LETTER TO SHAREHOLDERS
Dear Shareholder:
Thank you for your investment in the First Prairie Diversified Asset
Fund. In what has been a trying year for income-oriented investments, we
appreciate your continued confidence.
1994 was the worst year in decades for the bond market. During the
calendar year 1994, the Federal Reserve Board increased interest rates six
times, and the widely followed Lehman Brothers Government/Corporate Bond
Index provided a return of -3.51%.* The stock market did not fare much
better, with the Standard & Poor's 500 Composite Stock Price Index posting a
return of 1.31%.** In this environment, the First Prairie Diversified Asset
Fund, Class A shares, produced a total return of -1.92% with a distribution
rate of 5.68% per share for the fiscal year ended December 31, 1994. Class B
Shares, which were outstanding from February 8, 1994 through December 2,
1994, produced a total return of -3.13% for the period, with an annualized
distribution rate of 5.45% per share.
As we mentioned in past reports, we were anticipating a rise in interest
rates during 1994, and we substantially reduced the Fund's bond holdings and
portfolio duration in the Fall of 1993. While this helped to mitigate the
effect of rising interest rates, your Fund -- consistent with its primary
objective to maximize current income -- still held as of year-end a
significant portion of its holdings in fixed-income securities. The
allocation of assets as of year-end was as follows:
Bonds and Notes 33%
Convertible Bonds and Preferred Stock 19%
Common Stocks 37%
Cash and Cash Equivalents 11%
In terms of the common stock holdings of your Fund, the Electric Utilities
and Real Estate Investment Trust components of the
portfolio performed poorly due to the rising interest rates. On the positive
side, our large (but recently reduced) holdings in Health Care and Drugs
substantially helped Fund performance.
Our outlook for this year is that the Fed will continue to raise
short-term interest rates. As a result, the economy is beginning to respond
with slower growth. We expect that corporate profits will rise more slowly in
1995, after an excellent 1994. We are also witnessing meaningful increases in
dividends and expect this trend to continue this year. In view of this
outlook, we currently expect only moderate returns for common stocks, and
continue to have relatively short durations in our bond portfolio. Going
forward, we plan to add opportunistically to bonds at high real interest rate
levels, and continue to pursue attractive convertibles for good income and
appreciation potential.
DISCUSSION OF THE EXPECTED MERGER WITH PRAIRIE MANAGED ASSETS INCOME FUND
On February 14, 1995, the shareholders of First Prairie Diversified Asset
Fund approved the transfer of the Fund's assets to Prairie Managed Assets
Income Fund, a series of the newly-formed investment company named Prairie
Funds. In exchange for the Fund's assets, the Fund will receive and
distribute to its shareholders shares of Prairie Managed Assets Income Fund.
This exchange is expected to become effective on or about March 6, 1995.
Change can sometimes be confusing, and we would like you to understand
fully why this merger is taking place and how it will affect you.
After the exchange, your Fund will be known as "Prairie Managed Assets
Income Fund." We are in the process of changing the name of all former First
Prairie funds to Prairie Funds to underscore the broadening of our fund
family to a total of 18 funds. You may already have noticed that the Fund is
now being listed under "Prairie Funds" in the newspapers. Also, we felt
that "Managed Assets Income Fund" more clearly conveys the investment
objective of the Fund to maximize current income using an asset allocation
strategy.
While the investment objectives of the Fund will stay the same--to
maximize current income, with capital appreciation as a secondary goal--the
management policies of the Fund have been broadened to permit the Fund to
invest in securities of both domestic and foreign issuers. This will allow
the Fund to take advantage of a broader range of investment opportunities,
while providing greater diversification potential.
I am pleased to announce that Claude Erb, Managing Director of Research
and Asset Allocation for First Chicago Investment Management Company, will be
joining me as comanager of the Fund when the exchange becomes effective. He
has over 13 years of investment experience and will focus primarily on the
international components of the portfolio and overall allocation decisions
across asset classes.
Some of you called to ask why we were asking for your proxy vote to
approve the exchange. As a shareholder of a mutual fund, you have the legal
right to vote on many important matters affecting the management of the Fund.
Thus, the exchange with the new Fund and the resulting changes described
above could only be implemented if a majority of the Fund's shareholders gave
their approval.
We thank you for approving the merger and we appreciate the confidence
you have expressed in us. We plan to continue to earn your trust by pursuing
strategies which will maintain a high level of income and the opportunity for
capital growth.
Sincerely,
(Arthur P. Krill Signature Logo)
Arthur P. Krill
Portfolio Manager
February 1, 1995
New York, N.Y.
* 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.
**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 U.S. stock market performance.
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.
Distribution rate per share is based upon dividends per share
declared from net investment income during the period, divided by the
maximum offering price at the end of the period in the case of Class A
shares, or the net asset value at the end of the period in the case of
Class B shares, both adjusted for capital gain distributions.
FIRST PRAIRIE DIVERSIFIED ASSET FUND DECEMBER 31, 1994
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN FIRST PRAIRIE
DIVERSIFIED ASSET FUND,
CLASS A SHARES WITH THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX AND
THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX
[Exhibit A]
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS ACTUAL AGGREGATE TOTAL RETURN
- ------------------------------------------------------------ ------------------------------------------------------------
CLASS A CLASS B
- ------------------------------------------------------------ ------------------------------------------------------------
% Return Reflecting
% Return Applicable Contingent
Reflecting % Return Deferred Sales
% Return Without Maximum Initial Assuming No Charge Upon
PERIODS ENDED 12/31/94 Sales Charge Sales Charge (4.5%) Redemption Redemption*
- ----------------------- ---------------- ------------------ ------------ ------------------
<S> <C> <C> <C> <C> <C>
1 Year (1.92%) (6.35%) From Inception (2/8/94)
5 Years 8.69 7.70 to December 2, 1994 (3.13%) (6.84%)
From Inception (1/23/86) 10.16 9.59
</TABLE>
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Class A shares of First
Prairie Diversified Asset Fund on 1/23/86 (Inception Date) to a $10,000
investment made in the Standard & Poor's 500 Composite Stock Price Index and
the Lehman Brothers Government/Corporate Bond Index on that date. For
comparative purposes, the value of the Indices on 1/31/86 are used as the
beginning values on 1/23/86. All dividends and capital gain distributions are
reinvested.
The Fund's performance shown in the graph takes into account the maximum
initial sales charge on Class A Shares and all other applicable fees and
expenses.
Source: Lipper Analytical Services, Inc. Reflects the reinvestment of
income dividends and, where applicable, capital gains distributions. The
Standard & Poor's 500 Composite Stock Price Index is a widely accepted,
unmanaged index of overall stock market performance.
Source: Lehman Brothers. The 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.
Neither Index takes into account charges, fees and other expenses.
Further information relating to Fund performance, including expense
reimbursements, if applicable, is contained in the Condensed Financial
Information section of the Prospectus and elsewhere in this report.
* Maximum contingent deferred sales charge for Class B shares is 4%
and is reduced to 0% after six years.
<TABLE>
<CAPTION>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF INVESTMENTS DECEMBER 31, 1994
PRINCIPAL
BONDS AND NOTES--33.1% AMOUNT VALUE
------------- -------------
<S> <C> <C>
AUTO-RELATED-1.0% Hertz, Sub. Notes,
6.625%, 2000......................... $ 500,000 $ 455,683
-------------
BANKING--1.9% Citicorp, Sub. Notes:
9.75%, 1999.......................... 250,000 262,642
8.625%, 2002......................... 350,000 348,300
Westpac Banking, Sub. Deb.,
9.125%, 2001......................... 250,000 255,456
-------------
866,398
-------------
CONSUMER Time Warner, Notes,
GROWTH STAPLES--1.1% 7.95%, 2000 500,000 477,608
-------------
ENERGY--3.4% Burlington Resources, Notes,
8.50%, 2001.......................... 250,000 248,120
Coastal, Sr. Deb.,
10.25%, 2004......................... 500,000 537,500
Occidental Petroleum, Sr. Notes,
11.125%, 2010........................ 400,000 460,961
Shell Canada, Deb.,
7.375%, 1999......................... 250,000 243,302
-------------
1,489,883
-------------
FINANCIAL--11.2% Barclays American, Notes,
9.125%, 1997......................... 750,000 763,027
Chemical Banking, Sub. Notes,
7.625%, 2003......................... 500,000 468,570
Discover Credit Card, Med.-Term Notes,
8.37%, 1999.......................... 250,000 248,364
General Motors Acceptance:
Med.-Term Notes,
8.65%, 1996...................... 400,000 402,968
Notes:
7.75%, 1997...................... 250,000 245,606
7%, 2000......................... 500,000 465,042
International Lease Finance, Notes,
8.35%, 1998.......................... 500,000 498,878
KFW International Finance,
Guaranteed Notes,
8.85%, 1999.......................... 250,000 255,821
NationsBank, Sub. Notes,
8.125%, 2002......................... 350,000 338,455
Progressive, Notes,
6.60%, 2004.......................... 500,000 435,698
Salomon, Notes,
7.50%, 2003.......................... 500,000 448,483
Wells Fargo & Co., Sub. Notes,
8.375%, 2002......................... 400,000 390,780
-------------
4,961,692
-------------
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1994
PRINCIPAL
BONDS AND NOTES (CONTINUED) AMOUNT VALUE
------------- -------------
FOODS & BEVERAGES--5.3% Grand Metro Investment, Guaranteed Deb.,
9%, 2011............................. $ 250,000 $ 260,188
Philip Morris Cos., Notes:
8.625%, 1999......................... 500,000 502,281
7.125%, 2004......................... 250,000 223,475
RJR Nabisco Holdings:
Guaranteed Notes,
8.30%,1999....................... 750,000 720,817
Notes,
8.625%, 2002..................... 700,000 651,362
-------------
2,358,123
-------------
RETAIL--.6% May Department Stores, Med.-Term Notes,
9.45%, 1999.......................... 250,000 257,518
-------------
STEEL--1.0% USX-Marathon Group, Notes,
6.375%, 1998......................... 500,000 464,393
-------------
TECHNOLOGY--1.0% Digital Equipment, Notes,
8.625%, 2012......................... 500,000 424,010
-------------
UTILITIES--2.1% Commonwealth Edison,
First Mortgage, Ser. 81,
8.625%, 2022......................... 250,000 229,039
Long Island Lighting, Deb.,
9%, 2022............................. 300,000 247,194
Pacific Bell, Notes,
7%, 2004............................. 500,000 459,549
-------------
935,782
-------------
U.S. GOVERNMENT Federal National Mortgage Association:
& AGENCIES--4.5% 7.60%, 1997 400,000 397,704
8.35%, 1999.......................... 500,000 506,469
U.S. Treasury Notes:
8.50%, 1997.......................... 100,000 101,500
8.125%, 1998......................... 500,000 503,985
8%, 2001............................. 500,000 504,062
-------------
2,013,720
-------------
TOTAL BOND AND NOTES
(cost $15,633,508)................... $14,704,810
=============
EQUITY-RELATED SECURITIES--56.5%
(COMMON STOCKS AND CONVERTIBLE SECURITIES)
COMMON STOCKS--37.3% SHARES VALUE
------------- -------------
AUTO RELATED--1.4% General Motors 14,886 $ 628,933
-------------
BANKING--4.6% Bank of Boston 21,000 543,375
First Union............................ 21,000 868,875
NationsBank............................ 13,912 627,779
-------------
2,040,029
-------------
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1994
EQUITY-RELATED SECURITIES (CONTINUED)
(COMMON STOCKS AND CONVERTIBLE SECURITIES)
COMMON STOCKS (CONTINUED) SHARES VALUE
------------- -------------
DRUGS--3.8% Bristol-Myers Squibb 8,000 $ 463,000
Johnson & Johnson...................... 8,000 438,000
Pfizer................................. 10,000 772,500
-------------
1,673,500
-------------
ENERGY--3.8% Atlantic Richfield 5,000 508,750
British Petroleum PLC, A.D.S........... 9,000 718,875
Texaco................................. 7,500 449,063
-------------
1,676,688
-------------
FOODS & BEVERAGES--2.6% Philip Morris Cos 20,000 1,150,000
-------------
HOSPITAL-RELATED--3.6% National Health Investors 61,000 1,593,625
-------------
INSURANCE--2.0% Aon 28,500 912,000
-------------
REAL ESTATE--2.1% Amli Residential Properties 50,000 937,500
-------------
UTILITIES--13.4% British Telecommunications, A.D.R 10,000 601,250
Detroit Edison......................... 20,000 522,500
Entergy................................ 20,000 437,500
GTE.................................... 26,000 789,750
Long Island Lighting................... 33,000 507,375
PECO Energy............................ 25,000 612,500
Sprint................................. 20,000 552,500
Texas Utilities........................ 30,000 960,000
United Illuminating.................... 14,000 413,000
U.S. West.............................. 15,000 534,375
-------------
5,930,750
-------------
TOTAL COMMON STOCKS.................... 16,543,025
-------------
CONVERTIBLE PREFERRED STOCKS--11.9%
AUTOMOTIVE--3.4% Ford Motor, Ser. A, Cum., $4.20 9,000 828,000
General Motors, Ser. C, Cum., $3.25.... 12,000 688,500
-------------
1,516,500
-------------
BANKING--4.3% BankAmerica, Ser. G, Cum., $3.25 7,000 344,750
Citicorp, Cum., $1.22.................. 25,000 478,125
Citicorp, Cum., $5.375................. 6,000 (a) 695,625
National City, Cum., $4.00............. 6,000 375,000
-------------
1,893,500
-------------
ENERGY--.9% Snyder Oil, Ser. A, Cum., $1.50 20,000 402,500
-------------
FINANCE--1.1% First USA, Cum., 6.25% 15,000 489,375
-------------
INDUSTRIAL--.9% WHX, Ser. B, Cum., $3.75 10,000 427,500
-------------
INSURANCE--1.3%. Conseco, Ser. D, Cum., $3.25 14,000 570,500
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS..... 5,299,875
-------------
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF INVESTMENTS (CONTINUED) DECEMBER 31, 1994
PRINCIPAL
CONVERTIBLE SUBORDINATED DEBENTURES--7.3% AMOUNT VALUE
------------- -------------
CONSUMER Time Warner,
GROWTH STAPLES--1.1% 8.75%, 2015 $ 498,000 470,610
-------------
DRUGS--1.0% IVAX,
6.50%, 2001.......................... 500,000 (a) 432,500
-------------
ENERGY--.7% Swift Energy,
6.50%, 2003.......................... 300,000 300,375
-------------
HOSPITAL MANAGEMENT--1.2% Genesis Health Ventures,
6%, 2003............................. 400,000 552,500
-------------
INDUSTRIAL--3.3% Seagate Technology,
5%, 2003............................. 500,000 515,000
Starbucks,
4.50%, 2003.......................... 500,000 510,625
Toll Bros.,
4.75%, 2004.......................... 650,000 443,625
-------------
1,469,250
-------------
TOTAL CONVERTIBLE SUBORDINATED DEBENTURES 3,225,235
-------------
TOTAL EQUITY-RELATED SECURITIES
(cost $25,262,929)................... $25,068,135
=============
SHORT-TERM INVESTMENTS--7.0%
COMMERCIAL PAPER: Prudential Funding:
5%, 1/3/1995......................... 830,000 830,000
5%, 1/6/1995......................... 2,270,000 2,270,000
-------------
TOTAL SHORT-TERM INVESTMENTS
(cost $3,100,000).................... $ 3,100,000
=============
TOTAL INVESTMENTS (cost $43,996,437) ................................ 96.6% $42,872,945
====== =============
CASH AND RECEIVABLES (NET) ......................................... 3.4% $ 1,494,229
====== =============
NET ASSETS.................................................................. 100.0% $44,367,174
====== =============
NOTE TO STATEMENT OF INVESTMENTS;
(a) Securities exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
December 31, 1994, these securities amounted to $1,128,125 or 2.5% of net
assets.
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1994
ASSETS:
<S> <C> <C>
Investments in securities, at value
(cost $43,996,437)_see statement...................................... $42,872,945
Cash.................................................................... 434,586
Receivable for investment securities sold............................... 1,032,601
Dividends and interest receivable....................................... 556,532
Receivable for shares of Beneficial Interest subscribed................. 26,018
Prepaid expenses........................................................ 20,378
-------------
44,943,060
LIABILITIES:
Due to Adviser.......................................................... $ 18,901
Due to Administrator.................................................... 8,724
Payable for investment securities purchased............................. 338,831
Payable for shares of Beneficial Interest redeemed...................... 159,463
Accrued expenses........................................................ 49,967 575,886
---------- -------------
NET ASSETS ................................................................ $44,367,174
============
REPRESENTED BY:
Paid-in capital......................................................... $45,097,680
Accumulated undistributed investment income_net......................... 133,309
Accumulated undistributed net realized gain on investments.............. 259,677
Accumulated net unrealized (depreciation) on investments_Note 3......... (1,123,492)
-------------
NET ASSETS at value applicable to 3,658,679 Class A outstanding shares of
Beneficial Interest, equivalent to $12.13 per share
(unlimited number of $.01 par value shares authorized).................. $44,367,174
============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1994
INVESTMENT INCOME:
INCOME:
<S> <C> <C>
Interest.............................................................. $ 1,627,737
Cash dividends (net of $6,207 foreign taxes withheld at source)....... 1,494,420
------------
TOTAL INCOME...................................................... $ 3,122,157
EXPENSES:
Investment advisory fee_Note 2(a)..................................... 317,027
Administration fee_Note 2(a).......................................... 146,321
Shareholder servicing costs_Note 2(b,c)............................... 176,945
Legal fees............................................................ 54,768
Registration fees..................................................... 35,635
Auditing fees......................................................... 27,442
Prospectus and shareholders' reports_Note 2(b)........................ 24,862
Custodian fees........................................................ 16,960
Trustees' fees and expenses_Note 2(d)................................. 7,349
Distribution fee (Class B shares)_Note 2(b)........................... 4,752
Miscellaneous......................................................... 9,464
------------
821,525
Less_expense reimbursement from Adviser and Administrator due
to undertakings_Note 2(a,b,c)..................................... 508,365
------------
TOTAL EXPENSES.................................................. 313,160
------------
INVESTMENT INCOME--NET.......................................... 2,808,997
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized gain on investments_Note 3................................. $ 210,291
Net unrealized (depreciation) on investments............................ (4,108,668)
------------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS............... (3,898,377)
------------
NET (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS...................... $(1,089,380)
============
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1994
------------- -------------
<S> <C> <C>
OPERATIONS:
Investment income_net................................................... $ 2,500,971 $ 2,808,997
Net realized gain on investments........................................ 625,561 210,291
Net unrealized appreciation (depreciation) on investments for the year.. 1,377,749 (4,108,668)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS... 4,504,281 (1,089,380)
------------- -------------
NET EQUALIZATION CREDITS--Note 1(e)......................................... 59,053 2,562
------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income_net:
Class A shares........................................................ (2,506,116) (2,753,670)
Class B shares........................................................ ___ (34,937)
Net realized gain on investments:
Class A shares........................................................ (674,754) (19,340)
Class B shares........................................................ ___ (323)
------------- -------------
TOTAL DIVIDENDS................................................... (3,180,870) (2,808,270)
------------- -------------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares........................................................ 17,738,182 5,577,372
Class B shares........................................................ ___ 1,147,965
Dividends reinvested:
Class A shares........................................................ 2,955,407 2,307,933
Class B shares........................................................ ___ 28,168
Cost of shares redeemed:
Class A shares........................................................ (4,752,158) (11,257,088)
Class B shares........................................................ ___ (1,127,831)
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS 15,941,431 (3,323,481)
============= =============
TOTAL INCREASE (DECREASE) IN NET ASSETS......................... 17,323,895 (7,218,569)
NET ASSETS:
Beginning of year....................................................... 34,261,848 51,585,743
------------- -------------
End of year (including undistributed investment income_net:
$110,357 in 1993 and $133,309 in 1994)................................ $51,585,743 $44,367,174
============= =============
</TABLE>
<TABLE>
<CAPTION>
SHARES
--------------------------------------------------
CLASS A CLASS B
----------------------------- -------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
DECEMBER 2,
-----------------------------
1993 1994 1994(1)
------------- ------------- -------------
<S> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................. 1,371,296 441,901 90,904
Shares issued for dividends reinvested.................. 226,486 185,739 2,281
Shares redeemed......................................... (365,489) (903,518) (93,185)(2)
------------- ------------- -------------
NET INCREASE (DECREASE) IN SHARES OUTSTANDING..... 1,232,293 (275,878) ___
============= ============= ==============
- ----------------------------
(1) From February 8, 1994 (commencement of initial offering) to December 2, 1994.
(2) Includes 91,228 shares converted to Class A shares on December 2, 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 year indicated. This
information has been derived from the Fund's financial statements.
CLASS A SHARES--NOTE 1 CLASS B SHARES
--------------------------------------------------- ------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
---------------------------------------------------
PER SHARE DATA: 1990 1991 1992 1993 1994 DECEMBER 2, 1994(1)
------- ------- ------- ------- ------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.... $11.54 $10.79 $12.56 $12.68 $13.11 $13.05
------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income_net................. .86 .83 .79 .72 .73 .51
Net realized and unrealized gain (loss) on
investments......................... (.54) 1.77 .26 .61 (.98) (.91)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS.... .32 2.60 1.05 1.33 (.25) (.40)
------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment income_net.. (.88) (.83) (.77) (.72) (.72) (.54)
Dividends from net realized gain on
investments......................... (.19) -- (.16) (.18) (.01) (.01)
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS................. (1.07) (.83) (.93) (.90) (.73) (.55)
------ ------ ------ ------ ------ ------
Conversion to Class A shares.......... -- -- -- -- -- (12.10)(2)
------ ------ ------ ------ ------ ------
Net asset value, end of year.......... $10.79 $12.56 $12.68 $13.11 $12.13 --
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN (3)............... 2.94% 24.87% 8.68% 10.70% (1.92%) (3.13%)(4)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets -- -- .02% .39% .63% 1.21%(4)
Ratio of net investment income to average
net assets.......................... 7.71% 7.04% 6.24% 5.54% 5.77% 4.10%(4)
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)...... 2.58% 2.16% 1.86% 1.26% 1.04% .96%(4)
Portfolio Turnover Rate............... 29.97% 26.02% 22.14% 16.40% 28.69% 28.69%
Net Assets, end of year (000's Omitted) $8,950 $14,038 $34,262 $51,586 $44,367 --
- ----------------------------
(1) From February 8, 1994 (commencement of initial offering) to December 2, 1994.
(2) On December 2, 1994 the Fund terminated its offering of Class B shares and converted such shares to Class A.
(3) Exclusive of sales load.
(4) Not annualized.
See notes to financial statements.
</TABLE>
FIRST PRAIRIE DIVERSIFIED ASSET FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940 ("Act")
as a diversified open-end management investment company. The First National
Bank of Chicago ("Adviser") serves as the Fund's investment adviser. The
Dreyfus Corporation ("Administrator") provides certain administrative
services to the Fund-see Notes 2(a) and 4. Dreyfus Service Corporation, a
wholly-owned subsidiary of the Administrator, acted as the exclusive
distributor of the Fund's shares, until August 24, 1994. Effective August 24,
1994, the Administrator became a direct subsidiary of Mellon Bank, N.A.
On August 24, 1994, Premier Mutual Fund Services, Inc. (the"Distributor")
was engaged as the Fund's distributor. The Distributor, located at One
Exchange Place, Boston, Massachusetts 02109, is a wholly-owned subsidiary of
Institutional Administration Services, Inc., a provider of mutual fund
administration services, the parent company of which is Boston Institutional
Group, Inc. (see Note 4).
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 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 included the
services offered to and the expenses borne by each Class and certain voting
rights. On December 2, 1994 the Fund terminated its offering of Class B
shares and converted such shares to Class A.
(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.
(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
FIRST PRAIRIE DIVERSIFIED ASSET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
the applicable provisions of the Internal Revenue Code, and to make
distributions of taxable income sufficient to relieve it from substantially
all Federal income and excise 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 issuance 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 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, 1994
through September 12, 1994 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 an annual rate of .50 of 1% average daily net assets and
thereafter had undertaken through September 29, 1994 to reduce the Advisory
fee and 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. The Adviser and Administrator has currently
undertaken from September 30, 1994 to waive receipt of Advisory fee and
Administration fee to the extent that the Fund's aggregate annual expenses
exceed 1% of the Funds average daily net assets. Pursuant to such
undertakings, the Adviser and the Administrator reimbursed the Fund $259,250
and $119,654, respectively.
First Chicago Investment Services, Inc. ("FCIS"), an affiliate of the
Adviser, retained $80,008 during the year ended December 31, 1994 from
commissions earned on sales of the Fund's Class A shares.
No amounts were retained by the Distributor during the year ended
December 31, 1994 from contingent deferred sales charges imposed upon
redemptions of the Fund's 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 (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 year ended December 31, 1994, $16,654 was charged to the Fund
pursuant to the prior Service Plan. From February 8, 1994 through December 2,
1994 $4,752 was charged pursuant to the Class B Distribution Plan, of which
$4,752 was waived pursuant to an undertaking.
(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 share 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 year
ended December 31, 1994, $123,125 and $1,584 were charged to the Class A and
Class B shares, respectively, pursuant to the Shareholder Services Plan, of
which all was waived pursuant to an undertaking.
(D) Prior to August 24, 1994, certain officers and trustees of the Fund
were "affiliated persons," as defined in the Act, of the Adviser or the
Dreyfus Service Corporation. 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, 1994
amounted to $13,385,118 and $12,913,372, respectively.
At December 31, 1994, accumulated net unrealized depreciation on
investments was $1,123,492, consisting of $1,861,358 gross unrealized
appreciation and $2,984,850 gross unrealized depreciation.
At December 31, 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).
NOTE 4--SUBSEQUENT EVENTS:
As of January 1, 1995, the Fund's investment adviser is First Chicago
Investment Management Company ("FCIMCO"), a newly formed registered
investment adviser and a wholly-owned subsidiary of the Adviser. Effective
January 31, 1995, the Fund entered into a new administration agreement with
FCIMCO. In addition, effective January 31, 1995, FCIMCO entered into a master
sub-administration agreement with Concord Holding Corporation ("Concord")
pursuant to which FCIMCO will pay Concord a portion of its administration fee
in consideration of Concord's providing administrative services to the
Fund. From January 17, 1995 through January 31, 1995, Concord also served as
the Fund's administrator. The Fund has agreed to pay FCIMCO a monthly advisory
and administration fee at the annual rate of .65 and .15 of 1%, of
the value of the Fund's average daily net assets, respectively.
The Fund entered into a new distribution agreement with Concord Financial
Group, Inc., a wholly-owned subsidiary of Concord which became effective
January 17, 1995.
FIRST PRAIRIE DIVERSIFIED ASSET FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
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, 1994, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years
in the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1994 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 financial highlights
referred to above present fairly, in all material respects, the financial
position of First Prairie Diversified Asset Fund, at December 31, 1994, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated years, in conformity with generally
accepted accounting principles.
(Ernst & Young LLP Signature Logo)
New York, New York
February 10, 1995
IMPORTANT TAX INFORMATION (UNAUDITED)
For Federal tax purposes the Fund hereby designates $.005 per share as a
long-term capital gain distribution paid on July 1, 1994.
FIRST PRAIRIE
DIVERSIFIED ASSET FUND
200 PARK AVENUE
NEW YORK, NY 10166
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
CUSTODIAN
THE BANK OF NEW YORK
90 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. 372/367AR9412
FIRST
(First Prairie Logo)
PRAIRIE
DIVERSIFIED
ASSET FUND
ANNUAL REPORT
DECEMBER 31, 1994
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN FIRST PRAIRIE DIVERSIFIED ASSET FUND
WITH THE STANDARD & POOR'S 500 COMPOSITE STOCK PRICE
INDEX AND THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND
INDEX
EXHIBIT A:
_________________________________________________________________
| | STANDARD |LEHMAN BROTHERS| FIRST PRAIRIE |
| PERIOD | & POOR'S 500 | GOVERNMENT/ | DIVERSIFIED |
| | COMPOSITE STOCK| CORPORATE | ASSET FUND |
| | PRICE INDEX * | BOND INDEX** |(Class A Shares) |
|-------------| ---------------|---------------|-----------------|
| 1/23/86 | 10,000 | 10,000 | 9,551 |
| 12/31/86 | 11,800 | 11,494 | 10,849 |
| 12/31/87 | 12,420 | 11,757 | 10,662 |
| 12/31/88 | 14,476 | 12,649 | 12,558 |
| 12/31/89 | 19,055 | 14,449 | 14,954 |
| 12/31/90 | 18,462 | 15,646 | 15,394 |
| 12/31/91 | 24,075 | 18,169 | 19,222 |
| 12/31/92 | 25,907 | 19,547 | 20,890 |
| 12/31/93 | 28,513 | 21,703 | 23,126 |
| 12/31/94 | 28,889 | 20,941 | 22,683 |
|----------------------------------------------------------------|
*Source: Lipper Analytical Services, Inc.
**Source: Lehman Brothers
