus will be a direct
subsidiary of Mellon Bank, N.A. Closing of this merger is subject to a number
of contingencies, including receipt of certain regulatory approvals and
approvals of the stockholders of Dreyfus and of Mellon. The Merger is
expected to occur in August 1994, but could occur later.
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, 1994
amounted to $11,683,286 and $4,270,771, respectively.
At June 30, 1994, accumulated net unrealized depreciation on investments
was $748,290, consisting of $2,547,012 gross unrealized appreciation and
$3,295,302 gross unrealized depreciation.
At June 30, 1994, 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).
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FIRST PRAIRIE
DIVERSIFIED ASSET FUND
144 Glenn Curtiss Boulevard
Uniondale, NY 11556
Investment Adviser
THE FIRST NATIONAL BANK
OF CHICAGO
Three First National Plaza
Chicago, IL 60670
Administrator
THE DREYFUS CORPORATION
200 Park Avenue
New York, NY 10166
Distributor
DREYFUS SERVICE CORPORATION
200 Park Avenue
New York, NY 10166
Custodian
THE BANK OF NEW YORK
110 Washington Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
THE SHAREHOLDER SERVICES
GROUP, INC.
P.O. Box 9671
Providence, RI 02940
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 372/367SA946
FIRST
PRAIRIE
DIVERSIFIED
ASSET FUND
SEMI-ANNUAL REPORT
JUNE 30, 1994
