As filed with the Securities and Exchange Commission on May __, 1996
Registration No.__
==============================================================================
U.S. Securities and Exchange Commission
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ___ Post-Effective Amendment No. ___
(Check appropriate box or boxes)
Exact Name of Registrant as Specified in Charter:
THE WOODWARD FUNDS
Area Code and Telephone Number:
(313) 259-0729
Address of Principal Executive Offices:
c/o NBD Bank
900 Tower Drive
P. O. Box 7058
Troy, MI 48007-7058
Name and Address of Agent for Service:
W. Bruce McConnel, III
Drinker Biddle & Reath
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
Approximate Date of Proposed Public Offering: As soon as practicable after the
Registration Statement becomes effective under the Securities Act of 1933.
Calculation of Registration Fee under the Securities Act of 1933: No filing
fee is required because an indefinite number of shares have previously been
registered on Form N-1A (Registration Nos. 33-13990, 811-5148) pursuant to
Rule 24f-2 under the Investment Company Act of 1940. The Registrant is filing
as an exhibit to this Registration Statement a copy of its earlier declaration
under Rule 24f-2. Pursuant to Rule 429, this Registration Statement relates to
the aforesaid Registration Statement on Form N-1A.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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THE WOODWARD FUNDS
FORM N-14
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(a)
Item No. Heading
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Part A
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1. Beginning of Registration Statement
and Outside Front Cover Page................ Cover Page
2. Beginning and Outside
Back Cover Page............................. Table of Contents
3. Fee Table, Synopsis Information
and Risk Factors............................ Summary; Comparative Fee Table;
Comparison of Investment Policies and Risk
Factors; Appendix III
4. Information About the Transaction........... Summary; Information Relating to the
Proposed Reorganization; Comparison of
Investment Policies and Risk Factors;
Appendix III
5. Information About the Registrant............ Summary; Comparison of Investment Policies
and Risk Factors; Additional Information
About Woodward; Additional Information
About Prairie; Appendix III
5A. Management's Discussion of
Fund Performance............................ Appendix II
6. Information About the Company
Being Acquired.............................. Summary; Comparison of Investment Policies
and Risk Factors; Additional Information
About Woodward; Additional Information
About Prairie; Appendix III
7. Voting Information.......................... Summary; Information Relating to Voting
Matters
8. Interest of Certain Persons
and Experts................................. Additional Information About Woodward;
Additional Information About Prairie
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9. Additional Information Required
for Reoffering by Persons Deemed
to be Underwriters.......................... Inapplicable
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Part B
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10. Cover Page................................. Statement of Additional Information Cover
Page
11. Table of Contents........................... Table of Contents
12. Additional Information
About the Registrant........................ Statement of Additional Information of
Woodward dated April 15, 1996*
13. Additional Information
About the Company Being
Acquired.................................... Statement of Additional Information of Prairie
Funds dated April 11, 1996*
14. Financial Statements........................ Pro Forma Financial Statements
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Part C
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Items 15-17. Information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C of this Registration Statement.
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* Incorporated herein by reference thereto.
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PRAIRIE FUNDS
Three First National Plaza
Chicago, Illinois 60670
Dear Prairie International Equity Fund Shareholder:
The Board of Trustees of the Prairie Funds has called a Special
Meeting of Shareholders on July 10, 1996 concerning matters that are important
to you.
As you may be aware, First Chicago Corporation recently
completed a merger with NBD Bancorp, Inc. ("NBD") on November 30, 1995. As a
result, the new organization has since taken steps to consolidate the mutual
fund investment advisory activities of both bank holding companies. First
Chicago Investment Management Company currently provides investment advisory
services to the Prairie Funds. NBD Bank currently provides investment advisory
services to The Woodward Funds.
As the next step in the consolidation process, you are asked to
consider and approve a proposed Agreement and Plan of Reorganization (the
"Reorganization Agreement"). The Reorganization Agreement provides that the
Prairie International Equity Fund will transfer substantially all its assets
and liabilities to the existing Woodward International Equity Fund.
The transaction is expected to occur on or after August 24,
1996. The combined investment company will be renamed Pegasus Funds sometime
after the completion of the transaction.
What do these changes mean to you?
o Although the number of shares you hold may change, the value of the
shares you hold at the time of the Reorganization will not change as a
result of the transaction, and will be the same immediately after the
Reorganization.
o The Reorganization will be tax-free and will not involve any sales
loads, commissions or transaction charges.
o Following the Reorganization, the investment objective and policies of
the Woodward International Equity Fund will be substantially similar
to the current investment objective and policies of your Prairie
International Equity Fund, except as stated in the enclosures.
o Shareholders will benefit from improved shareholder servicing and the
elimination of redundant administration costs to the fund.
As a result, the Board of Trustees of the Prairie
Funds, have voted in favor of the proposed Reorganization
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Agreement and strongly encourage that you vote "For" the proposal as well.
The Reorganization Agreement and other related matters are
discussed in detail in the enclosed materials, which you should read
carefully.
Voting Instructions
Enclosed is a proxy card for the meeting. We urge you to read
the enclosed proxy statement and to vote by completing, signing and returning
the enclosed proxy ballot form(s) in the prepaid envelope. Please vote and
return each proxy card you receive. Every vote counts.
First Chicago NBD Corporation is pleased with the opportunities
the Reorganization will provide to better serve our mutual fund investors. If
you have any questions, your account manager will be happy to assist you.
Otherwise, you may call us at (800) ___-____. Thank you for your cooperation.
Sincerely,
Mark A. Dillon
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PRAIRIE FUNDS
Three First National Plaza
Chicago, IL 60670
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on July 10, 1996
To Prairie International Equity Fund Shareholders:
NOTICE IS HEREBY GIVEN THAT a Special Meeting of the Shareholders
("Shareholders") of the Prairie International Equity Fund of Prairie Funds
("Prairie") will be held at the offices of BISYS Fund Services, Inc., 3435
Stelzer Road, Columbus, Ohio, on July 10, 1996 at 9:00 a.m. (Eastern time) for
the following
purposes:
ITEM 1. To consider and act upon a proposal to approve an
Agreement and Plan of Reorganization (the
"Reorganization Agreement") and the transactions
contemplated thereby, including (a) the transfer
of substantially all of the assets and liabilities
of the Prairie International Equity Fund (the
"Prairie Fund") to the Woodward International
Equity Fund (the "Woodward Fund") in exchange for
Class A, Class B or Class I shares, as applicable,
of the Woodward Fund; and (b) the distribution of
such Woodward Fund shares to the shareholders of
the Prairie Fund according to their respective
interests.
ITEM 2. To transact such other business as may properly come
before the Special Meeting or any adjournment(s)
thereof.
The proposed reorganization and related matters are described in the
attached Combined Prospectus/Proxy Statement. Appendix I to the Combined
Prospectus/Proxy Statement is a copy of the Reorganization Agreement.
Shareholders of record as of the close of business on April 11, 1996
are entitled to notice of, and to vote at, the Special Meeting or any
adjournment(s) thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE EACH ACCOMPANYING PROXY CARD WHICH IS
BEING SOLICITED BY PRAIRIE'S BOARD OF TRUSTEES. THIS IS
IMPORTANT TO ENSURE A QUORUM AT THE SPECIAL MEETING. PROXIES MAY
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BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO PRAIRIE A
WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING
THE SPECIAL MEETING AND VOTING IN PERSON.
-----------------------------
George O. Martinez
Secretary
____________ __, 1996
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COMBINED PROSPECTUS/PROXY STATEMENT
Dated ____________ __, 1996
PRAIRIE FUNDS
Three First National Plaza
Chicago, Illinois 60670
(800) 370-9446
THE WOODWARD FUNDS
900 Tower Drive
P. O. Box 7058
Troy, Michigan 48007-7058
(800) 688-3350
This Combined Prospectus/Proxy Statement is furnished in connection
with the solicitation of proxies by the Board of Trustees of Prairie Funds
("Prairie") in connection with a Special Meeting (the "Meeting") of
Shareholders ("Shareholders") to be held on July 10, 1996 at 9:00 a.m.
(Eastern time) at the offices of BISYS Fund Services, Inc., 3435 Stelzer Road,
Columbus, Ohio at which Shareholders will be asked to consider and approve a
proposed Agreement and Plan of Reorganization dated May ___, 1996 (the
"Reorganization Agreement"), by and between Prairie and The Woodward Funds
("Woodward") and the matters contemplated therein. A copy of the
Reorganization Agreement is attached as Appendix I.
Prairie and Woodward are each open-end, management investment
companies. First Chicago Investment Management Company ("FCIMCO") currently
provides investment advisory services to Prairie. NBD Bank ("NBD") currently
provides investment advisory services to Woodward. In reviewing the proposed
reorganization (the "Reorganization"), the Prairie Board considered, among
other things, the recently completed merger of First Chicago Corporation, the
parent company of FCIMCO, and NBD Bancorp, Inc., the parent company of NBD;
the effect of such merger on Prairie; the fact that FCIMCO and NBD would serve
as co-advisers to Woodward after the Reorganization; the recommendations of
FCIMCO and NBD with respect to the proposed consolidation of Prairie and
Woodward; the fact that the Reorganization would constitute a tax-free
reorganization; and the fact that the interests of Shareholders would not be
diluted as a result of the Reorganization.
The Reorganization Agreement provides that the Prairie International
Equity Fund ("Prairie Fund") will transfer substantially all its assets and
liabilities to the existing Woodward International Equity Fund ("Woodward
Fund"). The Woodward Fund will be the surviving portfolio for purposes of
maintaining the financial statements and performance history in the
post-reorganization portfolio.
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In exchange for the transfer of these assets and liabilities, Woodward
will issue shares in the Woodward Fund to the Prairie Fund. The transaction is
expected to occur on or after August 24, 1996.
The Prairie Fund has three classes of shares outstanding. The Woodward
Fund currently has two classes of shares outstanding; however, in connection
with the Reorganization, the Woodward Fund will adopt a share class structure
substantially similar to Prairie's. Holders of each class of shares of the
Prairie Fund will receive the corresponding class of shares of the Woodward
Fund.
The Prairie Fund will make liquidating distributions of the Woodward
Fund shares to the Shareholders of the Prairie Fund, so that a holder of a
class of shares in the Prairie Fund will receive a class of shares (as
described herein) of the Woodward Fund with the same aggregate net asset value
as the Shareholder had in the Prairie Fund immediately before the transaction.
Following the Reorganization, Shareholders of the Prairie Fund will be
Shareholders of the Woodward Fund, and Prairie will be terminated under state
law and the Investment Company Act of 1940, as amended (the "1940 Act").
The Woodward Fund currently is conducting investment operations as
described in this Combined Prospectus/Proxy Statement.
This Combined Prospectus/Proxy Statement sets forth the information
that a Shareholder of the Prairie Fund should know before voting on the
Reorganization Agreement (and related transactions), and should be retained
for future reference. The Prospectus relating to the shares of the Woodward
Fund, which describes the Fund's operations, accompanies this Combined
Prospectus/Proxy Statement. Additional information is set forth in the
Statement of Additional Information relating to the Woodward Fund and this
Combined Prospectus/Proxy Statement, which are dated April 15, 1996
and ___________, 1996, respectively, and in the Prospectus and Statement of
Additional Information, each dated April 11, 1996 relating to Prairie. Each
of these documents is on file with the Securities and Exchange Commission
(the "SEC"), and is available without charge upon oral or written request
by writing or calling either Prairie or Woodward at the respective addresses
or telephone numbers indicated above.
This Combined Prospectus/Proxy Statement constitutes the Proxy
Statement of Prairie for the meeting of its Shareholders, and Woodward's
Prospectus for the shares of the Woodward Fund that have been registered with
the SEC and are to be issued in connection with the Reorganization.
This Combined Prospectus/Proxy Statement is expected to first be sent
to Shareholders on or about ___________, 1996.
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THE SECURITIES OF THE WOODWARD FUND 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 COMBINED PROSPECTUS/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROSPECTUS/PROXY
STATEMENT AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND,
IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY PRAIRIE OR WOODWARD.
SHARES OF THE WOODWARD FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, FIRST NATIONAL BANK OF CHICAGO OR NBD BANK OR ANY OF THEIR
AFFILIATES. SHARES OF THE WOODWARD FUND ARE NOT FEDERALLY INSURED BY,
GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENTAL AGENCY. INVESTMENT RETURN AND PRINCIPAL VALUE WILL VARY
AS A RESULT OF MARKET CONDITIONS OR OTHER FACTORS SO THAT SHARES OF THE
WOODWARD FUND, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. AN INVESTMENT IN THE WOODWARD FUND INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
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TABLE OF CONTENTS
Page
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Summary....................................................................
Proposed Reorganization............................................
Reasons for Reorganization.........................................
Federal Income Tax Consequences....................................
Overview of the Prairie Fund and
Woodward Fund....................................................
Voting Information.................................................
Risk Factors.......................................................
Information Relating to the Proposed Reorganization........................
Description of the Reorganization Agreement........................
Capitalization.....................................................
Federal Income Tax Consequences....................................
Comparison of Investment Policies and Risk Factors.........................
Prairie International Equity Fund and Woodward
International Equity Fund .......................................
Investment Policies and Risks -- General...........................
Investment Limitations.............................................
Purchase and Redemption Information, Exchange
Privileges, Distribution and Pricing.............................
Other Information..................................................
Information Relating to Voting Matters.....................................
General Information................................................
Shareholder and Board Approvals....................................
Appraisal Rights...................................................
Quorum.............................................................
Annual Meetings....................................................
Additional Information about Woodward......................................
Additional Information about Prairie.......................................
Litigation.................................................................
Financial Statements.......................................................
Other Business.............................................................
Shareholder Inquiries......................................................
Appendix I--Agreement and Plan of Reorganization........................I-1
Appendix II - Manager's Discussion of Fund Performance -
the Woodward Fund..............................................II-1
Appendix III - Shareholders Transactions and Services.................III-1
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SUMMARY
The following is a summary of certain information relating to the
Reorganization, the parties thereto and the related transactions, and is
qualified by reference to the more complete information contained elsewhere in
this Combined Prospectus/Proxy Statement, the Prospectuses and Statements of
Additional Information of the Prairie and Woodward Funds, and the
Reorganization Agreement attached to this Combined Prospectus/Proxy Statement
as Appendix I. The Prairie Fund's Annual Report to Shareholders may be
obtained free of charge by calling 1-800-370-9446 or writing Three First
National Plaza, Chicago, Illinois 60670. The Woodward Fund's Annual Report to
Shareholders may be obtained free of charge by calling 1-800-688-3350 or
writing P.O. Box 7058, Troy, Michigan 48007-7058.
Proposed Reorganization. Based upon their evaluation of the relevant
information presented to them, and in light of their fiduciary duties under
federal and state law, Prairie's and Woodward's Boards, including their
members who are not "interested persons" within the meaning of the 1940 Act,
have unanimously determined that the proposed Reorganization is in the best
interests of their Funds' respective Shareholders and that the interests of
such Shareholders will not be diluted as a result of such Reorganization.
The Cover Page and pages ___-___ hereof summarize the proposed
Reorganization.
PRAIRIE'S BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" APPROVAL OF THE REORGANIZATION AGREEMENT.
Reasons for the Reorganization. The primary reason for the Reorganization is
the recently completed merger between NBD Bancorp, Inc., the parent of NBD,
and First Chicago Corporation, the parent of FCIMCO. This Reorganization
presents the opportunity to combine the separate Prairie and Woodward mutual
fund families into a single, larger consolidated group. NBD and FCIMCO have
recommended that the Prairie Fund be reorganized as described in this Combined
Prospectus/Proxy Statement. In light of this recommendation, after
consideration of the reasons therefor and the proposed operations of the
combined fund after the Reorganization, and in consideration of the fact that
the Reorganization will be tax-free and will not dilute the interests of
Prairie Shareholders, the Board of Trustees of Prairie has authorized the
Agreement and Plan of Reorganization and recommended approval of the
Reorganization by Shareholders.
Federal Income Tax Consequences. Drinker Biddle & Reath, independent outside
counsel to Woodward and to its Board of Trustees, will issue an opinion (based
on certain assumptions) as of the effective time of the Reorganization that
the transaction will not give rise to the recognition of income, gain or loss
for federal income tax purposes to the Prairie Fund, the Woodward
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Fund or their respective shareholders. See "Information Relating
to the Proposed Reorganization -- Federal Income Tax
Consequences."
Overview of the Prairie Fund and Woodward Fund. The investment objectives and
policies of the Prairie Fund and Woodward Fund are similar. There are no
material differences between the investment objectives and policies except as
noted below.
The Prairie Fund's investment objective is to seek to achieve
long-term capital appreciation. The Woodward Fund's investment objective is to
achieve long-term capital appreciation and, secondarily, to produce current
income. The Funds invest primarily in equity securities of foreign issuers.
See "Comparison of Investment Policies and Risk Factors" below and the
Prairie Fund and Woodward Fund Prospectuses, which are incorporated by
reference herein, for a more detailed description of the similarities and
differences between the investment objectives and policies of the Prairie Fund
and the Woodward Fund.
Certain Arrangements with Service Providers - The Prairie Fund. FCIMCO serves
as investment adviser for the Prairie Fund and is entitled to receive an
advisory fee from it, computed daily and paid monthly, at the annual rate of
0.80% of the Fund's average daily net assets. The actual advisory fee rate for
the period ended December 31, 1995 (after waivers) was 0.47%.
Pursuant to the Prairie investment advisory contract, FCIMCO provides
the day-to-day management of the Prairie Fund's investments, subject to the
overall authority of the Board and in conformity with applicable state law and
the stated policies of the Fund. FCIMCO is responsible for making investment
decisions for the Prairie Fund, placing purchase and sale orders and providing
research, statistical analysis and continuous supervision of the Fund's
investments.
FCIMCO has engaged ANB-Investment Management and Trust Company
("ANB-IMC"), a wholly-owned subsidiary of American National Bank and Trust
Company, which in turn is a wholly-owned subsidiary of First Chicago NBD
Corporation, to serve as sub-investment adviser to the Prairie Fund under a
sub-advisory agreement between FCIMCO and ANB-IMC. Subject to the supervision
and approval of FCIMCO, the sub-adviser provides investment advisory
assistance and the day-to-day management of the Prairie Fund's investments, as
well as investment research and statistical information. ANB-IMC provides the
services under this agreement in accordance with the Prairie Fund's investment
objective, policies, and limitations. For the services provided as the Prairie
Fund's sub-adviser, ANB-IMC is entitled to receive a fee from FCIMCO, computed
daily and paid monthly, at the annual rate of 0.40% of the Fund's average
daily net assets.
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FCIMCO also serves as the Prairie Fund's administrator pursuant to a
separate administration agreement. For its services as administrator, FCIMCO
is entitled to receive a fee, calculated daily and paid monthly, at the annual
rate of 0.15% of the average daily net assets of the Prairie Fund. For the
period ended December 31, 1995, FCIMCO received administration fees (after fee
waivers) at the effective annual rate of 0.15% of the average daily net assets
of the Prairie Fund. FCIMCO has engaged Concord Holding Corporation
("Concord"), a wholly-owned subsidiary of The BISYS Group, Inc., to assist it
in providing certain administrative services for the Prairie Fund. FCIMCO, and
not the Prairie Fund, bears the fees for Concord's services as
sub-administrator.
Primary Funds Service Corp. ("PFSC") serves as Prairie's
transfer agent. It is anticipated that on or about July 12, 1996, First
Data Investor Services Group, Inc. will begin providing transfer agency
services to each Prairie Portfolio.
The Bank of New York provides custodial services to the Prairie Fund.
It is anticipated that on or about July 26, 1996, NBD will begin
providing custodial services to the Prairie Fund.
Concord Financial Group, Inc. ("CFG") is the principal
underwriter and distributor for Prairie. CFG is a wholly-owned
subsidiary of Concord.
Prairie has adopted a Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act (the "Prairie 12b-1 Plan"). Under the Prairie 12b-1 Plan, the
Class B Shares of the Prairie Fund have agreed to pay CFG for advertising,
marketing and distributing shares of the Fund at an aggregate annual rate of
0.75% of the average daily net asset value of the Fund's outstanding Class B
Shares. CFG may pay institutions, including FCIMCO, ANB-IMC and their
affiliates (including First NBD Investment Services, Inc.), certain banks,
securities dealers and other industry professionals such as investment
advisers, accountants and estate planning firms (collectively, "Service
Agents") for distribution services to Class B shareholders. CFG determines the
amounts, if any, to be paid to Service Agents under the Prairie 12b-1 Plan and
the basis on which such payments are made. The fees payable under the Prairie
12b-1 Plan are payable without regard to actual expenses incurred.
For the fiscal period ended December 31, 1995, Prairie paid fees to
CFG pursuant to the Prairie 12b-1 Plan of $379, which represents 0.62%
of the average net assets of the Prairie Fund's Class B Shares during that
period.
Prairie has adopted a Shareholder Services Plan for the Prairie Fund's
Class A and Class B Shares (each a "Shareholder Services Plan"). Under each
Shareholder Services Plan, the Prairie Fund pays CFG for the provision of
certain administrative support services to the shareholders of these shares a
fee at the annual rate of 0.25% of the value of the average daily net assets
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of such Class A or Class B Shares. The services provided may include personal
services related 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. Under the
Shareholder Services Plan, CFG may make payments to Service Agents in respect
of those services. FCIMCO, ANB-IMC, NBD, First National Bank of Chicago and
their affiliates may act as Service Agents and receive fees under the
Shareholder Services Plan.
For the period ended December 31, 1995, the Prairie Fund paid fees to
CFG pursuant to each Shareholder Services Plan of $3,057 and $109, of
the Class A and Class B Shares, respectively. Such payments represented 0.20%
and 0.18% of the average net assets of the Class A and Class B Shares,
respectively.
Certain Arrangements with Service Providers - Woodward Fund. NBD currently
serves as investment adviser to the Woodward Fund and is entitled to receive
an advisory fee, computed daily and paid monthly, at the annual rate of 0.75%
of the Fund's average daily net assets. The actual advisory fee rate for the
year ended December 31, 1995 (after waivers) was .67%.
As investment adviser, NBD currently manages the investments of the
Woodward Fund, makes decisions with respect to and places orders for all
purchases and sales of the Fund's securities, and maintains certain records
relating to such purchases and sales.
In connection with the Reorganization, Woodward expects to present a
proposal to its shareholders to approve a new advisory agreement. Pursuant to
the new agreement, FCIMCO and NBD have jointly agreed to provide day-to-day
management of the Woodward Fund's investments as co-adviser, subject to the
overall authority of Woodward's Board and in conformity with Massachusetts law
and the stated policies of the Fund. FCIMCO and NBD have advised Woodward's
Board that investment management for the Woodward Fund will be provided by
NBD's investment management staff. Under the new advisory agreement, FCIMCO
and NBD will be jointly entitled to receive a fee from the Woodward Fund,
computed daily and payable monthly, at the annual rate of .80% of the Fund's
average daily net assets.
Under the current advisory agreement, NBD also provides the Woodward
Fund with various administrative services without additional compensation. In
connection with the Reorganization, it is expected that Woodward will enter
into a new administration agreement with NBD, FCIMCO and BISYS Fund Services
("BISYS"), under which these parties will jointly agree to provide
administrative services to Woodward as co-administrators, subject to the
overall authority of Woodward's Board in accordance with Massachusetts law.
BISYS is a wholly-owned subsidiary of The BISYS Group, Inc. and is affiliated
with Concord, the current sub-administrator of Prairie. This new
administration
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arrangement is expected to be effective at the time of the Reorganization. For
their services as co-administrators, NBD, FCIMCO and BISYS will be jointly
entitled to receive a fee, computed daily and paid monthly, at the annual rate
of 0.15% of the average daily net assets of the Woodward Fund.
See "Management--Investment Adviser, Custodian and Transfer Agent" in
Woodward's Prospectus accompanying this Combined Prospectus/Proxy Statement,
which is incorporated herein by reference, for additional information on NBD.
For additional information on FCIMCO, see "Management of the Funds -
Investment Adviser and Administrator" in Prairie's Prospectus, which is
incorporated herein by reference.
NBD also receives compensation as Woodward's Custodian and Transfer
Agent under separate agreements. As Custodian and as Transfer Agent for the
Woodward Fund, NBD (i) maintains separate accounts in the name of the Fund,
(ii) collects and makes disbursements of money on behalf of the Fund, (iii)
issues and redeems shares of the Fund, (iv) collects and receives all income
and other payments and distributions on account of the portfolio securities of
the Fund, (v) addresses and mails all communications by Woodward to its
shareholders, including reports to shareholders, dividend and distribution
notices and proxy materials for any meeting of shareholders, (vi) maintains
shareholder accounts, (vii) makes periodic reports to the Board of Trustees
concerning Woodward's operations, and (viii) maintains on-line computer
capability for determining the status of shareholder accounts.
For its services as Custodian, NBD is also entitled to receive a fee
from the Woodward Fund at the following annual rate based on the aggregate
market value of the Fund's portfolio securities NBD holds as Custodian:
.00125% of the first $100 million; .0010% of the next $100 million; .0008% of
the next $100 million; .0007% of the next $100 million; and .0006% of the
balance over $400,000,000. NBD is also entitled to receive an annual account
fee of $1,000 and $1.54 per month per asset held in the Fund. In addition,
NBD, as Custodian, is entitled to receive $50 for each cash statement and
inventory statement and $13 for each pass-through certificate payment, $35 for
each option transaction requiring escrow receipts and $20 for all other
security transactions. NBD is also entitled to foreign transaction charges of
$150 per transaction in Argentina, Brazil and Chile; $100 per transaction in
Taiwan or Thailand; $75 per transaction in Denmark, Finland, Italy, Malaysia,
Mexico, Norway, Singapore, South Korea, Spain, Sweden and Switzerland; $65 per
transaction in Australia, Austria, Belgium, Hong Kong and New Zealand; $40 per
transaction in France, Germany, Ireland and the Netherlands. In addition to
the service fees above, the Trust will reimburse the Custodian for its
out-of-pocket expenses including, but not limited to, postage, telephone,
telex, facsimile, Federal Express and Federal Reserve wire fees, incurred on
behalf of the Trust.
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<PAGE>
For its services as Transfer Agent, NBD is also entitled to receive a
minimum annual fee from the Woodward Fund of $11,000, $15 annually per account
from the Fund for the preparation of statements of account, and $1.00 for each
confirmation of purchase and redemption transactions. Charges for providing
computer equipment and maintaining a computerized investment system are
expected to approximate $350 per month for the Fund.
In connection with the Reorganization, it is expected that First Data
Investor Services Group, Inc. ("First Data") will replace NBD as Woodward's
Transfer Agent.
Woodward's shares are currently offered on a continuous basis through
First of Michigan Corporation ("FoM") and Essex National Securities, Inc.
("Essex" and collectively with FoM as the "Co-Distributors").
Woodward has adopted a Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act (the "Woodward 12b-1 Plan"). Under the Woodward 12b-1 Plan,
shares of the Woodward Fund bear expenses of distribution fees payable in an
amount not to exceed 0.35% of the value of the Trust's average daily net
assets to finance activities primarily intended to result in the sale of
Woodward shares. Additionally, Woodward has adopted a Shareholder Servicing
Plan under which Woodward may enter into servicing agreements with banks and
financial institutions, including NBD, FCIMCO, the First National Bank of
Chicago ("FNBC") and their affiliates ("Shareholder Servicing Agents")
requiring such institutions to provide shareholder administrative support
services for their customers who beneficially own Woodward Fund Class A
Shares. For these services, the Woodward Fund may pay fees at an annual rate
of up to 0.25% of the average daily net asset value of the Class A Shares held
by Shareholder Servicing Agents for the benefit of their customers. At
Woodward's option, it may also reimburse such agents for their out-of-pocket
expenses. See "Management-Sponsors and Co-Distributors," "Service and
Distribution Plan" and "Shareholder Servicing Plan" in the Woodward Prospectus
accompanying this Combined Prospectus/Proxy Statement, which is incorporated
herein by reference, for additional information on the Co-Distributors, the
Woodward 12b-1 Plan and the Shareholder Servicing Plan.
For the fiscal year ended December 31, 1995, Woodward paid fees
pursuant to the Woodward 12b-1 Plan of $1,289,788, which represented 2% of
the Woodward Funds' average net assets during that period.
For the fiscal year ended December 31, 1995, Woodward paid fees
pursuant to the Shareholder Servicing Plan of $376,700, which represented
1% of the Woodward Funds' average net assets during that period.
In connection with the Reorganization, it is expected that the
Distribution Agreement with FoM and Essex will be terminated
-6-
<PAGE>
and the Woodward 12b-1 Plan and Shareholder Servicing Plan will be cancelled.
At the time of the Reorganization, BISYS will enter into a distribution
agreement to act as sponsor and principal underwriter for Woodward.
Additionally, Woodward is expected to adopt a share class structure
substantially similar to Prairie's, a Distribution Plan pursuant to Rule 12b-1
for its Class B Shares (the "New 12b-1 Plan"), and a Shareholder
Administrative Services Plan for its Class A and Class B Shares (the "New
Shareholder Services Plan"). Class I Shares will bear no 12b-1 or shareholder
servicing fees.
The New 12b-1 Plan and Shareholder Services Plan will be substantially
similar to those currently in place for Prairie. Under the New 12b-1 Plan, the
Class B Shares of the Woodward Fund will bear the expense of distribution fees
payable to BISYS at an annual rate of up to 0.75% of the average daily net
asset value of the Fund's outstanding Class B Shares to finance activities
which are primarily intended to result in the sale of Class B Shares. BISYS
may enter into agreements with Service Agents which provide distribution
services to Class B shareholders. Services provided by such Service Agents
will include advertising, marketing and distributing Class B Shares.
Additionally, BISYS may use payments under the New 12b-1 Plan to defray the
costs of commissions paid to Service Agents for the sale of Class B Shares.
The New 12b-1 Plan is a "compensation" plan as opposed to a
"reimbursement" type plan. Accordingly, payments by Class B Shares under the
New 12b-1 Plan will be based on the stated fee rather than on the specific
amounts expended by BISYS for distribution purposes. BISYS may be able to
recover such amounts or may earn a profit from payments made by Class B Shares
of Woodward under the New 12b-1 Plan.
Under the New Shareholder Services Plan, the Woodward Fund will pay
BISYS for the provision of certain services to the shareholders of Class A and
Class B Shares a fee at the annual rate of up to 0.25% of the value of the
average daily net assets of such shares. The services provided may include
personal services related to shareholder accounts, such as answering
shareholder inquiries regarding the Woodward Fund, providing beneficial
shareholders reports and other information, and providing services related to
the maintenance of shareholder accounts. Under the New Shareholder Services
Plan, BISYS may make payments to Service Agents in respect of those services.
NBD, FCIMCO, FNBC, ANB-IMC and their affiliates may act as Service Agents and
receive fees under the New Shareholder Services Plan.
Comparative Fee and Expense Tables. The tables below show (i) information
regarding the fees and expenses paid by each class of shares of the Prairie
Fund and by each class of shares of the Woodward Fund as of their most recent
fiscal years or periods, restated as of April 11, 1996 and April 15, 1996 to
reflect
-7-
<PAGE>
expenses the Prairie Fund and the Woodward Fund, respectively, expect to incur
during the current fiscal year, and (ii) estimated fees and expenses on a pro
forma basis giving effect to the proposed Reorganization.
-8-
<PAGE>
<TABLE>
<CAPTION>
Prairie Woodward International
International Equity Equity Pro Forma
Fund Fund Combined
-------------------------------- --------------------- ---------------------------
Class A Class B Class I Class A Class I Class A Class B Class I
Shares Shares Shares Shares Shares Shares Shares Shares
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases 4.50% None None 5.00% None 5.00% None None
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering price) None None None None None None None None
Deferred Sales Load (as a
percentage of original purchase
price or redemption proceeds,
as applicable) None+ 5.00% None None None None+ 5.00% None
Redemption Fee (as a percentage
of amount redeemed, if
applicable) None None None None None None None None
Exchange Fee None None None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Advisory Fees .80% .80% .80% .75% .75% .80% .80% .80%
12b-1 Fees None .75% None .004% .004% None .75% None
Other Expenses
(after fee waivers and/or
expense reimbursements) .50%(2)(4) .50%(2)(4) .25%(1)(4) .656%(3)(5) .406%(5) .80%(2) .80%(2) .28%(1)
Total Operating Expenses
(after fee waivers and/or
expense reimbursements) 1.30%(6) 2.05%(6) 1.05%(6) 1.41 %(7) 1.16 %(7) 1.60% 2.35% 1.08%
<FN>
- - --------------------------
+ A contingent deferred sales charge of up to 1.00% may be assessed on
certain redemptions of Class A Shares purchased without an initial
sales charge.
(1) Includes administration fees of 0.15%.
(2) Includes administration fees of 0.15% and shareholder servicing fees
of 0.25%.
(3) Includes shareholder servicing fees of 0.25%.
(4) Other Expenses, absent fee waivers and/or expense reimbursements,
would have been 1.16%, 2.28% and 0.58%, respectively, for the Class A,
Class B and Class I Shares of the Prairie Fund.
(5) Other Expenses, absent fee waivers and/or expense reimbursements,
would have been 0.846% and 0.596%, respectively, for the Class A and
Class I Shares of the Woodward Fund.
(6) Absent voluntary waivers, which can be terminated at any time, the
total operating expenses for Class A Shares, Class B Shares and Class
I Shares of the Prairie Fund would have been 1.96%, 3.83% and 1.38%,
respectively.
(7) Absent voluntary waivers, which can be terminated at any time, the
total operating expenses for Class A and Class I Shares of the
Woodward Fund would have been 1.60% and 1.35%, respectively.
</TABLE>
Example: An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return, and (2) redemption at the end of the following
periods:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Prairie International Equity Fund
Class A Shares $58 $84 $113 $195
Class B Shares $71 $94 $130 $210
Class I Shares $11 $33 $ 58 $128
Woodward International Equity Fund
Class A Shares $64 $93 $124 $212
Class I Shares $12 $37 $ 64 $142
Pro Forma Combined
Class A Shares $65 $98 $133 $231
Class B Shares $74 $103 $146 $251
Class I Shares $11 $34 $ 60 $132
</TABLE>
-9-
<PAGE>
Expense Ratios -- Prairie Fund. The following table sets forth (i) the ratios
of operating expenses to average net assets of the Prairie Fund for the period
ended December 31, 1995 (a) after fee waivers and expense reimbursements, and
(b) absent fee waivers and expense reimbursements:
<TABLE>
<CAPTION>
Period Ended December 31, 1995
------------------------------
Ratio of Operating Ratio of Operating
Expenses to Average Expenses to Average
Net Assets After Net Assets Absent
Fee Waivers and Fee Waivers and
Expense Expense
Reimbursements Reimbursements
------------------ ------------------
Prairie Fund
- - ------------
<S> <C> <C>
Class A Shares 1.50% 1.96%
Class B Shares 2.28% 3.83%
Class I Shares 1.05% 1.38%
</TABLE>
Expense Ratios -- Woodward Fund. The following table sets forth (i) the ratios
of operating expenses to average net assets of the Woodward Fund for the
fiscal year ended December 31, 1995 (a) after fee waivers and expense
reimbursements, and (b) absent fee waivers and expense reimbursements:
<TABLE>
<CAPTION>
Fiscal Year Ended December 31, 1995
-----------------------------------
Ratio of Operating Ratio of Operating
Expenses to Average Expenses to Average
Net Assets After Net Assets Absent
Fee Waivers and Fee Waivers and
Expense Expense
Reimbursements Reimbursements
------------------ ------------------
<S> <C> <C>
Woodward Fund 1.16% 1.24%
- - -------------
</TABLE>
-10-
<PAGE>
Expense Caps. Although under no contractual obligation, FCIMCO, NBD
and BISYS have informed Woodward and Prairie that they expect to waive fees
and reimburse expenses for the current fiscal year ending December 31, 1996 to
the extent the total operating expenses applicable to each class of shares of
the Woodward Fund exceed the amount set forth in the table below.
<TABLE>
<CAPTION>
Expense
Post-Reorganization Fund Limitation
------------------------ ----------
<S> <C>
Woodward International Equity Fund
Class A 1.71%
Class B 2.46%
Class I 1.18%
</TABLE>
Voting Information. This Combined Prospectus/Proxy Statement is being
furnished in connection with the solicitation of proxies by Prairie's Board of
Trustees in connection with the Special Meeting of Shareholders to be held at
the offices of BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio, on
Monday, July 10, 1996 at 9:00 a.m. (Eastern time). Only Shareholders of record
at the close of business on April 11, 1996 will be entitled to notice of and
to vote at the Meeting. Each share or fraction thereof is entitled to one vote
or fraction thereof. Shares represented by a properly executed proxy will be
voted in accordance with the instructions thereon, or if no specification is
made, the persons named as proxies will vote in favor of each proposal set
forth in the Notice of Meeting. Proxies may be revoked at any time before they
are exercised by submitting to Prairie a written notice of revocation or a
subsequently executed proxy or by attending the Meeting and voting in person.
For additional information, including a description of the Shareholder vote
required for approval of the Reorganization Agreement and related transactions
contemplated thereby, see "Information Relating to Voting Matters."
Risk Factors. The following discussion highlights the principal risk factors
associated with an investment in the Prairie Fund and the Woodward Fund and is
qualified in its entirety by the more extensive discussion of risk factors set
forth below under "Comparison of Investment Policies and Risk Factors" and
related Prospectuses and Statements of Additional Information which are
incorporated herein by reference.
Because of the similarities of the investment objectives and policies
of the Prairie Fund and the Woodward Fund, management believes that an
investment in the Woodward Fund involves risks that are similar to those of
the Prairie Fund. These investment risks include those typically associated
with investing in a portfolio of equity securities of foreign companies.
There are differences, however, between the Prairie Fund and the
Woodward Fund as noted above under "Summary - Overview of the Prairie Fund and
the Woodward Fund" and below under "Comparison
-11-
<PAGE>
of Investment Policies and Risk Factors." These differences can result in
different risks.
The per share price of the Funds will fluctuate with changes in value
of the investments held by each portfolio. Generally, the market value of debt
securities will vary inversely to changes in prevailing interest rates. The
Funds seek to achieve their investment objectives through investments in
securities of foreign issuers that involve risks not typically associated with
U.S. issuers. They also may invest in debt instruments with the lowest
investment grade rating which are speculative; illiquid instruments; and
certain options, futures and foreign currency transactions. They may engage in
securities lending transactions and in the use of reverse repurchase
agreements that can cause their net asset values to rise or fall faster than
they otherwise would. Reverse repurchase agreements involve the risk that the
market value of the securities sold by a fund may decline below the price of
the securities the fund is obligated to purchase. There is no assurance that
any fund will achieve its investment objective.
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
Prairie has entered into an agreement whereby the Prairie Fund is to
be acquired by the Woodward Fund. While significant provisions of the
Reorganization Agreement are summarized below, this summary is qualified in
its entirety by reference to the Reorganization Agreement, a copy of which is
attached as Appendix I to this Combined Prospectus/Proxy Statement.
Description of the Reorganization Agreement. The assets of the Prairie
Fund will be acquired by the Woodward Fund. The Reorganization Agreement
provides, first, that substantially all of the assets and liabilities of the
Prairie Fund will be transferred to the Woodward Fund. The holders of each
class of shares of the Prairie Fund will receive the class of shares of the
Woodward Fund. The number of each class of shares to be issued by the Woodward
Fund will have an aggregate net asset value equal to the aggregate net asset
value of the corresponding class or classes of shares of the Prairie Fund as
of the regular close of the New York Stock Exchange, currently 4:00 p.m. New
York time, on the business day immediately preceding the transaction.
The Prairie Fund may liquidate a limited number of its holdings in
light of the investment policies of the Woodward Fund and the strategies of
its investment adviser. The transaction costs that will result from such sales
are expected to be minimal.
The Reorganization Agreement provides that Prairie will declare a
dividend or dividends prior to the Reorganization which, together with all
previous dividends, will have the effect of distributing to the Shareholders
of the Prairie Fund all
-12-
<PAGE>
undistributed ordinary income earned and net capital gains realized up to and
including the effective time of the Reorganization.
Following the transfers of assets and liabilities from the Prairie
Fund to the Woodward Fund, and the issuance of shares by the Woodward Fund to
the Prairie Fund, the Prairie Fund will distribute the class of shares of the
Woodward Fund pro rata to the holders of classes of shares of the Prairie Fund
as described above in liquidation of the Prairie Fund. Each holder of a class
of shares of the Prairie Fund will receive an amount of equal value of the
corresponding class of shares of the Woodward Fund, plus the right to receive
any declared and unpaid dividends or distributions. Following the
Reorganization, the registration of Prairie as an investment company under the
1940 Act will be terminated, and Prairie will be terminated under state law.
The stock transfer books of Prairie will be permanently closed after
the Reorganization.
The Reorganization is subject to a number of conditions, including
approval of the Reorganization Agreement and the transactions contemplated
thereby described in this Combined Prospectus/Proxy Statement by the
Shareholders of the Prairie Fund; the receipt of certain legal opinions
described in the Reorganization Agreement; the receipt of certain certificates
from the parties concerning the continuing accuracy of their representations
and warranties in the Reorganization Agreement and other matters; and the
parties' performance in all material respects of their agreements and
undertakings in the Reorganization Agreement. Assuming satisfaction of the
conditions in the Reorganization Agreement, the Reorganizing Transaction is
expected to occur on or after August 24, 1996.
The expenses of the Woodward Fund and of the Prairie Fund incurred in
connection with the Reorganization will be borne by First Chicago NBD
Corporation or its subsidiaries; except that Woodward will bear any related
registration fees payable under the Securities Act of 1933 and state blue sky
laws.
The Reorganization may be abandoned prior to its consummation by the
mutual consent of the parties to the Reorganization Agreement. The
Reorganization Agreement provides further that at any time prior to, or (to
the fullest extent permitted by law) after, the approval of the Reorganization
Agreement by Prairie Shareholders (a) the parties thereto may, by written
agreement approved by their respective Boards of Trustees or authorized
officers and with or without the approval of their respective Shareholders,
amend any of the provisions of the Reorganization Agreement; and (b) either
party may waive any breach by the other party or the failure to satisfy any of
the conditions to its obligations with or without the approval of such party's
Shareholders.
-13-
<PAGE>
Board Consideration. In giving its approval to the Reorganization at
meetings held on December 6, 1995, January 9, 1996 and February 20, 1996, the
Board of Trustees of Prairie considered, primarily, the recent merger between
First Chicago Corporation, the parent company of FCIMCO, and NBD Bancorp,
Inc., the parent company of NBD. This Reorganization presents the opportunity
to combine the separate Prairie and Woodward International Equity Funds into a
single, larger consolidated Fund. Accordingly, FCIMCO and NBD recommended that
the Prairie Fund be reorganized as described in this Combined Prospectus/Proxy
Statement. The Board of Trustees of Prairie considered the recommendation of
FCIMCO and NBD with respect to the proposed consolidation of the Prairie and
Woodward Funds; the investment capabilities of the co-advisers; the
compatibility of the investment objectives and policies of the Prairie Fund
and the Woodward Fund; the improvement of operational efficiencies and
achievement of economies of scale through the consolidation of investment
portfolios that are substantially similar; the management and other fees paid
by the Woodward Fund; the historical and projected expense ratios of the
Woodward Fund as compared to those of the Prairie Fund; the comparative
investment performance of the Prairie Fund and the Woodward Fund; the fact
that the Reorganization would constitute a tax-free reorganization; the fact
that total operating expense ratios, prior to reimbursements, of the Woodward
Fund after the Reorganization were expected to be the same or lower than the
expense ratios of the Prairie Fund prior to the transaction; and that the
interests of Shareholders would not be diluted as a result of the
Reorganization.
After considering the foregoing factors, together with such other
information as they believed to be relevant, Prairie's Trustees unanimously
approved the Reorganization Agreement and directed that it be submitted to
Shareholders for approval.
PRAIRIE'S BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" APPROVAL OF THE REORGANIZATION AGREEMENT.
The Prairie Board of Trustees has not determined what action Prairie
will take in the event the Shareholders of the Prairie Fund fail to approve
the Reorganization Agreement or for any reason the Reorganization is not
consummated. In either such event, the Trustees will consider other
appropriate courses of action, including continuing operations of the Prairie
Fund in its present form.
At meetings held on November 27 and 28, 1995, January 9, 1996 and
February 20, 1996, the Woodward Board of Trustees considered the proposed
Reorganization. Based upon their evaluation of the relevant information
provided to them, and in light of their fiduciary duties under federal and
state law, the Trustees unanimously determined that the proposed
Reorganization is in the best interests of the Woodward Fund and its
shareholders, and that the interests of existing shareholders of
-14-
<PAGE>
the Woodward Fund would not be diluted as a result of the transaction.
Capitalization. Because the Prairie Fund will be combined in the
Reorganization with the Woodward Fund, the total capitalization of the
Woodward Fund after the Reorganization is expected to be greater than the
current capitalization of the Prairie Fund. The following sets forth as of
December 31, 1995, (i) the capitalization of the Prairie Fund and Woodward
Fund and (ii) the pro forma capitalization of the Woodward Fund as adjusted to
give effect to the Reorganization. If consummated, the capitalization of the
Woodward Fund is likely to be different at the effective time of the
Reorganization as a result of daily share purchase and redemption activity in
the Funds.
<TABLE>
<CAPTION>
Woodward
Prairie International
International Equity Pro Forma
Equity Fund Fund Combined
------------- ------------- ---------
<S> <C> <C> <C>
Total Net Assets 104,389,377 107,288,301 211,677,678
Class A Shares 2,749,124 N/A 3,674,486
Class B Shares 192,707 N/A 192,707
Class I Shares 101,447,546 N/A 207,810,485
Single Class Shares N/A 107,288,301 N/A
Shares Outstanding 9,343,629 9,712,891 19,163,186
Class A Shares 246,447 N/A 332,654
Class B Shares 17,292 N/A 17,292
Class I Shares 9,079,890 N/A 18,813,240
Single Class Shares N/A 9,712,891 N/A
Net Asset Value Per Share
Class A Shares $11.16 N/A $11.05
Class B Shares $11.14 N/A $11.14
Class I Shares $11.17 N/A $11.05
Single Class Shares N/A $11.05 N/A
</TABLE>
Federal Income Tax Consequences. Consummation of the Reorganization is subject
to the condition that Prairie and Woodward receive an opinion from Drinker
Biddle & Reath to the effect that for federal income tax purposes: (i) the
transfer of all of the assets and liabilities of the Prairie Fund (except for
a cash reserve in an amount necessary for the discharge of all known and
reasonably anticipated liabilities of the Prairie Fund) to the Woodward Fund
in exchange for shares of the Woodward Fund and liquidating distributions to
Shareholders of the Prairie Fund of the shares of the Woodward Fund so
received, as described in the Reorganization Agreement, will constitute a
reorganization within the meaning of Section 368(a)(1)(C) or Section
368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code"),
and with respect to the Reorganization, the Prairie Fund and Woodward Fund
each will be considered "a party to a reorganization" within the meaning of
Section 368(b) of the Code;
-15-
<PAGE>
(ii) no gain or loss will be recognized by the Prairie Fund as a result of
such transaction; (iii) no gain or loss will be recognized by the Woodward
Fund as a result of such transaction; (iv) no gain or loss will be recognized
by the Shareholders of the Prairie Fund on the distribution to them by Prairie
of shares of any class of the Woodward Fund in exchange for their shares of a
comparable class of the Prairie Fund; (v) the aggregate basis of the Woodward
Fund shares received by a shareholder of the Prairie Fund will be the same as
the aggregate basis of the shareholder's Prairie Fund shares immediately prior
to the Reorganization; (vi) the basis of the Woodward Fund in the assets of
the Prairie Fund received pursuant to the Reorganization will be the same as
the basis of the assets in the hands of the Prairie Fund immediately before
the Reorganization; (vii) a shareholder's holding period for Woodward Fund
shares will be determined by including the period for which the shareholder
held the Prairie Fund shares exchanged therefor, provided that the shareholder
held the Prairie Fund shares as a capital asset; and (viii) the Woodward
Fund's holding period with respect to the assets received in the
Reorganization will include the period for which such assets were held by the
Prairie Fund.
Woodward and Prairie have not sought a tax ruling from the Internal
Revenue Service ("IRS"), but are acting in reliance upon the opinion of
counsel discussed in the previous paragraph. That opinion is not binding on
the IRS and does not preclude the IRS from adopting a contrary position.
Shareholders should consult their own advisers concerning the potential tax
consequences to them, including state and local income taxes.
COMPARISON OF INVESTMENT POLICIES AND RISK FACTORS
The investment objective and policies of the Prairie Fund are, in many
respects, similar to those of the Woodward Fund. There are, however, certain
differences. The following discussion summarizes the more significant
differences in the investment policies, risk factors and limitations of the
Prairie Fund and the Woodward Fund and is qualified in its entirety by the
Prospectuses and Statements of Additional Information of the Prairie Fund and
the Woodward Fund which are incorporated herein by reference. For a discussion
of certain investment policies of the Prairie Fund and Woodward Fund and
related risk factors, see "Investment Policies and Risks -- General" below.
The investment objectives and certain investment policies of the
Prairie Fund and Woodward Fund are fundamental. This means that they may not
be changed without a vote of the holders of a majority of a fund's outstanding
shares, as defined by the 1940 Act. Investment policies of the Prairie Fund
and Woodward Fund that are not fundamental may be changed by each Fund's
respective Board of Trustees.
-16-
<PAGE>
Prairie International Equity Fund and Woodward International Equity Fund
Each Fund invests primarily in equity securities of foreign issuers.
Under normal market conditions, the Prairie Fund invests in countries which
are included in the Morgan Stanley Capital International-Europe, Australia and
Far East ("EAFE") Index. The Prairie Fund shifts its regional holdings to
emphasize or de-emphasize regions of the international market based on the
relative attractiveness of the region. The Woodward Fund's investments will
generally be allocated among countries and geographic regions which may
include, but are not limited to, the United Kingdom and European continent,
Japan, other Far East areas and Latin America. The Woodward Fund's assets will
be invested at all times in the securities of issuers located in at least
three different foreign countries. Both Funds invest in futures, options and
other derivative instruments.
Investment Policies and Risks -- General
The Prairie Fund and the Woodward Fund are permitted to (i) enter into
repurchase agreements and reverse repurchase agreements; and (ii) purchase
obligations of the U.S. Government, its agencies and instrumentalities. The
Prairie Fund may invest generally in bank obligations whereas the Woodward
Fund may only invest in bank obligations of financial institutions having
total assets at the time of purchase of $1 billion.
Foreign Securities. Foreign securities markets generally are not as
developed or efficient as those in the United States. Securities of foreign
issuers, whether made directly or indirectly, involve inherent risks, such as
political or economic instability of the issuer or the country of issue, the
difficulty of predicting international trade patterns, changes in exchange
rates of foreign currencies, the possibility of adverse changes in investment
or exchange control regulations, and may be less liquid and more volatile than
securities of comparable U.S. issuers. Similarly, volume and liquidity in most
foreign securities markets are less than in the United States and, at times,
volatility of price can be greater than in the United States. In addition,
there may be less publicly available information about a non-U.S. issuer, and
non-U.S. issuers generally are not subject to uniform accounting and financial
reporting standards, practices and requirements comparable to those applicable
to U.S. issuers. Investments by a Fund in foreign securities, with respect to
certain foreign countries, exposes a Fund to the possibility of expropriation
or confiscatory taxation, limitations on the removal of funds or other assets
or diplomatic developments that could affect investment within those
countries. Because of these and other factors, securities of foreign companies
acquired by a Fund may
-17-
<PAGE>
be subject to greater fluctuation in price than securities of domestic
companies.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in U.S.
dollars may be affected favorably or unfavorably by changes in currency rates
and exchange control regulations. Some currency exchange costs may be incurred
when a Fund changes investments from one country to another.
Furthermore, some securities may be subject to brokerage taxes levied
by foreign governments, which have the effect of increasing the costs of such
investments and reducing the realized gain or increasing the realized loss on
such securities at the time of sale. Income received by the Funds from sources
within foreign countries may be reduced by withholding or other taxes imposed
by such countries. Tax conventions between certain countries and the United
States, however, may reduce or eliminate such taxes. All such taxes paid by a
Fund will reduce its net income available for distribution to investors.
The Prairie Fund and the Woodward Fund are expressly permitted to
invest in securities of foreign issuers in the form of ADRs or similar
securities representing securities of foreign issuers and may invest in
securities of foreign issuers in the form of EDRs or similar securities
representing securities of foreign issuers. This policy will continue with
respect to the post-reorganization Fund.
ADRs are receipts typically issued by a United States bank or trust
company evidencing ownership of the underlying foreign securities and are
denominated in U.S. dollars. EDRs are receipts issued by a European financial
institution evidencing ownership of the underlying foreign securities and are
generally denominated in foreign currencies. Generally, EDRs, in bearer form,
are designed for use in the European securities markets. These securities may
not be denominated in the same currency as the securities they represent.
Certain institutions issuing ADRs or EDRs may not be sponsored by the issuer.
A non-sponsored depository may not provide the same shareholder information
that a sponsored depository is required to provide under its contractual
arrangements with the issuer.
Currency and Commodity Transactions. The Prairie Fund and the Woodward
Fund may invest in foreign currency and foreign commodity transactions.
Currency exchange rates may fluctuate significantly over short periods
of time. They generally are determined by the forces of supply and demand in
the foreign exchange markets and the relative merits of investments in
different countries, actual or perceived changes in interest rates and other
complex factors,
-18-
<PAGE>
as seen from an international perspective. Currency exchange rates also can be
affected unpredictably by intervention by U.S. or foreign governments or
central banks, or the failure to intervene, or by currency controls or
political developments in the United States or abroad.
The foreign currency market offers less protection against defaults in
the forward trading of currencies than is available when trading currencies on
an exchange. Since a forward currency contract is not guaranteed by an
exchange or clearinghouse, a default on the contract would deprive a Fund of
unrealized profits or force such Fund to cover its commitments for purchase or
resale, if any, at the current market price.
Unlike trading on domestic commodity exchanges, trading on foreign
commodity exchanges is not regulated by the Commodity Futures Trading
Commission ("CFTC") and may be subject to greater risks than trading on
domestic exchanges. In addition, any profits that a Fund might realize in
trading could be eliminated by adverse changes in the exchange rate, or such
Fund could incur losses as a result of those changes. Transactions on foreign
exchanges may include both commodities which are traded on domestic exchanges
and those which are not.
Supranational Bank Obligations. The Prairie Fund may invest in
obligations of supranational banks which are international banking
institutions designated or supported by national governments to promote
reconstruction, development or trade between nations (e.g., the World Bank).
After the Reorganization, the Fund will be permitted to invest in obligations
of supranational banks.
Derivative Instruments. The Prairie Fund and the Woodward Fund may
invest in certain derivative instruments. "Derivative" instruments are
instruments that derive value from the performance of underlying assets,
interest or currency exchange rates, or indices, and include (but are not
limited to) futures contracts, options, forward currency contracts and
structured debt obligations (including collateralized mortgage obligations and
other types of asset-backed securities, "stripped" securities and various
floating rate instruments, including "inverse" floaters).
Derivative instruments present, to varying degrees, market risk that
the performance of the underlying assets, exchange rates or indices will
decline; credit risk that the dealer or other counterparty to the transaction
will fail to pay its obligations; volatility and leveraging risk that, if
interest or exchange rates change adversely, the value of the "derivative"
instrument will decline more than the assets, rates or indices on which it is
based; liquidity risk that a Fund will be unable to sell a "derivative"
instrument when it wants because of lack of
-19-
<PAGE>
market depth or market disruption; pricing risk that the value of a
"derivative" instrument (such as an option) will not correlate exactly to the
value of the underlying assets, rates or indices on which it is based; and
operations risk that loss will occur as a result of inadequate systems and
controls, human error or otherwise. Some derivative instruments are more
complex than others, and for those instruments that have been developed
recently, data are lacking regarding their actual performance over complete
market cycles.
Asset-Backed Securities. The Prairie Fund and the Woodward Fund are
permitted to invest in asset-backed and mortgage-backed securities. The
post-reorganization Fund will not be permitted to invest in such securities.
Municipal Securities. The Prairie Fund is expressly permitted to
invest up to 25% of its assets in Municipal Securities. Following its
Reorganization, the Woodward Fund is not expecting to invest in Municipal
Securities.
Leveraging on an Unsecured Basis. The Prairie Fund may utilize
leveraging in that it may borrow for investment purposes on an unsecured
basis. The Woodward Fund will engage in such leveraging after the
Reorganization.
Interest Rate and Equity Index Swaps. The Prairie Fund is permitted to
enter into interest rate and equity index swaps. After the Reorganization, the
post-reorganization Fund will be permitted to invest in interest rate and
equity index swaps.
Interest rate swaps involve the exchange by a Fund with another party
of their respective commitments to pay or receive interest (for example, an
exchange of floating-rate payments for fixed-rate payments). Equity index
swaps involve the exchange by the Fund with another party of cash flows based
upon the performance of an index or a portion of an index which usually
includes dividends. In each case, the exchange commitments may involve
payments to be made in the same currency or in different currencies. Swaps are
a form of derivative security.
A Fund will usually enter into swaps on a net basis. In so doing, the
two payment streams are netted out, with the fund receiving or paying, as the
case may be, only the net amount of the two payments. If a fund enters into a
swap, it would maintain a segregated account in the full amount accrued on a
daily basis of the fund's obligations with respect to the swap. Each of these
funds will enter into swap transactions with counterparties only if: (i) for
transactions with maturities under one year, such counterparty has outstanding
short-term paper rated in the highest rating category by a Rating Agency, or
(ii) for transactions with maturities greater than one year, the counterparty
has outstanding debt securities rated in the two
-20-
<PAGE>
highest rating categories by a Rating Agency. If there is a default by the
other party to such a transaction, the Fund will have contractual remedies
pursuant to the agreements related to the transaction.
The use of swaps is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio security transactions. There is no limit on the amount of swap
transactions that may be entered into by a fund. These transactions do not
involve the delivery of securities or other underlying assets or principal.
Accordingly, the risk of loss with respect to swaps is limited to the net
amount of payments that a Fund is contractually obligated to make. If the
other party to a swap defaults, the relevant Fund's risk of loss consists of
the net amount of payments that such Fund contractually is entitled to
receive.
Short Selling. The Prairie Fund may make short sales, which are
transactions in which a Fund sells a security it does not own in anticipation
of a decline in the market value of that security. The post-reorganization
Fund will not make short sales of securities.
Options Transactions. The Prairie Fund may invest up to 5% of its
total assets in the purchase of call and put options and may write covered
call option contracts and covered put option contracts not exceeding 20% of
the market value of its net assets. Each Fund may also purchase and sell call
and put options on foreign currency for the purpose of hedging against changes
in future currency exchange rates, cash-settled options on interest rate swaps
and equity index swaps and call and put options on stock indexes listed on
U.S. securities exchanges or traded in the over-the-counter market.
The Woodward Fund may purchase and sell put and call options listed on
a national securities exchange and issued by the Options Clearing Corporation
for hedging purposes in an amount not exceeding 5% of a Fund's net assets. The
Fund may also write covered call and secured put options not exceeding 25% of
the value of its net assets. In addition, the Fund may purchase and sell call
and put options on foreign currency for the purpose of hedging against changes
in foreign currency exchange rates.
The post-reorganization Fund may invest up to 5% of its total assets
in the purchase of call and put options and may write covered call option
contracts and covered put option contracts not exceeding 25% of the market
value of its net assets. The Fund will also be permitted to purchase and sell
call and put options on foreign currency for the purpose of hedging against
changes in future currency exchange rates, cash-settled options on interest
rate swaps and equity index swaps and
-21-
<PAGE>
call and put options on stock indexes listed on U.S. securities exchanges or
traded in the over-the-counter market.
Futures Contracts and Options on Futures Contracts. The Prairie Fund
may enter into stock index futures contracts, interest rate futures contracts
and currency futures contracts, and options with respect to such contracts.
Currently, the Woodward Fund may trade futures contracts and related options
in U.S. domestic markets. In addition, the Fund may purchase and sell currency
futures contracts and options thereon.
The post-reorganization Fund may enter into futures contracts and
options on future contracts and may enter into stock index futures contracts
and each Fund may enter into interest rate futures contracts and currency
futures contracts, and options with respect thereto. These transactions will
be entered into as a substitute for comparable market positions in the
underlying securities or for hedging purposes. Although the Fund will not be a
commodity pool, it would be subject to rules of the CFTC limiting the extent
to which it could engage in these transactions. Futures and options
transactions are a form of derivative security.
The Prairie, Woodward and post-reorganization Fund's commodities
transactions must constitute bona fide hedging or other permissible
transactions pursuant to regulations promulgated by the CFTC. In addition, no
Fund may engage in such transactions if the sum of the amount of initial
margin deposits and premiums paid for unexpired commodity options, other than
for bona fide hedging transactions, would exceed 5% of the liquidation value
of its assets, after taking into account unrealized profits and unrealized
losses on such contracts it has entered into; provided, however, that in the
case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5%. To the extent a
Fund engages in the use of futures and options on futures for other than bona
fide hedging purposes, it may be subject to additional risk.
There are a number of particular risks associated with futures and
related options transactions. To the extent a Fund is engaging in a futures
transaction as a hedging device, due to the risk of an imperfect correlation
between securities in its portfolio that are the subject of a hedging
transaction and the futures contract used as a hedging device, it is possible
that the hedge will not be fully effective. In futures contracts based on
indices, the risk of imperfect correlation increases as the composition of the
Fund varies from the composition of the index. In an effort to compensate for
the imperfect correlation of movements in the price of the securities being
hedged and movements in the price of contracts, the Funds may buy or sell
futures contracts in a greater or lesser dollar amount than the
-22-
<PAGE>
dollar amount of the securities being hedged if the historical volatility of
the futures contract has been less or greater than that of the securities.
Such "over hedging" or "under hedging" may adversely affect a Fund's net
investment results if market movements are not as anticipated when the hedge
is established.
Successful use of futures by a Fund also is subject to the investment
adviser's ability to predict correctly movements in the direction of
securities prices, interest rates, currency exchange rates and other economic
factors. In addition, in such situations, if the Fund has insufficient cash,
it may have to sell securities to meet daily variation margin requirements.
Such sales of securities may, but will not necessarily, be at increased prices
which reflect the rising market. The Fund may have to sell securities at a
time when it may be disadvantageous to do so.
Although the Fund intends to enter into futures contracts and options
transactions only if there is an active market for such contracts, no
assurance can be given that a liquid market will exist for any particular
contract at any particular time.
Other Investment Companies. The Prairie Fund is permitted to invest in
closed-end investment companies, as permitted by the 1940 Act, which
principally invest in securities in which the Fund invests. The Woodward Fund
is permitted to invest in securities issued by investment companies which
invest in high quality, short-term debt securities. After the Reorganization,
the post-reorganization Fund will be permitted to invest in open and
closed-end investment companies which principally invest in securities in
which the Fund invests. As a shareholder of another investment company, a Fund
would bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would
be in addition to the advisory and other expenses that the Fund bears directly
in connection with its own operations.
Investment Limitations
Neither the Prairie Fund nor the Woodward Fund may change its
fundamental investment limitations without the affirmative vote of the holders
of a majority of the outstanding shares, as defined in the 1940 Act, of the
particular Prairie Fund. The investment limitations of the Prairie Fund and
the Woodward Fund are similar, but not identical.
Diversification. The Woodward Fund is currently classified as a
"diversified" investment portfolio. As a matter of fundamental policy, the
Fund may not purchase securities of any one issuer (other than securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities) if, immediately after such purchase, more than 5% of the
value of the
-23-
<PAGE>
Fund's total assets would be invested in the securities of such issuer, or
more than 10% of the issuer's outstanding voting securities would be owned by
the Fund, except that up to 25% of the Fund's total assets may be invested
without regard to these limitations.
The Prairie Fund is classified as a non-diversified portfolio under
the 1940 Act and is not subject to a fundamental limitation on
diversification. The Fund conducts its operations so as to qualify as a
regulated investment company under the Code, which generally requires, among
other things, that, with respect to at least 50% of the total assets of the
Fund, no more than 5% may be invested in securities of a single issuer (with
certain exceptions), and no more than 25% of the Fund's total assets may be
invested in the securities of a single issuer (with certain exceptions) at the
close of each quarter of each fiscal year. Since a relatively high percentage
of the assets of the Fund may be invested in the securities of a limited
number of issuers, some of which may be within the same industry or economic
sector, its portfolio of securities may be more susceptible to economic,
political or regulatory occurrences than the portfolio of a diversified
investment company.
After its Reorganization, the Fund expects to be classified as a
non-diversified portfolio.
Borrowings. The Prairie Fund may borrow money to the extent permitted
under the 1940 Act, which currently limits borrowing to no more than one-third
of the value of a fund's total assets and may engage in reverse repurchase
transactions. The Woodward Fund may borrow money from banks and enter into
reverse repurchase agreements for temporary purposes. The Woodward Fund will
not purchase securities while its borrowings, including reverse repurchase
agreements, exceed 5% of the total assets of the Fund. After the
Reorganization, the Woodward Fund will be permitted to borrow money directly
and engage in reverse repurchase transactions to the extent permitted under
the 1940 Act. These limitations are fundamental for each Fund.
Loans. Neither the Prairie Fund, the Woodward Fund or the
post-reorganization Fund, may make loans, except that each may: (i) lend
portfolio securities in an amount not exceeding 1/3 of its total assets; (ii)
purchase or hold debt instruments in accordance with its investment objective;
and (iii) enter into repurchase agreements. These limitations are fundamental
for each Fund.
Concentration. The Prairie Fund and Woodward Fund have adopted
fundamental policies on concentration. The Prairie Fund may invest up to 25%
of its respective total assets in the securities of issuers in a single
industry, although there is no
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<PAGE>
limitation on the purchase of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
The Woodward Fund does not purchase any securities which would cause
25% or more of the value of its total assets at the time of purchase to be
invested in the securities of one or more issuers conducting their principal
business activities in the same industry, provided that (a) there is no
limitation with respect to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and repurchase agreements
secured by such instruments, (b) wholly-owned finance companies are considered
to be in the industries of their parents if their activities are primarily
related to financing the activities of the parents, and (c) utilities are
divided according to their services, for example, gas, gas transmission,
electric and gas, electric and telephone are each considered a separate
industry.
Following its Reorganization, the Fund will not purchase any
securities which would cause 25% or more of the value of its total assets at
the time of purchase to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry, provided
that (a) there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government, any state, territory or possession of the
United States, the District of Columbia or any of their authorities, agencies,
instrumentalities or political subdivisions and repurchase agreements secured
by such instruments, (b) wholly-owned finance companies will be considered to
be in the industries of their parents if their activities are primarily
related to financing the activities of their parents, (c) utilities will be
divided according to their services, for example, gas, gas transmission,
electric and gas, electric and telephone will each be considered a separate
industry, and (d) personal credit and business credit business will be
considered separate industries.
These limitations are fundamental for each of the Funds.
Real Estate. Neither the Prairie Fund, Woodward Fund or the
post-reorganization Fund may purchase or sell real estate as a matter of
fundamental policy, except that each fund may purchase securities of issuers
which deal in real estate and may purchase securities which are secured by
interests in real estate.
Underwriting Securities. The Prairie Fund and the Woodward Fund have
adopted fundamental policies to the effect that they may not act as an
underwriter of securities within the meaning of the Securities Act of 1933
except insofar as a Fund might be deemed to be an underwriter upon the
disposition of portfolio securities and except to the extent that the purchase
of obligations directly from the issuer thereof in accordance with a
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<PAGE>
Fund's investment objective, policies and limitations may be deemed to be
underwriting. This policy will continue after the Reorganization.
Commodities. Neither the Prairie Fund, Woodward Fund nor the
post-reorganization Fund may invest in commodities, except that, to the extent
appropriate to its investment objective, each may purchase and sell options,
forward contracts, futures contracts, including without limitation those
relating to indices, and options on futures contracts or indices. In addition,
these Funds may purchase publicly traded securities of companies engaging in
whole or in part in such activities. This limitation is a fundamental policy
for each Fund.
Illiquid Securities. The Prairie Fund and Woodward Fund must limit
their investments in illiquid securities to 15% of net assets. These
limitations are currently fundamental limitations for the Woodward Fund
although they are expected to become non-fundamental, and thus may be changed
without shareholder approval, in connection with the Reorganization.
Margin Transactions. As a matter of fundamental policy, the Prairie
Fund may purchase securities on margin, although the Fund may make margin
deposits in connection with various transactions such as options and futures
contracts. The Prairie Fund is permitted to make short sales, which are
transactions in which it sells a security it does not own in anticipation of a
decline in the market value of that security, and otherwise maintain a short
position.
The Woodward Fund may not purchase securities on margin, make short
sales of securities or maintain a short position, except that (i) this
limitation does not apply to the Fund's transactions in such instruments as
futures contracts and options, and (ii) the Fund may obtain short-term credit
as may be necessary for the clearance of purchases and sales of portfolio
securities. These limitations are currently fundamental limitations for the
Woodward Fund although they are expected to become non-fundamental, and thus
may be changed without shareholder approval, in connection with the
Reorganization.
Options. The Prairie Fund is not permitted to purchase, sell or write
puts, calls or combinations thereof, except as described in its Prospectus and
Statement of Additional Information which are incorporated herein by
reference. These limitations are non-fundamental. The Woodward Fund may not
write or sell put options, call options, straddles, spreads, or any
combination thereof, except for transactions in options on securities or
indices of securities, futures contracts and options on futures contracts and
in similar investments. These limitations are currently fundamental
limitations for the
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<PAGE>
Woodward Fund although they are expected to become non-fundamental in
connection with the Reorganization.
Other Investment Companies. Neither the Prairie Fund nor the Woodward
Fund may acquire any other investment company or investment company security
except in connection with a merger, consolidation, reorganization or
acquisition of assets, or where otherwise permitted by the 1940 Act. The
foregoing limitations on investments in other investment companies are
currently fundamental as to the Woodward Fund but are expected to become
non-fundamental in connection with the Reorganization.
Miscellaneous. As a matter of non-fundamental policy, the Prairie 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 10% of the value of its total assets; and (ii) pledge, hypothecate,
mortgage or otherwise encumber its assets, but only to secure permitted
borrowings.
The Woodward Fund has no corresponding limitation on investment in
companies with less than three years' continuous operation. The
post-reorganization Fund will also have no such limitation. The Woodward Fund,
as a matter of fundamental policy, may not mortgage, pledge or hypothecate its
assets, except in connection with its borrowings. The post-reorganization Fund
will not be permitted to mortgage, pledge or hypothecate its assets except to
the extent permitted by the 1940 Act.
In addition, the Prairie Fund, as a matter of non-fundamental policy,
may not invest in securities of a company for the purpose of exercising
management or control. The Woodward Fund currently is subject to the foregoing
limitation as a matter of fundamental policy. The post-reorganization Fund
expects to adopt this limitation as a matter of non-fundamental policy.
For additional investment limitations and more detailed information on
the above limitations, see "Investment Limitations" and "Additional Investment
Limitations" in the Woodward Fund's Prospectus and Statement of Additional
Information and "Description of the Funds" and "Investment Objectives and
Management Policies" in Prairie's Prospectus and Statement of Additional
Information, which are incorporated herein by reference.
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<PAGE>
Purchase and Redemption Information, Exchange Privileges, Distribution and
Pricing. The purchase, redemption, conversion, exchange privileges and
distribution policies of the Prairie Fund and the Woodward Fund are discussed
above under "Summary -- Overviews of the Prairie Fund and Woodward Fund" and
below in Appendix III to this Combined Prospectus/Proxy Statement.
Other Information. Prairie and Woodward are registered as open-end management
investment companies under the 1940 Act. Prairie currently offers seventeen
investment portfolios and Woodward currently offers seventeen investment
portfolios.
Woodward and Prairie Funds are each organized as Massachusetts
business trusts and are subject to the provisions of their respective
Declarations of Trust and By-laws. Shares of both Prairie and Woodward: (i)
are entitled to one vote for each full share held and a proportionate
fractional vote for each fractional share held; (ii) will vote in the
aggregate and not by class except as otherwise expressly required by law or
when class voting is permitted by the respective Boards of Trustees; and (iii)
are entitled to participate equally in the dividends and distributions that
are declared with respect to a particular investment portfolio and in the net
distributable assets of such portfolio on liquidation. Shares of the Prairie
Fund have a par value of $.001. Shares of the Woodward Funds have a par value
of $.10. In addition, shares of the Prairie Fund and Woodward Fund have no
preemptive rights and only such conversion and exchange rights as the
respective Boards of Trustees may grant in their discretion. When issued for
payment as described in its prospectus, Prairie Fund shares and Woodward Fund
shares are fully paid and non-assessable by such entities except as required
under Massachusetts law with respect to Woodward and Prairie Funds. Woodward
is not required under Massachusetts law to hold annual shareholder meetings
and intends to do so only if required by the 1940 Act. Shareholders have the
right to remove Trustees. To the extent required by law, Woodward will assist
in shareholder communications in such matters.
The foregoing is only a summary. Shareholders may obtain copies of the
Declarations of Trust and By-laws (as applicable) of Woodward and Prairie
Funds upon written request at the addresses shown on the cover page of this
Combined Prospectus/Proxy Statement.
INFORMATION RELATING TO VOTING MATTERS
General Information. This Combined Prospectus/Proxy Statement is being
furnished in connection with the solicitation of proxies by Prairie's Board of
Trustees in connection with the Meeting. It is expected that the solicitation
of proxies will be primarily by mail. Officers and service contractors of
Prairie may also
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<PAGE>
solicit proxies by telephone, telegraph, facsimile or personal interview.
Shareholder Communications Corporation ("SCC") has been retained to assist in
the solicitation of proxies primarily by contacting shareholders by telephone
and telegram. Authorizations to execute proxies may be obtained by telephonic
or electronically transmitted instructions in accordance with procedures
designed to authenticate the shareholder's identity. In all cases where a
telephonic proxy is solicited, the shareholder will be asked to provide his or
her address, social security number (in the case of an individual) or taxpayer
identification number (in the case of an entity) and the number of shares
owned and to confirm that the shareholder has received the Combined
Prospectus/Proxy Statement and proxy card in the mail. Within 72 hours of
receiving a shareholder's telephonic or electronically transmitted voting
instructions, a confirmation will be sent to the shareholder to ensure that
the vote has been taken in accordance with the shareholder's instructions and
to provide a telephone number to call immediately if the shareholder's
instructions are not correctly reflected in the confirmation. Prairie has been
advised by its counsel that the use of telephonic or electronically
transmitted voting instructions complies with applicable state law.
Shareholders requiring further information with respect to telephonic or
electronically transmitted voting instructions or the proxy generally should
contact SCC toll-free at 1-800-733-8481, extension 458. Any shareholder giving
a proxy may revoke it at any time before it is exercised by submitting to
Prairie a written notice of revocation or a subsequently executed proxy or by
attending the Meeting and voting in person.
Only shareholders of record at the close of business on April 11, 1996
will be entitled to vote at the Meeting. On that date there were outstanding
and entitled to be voted 11,641,432 shares of Prairie International Equity
Fund. Each share or fraction thereof is entitled to one vote or fraction
thereof, and all shares will vote separately.
Prairie and Woodward have been advised by FCIMCO that the shares of
the Prairie Fund over which First Chicago NBD Corporation or its affiliates
have voting power will, wherever possible, be voted in accordance with
instructions received from beneficial owners or fiduciaries of such accounts
who are not related to First Chicago NBD Corporation or its affiliates. As to
employee benefit plans, First Chicago NBD Corporation may vote such shares in
accordance with the recommendation of an independent fiduciary. Where First
Chicago NBD Corporation is required to vote Prairie shares, it will vote them
in the same proportions as the shares of all other voting shareholders of the
Prairie Fund were actually voted.
If the accompanying proxy is executed and returned in time for the
Meeting, the shares covered thereby will be voted in
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<PAGE>
accordance with the proxy on all matters that may properly come before the
Meeting or any adjournment thereof. For information on adjournment of the
meeting, see "Quorum" below.
Shareholder and Board Approvals. The Reorganization Agreement (and the
transactions contemplated thereby) is being submitted for approval at the
Meeting by the holders of a majority of the outstanding shares of the Prairie
Fund in accordance with the provisions of the Prairie Declaration of Trust and
the requirements of the 1940 Act. The term "majority of the outstanding
shares" of the Prairie Fund as used herein means more than 50% of its
outstanding shares.
In tallying shareholder votes, abstentions and broker non-votes
(i.e., proxies sent in by brokers and other nominees that cannot be voted on a
proposal because instructions have not been received from the beneficial
owners) will be counted for purposes of determining whether or not a quorum is
present for purposes of convening the meeting. On the Reorganization proposal
abstentions and broker non-votes will be considered to be a vote against the
Reorganization proposal.
The approval of the Reorganization by the shareholders of Woodward is
not being solicited because their approval or consent is not legally required.
At April 11, 1996, FCIMCO and its affiliates held beneficially ___% of
the total assets of the Prairie Fund.
At April 11, 1996, the name, address and percentage of ownership of
the persons who owned of record 5% or more of any class of the Prairie Fund,
and the percentage of the respective share classes of the Woodward Fund that
would be owned by those persons upon the consummation of the Reorganizing
Transaction based upon their holdings on April 11, 1996, are as follows:
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<PAGE>
<TABLE>
<CAPTION>
Percentage
Percentage of Class of
Percentage of of Prairie Woodward
Class Owned Fund Shares Fund
Class of on Owned on Owned on
Prairie Fund Name and Address Shares Owned Record Date Record Date Consummation
- - ------------ ---------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
International Equity Eliz Morse Charitable Trust 587,439.106 5.21% 5.05
Fund William Alexander
Class I Suite 905, 79 W. Monroe
Chicago, IL 60603-4907
International Equity NSR Pension Plan 36,325.957 11.34%
Fund 16 Kimberly Cir.
Class A Oak Brook, IL 69521 .32
</TABLE>
At April 11, 1996, the name, address and share ownership of the
persons who owned of record 5% or more of Prairie investment portfolios not
involved in the Reorganization were as follows;
<TABLE>
<CAPTION>
==============================================================================================================
Name and Address Fund Percentage of Ownership
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Arthur F. Stoke Managed Assets 71.04%
Eklund & Eklund Class I
c/o John Livensparger
1 First National Plaza
Chicago, IL 60603
Stradford M. Dick, Jr. Trust 27.80%
2309 Central Street
Apartment 2
Evanston, Il 60201
NSR Pension Plan Bond Fund 22.83%
16 Kimberly Circle Class A
Oak Brook, IL 60521
Joe Keim Builders Inc. Inv. U.S. Government 8.32%
301 E. Longfellow Securities Fund
Wheaton, IL 60187
CHGO Com TR Island 6.90%
Comb Fds
Chicago Comm. Trust
c/o Carol Crenshaw
222 N. LaSalle, Suite 1400
Chicago, IL 60601
CHGO Com TR FNB Var 6.88%
Inst Fd
Chicago Comm. Trust
c/o Carol Crenshaw
222 N. LaSalle, Suite 1400
Chicago, IL 60601
</TABLE>
-31-
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------
Name and Address Fund Percentage of Ownership
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Eliz Morse Charitable Trust
William Alexander
Suite 905, 79 W. Monroe
Chicago, Il 60603-4907
R. Allerton Endowment Fd 5.26%
Robert Mars The Art
Institute of Chicago
111 S. Michigan Ave.
Chicago, IL 60603-6110
Andres Gabel MD IRA Managed Assets 25.98%
2509 Partridge Ln., Income Fund
Northbrook, IL 60062 Class I
Taylor William-Martial 18.30%
Trust
633 E. Woodland Rd.
Lake Forrest, IL 60045
G. Fremn & FT 14.26%
Fremn Linda FD
633 E. Woodland Rd.
Lake Forrest, IL 60045
FT Freeman, LJ 10.81%
Freeman Acct.
633 E. Woodland Rd.
Lake Forrest, IL 60045
Lincoln Cnty Hertiage Trust 5.56%
c/o Frances Freemena
34 W 040 White Thom
Box 205, Wayne, IL 60184
James R. Zeilstra 5.40%
1332 S. 60th Ct.
Cicero, IL 60650
Eliz Morse Charitable Trust International Bond Fund 7.65%
William Alexander Class I
Suite 905, 79 W. Monroe
Chicago, IL 60603-4907
Jep J Dau 6.05%
United Charities of Chicago
c/o Controller
14 E. Jackson
Chicago, IL 60604
George Plessing 5.11%
c/o Arthur J. Kenning
12803 Circle Parkway
Palos Park, IL 60464
NSR Pension Plan International Bond Fund 15.84%
16 Kimberly Cir. Class A
Oak Brook, IL 60521
</TABLE>
-32-
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------
Name and Address Fund Percentage of Ownership
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Eliz Morse Charitable Trust International Equity Fund 5.21%
William Alexander Class I
Suite 905, 79 W. Monroe
Chicago, IL 60603-4907
NSR Pension Plan International Equity Fund 11.34%
16 Kimberly Cir. Class A
Oak Brook, IL 69521
</TABLE>
==============================================================================
At April 11, 1996, the trustees and officers of Prairie, as a group,
owned less than 1% of the outstanding shares of the Prairie Fund. At
April 11, 1996, the trustees and officers of Woodward owned less than 1% of
the outstanding shares of the Woodward Fund.
At April 11, 1996, the name, address and percentage of ownership of
the persons who owned of record 5% or more of any class of shares of the
Woodward Fund, and the percentage of the respective share classes that would
be owned by those persons upon consummation of the Reorganizing Transaction
based upon their holdings on April 11, 1996, are as follows:
<TABLE>
<CAPTION>
Percentage
of Woodward Percentage
Percentage of Fund Shares of Class
Class of Class Owned on Owned on Owned on
Woodward Fund Name and Address Shares Owned Record Date Record Date Consummation
- - ------------- ---------------- ------------ -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
International Equity Employees Retirement Plan
Fund Class I of NBD Bank
Trust Administration
611 Woodward Avenue
Detroit, MI 48232 4,269,534.6700 34.88% 34.57%
International Equity BHC Securities
Fund Class A One Commerce Square
2005 Market Street
Philadelphia, PA 19103 23,040.3720 21.56% 0.19%
</TABLE>
At _________, 1996, the name, address and share ownership of the
persons who owned [beneficially/of record] 5% or more of Woodward's investment
portfolios not involved in the Reorganization were as follows:
<TABLE>
<CAPTION>
Name and Address Fund Percentage of Ownership
- - ---------------- ---- -----------------------
<S> <C> <C>
BHC Securities Money Market Fund- 18.30%
One Commerce Square Class A
2005 Market Street
Philadelphia, PA 19103
</TABLE>
-33-
<PAGE>
<TABLE>
<CAPTION>
Name and Address Fund Percentage of Ownership
- - ---------------- ---- -----------------------
<S> <C> <C>
BHC Securities Government Fund- 19.04%
One Commerce Square Class A
2005 Market Street
Philadelphia, PA 19103
SEC Lending Collateral- Government Fund- 5.66%
Lehman Class I
Trust Administration
611 Woodward Avenue
Detroit, MI 48232
BHC Securities Treasury Money 55.28%
One Commerce Square Market Fund-Class A
2005 Market Street
Philadelphia, PA 19103
Walter International 12.83%
Congo Inc.
One Jackson Square
BHC Securities Tax-Exempt Money 18.09%
One Commence Square Market Fund-Class A
2005 Market Street
Philadelphia, PA 19103
Michigan School Asbestos Michigan Tax-Exempt 13.90%
Trust Money Market Fund-
Humphrey, Farrington, Class I
McClain PC
c/o Scott Manuel
221 W. Lexington
Suite 400
P.O. Box 900
Independence, MS 64051
NBD Bancorp Inc. Bond Fund-Class I 5.21%
Employees' Savings and
Investment Plan
Trust Administration
611 Woodward Avenue
Detroit, MI 48232
Henry Ford Investment 19.00%
Management-Account
600 Fisher Building
Detroit, MI 48202
BHC Securities Intermediate Bond 12.11%
One Commerce Square Fund-Class A
2005 Market Street
Philadelphia, PA 19103
BHC Securities Short Bond Fund- 31.03%
One Commerce Square Class A
2005 Market Street
Philadelphia, PA 19103
Benjamin J. Soleau 6.44%
543 Adams
Plymouth, MI 48170
</TABLE>
-34-
<PAGE>
<TABLE>
<CAPTION>
Name and Address Fund Percentage of Ownership
- - ---------------- ---- -----------------------
<S> <C> <C>
Richard A. Poel 7.38%
10 Lakeview Drive
Beale AFB, Ca 95903
Richard L. Foersterling 25.95%
1256 Penniman
Plymouth, MI 48170
Michael G. Hall 5.10%
Family Trust
1006 Cumber Road
Ubly, MI 48475
The Wellness Plan Short Bond Fund- 24.82%
6500 John C. Lodge Class I
Detroit, MI 48202
Kresge Foundation 24.50%
3215 W. Big Beaver
P.O. Box 3151
Troy, MI 48007-3151
BHC Securities Municipal Bond 6.32%
One Commerce Square Fund-Class A
2005 Market Street
Philadelphia, PA 19103
Charles J. Lefler Municipal Bond 8.81%
Revocable Trust Fund-Class I
39740 Walker Court
Northville, MI 48167
Consumer Power 22.57%
212 W. Michigan Avenue
Jackson, MI 49201
Carol Lefler Revocable Michigan Municipal 6.72%
Trust Bond Fund-Class I
39740 Walker Court
Northville, MI 48167
BHC Securities Growth/Value Fund- 11.66%
One Commerce Square Class A
2005 Market Street
Philadelphia, PA 19103
BHC Securities Opportunity Fund- 9.85%
One Commerce Square Class A
2005 Market Street
Philadelphia, PA 19103
BHC Securities Intrinsic Value 11.90%
One Commerce Square Fund-Class A
2005 Market Street
Philadelphia, PA 19103
BHC Securities Capital Growth 13.64%
One Commerce Square Fund-Class A
2005 Market Street
Philadelphia, PA 19103
</TABLE>
-35-
<PAGE>
<TABLE>
<CAPTION>
Name and Address Fund Percentage of Ownership
- - ---------------- ---- -----------------------
<S> <C> <C>
BHC Securities Balanced Fund- 5.26%
One Commerce Square Class A
2005 Market Street
Philadelphia, PA 19103
NBD Bancorp, Inc. Balanced Fund- 22.81%
Employees' Savings and Class I
Investment Plan
Trust Administration
611 Woodward Avenue
Detroit, MI 48232
Dickinson/Wright Target 12.39%
Benefit
500 Woodward Avenue
Suite 4000
Detroit, MI 48226
Albert Kahn and 5.52%
Associates
7430 Second Avenue
Detroit, MI 48202
BHC Securities Equity Index Fund- 38.63%
One Commerce Square Class A
2005 Market Street
Philadelphia, PA 19103
Whirlpool Equity Index Fund- 28.06%
2000 M-63 North Class I
Benton Harbor, MI 49022
Oakland County 7.75%
Retirement System
1200 North Telegraph
Pontiac, MI 48053
Consumer Power Union 7.84%
Welfare Benefit
212 W. Michigan Avenue
Jackson, MI 49201
McGregor Fund 7.78%
333 West Fort Street
Detroit, MI 48226
BHC Securities International 21.56%
One Commerce Square Equity Fund-Class A
2005 Market Street
Philadelphia, PA 19103
Employees Retirement International 34.88%
Plan of NBD Bank Equity Fund-Class A
Trust Administration
611 Woodward Avenue
Detroit, MI 48232
</TABLE>
Appraisal Rights. Shareholders are not entitled to any rights of share
appraisal under Prairie's Declarations of Trust or Articles of Incorporation,
or under the laws of the Commonwealth of Massachusetts, in connection with the
Reorganization.
-36-
<PAGE>
Shareholders have, however, the right to redeem from Prairie their Prairie
Fund shares at net asset value until the effective time of the Reorganization,
and thereafter shareholders may redeem from Woodward the Woodward shares
acquired by them in the Reorganization at net asset value.
Quorum. In the event that a quorum is not present at the Meeting, or in the
event that a quorum is present at the Meeting but sufficient votes to approve
the Reorganization Agreement and the transactions contemplated thereby are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. Any such adjournment
will require the affirmative vote of a majority of those shares affected by
the adjournment that are represented at the Meeting in person or by proxy. If
a quorum is present, the persons named as proxies will vote those proxies
which they are entitled to vote FOR the Reorganization Agreement, in favor of
such adjournments, and will vote those proxies required to be voted AGAINST
such proposals against any adjournment. A shareholder vote may be taken with
respect to the Prairie Fund prior to any such adjournment if sufficient votes
have been received for approval with respect to the Prairie Fund. A quorum is
constituted with respect to the Prairie Fund by the presence in person or by
proxy of the holders of more than 30% of the outstanding shares of the Fund
entitled to vote at the Meeting. Prairie proxies properly executed and marked
with a negative vote or an abstention will be considered to be present at the
Meeting for the purposes of determining the existence of a quorum for the
transaction of business.
Annual Meetings. Woodward does not presently intend to hold annual meetings of
shareholders for the election of trustees and other business unless and until
such time as less than a majority of the trustees holding office have been
elected by the shareholders, at which time the trustees then in office will
call a shareholders' meeting for the election of trustees. Shareholders have
the right to call a meeting of shareholders to consider the removal of one or
more trustees or for other matters and such meetings will be called when
requested in writing by the holders of record of 10% or more of Woodward's
outstanding shares of beneficial interest. To the extent required by law,
Woodward will assist in shareholder communications on such matters.
ADDITIONAL INFORMATION ABOUT WOODWARD
Information about the Woodward Fund is included in the Prospectus
accompanying this Combined Prospectus/Proxy Statement, which are incorporated
by reference herein. Additional information about this Fund is included in its
Statement of
-37-
<PAGE>
Additional Information dated April 15, 1996 which has been filed with the SEC.
Copies of the Statements of Additional Information may be obtained without
charge by writing to Woodward c/o NBD, P.O. Box 7058, Troy, Michigan 48007, or
by calling Woodward at 1-800-688-3350. Woodward is subject to the
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act, as applicable, and, in accordance with such requirements, files proxy
materials, reports and other information with the SEC. These materials can be
inspected and copied at the Public Reference Facilities maintained by the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's Regional
Offices at 7 World Trade Center, Suite 1300, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material may also be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services, Securities and Exchange Commission,
Washington, D.C. 20549, at prescribed rates.
ADDITIONAL INFORMATION ABOUT PRAIRIE
Information about Prairie is incorporated herein by reference from its
Prospectus dated April 11, 1996 and Statement of Additional Information, dated
April 11, 1996, copies of which may be obtained without charge by writing or
calling Prairie at the address and telephone number shown on the cover page of
this Combined Prospectus/Proxy Statement. Reports and other information filed
by Prairie can be inspected and copied at the Public Reference Facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of such material can be obtained from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549, at prescribed rates.
LITIGATION
Neither Prairie nor Woodward is involved in any litigation or
proceeding that is believed likely to have any material adverse effect upon
the ability of the co-advisers to provide investment advisory services or any
material adverse effect upon either the Prairie Fund or the Woodward Fund.
FINANCIAL STATEMENTS
The financial highlights and financial statements for the Prairie Fund
for the period ended December 31, 1995 are contained in Prairie's Annual
Report to Shareholders and in Prairie's Prospectus and Statement of Additional
Information dated April 11, 1996, each of which is incorporated by reference
into this Combined Prospectus/Proxy Statement. The financial highlights and
the financial statements for the Woodward Fund for the fiscal year ended
December 31, 1995 is contained in Woodward's Annual Report to Shareholders and
in Woodward's Prospectus and Statement
-38-
<PAGE>
of Additional Information dated April 15, 1996, which is incorporated by
reference in this Combined Prospectus/Proxy Statement.
The audited financial statements of the Prairie Fund for the period
ended December 31, 1995, contained in Prairie's Annual Report and
incorporated by reference in this Combined Prospectus/Proxy Statement, have
been incorporated herein in reliance on the report of Ernst & Young LLP,
independent auditors, given upon the authority of such firm as experts in
accounting and auditing.
The audited financial statements of the Woodward Fund for the fiscal
year ended December 31, 1995, contained in Woodward's Annual Report and
incorporated by reference in this Combined Prospectus/Proxy Statement, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto and is incorporated herein in
reliance upon the authority of said firm as experts in accounting and
auditing.
OTHER BUSINESS
The Boards of Trustees of Prairie know of no other business to be
brought before the Meeting. However, if any other matters come before the
Meeting, it is the intention that proxies which do not contain specific
restrictions to the contrary will be voted on such matters in accordance with
the judgment of the persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to Prairie in writing at the
address on the cover page of this Combined Prospectus/Proxy Statement or by
telephoning 1-800-370-9446.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED TO
DATE AND SIGN EACH ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
-39-
<PAGE>
APPENDIX I
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
THE WOODWARD FUNDS AND PRAIRIE FUNDS
DATED May 21, 1996
I-1
<PAGE>
TABLE OF CONTENTS
I. Transfer of Assets
II. Liquidating Distribution and Termination of
Prairie
III. Valuation Time
IV. Certain Representations, Warranties and Agreements
of Prairie
V. Certain Representations, Warranties and Agreements
of Woodward
VI. Shareholder Action on Behalf of the Acquired Fund
VII. N-14 Registration Statement and Proxy Solicitation
Materials
VIII. Effective Time of the Reorganization
IX. Woodward Conditions
X. Prairie Conditions
XI. Tax Documents
XII. Finder's Fees
XIII. Announcements
XIV. Further Assurances
XV. Termination of Representations and Warranties
XVI. Termination of Agreement
XVII. Amendment and Waiver
XVIII. Governing Law
XIX. Successors and Assigns
XX. Beneficiaries
XXI. Prairie Liability
XXII. Woodward Liability
I-2
<PAGE>
XXIII. Notices
XXIV. Expenses
XXV. Entire Agreement
XXVI. Counterparts
I-3
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION made as of
________________, 1996 by and between The Woodward Funds, a Massachusetts
business trust ("Woodward") and Prairie Funds, a Massachusetts business trust
("Prairie").
WHEREAS, the parties desire that substantially all of the
assets and liabilities of the Prairie International Equity Fund (the "Acquired
Fund"), an investment portfolio offered by Prairie, be transferred to, and be
acquired and assumed by, the Woodward International Equity Fund (the
"Acquiring Fund"), an investment portfolio offered by Woodward, in exchange
for Class A, Class B or Class I Shares, as applicable, of the Acquiring Fund
which shall thereafter be distributed by Prairie to the holders of Class A,
Class B or Class I Shares, as applicable, of the Acquired Fund, all as
described in this Agreement (the "Reorganization");
WHEREAS, the parties intend that the Reorganization be treated
as a tax-free reorganization under Section 368(a)(1)(C), 368(a)(1)(D) or
368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (the "Code");
and
I-4
<PAGE>
WHEREAS, the parties intend that in connection with the
Reorganization the Acquired Fund shall be terminated and Prairie shall be
terminated under state law and deregistered as described in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth and subject to the terms and conditions
hereof, and intending to be legally bound hereby, Woodward and Prairie agree
as follows:
I. Transfer of Assets.
1.01 (a) At the Effective Time of the Reorganization (as
defined in Article VIII), all property of every
description, and all interests, rights, privileges
and powers of the Acquired Fund other than cash in
an amount necessary to pay any unpaid dividends
and distributions as provided in Article IV(g)
(such assets, the "Acquired Fund Assets") shall be
transferred and conveyed by the Acquired Fund to
Woodward on behalf of the Acquiring Fund, and
shall be accepted by Woodward on behalf of the
Acquiring Fund, and Woodward, on behalf of the
Acquiring Fund, shall assume all known liabilities
whether accrued, absolute, contingent or
otherwise, of the Acquired Fund reflected in the
calculation of the Acquired Fund's net asset value
I-5
<PAGE>
(the "Acquired Fund Liabilities"), so that at and after
the Effective Time of the Reorganization with respect to
the Acquired Fund: (i) all assets of the Acquired Fund
shall become and be the assets of the Acquiring Fund;
and (ii) all known liabilities of the Acquired Fund
reflected as such in the calculation of the Acquired
Fund's net asset value shall attach to the Acquiring
Fund as aforesaid and may thenceforth be enforced
against the Acquiring Fund to the extent as if the same
had been incurred by it. Without limiting the generality
of the foregoing, the Acquired Fund Assets shall include
all property and assets of any nature whatsoever,
including, without limitation, all cash, cash
equivalents, securities, other investments, claims and
receivables (including dividend and interest
receivables) owned by the Acquired Fund, and (subject to
Section 1.01(b)) any deferred or prepaid expenses shown
as an asset on the Acquired Fund's books, at the
Effective Time of the Reorganization of the Acquired
Fund, and all good will, all other intangible property
and all books and records belonging to the Acquired
Fund. Recourse by any person for the Acquired Fund
Liabilities assumed by the Acquiring Fund shall,
I-6
<PAGE>
at and after the Effective Time of the
Reorganization of the Acquired Fund, be limited to
the Acquiring Fund.
(b) Notwithstanding Section 1.01(a), unamortized
organizational expenses of the Acquired Fund shall
not be transferred or assumed hereunder. The
parties have been advised that such expenses will
be paid to the Acquired Fund by one or more third
parties and will be eliminated from the balance
sheets of the Acquired Fund prior to the Effective
Time of the Reorganization.
1.02 The holders of Class A Shares, Class B Shares and Class I Shares
of the Acquired Fund shall receive, respectively, Class A Shares, Class B
Shares and Class I Shares of the Acquiring Fund. In connection with the
Reorganization, the Board of Trustees of Woodward has adopted resolutions
authorizing (i) the change of designations of the classes of the Acquiring
Fund as used in Woodward's Prospectus from Retail Shares to Class A and from
Institutional Shares to Class I, and (ii) the establishment of Class B Shares
for the Acquiring Fund. These changes will be effective by the Effective Time
of the Reorganization with respect to the Acquiring Fund.
I-7
<PAGE>
1.03 In exchange for the transfer of the Acquired Fund Assets and the
assumption of the Acquired Fund Liabilities, Woodward shall simultaneously
issue at the applicable Effective Time of the Reorganization to the Acquired
Fund a number of full and fractional shares to the third decimal place, of the
Acquiring Fund and of the class or classes identified in Section 1.02, all
determined and adjusted as provided in this Agreement. The shares of each
class of the Acquiring Fund so issued will have an aggregate net asset value
equal to the value of the Acquired Fund Assets that are represented by shares
of the corresponding class of the Acquired Fund.
1.04 The net asset value of each class of shares of the Acquiring Fund
and the net asset value of each class of shares of the Acquired Fund shall be
determined as of the Valuation Time.
1.05 The net asset value of each class of shares of the Acquiring Fund
shall be computed in the manner set forth in the Acquiring Fund's then current
prospectus under the Securities Act of 1933, as amended (the "1933 Act"). The
net value of the Acquired Fund Assets to be transferred by the Prairie
portfolio shall be computed by Prairie and shall be subject to adjustment by
the amount, if any, agreed to by Woodward and Prairie. In determining the
value of the securities transferred by the Acquired Fund to the Acquiring
Fund, each security shall be priced in accordance with the policies and
procedures of Woodward
I-8
<PAGE>
described in its then current prospectus and statement of additional
information and adopted by Woodward's Board of Trustees, which are and shall
be consistent with the policies now in effect for Prairie. For such purposes,
price quotations and the security characteristics relating to establishing
such quotations shall be determined by Woodward, provided that such
determination shall be subject to the approval of Prairie.
II. Liquidating Distribution and Termination of Prairie.
Immediately after the Effective Time of the Reorganization,
the Acquired Fund shall distribute in complete liquidation pro rata to the
record holders of each class of its shares at the applicable Effective Time of
the Reorganization the shares of the class of the Acquiring Fund to be
received by the record holders of such class of the Acquired Fund. In
addition, each shareholder of record of the Acquired Fund shall have the right
to receive any unpaid dividends or other distributions which were declared
before the applicable Effective Time of the Reorganization with respect to the
shares of the Acquired Fund that are held by the shareholder at the applicable
Effective Time of the Reorganization. In accordance with instructions it
receives from Prairie, Woodward shall record on its books the ownership of
each class of shares of the Acquiring Fund by the record holders of the class
of shares of the Acquired Fund identified in Section 1.02. All of the issued
and outstanding shares of each class of the Acquired Fund shall be redeemed
and
I-9
<PAGE>
canceled on the books of Prairie at the Effective Time of the Reorganization
of such Acquired Fund and shall thereafter represent only the right to receive
the class of shares of the Acquiring Fund, and the Acquired Fund's transfer
books shall be closed permanently. As soon as practicable after the Effective
Time of the Reorganization, Prairie shall make all filings and take all other
steps as shall be necessary and proper to effect its complete dissolution, and
shall file an application pursuant to Section 8(f) of the Investment Company
Act of 1940 (the "1940 Act") for an order declaring that it has ceased to be
an investment company and any and all documents that may be necessary to
terminate its existence under state law.
III. Valuation Time. The Valuation Time for the Reorganization shall be 4:00
P.M., Eastern Time, on such date as may be agreed in writing by the duly
authorized officers of both parties hereto.
IV. Certain Representations, Warranties and Agreements of Prairie. Prairie, on
behalf of itself and its Acquired Fund, represents and warrants to, and agrees
with, Woodward as follows:
(a) It is a Massachusetts business trust duly created
pursuant to its Agreement and Declaration of Trust for
the purpose of acting as a management investment company
under the 1940 Act and is
I-10
<PAGE>
validly existing under the laws of, and duly authorized
to transact business in, the Commonwealth of
Massachusetts. The Acquired Fund is registered with the
Securities and Exchange Commission (the "SEC") as an
open-end management investment company under the 1940
Act and such registration is in full force and effect.
(b) It has power to own all of its properties and
assets and, subject to the approvals of
shareholders referred to herein, to carry out and
consummate the transactions contemplated hereby,
and has all necessary federal, state and local
authorizations to carry on its business as now
being conducted and to consummate the transactions
contemplated by this Agreement.
(c) This Agreement has been duly authorized, executed
and delivered by Prairie, and represents Prairie's
valid and binding contract, enforceable in
accordance with its terms, subject as to
enforcement to bankruptcy, insolvency,
reorganization, arrangement, moratorium, and other
similar laws of general applicability relating to
or affecting creditors' rights and to general
principles of equity. The execution and delivery
I-11
<PAGE>
of this Agreement does not and will not, and the
consummation of the transactions contemplated by this
Agreement will not, violate Prairie's Agreement and
Declaration of Trust, Charter or Bylaws, as applicable,
or any agreement or arrangement to which it is a party
or by which it is bound.
(d) The Acquired Fund has elected to qualify and has
qualified as a "regulated investment company"
under Subtitle A, Chapter 1, Subchapter M, Part I
of the Code, as of and since its first taxable
year; has been such a regulated investment company
at all times since the end of its first taxable
year when it so qualified; and qualifies and shall
continue to qualify as a regulated investment
company until the Effective Time of the Reorganization.
(e) All federal, state, local and foreign income, profits,
franchise, sales, withholding, customs, transfer and
other taxes, including interest, additions to tax and
penalties (collectively, "Taxes") relating to the
Acquired Fund Assets due or properly shown to be due on
any return filed by the Acquired Fund with respect to
taxable periods
I-12
<PAGE>
ending on or prior to, and the portion of any interim
period up to, the date hereof have been fully and timely
paid or provided for; and there are no levies, liens, or
other encumbrances relating to Taxes existing,
threatened or pending with respect to the Acquired Fund
Assets.
(f) The financial statements of the Acquired Fund for
the fiscal period ended December 31, 1995,
examined by Ernst & Young LLP, copies of which
have been previously furnished to Woodward,
present fairly the financial position of the
Acquired Fund as of December 31, 1995 and the
results of its operations for the period then
ending, in conformity with generally accepted
accounting principles.
(g) Prior to the Valuation Time, the Acquired Fund
shall have declared a dividend or dividends, with
a record date and ex-dividend date prior to the
Valuation Time, which, together with all previous
dividends, shall have the effect of distributing
to its shareholders all of its investment company
taxable income, if any, for the taxable period
ended on December 31, 1995 and for the period from
said date to and including the Effective Time of
I-13
<PAGE>
the Reorganization (computed without regard to any
deduction for dividends paid), and all of its net
capital gain, if any, realized in taxable periods or
years ended on or before December 31, 1995 and in the
period from said date to and including the Effective
Time of the Reorganization.
(h) At both the Valuation Time and the Effective Time of the
Reorganization, there shall be no known liabilities of
the Acquired Fund, whether accrued, absolute, contingent
or otherwise, not reflected in the net asset values per
share of its outstanding classes of shares.
(i) Except as disclosed on Schedule 1 to this Agreement,
there are no legal, administrative or other proceedings
pending or, to Prairie's knowledge threatened, against
Prairie or the Acquired Fund which could result in
liability on the part of Prairie or the Acquired Fund.
(j) Subject to the approvals of shareholders referred to
herein, at both the Valuation Time and the Effective
Time of the Reorganization, the Acquired Fund shall have
full right, power and authority to sell, assign,
transfer and deliver the Acquired
I-14
<PAGE>
Fund Assets of the Acquired Fund and, upon delivery and
payment for the Acquired Fund Assets as contemplated
herein, the Acquiring Fund shall acquire good and
marketable title thereto, free and clear of all liens
and encumbrances, and subject to no restrictions on the
ownership or transfer thereof (except as imposed by
federal or state securities laws).
(k) No consent, approval, authorization or order of
any court or governmental authority is required
for the consummation by Prairie of the
transactions contemplated by this Agreement,
except such as may be required under the 1933 Act,
the Securities Exchange Act of 1934 ("1934 Act"),
the 1940 Act, the rules and regulations under
those Acts, and state securities laws.
(l) Insofar as the following relate to Prairie, the
registration statement filed by Woodward on Form
N-14 relating to the shares of the Acquiring Fund
that will be registered with the SEC pursuant to
this Agreement, which, without limitation, shall
include a proxy statement of Prairie and the
prospectus of Woodward with respect to the
transaction contemplated by this Agreement, and
I-15
<PAGE>
any supplement or amendment thereto or to the documents
contained or incorporated therein by reference (the
"N-14 Registration Statement"), on the effective date of
the N-14 Registration Statement, at the time of any
shareholders' meeting referred to herein and at the
Effective Time of the Reorganization: (i) shall comply
in all material respects with the provisions of the 1933
Act, the 1934 Act and the 1940 Act, the rules and
regulations thereunder, and state securities laws, and
(ii) shall not contain any untrue statement of a
material fact or omit to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the
representations and warranties in this subsection shall
apply only to statements in or omissions from the N-14
Registration Statement made in reliance upon and in
conformity with information furnished by Prairie for use
in the N-14 Registration Statement.
(m) All of the issued and outstanding shares of each class
of the Acquired Fund have been duly and validly issued,
are fully paid and non-assessable, and were offered for
sale and sold in conformity
I-16
<PAGE>
with all applicable federal and state securities laws,
and no shareholder of the Acquired Fund has any
preemptive right of subscription or purchase in respect
of such shares.
(n) Prairie shall not sell or otherwise dispose of any
shares of the Acquiring Fund to be received in the
transactions contemplated herein, except in distribution
to its shareholders as contemplated herein.
V. Certain Representations, Warranties and Agreements of
Woodward. Woodward, on behalf of itself and the Acquiring Fund,
represents and warrants to, and agrees with, Prairie as follows:
(a) It is a Massachusetts business trust duly created
pursuant to its Agreement and Declaration of Trust
for the purpose of acting as a management
investment company under the 1940 Act and is
validly existing under the laws of, and duly
authorized to transact business in, the
Commonwealth of Massachusetts. The Acquiring Fund
is registered with the SEC as an open-end
management investment company under the 1940 Act
and such registration is in full force and effect.
I-17
<PAGE>
(b) It has power to own all of its properties and assets and
to carry out and consummate the transactions
contemplated herein, and has all necessary federal,
state and local authorizations to carry on its business
as now being conducted and to consummate the
transactions contemplated by this Agreement.
(c) This Agreement has been duly authorized, executed
and delivered by Woodward, and represents
Woodward's valid and binding contract, enforceable
in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency,
reorganization, arrangement, moratorium, and other
similar laws of general applicability relating to
or affecting creditors' rights and to general
principles of equity. The execution and delivery
of this Agreement did not, and the consummation of
the transactions contemplated by this Agreement
will not, violate Woodward's Agreement and
Declaration of Trust or By-laws or any agreement
or arrangement to which it is a party or by which
it is bound.
(d) The Acquiring Fund has qualified as a "regulated
investment company" under Subtitle A, Chapter 1,
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<PAGE>
Subchapter M, Part I of the Code, as of and since its
first taxable year; the Acquiring Fund has been such a
regulated investment company at all times since the end
of its first taxable year when it so qualified and
intends to continue to qualify as a regulated investment
company.
(e) The financial statements of the Acquiring Fund for
its fiscal year ended December 31, 1995, audited
by Arthur Andersen LLP, copies of which have been
previously furnished to Prairie, present fairly
the financial position of the Acquiring Fund as of
December 31, 1995 and the results of its
operations for the year then ended, in conformity
with generally accepted accounting principles.
(f) At both the Valuation Time and the Effective Time of the
Reorganization, there shall be no known liabilities of
the Acquiring Fund, whether accrued, absolute,
contingent or otherwise, not reflected in the net asset
values per share of its outstanding classes to be issued
pursuant to this Agreement.
(g) There are no legal, administrative or other
proceedings pending or, to its knowledge,
I-19
<PAGE>
threatened against Woodward or the Acquiring Fund which
could result in liability on the part of Woodward or the
Acquiring Fund.
(h) No consent, approval, authorization or order of
any court or governmental authority is required
for the consummation by Woodward of the
transactions contemplated by this Agreement,
except such as may be required under the 1933 Act,
the 1934 Act, the 1940 Act, the rules and
regulations under those Acts, and state securities
laws.
(i) Insofar as the following relate to Woodward, the
N-14 Registration Statement on its effective date,
at the time of any shareholders' meetings referred
to herein and the Effective Time of the
Reorganization: (i) shall comply in all material
respects with the provisions of the 1933 Act, the
1934 Act and the 1940 Act, the rules and
regulations thereunder, and state securities laws,
and (ii) shall not contain any untrue statement of
a material fact or omit to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading; provided,
however, that the representations and warranties
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<PAGE>
in this subsection shall apply only to statements in or
omissions from the N-14 Registration Statement made in
reliance upon and in conformity with information
furnished by Woodward for use in the N-14 Registration
Statement.
(j) The shares of each class of the Acquiring Fund to
be issued and delivered to the Acquired Fund for
the account of record holders of shares of the
Acquired Fund, pursuant to the terms hereof, shall
have been duly authorized as of the Effective Time
of the Reorganization and, when so issued and
delivered, shall be registered under the 1933 Act
and under applicable state securities laws, duly
and validly issued, fully paid and non-assessable,
and no shareholder of Woodward shall have any
preemptive right of subscription or purchase in
respect thereto.
VI. Shareholder Action on Behalf of the Acquired Fund.
6.01 As soon as practicable after the effective date of the
N-14 Registration Statement, but in any event prior to the Effective Time of
the Reorganization and as a condition to the Reorganization, the Board of
Trustees of Prairie shall call, and Prairie shall hold, a meeting of the
shareholders of the Acquired Fund for the purpose of considering and voting
upon:
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<PAGE>
(a) Approval of this Agreement and the transactions
contemplated hereby, including, without
limitation:
(i) The transfer of the Acquired Fund Assets
belonging to the Acquired Fund to the
Acquiring Fund, and the assumption by the
Acquiring Fund of the Acquired Fund
Liabilities, in exchange for shares of a class
or classes of shares of the Acquiring Fund, as
set forth in Section 1.02.
(ii) The liquidation of the Acquired Fund through
the distribution to its record holders of
shares of the class or classes of shares of
the Acquiring Fund as described in this
Agreement.
(b) Such other matters as may be determined by the
Boards of Trustees or authorized officers of the
parties.
6.02 Approval of this Reorganization Agreement by the shareholders of
the Acquired Fund shall constitute the waiver of the application of any
fundamental policy of the Acquired Fund that might be deemed to prevent them
from taking the actions
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<PAGE>
necessary to effectuate the Reorganization as described, and such policies, if
any, shall be deemed to have been amended accordingly.
VII. N-14 Registration Statement and Proxy Solicitation Materials. Woodward
shall file the N-14 Registration Statement under the 1933 Act, and Prairie
shall file the combined prospectus/proxy statement contained therein under the
1934 Act and 1940 Act proxy rules, with the SEC as promptly as practicable.
Each of Woodward and Prairie has cooperated and shall continue to cooperate
with the other, and has furnished and shall continue to furnish the other with
the information relating to itself that is required by the 1933 Act, the 1934
Act, the 1940 Act, the rules and regulations under each of those Acts and
state securities laws, to be included in the N-14 Registration Statement.
VIII. Effective Time of the Reorganization. Delivery of the Acquired Fund
Assets of the Acquired Fund and the shares of the classes of the Acquiring
Fund to be issued pursuant to Article I and the liquidation of the Acquired
Fund pursuant to Article II shall occur at the opening of business on the next
business day following the Valuation Time, or on such other date, and at such
place and time and date, as may be determined by the President or any Vice
President of each party hereto. The date and time at which such actions are
taken are referred to herein as
I-23
<PAGE>
the "Effective Time of the Reorganization." To the extent the Acquired Fund
Assets are, for any reason, not transferred at the Effective Time of the
Reorganization, Prairie shall cause the Acquired Fund Assets to be transferred
in accordance with this Agreement at the earliest practicable date thereafter.
IX. Woodward Conditions. The obligations of Woodward hereunder
shall be subject to the following conditions precedent:
(a) This Agreement and the transactions contemplated by this
Agreement shall have been approved by the shareholders
of the Acquired Fund, in the manner required by law.
(b) Prairie shall have duly executed and delivered to
Woodward such bills of sale, assignments,
certificates and other instruments of transfer
("Transfer Documents") as may be necessary or
desirable to transfer all right, title and
interest of Prairie and the Acquired Fund in and
to the Acquired Fund Assets. The Acquired Fund
Assets shall be accompanied by all necessary state
stock transfer stamps or cash for the appropriate
purchase price therefor.
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<PAGE>
(c) All representations and warranties of Prairie made
in this Agreement shall be true and correct in all
material respects as if made at and as of the
Valuation Time and the Effective Time of the
Reorganization. As of the Valuation Time and the
Effective Time of the Reorganization there shall
have been no material adverse change in the
financial position of the Acquired Fund since
December 31, 1995 other than those changes
incurred in the ordinary course of business as an
investment company. No action, suit or other
proceeding shall be threatened or pending before
any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages
or other relief in connection with, this Agreement
or the transactions contemplated herein.
(d) Woodward shall have received an opinion of Stroock
& Stroock & Lavan addressed to Woodward in form
reasonably satisfactory to it and dated the
Effective Time of the Reorganization,
substantially to the effect that: (i) Prairie
Funds is a Massachusetts business trust duly
organized and validly existing under the laws of
the Commonwealth of Massachusetts; (ii) the shares
of the Acquired Fund outstanding at such time are
I-25
<PAGE>
duly authorized, validly issued, fully paid and
non-assessable by the Acquired Fund, and to such
counsel's knowledge, no shareholder of the Acquired Fund
has any option, warrant or preemptive right to
subscription or purchase in respect thereof; (iii) this
Agreement and the Transfer Documents have been duly
authorized, executed and delivered by Prairie and
represent legal, valid and binding contracts,
enforceable in accordance with their terms, subject to
the effect of bankruptcy, insolvency, moratorium,
fraudulent conveyance and similar laws relating to or
affecting creditors' rights generally and court
decisions with respect thereto, and such counsel shall
not be required to express an opinion with respect to
the application of equitable principles in any
proceeding, whether at law or in equity, or with respect
to the provisions of this Agreement intended to limit
liability for particular matters to the Acquired Fund
and its assets; (iv) the execution and delivery of this
Agreement did not, and the consummation of the
transactions contemplated by this Agreement will not,
violate the Agreement and Declaration of Trust, Charter
or By-laws, as applicable, of Prairie or any material
agreement known to such counsel to which Prairie
I-26
<PAGE>
is a party or by which Prairie is bound; and (v) to such
counsel's knowledge, no consent, approval, authorization
or order of any court or governmental authority is
required for the consummation by Prairie of the
transactions contemplated by this Agreement, except such
as have been obtained under the 1933 Act, the 1934 Act,
the 1940 Act, the rules and regulations under those Acts
and such as may be required under the state securities
laws. Such opinion may rely on the opinion of other
counsel to the extent set forth in such opinion,
provided such other counsel is reasonably acceptable to
Woodward.
(e) Woodward shall have received an opinion of Drinker
Biddle & Reath, addressed to Woodward and Prairie
in form reasonably satisfactory to them and dated
the Effective Time of the Reorganization
substantially to the effect that for federal
income tax purposes (i) the transfer of the
Acquired Fund Assets hereunder, and the assumption
by the Acquiring Fund of Acquired Fund
Liabilities, in exchange for shares of each class
of the Acquiring Fund, and the distribution of
said shares to the shareholders of the Acquired
Fund, as provided in this Agreement, will each
I-27
<PAGE>
constitute a reorganization within the meaning of
Section 368(a)(1)(C), 368(a)(1)(D) or 368(a)(1)(F) of
the Code and with respect to the reorganization, the
Acquired Fund and the Acquiring Fund will each be
considered "a party to a reorganization" within the
meaning of Section 368(b) of the Code; (ii) in
accordance with Sections 361(a), 361(c)(1) and 357(a) of
the Code, no gain or loss will be recognized by such
Acquired Fund as a result of such transactions; (iii) in
accordance with Section 1032(a) of the Code, no gain or
loss will be recognized by the Acquiring Fund as a
result of such transactions; (iv) in accordance with
Section 354(a)(1) of the Code, no gain or loss will be
recognized by the shareholders of the Acquired Fund on
the distribution to them by the Acquired Fund of shares
of any class of the Acquiring Fund in exchange for their
shares of the corresponding class of the Acquired Fund;
(v) in accordance with Section 358(a)(1) of the Code,
the aggregate basis of Acquiring Fund shares received by
each shareholder of any class of the Acquired Fund will
be the same as the aggregate basis of the shareholder's
Acquired Fund shares immediately prior to the
transactions; (vi) in accordance with
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<PAGE>
Section 362(b) of the Code, the basis of the Acquired
Fund Assets to any Acquiring Fund will be the same as
the basis of the Acquired Fund Assets in the hands of
the corresponding Acquired Fund immediately prior to the
exchange; (vii) in accordance with Section 1223(1) of
the Code, a shareholder's holding period for Acquiring
Fund shares will be determined by including the period
for which the shareholder held the shares of an Acquired
Fund exchanged therefor, provided that the shareholder
held such shares of the Acquired Fund as a capital
asset; and (viii) in accordance with Section 1223(2) of
the Code, the holding period of the Acquiring Fund with
respect to the Acquired Fund Assets will include the
period for which the Acquired Fund Assets were held by
the Acquired Fund.
(f) The SEC shall not have issued any unfavorable advisory
report under Section 25(b) of the 1940 Act nor
instituted any proceeding seeking to enjoin consummation
of the transactions contemplated by this Agreement under
Section 25(c) of the 1940 Act.
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<PAGE>
(g) The N-14 Registration Statement shall have become
effective under the 1933 Act and no stop order
suspending such effectiveness shall have been
instituted or, to the knowledge of Woodward,
contemplated by the SEC and the parties shall have
received all permits and other authorizations
necessary under state securities laws to
consummate the transactions contemplated by this
Agreement.
(h) The President or a Vice President of Prairie shall have
certified that Prairie has performed and complied in all
material respects with each of its agreements and
covenants required by this Agreement to be performed or
complied with by it prior to or at the Valuation Time
and the Effective Time of the Reorganization.
(i) Prairie shall have delivered or caused to be
delivered to Woodward each account, book, record
or other document of Prairie applicable to the
Acquired Fund which is required to be maintained
by Section 31(a) of the 1940 Act and Rules 31a-1
to 31a-3 thereunder (regardless of what person
possesses the same). Prairie has instructed its
service contractors to provide Woodward upon
I-30
<PAGE>
request with access to and copies of all documents
belonging to Prairie.
X. Prairie Conditions. The obligations of Prairie hereunder with respect to
the Acquired Fund shall be subject to the following conditions precedent:
(a) This Agreement and the transactions contemplated by this
Agreement shall have been approved by the shareholders
of the Acquired Fund, in the manner required by law.
(b) All representations and warranties of Woodward
made in this Agreement shall be true and correct
in all material respects as if made at and as of
the Valuation Time and the Effective Time of the
Reorganization. As of the Valuation Time and the
Effective Time of the Reorganization there shall
have been no material adverse change in the
financial condition of the Acquiring Fund since
December 31, 1995 other than those changes
incurred in the ordinary course of business as an
investment company. No action, suit or other
proceeding shall be threatened or pending before
any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages
I-31
<PAGE>
or other relief in connection with, this Agreement
or the transactions contemplated herein.
(c) Prairie shall have received an opinion of Drinker
Biddle & Reath, addressed to Prairie in form
reasonably satisfactory to it and dated the
Effective Time of the Reorganization substantially
to the effect that: (i) Woodward is a
Massachusetts business trust duly organized and
validly existing under the laws of the
Commonwealth of Massachusetts and is qualified to
do business and in good standing in each state in
which such qualification is required; (ii) the
shares of each class of the Acquiring Fund to be
delivered at such time to the Acquired Fund as
provided for by this Agreement are duly authorized
and upon delivery will be validly issued, fully
paid and non-assessable by the Acquiring Fund and
to such counsel's knowledge, no shareholder of the
Acquiring Fund has any option, warrant or pre-
emptive right to subscription or purchase in
respect thereof; (iii) this Agreement has been
duly authorized, executed and delivered by
Woodward and represents a legal, valid and binding
contract, enforceable in accordance with its
terms, subject to the effect of bankruptcy,
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<PAGE>
insolvency, moratorium, fraudulent conveyance and
similar laws relating to or affecting creditors' rights
generally and court decisions with respect thereto, and
such counsel shall not be required to express an opinion
with respect to the application of equitable principles
in any proceeding, whether at law or in equity, or with
respect to the provisions of this Agreement intended to
limit liability for particular matters to the Acquiring
Fund and its assets; (iv) the execution and delivery of
this Agreement did not, and the consummation of the
transactions contemplated by this Agreement will not,
violate the Agreement and Declaration of Trust or
By-laws of Woodward, or any material agreement known to
such counsel to which Woodward is a party or by which
Woodward is bound; and (v) to such counsel's knowledge
no consent, approval, authorization or order of any
court or governmental authority is required for the
consummation by Woodward of the transactions
contemplated by this Agreement, except such as have been
obtained under the 1933 Act, the 1934 Act, the 1940 Act,
the rules and regulations under those Acts and such as
may be required under the state securities laws. Such
opinion may rely on the opinion of other counsel to the
extent set
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<PAGE>
forth in such opinion, provided such other counsel is
reasonably acceptable to Prairie.
(d) Prairie shall have received an opinion of Drinker Biddle
& Reath, addressed to Woodward and Prairie in the form
reasonably satisfactory to them and dated the Effective
Time of the Reorganization with respect to the matters
specified in Section
IX(e).
(e) The N-14 Registration Statement shall have become
effective under the 1933 Act and no stop order
suspending such effectiveness shall have been
instituted, or to the knowledge of Woodward,
contemplated by the SEC and the parties shall have
received all permits and other authorizations
necessary under state securities laws to
consummate the transactions contemplated by this
Agreement.
(f) The SEC shall not have issued any unfavorable advisory
report under Section 25(b) of the 1940 Act nor
instituted any proceeding seeking to enjoin consummation
of the transactions contemplated by this Agreement under
Section 25(c) of the 1940 Act.
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<PAGE>
(g) The President or Vice President of Woodward shall have
certified that Woodward has performed and complied in
all material respects with each of its agreements and
covenants required by this Agreement to be performed or
complied with by it prior to or at the Valuation Time
and the Effective Time of the Reorganization.
(h) Prairie shall have received from the SEC a written order
of exemption, satisfactory in form and substance to
Prairie and Woodward, exempting the Reorganization from
Sections 17(a) and 17(d) of the 1940 Act and Rule 17d-1
thereunder.
XI. Tax Documents. Prairie shall deliver to Woodward at the Effective Time of
the Reorganization confirmations or other adequate evidence as to the adjusted
tax basis of the Acquired Fund Assets then delivered to the Acquiring Fund in
accordance with the terms of this Agreement.
XII. Finder's Fees. Each party represents and warrants to each of the other
parties hereto that there is no person who is entitled to any finder's or
other similar fee or commission arising out of the transactions contemplated
by this Agreement.
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<PAGE>
XIII. Announcements. Any announcements or similar publicity with respect to
this Agreement or the transactions contemplated herein shall be at such time
and in such manner as the parties shall agree; provided, that nothing herein
shall prevent any party upon notice to the other parties from making such
public announcements as such party's counsel may consider advisable in order
to satisfy the party's legal and contractual obligations in such regard.
XIV. Further Assurances. Subject to the terms and conditions herein provided,
each of the parties hereto shall use its best efforts to take, or cause to be
taken, such action, to execute and deliver, or cause to be executed and
delivered, such additional documents and instruments, and to do, or cause to
be done, all things necessary, proper or advisable under the provisions of
this Agreement and under applicable law to consummate and make effective the
transactions contemplated by this Agreement.
XV. Termination of Representations and Warranties. The representations and
warranties of the parties set forth in this Agreement shall terminate at the
Effective Time of the Reorganization.
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<PAGE>
XVI. Termination of Agreement.
16.01 This Agreement may be terminated by a party at any time at or
prior to the Effective Time of the Reorganization of the Acquired Fund and the
Acquiring Fund at any time at or prior to the Effective Time of the
Reorganization, by the Board of Trustees of Woodward or the Board of Trustees
of Prairie, as provided below:
(a) By Woodward if the conditions set forth in Article
IX are not satisfied as specified in said Section;
(b) By Prairie if the conditions set forth in Article
X are not satisfied as specified in said Section;
(c) By the mutual consent of the parties.
16.02 If a party terminates this Agreement because one or more of its
conditions precedent have not been fulfilled, or if this Agreement is
terminated by mutual consent, this Agreement will become null and void without
any liability of either party or any of their investment portfolios to the
other; provided, however, that if such termination is by Woodward pursuant to
Section 16.01(a) as a result of a breach by Prairie of any of its
representations, warranties or covenants in this Agreement, or such
termination is by Prairie pursuant to Section 16.01(b) as a result of a breach
by Woodward of any of its representations,
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<PAGE>
warranties or covenants in this Agreement, nothing herein shall affect the
non-breaching party's right to damages on account of such other party's
breach.
XVII. Amendment and Waiver. At any time prior to or (to the fullest extent
permitted by law) after approval of this Agreement by the shareholders of
Prairie, (a) the parties hereto may, by written agreement authorized by their
respective Boards of Trustees, as the case may be, or their respective
Presidents or any Vice Presidents, and with or without the approval of their
shareholders, amend any of the provisions of this Agreement, and (b) either
party may waive any breach by the other party or the failure to satisfy any of
the conditions to its obligations (such waiver to be in writing and authorized
by the President or Vice President of the waiving party with or without the
approval of such party's shareholders).
XVIII. Governing Law. This Agreement and the transactions contemplated hereby
shall be governed, construed and enforced in accordance with the laws of the
Commonwealth of Massachusetts, without giving effect to the conflicts of law
principles otherwise applicable therein.
XIX. Successors and Assigns. This Agreement shall be binding upon the
respective successors and permitted assigns of the parties hereto. This
Agreement and the rights, obligations and
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<PAGE>
liabilities hereunder may not be assigned by either party without the consent
of the other party.
XX. Beneficiaries. Nothing contained in this Agreement shall be deemed to
create rights in persons not parties hereto, other than the successors and
permitted assigns of the parties.
XXI. Prairie Liability.
21.01 The name "Prairie Funds," refer respectively to the trust
created and the trustees, as trustees but not individually or personally,
acting from time to time under the Declaration of Trust dated October 20, 1994
which is hereby referred to and a copy of which is on file at the office of
the State Secretary of the Commonwealth of Massachusetts and at the principal
office of Prairie. The obligations of Prairie entered into in the name or on
behalf thereof by any of the trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
trustees, shareholders or representatives of Prairie personally, but bind only
the trust property, and all persons dealing with any portfolio of Prairie must
look solely to the trust property belonging to such portfolio for the
enforcement of any claims against Prairie.
21.02 Both parties specifically acknowledge and agree that any
liability of Prairie under this Agreement with respect to an
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<PAGE>
Acquired Fund, or in connection with the transactions contemplated herein with
respect to the Acquired Fund, shall be discharged only out of the assets of
the Acquired Fund and that no other portfolio of Prairie shall be liable with
respect thereto.
XXII. Woodward Liability.
22.01 The names "The Woodward Funds" and "Trustees of Woodward" refer,
respectively, to the trust created and the trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated April 21, 1987, as amended May 1, 1992, which is hereby referred
to and a copy of which is on file at the office of the State Secretary of the
Commonwealth of Massachusetts and at the principal office of Woodward. The
obligations of Woodward entered into in the name or on behalf thereof by any
of the trustees, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the trustees, shareholders or
representatives of Woodward personally, but bind only the trust property, and
all persons dealing with any portfolio of Woodward must look solely to the
trust property belonging to such portfolio for the enforcement of any claims
against Woodward.
22.02 Both parties specifically acknowledge and agree that any
liability of Woodward under this Agreement with respect to
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<PAGE>
the Acquiring Fund, or in connection with the transactions contemplated herein
with respect to the Acquiring Fund, shall be discharged only out of the assets
of the Acquiring Fund and that no other portfolio of Woodward shall be liable
with respect thereto.
XXIII. Notices. All notices required or permitted herein shall be in writing
and shall be deemed to be properly given when delivered personally or by
telecopier to the party entitled to receive the notice or when sent by
certified or registered mail, postage prepaid, or delivered to a nationally
recognized overnight courier service, in each case properly addressed to the
party entitled to receive such notice at the address or telecopier number
stated below or to such other address or telecopier number as may hereafter be
furnished in writing by notice similarly given by one party to the other party
hereto:
If to Woodward:
The Woodward Funds
Earl I. Heenan, Jr., President
c/o NBD Bank, Attn: Richard L. Foersterling
611 Woodward Avenue
Detroit, Michigan 48226
Telecopier Number: (313) 225-3940
With a copy to:
W. Bruce McConnel, III, Esq.
Drinker Biddle & Reath
1345 Chestnut Street
Philadelphia, PA 19107
Telecopier Number: (215) 988-2757
I-41
<PAGE>
If to Prairie:
Prairie Funds
c/o Mark A. Dillon, President
Three First National Plaza
Chicago, Illinois 60670
Telecopier Number: (312) 732-3864
With a copy to:
Lewis G. Cole, Esq.
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004-2696
Telecopier Number: (212) 806-6006
XXIV. Expenses. Each party represents to the other that its expenses incurred
in connection with the Reorganization will be borne by First Chicago NBD
Corporation or one or more of its affiliates, provided, however, that Woodward
shall bear any filing fees under the 1933 Act and state securities laws in
connection with its Class A, Class B and Class I Shares to be distributed to
shareholders of the Acquired Fund.
XXV. Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto and supersedes any and all prior
agreements, arrangements and understandings relating to matters provided for
herein.
XXVI. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered shall be deemed to be
an original, but all of which together shall constitute one and the same
instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their duly authorized officers designated below
as of the date first written above.
THE WOODWARD FUNDS
ATTEST:
___________________________ By: _________________________
PRAIRIE FUNDS
ATTEST:
____________________________ By: __________________________
I-43
<PAGE>
Schedule 1
to the
Agreement and Plan of Reorganization
By and Between
The Woodward Funds
and
Prairie Funds
On August 23, 1995, the U.S. Securities and Exchange
Commission issued in In the Matter of First Prairie Complex an
"Order Directing a Private Investigation and Designating Officers
to Take Testimony."
I-44
<PAGE>
APPENDIX II
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
WOODWARD INTERNATIONAL EQUITY FUND
Objective:
The Woodward International Equity Fund (the "Fund") is an equity mutual
fund which invests primarily in equity securities of foreign companies. The
Fund's objective is to achieve long-term capital appreciation and,
secondarily, to produce current income. The Fund seeks to achieve this
objective by emphasizing active country selection involving global economic
and political assessments together with valuation analysis of selected
countries' securities markets. The Fund may exhibit more volatility than the
U.S. equity market in general.
Performance Highlights:
International equity markets appreciated during 1995 as slower economic
growth and modest inflationary pressures resulted in lower interest rates. The
Morgan Stanley Capital International EAFE Index returned 11.2 percent in U.S.
dollar terms during 1995. European equity markets advanced 21.6 percent in
U.S. dollars on good earnings gains and lower interest rates. The Japanese
stock market lagged with a U.S. dollar return of 0.7 percent. This stock
market declined during the first half of the year on concerns about the anemic
business outlook, trade tensions with the U.S. and increasing nonperforming
loans at Japanese banks. The MSCI Pacific ex-Japan index returned 12.9
percent, led by a return of 22.6 percent in Hong Kong. Latin American equity
markets generally declined in response to a financial crisis in Mexico.
During the calendar year ended December 31, 1995, the Fund returned 11.5
percent (without sales charge). The net asset value increased from $10.005 to
$11.046. Distributions from ordinary income were $0.107 per share and there
was no long-term capital gains distribution.
The Fund's performance compared favorably with the Morgan Stanley
Capital International EAFE Index, a market value weighted index of about 1,100
equity securities issued by foreign companies with a total market value of
approximately US $5.3 trillion. This index is not subject to expenses of a
mutual fund. The Fund outperformed primarily due to its underweighting of
equities in Japan and overweighting of equities in Europe. The Fund also
outperformed the Lipper International Universe average return of 9.4 percent
for 1995.
Over the long term, international equities have historically provided
returns superior to U.S. large capitalization stocks although, at a higher
level of volatility. We continue to recommend that long-term investors have a
portion of their assets invested internationally to capture the benefits of
portfolio diversification and potential capital appreciation.
II-1
<PAGE>
<TABLE>
<CAPTION>
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
WOODWARD INTERNATIONAL EQUITY FUND (Continued)
Growth of $10,000 Invested in the
Woodward International Equity Fund and the
Morgan Stanley Capital International EAFE Index
[ GRAPH ]
12/3/94 6/95 12/95
------- ---- -----
<S> <C> <C> <C>
Fund (1) ... $ 9,500 $10,004 $10,595
Fund (2) ... $10,000 $10,531 $11,153
Index (3) .. $10,000 $10,492 $11,372
<FN>
(1) Includes maximum sales charge of 5.0%.
(2) Excludes maximum sales charge of 5.0%.
(3) Excludes expenses.
</TABLE>
<TABLE>
<CAPTION>
Since
Average Annual Total Return One Inception
Through 12/31/95 Year (12/3/94)
--------------------------- ---- ---------
<S> <C> <C>
Woodward International Equity Fund
(with maximum 5.0% sales charge) 5.9% 5.5%
Woodward International Equity Fund
(without sales charge) 11.5% 10.7%
Morgan Stanely Capital International
EAFE Index 11.2% 12.7%
Past performance is not predictive of future performance.
</TABLE>
II-2
<PAGE>
APPENDIX III
SHAREHOLDER TRANSACTIONS AND SERVICES
This Appendix compares the shareholder transactions and services
that are available in connection with: 1) the Woodward Fund and
2) the Prairie Fund. References to the Woodward Fund refers to
the post-reorganization Fund.
I. WOODWARD FUND
AND THE
PRAIRIE FUND
A. Sales Charges and Exemptions.
Class A Shares
<TABLE>
<CAPTION>
Class A Shares
Maximum Sales Charge
--------------------
Prairie Fund/ Current Proposed
Woodward Fund Sales Load Sales Load
- - ------------- ---------- ----------
<S> <C> <C>
International Equity Fund/International Equity Fund 4.5% 5.0%
</TABLE>
Class A shares purchased without an initial sales charge as part of an
investment of at least $1,000,000 or other sales load waiver as
described below, and where such shares are redeemed within two years
after purchase, a contingent deferred sales charge ("CDSC") will be
imposed at the time of redemption unless the investor qualifies for a
waiver of the CDSC as described below under "Class B Shares Waiver of
CDSC." The following table sets forth the rates of such CDSC for the
indicated time periods:
<TABLE>
<CAPTION>
CDSC as a % of
Amount Invested or Year Since Purchase
Redemption Proceeds Payment Was Made
------------------- -------------------
<S> <C>
1.00% First
0.50% Second
</TABLE>
III-1
<PAGE>
Class A Shares-Sales Load Waiver
a. Class A Shares of the Woodward Fund and Prairie Fund may be purchased
at net asset value and without a sales load by certain purchasers. The
sales load waiver applicable to the post-reorganization Fund is
substantially similar to the Prairie Fund's sales load waiver.
b. Reduced sales loads apply to any purchase of the Prairie Fund and
Woodward Fund Class A Shares where the dollar amount of shares
transacted or accumulated within a shareholder's account is at least
$50,000.
c. After the Reorganization, the following types of purchasers
may purchase Class A Shares of the Woodward Fund with no
sales charge: (i) full-time employees of NASD member firms
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 with respect to sales of Fund shares),
their spouses and minor children; (ii) accounts opened by a
bank, trust company or thrift institution, acting as a
fiduciary or custodian, 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; (iii) purchases for accounts registered
under the Uniform Gifts to Minors Act or Uniform Transfers
to Minors Act which are opened through FNIS and 401(k) and
other defined contribution or qualified retirement plan
accounts for which FNBC or its subsidiaries or affiliates
has served as administrator or trustee since at least June
1, 1995 or NBD or its subsidiaries or affiliates has served
as administrator or Trustee since January 1, 1996; (iv)
directors and full-time or part-time employees of FCN, or
any of its affiliates and subsidiaries, retired employees of
FCN, or any of its affiliates and subsidiaries, Board
members of a fund advised by the Investment Advisers,
including members of the Fund's Board of Trustees, or the
spouses, children, grandchildren, siblings, parents,
grandparents and in-laws of any of the foregoing
individuals; (v) purchases through certain broker-dealers,
registered investment advisers and other financial
institutions which have entered into an agreement with the
Distributor, which includes a requirement that such shares
be sold for the benefit of clients participating in a "wrap
account" or a similar program under which such clients pay a
fee to such broker-dealer, registered investment adviser or
other financial institution; and (vi) employees
participating in qualified plans or other programs where (i)
the employers or affiliated employers maintaining such plans
III-2
<PAGE>
or programs have a minimum of 200 employees eligible for participation
in such plans or programs or (ii) such plan's or program's assets
exceed one million dollars.
d. Class A shares also may be purchased at net asset value,
without a sales charge, with the proceeds from the
redemption of shares of an investment company sold with a
sales charge or commission or annuity contract or guaranteed
investment contract subject to a surrender charge. This
also includes shares of an investment company that were or
would be subject to a contingent deferred sales charge upon
redemption. The purchase must be made within 60 days of the
redemption, and the Transfer Agent must be notified in
writing by the investor at the time the purchase is made.
e. Class A and Class B Shares of the Woodward Fund and Prairie Fund also
offer rights of accumulation and letter of intent programs that can
reduce the sales charge payable on share purchases.
Class B Shares
a. Class B Shares will be offered for the Woodward Fund.
b. Class B Shares of the Woodward Fund will not be offered until the time
of the Reorganizing Transaction, as applicable. The following table
sets forth the rates of the CDSC for the Woodward Fund and the Prairie
Fund:
<TABLE>
<CAPTION>
Class B Shares
Maximum CDSC
--------------
Prairie Fund/ Current Proposed
Woodward Fund Sales Load Sales Load
- - ------------- ---------- ----------
<S> <C> <C>
International Equity Fund/International Equity Fund 5.0% 5.0%
</TABLE>
Class B Shares-Waiver of CDSC
a. In connection with redemptions of Class B Shares (and Class A Shares
subject to a CDSC), the Prairie Fund and the Woodward Fund will waive
the CDSC in connection with (a) redemptions made within one year after
the death of the shareholder, (b) redemptions by shareholders after
age 70-1/2 for purposes of the minimum required distribution from an
IRA, Keogh plan or custodial account pursuant to Section 403(b) of the
Code, (c) distributions from a qualified plan upon retirement or
termination of employment, (d) redemption of shares acquired through a
contribution in excess of permitted amounts, (e) in-service
withdrawals from tax qualified plans by participants and (f)
III-3
<PAGE>
redemptions initiated by a Fund of accounts with net assets of less
than $1,000.
B. Purchase Policies
The following table summarizes the Woodward and Prairie Fund's
existing purchase policies:
<TABLE>
<CAPTION>
Woodward Fund Prairie Fund
------------- ------------
<S> <C> <C>
Minimum Initial $1,000 ($250 for IRAs) for $1,000 ($250 for IRAs).
Investment initial purchases of Class A
Shares. NBD and its
affiliated and correspondent
banks (the "Banks") may
impose different minimum
investment requirements on
Class I Shares.
Minimum Subsequent $100. $100.
Investment
Automatic Class A Shares may be Shares may be purchased
Investment Plan purchased on a monthly basis on a monthly basis
through automatic deductions through automatic
from a shareholder's deductions from a
checking or savings account; shareholder's checking or
$25 minimum per transaction. savings account. No
minimum.
Purchase Methods Shares are sold by First of Shares are sold by
Michigan Corporation ("FoM") Concord Financial Group,
and Essex National Inc. ("Concord") directly
Securities ("Essex") and through
directly and through broker/dealers having a
broker/dealers having a dealer agreement with
dealer agreement with FoM or Concord or through
Essex, or through procedures procedures established by
established by FoM or Essex Concord in connection
in connection w/the with the requirements of
requirements of accounts at accounts at First
NBD Bank; by mail; by Chicago; by mail; by
telephone. telephone.
Payment Methods By check or wire. By check or wire.
</TABLE>
III-4
<PAGE>
The following table summarizes the post reorganization Fund's purchase
policies:
<TABLE>
<S> <C>
Minimum Initial $1,000 ($250 for IRAs).
Investment
Minimum Subsequent $100.
Investment
Automatic Investment Shares may be purchased on a monthly
Plan basis from a shareholder's checking or
savings account. $100 minimum per
transaction.
Purchase Methods Shares are offered to the general
public and may be purchased through a
number of institutions, including FCN,
the Investment Advisers, ANB and their
affiliates, other Service Agents, and
directly through the Distributor; by
mail; by telephone.
Payment Methods By check or wire.
</TABLE>
The Woodward Fund and Prairie Fund each reserves the right to reject
any purchase order.
C. Redemption Policies
The following table summarizes the Woodward and Prairie Fund's
existing redemption policies:
III-5
<PAGE>
<TABLE>
<CAPTION>
Woodward Fund Prairie Fund
------------- ------------
<S> <C> <C>
Redemption Methods Redemption requests Redemption requests
placed with or through placed with FCIMCO,
the investor's financial FNBC, ANB or a Service
institution or the Agent or by written
Transfer Agent; by mail; request to the
by telephone. Transfer Agent; by
mail; by telephone.
Payment Methods By check or wire. By check or wire.
Check Writing Privilege N/A N/A
Automatic Cash Available for N/A
Withdrawal Plan shareholders who own
Class A Shares having a minimum value
of $15,000.
Reinstatement Privilege Available for Available for
shareholders who purchase shareholders who
shares within 120 days of purchase shares within
redemption. 30 days of redemption.
</TABLE>
The following table summarizes the Post Reorganization Fund's redemption
policies:
<TABLE>
<S> <C>
Redemption Methods Redemption requests placed with the
Transfer Agent or, if the investor is a
participant in a fiduciary account or
retirement plan (as described in the
prospectus), by following instructions
pertaining to such account or plan; by
mail; by telephone.
Payment Methods By check or wire.
Check Writing Privilege N/A
Automatic Cash
Withdrawal Plan Available for shareholders who own
shares of a Fund having a minimum value
of $15,000.
Reinstatement Privilege Available for shareholders who
purchase shares within 120 days of
redemption.
</TABLE>
The Prairie 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 $1,000 or less. The
Woodward Fund reserves the right to
III-6
<PAGE>
redeem an investor's account at the Trust's option upon not less than
60 days' written notice if the account's net asset value is $1,000 or
less. The post reorganization Fund will reserve the right to redeem an
investor's account at the Trust's option upon not less than 30 days'
written notice if the account's net asset value is $1,000 or less.
Under certain circumstances the Woodward Fund may make payment for
redemptions in securities or other property.
A Prairie shareholder who, at the effective time of the
Reorganization, meets the Prairie, but not the Woodward, minimum
investment requirement, will not be required to redeem the Woodward
shares received in connection with the Reorganization, unless the
balance in the shareholder's account drops below the Prairie minimum
as a result of redemptions, or unless redemption appears appropriate
in light of Woodward's responsibilities under the 1940 Act.
D. Share Exchanges
<TABLE>
<CAPTION>
Prairie -
Class A Shares,
Woodward - Class B Shares and
Class A Shares Class I Shares
-------------- ------------------
<S> <C> <C>
By Mail Yes. Yes.
By Telephone Yes. Yes.
Minimum Must equal minimum No minimum.
investment required of the
portfolio being acquired.
</TABLE>
Class I Shares of Woodward do not have an exchange privilege.
With respect to the Woodward Class A Shares and the Prairie Class A,
Class B and Class I Shares, a shareholder may exchange shares of a
load portfolio for shares of a no load portfolio or another load
portfolio at net asset value. Any exchange of shares of a no load
portfolio for shares of a load portfolio will be subject to the
payment of the applicable sales load. Exchanges of Prairie Class B
Shares will be subject to the higher applicable CDSC of the two Funds.
Woodward and Prairie both reserve the right to modify or terminate
exchange privileges with 60 days' notice and to reject any exchange
request in whole or in part. Exchanges are only available in states
where exchanges can lawfully be made from one Portfolio to another,
and must satisfy the requirements relating to the minimum initial
investment in a Fund.
The Woodward Fund will permit investors to purchase, in
exchange for shares of a Fund which has been owned for at least 30
days, shares of the same Class of the other Funds of the Trust.
Exchanges may be made to the extent the
III-7
<PAGE>
shares being received in the exchange are offered for sale in the
shareholder's state of residence. Shares of the same Class of Funds
purchased by exchange will be purchased on the basis of relative net
asset value per share as follows: (i) shares of Funds purchased with
or without a sales load may be exchanged without a sales load for
shares of other Funds sold without a sales load; (ii) shares of Funds
purchased without a sales load may be exchanged for shares of other
Funds sold with a sales load, and the applicable sales load will be
deducted; (iii) shares of Funds purchased with a sales load, shares of
Funds acquired by a previous exchange from shares purchased with a
sales load and additional shares acquired through reinvestment of
dividends or distributions of any such Funds (collectively referred to
herein as "Purchased Shares") may be exchanged for shares of other
Funds sold with a sales load (referred to herein as "Offered Shares"),
provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load that could have been imposed in
connection with the Purchased Shares (at the time the Purchased Shares
were acquired), without giving effect to any reduced loads, the
difference will be deducted; (iv) shares of Funds subject to a CDSC
that are exchanged for shares of another Fund will be subject to the
higher applicable CDSC of the two Funds, and for purposes of
calculating CDSC rates and conversion periods, if any, will be deemed
to have been held since the date the shares being exchanged were
initially purchased; and (v) a qualified or non-qualified employee
benefit plan with assets of at least $1 million or 200 eligible lives
may be exchanged from Class B shares to Class A shares on or after
January 1 of the year following the year of the plan's eligibility,
provided that the sponsor of the plan has so notified the Service
Agent of its eligibility and in turn, the Service Agent has notified
the Trust of such eligibility.
No fees currently will be 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 will reserve the right to reject any
exchange request in whole or in part.
E. Responsibility for Telephone Instructions
Woodward, Prairie, their administrators and their distributors
are not liable for any loss, liability, cost or expense for acting
upon telephone instructions that are reasonably believed to be
genuine. In attempting to confirm that telephone instructions are
genuine, procedures are used that are considered reasonable, which may
include recording
III-8
<PAGE>
telephone instructions and requesting information as to account
registration (such as the name in which an account is registered, the
account number, recent transactions in the account and the account
holder's Social Security number, address and/or bank).
F. Conversions
Prairie Class B Shares automatically convert to Class A Shares
in the eighth year after the date of purchase. Prairie Class I shares
held by investors who after purchasing Class I shares for their
qualified trust, custody and/or agency account clients of the FCN or
its affiliates withdraw from such accounts will convert to Class A
shares automatically upon such withdrawal, based on the relative net
asset values for shares of each such Class, and will be subject to the
annual service fee charged to Class A shares.
After the reorganization, Woodward Class B Shares will
automatically convert to Class A Shares in the eighth year after the
date of purchase. Woodward Class I shares held by investors who after
purchasing Class I shares for their qualified trust, custody and/or
agency account clients of the FCN or its affiliates withdraw from such
accounts will convert to Class A shares automatically upon such
withdrawal, based on the relative net asset values for shares of each
such Class, and will be subject to the annual service fee charged to
Class A shares.
II. DIVIDENDS AND DISTRIBUTIONS
The Woodward Fund and Prairie Fund distribute their net capital gains
to Shareholders at least annually. The following table shows the policies
concerning the declaration and payment of dividends from net investment
income.
Current Dividend
Declared/Paid
----------------
Prairie International Equity Fund Quarterly/Quarterly
Woodward International Equity Fund Annually/Annually
Post-Reorganization Fund Quarterly/Quarterly
III-9
<PAGE>
PART B
PRAIRIE FUNDS
Three First National Plaza
Chicago, Illinois 60670
THE WOODWARD FUNDS
900 Tower Drive
P.O. Box 7058
Troy, Michigan 48007
STATEMENT OF ADDITIONAL INFORMATION
(1996 Special Meetings of Shareholders of
Prairie Funds)
This Statement of Additional Information is not a prospectus but
should be read in conjunction with the Combined Prospectus/ Proxy Statement
dated May __, 1996 for the Special Meetings of Shareholders of Prairie Funds
("Prairie") to be held on July 10, 1996. Copies of the Combined
Prospectus/Proxy Statement may be obtained at no charge by calling Prairie at
1-800-370-9446.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Prospectus/Proxy Statement.
Further information about the Class A, Class B and Class I Shares of
the Woodward Fund is contained in and incorporated by reference to Woodward's
Statement of Additional Information dated April 15, 1996, a copy of which are
included herewith. The audited financial statements and related independent
accountant's report for the Woodward Fund contained in the Annual Report dated
December 31, 1995, is hereby incorporated herein by reference. No other parts
of the Annual Reports are incorporated by reference herein.
Further information about the Class A, Class B and Class I Shares of
the Prairie Fund is contained in and incorporated by reference to Prairie's
Statement of Additional Information dated April 11, 1996, a copy of which is
included herewith. The audited financial statements and related independent
accountant's report for Prairie contained in the Annual Report dated December
31, 1995 are incorporated herein by reference. No other parts of the Annual
Report are incorporated by reference herein.
The date of this Statement of Additional Information is May __, 1996.
<PAGE>
TABLE OF CONTENTS
Page
----
General Information.......................................... B-3
Pro Forma Financial Statements............................... PFS-1
B-2
<PAGE>
GENERAL INFORMATION
The Shareholders of Prairie are being asked to approve or disapprove
an Agreement and Plan of Reorganization (the "Reorganization Agreement") dated
as of ___________, 1996 between Prairie and Woodward, and the transactions
contemplated thereby. The Reorganization Agreement contemplates the transfer
of substantially all of the assets and liabilities of International Equity
Fund to the Woodward International Equity Fund in exchange for full and
fractional shares representing interests in the Woodward Fund. The shares
issued by Woodward will have an aggregate net asset value equal to the
aggregate net asset value of the shares of the respective Prairie Fund that
are outstanding immediately before the effective time of the reorganization.
Following the exchange, the Prairie Fund will make a liquidating
distribution of the Woodward Fund shares to their shareholders. Each
shareholder owning shares of the Prairie Fund at the effective time of the
Reorganization will receive shares of the Woodward Fund of equal value, plus
the right to receive any unpaid dividends and distributions that were declared
before the effective time of the Reorganization on Prairie Fund shares. Upon
completion of the Reorganization, Prairie will be terminated under state law
and deregistered under the Investment Company Act of 1940.
The Special Meeting of Shareholders of Prairie to consider the
Reorganization Agreement and the related transactions will be held at _____
a.m./p.m. Eastern time on July 10, 1996 at the offices of BISYS Fund Services,
Inc., 3435 Stelzer Road, Columbus, Ohio. For further information about the
transaction, see the Combined Prospectus/Proxy Statement.
Banking laws and regulations currently prohibit a bank holding company
registered under the Bank Holding Company Act of 1956, as amended, or any bank
or non-bank affiliate thereof from sponsoring, organizing, controlling, or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling, or distributing securities such
as shares of the Woodward Fund, but do not prohibit such a bank holding
company or its affiliates or banks generally from acting as investment
adviser, transfer agent, administrator or custodian to such an investment
company or from purchasing shares of such a company as agent for and upon the
order of customers. FCIMCO, NBD and financial intermediaries which agree to
provide shareholder support services that are banks or bank affiliates are
subject to such banking laws and regulations. Should legislative, judicial, or
administrative action prohibit or restrict the activities of such companies in
connection with their services to the Woodward Fund, Woodward might be
required
B-3
<PAGE>
to alter materially or discontinue its arrangement with such companies and
change its method of operation. It is anticipated, however, that any resulting
change in Woodward's method of operation would not affect a Woodward Fund's
net asset value per share or result in financial loss to any shareholder.
B-4
<PAGE>
THE PRAIRIE/WOODWARD FUNDS
PRO FORMA FINANCIAL STATEMENTS
These pro forma financial statements are presented in accordance with the
rules prescribed by the Securities and Exchange Commission (SEC) to reflect
for the benefit of the shareholders of the Woodward and Prairie Funds the
effect of the merger of these Funds had the merger taken place effective for
the periods presented in the accompanying pro forma statements.
In accordance with SEC rules, Woodward and Prairie must present a pro forma
balance sheet as of December 31, 1995, and a pro forma statement of income for
the period ended December 31, 1995. The amounts presented for the Woodward and
Prairie Funds reflect the amounts shown on both Woodward's and Prairie's
financial reports filed with the SEC for the periods reflected.
The pro forma adjustments are explained in more detail in the notes to the pro
forma statements. Under SEC regulations, pro forma adjustments may only be
reflected for the effects which are directly related to the merger, expected
to have a continuing impact and are factually supportable. As such, pro forma
adjustments have been reflected only for those expense items of the funds
which are subject to contractual terms. Increased interest income or other
expense efficiencies resulting from the merger have not been reflected as such
adjustments are not permitted under the current SEC regulations. The pro forma
statements may not be indicative of the results that would have occurred if
the merger had taken place during the periods presented, nor may they be
reflective of the results that may be obtained in the future.
PFS-1
<PAGE>
Prairie/Woodward Funds
International Equity Fund
Pro Forma Combining Statement of Assets and Liabilities
December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Woodward Prairie Pro Forma
International International Combined
Equity Fund Equity Fund Adjustments (Note 1)
------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
ASSETS:
Investment in securities:
At Cost $ 100,165,227 $ 96,241,231 $ -- $ 196,406,458
============= ============= ============= =============
At Value $ 107,690,899 $ 102,116,486 $ -- $ 209,807,385
Cash 364,232 89,437 -- 453,669
Cash denominated in foreign currencies -- 948,475 -- 948,475
Receivable for securities sold 8,253 -- -- 8,253
Receivable from Advisor -- -- 60,697 (c) 60,697
Receivable for Fund shares sold -- 447,060 -- 447,060
Unrealized appreciation on foreign exchange contracts 52 -- -- 52
Withholding tax receivable 140,894 55,468 -- 196,362
Income receivable 178,985 1,089,681 -- 1,268,666
Deferred organization expenses 49,159 60,697 (60,697)(c) 49,159
Prepaids and other assets 27,321 3,482 -- 30,803
------------- -------------- ------------- -------------
TOTAL ASSETS 108,459,795 104,810,786 -- 213,270,581
------------- -------------- ------------- -------------
LIABILITIES:
Payable for securities purchased 770,234 -- -- 770,234
Unrealized depreciation on foreign exchange contracts 267 -- -- 267
Accrued investment advisory fee 67,327 31,952 -- 99,279
Accrued distribution fees 516 -- -- 516
Accrued custodial fees 14,528 -- -- 14,528
Administration fees payable -- 12,564 -- 12,564
Dividends payable 306,527 203,585 -- 510,112
Other accrued expenses and payables 12,095 173,308 -- 185,403
------------- ------------- ------------- -------------
TOTAL LIABILITIES 1,171,494 421,409 -- 1,592,903
------------- ------------- ------------- -------------
NET ASSETS $ 107,288,301 $ 104,389,377 $ -- $ 211,677,678
============= ============= ============= =============
Net assets consist of:
Capital shares, at par $ 971,289 $ 9,344 $ 935,686 (a) $ 1,916,319
Additional paid-in capital 98,938,436 95,968,721 (935,686)(a) 193,971,471
Accumulated undistributed net investment income 803 134,091 -- 134,894
Accumulated undistributed net realized gains (losses)
from investments and foreign currency transactions (154,256) 1,502,766 -- 1,348,510
Net unrealized appreciation on investments,
foreign currency translations and financial futures 7,532,029 6,774,455 -- 14,306,484
------------- ------------- ------------- -------------
TOTAL NET ASSETS $ 107,288,301 $ 104,389,377 $ -- $ 211,677,678
============= ============= ============= =============
Class A shares:
Net assets $ -- $ 2,749,124 $ 925,362 (b) $ 3,674,486
Shares outstanding -- 246,447 86,207 (a,b) 332,654
Net asset value per class A share $ -- $ 11.16 $ -- $ 11.05
Maximum offering price per share $ -- $ 11.69 $ -- $ 11.63
Class B Shares
Net Assets $ -- $ 192,707 $ -- $ 192,707
Shares outstanding -- 17,292 -- 17,292
Net asset value per class B share $ -- $ 11.14 $ -- $ 11.14
Class I shares:
Net assets $ -- $ 101,447,546 $ 106,362,939 (b) $ 207,810,485
Shares outstanding -- 9,079,890 9,733,350 (a,b) 18,813,240
Net asset value per class I share $ -- $ 11.17 $ -- $ 11.05
Single class shares:
Net assets $ 107,288,301 $ -- $(107,288,301)(b) $ --
Shares outstanding 9,712,891 -- $ (9,712,891)(b) --
Net asset value per single class share $ 11.05 $ -- $ -- $ --
Maximum offering price per share $ 11.63 $ -- $ -- $ --
<FN>
(a) Adjustment to reflect the issuance of Woodward International Equity
shares in exchange for shares of the Prairie International Equity Fund
in connection with the proposed reorganization.
(b) Adjustment reclassifies Woodward International Equity shares to reflect
the multi-class environment of the proposed reorganized entity.
(c) Remaining unamortized organizational costs of the Prairie International
Equity Fund will be assumed by the investment advisor prior to merger
date.
See Notes to Pro Forma Financial Statements.
</TABLE>
PFS-2
<PAGE>
Prairie/Woodward Funds
International Equity Fund
Pro Forma Combining Statement of Operations
For the Period
Ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Woodward Prairie Pro Forma
Internatonal International Combined
Equity Fund Equity Fund (1) Adjustments (Note 1)
----------- --------------- ----------- --------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 538,478 $ 746,158 $ -- $ 1,284,636
Dividends (net of foreign taxes withheld
of $98,515 for Woodward and $134,218
for Prairie) 1,279,198 973,285 -- 2,252,483
------------ ------------ ------------ ------------
TOTAL INVESTMENT INCOME 1,817,676 1,719,443 -- 3,537,119
------------ ------------ ------------ ------------
EXPENSES:
Advisory fees 529,312 506,105 24,343 (a) 1,059,760
Distribution fees 4,063 -- (4,063)(b) --
Administration fees -- 94,372 104,333 (a) 198,705
Shareholder servicing fees 252 3,253 1,264 (a) 4,769
Custodian fees and expenses 133,650 159,181 -- 292,831
Professional fees 66,313 28,042 (19,355)(c) 75,000
Amortization of organization expenses 10,714 15,262 (15,262)(d) 10,714
Transfer agent fees and expenses -- 16,161 -- 16,161
Marketing expenses 46,449 -- (46,449)(b) --
Registration, filing fees and other expenses 76,994 58,582 -- 135,576
------------ ------------ ------------ ------------
TOTAL EXPENSES 867,747 880,958 44,811 1,793,516
Expense reimbursements (51,707) (213,519) 45,161 (e) (220,065)
------------ ------------ ------------ ------------
NET EXPENSES 816,040 667,439 89,972 1,573,451
------------ ------------ ------------ ------------
NET OPERATING INCOME 1,001,636 1,052,004 (89,972) 1,963,668
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gains (losses) on investments (147,589) 505,347 -- 357,758
Net realized losses on foreign
currency transactions (475) (236,752) -- (237,227)
Net realized gains on futures transactions -- 3,503,125 -- 3,503,125
Net change in unrealized appreciation on
investments 7,523,087 5,875,255 -- 13,398,342
Net change in unrealized appreciation on
assets and liabilities denominated
in foreign currencies and financial futures 6,376 899,200 -- 905,576
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED
GAINS (LOSSES) ON INVESTMENTS
AND FOREIGN CURRENCY 7,381,399 10,546,175 -- 17,927,574
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 8,383,035 $ 11,598,179 $ (89,972) $ 19,891,242
============ ============ ============ ============
<FN>
(1) For the period March 3, 1995 (commencement of operations) through December
31, 1995.
(a) Adjustment to reflect the proposed contractual fee structure of Woodward
International Equity Fund after the reorganization.
(b) Adjustment eliminates expense as these costs will be included in the
administration expense of the Woodward International Equity Fund after
reorganization.
(c) Reduction reflects expected savings when the two funds become one.
(d) Remaining unamortized organizational costs of the Prairie International
Equity Fund will be assumed by the investment advisor prior to merger
date.
(e) Adjustment to reduce reimbursements from the advisor to reflect the new
fee structure of the Woodward International Equity Fund after
reorganization.
See Notes to Pro Forma Financial Statements.
</TABLE>
PFS-3
<PAGE>
<TABLE>
<CAPTION>
Prairie/Woodward Funds
International Equity Fund
- - ------------------------------------------------------------------------------
Pro Forma Combining
PORTFOLIO OF INVESTMENTS
December 31, 1995
(Unaudited)
- - ------------------------------------------------------------------------------
Pro Forma Pro Forma
Combined Combined
Woodward Prairie Shares Woodward Prairie Market Value
Shares Shares (Note 1) Description Market Value Market Value (Note 1)
-------- ------- -------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS -- 84.4%
AUSTRALIA -- 2.8%
-- 2,400 2,400 Aberfoyle -- 5,266 5,266
-- 3,800 3,800 Adelaide Brighton Limited -- 3,392 3,392
9,799 15,300 25,099 Amcor Limited 69,247 108,121 177,368
-- 6,900 6,900 Ampolex -- 15,090 15,090
-- 7,000 7,000 Ashton Mining Limited -- 10,154 10,154
-- 18,800 18,800 Australian National Industries
Limited -- 13,983 13,983
17,000 27,500 44,500 Boral Limited 42,996 69,550 112,546
8,027 5,500 13,527 Brambles Industries Limited 89,565 61,369 150,934
28,140 47,000 75,140 Broken Hill Proprietary Co 397,716 664,270 1,061,986
-- 12,200 12,200 Burns Philip & Co -- 27,316 27,316
-- 4,300 4,300 Caltex Limited -- 16,985 16,985
14,487 9,600 24,087 Coca-Coca Amatil 115,631 76,623 192,254
18,791 26,612 45,403 Coles Myer Limited 58,568 82,944 141,512
10,620 16,017 26,637 CRA Limited 155,938 235,192 391,130
-- 2,400 2,400 Crusader(b) -- 2,535 2,535
27,466 22,700 50,166 CSR Limited 89,488 73,959 163,447
-- 2,160 2,160 Dominion Mining Limited(b) -- 1,125 1,125
-- 6,900 6,900 Email Limited -- 16,424 16,424
-- 1,600 1,600 Emperor Mines Limited(b) -- 2,559 2,559
-- 7,600 7,600 FAI Insurances(b) -- 4,127 4,127
22,347 48,900 71,247 Fosters Brewing Group 36,737 80,387 117,124
-- 15,200 15,200 General Property Trust -- 26,910 26,910
-- 23,800 23,800 Gold Mines of Kalgoorlie -- 22,129 22,129
23,031 29,900 52,931 Goodman Fielder Limited 23,128 30,026 53,154
-- 9,600 9,600 Hardie (James) Industries -- 16,567 16,567
11,453 7,400 18,853 ICI Australia 87,751 56,697 144,448
-- 6,000 6,000 Lend Lease Corp -- 87,032 87,032
23,841 39,700 63,541 MIM Holdings Limited 32,986 54,925 87,911
38,710 34,900 73,610 National Australia Bank 348,421 314,124 662,545
-- 5,800 5,800 Newcrest Mining Limited -- 24,419 24,419
37,765 -- 37,765 News Corporation(Aust Listing) 201,702 -- 201,702
30,504 -- 30,504 News Corporation Preferred
Limited Voting Shares 142,726 -- 142,726
-- 49,700 49,700 News Corporation Limited -- 265,443 265,443
-- 17,100 17,100 North Limited -- 47,700 47,700
-- 3,500 3,500 OPSM Protector Limited -- 5,467 5,467
44,367 28,800 73,167 Pacific Dunlop Limited 103,960 67,481 171,441
-- 22,100 22,100 Pioneer International Holdings -- 57,045 57,045
13,882 -- 13,882 Pioneer International 35,832 -- 35,832
-- 15,100 15,100 QCT Resources -- 16,960 16,960
-- 5,000 5,000 RGC Limited -- 24,920 24,920
-- 2,500 2,500 Rothman's Holdings Limited -- 10,228 10,228
33,203 21,000 54,203 Santos Limited 97,066 61,389 158,455
-- 9,100 9,100 Schroders Property Fund -- 14,892 14,892
-- 4,200 4,200 Smith Howard Limited -- 19,839 19,839
-- 1,800 1,800 Sons of Gwalia Limited -- 9,908 9,908
-- 23,400 23,400 Southcorp Holdings -- 54,482 54,482
PFS-4
<PAGE>
-- 7,400 7,400 Stockland Trust Group -- 17,064 17,064
-- 14,400 14,400 TNT Limited(b) -- 19,066 19,066
-- 6,900 6,900 Tubemakers of Australia Limited -- 21,403 21,403
-- 23,700 23,700 Westfield Trust -- 42,662 42,662
55,410 45,500 100,910 Westpac Banking Corp 245,657 201,720 447,377
36,388 27,600 63,988 WMC Limited 233,866 177,385 411,251
----------- ------------- -----------
2,608,981 3,339,254 5,948,235
BELGIUM -- 2.2% ----------- ------------- -----------
220 -- 220 Bekaert Sa 181,283 -- 181,283
4,250 -- 4,250 Electrabel 1,010,905 -- 1,010,905
3,700 -- 3,700 Fortis Ag 450,099 -- 450,099
80 -- 80 Fortis Ag (VVPR) 9,745 -- 9,745
1,300 -- 1,300 Generale De Banque 460,514 -- 460,514
2,300 -- 2,300 Gpe Bruxelles Lam 319,259 -- 319,259
1,550 -- 1,550 Kredietbank 423,985 -- 423,985
2,160 -- 2,160 Petrofina Sa 661,305 -- 661,305
850 -- 850 Solvay 459,240 -- 459,240
1,300 -- 1,300 Tractebe Inv Cap 536,714 -- 536,714
1,804 -- 1,804 Union Miniere(b) 120,761 -- 120,761
----------- ------------- -----------
4,633,809 -- 4,633,809
----------- ------------- -----------
DENMARK -- 1.1%
275 -- 275 Carlsberg 'A' 15,383 -- 15,383
2,018 -- 2,018 Carlsberg 'B' 112,884 -- 112,884
15 -- 15 D/S 1912 'B' 286,910 -- 286,910
9 -- 9 D/S Svendborg 'B' 248,475 -- 248,475
3,695 -- 3,695 Danisco 178,689 -- 178,689
3,641 -- 3,641 Den Danske Bank 251,634 -- 251,634
2,800 -- 2,800 Iss International Series 'B' 63,156 -- 63,156
2,449 -- 2,449 Novo-Nordisk As 'B' 335,855 -- 335,855
1,175 -- 1,175 Sophus Berendsen 'B' 132,516 -- 132,516
8,786 -- 8,786 Tele Danmak 'B' 480,378 -- 480,378
3,535 -- 3,535 Unidanmark 'A' (Reg'd) 175,417 -- 175,417
----------- ------------- -----------
2,281,297 -- 2,281,297
----------- ------------- -----------
FINLAND -- 1.8%
3,800 -- 3,800 Amer Group 'A' 59,424 -- 59,424
500 -- 500 Cultor Oy Series '2' 20,728 -- 20,728
2,500 -- 2,500 Cultor Oy Series '1' 103,639 -- 103,639
12,000 -- 12,000 Kesco 149,516 -- 149,516
700 -- 700 Kone Corp 'B' 58,521 -- 58,521
12,500 -- 12,500 Kymmene Corp 331,068 -- 331,068
119,766 -- 119,766 Unitas Ser 'A'(b) 303,414 -- 303,414
2,000 -- 2,000 Metro AB 'A' 82,450 -- 82,450
24,500 -- 24,500 Nokia (AB) Oy Series 'A' 964,876 -- 964,876
PFS-5
<PAGE>
18,600 -- 18,600 Nokia (AB) Oy Series 'K' 736,802 -- 736,802
19,500 -- 19,500 Outokumpo Oy 'A' 309,880 -- 309,880
3,800 -- 3,800 Pohjola Series 'B' 49,010 -- 49,010
23,400 -- 23,400 Repola 441,915 -- 441,915
2,200 -- 2,200 Sampo 'A' 118,056 -- 118,056
1,600 -- 1,600 Stockmann Oy 'A' 91,386 -- 91,386
----------- ------------- -----------
3,820,685 -- 3,820,685
FRANCE -- 4.3% ----------- ------------- -----------
757 100 857 Accor 98,139 12,964 111,103
996 250 1,246 Air Liquide 165,173 41,459 206,632
2,544 1,700 4,244 Alcatel Alsthom 219,631 146,766 366,397
1,981 600 2,581 AXA 133,677 40,488 174,165
-- 4,500 4,500 Banque Nationale de Paris -- 203,266 203,266
-- 100 100 BIC -- 10,183 10,183
-- 100 100 Bouygues -- 10,087 10,087
3,615 -- 3,615 Banque National Paris 163,291 -- 163,291
766 3,300 4,066 Carnaudmetalbox(b) 35,086 151,154 186,240
586 150 736 Carrefour(b) 356,006 91,128 447,134
-- 250 250 Casino Guich-Perr -- 7,264 7,264
-- 50 50 Chargeurs -- 9,969 9,969
1,834 2,300 4,134 Cie De St Gobain 203,262 254,909 458,171
1,251 2,400 3,651 Cie De Suez 51,673 99,133 150,806
2,318 -- 2,318 Cie Fin Paribas 'A' 127,267 -- 127,267
-- 50 50 Cie Geophysique(b) -- 1,646 1,646
-- 50 50 Club Mediterranee(b) -- 3,998 3,998
-- 1,210 1,210 Compagnie Bancaire -- 135,589 135,589
-- 3,600 3,600 Compagnie UAP -- 94,152 94,152
-- 50 50 Comptoirs Modern -- 16,256 16,256
3,520 450 3,970 CSF (Thomson) 78,528 10,039 88,567
1,520 -- 1,520 Danone (Ex Bsn) 251,138 -- 251,138
-- 50 50 Docks de France -- 7,607 7,607
-- 50 50 Dollfus-Meig & Cie PV -- 2,044 2,044
2,307 2,700 5,007 Eaux-Cie Generale 230,635 269,924 500,559
5,566 3,300 8,866 ELF-Aquitane 410,646 243,466 654,112
861 100 100 Eridania Beghin-Say 147,890 17,177 165,067
-- 50 50 Essilor International -- 9,570 9,570
-- 25 25 Europe 1(b) -- 5,061 5,061
-- 250 250 Groupe Danone -- 41,306 41,306
-- 50 50 GTM Entrepose -- 3,512 3,512
-- 50 50 Imetal -- 5,981 5,981
985 250 250 L'oreal 264,056 67,019 331,075
1,800 330 2,130 Lafarge-Coppee 116,126 21,290 137,416
-- 350 350 Lagardere Groupe -- 6,441 6,441
500 500 1,000 Legrand 77,295 77,295 154,590
2,000 1,600 1,600 LVMH Moet Hennessy 417,146 333,716 750,862
1,753 100 1,853 Lyonnais Des Eaux-Dumez 169,013 9,641 178,654
2,150 2,300 4,450 Michelin, Class B 85,861 91,852 177,713
PFS-6
<PAGE>
-- 100 100 Moulinex(b) -- 1,374 1,374
-- 50 50 Nord Est -- 1,159 1,159
1,114 -- 1,114 Pernod-Ricard 63,395 -- 63,395
793 1,300 2,093 Peugeot SA 104,752 171,725 276,477
-- 100 100 Pinault-Printemps -- 19,978 19,978
600 -- 600 Printemps (Av) 119,868 -- 119,868
433 50 483 Promodes 101,911 11,768 113,679
5,686 1,250 6,936 Rhone Poulenc, Series A 121,966 26,813 148,779
2,339 3,300 5,639 Sanofi 150,134 211,818 361,952
3,630 500 4,130 Schneider SA 124,257 17,115 141,372
986 50 1,036 Sefimeg 65,527 3,323 68,850
-- 200 200 Seita -- 7,259 7,259
-- 50 50 Simco -- 4,754 4,754
1,829 2,500 4,329 Societe Generale 226,270 309,281 535,551
-- 50 50 Sodexho(b) -- 14,723 14,723
350 50 400 St Louis 93,040 13,291 106,331
4,716 4,800 9,516 Total, Class B 318,715 324,392 643,107
-- 50 50 Union Immobiliere de France -- 4,334 4,334
----------- ------------- -----------
5,291,375 3,696,459 8,987,834
GERMANY -- 4.1% ----------- ------------- -----------
250 -- 250 Allianz (Regd) 491,869 -- 491,869
-- 50 50 AMB AAchener & Muench -- 36,331 36,331
1,026 600 1,626 BASF AG 231,540 135,404 366,944
1,100 600 1,700 Bayer AG 292,662 159,634 452,296
5,140 3,000 8,140 Bayerische Vereinsbank 154,422 90,129 244,551
-- 50 50 Beiersdorf AG, Series ABC -- 34,410 34,410
-- 50 50 Bilfinger & Berger -- 19,039 19,039
-- 50 50 Brau Und Brunnen -- 7,616 7,616
-- 150 150 Bremer Vulkan AG -- 4,192 4,192
-- 50 50 CKAG Colonial -- 41,921 41,921
-- 500 500 Commerzbank AG -- 118,950 118,950
-- 1,000 1,000 Continental AG -- 14,148 14,148
384 350 734 Daimler Benz AG 194,243 177,045 371,288
-- 100 100 Degussa AG -- 33,746 33,746
10,440 8,000 18,440 Deutsche Bank AG 496,734 380,639 877,373
-- 400 400 Deutsche Lufthansa AG -- 55,475 55,475
-- 50 50 Didier-Werke AG(b) -- 4,045 4,045
7,140 -- 7,140 Dredsner Bank (Var) 191,810 -- 191,810
-- 50 50 FAG Kugelfischer Georg(b) -- 6,428 6,428
-- 55 55 Heidelberger Zement -- 34,508 34,508
357 100 100 Hochtief AG 152,899 42,829 195,728
402 300 702 Kaufhof Holding AG 122,739 91,597 214,336
156 100 256 Linde AG 92,645 59,388 152,033
-- 50 50 Linotype Hell AG(b) -- 5,153 5,153
1,707 -- 1,707 Lufthansa Ag 236,739 -- 236,739
-- 100 100 MAN AG 365,512 27,737 393,249
1,146 450 1,596 Mannesmann AG 313,042 143,526 456,568
PFS-7
<PAGE>
145 100 245 Muenchener Ruckvers -- 215,891 215,891
-- 50 50 PWA Papier Waldhof(b) 303,153 7,406 310,559
1,074 800 1,874 Preussag AG -- 225,812 225,812
516 300 816 RWE AG 188,010 109,308 297,318
600 500 1,100 SAP AG 91,303 77,553 168,856
1,350 1,000 2,350 Schering AG 89,888 66,584 156,472
704 650 1,354 Siemens AG(b) 387,592 357,862 745,454
716 350 1,066 Thyssen AG(b) 130,916 63,995 194,911
10,150 7,000 17,150 Veba AG 435,422 300,291 735,713
419 -- 419 Viag (VAR) 173,014 -- 173,014
506 200 706 Volkswagon AG 170,048 67,212 237,260
----------- ------------- -----------
5,306,203 3,215,804 8,522,008
HONG KONG -- 2.0% ----------- ------------- -----------
-- 6,000 6,000 Bank of East Asia -- 21,534 21,534
37,000 23,000 60,000 Cathay Pacific Airway 56,467 35,100 91,567
23,000 18,000 41,000 Cheung Kong Holdings 243,665 109,649 353,314
34,700 25,000 25,000 China Light and Power Co, Limited 159,769 115,105 274,874
-- 12,000 12,000 Chinese Estates Holdings -- 7,837 7,837
-- 5,000 5,000 Dickson Concepts IntlLimited -- 4,656 4,656
-- 4,000 4,000 Giordano International Holdings -- 3,414 3,414
-- 10,000 10,000 Hang Lung Development Co -- 15,908 15,908
39,400 21,800 61,200 Hang Seng Bank Limited 352,881 195,247 548,128
-- 1,200 1,200 Hong Kong Aircraft -- 3,104 3,104
20,000 -- 20,000 Hong Kong Electric 65,572 -- 65,572
203,600 106,400 310,000 Hong Kong Telecom 363,386 189,903 553,289
34,800 -- 34,800 Hong Kong & China Gas 56,035 -- 56,035
50,000 35,000 85,000 Hopewell Holdings 28,777 20,143 48,920
56,000 46,000 102,000 Hutchison Whampoa 341,131 280,214 621,345
10,000 8,000 18,000 Hysan Development Limited 26,449 21,158 47,607
-- 3,000 3,000 Johnson Electric Holdings -- 5,354 5,354
-- 3,000 3,000 Kumagai Gumi -- 2,173 2,173
-- 2,000 2,000 Lai Sun Garment International -- 1,940 1,940
-- 4,000 4,000 Miramar Hotel & Investment -- 8,432 8,432
31,366 13,000 44,366 New World Development Co 136,710 56,661 193,371
52 -- 52 New World Infrastr(b) 100 -- 100
-- 12,000 12,000 Oriental Press Group -- 3,647 3,647
-- 4,000 4,000 Peregrine Investment Holdings -- 5,173 5,173
-- 4,000 4,000 Playmates Toys Holdings -- 796 796
-- 22,000 22,000 Regal Hotel Holdings -- 5,177 5,177
-- 8,000 8,000 Shangri-La Asia -- 9,778 9,778
-- 12,000 12,000 Shun Tak Holdings Limited -- 8,458 8,458
12,000 12,000 South China Morning Post -- 7,333 7,333
45,700 25,000 70,700 Sun Hung Kai Properties 373,842 204,508 578,350
23,500 20,000 43,500 Swire Pacific Limited 182,361 155,200 337,561
-- 3,000 3,000 Television Broadcasts Limited -- 10,689 10,689
30,000 39,000 69,000 Wharf Holdings Limited 99,910 129,882 229,792
16,848 1,200 18,048 Wing Lung Bank 94,351 6,720 101,071
PFS-8
<PAGE>
-- 2,000 2,000 Winsor Industrial Corp Limited -- 1,693 1,693
----------- ------------- -----------
2,581,406 1,646,586 4,227,992
IRELAND -- 1.0% ----------- ------------- -----------
82,680 -- 82,680 Allied Irish Banks 447,907 -- 447,907
26,825 -- 26,825 Bank of Ireland (Dublin Listing) 193,904 -- 193,904
48,929 -- 48,929 Crh 367,014 -- 367,014
18,405 -- 18,405 Independent News 117,406 -- 117,406
24,349 -- 24,349 Greencore 209,568 -- 209,568
56,656 -- 56,656 Irish Life 215,211 -- 215,211
28,760 -- 28,760 Kerry Group 'A' 218,954 -- 218,954
139,859 -- 139,859 Smurfit(Jefferson) (Dublin Listing) 329,517 -- 329,517
----------- ------------- -----------
2,099,481 -- 2,099,481
JAPAN -- 36.2% ----------- ------------- -----------
-- 6,000 6,000 77 Bank -- 55,084 55,084
-- 1,000 1,000 Advantest Corp -- 51,380 51,380
36,000 10,000 46,000 Ajinomoto Co, Inc 401,351 111,485 512,836
-- 3,000 3,000 Alps Electric Co(b) -- 34,608 34,608
-- 28,000 28,000 Amada Co -- 276,871 276,871
-- 2,000 2,000 Aoki Corp(b) -- 8,394 8,394
-- 1,000 1,000 Aoyama Trading(b) -- 31,991 31,991
34,000 41,000 75,000 Asahi Bank Limited (c) 428,495 516,710 945,205
-- 8,000 8,000 Asahi Breweries -- 94,617 94,617
63,000 27,000 27,000 Asahi Chemical Industries 482,493 206,781 689,274
-- 33,000 33,000 Asahi Glass Co -- 367,903 367,903
-- 10,000 10,000 Ashikaga Bank -- 62,431 62,431
28,000 36,000 64,000 Bank of Tokyo 491,315 631,687 1,123,002
-- 20,000 20,000 Bank of Yokohama -- 163,836 163,836
-- 2,000 2,000 Banyu Pharmaceutical -- 24,624 24,624
31,000 16,000 47,000 Bridgestone Corp 492,866 254,382 747,249
-- 4,000 4,000 Brother Industries Limited -- 21,754 21,754
21,000 24,000 45,000 Canon, Inc 380,702 435,086 815,788
-- 1,000 1,000 Casio Computer Co -- 9,791 9,791
-- 13,000 13,000 Chiba Bank -- 117,205 117,205
6,000 7,000 13,000 Chichibu Onada Cement 32,050 37,391 69,441
-- 2,000 2,000 Chugai Pharmaceutical Co -- 19,176 19,176
-- 19,000 19,000 Citizen Watch Co Limited -- 145,513 145,513
-- 3,000 3,000 Cosmo Oil Co -- 16,403 16,403
-- 2,000 2,000 Credit Saison -- 47,697 47,697
-- 26,000 26,000 Dai Nippon Co Limited(b) -- 441,098 441,098
19,000 8,000 27,000 Dai Nippon Ink & Chemical 88,598 37,304 125,902
33,000 -- 33,000 Dai Nippon Printing 559,855 -- 559,855
-- 2,000 2,000 Dai Nippon Screen -- 17,566 17,566
40,000 64,000 104,000 Dai-Ichi Kangyo Bank 787,190 1,259,501 2,046,691
-- 13,000 13,000 Daicel Chemical Industries -- 73,978 73,978
-- 2,000 2,000 Daido Steel Co Limited -- 10,082 10,082
-- 9,000 9,000 Daiei Inc -- 109,062 109,062
PFS-9
<PAGE>
33,000 3,000 36,000 Daiichi Pharmaceuticals Co Limited 470,278 42,752 513,030
-- 27,000 27,000 Daikin Industries -- 264,368 264,368
-- 3,000 3,000 Daikyo(b) -- 22,394 22,394
-- 2,000 2,000 Daimaru(b) -- 15,511 15,511
13,000 1,000 14,000 Daishowa Paper(b) 100,822 7,756 108,578
-- 1,000 1,000 Daito Trust -- 11,827 11,827
-- 20,000 20,000 Daiwa Bank -- 161,896 161,896
-- 14,000 14,000 Daiwa House Industries -- 230,727 230,727
-- 3,000 3,000 Daiwa Kosho Lease Co Limited -- 29,956 29,956
34,000 24,000 58,000 Daiwa Securities 520,786 367,613 888,399
-- 3,000 3,000 Denki Kagaku Kogyo -- 10,906 10,906
-- 2,000 2,000 Ebara Corp -- 29,277 29,277
-- 3,000 3,000 Eisai Co -- 52,641 52,641
-- 2,000 2,000 Ezaki Glico Co -- 19,350 19,350
-- 7,000 7,000 Fanuc Co -- 303,339 303,339
43,000 56,000 99,000 Fuji Bank 950,445 1,237,785 2,188,230
-- 11,000 11,000 Fuji Photo Film Limited -- 317,783 317,783
6,000 3,000 9,000 Fujita Corp 27,106 13,553 40,659
-- 2,000 2,000 Fujita Kanko -- 44,207 44,207
10,000 43,000 53,000 Fujitsu Limited 111,486 479,390 590,876
-- 3,000 3,000 Furukawa Electric -- 14,687 14,687
-- 2,000 2,000 Gakken Co(b) -- 13,184 13,184
-- 9,000 9,000 Gunma Bank -- 96,847 96,847
-- 4,000 4,000 Gunze Limited(b) -- 24,236 24,236
65,000 12,000 77,000 Hankyu Corp(b) 356,029 65,728 421,757
-- 1,000 1,000 Hanyu Department Stores -- 14,833 14,833
57,000 2,000 59,000 Haseko Corp(b) 230,428 8,085 238,513
-- 2,000 2,000 Hazama Corp(b) -- 8,531 8,531
-- 3,000 3,000 Higo Bank -- 24,139 24,139
78,000 81,000 159,000 Hitachi Limited (b) 786,415 816,658 1,603,073
-- 5,000 5,000 Hokkaido Bank -- 16,965 16,965
-- 11,000 11,000 Hokuriku Bank -- 68,995 68,995
27,000 19,000 46,000 Honda Motor Co 557,528 392,335 949,863
48,000 2,000 50,000 Honshu Paper Co 294,091 12,254 306,345
-- 2,000 2,000 House Foods Corp(b) -- 36,063 36,063
-- 1,000 1,000 Hoya Corp -- 34,415 34,415
-- 26,000 26,000 Inax Corp -- 247,013 247,013
23,000 47,000 70,000 Industrial Bank of Japan 697,904 1,426,149 2,124,053
-- 2,000 2,000 Isetan Co -- 32,961 32,961
-- 2,000 2,000 Ishihara Sangyo Kaisha(b) -- 6,495 6,495
6,000 13,000 19,000 Ito Yokado Co 369,941 801,537 1,171,478
38,000 26,000 64,000 Itochu Corp 256,031 175,178 431,209
-- 3,000 3,000 Itoham Foods -- 22,685 22,685
-- 3,000 3,000 Iwantani International Corp(b) -- 15,996 15,996
-- 2,000 2,000 Jaccs -- 20,746 20,746
46,000 33,000 79,000 Japan Air Lines Co(b) 305,472 219,143 524,615
19,000 5,000 24,000 Japan Energy Corp 63,731 16,771 80,502
-- 1,000 1,000 Jeol -- 8,512 8,512
PFS-10
<PAGE>
-- 1,000 1,000 JGC Corp(b) -- 10,567 10,567
36,000 14,000 50,000 Joyo Bank 289,671 112,650 402,321
-- 4,000 4,000 Jusco Co(b) -- 104,312 104,312
11,000 12,000 23,000 Kajima Corp 108,772 118,660 227,432
-- 1,000 1,000 Kaken Pharmaceutical -- 9,016 9,016
-- 1,000 1,000 Kandenko Limited -- 12,506 12,506
-- 9,000 9,000 Kanebo Corp(b) -- 22,335 22,335
-- 3,000 3,000 Kaneka Corp -- 18,933 18,933
13,900 20,100 34,000 Kansai Electric Power (c) 336,883 487,146 824,029
-- 2,000 2,000 Kansai Paint Co Limited -- 9,307 9,307
-- 9,000 9,000 Kao Corp -- 111,680 111,680
-- 1,000 1,000 Katokichi -- 20,843 20,843
-- 11,000 11,000 Kawasaki Kisen Kaisha(b) -- 34,977 34,977
47,000 39,000 86,000 :Kawasaki Steel Corp 164,030 136,110 300,140
-- 6,000 6,000 Keihin Electric -- 36,005 36,005
-- 16,000 16,000 Keio Teito Electric Railway -- 93,221 93,221
-- 3,150 3,150 Kikkoman Corp -- 23,208 23,208
-- 2,000 2,000 Kinden Corp -- 34,124 34,124
-- 31,000 31,000 Kinki Nippon Railway -- 234,410 234,410
-- 19,000 19,000 Kirin Brewery Co -- 224,717 224,717
34,000 30,000 64,000 Kobe Steel(b) 105,146 92,775 197,921
33,000 9,000 42,000 Komatsu Limited (c) 271,930 74,162 346,092
-- 1,000 1,000 Konica Corp -- 7,251 7,251
60,000 13,000 73,000 Kubota Corp 386,809 83,808 470,617
-- 5,000 5,000 Kumagai Gumi Co -- 20,116 20,116
-- 5,000 5,000 Kurabo Industries -- 19,147 19,147
-- 8,000 8,000 Kuraray Co Limited -- 87,638 87,638
-- 2,000 2,000 Kureha Chemical Industries Co(b) -- 9,404 9,404
11,000 3,000 14,000 Kyocera Corp 817,922 223,070 1,040,992
-- 5,000 5,000 Kyowa Hakko Kogyo -- 47,212 47,212
-- 2,000 2,000 Lion Corp -- 11,808 11,808
-- 6,000 6,000 Maeda Road Construction -- 111,098 111,098
-- 2,000 2,000 Makita Corp -- 31,992 31,992
68,000 28,000 96,000 Marubeni Corp 368,506 151,738 520,244
-- 2,000 2,000 Marudai Food Co(b) -- 14,348 14,348
-- 4,000 4,000 Maruha Corp(b) -- 13,533 13,533
-- 5,000 5,000 Marui Co(b) -- 104,215 104,215
56,000 40,000 96,000 Matsushita Electric Industries 912,055 651,464 1,563,519
-- 4,000 4,000 Meija Milk Products -- 23,964 23,964
-- 5,000 5,000 Meiji Seika Kaisha -- 30,150 30,150
-- 1,000 1,000 Misawa Homes -- 8,803 8,803
-- 12,000 12,000 Mitsubishi Bank -- 282,690 282,690
-- 29,000 29,000 Mitsubishi Chemical Corp -- 141,131 141,131
26,000 29,000 55,000 Mitsubishi Corp 320,111 357,045 677,156
48,000 32,000 80,000 Mitsubishi Electric Corp 345,743 230,493 576,236
49,000 24,000 73,000 Mitsubishi Estate 612,787 300,139 912,926
19,000 3,000 22,000 Mitsubishi Gas(b) 85,651 13,524 99,175
79,000 68,000 147,000 Mitsubishi Heavy Industries Limited 630,305 542,538 1,172,843
PFS-11
<PAGE>
-- 21,000 21,000 Mitsubishi Materials -- 108,917 108,917
-- 2,000 2,000 Mitsubishi Oil Co -- 17,780 17,780
-- 34,000 34,000 Mitsubishi Paper -- 204,687 204,687
17,000 1,000 18,000 Mitsubishi Steel Manufacturing(b) 88,995 5,235 94,230
11,000 24,000 35,000 Mitsubishi Trust and Banking Limited 183,419 400,186 583,605
-- 29,000 29,000 Mitsui & Co Limited -- 254,710 254,710
-- 1,000 1,000 Mitsui Engine & Shipbuilding(b) -- 2,782 2,782
-- 13,000 13,000 Mitsui Fire & Marine Insurance -- 92,756 92,756
-- 15,000 15,000 Mitsui Fudosan Co -- 184,679 184,679
-- 9,000 Mitsui Mining and Smelting(b) -- 36,122 36,122
63,000 20,000 83,000 Mitsui OSK Lines(b) 202,159 64,176 266,335
-- 6,000 6,000 Mitsui Toatsu Chemical -- 24,139 24,139
-- 22,000 22,000 Mitsui Trust and Banking Co -- 241,003 241,003
-- 6,000 6,000 Mitsukoshi Limited(b) -- 56,422 56,422
-- 1,000 1,000 Mochida Pharmaceuticals -- 13,863 13,863
-- 4,000 4,000 Murata Manufacturing Co -- 147,356 147,356
-- 1,000 1,000 Nagase & Co(b) -- 8,609 8,609
61,000 11,000 72,000 Nagoya Railroad Co 307,508 55,452 362,960
-- 6,000 6,000 Nankai Electric Railway -- 40,717 40,717
-- 30,000 30,000 NEC Corp -- 366,450 366,450
-- 8,000 8,000 New Oji Paper -- 72,437 72,437
-- 44,000 44,000 NGK Insulators -- 439,349 439,349
-- 8,000 8,000 Nichido Fire and Marine Insurance -- 64,371 64,371
47,000 22,000 69,000 Nichii Co Limited 624,226 292,191 916,417
-- 5,000 5,000 Nichirei Corp -- 32,476 32,476
30,000 4,000 34,000 Nihon Cement Co 200,675 26,756 227,431
-- 2,600 2,600 Nintendo Co -- 197,864 197,864
-- 2,000 2,000 Nippon Beet Sugar(b) -- 8,880 8,880
1,000 -- 1,000 Nippon Communications Systems Corp(b) -- 10,567 10,567
25,000 19,000 44,000 Nippon Denso 467,758 355,496 823,254
-- 16,000 16,000 Nippon Express Co -- 154,179 154,179
-- 11,000 11,000 Nippon Fire and Marine Insurance -- 74,647 74,647
-- 10,000 10,000 Nippon Light Metal -- 57,391 57,391
-- 16,000 16,000 Nippon Meat Packers -- 232,666 232,666
86,000 11,000 97,000 Nippon Oil Co 540,253 69,102 609,355
-- 10,000 10,000 Nippon Paper Industries -- 69,509 69,509
-- 2,000 2,000 Nippon Seiko Kab Kai -- 14,542 14,542
-- 5,000 5,000 Nippon Shinpan Co -- 37,808 37,808
-- 2,000 2,000 Nippon Shokubai Kagaku Kogyo -- 19,583 19,583
108,000 138,000 246,000 Nippon Steel Corp 370,639 473,588 844,227
-- 4,000 4,000 Nippon Suisan(b) -- 16,558 16,558
-- 22,000 22,000 Nippon Yusen Kab Kai -- 127,752 127,752
-- 2,000 2,000 Nishimatsu(b) -- 23,460 23,460
53,000 46,000 99,000 Nissan Motor Co 407,449 353,634 761,083
-- 4,000 4,000 Nisshinbo Industries, Inc -- 38,778 38,778
-- 2,000 2,000 Nissin Food Products Co, Limited(b) -- 46,921 46,921
48,000 40,000 88,000 NKK Corp(b) 129,363 107,800 237,163
-- 2,000 2,000 NOF Corp -- 10,877 10,877
44,000 36,000 80,000 Nomura Securities 959,752 785,250 1,745,002
PFS-12
<PAGE>
-- 1,000 1,000 NTN Corp -- 6,689 6,689
8,000 8,000 16,000 Obayashi Corp 63,596 63,595 127,191
-- 10,000 10,000 Odakyu Electric Railway -- 68,345 68,345
-- 3,000 3,000 Okamoto Industries -- 19,486 19,486
-- 1,000 1,000 Okumura(b) -- 9,113 9,113
-- 1,000 1,000 Olympus Optical Co, Limited -- 9,694 9,694
17,000 3,000 20,000 Omron Corp 392,238 69,218 461,456
-- 3,000 3,000 Onward Kashiyama(b) -- 48,860 48,860
-- 5,000 5,000 Oreint Corp -- 28,405 28,405
-- 3,000 3,000 Orix Corp -- 123,604 123,604
124,000 117,000 241,000 Osaka Gas Co 429,154 404,925 834,079
-- 2,000 2,000 Penta-Ocean(b) -- 15,511 15,511
-- 8,000 8,000 Pioneer Electronic -- 146,580 146,580
-- 2,000 2,000 QP Corp(b) -- 17,431 17,431
-- 5,000 5,000 Renown, Inc(b) -- 17,402 17,402
55,000 5,000 60,000 Ricoh Co 602,511 54,774 657,285
-- 2,000 2,000 Rohn Company Limited -- 113,037 113,037
-- 4,000 4,000 Sagami -- 17,334 17,334
19,000 61,000 80,000 Sakura Bank 241,295 774,682 1,015,977
-- 2,000 2,000 Sankyo Aluminum -- 10,722 10,722
15,000 19,000 34,000 Sankyo Co 337,367 427,331 764,698
-- 1,000 1,000 Sanrio Corp(b) -- 11,536 11,536
-- 2,000 2,000 Sanwo Shutter Corp -- 14,522 14,522
34,000 32,000 66,000 Sanyo Electric Corp 196,119 184,582 380,701
-- 6,000 6,000 Sapporo Corporation -- 55,840 55,840
12,000 -- 12,000 Sato Kogyo Co 73,872 -- 73,872
-- 7,000 7,000 Secom Co -- 487,243 487,243
-- 1,000 1,000 Sega Enterprises -- 55,258 55,258
-- 10,000 10,000 Seino Transportation -- 167,714 167,714
-- 2,000 2,000 Seiyu(b) -- 24,818 24,818
15,000 8,000 23,000 Sekisui Chemical 221,034 117,884 338,918
43,000 54,000 97,000 Sekisui House 550,258 691,016 1,241,274
-- 1,000 1,000 Settsu Corp(b) -- 3,151 3,151
7,000 8,000 15,000 Seven-Eleven Japan NPV 494,030 564,605 1,058,635
24,000 18,000 42,000 Sharp Corp 383,901 287,924 671,825
25,000 9,000 34,000 Shimizu Corp 254,480 91,612 346,092
13,000 4,000 17,000 Shin-Etsu Chemical Co 269,700 82,984 352,684
-- 16,000 16,000 Shinmaywa Industries -- 132,154 132,154
-- 3,000 3,000 Shiongoi & Co -- 25,273 25,273
-- 4,000 4,000 Shiseido Co -- 47,696 47,696
-- 14,000 14,000 Shizuoka Bank -- 176,438 176,438
-- 1,000 1,000 Shochiku Co(b) -- 10,955 10,955
-- 1,000 1,000 Shokusan(b) -- 3,665 3,665
102,000 10,000 112,000 Showa Denko KK(b) 320,383 31,410 351,793
-- 2,000 2,000 Skylark Co -- 36,839 36,839
-- 5,000 5,000 Snow Brand Milk(b) -- 31,992 31,992
-- 6,200 6,200 Sony Corp -- 372,054 372,054
37,000 63,000 100,000 Sumitomo Bank 785,542 1,337,540 2,123,082
92,000 20,000 112,000 Sumitomo Chemical 459,324 99,852 559,176
PFS-13
<PAGE>
34,000 20,000 54,000 Sumitomo Corp 346,092 203,582 549,674
-- 22,000 22,000 Sumitomo Electric Industries -- 264,464 264,464
-- 2,000 2,000 Sumitomo Forestry -- 30,634 30,634
83,000 -- 83,000 Sumitomo Heavy Industries(b) 298,522 -- 298,522
-- 12,000 12,000 Sumitomo Marine and Fire Insurance -- 98,651 98,651
156,000 36,000 192,000 Sumitomo Metal Industries(b) 473,361 109,235 582,596
-- 10,000 10,000 Sumitomo Metal Mining -- 89,964 89,964
-- 5,000 5,000 Sumitomo Osaka Cement -- 23,267 23,267
47,000 11,000 58,000 Taisei Corp 313,936 73,473 387,409
-- 4,000 4,000 Taisho Pharmaceutical Co -- 79,107 79,107
-- 2,000 2,000 Taiyo Yuden -- 21,522 21,522
-- 4,000 4,000 Takara Shuzo(b) -- 38,274 38,274
-- 2,000 2,000 Takara(b) -- 22,879 22,879
-- 2,000 2,000 Takashimaya Co(b) -- 31,992 31,992
24,000 32,000 56,000 Takeda Chemical Industries 395,534 527,376 922,910
-- 2,000 2,000 Tanabe -- 14,406 14,406
-- 8,000 8,000 TDK Corp -- 408,718 408,718
-- 11,000 11,000 Teijin Limited -- 56,305 56,305
-- 1,000 1,000 TOA Corp(b) -- 7,368 7,368
-- 12,000 12,000 Tobu Railway Co -- 75,151 75,151
-- 8,080 8,080 Tohoku Electric Power -- 195,045 195,045
25,000 36,000 61,000 Tokai Bank 349,001 502,560 851,561
-- 29,000 29,000 Tokio Marine and Fire Insurance -- 379,538 379,538
-- 3,000 3,000 Tokyo Broadcasting -- 49,442 49,442
-- 3,000 3,000 Tokyo Dome Corp -- 51,477 51,477
36,600 27,200 63,800 Tokyo Electric Power 979,296 727,782 1,707,078
-- 3,000 3,000 Tokyo Electronics -- 116,333 116,333
15,000 43,000 58,000 Tokyo Gas Co 52,932 151,734 204,666
-- 20,000 20,000 Tokyo Steel Manufacturing Co Limited -- 368,388 368,388
-- 2,000 2,000 Tokyo Style Co(b) -- 34,318 34,318
-- 4,000 4,000 Tokyo Tatemono(b) -- 19,001 19,001
-- 5,000 5,000 Tokyoto Keiba Co -- 20,843 20,843
47,000 16,000 63,000 Tokyu Corp 332,161 113,075 445,236
-- 20,000 20,000 Tonen Corp -- 292,772 292,772
-- 14,000 14,000 Toppan Printing Co -- 184,582 184,582
20,000 90,000 110,000 Toray Industries Inc 131,845 593,298 725,143
-- 88,000 88,000 Tosihiba Corp -- 690,166 690,166
-- 5,000 5,000 Tosoh Corp(b) -- 24,091 24,091
5,000 3,000 8,000 Tostem Corp 166,260 99,756 266,016
15,000 4,000 19,000 Toto Limited 209,400 55,840 265,240
-- 1,000 1,000 Toyo Engineering -- 6,301 6,301
-- 3,000 3,000 Toyo Kanetsu KK -- 15,385 15,385
12,000 2,000 14,000 Toyo Seikan Kaisha 359,471 59,912 419,383
-- 13,000 13,000 Toyobo Co(b) -- 46,756 46,756
12,000 2,000 14,000 Toyoda Automatic Loom Works Limited 215,217 35,869 251,086
56,000 77,000 133,000 Toyota Motor Corp 1,188,929 1,634,772 2,823,701
-- 2,000 2,000 UBE Industries(b) -- 7,562 7,562
-- 3,000 3,000 Unitika Limited(b) -- 9,132 9,132
PFS-14
<PAGE>
-- 3,000 3,000 Yamaguchi Bank -- 51,187 51,187
34,000 22,000 56,000 Yamaichi Securities Co 264,678 171,261 435,939
-- 4,000 4,000 Yamanouchi Pharmaceutical -- 86,087 86,087
-- 4,000 4,000 Yamato Transport -- 47,696 47,696
14,000 3,000 17,000 Yamazaki Baking Co 260,587 55,840 316,427
-- 20,000 20,000 Yasuda Trust and Bank -- 118,466 118,466
-- 7,000 7,000 Yokogawa Bridge Works Corp -- 105,863 105,863
-- 4,000 4,000 Yokogawa Electric -- 37,847 37,847
----------- ------------- -----------
32,893,948 43,005,659 75,899,607
MALAYSIA -- 1.0% ----------- ------------- -----------
6,000 -- 6,000 Ammb Holdings Berhad 68,534 -- 68,534
5,000 -- 5,000 Commerce Asset Holding 25,208 -- 25,208
17,000 -- 17,000 Dcb Holdings Berhad 49,549 -- 49,549
17,000 -- 17,000 Edaran Otomobil 127,890 -- 127,890
31,000 -- 31,000 Golden Hope Plants 51,770 -- 51,770
7,000 -- 7,000 Hong Leong Properties 7,279 -- 7,279
16,000 -- 16,000 Hume Inds (M) Berhad 76,884 -- 76,884
6,000 -- 6,000 Landmarks Berhad 7,988 -- 7,988
41,333 -- 41,333 Leader Univ Holdings 94,423 -- 94,423
61,500 -- 61,500 Magnum Corp Berhad 116,271 -- 116,271
8,000 -- 8,000 Malaysian Airline Systems 25,995 -- 25,995
32,000 -- 32,000 Malayan Bkg Berhad 269,723 -- 269,723
28,000 -- 28,000 Malayan Utd Inds 22,718 -- 22,718
22,000 -- 22,000 Malaysian Int Ship (Alien Market) 57,623 -- 57,623
2,000 -- 2,000 Nestle Malay Berhad 14,652 -- 14,652
14,000 -- 14,000 Public Bank Berhad 19,631 -- 19,631
51,000 -- 51,000 Public Bank Berhad (Alien Market) 97,625 -- 97,625
19,000 -- 19,000 Resorts World Berhad 101,776 -- 101,776
10,000 -- 10,000 Rothmans Pall Mall 82,319 -- 82,319
52,200 -- 52,200 Sime Darby Berhad 138,780 -- 138,780
21,000 -- 21,000 Tech Res Inds Berhad(b) 62,035 -- 62,035
41,000 -- 41,000 Telekom Malaysia 319,744 -- 319,744
74,000 -- 74,000 Tenaga Nasional 291,465 -- 291,465
8,000 -- 8,000 United Engineers Berhad 51,046 -- 51,046
----------- ------------- -----------
2,180,927 -- 2,180,927
----------- ------------- -----------
MEXICO -- 0.5%
3,500 -- 3,500 Alfa Sa Series 'A' (Cpo) 44,791 -- 44,791
29,937 -- 29,937 Cemex Sa Ser 'A' 98,692 -- 98,692
147,000 -- 147,000 Cifra Sa De Cv 'B'(b) 154,541 -- 154,541
17,000 -- 17,000 Fomento Economico Mexico Series 'B' 39,274 -- 39,274
685 -- 685 Gpo Financiero Banamex-Ac Series 'L' 1,006 -- 1,006
13,700 -- 13,700 Gpo Financiero Banamex-Ac Series 'B' 22,831 -- 22,831
55,000 -- 55,000 Gpo Financiero Bancomer Series 'B' 15,490 -- 15,490
2,037 -- 2,037 Gpo Financiero Bancomer Series 'L' 523 -- 523
12,000 -- 12,000 Grupo Ind Bimbo Series 'A' 49,061 -- 49,061
16,000 -- 16,000 Grupo Carso Series 'A1' (b) 85,350 -- 85,350
11,500 -- 11,500 Grupo Televisa Ptg Certs
Repr 1 A,L,D Shs 130,452 -- 130,452
10,000 -- 10,000 Industrias Penoles 41,273 -- 41,273
PFS-15
<PAGE>
11,000 -- 11,000 Kimberly Clark Mexico 'A' 166,326 -- 166,326
162,000 -- 162,000 Telefonos De Mexico Series 'L' 258,620 -- 258,620
(Ltd Voting) ----------- ------------- -----------
1,108,231 -- 1,108,231
----------- ------------- -----------
NETHERLANDS -- 3.1%
11,227 -- 11,227 ABN Amro Holding 511,977 -- 511,977
4,389 -- 4,389 Ahold (kon) Nv 179,340 -- 179,340
2,562 -- 2,562 Akzo Nobel Nv 296,638 -- 296,638
23,480 -- 23,480 Elsevier Nv 313,460 -- 313,460
1,734 -- 1,734 Heineken Nv 307,968 -- 307,968
8,743 -- 8,743 ING Groep Nv Cva 584,689 -- 584,689
2,341 -- 2,341 KLM 82,366 -- 82,366
2,446 -- 2,446 KNP BT (Kon) Nv 62,867 -- 62,867
1,568 -- 1,568 Kon Hoogovens Nv Cva 52,528 -- 52,528
15,198 -- 15,198 Kon Ptt Nederland 552,745 -- 552,745
11,082 -- 11,082 Philips Electronic 400,974 -- 400,974
16,546 -- 16,546 Royal Dutch Petroleum (Br) 2,314,186 -- 2,314,186
5,151 -- 5,151 Unilever Nv Cva 724,616 -- 724,616
2,079 -- 2,079 Wolters Kluwer Cva 196,877 -- 196,877
----------- ------------- -----------
6,581,230 -- 6,581,230
----------- ------------- -----------
NORWAY -- 1.8%
7,100 -- 7,100 Bergesen Dy As 'A' 141,599 -- 141,599
2,400 -- 2,400 Bergensen Dy As 'B' Non-Voting 47,105 -- 47,105
4,900 -- 4,900 Dyno Industrier 114,786 -- 114,786
10,010 -- 10,010 Hafslund Nycomed Series 'A' 262,218 -- 262,218
6,018 -- 6,018 Hafslund Nycomed Series 'B' 152,882 -- 152,882
3,900 -- 3,900 Kvaerner As Series 'A' 130,867 -- 130,867
5,750 -- 5,750 Kvaerner As Series 'B' 203,867 -- 203,867
4,600 -- 4,600 Leif Hoegh & Co 68,441 -- 68,441
35,100 -- 35,100 Norsk Hydro As 1,477,812 -- 1,477,812
4,100 -- 4,100 Norske Skogsindust 'A' 120,706 -- 120,706
6,150 -- 6,150 Orkla As 'A' 306,631 -- 306,631
1,200 -- 1,200 Orkla As 'B' 57,361 -- 57,361
14,721 -- 14,721 Transocean (b) 255,142 -- 255,142
51,053 -- 51,053 Uni Storebrand As 'A' (b) 282,826 -- 282,826
4,000 -- 4,000 Unitor As 55,082 -- 55,082
----------- ------------- -----------
3,677,324 -- 3,677,324
SINGAPORE -- 4.2% ----------- ------------- -----------
-- 20,000 20,000 Amcol Holdings -- 55,144 55,144
-- 13,000 13,000 Chaun Hup Holdings -- 11,764 11,764
37,600 52,000 89,600 City Developments 273,799 378,654 652,453
30,000 16,000 46,000 Cycle and Carriage 299,053 159,494 458,547
21,831 -- 21,831 Dairy Farms Intl (Sing Quote) 20,084 -- 20,084
-- 61,000 61,000 DBS Land Limited -- 206,137 206,137
35,250 45,000 80,250 Development Bank Singapore 438,611 559,926 998,537
-- 16,000 16,000 First Capital Corp -- 44,341 44,341
PFS-16
<PAGE>
18,000 16,000 34,000 Fraser and Neave Limited 229,062 203,610 432,672
-- 29,000 29,000 Hai Sun Hup Group -- 19,476 19,476
-- 12,000 12,000 Haw Par Brothers International -- 25,620 25,620
25,975 -- 25,975 Hong Kong Land Holdings (Sing Quote) 48,054 -- 48,054
-- 27,000 27,000 Hotel Properties Limited -- 41,801 41,801
-- 11,000 11,000 Inchcape Berhad -- 35,306 35,306
2,041 -- 2,041 Jardine Matheson (Sing Quote) 13,981 -- 13,981
13,000 7,000 20,000 Jurong Shipyard 100,179 53,942 154,121
45,000 34,000 79,000 Keppel Corp 400,858 302,869 703,727
-- 4,000 4,000 Low Keng Huat Limited -- 2,234 2,234
-- 22,000 22,000 Lum Chang Holdings Limited -- 18,352 18,352
-- 7,000 7,000 Metro Holdings -- 27,218 27,218
-- 22,000 22,000 Natsteel Limited -- 45,104 45,104
-- 46,000 46,000 Neptune Orient Lines -- 51,704 51,704
33,833 61,000 94,833 Overseas Chinese Banking Corp 423,371 763,324 1,186,695
-- 8,000 8,000 Overseas Union Enterprises -- 40,439 40,439
-- 19,000 19,000 Parkway Holdings Limited -- 51,581 51,581
-- 3,000 3,000 Prima Limited -- 11,453 11,453
-- 4,000 4,000 Robinson and Company -- 16,684 16,684
-- 10,000 10,000 Shangri-La Hotel -- 38,883 38,883
-- 86,000 86,000 Sia Limited Foreign -- 802,561 802,561
48,000 -- 48,000 Singapore Airlines (Alien Market) 447,943 -- 447,943
16,000 22,800 38,800 Singapore Press Holdings 282,792 402,979 685,771
44,000 40,000 84,000 Straits Steamship 148,692 135,172 283,864
36,000 20,000 56,000 Straits Trading Co 84,498 46,942 131,440
-- 90,000 90,000 United Industrial Corp -- 88,443 88,443
40,804 60,600 101,404 United Overseas Bank 392,328 582,663 974,991
-- 33,000 33,000 United Overseas Land -- 62,756 62,756
----------- ------------- -----------
3,603,305 5,286,576 8,889,881
----------- ------------- -----------
SPAIN -- 1.2%
401 -- 401 Acerinox Sa (Reg'd) 40,557 -- 40,557
3,909 -- 3,909 Argentaria Corp Banc 161,108 -- 161,108
6,059 -- 6,059 Autopistas Cesa 68,923 -- 68,923
5,568 -- 5,568 Banco Bilbao Vizcaya (Reg'd) 200,568 -- 200,568
3,721 -- 3,721 Banco Central Hispan (Reg'd) 75,453 -- 75,453
4,588 -- 4,588 Banco Santander (Reg'd) 230,315 -- 230,315
947 -- 947 Corporation Mapfre (Ref'd) 53,003 -- 53,003
6,839 -- 6,839 Empresa Nac Electricid 387,285 -- 387,285
588 -- 588 Fomento Const Y Contra 45,076 -- 45,076
1,341 -- 1,341 Gas Natural Sdg Sa 208,916 -- 208,916
19,807 -- 19,807 Iberdrola Sa 181,227 -- 181,227
8,351 -- 8,351 Repsol Sa 273,626 -- 273,626
1,599 -- 1,599 Tabacalera Sa Series 'A' (Reg'd) 60,630 -- 60,630
24,037 -- 24,037 Telefonica De Espana 332,867 -- 332,867
12,958 -- 12,958 Union Electrical Fenosa 77,973 -- 77,973
2,815 -- 2,815 Vallehermoso Sa 52,325 -- 52,325
PFS-17
<PAGE>
310 -- 310 Zardoya-Otis 33,858 -- 33,858
----------- ------------- -----------
2,483,710 -- 2,483,710
----------- ------------- -----------
SWITZERLAND -- 2.8%
240 -- 240 Bbc Brown Boveri (Br) 279,494 -- 279,494
108 -- 108 Alusuisse-Lonza Holdings (Reg'd) 85,788 -- 85,788
380 -- 380 Ciba-Geigy (Reg'd) 335,202 -- 335,202
120 -- 120 Ciba-Geigy (Br) 105,332 -- 105,332
6,034 -- 6,034 Cs Holding (Reg'd) 620,102 -- 620,102
55 -- 55 Holderbank Fn Glarus Wts (Pur Br)(b)* 50 -- 50
135 -- 135 Holderbank Fn Glarus (Br) 103,833 -- 103,833
80 -- 80 Merkur Hldg Ag (Reg'd) 17,590 -- 17,590
673 -- 673 Nestle Sa (Reg'd) 746,315 -- 746,315
44 -- 44 Roche Holdings (Br) 617,564 -- 617,564
113 -- 113 Roche Holdings Genusscheine Npv 896,124 -- 896,124
835 -- 835 Sandoz (Reg'd) 766,314 -- 766,314
566 -- 566 Schweiz Bangesellsch (Br) 614,870 -- 614,870
252 -- 252 Schweiz Bangesellsch (Reg'd) 57,380 -- 57,380
700 -- 700 Schweiz Bankverein (Reg'd) 143,267 -- 143,267
24 -- 24 Sgs Holding (Br) 47,764 -- 47,764
475 -- 475 Smh Ag Neuenburg (Reg'd) 62,334 -- 62,334
25 -- 25 Smh Ag Neuenburg (Br) 14,992 -- 14,992
13 -- 13 Sulzer Ag Ptg 6,948 -- 6,948
1,200 -- 1,200 Zurich Versicherun (Reg'd) 359,796 -- 359,796
----------- ------------- -----------
5,881,058 -- 5,881,058
----------- ------------- -----------
UNITED KINGDOM -- 14.3%
38,813 21,900 60,713 Abbey National PLC(b) 383,260 216,252 599,512
-- 3,000 3,000 Anglian Water PLC -- 28,180 28,180
17,988 2,900 20,888 Argos PLC 166,452 26,835 193,287
-- 11,000 11,000 Argyll Group -- 58,067 58,067
-- 11,100 11,100 Arjo Wiggins -- 28,435 28,435
33,128 2,400 35,528 Associated Brittish FDS 189,793 13,750 203,543
34,087 26,900 60,987 Barclays PLC(b) 391,104 308,643 699,747
24,550 27,900 52,450 Bass(b) 274,056 311,450 585,506
67,568 35,500 103,068 Bat Industries 595,342 312,791 908,133
-- 3,200 3,200 BBA Group -- 14,383 14,383
-- 48,400 48,400 Bet Pub Limited -- 95,435 95,435
-- 2,800 2,800 BICC PLC -- 11,998 11,998
-- 9,900 9,900 Blue Circle Industries -- 52,644 52,644
13,799 6,500 20,299 BOC Group 193,033 90,928 283,961
16,553 9,300 25,853 Boots Co PLC 150,594 84,613 235,207
-- 6,800 6,800 BPB Industries -- 31,884 31,884
-- 2,200 2,200 British Aerospace -- 27,223 27,223
44,575 13,000 57,575 British Airways 322,505 94,056 416,561
123,228 116,800 240,028 British Gas 485,962 460,612 946,574
-- 5,000 5,000 British Land Co(b) -- 29,577 29,577
PFS-18
<PAGE>
125,393 61,800 187,193 British Petroleum 1,049,353 517,173 1,566,526
37,990 27,500 65,490 British Steel 95,995 69,487 165,482
130,594 131,700 262,294 British Telecom 717,771 723,850 1,441,621
78,087 61,600 139,687 BTR PLC(b) 398,873 314,653 713,526
52,660 18,900 71,560 Cable & Wireless 376,096 134,982 511,078
27,535 16,400 43,935 Cadbury Schweppes PLC 227,434 135,461 362,895
-- 2,300 2,300 Carlton Communities PLC(b) -- 34,496 34,496
-- 2,800 2,800 Chubb Security(b) -- 13,846 13,846
-- 15,600 15,600 Coats Viyella -- 42,385 42,385
-- 11,100 11,100 Commercial Union -- 108,228 108,228
-- 5,500 5,500 Courtaulds PLC -- 34,755 34,755
-- 2,200 2,200 De La Rue PLC (b) -- 22,236 22,236
-- 1,200 1,200 Delta PLC -- 7,434 7,434
-- 5,800 5,800 Electrocomponent PLC -- 32,418 32,418
33,609 4,200 37,809 English China Clays 165,415 20,671 186,086
-- 15,800 15,800 Forte PLC -- 81,075 81,075
-- 3,400 3,400 General Accident -- 34,365 34,365
59,140 46,000 105,140 General Electric 325,964 253,538 579,502
-- 4,700 4,700 GKN PLC -- 56,845 56,845
63,234 46,900 110,134 Glaxo Holdings PLC 898,321 666,271 1,564,592
47,103 39,300 86,403 Grand Metropolitan 339,333 283,117 622,450
19,328 9,800 29,128 Great Universe Stores PLC 205,559 104,226 309,785
-- 6,600 6,600 Guardian Royal Exchange PLC -- 28,282 28,282
59,179 43,200 102,379 Guinness 435,517 317,922 753,439
-- 3,900 3,900 :Hammerson PLC -- 21,344 21,344
107,145 75,200 182,345 Hanson 320,230 224,750 544,980
-- 9,600 9,600 Harrison & Crossfield PLC -- 23,847 23,847
-- 3,300 3,300 Hepworth Ceramic -- 16,344 16,344
42,779 -- 42,779 HSBC Holdings (UK Regd)) 652,231 -- 652,231
24,871 43,800 68,671 HSBC Holdings 388,464 684,117 1,072,581
-- 4,400 4,400 IMI PLC -- 22,441 22,441
17,053 9,900 26,953 Imperial Chemical Industries 202,016 117,278 319,294
11,605 -- 11,605 Inchcape 44,865 -- 44,865
11,117 6,500 17,617 Kingfisher PLC 93,551 54,698 148,249
64,565 19,400 83,965 Ladbroke Group PLC(b) 146,857 44,125 190,982
-- 6,900 6,900 Land Securities PLC -- 66,099 66,099
-- 74,200 74,200 Lasmo PLC -- 201,601 201,601
-- 9,700 9,700 Legal and General -- 100,903 100,903
74,113 180,086 254,199 Lloyds TSB Group 381,450 926,867 1,308,317
-- 3,300 3,300 London Electricity PLC -- 29,409 29,409
-- 9,000 9,000 Lonrho PLC(b) -- 24,593 24,593
-- 28,300 28,300 Lucas Industries PLC -- 79,529 79,529
53,864 46,700 100,564 Marks & Spencer PLC 376,332 326,279 702,611
15,356 5,500 20,856 MEPC 94,175 33,730 127,905
-- 8,200 8,200 Metal Box-Caradon(b) -- 24,889 24,889
-- 2,910 2,910 National Grid Group(b) -- 9,013 9,013
34,132 13,000 47,132 National Power 238,205 90,726 328,931
-- 3,700 3,700 Next PLC -- 26,195 26,195
-- 3,800 3,800 Northwest Water Group(b) -- 36,343 36,343
-- 10,100 10,100 P & O Steam Nav(b) -- 74,642 74,642
PFS-19
<PAGE>
-- 6,500 6,500 Pearson PLC -- 62,973 62,973
-- 10,800 10,800 Pilkington Ord PLC -- 33,871 33,871
68,435 31,700 100,135 Prudential Corp 440,947 204,249 645,196
-- 11,300 11,300 Rank Organisation PLC -- 81,757 81,757
-- 22,600 22,600 Reckitt and Coleman -- 250,182 250,182
-- 7,100 7,100 Redland PLC -- 42,881 42,881
-- 9,400 9,400 Reed International -- 143,317 143,317
39,031 27,800 66,831 Reuters Holdings PLC(b) 357,537 254,656 612,193
-- 6,800 6,800 Rexam PLC -- 37,374 37,374
19,470 2,700 22,170 RMC Group 299,571 41,543 341,114
54,712 39,300 94,012 Rolls Royce 160,548 115,322 275,870
-- 13,300 13,300 Royal Bank of Scotland PLC -- 121,006 121,006
-- 24,200 24,200 Royal Insurance PLC -- 143,528 143,528
27,830 17,800 45,630 RTZ Corp 404,435 258,675 663,110
-- 8,700 8,700 Rugby -- 14,858 14,858
32,305 17,600 49,905 Sainsbury (J) PLC 197,116 107,390 304,506
-- 3,200 3,200 Schroders PLC(b) -- 67,966 67,966
-- 1,000 1,000 Scottish & New Castle PLC(b) -- 9,517 9,517
-- 13,600 13,600 Scottish Power PLC(b) -- 78,127 78,127
50,391 88,800 139,191 Sears 81,367 143,385 224,752
-- 24,700 24,700 Sedgwick Group -- 46,401 46,401
-- 200 200 Seeboard PLC(b) -- 1,633 1,633
-- 5,300 5,300 Slough Estate PLC -- 18,021 18,021
22,799 4,100 26,899 Smith Industries 225,130 40,485 265,615
22,566 50,400 72,966 Smithkline Beecham 245,953 549,320 795,273
24,860 12,900 37,760 Smithkline Beecham, Class A 274,043 142,202 416,245
-- 200 200 Southern Electric PLC(b) -- 2,807 2,807
-- 1,700 1,700 Southern Water PLC -- 18,159 18,159
-- 4,200 4,200 T & N PLC -- 10,564 10,564
-- 12,600 12,600 Tarmac PLC -- 20,148 20,148
-- 1,000 1,000 Tate & Lyle PLC -- 7,328 7,328
91,386 5,200 96,586 Taylor Woodrow PLC 166,716 9,486 176,202
47,446 77,700 125,146 Tesco 218,784 358,290 577,074
26,744 22,800 49,544 Thames Water PLC 233,358 198,944 432,302
12,257 7,100 19,357 Thorn EMI PLC(b) 288,688 167,226 455,914
-- 5,500 5,500 TI Group PLC(b) -- 39,195 39,195
-- 12,600 12,600 Trafalgar House PLC(b) -- 5,428 5,428
-- 600 600 Unigate Limited -- 3,829 3,829
14,968 13,500 28,468 Unilever PLC 301,910 277,301 579,211
-- 1,400 1,400 United Biscuts PLC -- 5,564 5,564
74,958 26,200 101,158 Vodafone Group 268,255 93,762 362,017
-- 7,900 7,900 Williams Holdings -- 40,231 40,231
-- 3,200 3,200 Willis Corroon PLC -- 7,005 7,005
-- 4,900 4,900 Wimpey George PLC -- 10,955 10,955
-- 7,500 7,500 Wolseley -- 52,517 52,517
17,984 8,900 26,884 Zeneca Group 347,908 172,172 520,080
----------- ------------- -----------
15,838,374 14,106,784 29,945,158
----------- ------------- -----------
----------- ------------- -----------
Total Common Stocks (cost $164,108,114) 102,871,344 74,297,122 177,168,466
----------- ------------- -----------
PFS-20
<PAGE>
PREFERRED STOCKS -- 0.3%
AUSTRALIA -- 0.0%
-- 24,100 24,100 News Corp, Limited Voting Preferred Shares -- 112,761 112,761
----------- ------------- -----------
FRANCE -- 0.0%
-- 50 50 Casino Guich-Perr, Preferred Shares -- 1,135 1,135
----------- ------------- -----------
GERMANY -- 0.3%
-- 200 200 Allianz AG, Preferred Shares Nonvoting -- 393,495 393,495
-- 500 500 Kloeckner AG, Preferred Shares Nonvoting -- 3,022 3,022
-- 50 50 Lufthansa AG, Preferred Shares Nonvoting -- 6,550 6,550
-- 50 50 Man AG, Preferred Shares Nonvoting -- 10,753 10,753
-- 150 150 RWE AG, Preferred Shares Nonvoting -- 41,921 41,921
-- 500 500 SAP AG, Preferred Shares Nonvoting -- 76,085 76,085
-- 50 50 Volkswagon AG, Preferred Shares Nonvoting -- 12,150 12,150
----------- ----------- -----------
-- 543,976 543,976
----------- ----------- -----------
----------- ----------- -----------
Total Preferred Stocks (cost $580,168) -- 657,872 657,872
----------- ----------- -----------
PFS-21
<PAGE>
<CAPTION>
Pro Forma Pro Forma
Combined Combined
Woodward Prairie Principal Woodward Prairie Market
Principal Principal Amount Market Market Value
Amount Amount (Note 1) Description Value Value (Note 1)
- - -------- --------- --------- ----------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
FOREIGN CORPORATE OBLIGATIONS -- 6.3%
GERMANY -- 6.3%
-- 18,700,000 18,700,000 ** Bundeslaender Versicher, 8.63%, 2/20/96
(cost $12,896,203) -- 13,143,650 13,143,650
SHORT-TERM INVESTMENTS -- 9.0%
Repurchase Agreements -- 2.3%
Salomon Brothers, Revolving Repurchase
Agreement, 5.875%, 1/3/95 (secured by
various US Treasury Strips with
maturities ranging from 2/15/95 through
4,819,555 -- 4,819,555 5/15/99, all held at Chemical Bank) 4,819,555 -- 4,819,555
US Treasury Bills -- 6.7%
-- 1,000,000 1,000,000 US Treasury Bill, 5.61%*, 2/08/96 -- 994,320 994,320
-- 2,000,000 2,000,000 US Treasury Bill, 5.48%*, 2/15/96 -- 1,986,675 1,986,675
-- 2,500,000 2,500,000 US Treasury Bill, 5.54%*, 3/07/96 -- 2,478,150 2,478,150
-- 1,600,000 1,600,000 US Treasury Bill, 5.07%*, 3/28/96 -- 1,581,232 1,581,232
-- 3,500,000 3,500,000 US Treasury Bill, 5.35%*, 5/02/96 -- 3,441,883 3,441,883
-- 1,500,000 1,500,000 US Treasury Bill, 5.65%*, 7/25/96 -- 1,457,802 1,457,802
-- 1,150,000 1,150,000 US Treasury Bill, 5.61%*, 8/22/96 -- 1,113,305 1,113,305
-- 1,000,000 1,000,000 US Treasury Bill, 5.61%*, 9/19/96 -- 964,475 964,475
Total Short Term Investments ----------- ----------- -----------
(cost $18,821,973) 4,819,555 14,017,842 18,837,397
----------- ----------- -----------
Total Investments (cost $196,406,458) 107,690,899 102,116,486 209,807,385
=========== =========== ===========
<FN>
_______________
(b) Represents non-income producing securities
* Yield at purchase
** Denominated in local currency
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS -- Woodward
As of December 31, 1995, the Fund had entered into two forward
foreign currency exchange contracts that obligate the Fund to deliver
currencies at specified future dates.
Outstanding contracts as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
U.S. Dollar U.S. Dollar
Currency To Value As Of Currency To Value as of Unrealized
Settlement Date Be Delivered Dec. 31, 1995 Be Received Dec. 31, 1995 Gain (Loss)
- - --------------- ------------ ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Jan. 2, 1996...... 770,501 $770,501 3,344,361 $770,234 $(267)
U.S. Dollars Finnish Marks
Jan. 3, 1996...... 5,349 (8,305) 8,253 (8,253) 52
G.B. Pounds U.S. Dollars
-------- -------- -----
$762,196 $761,981 $(215)
======== ======== =====
</TABLE>
<TABLE>
<CAPTION>
FOREIGN CURRENCY INVESTMENTS -- Prairie
Contract Contract Unrealized
Price Value (Depreciation)
-------- -------- --------------
<S> <C> <C> <C>
Currency Purchased:
German Deutsche Mark.......... $0.698600 $328,907 $ (3,032)
Japanese Yen(a)............... $0.960000 504,385 (69,326)
U.K. Pound Sterling........... $1.552600 115,183 (1,442)
-------- ---------
Total Foreign Currency Investments
(cost $1,022,275)............. $948,475 $ (73,800)
======== =========
<FN>
(a) Pledged to cover margin requirements for open futures positions.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL FUTURES -- Prairie
Unrealized
Market Value Appreciation
Number of Covered (Depreciation)
Contracts by Contracts Expiration at 12/31/95
--------- ------------ ---------- --------------
<S> <C> <C> <C> <C>
Financial Futures Purchased
Long:
British Pound -- FTSE(1)..... 57 $ 8,134,087 March 1996 $ 54,862
German Deutsche Marks --
DAX(1)..................... 3 447,415 March 1996 12,404
Japanese Yen -- TOPIX(1)..... 120 18,426,486 March 1996 851,509
Financial Futures Sold Short:
German Deutsche Marks(2)..... 130 $11,340,875 March 1996 (71,500)
Japanese Yen(2).............. 69 8,491,312 March 1996 101,775
---------
$ 949,050
=========
<FN>
(1) Exchange traded local currency denominated futures contracts.
(2) U.S. Dollar denominated futures contracts.
</TABLE>
PFS-22
<PAGE>
THE PRAIRIE/WOODWARD FUNDS
Notes to Pro Forma Financial Statements
(Unaudited)
(1) Basis of Combination-
The unaudited Pro Forma Combining Schedule of Investments, Pro Forma
Combining Statement of Assets and Liabilities and Pro Forma Combining
Statement of Operations reflect the accounts of the Woodward
International Equity Fund and Prairie International Equity Fund for the
period ended December 31, 1995. These statements have been derived from
the funds' books and records utilized in calculating daily net asset
value at December 31, 1995.
The pro forma statements give effect to the proposed transfer of the
assets and stated liabilities of the Prairie International Equity fund
in exchange for shares of the Woodward International Equity Fund.
In accordance with generally accepted accounting principles, the
historical cost of investment securities will be carried forward to the
Woodward International Equity Fund and the results of operations for
pre-combination periods for the Woodward International Equity Fund will
not be restated. The pro forma statements do not reflect the expenses of
any fund in carrying out their obligation under the Agreement and Plan
of Reorganization. Under the terms of the Plan of Reorganization, the
combination of the funds will be taxed as a tax free business
combination and accordingly will be accounted for by a method of
accounting for tax free mergers of investment companies (sometimes
referred to as the pooling without restatement method).
The Pro Forma Combining Schedule of Investments, Statement of Assets and
Liabilities and Statement of Operations should be read in conjunction
with the historical financial statements of the funds included or
incorporated by reference in the Statement of Additional Information.
(2) Portfolio Valuation-
Investments held by the Woodward International Equity Fund and the
Prairie International Equity Fund are stated at market value.
(3) Capital Shares-
The pro forma net asset value per share assumes the issuance of
additional shares of the Woodward International Equity Fund which would
have been issued at December 31, 1995, in connection with the proposed
reorganization. The pro forma number of shares outstanding of 19,163,186
consists of 9,450,295 additional shares assumed issued in the
reorganization plus 9,712,891 shares of the Woodward International
Equity Fund outstanding at December 31, 1995.
PFS-23
<PAGE>
FORM N-14
PART C. OTHER INFORMATION
Item 15. Indemnification
Indemnification of Registrant's principal underwriter against
certain losses is provided for in Section 11 of the Distribution Agreement
incorporated herein by reference as Exhibit (7)(b). Indemnification of
Registrant's Custodian is provided for in Article XII of the Amended and
Restated Custodian Agreement incorporated herein by reference as Exhibit
(9)(a). Indemnification of Registrant's Transfer Agent and Dividend Disbursing
Agent is provided for in Article III of the Amended and Restated Transfer
Agency and Dividend Disbursing Agreement incorporated herein by reference as
Exhibit (13)(c). Registrant has obtained from a major insurance carrier a
trustees' and officers' liability policy covering certain types of errors and
omissions. In addition, Section 5.4 of the Registrant's Amended and Restated
Declaration of Trust incorporated herein by reference as Exhibit (1)(b),
provides as follows:
5.4 Mandatory Indemnification.
(a) Subject only to the provisions hereof, every person
who is or has been a Trustee, officer, employee or agent of the Trust
and every person who serves at the Trust's request as director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise shall be indemnified by the Trust
to the fullest extent permitted by law against all liabilities and
against all expenses reasonably incurred or paid by him in connection
with any debt, claim, action, demand, suit, proceeding, judgment,
decree, liability or obligation of any kind in which he becomes
involved as a party or otherwise or is threatened by virtue of his
being or having been a Trustee, officer, employee or agent of the
Trust or of another corporation, partnership, joint venture, trust or
other enterprise at the request of the Trust and against amounts paid
or incurred by him in the compromise or settlement thereof.
(b) The words "claim", "action", "suit", or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal, administrative, legislative, investigative or other,
including appeals), actual or threatened, and the words "liabilities"
and "expenses" shall include, without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and
other liabilities.
<PAGE>
(c) No indemnification shall be provided here-
under to a Trustee or officer:
(i) against any liability to the Trust or the
Shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office ("disabling
conduct");
(ii) with respect to any matter as to which he
shall, by the court or other body by or before which the
proceeding was brought or engaged, have been finally
adjudicated to be liable by reason of disabling conduct;
(iii) in the absence of a final adjudication on
the merits that such Trustee or officer did not engage
in disabling conduct, unless a reasonable determination,
based upon a review of the facts that the person to be
indemnified is not liable by reason of such conduct, is
made:
(A) by vote of a majority of a quorum
of the Trustees who are neither Interested
Persons nor parties to the proceedings; or
(B) by independent legal counsel, in a
written opinion.
(d) The rights of indemnification herein provided may be
insured against by policies maintained by the Trust, shall be
severable, shall not affect any other rights to which any Trustee,
officer, employee or agent may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee, officer,
employee, or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person; provided, however, that
no person may satisfy any right of indemnity or reimbursement granted
herein except out of the property of the Trust, and no other person
shall be personally liable to provide indemnity or reimbursement
hereunder (except an insurer or surety or person otherwise bound by
contract).
(e) Expenses in connection with the preparation and
presentation of a defense to any claim, action, suit or proceeding of
the character described in paragraph (a) of this Section 5.4 may be
paid by the Trust prior to final disposition thereof upon receipt of a
written undertaking by or on behalf of the Trustee, officer, employee
or agent to reimburse the Trust if it is ultimately determined under
this Section 5.4 that he is not entitled to indemnification. Such
undertaking shall be secured by a surety bond or other
-2-
<PAGE>
suitable insurance or such security as the Trustees shall require
unless a majority of a quorum of the Trustees who are neither
Interested Persons nor parties to the proceeding, or independent legal
counsel in a written opinion, shall have determined, based on readily
available facts, that there is reason to believe that the indemnitee
ultimately will be found to be entitled to indemnification.
Insofar as indemnification for liability arising under
the Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of Registrant pursuant to the foregoing
provisions, or otherwise, Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee, officer or controlling person of
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person
in connection with the securities being registered, Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Section 5.1 of the Registrant's Declaration of Trust,
incorporated herein by reference as Exhibit (1), also provided
indemnification of shareholders of the Registrant.
Section 5.1 states as follows:
5.1 Limitation of Personal Liability and Indemnification of
Shareholders. The Trustees, officers, employees or agents of the Trust
shall have no power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment
whatsoever, other than such as the Shareholder may at any time agree
to pay by way of subscription to any Shares or otherwise.
No Shareholder or former Shareholder of the Trust shall
be liable solely by reason of his being or having been a Shareholder
for any debt, claim, action, demand, suit, proceeding, judgment,
decree, liability or obligation of any kind, against, or with respect
to, the Trust arising out of any action taken or omitted for or on
behalf of the Trust, and the Trust shall be solely liable therefor and
resort shall be had solely to the Trust Property for the payment or
performance thereof.
-3-
<PAGE>
Each Shareholder or former Shareholder of the Trust (or
their heirs, executors, administrators or other legal representatives
or, in case of a corporate entity, its corporate or general successor)
shall be entitled to indemnity and reimbursement out of the Trust
Property to the full extent of such liability and the costs of any
litigation or other proceedings in which such liability shall have
been determined, including, without limitation, the fees and
disbursements of counsel if, contrary to the provisions hereof, such
Shareholder or former Shareholder of the Trust shall be held to
personal liability.
Item 16. Exhibits
(1) (a) Amended and Restated Declaration of Trust dated as
of May 1, 1992 is incorporated herein by reference to
exhibit (1)(b) of Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A filed
with the Commission on September 8, 1992.
(2) Bylaws of Registrant is incorporated herein by
reference to exhibit (2) of Pre-Effective
Amendment No. 1 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on July 24, 1987.
(3) None.
(4) Plan of Reorganization filed herewith as Appendix
A to the Combined Proxy Statement/Prospectus.
(5) (a) None.
(6) (a) Co-Advisory Agreement between Registrant,
NBD Bank and First Chicago Investment Management
Company.
(b) Advisory Agreement between Registrant and NBD dated
November 28, 1995 is incorporated herein by reference to
exhibit 5(b) of Post-Effective Amendment No. 28 to
Registrant's Registration Statement on Form N-1A filed
with the Commission
on April 5, 1996.
(c) Form of Sub-Advisory Agreement among NBD, FCIMCO
and ANB Investment Management and Trust Company
("ANB-IMC") is incorporated herein by reference to
exhibit 5(c) of Post-Effective Amendment No. 30 to
-4-
<PAGE>
Registrant's Registration Statement on Form N-1A filed
with the Commission on April 15, 1996.
(7) (a) Form of Distribution Agreement among Registrant
and BISYS Fund Services Limited Partnership, d/b/a
BISYS Fund Services ("BISYS") is incorporated
herein by reference to exhibit 6(a) of Post-
Effective Amendment No. 28 to Registrant's
Registration Statement on Form N-1A filed with the
Commission on April 5, 1996.
(b) Distribution Agreement dated March 15, 1994 among
Registrant, FoM and Essex relating to Series A, B, C, M,
N, O, P, Q, R, S, T, U and V is incorporated herein by
reference to exhibit (6)(a) of Post-Effective Amendment
No. 25 to the Registrant's Registration Statement on
Form N-1A filed with the Commission on July 28, 1995.
(8) Deferred Compensation Plan is incorporated herein
by reference to exhibit 7 of Post-Effective
Amendment No. 30 to Registrant's Registration
Statement on Form N-1A filed with the commission
on April 15, 1996.
(9) (a) Amended and Restated Custodian Agreement dated
May 16, 1989 between Registrant and National Bank
of Detroit for Series A, B, C, D, E, F, G, H, I,
J, K and L of the Registrant is incorporated
herein by reference to exhibit (8)(b) of Post-
Effective Amendment No. 3 to the Registrant's
Registration Statement on Form N-1A filed with the
Commission on April 30, 1990.
(b) Addendum No. 1 dated January 23, 1991 to the
Amended and Restated Custodian Agreement between
Registrant and NBD relating to the Woodward
Michigan Tax-Exempt Money Market Fund (Series M)
is incorporated herein by reference to exhibit
(8)(c) of Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form N-1A
filed with the Commission on February 28, 1991.
(c) Addendum No. 2 dated April 28, 1992 to the Amended
and Restated Custodian Agreement between
Registrant and NBD relating to the Woodward Equity
Index Fund (Series N) is incorporated herein by
reference to exhibit (8)(d) of Post-Effective
Amendment No. 10 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on September 8, 1992.
-5-
<PAGE>
(d) Addendum No. 3 dated January 1, 1993 to the
Amended and Restated Custodian Agreement between
Registrant and NBD relating to the Woodward
Treasury Money Market Fund (Series O) is
incorporated herein by reference to exhibit (8)(e)
of Post-Effective Amendment No. 14 to the
Registrant's Registration Statement on Form N-1A
filed with the Commission on April 29, 1993.
(e) Addendum No. 4 dated February 1, 1993 to the
Amended and Restated Custodian Agreement between
Registrant and NBD relating to the Woodward
Municipal Bond Fund (Series P) and the Woodward
Michigan Municipal Bond Fund (Series Q) is
incorporated herein by reference to exhibit (8)(f)
of Post-Effective Amendment No. 14 to the
Registrant's Registration Statement on Form N-1A
filed with the Commission on April 29, 1993.
(f) Addendum No. 5 dated January 1, 1994 to the
Amended and Restated Custodian Agreement between
Registrant and NBD relating to the Woodward
Balanced Fund (Series R) is incorporated herein by
reference to exhibit (8)(g) of Post-Effective
Amendment No. 22 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on July 29, 1994.
(g) Addendum No. 6 dated July 1, 1994 to the Amended
and Restated Custodian Agreement between
Registrant and NBD relating to the Woodward
Capital Growth and Short Bond Funds (Series S and
U) is incorporated herein by reference to exhibit
(8)(h) of Post-Effective Amendment No. 23 to the
Registrant's Registration Statement on Form N-1A
filed with the Commission on January 27, 1995.
(h) Addendum No. 7 to the Amended and Restated
Custodian Agreement between Registrant and NBD
relating to the Woodward International Equity Fund
(Series T) is incorporated herein by reference to
exhibit (8)(i) of Post-Effective Amendment No. 25
to the Registrant's Registration Statement on Form
N-1A filed with the Commission on July 28, 1995.
(i) Addendum No. 8 to the Amended and Restated
Custodian Agreement between Registrant and NBD
relating to the Woodward Cash Management Fund,
Treasury Prime Cash Management Fund and U.S.
Government Securities Cash Management Fund.
-6-
<PAGE>
(j) Form of Addendum No. 9 to the Amended and Restated
Custodian Agreement between Registrant and NBD
relating to the Woodward U.S. Government Income
Fund (Series V) is incorporated herein by
reference to exhibit (8)(k) of Post-Effective
Amendment No. 17 to Registrant's Registration
Statement on Form N-1A filed with the Commission
on November 31, 1993.
(k) Global Custody Agreement dated November 21, 1994 between
Barclays Bank, PLC and NBD relating to Series A, B, C,
M, N, O, P, Q, R, S, T, U and V is incorporated herein
by reference to exhibit (8)(k) of Post-Effective
Amendment No. 25 to Registrant's Registration Statement
on Form N-1A filed with the Commission on July 28, 1995.
(10) (a) Revised Service and Distribution Plan relating to
Registrant's distribution expenses pursuant to
Rule 12b-1, effective April 20, 1994, is
incorporated herein by reference to exhibit
(15)(l) of Post-Effective Amendment No. 22 of the
Registrant's Registration Statement on Form N-1A
filed with the Commission on July 29, 1994.
(b) Distribution Plan for Class B Shares is incorporated
herein by reference to exhibit (15)(b) of Post-Effective
Amendment No. 30 of the Registrant's Registration
Statement on Form N-1A filed with the Commission on
April 15, 1996.
(11) Opinion of Drinker Biddle & Reath that shares are
validly issued, fully paid and non-assessable.<F1>1
(12) Opinion of Drinker Biddle & Reath as to tax
matters and consequences (including consent of
such firm).
(13) (a) Form of Co-Administration Agreement among the
Registrant, NBD, FCIMCO and BISYS is incorporated herein
by reference to exhibit (9)(a) of Post-Effective
Amendment No. 28 of the Registrant's Registration
Statement on Form N-1A filed with the Commission on
April 5, 1996.
<F1>
- - --------
1 Filed pursuant to Rule 24f-2 as part of Registrant's
Rule 24f-2 Notice.
-7-
<PAGE>
(b) Form of Transfer Agency Agreement between The
Woodward Funds and First Data Investor Services
Group, Inc.
(c) Amended and Restated Transfer Agency and Dividend
Disbursement Agreement dated May 16, 1989 between
Registrant and National Bank of Detroit for Series
A, B, C, D, E, F, G, H, I, J, K and L of the
Registrant is incorporated herein by reference to
exhibit (9)(b) of Post-Effective Amendment No. 3
to the Registrant's Registration Statement on Form
N-1A filed with the Commission on April 30, 1990.
(d) Addendum No. 1 dated January 23, 1991 to the
Amended and Restated Transfer Agency and Dividend
Disbursement Agreement between Registrant and NBD
relating to the Woodward Michigan Tax-Exempt Money
Market Fund (Series M) is incorporated herein by
reference to exhibit (9)(c) of Post-Effective
Amendment No. 5 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on February 28, 1991.
(e) Addendum No. 2 dated April 28, 1992 to the Amended
and Restated Transfer Agency and Dividend
Disbursement Agreement between Registrant and NBD
relating to the Woodward Equity Index Fund (Series
N) is incorporated herein by reference to exhibit
(9)(d) of Post-Effective Amendment No. 10 to the
Registrant's Registration Statement on Form N-1A
filed with the Commission on September 8, 1992.
(f) Addendum No. 3 dated January 1, 1993 to the
Amended and Restated Transfer Agency and Dividend
Disbursement Agreement between Registrant and NBD
relating to the Woodward Treasury Money Market
Fund (Series O) is incorporated herein by
reference to exhibit (9)(e) of Post-Effective
Amendment No. 14 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on April 29, 1993.
(g) Addendum No. 4 dated February 1, 1993 to the
Amended and Restated Transfer Agency and Dividend
Disbursement Agreement between Registrant and NBD
relating to the Woodward Municipal Bond Fund
(Series P) and the Woodward Michigan Municipal
Bond Fund (Series Q) is incorporated herein by
reference to exhibit (9)(f) of Post-Effective
Amendment No. 14 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on April 29, 1993.
-8-
<PAGE>
(h) Addendum No. 5 dated January 1, 1994 to the
Amended and Restated Transfer Agency and Dividend
Disbursement Agreement between Registrant and NBD
relating to the Woodward Balanced Fund (Series R)
is incorporated herein by reference to exhibit
(9)(g) of Post-Effective Amendment No. 22 to the
Registrant's Registration Statement on Form N-1A
filed with the Commission on July 29, 1994.
(i) Addendum No. 6 dated July 1, 1994 to the Amended
and Restated Transfer Agency and Dividend
Disbursement Agreement between Registrant and NBD
relating to the Woodward Capital Growth,
International Equity and Short Bond Funds (Series
S, T and U) is incorporated herein by reference to
exhibit (9)(h) of Post-Effective Amendment No. 23
to the Registrant's Registration Statement on Form
N-1A filed with the Commission on January 27,
1995.
(j) Form of Addendum No. 7 to the Amended and Restated
Transfer Agency and Dividend Disbursement
Agreement between Registrant and NBD relating to
the Woodward Cash Management, U.S. Government
Securities Cash Management and Treasury Prime Cash
Management Funds incorporated by reference to
exhibit 9(i) of Post-Effective Amendment No. 28 to
the Registration Statement on Form N-1A filed with
the Commission on April 5, 1996.
(k) Form of Addendum No. 8 to the Amended and Restated
Transfer Agency and Dividend Disbursement
Agreement between Registrant and NBD relating to
the Woodward Managed Assets Conservative Fund,
Managed Assets Growth Fund, Equity Income Fund,
Small-Cap Opportunity Fund, Major Markets Fund,
Income Fund, International Bond Fund and
Intermediate Municipal Bond Fund is incorporated
herein by reference to exhibit (9)(j) of Post-
Effective Amendment No. 29 of the Registrant's
Registration Statement on Form N-1A filed with the
Commission on April 10, 1996.
(l) Form of Broker-Dealer Agreement between FoM and
Broker-Dealers is incorporated herein by reference to
exhibit (9)(c) of Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A filed
with the Commission on March 2, 1989.
(m) Bank Agreement between FoM and BHC Securities,
Inc. dated June 15, 1992 is incorporated herein by
-9-
<PAGE>
reference to exhibit (9)(h) of Post-Effective
Amendment No. 10 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on September 8, 1992.
(n) Bank Agreement between FoM and NBD Securities,
Inc. dated June 8, 1992 is incorporated herein by
reference to exhibit (9)(i) of Post-Effective
Amendment No. 10 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on September 8, 1992.
(o) Revised Shareholder Services Plan including form of
Service Agreement adopted by the Board of Trustees on
November 16, 1993 is incorporated herein by reference to
exhibit (9)(t) of Post-Effective Amendment No. 22 to
the Registrant's Registration Statement on Form N-1A
filed with the Commission on July 29, 1994.
(p) Form of Distribution and Services Plan, including Form
of Servicing Agreement is incorporated herein by
reference to exhibit 9(n) of Post-Effective Amendment
No. 28 to the Registrant's Registration Statement on
Form N-1A filed with the Commission
on April 5, 1996.
(q) Shareholder Services Plan including form of Service
Agreement with respect to Class A Shares is incorporated
herein by reference to exhibit (9)(p) of Post-Effective
Amendment No. 30 of the Registrant's Registration
Statement on Form N-1A filed with the Commission on
April 15, 1996.
(r) Shareholder Administrative Services Plan including form
of Service Agreement is incorporated herein by reference
to exhibit (9)(q) of Post-Effective Amendment No. 30 of
the Registrant's Registration Statement on Form N-1A
filed with the Commission
on April 15, 1996.
(14) (a) Consent Ernst & Young LLP
(b) Consent of Arthur Andersen LLP.
(c) Consent of Drinker Biddle & Reath.
(15) Not Applicable.
(16) Not Applicable.
(17) (a) Rule 18f-3 Plan is incorporated herein by
reference to exhibit (18)(a) of Post-Effective
Amendment No. 30 of the Registrant's Registration
Statement on Form N-1A filed with the Commission
on April 15, 1996.
-10-
<PAGE>
(b) Amended Rule 18f-3 Plan is incorporated herein by
reference to exhibit (18)(b) of Post-Effective
Amendment No. 30 of the Registrant's Registration
Statement on Form N-1A filed with the Commission
on April 15, 1996.
(c) Declaration pursuant to Rule 24f-2 under the Investment
Company Act of 1940 of the Registrant.
(d) Form of Proxy.
(e) Prospectus dated April 15, 1996 for Class A Shares
of The Woodward Growth/Value, Opportunity,
Intrinsic Value, Capital Growth, Balanced and
International Equity Funds.
(f) Prospectus dated April 15, 1996 for Class I Shares
of The Woodward Growth/Value, Opportunity,
Intrinsic Value, Capital Growth, Balanced and
International Equity1 Funds.
(g) Statement of Additional Information dated April
15, 1996 for Class A and Class I Shares of The
Woodward Growth/Value, Opportunity, Intrinsic
Value, Capital Growth, Balanced and International
Equity Funds.
(h) Prospectus dated April 11, 1996 for the Prairie
Managed Assets Income Fund, Managed Assets Fund,
Equity Income Fund, Growth Fund, Special
Opportunities Fund, International Equity Fund,
Intermediate Bond Fund, Bond Fund, International
Bond Fund, Intermediate Municipal Bond Fund,
Municipal Bond Fund, U.S. Government Money market
Fund, Money Market Fund and Municipal Money Market
Fund. dated December 31, 1995.
(i) Statement of Additional Information dated April
11, 1996 for Class A, Class B and Class I Shares
of the Prairie Managed Assets Income Fund, Managed
Assets Fund, Equity Income Fund, Growth Fund,
Special Opportunities Fund, International Equity
Fund, Intermediate Bond Fund, Bond Fund,
International Bond Fund, Intermediate Municipal
Bond Fund, Municipal Bond Fund, U.S. Government
Money Market Fund, Money Market Fund and Municipal
Money Market Fund. dated December 31, 1995.
(j) Annual Report to Shareholders for The Woodward
International Equity Fund dated December 31, 1995.
(k) Annual Report to Shareholders for The Prairie
Managed Assets Income Fund, Managed Assets Fund,
Equity Income Fund, Growth Fund, Special
Opportunities Fund, International Equity Fund,
Intermediate Bond Fund, Bond Fund, International
Bond Fund, Intermediate Municipal Bond Fund,
Municipal Bond Fund, U.S. Government Money Market
-11-
<PAGE>
Fund, Money Market Fund and Municipal Money Market Fund
dated December 31, 1995.
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by
any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c) of the Securities Act of 1933, as
amended, the reoffering prospectus will contain the information
called for by the applicable registration form for reofferings
by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an
amendment to the registration statement and will not be used
until the amendment is effective, and that, in determining any
liability under the 1933 Act, each post-effective amendment
shall be deemed to be a new registration statement for the
securities offered therein, and the offering of the securities
at that time shall be deemed to be the initial bona fide
offering of them.
-12-
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, as amended, this
Registration Statement has been signed on behalf of the Registrant, in the
City of Detroit, State of Michigan, on the 24th day of April, 1996.
THE WOODWARD FUNDS
Registrant
/s/ Earl I. Heenan, Jr.
-----------------------
Earl I. Heenan, Jr.
Chairman of the Board and President
As required by the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
/s/ Earl I. Heenan, Jr.
- - -------------------------
Earl I. Heenan, Jr. Trustee May 24, 1996
/s/ Eugene C. Yehle
- - -------------------------
Eugene C. Yehle Trustee May 24, 1996
/s/ Will M. Caldwell
- - -------------------------
Will M. Caldwell Trustee May 24, 1996
/s/ Julius L. Pallone
- - -------------------------
Julius L. Pallone Trustee May 24, 1996
/s/ Nicholas J. De Grazia
- - -------------------------
Nicholas J. De Grazia Trustee May 24, 1996
/s/ Donald G. Sutherland
- - -------------------------
Donald G. Sutherland Trustee May 24, 1996
/s/ Donald L. Tuttle
- - -------------------------
Donald L. Tuttle Trustee May 24, 1996
/s/ John P. Gould
- - -------------------------
John P. Gould Trustee May 24, 1996
/s/ Marilyn McCoy
- - -------------------------
Marilyn McCoy Trustee May 24, 1996
-13-
<PAGE>
THE WOODWARD FUNDS
Power of Attorney
Eugene C. Yehle, whose signature appears below, hereby constitutes
and appoints Earl I. Heenan Jr. and W. Bruce McConnel, III, and either of
them, his true and lawful attorneys and agents, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable the Trust to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended ("Acts"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of any and all amendments (including post-effective
amendments) to the Trust's Registration Statements pursuant to said Acts on
Form N-1A or Form N-14, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a trustee and/or officer of the Trust any and
all such amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
/s/Eugene C. Yehle
------------------
Date: March 7, 1996
-------------------
-14-
<PAGE>
THE WOODWARD FUNDS
Power of Attorney
Will M. Caldwell, whose signature appears below, hereby
constitutes and appoints Earl I. Heenan Jr. and W. Bruce McConnel, III, and
either of them, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, or either of
them, may deem necessary or advisable or which may be required to enable the
Trust to comply with the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended ("Acts"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all amendments
(including post-effective amendments) to the Trust's Registration Statements
pursuant to said Acts on Form N-1A or Form N-14, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a trustee and/or officer
of the Trust any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue hereof.
/s/Will M. Caldwell
-------------------
Date: February 29, 1996
-------------------
-15-
<PAGE>
THE WOODWARD FUNDS
Power of Attorney
Julius L. Pallone, whose signature appears below, hereby
constitutes and appoints Earl I. Heenan Jr. and W. Bruce McConnel, III, and
either of them, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, or either of
them, may deem necessary or advisable or which may be required to enable the
Trust to comply with the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended ("Acts"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all amendments
(including post-effective amendments) to the Trust's Registration Statements
pursuant to said Acts on Form N-1A or Form N-14, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a trustee and/or officer
of the Trust any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue hereof.
/s/Julius L. Pallone
--------------------
Date: February 28, 1996
-------------------
-16-
<PAGE>
THE WOODWARD FUNDS
Power of Attorney
Nicholas J. De Grazia, whose signature appears below, hereby
constitutes and appoints Earl I. Heenan Jr. and W. Bruce McConnel, III, and
either of them, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, or either of
them, may deem necessary or advisable or which may be required to enable the
Trust to comply with the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended ("Acts"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all amendments
(including post-effective amendments) to the Trust's Registration Statements
pursuant to said Acts on Form N-1A or Form N-14, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a trustee and/or officer
of the Trust any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue hereof.
/s/Nicholas J. De Grazia
------------------------
Date: February 20, 1996
-------------------
-17-
<PAGE>
THE WOODWARD FUNDS
Power of Attorney
Donald G. Sutherland, whose signature appears below, hereby
constitutes and appoints Earl I. Heenan Jr. and W. Bruce McConnel, III, and
either of them, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, or either of
them, may deem necessary or advisable or which may be required to enable the
Trust to comply with the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended ("Acts"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all amendments
(including post-effective amendments) to the Trust's Registration Statements
pursuant to said Acts on Form N-1A or Form N-14, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a trustee and/or officer
of the Trust any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue hereof.
/s/Donald G. Sutherland
-----------------------
Date: February 28, 1996
-------------------
-18-
<PAGE>
THE WOODWARD FUNDS
Power of Attorney
Donald L. Tuttle, whose signature appears below, hereby
constitutes and appoints Earl I. Heenan Jr. and W. Bruce McConnel, III, and
either of them, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, or either of
them, may deem necessary or advisable or which may be required to enable the
Trust to comply with the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended ("Acts"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all amendments
(including post-effective amendments) to the Trust's Registration Statements
pursuant to said Acts on Form N-1A or Form N-14, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a trustee and/or officer
of the Trust any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, or either of them, shall do or cause to be done by
virtue hereof.
/s/Donald L. Tuttle
-------------------
Date: February 28, 1996
-------------------
-19-
<PAGE>
THE WOODWARD FUNDS
Power of Attorney
John P. Gould, whose signature appears below, hereby constitutes
and appoints Earl I. Heenan Jr. and W. Bruce McConnel, III, and either of
them, his true and lawful attorneys and agents, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable the Trust to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended ("Acts"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of any and all amendments (including post-effective
amendments) to the Trust's Registration Statements pursuant to said Acts on
Form N-1A or Form N-14, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a trustee and/or officer of the Trust any and
all such amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
/s/John P. Gould
----------------
Date: February 28, 1996
-------------------
-20-
<PAGE>
THE WOODWARD FUNDS
Power of Attorney
Marilyn McCoy, whose signature appears below, hereby constitutes
and appoints Earl I. Heenan Jr. and W. Bruce McConnel, III, and either of
them, her true and lawful attorneys and agents, with power of substitution or
resubstitution, to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, or either of them, may deem
necessary or advisable or which may be required to enable the Trust to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended ("Acts"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of any and all amendments (including post-effective
amendments) to the Trust's Registration Statements pursuant to said Acts on
Form N-1A or Form N-14, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign in the name and
on behalf of the undersigned as a trustee and/or officer of the Trust any and
all such amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue hereof.
/s/Marilyn McCoy
----------------
Date: February 18, 1996
-------------------
-21-
<PAGE>
THE WOODWARD FUNDS
Power of Attorney
Earl I. Heenan, Jr., whose signature appears below, hereby
constitutes and appoints W. Bruce McConnel, III his true and lawful attorney
and agent, with power of substitution or resubstitution, to do any and all
acts and things and to execute any and all instruments which said attorney and
agent may deem necessary or advisable or which may be required to enable the
Trust to comply with the Investment Company Act of 1940, as amended, and the
Securities Act of 1933, as amended ("Acts"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of any and all amendments
(including post-effective amendments) to the Trust's Registration Statements
pursuant to said Acts on Form N-1A or Form N-14, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign in the name and on behalf of the undersigned as a trustee and/or officer
of the Trust any and all such amendments filed with the Securities and
Exchange Commission under said Acts, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorney and agent shall do or cause to be done by virtue hereof.
/s/Earl I. Heenan, Jr.
----------------------
Date: March 4, 1996
-----------------
-22-
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
- - ----------- ------- --------
(6) (a) Co-Advisory Agreement between The Woodward
Funds, NBD Bank and First Chicago Investment
Management Company.
(9) (i) Addendum No. 8 to the Amended and Restated
Custodian Agreement between The Woodward
Funds and NBD Bank relating to the Woodward
Cash Management Fund, Treasury Prime Cash
Management Fund and U.S. Government Securities
Cash Management Fund.
(12) Opinion of Drinker Biddle & Reath as to tax
matters and consequences (including consent
of such firm).
(13) (b) Form of Transfer Agency Agreement between The
Woodward Funds and First Data Investor
Services Group, Inc.
(14) (a) Consent of Ernst & Young LLP.
(14) (b) Consent of Arthur Andersen LLP.
(14) (c) Consent of Drinker Biddle & Reath.
(17) (c) Declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 of
the Registrant.
(17) (d) Forms of Proxy.
(17) (e) Prospectus dated April 15, 1996 for Class A
Shares of The Woodward Growth/Value,
Opportunity, Intrinsic Value, Capital Growth,
Balanced and International Equity Funds.
(17) (f) Prospectus dated April 15, 1996 for Class I
Shares of The Woodward Growth/Value,
Opportunity, Intrinsic Value, Capital Growth,
Balanced and International Equity Funds.
(17) (g) Statement of Additional Information dated
April 15, 1996 for Class A and Class I Shares
of The Woodward Growth/Value, Opportunity,
Intrinsic Value, Capital Growth, Balanced
and International Equity Funds.
(17) (h) Prospectus dated April 11, 1996 for the
Prairie Managed Assets Income Fund, Managed
Assets Fund, Equity Income Fund, Growth Fund,
Special Opportunities Fund, International
Equity Fund, Intermediate Bond Fund, Bond
Fund, International Bond Fund, Intermediate
Municipal Bond Fund, Municipal Bond Fund,
U.S. Government Money market Fund, Money
<PAGE>
Market Fund and Municipal Money Market Fund,
dated December 31, 1995.
(17) (i) Statement of Additional Information dated
April 11, 1996 for Class A, Class B and Class
I Shares of the Prairie Managed Assets Income
Fund, Managed Assets Fund, Equity Income
Fund, Growth Fund, Special Opportunities
Fund, International Equity Fund, Intermediate
Bond Fund, Bond Fund, International Bond
Fund, Intermediate Municipal Bond Fund,
Municipal Bond Fund, U.S. Government Money
Market Fund, Money Market Fund and Municipal
Money Market Fund, dated December 31, 1995.
(17) (j) Annual Report to Shareholders for The
Woodward International Equity Fund.
(17) (k) Annual Report to Shareholders for The Prairie
Managed Assets Income Fund, Managed Assets
Fund, Equity Income Fund, Growth Fund,
Special Opportunities Fund, International
Equity Fund, Intermediate Bond Fund, Bond
Fund, International Bond Fund, Intermediate
Municipal Bond Fund, Municipal Bond Fund,
U.S. Government Money Market Fund, Money
Market Fund and Municipal Money Market Fund
dated December 31, 1995.
Exhibit (6)(a)
CO-ADVISORY AGREEMENT
This Agreement, dated as of the ___ day of ______, 1996, is entered
into by and among NBD Bank ("NBD"), First Chicago Investment Management
Company ("FCIMCO") and The Woodward Funds (the "Trust"), a Massachusetts
business trust registered as an investment company under the Investment
Company Act of 1940 (the
"1940 Act");
WHEREAS, the Trust desires to appoint NBD and FCIMCO to act as
co-advisers to the Trust's investment portfolios listed on Schedule 1 attached
hereto (each a "Fund" and collectively the "Funds").
WHEREAS, NBD and FCIMCO (each an "Adviser" and collectively the
"Advisers") desire to perform investment advisory services on behalf of the
Trust's Funds;
NOW, THEREFORE, the parties hereto intending to be legally bound,
hereby agree as follows:
1. Appointment. (a) The Trust hereby appoints the Advisers to act as
investment co-advisers for each of the Funds of the Trust for the period and
on the terms set forth in this Agreement. The Advisers accept such appointment
and agree to render the services herein set forth, for the compensation herein
provided. The Advisers may, in their discretion, provide such services through
their own employees or the employees of one or more affiliated companies that
are qualified to act as investment adviser to the Trust under applicable law
and are under the common control of First Chicago NBD Corporation provided (i)
that all persons, when providing services hereunder, are functioning as part
of an organized group of persons, and (ii) that such organized group of
persons is managed at all times by persons who are authorized officers of one
or both of the Advisers.
(b) In the event that the Trust establishes one or more
investment portfolios other than the Funds with respect to which it desires to
retain the Advisers to act as investment co-advisers hereunder, the Trust
shall notify the Advisers in writing. If the Advisers are willing to render
such services they shall notify the Trust in writing whereupon, subject to
such shareholder approval as may be required pursuant to Paragraph 8 hereof,
such portfolio shall become a Fund hereunder and the compensation payable by
such new Fund to the Advisers will be as agreed in writing at the time.
2. Management. Subject to the supervision of the Board of Trustees of
the Trust (the "Board"), the Advisers will provide
<PAGE>
a continuous investment program for each of the Funds, including investment
research and management with respect to all securities, investments, cash and
cash equivalents in each Fund. The Advisers will determine from time to time
what securities and other investments will be purchased, retained or sold by
the Trust for each of its Funds. The Advisers will provide the services
rendered by them hereunder in accordance with the investment objective and
policies of each of the Funds as stated in their respective prospectuses
("Prospectuses" or a "Prospectus"), statements of additional information
("SAIs") and all amendments and supplements thereto, Bylaws, Amended and
Restated Declaration of Trust and resolutions adopted from time to time by the
Trust's Board. The Advisers further agree that they:
(a) will conform with all applicable Rules and Regulations
(hereinafter called the "Rules") of the Securities and
Exchange Commission ("SEC"), and will in addition
conduct their activities under this Agreement in
accordance with other applicable laws;
(b) will place all orders for the purchase and sale of
portfolio securities for the account of each Fund
with brokers or dealers selected by the Advisers.
In executing portfolio transactions and selecting
brokers or dealers, the Advisers will use their
best efforts to seek on behalf of the Trust and
each Fund thereof the best overall terms
available. In assessing the best overall terms
available for any transaction, the Advisers shall
consider all factors they deem relevant, including
the breadth of the market in the security, the
price of the security, the financial condition and
execution capability of the broker or dealer, and
the reasonableness of the commission, if any, both
for the specific transaction and on a continuing
basis. In evaluating the best overall terms
available, and in selecting the broker or dealer
to execute a particular transaction, the Advisers
may also consider the brokerage and research
services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934)
provided to any Fund and/or other accounts over
which the Advisers or an affiliate of the Advisers
exercises investment discretion. The Advisers are
authorized, subject to the prior approval of such
policy by the Trust's Board, to pay to a broker or
dealer who provides such brokerage and research
services a commission for executing a portfolio
transaction for any Fund which is in excess of the
amount of commission another broker or dealer
-2-
<PAGE>
would have charged for effecting that transaction if,
but only if, such is consistent with applicable law and
the Advisers determine in good faith that such
commission was reasonable in relation to the value of
the brokerage and research services provided by such
broker or dealer -- viewed in terms of that particular
transaction or in terms of the overall responsibilities
of the Advisers to the particular Fund and to the Trust.
In no instance will portfolio securities be purchased
from or sold to the Advisers or the Trust's principal
underwriter for the Funds or an affiliated person of
either, acting as principal or as broker, except as
permitted by law. In executing portfolio transactions
for any Fund, the Advisers, to the extent permitted by
applicable laws and regulations, may but shall not be
obligated to, aggregate the securities to be sold or
purchased with those of other Funds and their other
clients where such aggregation is not inconsistent with
applicable law and the policies set forth in the Funds'
registration statement. In such event, the Advisers will
allocate the securities so purchased or sold, and the
expenses incurred in the transaction, in the manner they
consider to be the most equitable and consistent with
their fiduciary obligations to the Funds and such other
clients;
(c) will maintain a policy and practice of conducting
their investment advisory operations independently
of their commercial banking operations. When the
Advisers make investment recommendations for a
Fund, their investment advisory personnel will not
inquire or take into consideration whether the
issuer of securities proposed for purchase or sale
for the Fund's account are customers of their
commercial departments. In dealing with
commercial customers, the Advisers' commercial
departments will not inquire or take into
consideration whether securities or those
customers are held by the Funds;
(d) will maintain all books and records with respect to the
securities transactions of the Funds; and furnish the
Trust's Board such periodic and special reports as the
Board may request;
(e) will treat confidentially and as proprietary
information of the Trust all records and other
-3-
<PAGE>
information relative to the Trust and prior or present
shareholders of the Funds or those persons or entities
who respond to inquiries of the Trust's principal
underwriter concerning investment in the Funds and will
not use such records and information for any purpose
other than performance of their responsibilities and
duties hereunder, except after prior notification to and
approval in writing by the Trust, which approval shall
not be unreasonably withheld and may not be withheld
where the Advisers may be exposed to civil or criminal
contempt proceedings for failure to comply, when
requested to divulge such information by duly
constituted authorities, or when so requested by the
Trust. Nothing contained herein or in any other
agreement executed with the Trust, however, shall
prohibit NBD, FCIMCO and any of their affiliates from
advertising to or soliciting the public generally with
respect to other products or services, including, but
not limited to, any advertising or marketing via radio,
television, newspapers, magazines or direct mail
solicitation, regardless of whether such advertisement
or solicitation may coincidentally include prior or
present Fund shareholders or those persons or entities
who have responded to inquiries of the Trust's principal
underwriter.
3. Services Not Exclusive. The services rendered by the Advisers
hereunder are not to be deemed exclusive, and the Advisers shall be free to
render similar services to others so long as their services under this
Agreement are not impaired thereby.
4. Expenses. During the term of this Agreement, the Advisers will pay
all expenses incurred by them in connection with their activities under this
Agreement other than the cost of securities purchased for the Funds (including
brokerage commissions, if any).
In addition, if the expenses borne by any Fund in any fiscal year
exceed the applicable expense limitations imposed by the securities
regulations of any state in which the shares are registered or qualified for
sale to the public, the Advisers jointly and severally agree to reimburse such
Fund for a portion of any excess expense in an amount equal to the portion
that the advisory fees otherwise payable by the Fund to the Advisers bear to
the total amount of investment advisory and administration fees otherwise
payable by the Fund. The expense reimbursement obligation of the Advisers is
limited to the amount of their fees hereunder for such fiscal year; provided,
however, that notwithstanding the foregoing, the Advisers shall reimburse such
-4-
<PAGE>
Fund for a portion of any such excess expenses in an amount equal to the
proportion that the fees otherwise payable to the Advisers bear to the total
investment advisory and administration fees otherwise payable by the Fund
regardless of the amount of such fees payable to the Advisers during such
fiscal year to the extent that the securities regulations of any state in
which the Trust's shares are registered or qualified for sale so require. Such
expense reimbursement, if any, will be estimated, reconciled and paid on a
monthly basis.
5. Compensation. For the services provided and the expense assumed
pursuant to this Agreement, the Trust will pay the Advisers and the Advisers
will accept as full compensation therefor the fees set forth on Schedule 2
hereof.
6. Sub-Adviser. It is understood that, subject to the prior approval
of the Board of the Trust, the Advisers may employ a sub-adviser(s) to assist
them in the performance of this Agreement, and it is agreed that the Advisers
shall be as fully responsible to the Trust for the acts and omissions of the
sub-adviser(s) as they are for their own acts and omissions. Any compensation
to be paid to such sub-adviser will be paid by the Advisers and the activities
of such subadviser will be subject to the provisions of this Agreement. The
Advisers will use their best effort to cause the sub-adviser(s) to comply with
all of the Advisers' policies, including without limitation, their codes of
ethics and their policies relating to personal trading, brokerage and
securities allocation, soft and hard dollars and compliance.
7. Limitation of Liability of the Advisers. The Advisers shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Trust in connection with the matters to which this Agreement relates,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Advisers in the
performance of their duties or from reckless disregard by their obligations
and duties under this Agreement. The Advisers agree that their liability,
including the liability of any sub-adviser, under this Agreement as set forth
herein, shall be joint and several. Any person, even though also an officer,
Board member, partner, director, employee or agent of an Adviser, who may be
or become an officer, Board member, partner, employee or agent of the Trust,
shall be deemed, when rendering services to the Trust or acting on any
business of the Trust (other than services or business in connection with the
Advisers' duties as co-advisers hereunder) to be rendering such services to or
acting solely for the Trust and not as an officer, Board member, partner,
director, employee or agent or one under the control or direction of the
Advisers even though paid by either of them.
-5-
<PAGE>
8. Duration and Termination. Subject to shareholder approval of the
Agreement and Plan of Reorganization ("Reorganization Plan") by and among the
Trust, Prairie Funds, Prairie Intermediate Bond Fund and Prairie Municipal
Bond Fund, Inc. dated May 21, 1996, this Agreement shall become effective as
to each Fund upon the first reorganization involving the Trust and one or more
of the Prairie funds as described in the Reorganization Agreement. Unless
sooner terminated as provided herein, shall continue with respect to such Fund
until _____, 199_. Thereafter, if not terminated, this Agreement shall
continue with respect to a Fund for successive annual periods, provided such
continuance is specifically approved at least annually (a) by the vote of a
majority of those members of the Board of the Trust who are not parties to
this Agreement or "interested persons" of any such party, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the
Board of the Trust or by vote of a majority of the outstanding voting
securities of such Fund; provided, however, that this Agreement may be
terminated with respect to a Fund, without the payment of any penalty, by the
Board of the Trust or by vote of a majority of the outstanding voting
securities of such Fund on sixty (60) days' written notice, or by the
Advisers, on ninety (90) days' written notice to the Trust. This Agreement
will immediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meaning as such terms
have in the 1940 Act.)
9. Amendment of this Agreement. No provisions in this Agreement may be
changed, discharged or terminated orally, but only by an instrument in writing
signed by the party or parties against which enforcement of the change,
discharge or termination is sought, and no amendment to this Agreement
affecting a Fund shall be effective until approved by vote of the holders of a
majority of the outstanding voting securities of such Fund.
10. Names. The names "The Woodward Funds" and "Trustees of The
Woodward Funds" refer, respectively, to the Trust created and the trustees
("Trustees"), as trustees but not individually or personally, acting from time
to time under a Declaration of Trust dated April 21, 1987, as amended on May
1, 1992, which is hereby referred to and a copy of which is on file at the
office of the Secretary of State of the Commonwealth of Massachusetts and at
the principal office of the Trust. The obligations of the Fund entered into in
the name or on behalf thereof by any of the Trustees, representatives or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, shareholders or representatives of the Trust
personally, but bind only the Trust property, and all persons dealing with any
series of shares in the Trust must look solely to the Trust property belonging
to such series for the enforcement of any claims against the Trust.
-6-
<PAGE>
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall be
governed by Michigan law.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
THE WOODWARD FUNDS
Attest:
_______________________ By: ______________________
NBD BANK
Attest:
_______________________ By: ______________________
(Corporate Seal)
FIRST CHICAGO INVESTMENT
MANAGEMENT COMPANY
Attest:
_______________________ By: _______________________
(Corporate Seal)
-7-
<PAGE>
SCHEDULE 1
MONEY MARKET FUND
TREASURY MONEY MARKET FUND
MUNICIPAL MONEY MARKET FUND
MICHIGAN MUNICIPAL MONEY MARKET FUND
CASH MANAGEMENT FUND
U.S. GOVERNMENT SECURITIES CASH MANAGEMENT FUND
TREASURY PRIME CASH MANAGEMENT FUND
GROWTH FUND
INTERNATIONAL EQUITY FUND
EQUITY INDEX FUND
GROWTH AND VALUE FUND
INTRINSIC VALUE FUND
MID CAP OPPORTUNITY FUND
EQUITY INCOME FUND
SMALL CAP OPPORTUNITY FUND
BOND FUND
SHORT BOND FUND
MICHIGAN MUNICIPAL BOND FUND
INTERMEDIATE MUNICIPAL BOND FUND
MUNICIPAL BOND FUND
INCOME FUND
INTERMEDIATE BOND FUND
INTERNATIONAL BOND FUND
MANAGED ASSETS BALANCED FUND
MANAGED ASSETS CONSERVATIVE FUND
MANAGED ASSETS GROWTH FUND
INTERNATIONAL MAJOR MARKETS FUND
-8-
<PAGE>
SCHEDULE 2
As compensation for their services hereunder, the Trust will pay an
advisory fee, computed daily and payable monthly, at the following annual
rates for the respective Funds:
=====================================================================
Fund Fee Rate
- - ---------------------------------------------------------------------
Money Market Fund .30% of the first $1.0 billion,
Treasury Money Market Fund .275% of the next $1 billion
Michigan Municipal Money and .25% of each such
Market Fund Fund's average daily net
Municipal Money Market Fund assets in excess of $2 billion
- - ---------------------------------------------------------------------
International Equity Fund .80% of the average net assets
International Major Markets of the Fund
Fund
- - ---------------------------------------------------------------------
Managed Assets Balanced Fund .65% of the average net assets
Managed Assets Conservative of the Fund
Fund
Managed Assets Growth Fund
- - ---------------------------------------------------------------------
Municipal Bond Fund .40% of the average net assets
Income Fund of the respective Fund
Intermediate Municipal Bond
Fund
Intermediate Bond Fund
Michigan Municipal Bond
Bond Fund
- - ---------------------------------------------------------------------
Short Bond Fund .35% of the average net assets
of the respective Fund
- - ---------------------------------------------------------------------
Cash Management Fund .20% of the average net assets
U.S. Government for each Fund
Cash Management Fund
Treasury Prime Cash
Management Fund
- - ---------------------------------------------------------------------
Equity Index Fund .10% of the average net assets
of the Fund
- - ---------------------------------------------------------------------
International Bond Fund .70% of the average net assets
Small Cap Opportunity Fund of the Fund
- - ---------------------------------------------------------------------
Equity Income Fund .50% of the average net assets
of the respective Fund
- - ---------------------------------------------------------------------
Growth Fund .60% of the average net assets
Mid Cap Opportunity Fund of the respective Fund
Growth and Value Fund
Intrinsic Value Fund
=====================================================================
-9-
<PAGE>
Net asset value shall be computed in accordance with the Funds'
Prospectuses and resolutions of the Trust's Board of Trustees. The fee for the
period from the day of the month this Agreement is entered into until the end
of that month shall be pro-rated according to the proportion which such period
bears to the full monthly period. Upon any termination of this Agreement
before the end of any month, the fee for such part of a month shall be
pro-rated according to the proportion which such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. Such fee as is attributable to each Fund shall be a separate charge
to such Fund and shall be the several (and not joint or joint and several)
obligation of each such Fund.
In addition, the Advisers will receive as compensation under
this Agreement 4/10ths of the gross income earned by each Fund on each loan of
its securities (including capital gains and loss, if any).
-10-
Exhibit 9(i)
ADDENDUM NO. 8 TO
AMENDED AND RESTATED
CUSTODIAN AGREEMENT
This Addendum, dated as of the ____ day of ___________, 1996,
is entered into between THE WOODWARD FUNDS (the "Trust"), a Massachusetts
business trust, and NBD BANK ("NBD" or the "Custodian"), a state-chartered
bank incorporated under the laws of Michigan.
WHEREAS, the Trust and NBD have entered into an Amended and
Restated Custodian Agreement dated May 16, 1989 and Addenda Nos. 1, 2, 3, 4,
5, 6 and 7 (the "Custodian Agreement"), pursuant to which the Trust appointed
NBD to act as Custodian to the Trust's Woodward Government Fund, Woodward
Money Market Fund, Woodward Tax-Exempt Money Market Fund, Woodward
Growth/Value Fund, Woodward Opportunity Fund, Woodward Intrinsic Value Fund,
Woodward Intermediate Bond Fund, Woodward Bond Fund, Woodward Michigan
Tax-Exempt Money Market Fund, Woodward Equity Index Fund, Woodward Treasury
Money Market Fund, Woodward Municipal Bond Fund, Woodward Michigan Municipal
Bond Fund, Woodward Balanced Fund, Woodward Capital Growth Fund, Woodward
Short Bond Fund, Woodward U.S. Government Income Fund and Woodward
International Equity Fund;
WHEREAS, Article XIV, Paragraph 9 of the Custodian Agreement
provides that in the event the Trust establishes one or more additional
portfolios with respect to which it desires to retain NBD to act as the
custodian under the Custodian Agreement, the Trust shall so notify NBD in
writing and if NBD is willing to render such services it shall notify the
Trust in writing, and the compensation to be paid to NBD shall be that which
is agreed to in writing by the Trust and NBD pursuant to Article XII,
Paragraph 7 of the Custodian Agreement;
WHEREAS, pursuant to Article XIV, Paragraph 9 of the Custodian
Agreement, the Trust has notified NBD that it intends to establish the
Woodward Cash Management Fund, Woodward U.S. Government Securities Cash
Management Fund, Woodward Treasury Prime Cash Management Fund, Woodward Equity
Income Fund, Woodward Small-Cap Opportunity Fund, Woodward Intermediate
Municipal Bond Fund, Woodward Income Fund, Woodward International Bond Fund,
Woodward Managed Assets Conservative Fund, Woodward Managed Assets Growth Fund
and Woodward International Major Markets Fund and that it desires to retain
NBD to act as the custodian therefor, and NBD has notified the Trust that it
is willing to serve as custodian for such Funds.
<PAGE>
NOW THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Appointment. The Trust hereby appoints NBD to act as
Custodian to the Trust for the Woodward Cash Management Fund, Woodward U.S.
Government Securities Cash Management Fund, Woodward Treasury Prime Cash
Management Fund, Woodward Equity Income Fund, Woodward Small-Cap Opportunity
Fund, Woodward Intermediate Municipal Bond Fund, Woodward Income Fund,
Woodward International Bond Fund, Woodward Managed Assets Conservative Fund,
Woodward Managed Assets Growth Fund and Woodward International Major Markets
Fund for the period and on the terms set forth in the Custodian Agreement. NBD
hereby accepts such appointment and agrees to render the services set forth in
the Custodian Agreement, for the compensation provided in Appendix A hereto.
2. Capitalized Terms. From and after the date hereof, the terms
"Fund" and "Series" as used in the Custodian Agreement shall be deemed to
include the Woodward Cash Management Fund, Woodward U.S. Government Securities
Cash Management Fund, Woodward Treasury Prime Cash Management Fund, Woodward
Equity Income Fund, Woodward Small-Cap Opportunity Fund, Woodward Intermediate
Municipal Bond Fund, Woodward Income Fund, Woodward International Bond Fund,
Woodward Managed Assets Conservative Fund, Woodward Managed Assets Growth Fund
and Woodward International Major Markets Fund. Capitalized terms used herein
and not otherwise defined shall have the meanings ascribed to them in the
Custodian Agreement.
3. Miscellaneous. Except to the extent supplemented hereby, the
Custodian Agreement shall remain unchanged and in full force and effect and is
hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum
as of the date and year first above written.
THE WOODWARD FUNDS
By: _______________________
Earl I. Heenan, Jr.
President
NBD BANK
By: ________________________
Its:________________________
-2-
<PAGE>
APPENDIX A
For the services provided pursuant to the Custodian Agreement
with respect to the Woodward Cash Management Fund, Woodward U.S. Government
Securities Cash Management Fund, Woodward Treasury Prime Cash Management Fund,
Woodward Equity Income Fund, Woodward Small-Cap Opportunity Fund, Woodward
Intermediate Municipal Bond Fund, Woodward Income Fund, Woodward International
Bond Fund, Woodward Managed Assets Conservative Fund, Woodward Managed Assets
Growth Fund and Woodward International Major Markets Fund, the Custodian will
accept the following fees:
(a) With respect to the Woodward Small-Cap Opportunity
Fund, Woodward Intermediate Municipal Bond Fund, Woodward Equity Income Fund,
Woodward Managed Assets Conservative Fund, Woodward Managed Assets Growth Fund
and Woodward Income Fund --
Basic Annual Account Charge $1,000
Annual Security Fee
First $20,000,000 = .0003
Next $20,000,000 = .00025
Next $20,000,000 = .0002
Next $40,000,000 = .00015
Next $200,000,000 = .000125
Balance over $300,000,000 = .0001
Asset Fee $1.541 per security held at end of month.
Security Transactions:
$13.00 for each Pass-Through Certificate Payment
$35.00 for Option Transactions requiring Escrow Receipts
$20.00 for all other security transactions
Accounting Statements:
Cash Statement - $50 per statement
Inventories - $50 per inventory
(b) With respect to the Woodward International Bond Fund
and Woodward International Major Markets Fund --
Basic Annual Account Charge $1,000
Annual Security Fee
First $100,000,000 = .00125
<PAGE>
Next $100,000,000 = .0010
Next $100,000,000 = .0008
Next $100,000,000 = .0007
Balance over $400,000,000 = .0006
Asset Fee $1.541 per security held at end of month.
Foreign Transaction Charges
$150 per transaction - Argentina, Brazil, Chile
$100 per transaction - Taiwan, Thailand
$ 75 per transaction - Denmark, Finland, Italy, Malaysia,
Mexico, Norway, Singapore, South
Korea, Spain, Sweden, Switzerland
$ 65 per transaction - Australia, Austria, Belgium,
Hong Kong, New Zealand
$ 40 per transaction - France, Germany, Ireland, Netherlands
Security Transactions in the U.S.:
$13.00 for each Pass-Through Certificate Payment
$35.00 for Option Transactions requiring Escrow Receipts
$20.00 for all other security transactions
Accounting Statements:
Cash Statement - $50 per statement
Inventories - $50 per inventory
(c) With respect to the Woodward Cash Management Fund,
Woodward U.S. Government Securities Cash Management Fund and Woodward Treasury
Prime Cash Management Fund --
Unit Price
----------
Clearing and settlement transaction $ 11.00
Accounting entry and vault/safekeeping
transactions $ 12.00
Activity Processing
- - -------------------
A. Master Control Fund Accounting
------------------------------
Annual maintenance $ 6.25
Debit activity $ .15
Credit activity $ .35
-2-
<PAGE>
B. Master Settlement Accounting
----------------------------
Account maintenance $ 9.25
Debit activity $ .15
Credit activity $ .35
Check supplies $ 6.25
1. Out-of-Pocket Expenses. In addition to the service fees
above, the Trust will reimburse the Custodian for its out-of-pocket expenses
including, but not limited to, postage, telephone, telex, facsimile, Federal
Express and Federal Reserve wire fees, incurred on behalf of the Trust.
-3-
Exhibit 12
May 24, 1996
The Woodward Funds
900 Tower Drive
Troy, Michigan 87007-7058
Prairie Funds
Three First National Plaza
Chicago, Illinois 60670
Re: Agreement and Plan of Reorganization by and
between The Woodward Funds and Prairie Funds
--------------------------------------------
Dear Sirs and Mesdames:
We have been asked to give our opinion, in accordance with the
above Agreement and Plan of Reorganization concerning the Woodward
International Equity Fund and the Prairie International Equity Fund (the
"Agreement"), as to certain Federal income tax consequences of the
transactions contemplated
therein.
Background
The Woodward Funds ("Woodward") is a Massachusetts business
trust consisting of multiple investment portfolios, including the Woodward
International Equity Fund (the "Acquiring Fund"). Prairie Funds ("Prairie") is
a Massachusetts business trust consisting of multiple investment portfolios,
including the Prairie International Equity Fund (the "Acquired Fund").
Woodward and Prairie are both open-end management investment companies
registered with the Securities and Exchange Commission (the "SEC") under the
Investment Company Act of 1940, as amended (the "1940 Act").
At the Effective Time of the Reorganization (as defined in the
Agreement), it is contemplated that the Acquired Fund will transfer all of its
assets and liabilities to the Acquiring Fund in exchange for shares of the
Acquiring Fund. Prairie will then distribute the shares of the Acquiring Fund
to the shareholders of the Acquired Fund in cancellation of all outstanding
shares of the Acquired Fund, and the existence of the Acquired Fund will be
terminated. All of the above steps constitute the
<PAGE>
The Woodward Funds
Prairie Institutional Funds
May 22, 1996
Page 2
"Reorganization." After the Reorganization, the Acquiring Fund will continue
the investment operations of the Acquired Fund.
Assumptions
For purposes of this opinion, we have made certain assumptions.
Please advise us if you are aware of any facts inconsistent with any of these
assumptions:
First, the Acquired Fund and the Acquiring Fund each qualified
as a "regulated investment company" under Part I of Subchapter M of Subtitle
A, Chapter 1, of the Internal Revenue Code of 1986, as amended (the "Code"),
for the most recently ended fiscal year and will so qualify for the current
fiscal year.
Second, the Acquired Fund will tender for acquisition by the
Acquiring Fund assets consisting of at least 90% of the fair market value of
its net assets and at least 70% of the fair market value of its gross assets
immediately prior to the Reorganization. For purposes of this assumption, all
of the following shall be considered as assets of the Acquired Fund held
immediately prior to the Reorganization: (a) amounts used by the Acquired Fund
to pay its expenses in connection with the transactions contemplated hereby
and (b) all amounts used to make redemptions of or distributions on the
Acquired Fund's shares (except for redemptions in the ordinary course of its
business, as required by section 22(e) of the 1940 Act pursuant to a demand
for redemption by a shareholder of the Acquired Fund, and distributions of net
investment income and net capital gains, other than net capital gains
resulting from sales of assets for the purpose of satisfying investment
objectives of the Acquiring Fund, if any, that differ from the existing
investment objectives of the Acquired Fund).
Third, the Acquired Fund will distribute to its shareholders in
complete liquidation of the Acquired Fund the Acquiring Fund shares that it
will receive in the Reorganization as promptly as practicable and having made
such distributions will take all necessary steps to terminate its existence.
Fourth, prior to the Reorganization, the Acquired Fund will
continue its historic business within the meaning of Treasury Regulations
section 1.368-1(d) and will not dispose of
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The Woodward Funds
Prairie Institutional Funds
May 22, 1996
Page 3
more than fifty percent (50%) of the fair market value of its assets for the
purpose of satisfying investment objectives of the Acquiring Fund, if any,
that differ from its existing investment objectives.
Fifth, following the Reorganization, the Acquiring Fund will
continue the historic business of the Acquired Fund or will use a significant
portion of the Acquired Fund's historic business assets in a business.
Sixth, at the Effective Time of the Reorganization, the
adjusted income tax basis and the fair market value of the assets to be
transferred by the Acquired Fund to the Acquiring Fund will each equal or
exceed the sum of the liabilities to be assumed by the Acquiring Fund or to
which such transferred assets are subject.
Seventh, at the Effective Time of the Reorganization, there
will be no plan or intention by the shareholders of the Acquired Fund who own
five percent (5%) or more of the Acquired Fund's stock and, to the best of the
knowledge of the management of Prairie, no current plan or intention on the
part of the remaining shareholders of the Acquired Fund, to sell, exchange or
otherwise dispose of a number of shares of the Acquiring Fund's stock to be
received in the Reorganization that would reduce the Acquired Fund
shareholders' ownership of Acquiring Fund stock to a number of shares having a
value, as of the time of the Reorganization, of less than fifty percent (50%)
of the value of all of the formerly outstanding stock of the Acquired Fund
immediately prior to the Reorganization. For purposes of this assumption, (a)
shares of the Acquired Fund surrendered by dissenters will be treated as
outstanding Acquired Fund stock immediately prior to the Reorganization, and
(b) shares of the Acquired Fund and the Acquiring Fund held by Acquired Fund
shareholders and otherwise sold, redeemed or disposed of in anticipation of
the Reorganization, or subsequent to the Reorganization pursuant to a plan or
intention that existed at the time of the Reorganization, also will be taken
into account.
Eighth, at the Effective Time of the Reorganization, the
Acquiring Fund will have no plan or intention to reacquire any of its shares
issued in the Reorganization, except in the ordinary course of business.
<PAGE>
The Woodward Funds
Prairie Institutional Funds
May 22, 1996
Page 4
Ninth, at the Effective Time of the Reorganization, the
Acquiring Fund will have no plan or intention to sell or otherwise to dispose
of any of the assets of the Acquired Fund acquired in the Reorganization,
except for dispositions made in the ordinary course of business.
Tenth, there is and will be no intercorporate indebtedness
between the Acquiring Fund and the Acquired Fund that was issued, acquired or
will be settled at a discount.
Eleventh, the Acquiring Fund does not and will not own,
directly or indirectly, nor has it owned during the past five years, directly
or indirectly, any stock of the Acquired Fund.
Twelfth, the Acquired Fund is not and will not be under the
jurisdiction of a court in a case under Title 11 of the United States Code or
a receivership, foreclosure or similar proceeding in any Federal or State
court.
Thirteenth, the liabilities of the Acquired Fund that will be
assumed by the Acquiring Fund and the liabilities, if any, to which the
transferred assets will be subject were incurred by the Acquired Fund in the
ordinary course of its business.
Fourteenth, the Reorganization will be accomplished for the
purposes set forth in the Combined Proxy Statement/Prospectus (the "Proxy
Statement"), a draft of which is part of the Registration Statement (the
"Registration Statement") being filed
this day with the SEC.
Fifteenth, the Agreement substantially in the form included as
an exhibit in the Proxy Statement will be duly authorized by the parties and
approved by the shareholders of the Acquired Fund, and the appropriate
documents will be filed with the appropriate government agencies.
Conclusions
Based upon the Code, applicable Treasury Department regulations
in effect as of the date hereof, current published administrative positions of
the Internal Revenue Service contained in revenue rulings and procedures, and
judicial decisions, and upon the information, representations and
<PAGE>
The Woodward Funds
Prairie Institutional Funds
May 22, 1996
Page 5
assumptions contained herein and in the documents provided to us by you
(including the Proxy Statement and the Agreement), it is our opinion for
Federal income tax purposes that:
(i) the transfer by the Acquired Fund of all of its assets and
liabilities to the Acquiring Fund in exchange for shares of the Acquiring
Fund, and the distribution of said shares to the shareholders of the Acquired
Fund, as provided in the Agreement, will constitute a reorganization within
the meaning of section 368(a)(1)(C) or section 368(a)(1)(D) of the Code, and
the Acquiring Fund and the Acquired Fund each will be "a party to the
reorganization" within the meaning of section 368(b) of the Code;
(ii) in accordance with sections 361(a), 361(c)(1) and 357(a)
of the Code, no gain or loss will be recognized by the Acquired Fund as a
result of the Reorganization;
(iii) in accordance with section 1032(a) of the Code, no gain
or loss will be recognized by the Acquiring Fund as a result of the
Reorganization;
(iv) in accordance with section 354(a)(1) of the Code, no gain
or loss will be recognized by the shareholders of the Acquired Fund on the
distribution to them by the Acquired Fund of shares of the Acquiring Fund in
exchange for their shares of the Acquired Fund;
(v) in accordance with section 358(a)(1) of the Code, the
aggregate basis of the Acquiring Fund shares received by each shareholder of
the Acquired Fund will be the same as the aggregate basis of the shareholder's
Acquired Fund shares exchanged therefor in the Reorganization;
(vi) in accordance with section 362(b) of the Code, the basis
of the assets received by the Acquiring Fund in the Reorganization will be the
same as the basis of such assets in the hands of the Acquired Fund immediately
before the Reorganization;
(vii) in accordance with section 1223(1) of the Code, a
shareholder's holding period for Acquiring Fund shares will be determined by
including the period for which the shareholder held the shares of the Acquired
Fund exchanged therefor, provided that
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The Woodward Funds
Prairie Institutional Funds
May 22, 1996
Page 6
the shareholder held such shares of the Acquired Fund as a capital asset;
(viii) in accordance with section 1223(2) of the Code, the
holding period of the Acquiring Fund with respect to the assets acquired in
the Reorganization will include the period for which such assets were held by
the Acquired Fund; and
(ix) in accordance with section 381(a) of the Code, the
Acquiring Fund will succeed to the tax attributes of the Acquired Fund
described in section 381(c) of the Code.
We express no opinion relating to any Federal income tax matter
except on the basis of the documents and assumptions described above. In
issuing our opinion, we have relied solely upon existing provisions of the
Code, existing and proposed regulations thereunder, and current administrative
positions and judicial decisions. Such laws, regulations, administrative
positions and judicial decisions are subject to change at any time. Any such
change could affect the validity of the opinion set forth above.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the references to our firm under the
caption "Information Relating to the Proposed Reorganization -- Federal Income
Tax Consequences" in the Proxy Statement. This does not constitute a consent
under section 7 of the Securities Act of 1933, and in consenting to such
references to our firm we have not certified any part of the Registration
Statement and do not otherwise come within the categories of persons whose
consent is required under section 7 or under the rules and regulations of the
SEC issued thereunder.
Very truly yours,
DRINKER BIDDLE & REATH
SDDH:EMM:FRB
Exhibit (13)(b)
TRANSFER AGENCY AND SERVICES AGREEMENT
THIS AGREEMENT, dated as of this ____ day of __________, 1996 between
The Woodward Funds (the "Fund"), a Massachusetts business trust having its
principal place of business at ___________________________ and FIRST DATA
INVESTOR SERVICES GROUP, INC. ("FDISG"), a Massachusetts corporation with
principal offices at One Exchange Place, 53 State Street, Boston,
Massachusetts 02109.
WITNESSETH
WHEREAS, the Fund is authorized to issue Shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets;
WHEREAS, the Fund initially intends to offer shares in those
Portfolios identified in the attached Exhibit 1, each such Portfolio, together
with all other Portfolios subsequently established by the Fund shall be
subject to this Agreement in accordance with Article 14;
WHEREAS, the Fund on behalf of the Portfolios, desires to appoint
FDISG as its transfer agent, dividend disbursing agent and agent in connection
with certain other activities and FDISG desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the Fund and FDISG agree as follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
(a) "Articles of Incorporation" shall mean the Articles of
Incorporation, Declaration of Trust, or other similar or
organizational document as the case may be, of the Fund as the same
may be amended from time to time.
(b) "Authorized Person" shall be deemed to include (i) any
authorized officer of the Fund; or (ii) any person, whether or not
such person is an officer or employee of the Fund, duly authorized to
give Oral Instructions or Written Instructions on behalf of the Fund
as indicated in writing to FDISG from time to time.
<PAGE>
(c) "Board of Directors" shall mean the Board of Directors or
Board of Trustees of the Fund, as the case may be.
(d) "Commission" shall mean the Securities and Exchange
Commission.
(e) "Custodian" refers to any custodian or subcustodian of
securities and other property which the Fund may from time to time
deposit, or cause to be deposited or held under the name or account of
such a custodian pursuant to a Custodian Agreement.
(f) "1934 Act" shall mean the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder, all as amended
from time to time.
(g) "1940 Act" shall mean the Investment Company Act of 1940
and the rules and regulations promulgated thereunder, all as amended
from time to time.
(h) "Oral Instructions" shall mean instructions, other than
Written Instructions, actually received by FDISG from a person
reasonably believed by FDISG to be an Authorized Person;
(i) "Portfolio" shall mean each separate series of shares
offered by the Fund representing interest in a portfolio of securities
and other assets;
(j) "Prospectus" shall mean the most recently dated Fund
Prospectus and Statement of Additional Information, including any
supplements thereto if any, which has become effective under the
Securities Act of 1933 and the 1940 Act.
(k) "Shares" refers collectively to such shares of capital
stock or beneficial interest, as the case may be, or class thereof, of
each respective Portfolio of the Fund as may be issued from time to
time.
(l) "Shareholder" shall mean a record owner of Shares of each
respective Portfolio of the Fund.
(m) "Written Instructions" shall mean a written communication
signed by a person reasonably believed by FDISG to be an Authorized
Person and actually received by FDISG. Written Instructions shall
include manually executed originals and authorized electronic
transmissions, including telefacsimile of a manually executed original
or other process.
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<PAGE>
Article 2 Appointment of FDISG.
The Fund, on behalf of the Portfolios, hereby appoints and constitutes
FDISG as transfer agent and dividend disbursing agent for Shares of each
respective Portfolio of the Fund and as shareholder servicing agent for the
Fund and FDISG hereby accepts such appointments and agrees to perform the
duties hereinafter set forth.
Article 3 Duties of FDISG.
3.1 FDISG shall be responsible for:
(a) Administering and/or performing the customary services of a
transfer agent; acting as service agent in connection with dividend
and distribution functions; and for performing shareholder account and
administrative agent functions in connection with the issuance,
transfer and redemption or repurchase (including coordination with the
Custodian) of Shares of each Portfolio, as more fully described in the
written schedule of Duties of FDISG annexed hereto as Schedule A and
incorporated herein, and in accordance with the terms of the
Prospectus of the Fund on behalf of the applicable Portfolio,
applicable law and the procedures established from time to time
between FDISG and the Fund.
(b) Recording the issuance of Shares and maintaining pursuant
to Rule 17Ad-10(e) of the 1934 Act a record of the total number of
Shares of each Portfolio which are authorized, based upon data
provided to it by the Fund, and issued and outstanding. FDISG shall
provide the Fund on a regular basis with the total number of Shares of
each Portfolio which are authorized and issued and outstanding and
shall have no obligation, when recording the issuance of Shares, to
monitor the issuance of such Shares or to take cognizance of any laws
relating to the issue or sale of such Shares, which functions shall be
the sole responsibility of the Fund.
(c) Notwithstanding any of the foregoing provisions of this
Agreement, FDISG shall be under no duty or obligation to inquire into,
and shall not be liable for: (i) the legality of the issuance or sale
of any Shares or the sufficiency of the amount to be received
therefor; (ii) the legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor; (iii) the legality of the
declaration of any dividend by the Board of Directors, or the legality
of the issuance of any Shares in payment of any dividend; or (iv) the
legality of any recapitalization or readjustment of the Shares.
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<PAGE>
3.2 In addition, the Fund shall (i) identify to FDISG in writing
those transactions and assets to be treated as exempt from blue sky reporting
for each State and (ii) verify the establishment of transactions for each
State on the system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of FDISG for the Fund's blue sky
State registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Fund and the reporting of
such transactions to the Fund as provided above.
3.3 In addition to the duties set forth herein, FDISG shall perform
such other duties and functions, and shall be paid such amounts therefor, as
may from time to time be agreed upon in writing between the Fund and FDISG.
Article 4 Recordkeeping and Other Information.
4.1 FDISG shall create and maintain all records required of it
pursuant to its duties hereunder and as set forth in Schedule A in accordance
with all applicable laws, rules and regulations, including records required by
Section 31(a) of the 1940 Act. Where applicable, such records shall be
maintained by FDISG for the periods and in the places required by Rule 31a-2
under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, FDISG
agrees that all such records prepared or maintained by FDISG relating to the
services to be performed by FDISG hereunder are the property of the Fund and
will be preserved, maintained and made available in accordance with such
section, and will be surrendered promptly to the Fund on and in accordance
with the Fund's request.
4.3 In case of any requests or demands for the inspection of
Shareholder records of the Fund, FDISG will endeavor to notify the Fund of
such request and secure Written Instructions as to the handling of such
request. FDISG reserves the right, however, to exhibit the Shareholder records
to any person whenever it is advised by its counsel that it may be held liable
for the failure to comply with such request.
Article 5 Fund Instructions.
5.1 FDISG will have no liability when acting upon Written or Oral
Instructions believed to have been executed or orally communicated by an
Authorized Person and will not be held to have any notice of any change of
authority of any person until receipt of a Written Instruction thereof from
the Fund. FDISG will also have no liability when processing Share certificates
which it reasonably believes to bear the proper manual or facsimile
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<PAGE>
signatures of the officers of the Fund and the proper countersignature of
FDISG.
5.2 At any time, FDISG may request Written Instructions from the
Fund and may seek advice from legal counsel for the Fund, or its own legal
counsel, with respect to any matter arising in connection with this Agreement,
and it shall not be liable for any action taken or not taken or suffered by it
in good faith in accordance with such Written Instructions or in accordance
with the opinion of counsel for the Fund or for FDISG. Written Instructions
requested by FDISG will be provided by the Fund within a reasonable period of
time.
5.3 FDISG, its officers, agents or employees, shall accept Oral
Instructions or Written Instructions given to them by any person representing
or acting on behalf of the Fund only if said representative is an Authorized
Person. The Fund agrees that all Oral Instructions shall be followed within
one business day by confirming Written Instructions, and that the Fund's
failure to so confirm shall not impair in any respect FDISG's right to rely on
Oral Instructions.
Article 6 Compensation.
6.1 The Fund on behalf of each of the Portfolios will compensate
FDISG for the performance of its obligations hereunder in accordance with the
fees set forth in the written Fee Schedule annexed hereto as Schedule B and
incorporated herein.
6.2 In addition to those fees set forth in Section 6.1 above, the
Fund on behalf of each of the Portfolios agrees to pay, and will be billed
separately for, out-of-pocket expenses incurred by FDISG in the performance of
its duties hereunder. Out-of-pocket expenses shall include, but shall not be
limited to, items specified in the written schedule of out-of-pocket charges
annexed hereto as Schedule C and incorporated herein. Schedule C may be
modified by written agreement between the parties. Unspecified out-of-pocket
expenses shall be limited to those out-of-pocket expenses reasonably incurred
by FDISG in the performance of its obligations hereunder.
6.3 The Fund on behalf of each of the Portfolios agrees to pay all
fees and out-of-pocket expenses within fifteen (15) days following the receipt
of the respective invoice.
6.4 Any compensation agreed to hereunder may be adjusted from time
to time by attaching to Schedule B, a revised Fee Schedule executed and dated
by the parties hereto.
6.5 The Fund acknowledges that the fees that FDISG charges the Fund
under this Agreement reflect the allocation of risk between the parties,
including the disclaimer of warranties in
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<PAGE>
Section 9.3 and the limitations on liability and exclusion of remedies in
Section 11.2 and Article 12. Modifying the allocation of risk from what is
stated here would affect the fees that FDISG charges, and in consideration of
those fees, the Fund agrees to the stated allocation of risk.
Article 7 Documents.
In connection with the appointment of FDISG, the Fund shall, on or
before the date this Agreement goes into effect, but in any case with a
reasonable period of time for FDISG to prepare to perform its duties
hereunder, deliver or caused to be delivered to FDISG the documents set forth
in the written schedule of Fund Documents annexed hereto as Schedule D.
Article 8 Transfer Agent System.
8.1 FDISG shall retain title to and ownership of any and all data
bases, computer programs, screen formats, report formats, interactive design
techniques, derivative works, inventions, discoveries, patentable or
copyrightable matters, concepts, expertise, patents, copyrights, trade
secrets, and other related legal rights utilized by FDISG in connection with
the services provided by FDISG to the Fund herein (the "FDISG System").
8.2 FDISG hereby grants to the Fund a limited license to the FDISG
System for the sole and limited purpose of having FDISG provide the services
contemplated hereunder and nothing contained in this Agreement shall be
construed or interpreted otherwise and such license shall immediately
terminate with the termination of this Agreement.
Article 9 Representations and Warranties.
9.1 FDISG represents and warrants to the Fund that:
(a) it is a corporation duly organized, existing and
in good standing under the laws of the Commonwealth of
Massachusetts;
(b) it is empowered under applicable laws and by its
Articles of Incorporation and By-Laws to enter into and
perform this Agreement;
(c) all requisite corporate proceedings have been
taken to authorize it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory
agency as a transfer agent and such registration will remain in effect
for the duration of this Agreement; and
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<PAGE>
(e) it has and will continue to have access to the
necessary facilities, equipment and personnel to perform its duties
and obligations under this Agreement.
9.2 The Fund represents and warrants to FDISG that:
(a) it is duly organized, existing and in good
standing under the laws of the jurisdiction in which it is
organized;
(b) it is empowered under applicable laws and by its
Article of Incorporation and By-Laws to enter into this
Agreement;
(c) all corporate proceedings required by said Articles of
Incorporation, By-Laws and applicable laws have been taken to
authorize it to enter into this Agreement;
(d) a registration statement under the Securities Act of
1933, as amended, and the 1940 Act on behalf of each of the Portfolios
is currently effective and will remain effective, and all appropriate
state securities law filings have been made, and will continue to be
made, with respect to all Shares of the Fund being offered for sale;
and
(e) all outstanding Shares are validly issued, fully paid
and non-assessable and when Shares are hereafter issued in accordance
with the terms of the Fund's Articles of Incorporation and its
Prospectus with respect to each Portfolio, such Shares shall be
validly issued, fully paid and non-assessable.
9.3 THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY PROVIDED IN
THIS AGREEMENT, FDISG DISCLAIMS ALL OTHER REPRESENTATIONS OR WARRANTIES,
EXPRESS OR IMPLIED, MADE TO THE FUND OR ANY OTHER PERSON, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES REGARDING QUALITY, SUITABILITY, MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF ANY COURSE OF
DEALING, CUSTOM OR USAGE OF TRADE) OF ANY SERVICES OR ANY GOODS PROVIDED
INCIDENTAL TO SERVICES PROVIDED UNDER THIS AGREEMENT. FDISG DISCLAIMS ANY
WARRANTY OF TITLE OR NON-INFRINGEMENT EXCEPT AS OTHERWISE SET FORTH IN THIS
AGREEMENT.
Article 10 Indemnification.
10.1 FDISG shall not be responsible for and the Fund on behalf of
each Portfolio shall indemnify and hold FDISG harmless from and against any
and all claims, costs, expenses (including reasonable attorneys' fees),
losses, damages, charges, payments and liabilities of any sort or kind which
may be asserted against FDISG or for which FDISG may be held to be liable (a
"Claim") arising out of or attributable to any of the following:
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<PAGE>
(a) any actions of FDISG required to be taken pursuant to this
Agreement unless such Claim resulted from a negligent act or omission
to act or bad faith by FDISG in the performance of its duties
hereunder;
(b) FDISG's reasonable reliance on, or reasonable use of
information, data, records and documents (including but not limited to
magnetic tapes, computer printouts, hard copies and microfilm copies)
received by FDISG from the Fund, or any authorized third party acting
on behalf of the Fund, including but not limited to the prior transfer
agent for the Fund, in the performance of FDISG's duties and
obligations hereunder;
(c) the reliance on, or the implementation of, any Written or
Oral Instructions or any other instructions or requests of the Fund on
behalf of the applicable Portfolio;
(d) the offer or sales of shares in violation of any
requirement under the securities laws or regulations of any state that
such shares be registered in such state or in violation of any stop
order or other determination or ruling by any state with respect to
the offer or sale of such shares in such state; and
(e) the Fund's refusal or failure to comply with the terms of
this Agreement, or any Claim which arises out of the Fund's negligence
or misconduct or the breach of any representation or warranty of the
Fund made herein.
10.2 In any case in which the Fund may be asked to indemnify or hold
FDISG harmless, FDISG will notify the Fund promptly after identifying any
situation which it believes presents or appears likely to present a claim for
indemnification against the Fund although the failure to do so shall not
prevent recovery by FDISG and shall keep the Fund advised with respect to all
developments concerning such situation. The Fund shall have the option to
defend FDISG against any Claim which may be the subject of this
indemnification, and, in the event that the Fund so elects, such defense shall
be conducted by the Fund and satisfactory to FDISG, and thereupon the Fund
shall take over complete defense of the Claim and FDISG shall sustain no
further legal or other expenses in respect of such Claim. FDISG will not
confess any Claim or make any compromise in any case in which the Fund will be
asked to provide indemnification, except with the Fund's prior written
consent. The obligations of the parties hereto under this Article 10 shall
survive the termination of this Agreement.
10.3 Any claim for indemnification under this Agreement must be made
prior to the earlier of:
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<PAGE>
(a) one year after the Fund becomes aware of the event for
which indemnification is claimed; or
(b) one year after the earlier of the termination of this
Agreement or the expiration of the term of this Agreement.
10.4 Except for remedies that cannot be waived as a matter of law
(and injunctive or provisional relief), the provisions of this Article 10
shall be FDISG's sole and exclusive remedy for claims or other actions or
proceedings to which the Fund's indemnification obligations pursuant to this
Article 10 may apply.
Article 11 Standard of Care.
11.1 FDISG shall at all times act in good faith and agrees to use its
best efforts within commercially reasonable limits to ensure the accuracy of
all services performed under this Agreement, but assumes no responsibility for
loss or damage to the Fund unless said errors are caused by FDISG's own
negligence, bad faith or willful misconduct or that of its employees.
11.2 Notwithstanding any provision in this Agreement to the contrary,
FDISG's cumulative liability (to the fund) for all losses, claims, suits,
controversies, breaches, or damages for any cause whatsoever (including but
not limited to those arising out of or related to this Agreement) and
regardless of the form of action or legal theory shall not exceed the lesser
of (i) $500,000 or (ii) the fees received by FDISG for services provided under
this Agreement during the twelve months immediately prior to the date of such
loss or damage. Fund understands the limitation on FDISG's damages to be a
reasonable allocation of risk and Fund expressly consents with respect to such
allocation of risk. In allocating risk under the Agreement, the parties agree
that the damage limitation set forth above shall apply to any alternative
remedy ordered by a court in the event such court determines that sole and
exclusive remedy provided for in the Agreement fails of its essential purpose.
11.3 Neither party may assert any cause of action against the other
party under this Agreement that accrued more than two (2) years prior to the
filing of the suit (or commencement of arbitration proceedings) alleging such
cause of action.
11.4 Each party shall have the duty to mitigate damages for which the
other party may become responsible.
Article 12 Consequential Damages.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY,
IN NO EVENT SHALL FDISG, ITS AFFILIATES OR ANY OF ITS OR THEIR
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<PAGE>
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY
THEORY OF TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY
FOR LOST PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE
PARTIES REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER EITHER
PARTY OR ANY ENTITY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written
above and shall continue for a period of five (5) years (the "Initial Term").
13.2 Upon the expiration of the Initial Term, this Agreement shall
automatically renew for successive terms of three (3) years ("Renewal Terms")
each, unless the Fund or FDISG provides written notice to the other of its
intent not to renew. Such notice must be received not less than ninety (90)
days and not more than one-hundred eighty (180) days prior to the expiration
of the Initial Term or the then current Renewal Term.
13.3 In the event a termination notice is given by the Fund, all
expenses associated with movement of records and materials and conversion
thereof to a successor transfer agent will be borne by the Fund.
13.4 If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") the other party (the
"Non-Defaulting Party") may give written notice thereof to the Defaulting
Party, and if such material breach shall not have been remedied within thirty
(30) days after such written notice is given, then the Non-Defaulting Party
may terminate this Agreement by giving thirty (30) days written notice of such
termination to the Defaulting Party. If FDISG is the Non-Defaulting Party, its
termination of this Agreement shall not constitute a waiver of any other
rights or remedies of FDISG with respect to services performed prior to such
termination or rights of FDISG to be reimbursed for out-of-pocket expenses. In
all cases, termination by the Non-Defaulting Party shall not constitute a
waiver by the Non-Defaulting Party of any other rights it might have under
this Agreement or otherwise against the Defaulting Party.
Article 14 Additional Portfolios.
In the event that the Fund establishes one or more Portfolios in
addition to those identified in Exhibit 1, with respect to which the Fund
desires to have FDISG render services as transfer agent under the terms
hereof, the Fund shall so notify FDISG in writing, and if FDISG agrees in
writing to
-10-
<PAGE>
provide such services, Exhibit 1 shall be amended to include such additional
Portfolios.
Article 15 Confidentiality.
15.1 The parties agree that the Proprietary Information (defined
below) and the contents of this Agreement (collectively "Confidential
Information") are confidential information of the parties and their respective
licensors. The Fund and FDISG shall exercise at least the same degree of care,
but not less than reasonable care, to safeguard the confidentiality of the
Confidential Information of the other as it would exercise to protect its own
confidential information of a similar nature. The Fund and FDISG may use the
Confidential Information only to exercise its rights under this Agreement. The
Fund and FDISG shall not duplicate, sell or disclose to others the
Confidential Information of the other, in whole or in part, without the prior
written permission of the other party. The Fund and FDISG may, however,
disclose Confidential Information to its employees who have a need to know the
Confidential Information to perform work for the other, provided that each
shall use reasonable efforts to ensure that the Confidential Information is
not duplicated or disclosed by its employees in breach of this Agreement. The
Fund and FDISG may also disclose the Confidential Information to independent
contractors, auditors, and professional advisors, provided they first agree in
writing to be bound by the confidentiality obligations substantially similar
to this Section 15.1. Notwithstanding the previous sentence, in no event shall
either the Fund or FDISG disclose the Confidential Information to any
competitor of the other without specific, prior written consent.
15.2 Proprietary Information means:
(a) any data or information that is competitively sensitive
material, and not generally known to the public, including, but not
limited to, information about product plans, marketing strategies,
finance, operations, customer relationships, customer profiles, sales
estimates, business plans, and internal performance results relating
to the past, present or future business activities of the Fund or
FDISG, their respective subsidiaries and affiliated companies and the
customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process,
procedure, formula, or improvement that is commercially valuable and
secret in the sense that its confidentiality affords the Fund or FDISG
a competitive advantage over its competitors; and
-11-
<PAGE>
(c) all confidential or proprietary concepts, documentation,
reports, data, specifications, computer software, source code, object
code, flow charts, databases, inventions, know-how, show-how and trade
secrets, whether or not patentable or copyrightable.
15.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory notebooks,
drawings, diagrams, specifications, bills of material, equipment, prototypes
and models, and any other tangible manifestation of the foregoing of either
party which now exist or come into the control or possession of the other.
Article 16 Force Majeure.
No party shall be liable for any default or delay in the performance
of its obligations under this Agreement if and to the extent such default or
delay is caused, directly or indirectly, by (i) fire, flood, elements of
nature or other acts of God; (ii) any outbreak or escalation of hostilities,
war, riots or civil disorders in any country, (iii) any act or omission of the
other party or any governmental authority; (iv) any labor disputes (whether or
not the employees' demands are reasonable or within the party's power to
satisfy); or (v) nonperformance by a third party or any similar cause beyond
the reasonable control of such party, including without limitation, failures
or fluctuations in telecommunications or other equipment. In any such event,
the nonconforming party shall be excused from any further performance and
observance of the obligations so affected only for as long as such
circumstances prevail and such party continues to use commercially reasonable
efforts to recommence performance or observance as soon as practicable.
Article 17 Assignment and Subcontracting.
This Agreement, its benefits and obligations shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement may not be assigned or otherwise transferred
by either party hereto, without the prior written consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that
FDISG may, in its sole discretion, assign all its right, title and interest in
this Agreement to an affiliate, parent or subsidiary, or to the purchaser of
substantially all of its business. FDISG may, in its sole discretion, engage
subcontractors to perform any of the obligations contained in this Agreement
to be performed by FDISG.
Article 18 Arbitration.
18.1 Any claim or controversy arising out of or relating to
this Agreement, or breach hereof, shall be settled by arbitration
-12-
<PAGE>
administered by the American Arbitration Association in Boston, Massachusetts
in accordance with its applicable rules, except that the Federal Rules of
Evidence and the Federal Rules of Civil Procedure with respect to the
discovery process shall apply.
18.2 The parties hereby agree that judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction.
18.3 The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law
provisions in this Agreement, the parties agree that the Federal Arbitration
Act shall govern and control with respect to the provisions of this Article
18.
Article 19 Notice.
Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or FDISG, shall be sufficiently
given if addressed to that party and received by it at its office set forth
below or at such other place as it may from time to time designate in writing.
To the Fund:
Attention:__________________
To FDISG:
First Data Investor Services Group, Inc.
One Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: President
with a copy to FDISG's General Counsel
Article 20 Governing Law/Venue.
The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, shall govern the interpretation, validity, and enforcement
of this agreement. All actions arising from or related to this Agreement shall
be brought in the state and federal courts sitting in the City of Boston, and
FDISG and Client hereby submit themselves to the exclusive jurisdiction of
those courts.
-13-
<PAGE>
Article 21 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original; but such counterparts shall,
together, constitute only one instrument.
Article 22 Captions.
The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
Article 23 Publicity.
Neither FDISG nor the Fund shall release or publish news releases,
public announcements, advertising or other publicity relating to this
Agreement or to the transactions contemplated by it without the prior review
and written approval of the other party; provided, however, that either party
may make such disclosures as are required by legal, accounting or regulatory
requirements after making reasonable efforts in the circumstances to consult
in advance with the other party.
Article 24 Relationship of Parties/Non-Solicitation.
24.1 The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be interpreted or
construed otherwise.
24.2 During the term of this Agreement and for one (1) year afterward,
the Fund shall not recruit, solicit, employ or engage, for the Fund or others,
FDISG's employees.
Article 25 Entire Agreement; Severability.
25.1 This Agreement, including Schedules, Addenda, and Exhibits
hereto, constitutes the entire Agreement between the parties with respect to
the subject matter hereof and supersedes all prior and contemporaneous
proposals, agreements, contracts, representations, and understandings, whether
written or oral, between the parties with respect to the subject matter
hereof. No change, termination, modification, or waiver of any term or
condition of the Agreement shall be valid unless in writing signed by each
party. No such writing shall be effective as against FDISG unless said writing
is executed by a Senior Vice President, Executive Vice President, or President
of FDISG. A party's waiver of a breach of any term or condition in the
Agreement shall not be deemed a waiver of any subsequent breach of the same or
another term or condition.
-14-
<PAGE>
25.2 The parties intend every provision of this Agreement to be
severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such
case, the parties shall in good faith modify or substitute such provision
consistent with the original intent of the parties. Without limiting the
generality of this paragraph, if a court determines that any remedy stated in
this Agreement has failed of its essential purpose, then all other provisions
of this Agreement, including the limitations on liability and exclusion of
damages, shall remain fully effective.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers, as of the day and year first
above written.
THE WOODWARD FUNDS
By:___________________________
Title:________________________
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:___________________________
Title:________________________
-15-
<PAGE>
Exhibit 1
<PAGE>
Schedule A
DUTIES OF FDISG
1. Shareholder Information. FDISG shall maintain a record of the
number of Shares held by each Shareholder of record which shall include name,
address, taxpayer identification and which shall indicate whether such Shares
are held in certificates or uncertificated form.
2. Shareholder Services. FDISG shall respond as appropriate to all
inquiries and communications from Shareholders relating to Shareholder
accounts with respect to its duties hereunder and as may be from time to time
mutually agreed upon between FDISG and the Fund.
3. Share Certificates.
(a) At the expense of the Fund, the Fund shall supply FDISG
with an adequate supply of blank share certificates to meet FDISG requirements
therefor. Such Share certificates shall be properly signed by facsimile. The
Fund agrees that, notwithstanding the death, resignation, or removal of any
officer of the Fund whose signature appears on such certificates, FDISG or its
agent may continue to countersign certificates which bear such signatures
until otherwise directed by Written Instructions.
(b) FDISG shall issue replacement Share certificates in lieu of
certificates which have been lost, stolen or destroyed, upon receipt by FDISG
of properly executed affidavits and lost certificate bonds, in form
satisfactory to FDISG, with the Fund and FDISG as obligees under the bond.
(c) FDISG shall also maintain a record of each certificate
issued, the number of Shares represented thereby and the Shareholder of
record. With respect to Shares held in open accounts or uncertificated form
(i.e., no certificate being issued with respect thereto) FDISG shall maintain
comparable records of the Shareholders thereof, including their names,
addresses and taxpayer identification. FDISG shall further maintain a stop
transfer record on lost and/or replaced certificates.
4. Mailing Communications to Shareholders; Proxy Materials. FDISG
will address and mail to Shareholders of the Fund, all reports to
Shareholders, dividend and distribution notices and proxy material for the
Fund's meetings of Shareholders. In connection with meetings of Shareholders,
FDISG will prepare Shareholder lists, mail and certify as to the mailing of
proxy materials, process and tabulate returned proxy cards, report on proxies
voted prior to meetings, act as
<PAGE>
inspector of election at meetings and certify Shares voted at meetings.
5. Sales of Shares
(a) FDISG shall not be required to issue any Shares of the Fund
where it has received a Written Instruction from the Fund or official notice
from any appropriate authority that the sale of the Shares of the Fund has
been suspended or discontinued. The existence of such Written Instructions or
such official notice shall be conclusive evidence of the right of FDISG to
rely on such Written Instructions or official notice.
(b) In the event that any check or other order for the payment
of money is returned unpaid for any reason, FDISG will endeavor to: (i) give
prompt notice of such return to the Fund or its designee; (ii) place a stop
transfer order against all Shares issued as a result of such check or order;
and (iii) take such actions as FDISG may from time to time deem appropriate.
6. Transfer and Purchase
(a) FDISG shall process all requests to transfer or redeem
Shares in accordance with the transfer or repurchase procedures set forth in
the Fund's Prospectus.
(b) FDISG will transfer or repurchase Shares upon receipt of
Oral or Written Instructions or otherwise pursuant to the Prospectus and Share
certificates, if any, properly endorsed for transfer or redemption,
accompanied by such documents as FDISG reasonably may deem necessary.
(c) FDISG reserves the right to refuse to transfer or
repurchase Shares until it is satisfied that the endorsement on the
instructions is valid and genuine. FDISG also reserves the right to refuse to
transfer or repurchase Shares until it is satisfied that the requested
transfer or repurchase is legally authorized, and it shall incur no liability
for the refusal, in good faith, to make transfers or repurchases which FDISG,
in its good judgement, deems improper or unauthorized, or until it is
reasonably satisfied that there is no basis to any claims adverse to such
transfer or repurchase.
(d) When Shares are redeemed, FDISG shall, upon receipt of the
instructions and documents in proper form, deliver to the Custodian and the
Fund or its designee a notification setting forth the number of Shares to be
repurchased. Such repurchased shares shall be reflected on appropriate
accounts maintained by FDISG reflecting outstanding Shares of the Fund and
Shares attributed to individual accounts.
-2-
<PAGE>
(e) FDISG, upon receipt of the monies paid to it by the
Custodian for the repurchase of Shares, pay such monies as are received from
the Custodian, all in accordance with the procedures described in the written
instruction received by FDISG from the Fund.
(f) FDISG shall not process or effect any repurchase with
respect to Shares of the Fund after receipt by FDISG or its agent of
notification of the suspension of the determination of the net asset value of
the Fund.
7. Dividends
(a) Upon the declaration of each dividend and each capital
gains distribution by the Board of Directors of the Fund with respect to
Shares of the Fund, the Fund shall furnish or cause to be furnished to FDISG
Written Instructions setting forth the date of the declaration of such
dividend or distribution, the ex-dividend date, the date of payment thereof,
the record date as of which Shareholders entitled to payment shall be
determined, the amount payable per Share to the Shareholders of record as of
that date, the total amount payable on the payment date, and whether such
dividend or distribution is to be paid in Shares at net asset value.
(b) On or before the payment date specified in such resolution
of the Board of Directors, the Fund will pay to FDISG sufficient cash to make
payment to the Shareholders of record as of such payment date.
(c) If FDISG does not receive sufficient cash from the Fund to
make total dividend and/or distribution payments to all Shareholders of the
Fund as of the record date, FDISG will, upon notifying the Fund, withhold
payment to all Shareholders of record as of the record date until sufficient
cash is provided to FDISG.
8. In addition to and neither in lieu nor in contravention of the
services set forth above, FDISG shall: (i) perform all the customary services
of a transfer agent, registrar, dividend disbursing agent and agent of the
dividend reinvestment and cash purchase plan as described herein consistent
with those requirements in effect as at the date of this Agreement. The
detailed definition, frequency, limitations and associated costs (if any) set
out in the attached fee schedule, include but are not limited to: maintaining
all Shareholder accounts, preparing Shareholder meeting lists, mailing
proxies, tabulating proxies, mailing Shareholder reports to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts where applicable, preparing and filing U.S. Treasury Department Forms
1099 and other appropriate forms required with respect to
-3-
<PAGE>
dividends and distributions by federal authorities for all Shareholders.
-4-
<PAGE>
Schedule B
Fee Schedule
<PAGE>
Schedule C
OUT-Of-POCKET EXPENSES
The Fund shall reimburse FDISG monthly for applicable out-of-pocket
expenses, including, but not limited to the following items:
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Printing costs, including certificates, envelopes,
checks and stationery
- Postage (bulk, pre-sort, ZIP+ 4, barcoding, first
class) direct pass through to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including all
lease, maintenance and line costs
- Ad hoc reports
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other
equipment and any expenses incurred in connection with
such terminals and lines
- Duplicating services
- Courier services
- Incoming and outgoing wire charges
- Federal Reserve charges for check clearance
- Overtime, as approved by the Fund
- Temporary staff, as approved by the Fund
- Travel and entertainment, as approved by the Fund
- Record retention, retrieval and destruction costs,
including, but not limited to exit fees charged by
third party record keeping vendors
- Third party audit reviews
- Ad hoc SQL time
- All Systems enhancements after the conversion at the
rate of $100.00 per hour
- Insurance
- Such other miscellaneous expenses reasonably incurred
by FDISG in performing its duties and responsibilities
under this Agreement.
The Fund agrees that postage and mailing expenses will be paid on the
day of or prior to mailing as agreed with FDISG. In addition, the Fund will
promptly reimburse FDISG for any other unscheduled expenses incurred by FDISG
whenever the Fund and FDISG mutually agree that such expense are not otherwise
properly borne by FDISG as part of its duties and obligations under the
Agreement.
<PAGE>
Schedule D
Fund Documents
- Certified copy of the Articles of Incorporation of the
Fund, as amended;
- Certified copy of the By-laws of the Fund, as amended;
- Copy of the resolution of the Board of Directors
authorizing the execution and delivery of this
Agreement;
- Specimens of the certificates for Shares of the Fund, if
applicable, in the form approved by the Board of Directors of
the Fund, with a certificate of the Secretary of the Fund as to
such approval;
- All account application forms and other documents
relating to Shareholder accounts or to any plan,
program or service offered by the Fund;
- Certified list of Shareholders of the Fund with the name,
address and taxpayer identification number of the Shareholder,
and the number of Shares of the Fund held by each, certificate
numbers and denominations (if any certificates have been
issued), lists of any accounts against which stop transfer
orders have been placed, together with the reasons therefore,
and the number of Shares redeemed by the Fund; and
- All notices issued by the Fund with respect to the Shares in
accordance with and pursuant to the Articles of Incorporation
or By-laws of the Fund or as required by law and shall perform
such other specific duties as are set forth in the Articles of
Incorporation including the giving of notice of any special or
annual meetings of shareholders and any other notices required
thereby.
Exhibit (14)(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Financial
Statements" in the Combined Proxy Statement/Prospectus and to the
incorporation by reference of our report on the financial statements of The
Prairie Funds, Prairie Municipal Bond Fund, Inc. and Prairie Intermediate Bond
Fund dated February 23, 1996 in this Registration Statement (Form N-14) of The
Woodward Funds.
ERNST & YOUNG LLP
New York, New York
May 24, 1996.
Exhibit (14)(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form N-14 of our report dated
February 19, 1996, included in The Woodward Funds Annual Report to Shareholders
for the year ended December 31, 1995, and to all references to our Firm
included in this registration statement on Form N-14.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Detroit, Michigan,
May 22, 1996.
Exhibit (14)(c)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to
our Firm included in the Registration Statement on Form N-14 under the
Securities Act of 1933 and the Investment Company Act of 1940, respectively.
However, this action does not constitute a consent under Section 7 of the
Securities Act of 1933, because we have not certified any part of the
Registration Statement and do not otherwise come within the categories of
persons whose consent is required under Section 7 or under the rules and
regulations of the Securities and Exchange Commission thereunder.
/s/DRINKER BIDDLE & REATH
-------------------------
DRINKER BIDDLE & REATH
Philadelphia, Pennsylvania
May 24, 1996
Exhibit (17)(c)
As filed with the Securities and Exchange Commission on May 11, 1987
Registration No. 33-13990
- - ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. __ [ ]
POST-EFFECTIVE AMENDMENT NO. __ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. __ [ ]
(Check appropriate box or boxes)
THE WOODWARD FUNDS
(Exact Name of Registrant as Specified in Charter)
100 Wall Street/27th Floor
New York, New York 10005
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (313) 259-0729
Earl I. Heenan, Jr.
333 West Fort Street
Detroit, Michigan 48226
(Name and Address of Agent for Service)
Copies to:
John Martin, President George G. Martin, Esq.
First of Michigan Corporation Miller, Canfield, Paddock and Stone
100 Renaissance Center/26th Floor 2500 Comerica Building
Detroit, Michigan 48243 Detroit, Michigan 48226
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
===================================================================================================
Proposed
Maximum
Amount Offering Amount of
Being Price Per Registration
Title of Securities Being Registered Registered Unit Fee
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series A Shares of beneficial interest ($.10 par value) Indefinite $1.00 *
Series B Shares of beneficial interest ($.10 par value) Indefinite $1.00 *
Series C Shares of beneficial interest ($.10 par value) Indefinite $1.00 *
Series D Shares of beneficial interest ($.10 par value) Indefinite $1.00 *
Series E Shares of beneficial interest ($.10 par value) Indefinite $1.00 *
Series F Shares of beneficial interest ($.10 par value) Indefinite $1.00 *
Series G Shares of beneficial interest ($.10 par value) Indefinite $1.00 *
<FN>
- - ------------------------------------------------------------------------------
* Pursuant to the provisions of Rule 24f-2 under the Investment
Company Act of 1940, registrant hereby elects to register an indefinite number
of shares of beneficial interest of series class designation. The $500 filing
fee required by said Rule has been paid.
- - ------------------------------------------------------------------------------
</TABLE>
<PAGE>
The registrant hereby amends this registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that his Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
As filed with the Securities and Exchange Commission on April 15, 1996
Registration No. 33-13990/811-5148
- - ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 30
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 30
THE WOODWARD FUNDS
(Exact Name of Registrant as Specified in Charter)
c/o NBD Bank
900 Tower Drive
P.O. Box 7058
Troy, Michigan 48007-7058
(Address of Principal Executive Offices)
Registrant's Telephone Number:
(313) 259-0729
W. Bruce McConnel, III
DRINKER BIDDLE & REATH
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[x] on April 15, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
<PAGE>
Registrant has previously registered an indefinite number of its shares of
beneficial interest under the Securities Act of 1933 pursuant to Rule 24f-2
under the Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for
the fiscal year ended December 31, 1995 was filed on February 27, 1996.
Exhibit (17)(d)
EXHIBIT 17(d)
[PRELIMINARY COPY]
PROXY
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of PRAIRIE FUNDS (the
"Company") for use at a Meeting of Shareholders to be held at the offices of
BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, Ohio on _________,
1996 at __:00 a.m. (Eastern time).
The undersigned hereby appoints George O. Martinez and D'Ray Brewer,
and each of them, with full power of substitution, as proxies of the
undersigned to vote at the above-stated Meeting, and at all adjournments or
postponements thereof, all shares of beneficial interest, evidencing interests
in the International Equity Fund (the "Fund"), held of record by the
undersigned on April 11, 1996, the record date for the meeting, upon the
following matters and upon any other matter which may come before the meeting,
in their discretion:
FOR AGAINST ABSTAIN
/ / / / / / 1. Proposal to approve an Agreement
and Plan of Reorganization and the
transactions contemplated thereby,
including the transfer of
substantially all of the assets and
liabilities of the Company's
International Equity Fund (the
"Prairie Fund") to Woodward's
International Equity Fund
(the "Woodward Fund") in
exchange for Class A, Class B or
Class I Shares, as applicable, of
the Woodward Fund, the distribution
of the Woodward Fund's shares so
received to shareholders of the
Prairie Fund according to
their respective interests, and the
termination of the Company's
existence under state law and the
Investment Company Act of 1940, as
amended.
<PAGE>
2. In their discretion, the proxies
are authorized to vote upon such
other business as may properly
come before the meeting.
Every properly signed proxy will be voted in the manner specified
hereon and, in the absence of specification, will be treated as GRANTING
authority to vote FOR Proposals 1 and 2.
PLEASE SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When
signing as attorney or as executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
Dated: __________________________________
X
-----------------------------------------
Signature
X
-----------------------------------------
Signature, if held jointly
-2-
Exhibit (17)(e)
- - ------------------------------------------------------------------------------
PROSPECTUS April 15, 1996
- - ------------------------------------------------------------------------------
THE WOODWARD FUNDS
c/o NBD Bank, Transfer Agent
P.O. Box 7058
Troy, Michigan 48007-7058
24 Hour yield and performance information
Purchase and Redemption orders:
(800) 688-3350
- - -------------------------------------------------------------------------------
The Woodward Funds (the "Trust") is offering in this Prospectus shares
in the following six investment portfolios (the "Portfolios"), each having its
own investment objective and policies as described in this Prospectus:
Class A shares of the:
Woodward Growth/Value Fund
Woodward Opportunity Fund
Woodward Intrinsic Value Fund
Woodward Capital Growth Fund
Woodward Balanced Fund
Woodward International Equity Fund
Each of the Portfolios is advised by NBD Bank ("NBD" or the "Adviser")
and is sponsored and distributed by First of Michigan Corporation ("FoM" or
"Co-Distributor") and Essex National Securities, Inc. ("Essex" or
"Co-Distributor").
This Prospectus sets forth concisely information that a prospective
investor should consider before investing. Investors should read this
Prospectus and retain it for future reference. Additional information about
the Trust, contained in a Statement of Additional Information, has been filed
with the Securities and Exchange Commission (the "SEC") and is available upon
request without charge by writing to The Woodward Funds at the address above.
The Statement of Additional Information bears the same date as this Prospectus
and is incorporated by reference in its entirety into the Prospectus.
- - ------------------------------------------------------------------------------
SHARES OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED OR OTHERWISE SUPPORTED BY, NBD BANK, ITS PARENT COMPANY
OR ITS AFFILIATES, AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY GOVERNMENTAL AGENCY.
INVESTMENT IN THE TRUST INVOLVES RISKS, INCLUDING THE LOSS OF PRINCIPAL.
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.
- - ------------------------------------------------------------------------------
INVESTMENT ADVISER:
NBD Bank
<PAGE>
EXPENSE SUMMARY
The Trust currently offers Class I shares (formerly known as
"Institutional Shares") and Class A shares (formerly known as "Retail Shares")
in each of the Woodward Growth/Value Fund ("Growth/Value Portfolio"), Woodward
Opportunity Fund ("Opportunity Portfolio"), Woodward Intrinsic Value Fund
("Intrinsic Value Portfolio"), Woodward Capital Growth Fund ("Capital Growth
Portfolio"), Woodward Balanced Fund ("Balanced Portfolio") and Woodward
International Equity Fund ("International Equity Portfolio"). Class I shares
are sold primarily to NBD and its affiliated and correspondent banks acting on
behalf of their respective customers. Class A shares are sold to the general
public primarily through financial institutions such as banks, brokers and
dealers. Class I shares are offered in a separate Prospectus. Investors should
call (800) 688-3350, a Co-Distributor or their financial institutions if they
would like to obtain more information concerning Class I shares and/or Class A
shares of the Portfolios. The following table is provided to assist investors
in understanding the various costs and expenses that an investor will
indirectly incur as a beneficial owner of Class A shares in each of the
Portfolios.
<TABLE>
<CAPTION>
Inter-
Growth/ Oppor- Intrinsic Capital national
Value tunity Value Growth Balanced Equity
Portfolio(1) Portfolio(1) Portfolio(1) Portfolio(1) Portfolio(1) Portfolio(1)
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed
on Purchases............... 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
(as a percentage of
offering price)
Sales Load
Imposed on Reinvested
Dividends................. None None None None None None
Deferred Sales Load........... None None None None None None
Redemption Fee................ None None None None None None
Exchange Fee.................. None None None None None None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of
average net assets)
Management Fees............... .75% .75% .75% .75% .75% .75%
12b-1 Fees(2)................. .011% .015% .011% .005% .013% .004%
Shareholder Servicing Fees(3). .25% .25% .25% .25% .25% .25%
Other Expenses(4)
(before fee waivers and/or
expense reimbursements).... .039% .035% .089% 0.145% 0.327% 0.596%
(after fee waivers and/or
expense reimbursements).... N/A N/A N/A 0.125% .187% 0.406%
Total Operating Expenses
(before fee waivers and/or
expense reimbursements).... 1.05% 1.05% 1.10% 1.15% 1.34% 1.60%
(after fee waivers and/or
expense reimbursements).... N/A N/A N/A 1.13% 1.20% 1.41%
<FN>
- - ---------------------
1. The expenses for each of the Portfolios have been restated to
reflect current expenses.
2. As a result of the payment of sales loads and 12b-1 fees, long-term
shareholders may pay more than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers, Inc. (the "NASD"). Rules adopted by the NASD generally limit the
aggregate sales charges and payments under the Trust's Service and
Distribution Plan ("Distribution Plan") to a certain percentage of total new
gross share sales,
-2-
<PAGE>
plus interest. The Trust would stop accruing 12b-1 fees if, to the extent, and
for as long as, such limit would otherwise be exceeded.
3. The Trust has adopted a Shareholder Servicing Plan pursuant to
which the Trust may enter into agreements with institutions under which they
will render shareholder administrative support services for their customers
who beneficially own shares in return for a fee of up to .25% per annum of the
value of such shares ("Servicing Fees"). For further information,
see "Shareholder Servicing Plan" and "Investment Adviser, Custodian
and Transfer Agent" under the heading "Management" in this Prospectus.
4. Credits or charges not reflected in the expense table may be
incurred directly by customers of financial institutions in connection with an
investment in the Portfolios.
- - -------------------
</TABLE>
<TABLE>
<CAPTION>
Inter-
Growth/ Oppor- Intrinsic Capital national
Value tunity Value Growth Balanced Equity
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Example
You would pay the following
expenses on a $1,000
investment, assuming:
(1) a 5% annual return
and (2) redemption at the
end of each time period:
One Year.................. $ 10.76 $ 10.76 $ 11.27 $ 11.58 $ 12.30 $ 14.45
Three Years............... 33.57 33.57 35.15 36.09 38.30 44.91
Five Years................ 58.20 58.20 60.91 62.53 66.31 77.58
Ten Years................. 128.75 128.75 134.57 138.04 146.10 169.97
Example
You would pay the following
expenses on a $1,000
investment, assuming (1) a
5% annual return, (2)
redemption at the end
of each time period
and (3) the imposition
of a maximum sales load at
the beginning of the period:
One Year:................ $ 60.22 $ 60.22 $ 60.71 $ 61.00 $ 61.68 $ 63.72
Three Years:............. 81.89 81.89 83.39 84.29 86.39 92.67
Five Years:.............. 105.29 105.29 107.86 109.40 112.99 123.70
Ten Years:............... 172.32 172.32 177.84 181.14 188.80 211.47
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATES OF RETURN. ACTUAL EXPENSES OR RATE OF RETURN MAY BE
GREATER OR LESSER THAN THOSE SHOWN.
The examples demonstrate the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect
to a hypothetical investment in Class A shares in each of the Portfolios,
based upon payment by the Portfolios of operating expenses at the respective
levels set forth in the expense table. For more complete descriptions of
Portfolio expenses, see "Investment Adviser, Custodian and Transfer Agent",
"Sponsors and Co- Distributors", "Shareholder Servicing Plan", "Service and
Distribution Plan" and "Trust Expenses" under the heading "Management" in this
Prospectus and the financial statements and related notes contained in the
Statement of Additional Information.
-3-
<PAGE>
BACKGROUND
Shares of each Portfolio have been classified into two separate
classes of shares -- Class I shares and Class A shares. Only the Class A
shares are offered pursuant to this Prospectus. Until April 15, 1996, Class I
shares and Class A shares represented equal pro rata interests in a Portfolio.
As of such date, the Trust implemented its Shareholder Servicing Plan with
respect to Class A shares only and began to allocate Servicing Fees
attributable to such shares exclusively to them. See "Shareholder Servicing
Plan" and "Investment Adviser, Custodian and Transfer Agent" under
"Management," and see "Dividends and Distributions" and "Other Information"
for a description of the impact that this may have on holders of Class A
shares.
-4-
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below provide supplementary information to the Portfolios'
financial statements contained in their Statement of Additional Information
and set forth certain information concerning the historic investment results
of Portfolio shares. They present a per share analysis of how each Portfolio's
net asset value has changed during the periods presented. The tables have been
derived from the Portfolios' financial statements which have been audited by
Arthur Andersen LLP, the Trust's independent public accountants, whose report
thereon is contained in the Statement of Additional Information along with the
financial statements. The financial data included in these tables should be
read in conjunction with the financial statements and related notes included
in the Statement of Additional Information. Further information about the
performance of the Portfolios is available in annual reports to shareholders.
The Statement of Additional Information and annual reports to shareholders may
be obtained from the Trust free of charge by calling (800) 688-3350.
<TABLE>
<CAPTION>
Growth/Value Portfolio
June 1, 1991
(Commencement
Year Ended Year Ended Year Ended Year Ended of Operations) to
December December December December December 31,
31, 1995 31, 1994 31, 1993 31, 1992 1991
---------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period...................... $10.67 $11.16 $10.51 $ 9.86 $10.00
Income from investment
operations:
Net investment income.......... 0.21 0.23 0.20 0.22 0.14
Net realized and unrealized
gains (losses) on
investments.................. 2.76 (0.17) 1.24 0.75 (0.14)
------ ------- ------ ------ -------
Total from investment
operations................... $ 2.97 $ 0.06 $ 1.44 $ 0.97 $ 0.00
------ ------ ------ ------ ------
Less distributions:
From net investment
income...................... $ (0.22) $ (0.21) $(0.20) $(0.22) $(0.14)
From realized
gains....................... (0.26) (0.30) (0.59) (0.10) (0.00)
In excess of realized
gains....................... 0.00 (0.01) 0.00 0.00 0.00
Tax return of capital.......... 0.00 (0.03) 0.00 0.00 0.00
------- ------- ------- ------- -------
Total distributions......... $ (0.48) $ (0.55) $ (0.79) $ (0.32) $ (0.14)
------- ------- ------- ------- -------
Net asset value, end of
period...................... $13.16 $10.67 $11.16 $10.51 $ 9.86
====== ====== ====== ====== ======
Total return(b).................. 28.04% 0.55% 13.79% 9.87% 0.17%(a)
Ratios/Supplemental Data
Net assets, end of period........ $737,167,067 $571,370,711 $429,635,045 $287,344,809 $238,085,630
Ratio of expenses to average
net assets..................... 0.84% 0.84% 0.83% 0.83% 0.85%(a)
Ratio of net investment income
to average net assets.......... 1.73% 2.07% 1.84% 2.20% 2.56%(a)
Portfolio turnover rate.......... 26.80% 28.04% 42.31% 16.28% 0.94%
Average Commission Rate.......... $0.04
<FN>
- - ------------------------
(a) Annualized for periods less than one year for comparability
purposes. Actual annual values may be less than or greater than those shown.
(b) Total returns as presented do not include any applicable sales
load.
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Opportunity Portfolio
June 1, 1991
(Commencement
Year Ended Year Ended Year Ended Year Ended of Operations) to
December December December December December 31,
31, 1995 31, 1994 31, 1993 31, 1992 1991
---------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period...................... $13.34 $14.49 $12.37 $10.40 $10.00
Income from investment
operations:
Net investment income.......... 0.06 0.07 0.10 0.11 0.09
Net realized and unrealized
gains (losses) on
investments.................. 2.57 (0.54) 2.87 2.43 0.43
------ ------- ------ ------ ------
Total from investment
operations................... $ 2.63 $ (0.47) $ 2.97 $ 2.54 $ 0.52
------ ------- ------ ------ ------
Less distributions:
From net investment
income....................... $(0.06) $(0.07) $(0.10) $(0.11) $(0.09)
From realized
gains........................ (0.76) (0.49) (0.75) (0.46) (0.03)
In excess of realized
gains......................... 0.00 (0.02) 0.00 0.00 0.00
Tax return of capital.......... 0.00 (0.10) 0.00 0.00 0.00
------- ------- ------ ------ ------
Total distributions........... $ (0.82) $ (0.68) $ (0.85) $ (0.57) $ (0.12)
------- ------- ------- ------- -------
Net asset value, end of
period......................... $15.15 $13.34 $14.49 $12.37 $10.40
====== ====== ====== ====== ======
Total return(b).................. 19.88% (3.27%) 24.01% 24.56% 8.92%(a)
Ratios/Supplemental Data
Net assets, end of period........ $650,952,268 $524,999,120 $365,664,513 $166,423,073 $108,046,450
Ratio of expenses to average
net assets..................... 0.89% 0.90% 0.86% 0.84% O.84%(a)
Ratio of net investment income
to average net assets.......... 0.37% 0.53% 0.71% 1.09% 1.56%(a)
Portfolio turnover rate 53.55% 37.51% 33.99% 34.44% 2.92%
Average Commission Rate.......... $0.04
<FN>
- - ------------------------
(a) Annualized for periods less than one year for comparability
purposes. Actual annual values may be less than or greater than those shown.
(b) Total returns as presented do not include any applicable sales
load.
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Intrinsic Value Portfolio
June 1, 1991
(Commencement
Year Ended Year Ended Year Ended Year Ended of Operations) to
December December December December December 31,
31, 1995 31, 1994 31, 1993 31, 1992 1991
---------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period...................... $10.48 $11.05 $10.40 $ 9.89 $10.00
Income from investment
operations:
Net investment income.......... 0.29 0.31 0.29 0.29 0.17
Net realized and unrealized
gains (losses) on
investments.................. 2.24 (0.38) 1.23 1.14 ( 0.02)
------ ------- ------ ------ -------
Total from investment
operations................... $ 2.53 $(0.07) $ 1.52 $ 1.43 $ 0.15
------- ------- ------ ------ ------
Less distributions:
From net investment
income....................... $(0.30) $(0.30) $(0.28) $(0.28) $(0.17)
From realized
gains........................ (0.82) (0.20) ( 0.59) ( 0.64) ( 0.09)
------ ------- ------- ------- -------
Total distributions............ $ (1.12) $ (0.50) $ (0.87) $ (0.92) $ (0.26)
------- ------- ------- ------- -------
Net asset value, end of
period......................... $11.89 $10.48 $11.05 $10.40 $9.89
====== ====== ====== ====== =====
Total return(b).................. 24.38% (0.60%) 14.71% 14.56% 2.70%(a)
Ratios/Supplemental Data
Net assets, end of period........ $255,884,859 $220,028,096 $192,555,183 $107,260,873 $77,450,163
Ratio of expenses to average
net assets..................... 0.91% 0.91% 0.86% 0.84% O.84%(a)
Ratio of net investment income
to average net assets.......... 2.49% 2.92% 2.67% 2.78% 3.03%(a)
Portfolio turnover rate.......... 45.55% 58.62% 63.90% 48.52% 1.80%
Average Commission Rate.......... $0.03
<FN>
- - ------------------------
(a) Annualized for periods less than one year for comparability
purposes. Actual annual values may be less than or greater than those shown.
(b) Total returns as presented do not include any applicable sales
load.
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
Capital Growth Portfolio
July 2, 1994
(Commencement
Year Ended of Operations) to
December 31, December 31,
1995 1994
------------ -----------------
<S> <C> <C>
Net asset value, beginning of period .......... $ 10.44 $ 10.00
Income from investment operations:
Net investment income ....................... 0.08 0.05
Net realized and unrealized gains (losses) on
investments ............................... 2.93 0.43
--------------- ---------------
Total from investment operations ............ $ 3.01 $ 0.48
--------------- ---------------
Less distributions:
From net investment income .................. $ (0.08) $ (0.04)
From net realized gains ..................... (0.11) 0.00
--------------- ---------------
Total distributions ......................... $ (0.19) $ (0.04)
--------------- ---------------
Net asset value, end of period ................ $ 13.26 $ 10.44
=============== ===============
Total return (b) .............................. 28.90% 9.62%(a)
Ratios/Supplemental Data
Net assets, end of period ..................... $ 195,861,178 $ 81,269,604
Ratio of expenses to average net assets ....... 0.86% 0.85%(a)
Ratio of net investment income to average net
assets ...................................... 0.65% 1.25%(a)
Ratio of expenses to average net assets without
fee waivers/reimbursed expenses ............. 0.90% 0.95%(a)
Ratio of net investment income to average net
assets without fee waivers/reimbursed
expenses .................................... 0.61% 1.15%(a)
Portfolio turnover rate ....................... 6.97% 3.29%
Average Commission Rate ....................... $ 0.04
<FN>
- - ---------------
(a) Annualized for periods less than one year for comparability
purposes. Actual annual values may be less than or greater than those shown.
(b) Total returns as presented do not include any applicable sales
load.
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
Balanced Portfolio
Year Ended Year Ended
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Net asset value, beginning
of period .............................. $ 9.53 $ 10.00
Income from investment
operations:
Net investment income .................. 0.35 0.28
Net realized and unrealized
gains (losses) on
investments .......................... 1.83 (0.48)
-------------- --------------
Total from investment
operations ........................... $ 2.18 $ (0.20)
-------------- --------------
Less distributions:
From net investment
income ............................... $ (0.35) $ (0.27)
From realized
gains ................................ (0.12) 0.00
-------------- --------------
Total distributions .................... $ (0.47) $ (0.27)
-------------- --------------
Net asset value, end of
period ................................. $ 11.24 $ 9.53
============== ==============
Total return(a) .......................... 23.18% (1.95%)
Ratios/Supplemental Data
Net assets, end of period ................ $ 93,623,801 $ 54,167,192
Ratio of expenses to average
net assets ............................. 0.91% 0.85%
Ratio of net investment income
to average net assets .................. 3.40% 3.41%
Ratio of expenses to average net assets
without fee waivers/reimbursed expenses 1.09% 1.56%
Ratio of net investment income to average
net assets without fee waivers/reimbursed
expenses ................................ 3.22% 2.70%
Portfolio turnover rate .................. 31.76% 37.49%
Average Commission Rate .................. $ 0.05
<FN>
- - ------------------------
(a) Total returns as presented do not include any applicable sales load.
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
International Equity Portfolio
December 3, 1994
Year Ended (Commencement
December 31, of Operations) to
1995 December 31, 1994
------------ -----------------
<S> <C> <C>
Net asset value, beginning
of period ............................. $ 10.01 $ 10.00
Income from investment
operations:
Net investment income ................. 0.10 0.01
Net realized and unrealized
gains (losses) on
investments ......................... 1.05 0.00
Total from investment
operations .......................... $ 1.15 $ 0.01
--------------- ---------------
Less distributions:
From net investment
income .............................. $ (0.11) $ 0.00
From realized
gains ............................... (0.00) 0.00
--------------- ---------------
Total distributions ................... $ (0.11) $ 0.00
--------------- ---------------
Net asset value, end of
period ................................ $ 11.05 $ 10.01
=============== ===============
Total return(b) ......................... 11.47% 1.26%(a)
Ratios/Supplemental Data
Net assets, end of period ............... $ 107,288,301 $ 36,545,470
Ratio of expenses to average
net assets ............................ 1.16% 1.15%(a)
Ratio of net investment income
to average net assets ................. 1.43% 1.18%(a)
Ratio of expenses to average net
assets without reimbursed
expenses .............................. 1.24% 1.92%(a)
Ratio of net investment income to average
net assets without reimbursed
expenses .............................. 1.35% 0.41%(a)
Portfolio turnover rate ................. 2.09% 0.30%
Average Commission Rate ................. $ 0.05
<FN>
- - ------------------------
(a) Annualized for periods less than one year for comparability
purposes. Actual annual values may be less than or greater than those shown.
(b) Total return as presented does not include any applicable sales
load.
</TABLE>
-10-
<PAGE>
INTRODUCTION
The Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"). The
Trust currently consists of seventeen investment portfolios, each of which
consists of a separate pool of assets with separate investment objective and
policies. However, only the Class A shares of the Growth/Value, Opportunity,
Intrinsic Value, Capital Growth, Balanced and International Equity Portfolios
are offered pursuant to this Prospectus. Each such Portfolio is classified as
a diversified investment portfolio under the 1940 Act.
PROPOSED REORGANIZATION
On December 1, 1995, NBD's parent, NBD Bancorp, Inc., merged with
First Chicago Corporation and the combined company was renamed First Chicago
NBD Corporation ("FCNBD"). An affiliate of FCNBD serves as the investment
adviser to Prairie Funds, Prairie Institutional Funds, Prairie Intermediate
Bond Fund and Prairie Municipal Bond Fund, Inc. (collectively, "Prairie").
FCNBD has recommended to both the Board of Trustees of the Trust and the Board
of Trustees/Directors of Prairie that the portfolios of the Trust and Prairie
be reorganized as described below. In light of this recommendation and after
considering various matters, the Trust's Board and Prairie's Board have
authorized certain Agreements and Plans of Reorganization (the
"Reorganization").
A Special Meeting of the Shareholders of each Prairie portfolio is
expected to be held in June 1996 to consider the approval or disapproval of
the Reorganization. The Reorganization generally provides for the transfer of
substantially all of each Prairie portfolio's assets and liabilities to a
corresponding portfolio of the Trust in exchange for such portfolio's shares.
In connection with the proposed Reorganization, a Special Meeting of
the Shareholders of the Trust is expected to be held in June 1996 to consider
proposals relating to investment policies, service agreements, the election of
two new trustees, and other matters. Proxy materials describing these matters
will be mailed to the Trust's shareholders of record for the meeting.
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The investment objective of a Portfolio may not be changed without
approval of the holders of at least a majority of the outstanding shares of
such Portfolio. See "Other Information." Except as noted below under
"Investment Limitations," a Portfolio's investment policies may be changed
without a vote of shareholders. There can be no assurance that a Portfolio
will achieve its objective.
Growth/Value Portfolio
The investment objective of the Growth/Value Portfolio is to achieve
long-term capital appreciation and, secondarily, to produce current income
approximating that prevailing within the general equity market. The Portfolio
seeks to achieve this objective by investing primarily in equity securities of
relatively large companies. The Adviser believes that well managed, larger
companies historically have provided investors with attractive returns, high
liquidity and lower than average volatility. The Portfolio invests in
companies which the Adviser believes have earnings growth expectations that
exceed those implied by the market's current valuation. In addition, the
Portfolio seeks to maintain a portfolio of companies whose earnings will
increase at a faster rate than within the general equity market. The equity
portion of the portfolio generally will be constructed in a "bottom-up"
manner. "Bottom-up" refers to an analytical approach to securities selection
which first focuses on the company
-11-
<PAGE>
and company-related matters as contrasted to a "top-down" analysis which first
focuses on the industry or the economy. In the Adviser's opinion this
procedure may generally be expected to result in a portfolio characterized by
lower price/earnings ratios, above average growth prospects, and average
market risk.
Opportunity Portfolio
The investment objective of the Opportunity Portfolio is to achieve
long-term capital appreciation and, secondarily, to maintain a moderate level
of dividend income. The Portfolio seeks to achieve this objective by investing
primarily in equity securities of companies with small to intermediate market
capitalization. The Adviser believes that there are many companies in this
size range that enjoy enhanced growth prospects, operate in more stable market
niches, and have greater ability to respond to new business opportunities, all
of which increase their likelihood of attaining superior levels of
profitability and investment returns. However, they may escape many investors'
attention because they are less well known than some larger companies. Shares
of these companies may also be more volatile than those of larger companies,
so the Opportunity Portfolio can be expected to exhibit somewhat greater
volatility than market indices dominated by very large companies. The Adviser
intends to reduce the volatility and enhance the potential return of the
Portfolio's holdings by concentrating on companies which have demonstrated
records of superior profitability, maintain conservative balance sheets, and
are, in general, of above-average quality, although stocks of lesser quality
may be purchased by the Portfolio if the Adviser believes they offer
sufficient opportunity for capital appreciation.
Intrinsic Value Portfolio
The investment objective of the Intrinsic Value Portfolio is to
provide long-term capital growth, with income a secondary consideration. The
Portfolio seeks to achieve this objective by investing primarily in equity
securities of companies believed by the Adviser to represent a value or
potential worth which is not fully recognized by prevailing market prices. In
selecting investments for the Portfolio, screening techniques are employed to
isolate issues believed to be attractively priced. The Adviser then evaluates
the underlying earning power and dividend paying ability of these potential
investments. The Portfolio's holdings are usually characterized by lower
price/earnings, price/cash flow and price/book value ratios and by above
average current dividend yields relative to the equity market. Companies
purchased by the Portfolio are often deemed by the Adviser to be overlooked
and out of favor by the marketplace at the time of purchase. In general the
Portfolio's investments are diversified among industry groups that meet the
Portfolio's valuation criteria to attempt to reduce certain of the risks
inherent in common stock investments.
Capital Growth Portfolio
The investment objective of the Capital Growth Portfolio is to
maximize long-term capital appreciation with current income not a significant
consideration. The Portfolio seeks to achieve this objective by investing
primarily in equity securities of companies with a market capitalization of at
least $1 billion. In selecting investments for the Portfolio, the Adviser will
employ screening techniques and a research intensive approach emphasizing
superior, sustainable annual earnings growth which is supported by strong
revenue growth, margin expansion and conservative financial leverage. Because
of this growth orientation, certain market sectors may be over represented in
the Portfolio's investments; however, investments will be diversified among
industry groups and individual issuers. The value of the Portfolio's
investments will fluctuate based on market and specific industry conditions,
and other factors such as investment-style preferences. It is anticipated
that, generally, the dividend yield of the Portfolio will be less than or
equal to that of the broad
-12-
<PAGE>
equity market and will likely fluctuate. Therefore, the Portfolio is intended
for investors seeking long-term capital appreciation.
Investment Policies Applicable to the Growth/Value, Opportunity, Intrinsic Value
and Capital Growth Portfolios
The Growth/Value, Opportunity, Intrinsic Value and Capital Growth
Portfolios invest primarily in publicly traded common stocks of companies
incorporated in the United States, although each such Portfolio may also
invest up to 25% of its total assets in the securities of foreign issuers,
either directly or through American Depository Receipts. In addition, they may
invest in securities convertible into common stock, such as certain bonds and
preferred stocks, and may invest up to 5% of their respective net assets in
other types of securities having common stock characteristics (such as rights
and warrants to purchase equity securities). The Portfolios may also enter
into futures contracts and related options and may utilize options. Under
normal market conditions, each Portfolio expects to invest at least 65% of the
value of its total assets in equity securities. Each Portfolio may also hold
up to 35% of its total assets in short-term obligations issued or guaranteed
by the U.S. Government, or its agencies or instrumentalities, money market
instruments, repurchase agreements and cash.
Balanced Portfolio
The investment objective of the Balanced Portfolio is to achieve
long-term total return through a combination of capital appreciation and
current income. The Portfolio seeks to achieve its investment objective by
investing its assets primarily in three major asset groups: equity securities;
fixed income securities; and cash equivalent securities. In pursuing the
Portfolio's investment objective, the Adviser allocates the Portfolio's
investments primarily based on its evaluation of the long-term relative
attractiveness of the major asset groups. The Adviser bases its evaluations of
relative attractiveness on its outlook for the capital market. This outlook
includes, but is not limited to, judgments about where the economy appears to
be in the business cycle together with expectations for inflation, interest
rates, and long-term corporate earnings growth.
Under normal market conditions, the Portfolio's policy is to invest at
least 25% of the value of its total assets in fixed income senior securities
and no more than 75% in equity securities. Compliance with these percentage
requirements may limit the ability of the Portfolio to maximize total return.
The actual percentage of assets invested in equity securities, fixed income
securities and cash equivalent securities will vary from time to time,
depending on the judgment of the Adviser as to general market and economic
conditions, trends in yields, interest rates and changes in fiscal and
monetary developments.
Equity Securities. The equity securities in which the Balanced
Portfolio normally invests are common stocks, preferred stocks, rights,
warrants and securities convertible into common or preferred stocks. The
equity portion of the Balanced Portfolio's investments will be invested
primarily in publicly traded stocks of companies incorporated in the United
States, although up to 20% of its total assets may be invested in the equity
securities of foreign issuers, either directly or through American Depository
Receipts.
The Adviser selects equity securities for the Portfolio based on such
factors as general financial condition, price/earnings, price/cash flow and
price/book value ratios, above average current dividend yields relative to the
equity market, market share, product leadership and other investment criteria.
The Portfolio invests in the equity securities of companies which the Adviser
believes have earnings growth expectations that exceed those implied by the
market's current valuation and that will increase at a faster rate than within
the general equity market. The Adviser may also select equity securities of
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companies with small to intermediate market capitalization which enjoy
enhanced growth prospects, operate in market niches, and have greater ability
to respond to new business opportunities, all of which increase their
likelihood of attaining superior levels of profitability and investment
returns. The Adviser may also select equity securities of companies it
believes represent a value or potential worth which is not fully recognized by
prevailing market prices.
Debt Securities. The Balanced Portfolio invests the fixed income
portion of its portfolio of investments in a broad range of debt securities
rated "investment grade" or higher at the time of purchase, or unrated
investments deemed by the Adviser to be of comparable quality. Debt securities
in which the Portfolio normally invests are: (i) obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities; (ii)
corporate, bank and commercial obligations; (iii) securities issued or
guaranteed by foreign governments, their agencies or instrumentalities; (iv)
securities issued by supranational banks; (v) mortgage backed securities; and
(vi) securities representing interests in pools of assets. Investments include
fixed and variable-rate bonds, zero coupon bonds, debentures, and various
types of demand instruments. Obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities may include mortgage backed
securities, as well as "stripped securities" (both interest-only and
principal-only) and custodial receipts for Treasury securities. Most fixed
income obligations acquired by the Portfolio will be issued by companies or
governmental entities located within the United States. Up to 15% of the total
assets of the Portfolio may, however, be invested in dollar-denominated debt
obligations (including cash equivalent securities) of foreign issuers.
The Adviser manages the fixed income portion of the Portfolio based on
anticipated interest rate changes and the use of active management strategies
such as sector rotation, intra-sector adjustments and yield curve and
convexity considerations. In use of such active management strategies, the
Adviser seeks value in investment grade fixed income securities. Sector
rotation involves the Adviser selecting among different economic or industry
sectors based upon apparent or relative attractiveness. Thus at times a sector
offers yield advantages relative to other sectors. An intra-sector adjustment
occurs when the Adviser determines to select a particular issue within a
sector. Yield curve considerations involve the Adviser attempting to compare
the relationship between time to maturity and yield to maturity in order to
identify the relative value in the relationship. Convexity considerations
consist of the Adviser seeking securities that rise in price more quickly, or
decline in price less quickly, than the typical security of that price risk
level and therefore enable the Adviser to obtain an additional return when
interest rates change dramatically.
In acquiring particular fixed income securities for the Portfolio, the
Adviser will consider, among other things, historical yield relationships
between private and governmental debt securities, intermarket yield
relationships among various industry sectors, current economic cycles and the
attractiveness and creditworthiness of particular issuers. Depending upon the
Adviser's analysis of these and other factors, the Portfolio's holdings of
issues in particular industry sectors may be overweighted when compared to the
relative industry weightings in the Lehman Brothers Aggregate Bond Index, or
other recognized indices. The value of the fixed income portion of the
Portfolio can be expected to vary inversely with changes in prevailing
interest rates.
Cash Equivalent Securities and Other Investments. The cash equivalent
securities in which the Balanced Portfolio normally invests are short-term
obligations issued or guaranteed by the U.S. Government, or its agencies or
instrumentalities, "high quality" money market instruments such as
certificates of deposit, bankers' acceptances, time deposits, repurchase
agreements, reverse repurchase agreements, short-term obligations issued by
state and local governmental issuers which carry yields that are competitive
with those of other types of high quality money market instruments, commercial
paper, notes, other
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short-term obligations and variable rate master demand notes. "High quality"
money market instruments are money market instruments which are rated at the
time of purchase within the two highest rating categories or which are unrated
at such time but are deemed by the Adviser to be of comparable quality. Such
investments may include obligations of foreign banks and foreign branches of
U.S. banks. The Portfolio may also invest its cash balances in securities
issued by other investment companies which invest in high-quality, short-term
debt securities. As a shareholder of another investment company, the Portfolio
would bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would
be in addition to the advisory and other expenses that the Portfolio bears
directly in connection with its own operations.
The Balanced Portfolio may also enter into futures contracts
and related options and utilize options as more fully described below.
International Equity Portfolio
The investment objective of the International Equity Portfolio is to
achieve long-term capital appreciation and, secondarily, to produce current
income. The Portfolio seeks to achieve its objective by investing primarily in
equity securities of foreign issuers. The Portfolio may exhibit more
volatility than the U.S. equity market in general.
The Adviser's investment approach to managing the Portfolio's assets
emphasizes active country selection involving global economic and political
assessments together with valuation analysis of selected countries' securities
markets. This country allocation approach is based on absolute/relative
valuations, expected total returns including currency and changing
fundamentals. In situations where an investment's attractiveness outweighs
prospects for currency weakness, the Adviser will take suitable hedging
measures. An index approach is typically used at the stock selection level.
The Adviser employs quantitative techniques in conjunction with its
judgment and experience to determine the foreign equity markets that the
Portfolio will be invested in and the percentage of total assets the Portfolio
will hold by country. This investment approach focuses on economic
developments in foreign countries, fundamental analysis at the country level
and the political environment. After the country weightings have been
determined, investments are typically made in country "baskets" of equity
securities. A country "basket" is comprised of equity securities of a
particular country and is constructed using a quantitatively-oriented sampling
technique to replicate the performance of an individual country's stock market
index. The Morgan Stanley Capital International Country Indexes have, for some
time, been the accepted benchmarks in the U.S. for international equity fund
country comparisons. The Portfolio may also invest in individual equity
securities the Adviser believes offer opportunity for capital appreciation.
The Portfolio's investments will generally be diversified among
geographic regions and countries. The Portfolio's assets may be invested in
equity securities located in but not limited to the United Kingdom and
European continent, Japan, other Far East areas and Latin America. The
Portfolio may also invest in other regions seeking to capitalize on investment
opportunities in other parts of the world. The Portfolio's assets will be
invested at all times in the securities of issuers located in at least three
different foreign countries. Investments in a particular country may exceed
25% of the Portfolio's total assets, thus making its performance more
dependent upon the political and economic circumstances of a particular
country than a more widely diversified portfolio.
The Portfolio will be primarily invested in equity securities of
foreign companies consisting of common stocks, preferred stocks, rights,
warrants, and
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securities convertible into common or preferred stock. Equity investments also
include American Depository Receipts, European Depository Receipts and similar
securities that are either sponsored or unsponsored. Under normal market
conditions, the Portfolio expects to invest at least 65% of the value of its
total assets in equity securities of foreign issuers. The Portfolio may hold
up to 35% of its total assets in debt securities, and cash equivalent holdings
consisting of short-term debt obligations and cash. However, the Portfolio
does not expect to have a substantial portion of its assets invested in debt
securities and cash equivalent holdings under normal market conditions. Debt
securities in which the Portfolio may invest consist of: (i) debt securities
of foreign issuers, foreign governments and agencies that the Adviser
believes, based on market conditions, the financial condition of the issuer,
general economic conditions and other relevant factors, offer opportunities
for capital appreciation; (ii) obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; (iii) corporate, bank and
commercial obligations; (iv) mortgage backed securities; and (v) securities
representing interests in pools of assets. In the event the Adviser determines
that unusual and adverse market conditions exist, the Portfolio may adopt a
temporary defensive posture and invest without limitation in debt securities
and cash equivalent holdings. To the extent the Portfolio is so invested, its
investment objective may not be achieved.
The Portfolio may also enter into futures contracts, related options,
foreign currency transactions and forward contracts, and utilize options.
OTHER INVESTMENT POLICIES
Ratings
If not rated as commercial paper, debt obligations acquired by any of
the Portfolios will be investment grade at the time of purchase, i.e.,
obligations rated AAA, AA, A or BBB by Standard & Poor's Rating Group,
Division of McGraw Hill ("S&P"), Fitch Investors Service, Inc. ("Fitch"), Duff
& Phelps Credit Co. ("Duff") or IBCA, Inc. ("IBCA") or Aaa, Aa, A or Baa by
Moody's Investors Service, Inc. ("Moody's") (each a "Rating Agency") or be
unrated but deemed by the Adviser to be comparable in quality at the time of
purchase to instruments that are so rated. Obligations rated in the lowest of
the top four rating categories (Baa by Moody's or BBB by S&P, Fitch, Duff or
IBCA) are considered to have less capacity to pay interest and repay principal
and have certain speculative characteristics. The debt ratings are described
in the Statement of Additional Information.
Short-Term Investments
Each Portfolio may hold the types of short-term investments described
under "Balanced Portfolio - Cash Equivalent Securities and Other Investments"
above.
U.S. Government Obligations
The Portfolios may invest in all types of U.S. Government securities,
including U.S. Treasury bonds, notes and bills, and obligations of Federal
Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage
Association, Federal National Mortgage Association, General Services
Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks, Tennessee Valley Authority, Resolution Funding Corporation and
Maritime Administration. The Portfolios may also invest in interests in the
foregoing securities, including collateralized mortgage obligations guaranteed
by a U.S. Government agency or instrumentality, and in Government-backed
trusts which hold obligations of
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foreign governments that are guaranteed or backed by the full faith and credit
of the United States.
Obligations of certain U.S. Government agencies and instrumentalities
such as those of the Government National Mortgage Association, are supported
by the full faith and credit of the U.S. Treasury; others, such as the
Export-Import Bank of the United States, are supported by the right of the
issuer to borrow from the Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations; still others, such
as those of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality.
Securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities have historically involved little risk of loss of
principal if held to maturity. However, no assurance can be given that the
U.S. Government would provide financial support to U.S. Government-sponsored
instrumentalities if it is not legally obligated to do so.
Stripped Government Obligations
To the extent consistent with their respective investment objectives,
the Balanced and International Equity Portfolios may purchase Treasury
receipts and other "stripped" securities that evidence ownership in either the
future interest payments or the future principal payments on U.S. Government
obligations. These participations, which may be issued by the U.S. Government
(or a U.S. Government agency or instrumentality) or by private issuers such as
banks and other institutions, are issued at a discount to their "face value,"
and may include stripped mortgage backed securities ("SMBS"), which are
derivative multi-class mortgage securities. Stripped securities, particularly
SMBS, may exhibit greater price volatility than ordinary debt securities
because of the manner in which their principal and interest are returned to
investors.
SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions from a pool of
mortgage backed obligations. A common type of SMBS will have one class
receiving all of the interest, while the other class will receive all of the
principal. However, in some instances, one class will receive some of the
interest and most of the principal while the other class will receive most of
the interest and the remainder of the principal. If the underlying obligations
experience greater than anticipated prepayments of principal, a Portfolio may
fail to fully recoup its initial investment in these securities. The market
value of the class consisting entirely of principal payments generally is
extremely volatile in response to changes in interest rates. The yields on a
class of SMBS that receives all or most of the interest are generally higher
than prevailing market yields on other mortgage backed obligations because
their cash flow patterns are more volatile and there is a greater risk that
the initial investment will not be fully recouped.
Custodial Receipts for Treasury Securities
The Balanced and International Equity Portfolios may purchase
participations in trusts that hold U.S. Treasury securities (such as TIGRs and
CATs) where the trust participations evidence ownership in either the future
interest payments or the future principal payments on the U.S. Treasury
obligations. These participations are normally issued at a discount to their
"face value," and may exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest are
returned to investors.
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Repurchase and Reverse Repurchase Agreements
To increase its income, each Portfolio may agree to purchase portfolio
securities from financial institutions subject to the seller's agreement to
repurchase them at a mutually agreed-upon date and price ("repurchase
agreements"). No Portfolio will enter into repurchase agreements with the
Adviser, the Co-Distributors, or any of their affiliates. The seller under a
repurchase agreement will be required to maintain the value of the securities
subject to the agreement at not less than the repurchase price, marked to
market daily. Default by the seller would, however, expose a Portfolio to
possible loss because of adverse market action or delay in connection with the
disposition of the underlying obligations.
Each Portfolio may also obtain funds for temporary purposes by
entering into reverse repurchase agreements. Pursuant to such agreements the
Portfolios will sell portfolio securities to financial institutions such as
banks and broker-dealers and agree to repurchase them at a particular date and
price. Reverse repurchase agreements involve the risk that the market value of
the securities sold by a Portfolio may decline below the price of the
securities it is obligated to repurchase.
Lending Portfolio Securities
To increase income or offset expenses, each Portfolio may lend its
portfolio securities to financial institutions such as banks and
broker-dealers in accordance with the investment limitations described below.
Agreements would require that the loans be continuously secured by collateral
equal at all times in value to at least the market value of the securities
loaned plus accrued interest. Collateral for such loans could include cash or
securities of the U.S. Government, its agencies or instrumentalities. Such
loans will not be made if, as a result, the aggregate of all outstanding loans
of a particular Portfolio exceeds one-third of the value of its total assets.
Loans of securities involve risks of delay in receiving additional collateral
or in recovering the securities loaned or possible loss of rights in the
collateral should the borrower of the securities become insolvent. Loans will
be made only to borrowers that provide the requisite collateral comprised of
liquid assets and when, in the Adviser's judgment, the income to be earned
from the loan justifies the attendant risks.
Illiquid Securities
In accordance with their fundamental investment limitation described
below, the Growth/Value, Opportunity and Intrinsic Value Portfolios will not
knowingly invest more than 10% and the Capital Growth, Balanced and
International Equity Portfolios will not knowingly invest more than 15% of the
value of their respective total assets in securities that are illiquid.
Securities having legal or contractual restrictions on resale or no readily
available market, and instruments (including repurchase agreements, variable
and floating rate instruments and time deposits) that do not provide for
payment to the Portfolios within seven days after notice are subject to this
limitation. Securities that have legal or contractual restrictions on resale
but have a readily available market are not deemed to be illiquid for purposes
of this limitation.
The Portfolios may purchase securities which are not registered under
the Securities Act of 1933, as amended (the "1933 Act"), but which can be sold
to "qualified institutional buyers" in accordance with Rule 144A under the
1933 Act. Any such security will not be considered to be illiquid so long as
it is determined by the Board of Trustees or the Adviser, acting under
guidelines approved and monitored by the Board, that an adequate trading
market exists for that security. This investment practice could have the
effect of increasing the level of illiquidity in a Portfolio during any period
that qualified institutional buyers become uninterested in purchasing these
restricted securities. The ability to sell to qualified institutional buyers
under
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Rule 144A is a recent development, and it is not possible to predict how this
market will develop. The Board of Trustees will carefully monitor any
investments by a Portfolio in these securities.
Borrowings
The Portfolios may borrow money for temporary purposes in accordance
with the investment limitations described below. Borrowings may be effected
through reverse repurchase agreements under which the Portfolios would sell
portfolio securities to financial institutions such as banks and
broker-dealers and agree to repurchase them at a particular date and price.
Reverse repurchase agreements involve the risk that the market value of the
securities sold by a Portfolio may decline below the price of the securities
it is obligated to repurchase.
Foreign Securities
As stated above, the Growth/Value, Opportunity, Intrinsic Value,
Capital Growth, Balanced and International Equity Portfolios may invest up to
25%, 25%, 25%, 25%, 20% and 100% of their respective total assets (exclusive
of short-term cash investments) in foreign securities. Investments in foreign
securities, whether made directly or indirectly, involve certain inherent
risks, such as political or economic instability of the issuer or the country
of issue, the difficulty of predicting international trade patterns, changes
in exchange rates of foreign currencies and the possibility of adverse changes
in investment or exchange control regulations. There may be less publicly
available information about a foreign company than about a U.S. company.
Listed foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards comparable to those applicable to
domestic companies. Further, foreign stock markets are generally not as
developed or efficient as those in the U.S. and in most foreign markets volume
and liquidity are less than in the U.S. Fixed commissions on foreign stock
exchanges are generally higher than the negotiated commissions on U.S.
exchanges, and there is generally less government supervision and regulation
of foreign stock exchanges, brokers and listed companies than in the U.S. With
respect to certain foreign countries, there is a possibility of expropriation
or confiscatory taxation, limitations on the removal of funds or other assets
or diplomatic developments that could affect investment within those
countries. Because of these and other factors, securities of foreign companies
acquired by a Portfolio may be subject to greater fluctuation in price than
securities of domestic companies.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in U.S.
dollars may be affected favorably or unfavorably by changes in currency rates
and exchange control regulations. Some currency exchange costs may be incurred
when a Portfolio changes investments from one country to another.
Furthermore, some securities may be subject to brokerage taxes levied
by foreign governments, which have the effect of increasing the costs of such
investments and reducing the realized gain or increasing the realized loss on
such securities at the time of sale. Income received by the Portfolios from
sources within foreign countries may be reduced by withholding or other taxes
imposed by such countries. Tax conventions between certain countries and the
United States, however, may reduce or eliminate such taxes. All such taxes
paid by a Portfolio will reduce its net income available for distribution to
investors.
American Depository Receipts ("ADRs")
The Portfolios may invest in securities of foreign issuers in the form
of ADRs or similar securities representing securities of foreign issuers.
These securities may not be denominated in the same currency as the securities
they represent. ADRs are receipts typically issued by a United States bank or
trust
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company evidencing ownership of the underlying foreign securities and are
denominated in U.S. dollars. Certain such institutions issuing ADRs may not be
sponsored by the issuer. A non-sponsored depository may not provide the same
shareholder information that a sponsored depository is required to provide
under its contractual arrangements with the issuer.
European Depository Receipts ("EDRs")
The Capital Growth and International Equity Portfolios may invest in
securities of foreign issuers in the form of EDRs or similar securities
representing securities of foreign issuers. These securities may not be
denominated in the same currency as the securities they represent. EDRs are
receipts issued by a European financial institution evidencing ownership of
the underlying foreign securities and are generally denominated in foreign
currencies. Generally, EDRs, in bearer form, are designed for use in the
European securities markets.
Supranational Bank Obligations
The Balanced Portfolio may invest in obligations of supranational
banks. Supranational banks are international banking institutions designed or
supported by national governments to promote economic reconstruction,
development or trade between nations (e.g., the World Bank). Obligations of
supranational banks may be supported by appropriated but unpaid commitments of
their member countries and there is no assurance that these commitments will
be undertaken or met in the future.
Convertible Securities
A convertible security is a security that may be converted either at a
stated price or rate within a specified period of time into a specified number
of shares of common stock. By investing in convertible securities, a Portfolio
seeks the opportunity, through the conversion feature, to participate in the
capital appreciation of the common stock into which the securities are
convertible, while earning higher current income than is available from the
common stock. Convertible securities acquired by a Portfolio will be rated
investment grade by a Rating Agency, or if unrated, will be of comparable
quality as determined by the Adviser. Subsequent to its purchase by a
Portfolio, a rated security may cease to be rated or its rating may be reduced
below the minimum rating required for purchase by the Portfolio. The Adviser
will consider such an event in determining whether the Portfolio involved
should continue to hold the security. The Adviser expects, however, to
promptly sell any securities that are non-investment grade as a result of
these events that exceed 5% of a Portfolio's net assets where it has
determined that such sale is in the best interest of the Portfolio.
Warrants
Each Portfolio may invest up to 5% of its assets at the time of
purchase in warrants and similar rights (other than those that have been
acquired in units or attached to other securities). Warrants represent rights
to purchase securities at a specified price valid for a specified period of
time. The prices of warrants do not necessarily correlate with the prices of
the underlying securities.
When-Issued Purchases and Forward Commitments
The Portfolios may purchase securities on a "when-issued" basis and
may purchase or sell securities on a "forward commitment" basis. These
transactions, which involve a commitment by a Portfolio to purchase or sell
particular securities with payment and delivery taking place at a future date
(perhaps one or two months later), permit the Portfolio to lock-in a price or
yield on a
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security it owns or intends to purchase, regardless of future changes in
interest rates. When-issued and forward commitment transactions involve the
risk, however, that the yield obtained in a transaction may be less favorable
than the yield available in the market when the securities delivery takes
place. Each Portfolio's forward commitments and when-issued purchases are not
expected to exceed 25% of the value of its total assets absent unusual market
conditions. The Portfolios do not earn income with respect to these
transactions until the subject securities are delivered to the Portfolios. The
Portfolios do not intend to engage in when-issued purchases and forward
commitments for speculative purposes but only in furtherance of their
investment objectives.
Asset Backed Securities
Asset Backed Securities held by the Balanced and International Equity
Portfolios arise through the grouping by governmental, government-related and
private organizations of loans, receivables and other assets originated by
various lenders, as described below.
The yield characteristics of Asset Backed Securities differ from
traditional debt securities. A major difference is that the principal amount
of the obligations may be prepaid at any time because the underlying assets
(i.e., loans) generally may be prepaid at any time. As a result, if an Asset
Backed Security is purchased at a premium, a prepayment rate that is faster
than expected will reduce yield to maturity, while a prepayment rate that is
slower than expected will have the opposite effect of increasing yield to
maturity. Conversely, if an Asset Backed Security is purchased at a discount,
faster than expected prepayments will increase, while slower than expected
prepayments will decrease, yield to maturity. In calculating the average
weighted maturity of the Portfolios, the maturity of Asset Backed Securities
will be based on estimates of average life.
Prepayments on Asset Backed Securities generally increase with falling
interest rates and decrease with rising interest rates. Prepayment rates are
also influenced by a variety of economic and social factors. In general, the
collateral supporting non-mortgage backed securities is of shorter maturity
than mortgage loans and is less likely to experience substantial prepayments.
Like other fixed income securities, when interest rates rise the value of an
Asset Backed Security generally will decline; however, when interest rates
decline, the value of an Asset Backed Security with prepayment features may
not increase as much as that of other fixed income securities, and, as noted
above, changes in market rates of interest may accelerate or retard
prepayments and thus affect maturities.
These characteristics may result in a higher level of price volatility
for these assets under certain market conditions. In addition, while the
trading market for short-term mortgages and Asset Backed Securities is
ordinarily quite liquid, in times of financial stress the trading market for
these securities sometimes becomes restricted.
Mortgage Backed Securities. Asset Backed Securities acquired by the
Balanced and International Equity Portfolios consist of both mortgage and
non-mortgage backed securities. Mortgage backed securities represent an
ownership interest in a pool of mortgages, the interest on which is in most
cases issued and guaranteed by an agency or instrumentality of the U.S.
Government, although not necessarily by the U.S. Government itself. Mortgage
backed securities include collateralized mortgage obligations and mortgage
pass-through certificates.
Collateralized mortgage obligations ("CMOs") provide the holder with a
specified interest in the cash flow of a pool of underlying mortgages or other
mortgage backed securities. Issuers of CMOs ordinarily elect to be taxed as
pass-through entities known as real estate mortgage investment conduits
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("REMICs"). CMOs are issued in multiple classes, each with a specified fixed
or floating interest rate and a final distribution date. The relative payment
rights of the various CMO classes may be structured in a variety of ways. In
most cases, however, payments of principal are applied to the CMO classes in
the order of their respective stated maturities, so that no principal payments
will be made on a CMO class until all other classes having an earlier stated
maturity date are paid in full. These multiple class securities may be issued
or guaranteed by U.S. Government agencies or instrumentalities, including the
Government National Mortgage Association ("GNMA"), Federal National Mortgage
Association ("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC"), or
issued by trusts formed by private originators of, or investors in, mortgage
loans. Classes in CMOs which the Portfolios may hold are known as "regular"
interests. CMOs also issue "residual" interests, which in general are junior
to and more volatile than regular interests. The Portfolios do not intend to
purchase residual interests.
Mortgage pass-through certificates provide the holder with a pro rata
interest in the underlying mortgages. One type of such certificate in which
the Portfolios may invest is a GNMA Certificate which is backed as to the
timely payment of principal and interest by the full faith and credit of the
U.S. Government. Another type is a FNMA Certificate, the principal and
interest of which are guaranteed only by FNMA itself, not by the full faith
and credit of the U.S. Government. Another type is a FHLMC Participation
Certificate which is guaranteed by FHLMC as to timely payment of principal and
interest. However, like a FNMA security it is not guaranteed by the full faith
and credit of the U.S. Government. Privately issued mortgage backed securities
will carry a rating at the time of purchase of at least A by S&P or by Moody's
or, if unrated, will be in the Adviser's opinion equivalent in credit quality
to such rating. Mortgage backed securities issued by private issuers, whether
or not such obligations are subject to guarantees by the private issuer, may
entail greater risk than obligations directly or indirectly guaranteed by the
U.S. Government.
Non-Mortgage Backed Securities. The Balanced and International Equity
Portfolios may also invest in non-mortgage backed securities including
interests in pools of receivables, such as motor vehicle installment purchase
obligations and credit card receivables. Such securities are generally issued
as pass-through certificates, which represent undivided fractional ownership
interests in the underlying pools of assets. Such securities may also be debt
instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity organized solely for
the purpose of owning such assets and issuing such debt. Non-mortgage backed
securities are not issued or guaranteed by the U.S. Government or its agencies
or instrumentalities.
Non-mortgage backed securities involve certain risks that are not
presented by mortgage backed securities. Primarily, these securities do not
have the benefit of the same security interest in the underlying collateral.
Credit card receivables are generally unsecured and the debtors are entitled
to the protection of a number of state and federal consumer credit laws. Most
issuers of motor vehicle receivables permit the servicers to retain possession
of the underlying obligations. If the servicer were to sell these obligations
to another party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the related motor vehicle receivables. In
addition, because of the large number of vehicles involved in a typical
issuance and technical requirements under state laws, the trustee for the
holders of the motor vehicle receivables may not have an effective security
interest in all of the obligations backing such receivables. Therefore, there
is a possibility that recoveries on repossessed collateral may not, in some
cases, be able to support payments on these securities.
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Variable and Floating Rate Instruments
The Balanced Portfolio may invest in leveraged inverse floating rate
debt instruments ("inverse floaters"). The interest rate of an inverse floater
resets in the opposite direction from the market rate of interest to which it
is indexed. An inverse floater may be considered to be leveraged to the extent
that its interest rate varies by a magnitude that exceeds the magnitude of the
change in the index rate of interest. The higher degree of leverage inherent
in inverse floaters is associated with greater volatility in their market
values.
The absence of an active secondary market with respect to particular
variable and floating rate instruments could make it difficult for the
Balanced Portfolio to dispose of the instruments if the issuer defaulted on
its payment obligation or during periods that the Portfolio is not entitled
to exercise demand rights, and the Portfolio could, for these or other reasons,
suffer a loss with respect to such instruments. Variable and floating rate
instruments (including inverse floaters) will be subject to the Portfolio's
limitation on illiquid investments. See "Illiquid Securities."
Zero Coupon Obligations
Each Portfolio may invest in zero coupon obligations which are
discount debt obligations that do not make periodic interest payments although
income is generally imputed to the holder on a current basis. Such obligations
may have higher price volatility than those which require the payment of
interest periodically. The Adviser will consider the liquidity needs of a
Portfolio when any investment in zero coupon obligations is made.
Foreign Currency Transactions
The International Equity and Balanced Portfolios may engage in
currency exchange transactions to the extent consistent with their respective
investment objectives or to hedge their portfolios. The Portfolios will
conduct their currency exchange transactions either on a spot (i.e., cash)
basis at the rate prevailing in the currency exchange market, or through
entering into forward contracts to purchase or sell currencies. A forward
currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date, which must be more than two days from the
date of the contract, at a price set at the time of the contract. Forward
currency exchange contracts are entered into in the interbank market conducted
directly between currency traders (typically commercial banks or other
financial institutions) and their customers. They may be used to reduce the
level of volatility caused by changes in foreign currency exchange rates or
when such transactions are economically appropriate for the reduction of risks
in the ongoing management of the Portfolios. Although forward currency
exchange contracts may be used to minimize the risk of loss due to a decline
in the value of the hedged currency, at the same time they tend to limit any
potential gain that might be realized should the value of such currency
increase. The Portfolios also may combine forward currency exchange contracts
with investments in securities denominated in other currencies.
The International Equity Portfolio also may maintain short positions
in forward currency exchange transactions, which would involve the Portfolio
agreeing to exchange an amount of a currency it did not currently own for
another currency at a future date in anticipation of a decline in the value of
the currency sold relative to the currency the Portfolio contracted to receive
in the exchange.
Each of the International Equity and Balanced Portfolios will maintain
in a segregated custodial account cash or U.S. Government securities or other
high quality liquid debt securities at least equal to the aggregate amount of
its short positions (in the case of the International Equity Portfolio) and of
its total assets committed to consummation of its forward currency exchange
contracts, plus accrued interest, in accordance with applicable requirements
of the SEC.
Options on Foreign Currency
The International Equity and Balanced Portfolios may purchase and sell
call and put options on foreign currency for the purpose of hedging against
changes in future currency exchange rates. Call options convey the right to
buy the underlying currency at a price which is expected to be lower than the
spot price
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of the currency at the time the option expires. Put options convey the right
to sell the underlying currency at a price which is anticipated to be higher
than the spot price of the currency at the time the option expires. The
Portfolios may use foreign currency options for the same purposes as forward
currency exchange and futures transactions, as described herein. See also
"Options" and "Currency Futures and Options on Currency Futures" below.
Futures Contracts and Related Options
Each Portfolio may trade futures contracts and options on futures
contracts in U.S. domestic markets, such as the Chicago Board of Trade and the
International Monetary Market of the Chicago Mercantile Exchange. To the
extent permitted under applicable law, the International Equity Portfolio may
also trade futures contracts and related options on exchanges located outside
the United States, such as the London International Financial Futures Exchange
and the Sydney Futures Exchange Limited. Foreign markets may offer advantages
such as trading in commodities that are not currently traded in the United
States or arbitrage possibilities not available in the United States. Foreign
markets, however, may have greater risk potential than domestic markets.
Each Portfolio may purchase and sell futures contracts which obligate
it to take or make delivery of certain securities at maturity, as well as
stock index futures contracts which are bilateral agreements pursuant to which
two parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the stock index value
(which assigns relative values to the common stocks included in the index) at
the close of the last trading day of the contract and the price at which the
futures contract is originally struck. No physical delivery of the underlying
stocks in the index is made. The Capital Growth, Balanced and International
Equity Portfolios may enter into contracts for the future delivery of
fixed-income securities commonly known as interest rate futures contracts.
A Portfolio may sell a futures contract in order to offset an expected
decrease in the value of its portfolio that might otherwise result from a
market decline or currency exchange fluctuation. A Portfolio may do so either
to hedge the value of its securities portfolio as a whole, or to protect
against declines occurring prior to sales of securities in the value of the
securities to be sold. In addition, a Portfolio may utilize futures contracts
in anticipation of changes in the composition of its holdings or in currency
exchange rates.
The Capital Growth, Balanced and International Equity Portfolios may
also purchase options on futures contracts and may purchase and write put and
call options on stock indices listed on U.S. and, in the case of the
International Equity Portfolio foreign exchanges, or traded in the
over-the-counter market. A futures option gives the holder, in return for the
premium paid, the right to buy (call) from or sell (put) to the writer of the
option a futures contract at a specified price at any time during the period
of the option.
When a Portfolio sells an option on a futures contract, it becomes
obligated to purchase or sell a futures contract if the option is exercised.
In anticipation of a market advance, a Portfolio may purchase call options on
futures contracts as a substitute for the purchase of futures contracts to
hedge against a possible increase in the price of securities which the
Portfolio intends to purchase. Similarly, if the value of a Portfolio's
portfolio securities is expected to decline, the Portfolio might purchase put
options or sell call options on futures contracts rather than sell futures
contracts.
The Portfolios' commodities transactions must constitute bona fide
hedging or other permissible transactions pursuant to regulations promulgated
by the Commodities and Futures Trading Commission ("CFTC"). In addition, a
Portfolio may not engage in such transactions if the sum of the amount of
initial margin deposits and premiums paid for unexpired commodity options,
other than for bona
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fide hedging transactions, would exceed 5% of the liquidation value of its
assets, after taking into account unrealized profits and unrealized losses on
such contracts it has entered into; provided, however, that in the case of an
option that is in-the-money at the time of purchase, the in-the-money amount
may be excluded in calculating the percentage limitation. Pursuant to SEC
requirements, the Portfolios will be required to segregate cash or high
quality money market instruments in connection with their commodities
transactions in an amount generally equal to the value of the underlying
commodity. The Trust intends to comply with the regulations of the CFTC
exempting the Portfolios from registration as a "commodity pool operator."
For a more detailed description of futures contracts and related
options, see Appendix B to the Statement of Additional Information.
Currency Futures and Options on Currency Futures
The International Equity and Balanced Portfolios may purchase and sell
currency futures contracts and options thereon. By selling foreign currency
futures, a Portfolio can establish the number of U.S. dollars that it will
receive in the delivery month for a certain amount of a foreign currency. In
this way, if a Portfolio anticipates a decline of a foreign currency against
the U.S. dollar, the Portfolio can attempt to fix the U.S. dollar value of
some or all of its securities that are denominated in that currency. By
purchasing foreign currency futures, a Portfolio can establish the number of
U.S. dollars that it will be required to pay for a specified amount of a
foreign currency in the delivery month. Thus, if a Portfolio intends to buy
securities in the future and expects the U.S. dollar to decline against the
relevant foreign currency during the period before the purchase is effected,
the Portfolio, for the price of the currency future, can attempt to fix the
price in U.S. dollars of the securities it intends to acquire.
The purchase of options on currency futures will allow a Portfolio,
for the price of the premium it must pay for the option, to decide whether or
not to buy (in the case of a call option) or to sell (in the case of a put
option) a futures contract at a specified price at any time during the period
before the option expires. If the Portfolios, in purchasing an option, have
been correct in their judgment concerning the direction in which the price of
a foreign currency would move as against the U.S. dollar, they may exercise
the option and thereby take a futures position to hedge against the risk they
had correctly anticipated or close out the option position at a gain that will
offset, to some extent, currency exchange losses otherwise suffered by the
Portfolios. If exchange rates move in a way a Portfolio did not anticipate,
the Portfolio will have incurred the expense of the option without obtaining
the expected benefit. As a result, a Portfolio's profits on the underlying
securities transactions may be reduced or overall losses may be incurred.
Options
The Capital Growth, Balanced and International Equity Portfolios may
purchase and sell put and call options listed on a national securities
exchange and issued by the Options Clearing Corporation for hedging purposes.
Such transactions may be effected on a principal basis with primary reporting
dealers in U.S. Government securities in an amount not exceeding 5% of a
Portfolio's net assets, as described further in the Statement of Additional
Information. Such options may relate to particular securities or to various
stock indices or bond indices. Purchasing options is a specialized investment
technique which entails a substantial risk of a complete loss of the amounts
paid as premiums to the writer of the option. Each such Portfolio may also
purchase and write put and call options on stock indices listed on foreign
exchanges or traded in the over-the-counter market.
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<PAGE>
The Capital Growth, Balanced and International Equity Portfolios may
purchase and sell put options on portfolio securities at or about the same
time that they purchase the underlying security or at a later time. By buying
a put, a Portfolio limits its risk of loss from a decline in the market value
of the security until the put expires. Any appreciation in the value of and
yield otherwise available from the underlying security, however, will be
partially offset by the amount of the premium paid for the put option and any
related transaction costs. Call options may be purchased by a Portfolio in
order to acquire the underlying security at a later date at a price that
avoids any additional cost that would result from an increase in the market
value of the security. A Portfolio may also purchase call options to increase
its return to investors at a time when the call is expected to increase in
value due to anticipated appreciation of the underlying security. Prior to its
expiration, a purchased put or call option may be sold in a closing sale
transaction (a sale by a Portfolio, prior to the exercise of an option that it
has purchased, of an option of the same series), and profit or loss from the
sale will depend on whether the amount received is more or less than the
premium paid for the option plus the related transaction costs.
In addition, the Capital Growth, Balanced and International Equity
Portfolios may write covered call and secured put options. A covered call
option means that a Portfolio owns or has the right to acquire the underlying
security subject to call at all times during the option period. A secured put
option means that a Portfolio maintains in a segregated account with its
custodian cash or U.S. Government securities in an amount not less than the
exercise price of the option at all times during the option period. Such
options will be listed on a national securities exchange and issued by the
Options Clearing Corporation and may be effected on a principal basis with
primary reporting dealers in U.S. Government securities. The aggregate value
of the securities subject to options written by a Portfolio will not exceed
25% of the value of its net assets. In order to close out an option position
prior to maturity, a Portfolio may enter into a "closing purchase transaction"
by purchasing a call or put option (depending upon the position being closed
out) on the same security with the same exercise price and expiration date as
the option which it previously wrote.
By writing a covered call option, a Portfolio forgoes the opportunity
to profit from an increase in the market price of the underlying security
above the exercise price except insofar as the premium represents such a
profit, and it is not able to sell the underlying security until the option
expires or is exercised or the Portfolio effects a closing purchase
transaction by purchasing an option of the same series. If a Portfolio writes
a secured put option, it assumes the risk of loss should the market value of
the underlying security decline below the exercise price of the option. The
use of covered call and secured put options will not be a primary investment
technique of the Portfolios.
For additional information relating to option trading practices,
including particular risks thereof, see the Statement of Additional
Information.
Risk Factors Associated with Futures, Options and Currency Futures and Options
To the extent a Portfolio is engaging in a futures transaction as a
hedging device, due to the risk of an imperfect correlation between securities
in its portfolio that are the subject of a hedging transaction and the futures
contract used as a hedging device, it is possible that the hedge will not be
fully effective in that, for example, losses on the portfolio securities may
be in excess of gains on the futures contract or losses on the futures
contract may be in excess of gains on the portfolio securities that were the
subject of the hedge. In futures contracts based on indices, the risk of
imperfect correlation increases as the composition of the Portfolio varies
from the composition of the index. In an effort to compensate for the
imperfect correlation of movements in the price of the securities being hedged
and movements in the price of futures
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<PAGE>
contracts, the Portfolio may buy or sell futures contracts in a greater or
lesser dollar amount than the dollar amount of the securities being hedged if
the historical volatility of the futures contract has been less or greater
than that of the securities. Such "over hedging" or "under hedging" may
adversely affect the Portfolio's net investment results if market movements
are not as anticipated when the hedge is established.
Successful use of futures by a Portfolio also is subject to the
Adviser's ability to predict correctly movements in the direction of
securities prices, interest rates, currency exchange rates and other economic
factors. For example, if the Portfolio has hedged against the possibility of a
decline in the market adversely affecting the value of securities held in its
portfolio and prices increase instead, the Portfolio will lose part or all of
the benefit of the increased value of securities which it has hedged because
it will have offsetting losses in its futures positions. In addition, in such
situations, if the Portfolio has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. Such sales of
securities may, but will not necessarily, be at increased prices which reflect
the rising market. The Portfolio may have to sell securities at a time when it
may be disadvantageous to do so.
Although a Portfolio intends to enter into futures contracts and
options transactions only if there is an active market for such contracts, no
assurance can be given that a liquid market will exist for any particular
contract at any particular time. See "Illiquid Securities" above. Many futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single trading day. Once the daily limit has
been reached in a particular contract, no trades may be made that day at a
price beyond that limit or trading may be suspended for specified periods
during the trading day. Futures contracts prices could move to the limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and potentially subjecting the
Portfolio to substantial losses. If it is not possible, or the Portfolio
determines not, to close a futures position in anticipation of adverse price
movements, it will be required to make daily cash payments of variation
margin. In such circumstances, an increase in the value of the portion of the
portfolio being hedged, if any, may offset partially or completely losses on
the futures contract.
Currency exchange rates may fluctuate significantly over short periods
of time. They generally are determined by the forces of supply and demand in
the foreign exchange markets and the relative merits of investments in
different countries, actual or perceived changes in interest rates and other
complex factors as seen from an international perspective. Currency exchange
rates also can be affected unpredictably by intervention by U.S. or foreign
governments or central banks, or the failure to intervene, or by currency
controls or political developments in the United States or abroad. The foreign
currency market offers less protection against defaults in the forward trading
of currencies than is available when trading in currencies occurs on an
exchange. Since a forward currency contract is not guaranteed by an exchange
or clearinghouse, a default on the contract would deprive the Portfolio of
unrealized profits or force the Portfolio to cover its commitments for
purchase or resale, if any, at the current market price.
Unlike trading on domestic commodity exchanges, trading on foreign
commodity exchanges is not regulated by the CFTC and may be subject to greater
risks than trading on domestic exchanges. For example, some foreign exchanges
are principal markets so that no common clearing facility exists and a trader
may look only to the broker for performance of the contract. In addition,
unless the Portfolio hedges against fluctuations in the exchange rate between
the U.S. dollar and the currencies in which trading is done on foreign
exchanges, any profits that the Portfolio might realize in trading could be
eliminated by adverse changes in the exchange rate, or the Portfolio could
incur losses as a
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result of those changes. Transactions on foreign exchanges may include both
commodities which are traded on domestic exchanges and those which are not.
Risk Factors Associated with Derivative Instruments
Each Portfolio may purchase derivative instruments. Derivative
instruments are instruments that derive value from the performance of
underlying assets, interest or currency exchange rates, or indices, and
include (but are not limited to) futures contracts, options, forward currency
contracts and structured debt obligations (including collateralized mortgage
obligations and other types of asset-backed securities, "stripped" securities
and various floating rate instruments, including "inverse" floaters).
Derivative instruments present, to varying degrees, market risk that
the performance of the underlying assets, exchange rates or indices will
decline; credit risk that the dealer or other counterparty to the transaction
will fail to pay its obligations; volatility and leveraging risk that, if
interest or exchange rates change adversely, the value of the derivative
instrument will decline more than the assets, rates or indices on which it is
based; liquidity risk that a Portfolio will be unable to sell a derivative
instrument when it wants because of lack of market depth or market disruption;
pricing risk that the value of a derivative instrument (such as an option)
will not correlate exactly to the value of the underlying assets, rates or
indices on which it is based; and operations risk that loss will occur as a
result of inadequate systems and controls, human error or otherwise. Some
derivative instruments are more complex than others, and for those
instruments that have been developed recently, data are lacking regarding
their actual performance over complete market cycles.
The Adviser will evaluate the risks presented by the derivative
instruments purchased by the Portfolios, and will determine, in connection
with its day-to-day management of the Portfolios, how they will be used in
furtherance of the Portfolios' investment objectives. It is possible, however,
that the Adviser's evaluations will prove to be inaccurate or incomplete and,
even when accurate and complete, it is possible that the Portfolios will,
because of the risks discussed above, incur loss as a result of their
investments in derivative instruments.
Portfolio Turnover
Generally the Portfolios will purchase securities for capital
appreciation or investment income, or both, and not for short-term trading
profits. However, a Portfolio may sell a portfolio investment soon after its
acquisition if the Adviser believes that such a disposition is consistent with
or in furtherance of the Portfolio's investment objective. Portfolio
investments may be sold for a variety of reasons, such as more favorable
investment opportunities or other circumstances. As a result, such Portfolios
are likely to have correspondingly greater brokerage commissions and other
transaction costs which are borne indirectly by shareholders. Portfolio
turnover may also result in the realization of substantial net capital gains.
(See "Taxes-Federal" in the Prospectus and "Additional Information Concerning
Taxes" in the Statement of Additional Information.) While it is not possible
to accurately predict portfolio turnover rates, the annual turnover rates for
the Growth/Value, Opportunity, Intrinsic Value, Capital Growth and
International Equity Portfolios are not expected to exceed 100% and the annual
turnover rate for the Balanced Portfolio is not expected to exceed 75%.
Investment Limitations
Each Portfolio is subject to a number of investment limitations. The
following investment limitations are matters of fundamental policy and may not
be changed with respect to a particular Portfolio without the affirmative vote
of the holders of a majority of the Portfolio's outstanding shares. Other
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investment limitations that cannot be changed without a vote of shareholders
are contained in the Statement of Additional Information under "Investment
Objectives, Policies and Risk Factors."
No Portfolio may:
1. Purchase securities of any one issuer (other than securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of a Portfolio's
total assets would be invested in the securities of such issuer, or more than
10% of the issuer's outstanding voting securities would be owned by a
Portfolio, except that up to 25% of the value of the Portfolio's total assets
may be invested without regard to these limitations.
2. Purchase any securities which would cause 25% or more of the value
of the Portfolio's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no limitation with
respect to obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and repurchase agreements secured by such
instruments; (b) wholly-owned finance companies will be considered to be in
the industries of their parents if their activities are primarily related to
financing the activities of the parents; and (c) utilities will be divided
according to their services, for example, gas, gas transmission, electric and
gas, electric and telephone will each be considered a separate industry.
3. Make loans, except that each Portfolio may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies and may lend portfolio securities in an
amount not exceeding one-third of its total assets.
4. Borrow money or issue senior securities, except that each Portfolio
may borrow from banks and enter into reverse repurchase agreements for
temporary purposes in amounts not in excess of 10% of the value of its total
assets at the time of such borrowing; or mortgage, pledge or hypothecate any
assets, except in connection with any such borrowing and in amounts not in
excess of the lesser of the dollar amounts borrowed or 10% of the value of the
Portfolio's total assets at the time of such borrowing. No Portfolio will
purchase securities while its borrowings (including reverse repurchase
agreements) in excess of 5% of its total assets are outstanding. Securities
held in escrow or separate accounts in connection with a Portfolio's
investment practices described in the Statement of Additional Information or
in this Prospectus are not deemed to be pledged for purposes of this
limitation.
In addition, the Growth/Value, Opportunity and Intrinsic Value
Portfolios may not invest more than 10% of their respective total assets in
illiquid investments. The Capital Growth, Balanced and International Equity
Portfolios may invest up to 15% of their respective total assets in illiquid
securities. See "Illiquid Securities" above.
Generally, if a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in the value of a Portfolio's portfolio securities will not constitute
a violation of such limitation for purposes of the 1940 Act.
In order to permit the sale of a Portfolio's shares in certain states,
the Portfolios may make commitments more restrictive than the investment
policies and limitations described above. Should a Portfolio determine that
any such commitment is no longer in the best interests of the Portfolio, it
will revoke the commitment by terminating sales of its shares in the state
involved.
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PURCHASE OF SHARES
In General
Each Portfolio's shares are offered and sold on a continuous basis by
FoM and Essex, as the Trust's Co-Distributors. FoM is a registered
broker/dealer with offices at 100 Renaissance Center, 26th Floor, Detroit,
Michigan 48243. Essex is a registered broker/dealer with offices at 215
Gateway Road West, Napa, California 94558.
Class A shares are sold to the public primarily through financial
institutions such as banks, brokers and dealers. Investors may purchase Class
A shares directly in accordance with the procedures set forth below or through
procedures established by their financial institutions in connection with the
requirements of their accounts.
Financial institutions may impose different minimum investment and
other requirements on their customers and may charge additional fees in
connection with the establishment of accounts with the institutions and
purchase and redemption of Class A shares. Persons wishing to purchase Class A
shares through their accounts at an institution or a Co-Distributor should
contact the institution or Co-distributor directly for appropriate
instructions and fee information. In addition, certain financial institutions
may enter into shareholder servicing agreements with the Trust whereby they
would perform various administrative support services for their customers who
are the beneficial owners of Class A shares in return for fees from the
Portfolios. See "Shareholder Servicing Plan" under the heading "Management" in
this Prospectus.
All shareholders of record will receive confirmations of share
purchases and redemptions. Class A shares purchased by institutions on behalf
of their customers will normally be held of record by them. Institutions will
record their customers' beneficial ownership of such shares and provide
regular account statements reflecting such beneficial ownership.
Institutions will be responsible for transmitting purchase and
redemption orders to FoM, Essex or NBD acting as transfer agent (the "Transfer
Agent") on a timely basis, in accordance with the procedures stated below.
Purchase Procedures
The minimum initial investment is $1,000, except for purchases through
an institution whose customers have invested an aggregate minimum of $1,000 or
for investments made through a Co-Distributor's or an institution's sweep
privilege, the Trust's Automatic Investment Plan described below, or the
Trust's IRA program described below. The minimum subsequent investment is
$100, except for reinvested dividends or as otherwise described below. The
Trust reserves the right to reject any purchase order.
Orders for Class A shares may be placed by telephone by calling (800)
688-3350 (provided an investor has made the appropriate election in his
account application) or by mail (by completing the account application which
accompanies this Prospectus and mailing the completed form and the payment for
shares to FoM, Essex or the Transfer Agent). All checks must be drawn on a
bank located within the United States and must be payable in U.S. dollars.
Subsequent investments in an existing account in a Portfolio may be made at
any time by sending a check or money order along with either (a) the
detachable form that regularly accompanies the Trust's confirmation of a prior
transaction, (b) a subsequent order form which may be obtained from the Trust,
or (c) a letter stating the amount of the investment, the name of the
Portfolio and the account number in which the investment is to be made. If any
check used for investment in an account does not clear, the order will be
cancelled and notice thereof will be given; in such event the account will be
responsible for any loss to the Trust as well as a $15 fee imposed by the
Transfer Agent.
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With the exception of customers of FoM and residents of
the state of Texas, Class A shares may also be paid for by wiring
federal funds to the Transfer Agent, NBD Bank, ABA 072000326, for the
account of The Woodward Funds, Account Number GL 325612, and
identifying the customer name and account number. Before wiring payment,
customers should notify the Transfer Agent by calling (800) 688-3350.
If customers of FoM wire payment in federal funds, they should direct
payment to NBD Bank, ABA 072000326, for the account of First of Michigan
Corporation re: The Woodward Funds, Account Number 059-41, and should identify
the customer name and account number. Before wiring payment, customers of FoM
should call FoM at (800) 544-8275 (outside Michigan) or (800) 852-7730 (within
Michigan).
Purchase orders which are accompanied by payment (by check or wire
transfer) and received by the Transfer Agent in proper form on a Business Day
(as defined below) prior to the close of the New York Stock Exchange are
priced at the public offering price (i.e. net asset value plus the applicable
sales load set forth below) of the particular Portfolio determined on that
Business Day. Purchase orders which are received by the Transfer Agent after
the close of trading on the Exchange on a Business Day or on non-Business Days
will be executed as of the determination of net asset value on the next
Business Day.
The Trust will not accept payment in cash or third party checks for
the purchase of shares. Federal regulations require that each investor provide
a certified taxpayer identification number upon opening or reopening an
account. Applications without a taxpayer identification number will not be
accepted. See the account application for further information about this
requirement.
Net Asset Value and Pricing of Shares
The net asset value of each Portfolio for purposes of pricing purchase
and redemption orders is determined as of the close of trading on the floor
of the New York Stock Exchange ("Exchange") (currently 4:00 p.m. New York
Time), on each day the Exchange is open for business ("Business
Day") except: (i) those holidays which the Exchange observes (currently New
Year's Day, Presidents' Day, Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day and Christmas Day); and
(ii) those Business Days on which the Exchange closes prior to the close of
its regular trading hours ("Early Closing Time"), in which event the net asset
value of each Portfolio will be determined and its shares will be priced as
of such Early Closing Time. Net asset value per Class A share of
a Portfolio is calculated by dividing the value of all securities
and other assets belonging to the Portfolio allocable to that Class A,
less the liabilities charged to that Class A, by the number of the
outstanding shares of such Class A.
Securities held by the Portfolios which are traded on a recognized
U.S. stock exchange are valued at the last sale price on the securities
exchange on which such securities are primarily traded or at the last sale
price on the national securities market. Securities which are primarily traded
on foreign securities exchanges are generally valued at the latest closing
price on their respective exchanges, except when an occurrence subsequent to
the time a value was established is likely to have changed such value, in
which case the fair value of those securities will be determined through
consideration of other factors by the Adviser under the supervision of the
Board of Trustees. Securities, whether U.S. or foreign, traded on only
over-the-counter markets and securities for which there were no transactions
are valued at the average of the current bid and asked prices. Fixed income
securities held by the Portfolios are valued according to the broadest and
most representative market, which ordinarily will be the over-the-counter
markets, whether in the United States or in foreign countries. Such securities
are valued at the average of the current bid and asked prices. Securities for
which accurate market quotations are not readily
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available, and other assets are valued at fair value by the Adviser under the
supervision of the Board of Trustees. Securities may be valued on the basis of
prices provided by independent pricing services when the Adviser believes such
prices reflect the fair market value of such securities. The prices provided
by pricing services take into account institutional size trading in similar
groups of securities and any developments related to specific securities. For
valuation purposes, the value of assets and liabilities expressed in foreign
currencies will be converted to U.S. dollars equivalent at the prevailing
market rate on the day of valuation. A Portfolio's open futures contracts will
be "marked-to-market."
PUBLIC OFFERING PRICE
The public offering price for Class A shares of the Portfolios is the
sum of the net asset value per share of the Class A shares being purchased
plus a sales load as follows:
<TABLE>
<CAPTION>
Reallowance to
Total Sales Load Institutions
------------------------------- --------------
As a % of As a % of As a % of
offering price net asset value offering price
Amount of Transaction per share per share per share
- - --------------------- -------------- --------------- --------------
<S> <C> <C> <C>
Less than $49,999................... 5.00 5.26 4.50
$50,000 to $99,999.................. 4.50 4.71 4.00
$100,000 to $249,999................ 3.50 3.63 3.00
$250,000 to $499,999................ 2.50 2.56 2.00
$500,000 to $999,999................ 2.00 2.04 1.75
$1,000,000 and over................. .00 .00 .00
</TABLE>
The sales load described above will not be applicable to purchases of
Class A shares by: (1) any bank, trust company or other institution acting on
behalf of its fiduciary customer accounts or any other account maintained by
its trust department (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); (2) any individual, trust,
corporation or other person where the shares are acquired in connection with
the distribution of assets held in any account referred to in (l) above with
NBD or its affiliates; (3) individual retirement accounts maintained by the
trust division of NBD or of its affiliates; (4) current and retired directors,
officers and employees of NBD or any of its affiliates; (5) the trustees,
former trustees and officers of the Trust; (6) broker/dealers which have
entered into an agreement with a Co- Distributor or the Trust pursuant to the
Trust's Service and Distribution Plan or Shareholder Servicing Plan and their
representatives purchasing for their own accounts; and (7) spouses, children,
grandchildren, siblings, parents, grandparents and in-laws of individuals
referred to in paragraphs (4), (5) and (6) above. An application to qualify
for such purchases of Class A shares (an "NAV Account Application") may be
obtained from the Transfer Agent by calling (800) 688-3350. In addition, no
sales load is charged on the reinvestment of dividends or distributions, or in
connection with certain share exchanges described below under "Shareholder
Services -- Exchange Privilege." The Trust may terminate any exemption from
the sales load by providing notice in the Prospectus, but any such termination
would only affect future purchases of Class A shares. The reallowance to
institutions may be changed from time to time.
From time to time, the Co-Distributors, at their expense, may offer
additional promotional incentives to dealers.
Quantity Discounts
An investor may be entitled to reduced sales charges through Rights of
Accumulation, a Letter of Intent or a combination of investments, even if the
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investor does not wish to make an investment of a size that would normally
qualify for a quantity discount.
An investor must notify his institution or the Transfer Agent at the
time of purchase whenever a quantity discount applies. Upon such notification,
the investor will receive the lowest applicable sales charge. Quantity
discounts may be modified or terminated at any time and are subject to
confirmation of an investor's holdings. For more information about quantity
discounts, an investor should contact his institution or call (800) 688-3350.
Right of Accumulation. A reduced sales load applies to any purchase of
Class A shares of the Portfolios and any other portfolio which is currently
offered or may be offered in the future by the Trust that is sold with a sales
load ("Eligible Portfolios") where an investor's then current aggregate
investment is $50,000 or more. "Aggregate investment" means the total of: (a)
the dollar amount of the then current purchase; and (b) the value (based on
current net asset value) of Class A shares of Eligible Portfolios on which a
sales load has been paid (including shares acquired through reinvestment of
dividends or distributions on shares that were subject to a sales load). If,
for example, an investor beneficially owns Class A shares of the Growth/Value
Portfolio with an aggregate current value of $49,500 and subsequently
purchases additional Class A shares having a current value of $1,000, the load
applicable to the subsequent purchase would be reduced to 4.50% of the
offering price. Similarly, with respect to each subsequent investment, the
current value of all Class A shares of Eligible Portfolios that are
beneficially owned by the investor at the time of investment may be combined
to determine the applicable sales load.
Letter of Intent. By signing a Letter of Intent form (available from
his institution or the Transfer Agent) an investor becomes eligible for the
reduced sales load applicable to the total number of Eligible Portfolio Class
A shares purchased in a thirteen-month period (net of redemptions) pursuant to
the terms and under the conditions set forth in the Letter of Intent. To
compute the applicable sales load, the offering price of Class A shares an
investor beneficially owns (on the date of submission of the Letter of Intent)
in any Eligible Portfolio 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 Class A shares equal to the
amount indicated in the Letter of Intent for payment of a higher sales load if
an investor does not purchase the full amount specified in the Letter of
Intent. The escrow will be released when an investor fulfills the terms of the
Letter of Intent by purchasing the specified amount. If total purchases within
the thirteen-month period of the Letter of Intent exceed the amount specified,
an adjustment will be made in the form of additional Class A shares credited
to the shareholder's account to reflect further reduced sales charges
applicable to such purchases. If total purchases are less than the amount
specified, an 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 total purchases. If such remittance is not received within thirty 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 an investor
to purchase the full amount indicated at the sales load in effect at the time
of signing, but an investor must complete the intended purchase to obtain the
reduced sales load.
Qualification for Discounts. For the purpose of applying the Right of
Accumulation and Letter of Intent privileges described above, the scale of
sales loads applies to the combined purchases made by any individual and/or
spouse purchasing securities for his, her or their own account or for the
account of any minor children under the Uniform Gifts to Minors Act or the
Uniform Transfers to Minors Act, or the aggregate investments of a trustee or
custodian of any
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qualified pension or profit sharing plan or IRA established, or the aggregate
investment of a trustee or other fiduciary, for the benefit of the persons
listed above.
REDEMPTION OF SHARES
In General
Redemption orders are effected at the net asset value next determined
after receipt by the Transfer Agent of a proper notice of redemption in
accordance with the procedures set forth below.
Redemption orders must be placed with or through the same financial
institution that placed the original purchase order. It is the responsibility
of the financial institutions to transmit redemption orders to the Transfer
Agent. Redemption proceeds are paid by check or credited to the investor's
account with his financial institution. Investors who purchased shares
directly from the Trust should follow the redemption procedures set forth
below.
Redemption Procedures
Shareholders of record may redeem shares in any amount by calling
(800) 688-3350 (provided they have made the appropriate election on the account
application) or by sending a written request to The Woodward Funds, c/o NBD
Bank, P.O. Box 7058, Troy, Michigan 48007-7058. Written requests to redeem
shares having a net asset value of more than $50,000 must have all signatures
of the registered owner(s) or their authorized legal representative guaranteed
by a commercial bank or trust company which is a member of the Federal Reserve
System or FDIC, a member firm of a national securities exchange or a savings
and loan association. A signature guaranteed by a savings bank or notarized by
a notary public is not acceptable. A signature guarantee will also be required
for redemption requests (in any amount) if the address of record for the
account has been changed within the previous 15 days or which requests that
the proceeds be paid to an account other than the one preauthorized on the
application, a payee or payees other than the registered owners of the
account, or an address other than the address of record. The Trust may require
additional supporting documents for redemptions made by corporations,
fiduciaries, executors, administrators, trustees, guardians and institutional
investors.
Redemption orders for Class A shares may be placed through an
institution or directly by telephone by calling (800) 688-3350. During periods
of unusual economic or market changes, telephone redemptions may be difficult
to implement. In such event, shareholders should mail their redemption
requests to their financial institutions or The Woodward Funds, c/o NBD Bank
at the address shown above. Neither the Trust nor its Transfer Agent will be
responsible for the authenticity of instructions received by telephone that
are reasonably believed to be genuine. In attempting to confirm that telephone
instructions are genuine, the Trust and its Transfer Agent will use such
procedures as are considered reasonable, including recording those
instructions and requesting information as to account registration (including,
but not limited to, the name in which an account is registered, the account
number, or recent transactions in the account). To the extent that the Trust
and its Transfer Agent fail to use reasonable procedures to verify the
genuineness of telephone instructions, they may be liable for such
instructions that prove to be fraudulent and unauthorized. In all other cases,
shareholders will bear the risk of loss for fraudulent telephone transactions.
Other Redemption Information
The Trust will make payment for redeemed shares within the time period
prescribed by the settlement requirements of the Securities Exchange Act of
1934 after receipt by the Transfer Agent of a request in proper form. If
shares to
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be redeemed were purchased by check, the Trust will transmit the redemption
proceeds promptly upon clearance of such check, which could take up to fifteen
days from the purchase date. A shareholder having purchased shares by wire
must have filed an account application before any redemption requests can be
honored.
Currently, the Trust imposes no charge when shares are redeemed.
However, institutions may charge a fee for providing services in connection
with investments in Portfolio shares; NBD currently charges $16 for wire
transactions. The Trust reserves the right to redeem accounts involuntarily,
after sixty days' notice, if redemptions cause the account's net asset value
to remain at $1,000 or less. Under certain circumstances, the Trust may make
payment for redemption in securities or other property.
Questions concerning the proper form for redemption requests should be
directed to the Transfer Agent at (800) 688-3350 or an investor's financial
institution.
SHAREHOLDER SERVICES
The shareholder services and privileges under this heading may not be
available to certain clients of particular financial institutions, and some
may impose conditions on their clients that are different from those described
below. investors should consult their own financial institutions in this
regard. Other investors should direct any questions to the Transfer Agent. The
Trust may modify or terminate any of the following services and privileges at
any time.
Exchange Privilege
Investors may exchange Class A shares which have been owned for at
least thirty days of the Growth/Value, Opportunity, Intrinsic Value, Capital
Growth, Balanced and International Equity Portfolios, of the Woodward
Intermediate Bond, Bond, Short Bond, Municipal Bond and Michigan Municipal
Bond Funds and of other investment portfolios of the Trust which may be
offered in the future and sold with a sales charge (each a "load portfolio")
and Class A shares which have been owned for at least thirty days of the
Woodward Equity Index, Money Market, Government, Treasury Money Market,
Tax-Exempt Money Market and Michigan Tax-Exempt Money Market Funds and of
other investment portfolios of the Trust which may be offered in the future
and sold without a sales charge (each a "no load portfolio"). The cost of the
acquired Class A shares will be their net asset value plus the applicable
sales load, if any.
With respect to exchanges between load portfolios other than exchanges
involving the Woodward Short Bond Fund, no additional sales load will be
payable, provided that the investor previously paid a sales load upon the
acquisition of Class A shares of a load Portfolio. Investors exchanging Class
A shares of the Woodward Short Bond Fund will be required to pay the
difference between the sales load previously paid and the sales load
applicable on the Class A shares being acquired in the exchange, unless the
investor's holding of Class A shares of the Woodward Short Bond Fund resulted
from a previous exchange of Class A shares with respect to which the investor
had paid a higher sales load.
Exchanges of Class A shares of a load portfolio for Class A shares of
a no load portfolio and exchanges of Class A shares of a no load portfolio for
Class A shares of another no load portfolio will not be subject to the payment
of a sales load.
Any exchange of Class A shares of a no load portfolio for Class A
shares of a load portfolio will be subject to the payment of the applicable
sales load, unless the investor is exchanging shares of a no load portfolio
which were received in a previous exchange transaction involving Class A
shares of a load portfolio. In such case, the investor will receive a credit
for any sales load
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previously paid and no additional sales load will be payable, except as noted
above with respect to the Woodward Short Bond Fund.
Shareholders contemplating an exchange should carefully review the
prospectus of the portfolio into which the exchange is being considered. The
Prospectus for any portfolio of the Trust may be obtained from an investor's
financial institution or from the Transfer Agent by calling (800) 688-3350.
Exchanges will only be made into shares of Portfolios which are legally
registered for sale in the state of residence of the investor.
Exchanges will be effected by a redemption of Class A shares of the
portfolio held and the purchase of Class A shares of the portfolio acquired.
Investors should make their exchange requests in writing or by telephone to
the financial institutions through which they purchased their original Class A
shares. It is the responsibility of financial institutions to transmit
exchange requests to the Transfer Agent. Other investors should transmit
exchange requests directly to the Transfer Agent. The total value of shares
being exchanged must at least equal the minimum investment requirement of the
portfolio whose shares are being acquired in the exchange. Only one exchange
in any thirty-day period is permitted and only Class A shares that may be
legally sold in the state of the investor's residence may be acquired in an
exchange. The Trust reserves the right to reject any exchange request.
Investors wishing to make an exchange should contact their
institutions or the Transfer Agent (as appropriate). Exchange requests in the
required form which are received by the Transfer Agent prior to 4:00 p.m.,
Eastern time or Early Closing Time, will be effected on the same
Business Day after such request is received. Requests received after
4:00 p.m., Eastern time or Early Closing Time, will be effected on
the next Business Day after such request is received. During periods of
significant economic or market change, telephone exchanges may be difficult to
complete. In such event, an investor should mail the exchange request to his
financial institution or the Transfer Agent. Neither the Trust nor the
Transfer Agent will be responsible for the authenticity of instructions
received by telephone that are reasonably believed to be genuine. In
attempting to confirm that telephone instructions are genuine, the Trust and
its Transfer Agent will use such procedures as are considered reasonable,
including recording those instructions and requesting information as to
account registration (including, but not limited to, the name in which an
account is registered, the account number, or recent transactions in the
account). To the extent that the Trust and its Transfer Agent fail to use
reasonable procedures to verify the genuineness of telephone instructions,
they may be liable for such instructions that prove to be fraudulent and
unauthorized. In all other cases, shareholders will bear the risk of loss for
fraudulent telephone transactions. The Trust reserves the right to modify or
terminate its exchange procedures upon sixty days notice to shareholders.
Reinvestment Privilege
Class A shares of a Portfolio may be purchased at net asset value by
persons who have redeemed within the previous 120 days their Class A shares of
that Portfolio or another investment portfolio of the Trust which were
purchased with a sales load. The amount which may be so reinvested is limited
to an amount up to the redemption proceeds. In order to exercise this
privilege, a written order for the purchase of Class A shares of the Portfolio
must be received by the Transfer Agent within 120 days after the redemption.
Reinvestment will be at the next calculated net asset value after receipt.
Option to Make Systematic Withdrawals
The Trust has available to shareholders a Systematic Withdrawal Plan
pursuant to which a shareholder who owns Class A shares of any investment
portfolio having a minimum value of $15,000 at the time he elects under the
Plan may have a fixed sum distributed in redemption at regular intervals. An
application form and additional information regarding this service may be
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obtained from an investor's financial institution or the Transfer Agent by
calling (800) 688-3350.
Automatic Investment
The Trust offers an Automatic Investment Plan (the "Plan") whereby a
shareholder may automatically purchase Class A shares on a regular basis in
accordance with an election in his account application. An application may be
obtained from the Transfer Agent by calling (800) 688-3350. Under the Plan a
shareholder's financial institution debits a pre-authorized amount from his
account and applies the amount to the purchase of Class A shares. The minimum
per transaction is $25. The minimum initial investment in a Portfolio is also
$25 for the following shareholders who elect the Plan: (1) current and retired
directors, officers and employees of NBD or any of its affiliates; (2) the
trustees, former trustees and officers of the Trust; (3) broker/dealers which
have entered into an agreement with a Co-Distributor or the Trust pursuant to
the Trust's Distribution Plan or Shareholder Servicing Plan and their
representatives purchasing for their own accounts; and (4) spouses, children,
grandchildren, siblings, parents, grandparents and in-laws of individuals
referred to in (l), (2) and (3) above. An NAV Account Application may be
obtained from the Transfer Agent by calling (800) 688-3350. The Plan can be
implemented with any financial institution that is a member of the Automated
Clearing House. No service fee is currently charged by the Trust for
participating in the Plan. Death or legal incapacity will terminate a
shareholder's participation in the Plan. Deposits, withdrawals and adjustments
will be made electronically under the rules of the Automated Clearing House
Association.
Cross Reinvestment of Dividend Plan
The Trust makes available to shareholders a Cross Reinvestment of
Dividend Plan (the "Plan") pursuant to which a shareholder who owns Class A
shares of any portfolio with a minimum value of $10,000 at the time he elects
under the Plan may have dividends paid by such portfolio automatically
reinvested into Class A shares of another portfolio in which he has invested a
minimum of $1,000. Shareholders may obtain an application and additional
information from their institutions or the Transfer Agent by calling
(800) 688-3350.
The Woodward Funds Individual Retirement Custodial Account
Class A shares may be purchased in conjunction with the Trust's
Individual Retirement Custodial Account program ("IRA") where NBD acts as
custodian. investors should consult their institutions or a Co-Distributor for
information as to applications and annual fees. The minimum investment for an
IRA is $250 for investors who are not employees of NBD and $25 for investors
who are employees of NBD. Investors should also consult their tax advisers to
determine whether the benefits of an IRA are available or appropriate.
Other Retirement Plans
NBD and its affiliates offer a variety of pension and profit sharing
plans including IRAs, defined contribution plans, 401(k) Plans, 403(b)(7)
Plans and 457 Plans through which investors may purchase Class A shares. The
minimum investment for these Plans may differ from the minimum discussed above
in "Purchase of Shares." For details concerning any of the retirement plans,
please call the Transfer Agent or a Co-Distributor.
Direct Deposit Program
If an investor receives federal salary, social security, or certain
veteran's, military or other payments from the federal government or elects to
use his employer's payroll deposit program, he is eligible for the Direct
Deposit Program. With this Program, an investor may purchase Class A shares
(minimum of
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$25) by having these deposits automatically deposited into his Portfolio
account. For instructions on how to enroll in the Direct Deposit Program, an
investor should call his institution or the Transfer Agent. Death or legal
incapacity will terminate an investor's participation in the Program. An
investor may elect at any time to terminate his participation by notifying in
writing the appropriate federal agency. Further, the Trust may terminate an
investor's participation upon thirty days' notice to him.
PERFORMANCE INFORMATION
From time to time, in advertisements or in reports to shareholders the
performance of each class of shares of the Portfolios may be compared to the
performance of other mutual funds with similar investment objectives and to
stock and other relevant indices or to rankings prepared by independent
services or other financial or industry publications that monitor the
performance of mutual funds. For example, performance may be compared to data
prepared by Lipper Analytical Services, Inc. In addition, the performance of
the Portfolios may be compared to the Standard & Poor's 500 Index, an index of
unmanaged groups of common stocks, the Consumer Price Index, or the Dow Jones
Industrial Average, a recognized unmanaged index of common stocks of thirty
industrial companies listed on the New York Stock Exchange. Performance data
as reported in national financial publications such as Money Magazine, Forbes,
Barron's, The Wall Street Journal and The New York Times, or in publications
of a local or regional nature, may also be used in comparing the performance
of a Portfolio.
The Portfolios calculate their total returns on an "average annual
total return" basis for various periods from the date they commenced
investment operations and for other periods as permitted under the rules of
the SEC. Average annual total return of a class reflects the average annual
percentage change in value of an investment in the class over the measuring
period. Total returns may also be calculated on an "aggregate total return
basis" for various periods. Aggregate total return reflects the total
percentage change in value over the measuring period. Both methods of
calculating total return also reflect changes in the price of the shares and
assume that any dividends and capital gain distributions made by the class
during the period are reinvested in shares of the class. When considering
average total return figures for periods longer than one year, it is important
to note that a class' annual total return for any one year in the period might
have been greater or less than the average for the entire period.
Performance of each class of shares is based on historical earnings
and will fluctuate and is not intended to indicate future performance. The
investment return and principal value of an investment in a class will
fluctuate so that a shareholder's shares, when redeemed, may be worth more or
less than their original cost. Performance data may not provide a basis for
comparison with bank deposits and other investments which provide a fixed
yield for a stated period of time. Performance data should also be considered
in light of the risks associated with a Portfolio's portfolio composition,
quality, maturity, operating expenses and market conditions. Any fees charged
by financial institutions directly to their customer accounts in connection
with investments in shares will not be reflected in performance calculations.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income are declared and paid quarterly
by each Portfolio, except the International Equity Portfolio which declares
and pays dividends annually. Each Portfolio's net realized capital gains are
distributed at least annually.
Dividends and distributions will reduce a class' net asset value by
the amount of the dividend or distribution. All dividends and distributions
are automatically reinvested (without any sales charge) in additional Class A
shares
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of the same Portfolio at their net asset value per share determined on the
payment date, unless the holder has notified the Transfer Agent in writing
that he elects to have dividends or capital gain distributions (or both) paid
in cash. Shareholders must make such election, or any revocation thereof, in
writing to their financial institutions or Transfer Agent. If an account
is established with telephone privileges, the registered owner or his
preauthorized legal representative may change the election to receive
dividends in cash to an election to receive dividends in shares by
telephoning the Transfer Agent at (800) 688-3350. The election will
become effective with respect to dividends paid after its receipt by the
Transfer Agent.
TAXES
Federal
Each Portfolio intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification will relieve the Portfolios of liability for federal income
taxes to the extent their earnings are distributed in accordance with the
Code.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that each Portfolio distribute to
its shareholders an amount equal to at least the sum of 90% of its investment
company taxable income and 90% of its net tax-exempt interest income for such
year. In general, a Portfolio's investment company taxable income will be its
taxable income, subject to certain adjustments and excluding the excess of any
net long-term capital gain for the taxable year over the net short-term
capital loss, if any, for such year. Each Portfolio intends to distribute as
dividends substantially all of its investment company taxable income and any
net tax-exempt interest income each year. Such dividends will be taxable as
ordinary income to the Portfolio's shareholders who are not currently exempt
from federal income taxes regardless of whether a distribution is received in
cash or reinvested in additional shares. (Federal income taxes for
distributions to an IRA are deferred under the Code.) Such ordinary income
distributions will qualify for the dividends received deduction for
corporations to the extent of the total qualifying dividends received by the
distributing Portfolio from domestic corporations for the taxable year.
Substantially all of each Portfolio's net realized long-term capital
gains, if any, will be distributed at least annually to its shareholders. The
Portfolios will generally have no tax liability with respect to such gains and
the distributions will be taxable to Portfolio shareholders who are not
currently exempt from federal income taxes as long-term capital gains,
regardless of how long the shareholders have held the shares and whether such
gains are received in cash or reinvested in additional shares.
Dividends declared in October, November or December of any year
payable to shareholders of record on a specified date in such months will be
deemed for federal tax purposes to have been paid by the Portfolio and
received by the shareholders on December 31 of such year if such dividends are
paid during January of the following year.
Prior to purchasing shares of a Portfolio, the impact of dividends or
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Any dividend or distribution declared
shortly after the purchase of shares prior to the record date will have the
effect of reducing the per share net asset value by the per share amount of
the dividend or distribution. All or a portion of such amounts, although in
effect a return of capital, is subject to tax.
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A taxable gain or loss may be realized by a shareholder upon his
redemption, transfer or exchange of shares of a Portfolio depending upon the
tax basis and their price at the time of redemption, transfer or exchange. If
a shareholder has held shares for six months or less and during that time
received a distribution taxable as a long-term capital gain, then any loss the
shareholder might realize on the sale of those shares will be treated as a
long-term loss to the extent of the earlier capital gain distribution.
Generally, a shareholder may include sales charges incurred upon the purchase
of Portfolio shares in his tax basis for such shares for the purpose of
determining gain or loss on a redemption, transfer or exchange of such shares.
However, if the shareholder effects an exchange of such shares for shares of
another Portfolio within 90 days of the purchase and is able to reduce the
sales charges applicable to the new shares (by virtue of the Trust's exchange
privilege), the amount equal to such reduction may not be included in the tax
basis of the shareholder's exchanged shares but may be included under certain
circumstances in the tax basis of the new shares.
It is expected that dividends and certain interest income earned by
the International Equity Portfolio from foreign securities will be subject to
foreign withholding taxes or other taxes. So long as more than 50% of the
value of the Portfolio's total assets at the close of any taxable year
consists of equity or debt securities of foreign corporations, the Portfolio
may elect, for U.S. federal income tax purposes, to treat certain foreign
taxes paid by it, including generally any withholding taxes and other foreign
income taxes, as paid its shareholders. The Portfolio may make this election.
As a consequence, the amount of such foreign taxes paid by the Portfolio will
be included in its shareholders' income pro rata (in addition to taxable
distributions actually received by them), and the shareholders will be
entitled (a) to credit their proportionate amounts of such taxes against their
U.S. federal income tax liabilities, or (b) if they itemize their deductions,
to deduct such proportionate amounts from their U.S. income.
Shareholders will be advised at least annually as to the federal
income tax consequences of distributions made to them each year.
The foregoing discussion summarizes some of the important tax
considerations generally affecting the Portfolios and their shareholders and
is not intended as a substitute for careful tax planning. Accordingly,
potential investors in the Portfolios should consult their tax advisers with
specific reference to their own tax situation.
State and Local
The Trust may be subject to state or local taxes in jurisdictions in
which the Trust may be deemed to be doing business. In addition, in those
states or localities which have income tax laws, the treatment of the Trust
and its shareholders under such laws may differ from treatment under federal
income tax laws. Shareholders are advised to consult their tax advisers
concerning the application of state and local taxes, which may have different
consequences from those of the federal income tax law described above.
MANAGEMENT
Trustees and Officers of the Trust
The Board of Trustees of the Trust is responsible for the management
of the business and affairs of the Trust. The Trustees and executive officers
of the Trust and their principal occupations for the last five years are set
forth below. Each Trustee has an address at The Woodward Funds, c/o NBD Bank,
611 Woodward Avenue, Detroit, Michigan 48226.
-40-
<PAGE>
*Earl I. Heenan, Jr., Chairman and President
Director (since 1995), Vice Chairman (1988-1995) and President
(1955-1988), Detroit Mortgage & Realty Company; President (1989-1992)
and Trustee (since 1966), Cottage Hospital of Grosse Pointe (affiliate
of Henry Ford Health System); Trustee, Henry Ford Health Sciences Center
(since 1987); Trustee, Henry Ford Continuing Care Corporation (since 1980);
Trustee, Earhart Foundation (since 1980). He is 77 years old and his
address is 333 West Fort Street, Detroit, Michigan 48226.
*Eugene C. Yehle, Trustee and Treasurer
Retired; Director of Investor Relations and Pension Investments, Dow
Chemical Company (1972-1985); Trustee, Alma College (since 1978); Trustee
(since 1977) and Chairman (since 1983), Charles J. Strosacker Foundation;
Trustee (1989-1993), Higgins Lake Foundation. He is 75 years old and his
address is 4501 Linden Drive, Midland, Michigan 48640.
Will M. Caldwell, Trustee
Retired; Executive Vice President, Chief Financial Officer and
Director, Ford Motor Company (1979-1985); Director, First Nationwide Bank
(1986-1991); Director, Air Products & Chemicals, Inc. (since 1985); Director,
Zurich Holding Company of America (since 1990); Director, The Batts Group,
Ltd. (since 1986); Trustee and Vice Chairman, Detroit Medical Center
(1986-1991); Trustee Emeritus and Chairman of the Pension Investment
Sub-Committee, Detroit Medical Center (since 1991). He is 70 years old and his
address is 2733 Glenbrook Court, Bloomfield Hills, Michigan 48302.
Nicholas J. De Grazia, Trustee
Consultant, Lionel L.L.C. (since 1995); President, Chief Operating
Officer and Director, Lionel Trains, Inc. (1990-1995); Vice President-Finance
and Treasurer, University of Detroit (1986-1990); President (1981-1990) and
Director (1986-1995), Polymer Technologies, Inc.; President, Florence
Development Company (1987-1990); Chairman (since 1994) and Director
(1992-1995), Central Macomb County Chamber of Commerce; Vice Chairman, Michigan
Higher Education Facilities Authority (since 1991). He is 53 years old and his
address is 3650 Shorewood Drive, North Lakeport, Michigan 48059.
John P. Gould, Trustee
Steven G. Rothmeier Professor (since January, 1996); Distinguished
Service Professor of Economics of the University of Chicago Graduate School
of Business (since 1984); Dean of the University of Chicago Graduate School
of Business (1983-1993); Member of Economic Club of Chicago and Commercial
Club of Chicago; Director of Harbor Capital Advisors and Dimensional Fund
Advisors; Trustee, Prairie Family of Funds. He is 57 years old and his address
is University of Chicago Graduate School of Business, 1101 East 58th Street,
Chicago, Illinois 60637.
Marilyn McCoy, Trustee
Vice President of Administration and Planning of Northwestern
University (since 1985); Director of Planning and Policy Development for the
University of Colorado (1981-1985); Member of the Board of Directors of
Evanston Hospital, Chicago Metropolitan YMCA, Chicago Network and United
Charities; Member of the Chicago Economics Club; Trustee, Prairie Family of
Funds. She is 48 years old and her address is 1100 North Lake Shore Drive,
Chicago, Illinois 60611.
- - -----------------------------
* Trustees who are "interested persons" of the Trust, as defined in the 1940
Act.
-41-
<PAGE>
Julius L. Pallone, Trustee
President, J.L. Pallone Associates, Consultants (since 1994); Chairman
of the Board (1974-1993), Maccabees Life Insurance Company; President and
Chief Executive Officer, Royal Financial Services (1991-1993); Director,
American Council of Life Insurance of Washington, D.C. (life insurance
industry association) (1988-1993); Director, Crowley, Milner and Company
(department store) (since 1988); Trustee, Lawrence Institute of Technology
(since 1982); Director, Detroit Symphony Orchestra (since 1985); Director,
Oakland Commerce Bank (since 1984) and Michigan Opera Theater (since 1981). He
is 65 years old, and his address is 26957 Northwestern Highway, Suite 288,
Southfield, Michigan 48034.
*Donald G. Sutherland, Trustee
Partner of the law firm Ice, Miller, Donadio & Ryan, Indianapolis,
Indiana. He is 67 years old, and his address is One American Square, 34th
Floor, Indianapolis, Indiana 46204.
Donald L. Tuttle, Trustee
Vice President (since 1995), Senior Vice President (1992-1995),
Association for Investment Management and Research; Senior Professor of
Finance, Indiana University (1970-1991); Vice President, Trust & Investment
Advisers, Inc. (1990-1991); Director, Federal Home Loan Bank of Indianapolis
(1981 to 1985). He is 61 years old, and his address is 5 Boar's Head Lane,
Charlottesville, Virginia 22903.
W. Bruce McConnel, III, Secretary
Partner of the law firm Drinker Biddle & Reath, Philadelphia,
Pennsylvania. He is 53 years old, and his address is 1345 Chestnut Street,
Philadelphia, Pennsylvania 19107.
The Trustees receive fees and are reimbursed for their expenses in
connection with each meeting of the Board of Trustees they attend. Additional
information on the compensation paid by the Trust to its Trustees and officers
is included in the Statement of Additional Information.
Investment Adviser, Custodian and Transfer Agent
The investment adviser for each Portfolio is NBD, a wholly owned
subsidiary of First Chicago NBD Corporation, a bank holding company. NBD has
offices at 611 Woodward Avenue, Detroit, Michigan 48226. As of December 31,
1995, NBD was providing investment management and advisory services for
accounts aggregating approximately $37.9 billion. NBD has been in the business
of providing such services since 1933. Included among NBD's accounts are
pension and profit sharing funds for major corporations and state and local
governments, commingled trust funds and a variety of institutional and
personal advisory accounts, estates and trusts. NBD also acts as investment
adviser for other registered investment company portfolios.
NBD provides investment advisory and certain administrative services
to each Portfolio pursuant to an Advisory Agreement. Subject to the overall
supervision of the Board of Trustees, NBD makes investment decisions for each
of the Portfolios.
- - -----------------------------
* Trustees who are "interested persons" of the Trust, as defined in the 1940
Act.
-42-
<PAGE>
Jeffrey C. Beard, First Vice President and Gary L. Konsler, First Vice
President, are primarily responsible for the day-to-day management of the
Growth/Value and Capital Growth Portfolios. Mr. Beard joined NBD in 1982 after
receiving an MBA in Finance from Michigan State University in 1981. Mr.
Konsler joined NBD in 1973 after receiving a JD from Indiana University.
Ronald L. Doyle, First Vice President, and Joseph R. Gatz, Second Vice
President, are primarily responsible for the day-to-day management of the
Opportunity Portfolio. Mr. Doyle joined NBD in 1982 after receiving his MBA in
Finance from Michigan State University. Mr. Gatz joined NBD in 1986 after
receiving his MBA from Indiana University.
Chris M. Gassen, Vice President, and F. Richard Neumann, Vice
President, are primarily responsible for the day-to-day management of the
Intrinsic Value Portfolio. Mr. Gassen joined NBD in 1985 after receiving an
MBA in Finance from Indiana University. Mr. Neumann joined NBD in 1981 after
receiving an MBA in Finance/Accounting from the University of Chicago.
Claude B. Erb, First Vice President, is primarily responsible
for the day-to-day portfolio management of the Balanced Portfolio. Mr. Erb
joined First Chicago NBD Corporation in 1993, after receiving his MBA in
Finance from the University of California.
Richard P. Kost, First Vice President and Clyde L. Carter, Jr.,
Assistant Vice President, are primarily responsible for the day-to-day
portfolio management of the International Equity Portfolio. Mr. Kost joined
NBD in 1964 after he received his MBA from the University of Michigan. Mr.
Carter joined NBD in 1987 after he received his MBA from Western Michigan
University.
For its services under the Advisory Agreement, NBD is entitled to
receive advisory fees, computed daily and payable monthly, at an annual rate
of .75% of the average daily net assets of each of the Portfolios. In
addition, NBD is entitled to 4/10ths of the gross income earned by a Portfolio
on each loan of securities (excluding capital gains and losses, if any). NBD
may voluntarily waive its fees in whole or in part with respect to any
particular Portfolio.
NBD also receives compensation as the Trust's Custodian and Transfer
Agent under separate agreements. The fees payable by the Portfolios for these
services are described in the Statement of Additional Information.
Banking laws and regulations currently prohibit a bank holding company
registered under the Bank Holding Company Act of 1956 or any affiliate thereof
from sponsoring, organizing, controlling, or distributing the shares of a
registered open-end investment company continuously engaged in the issuance of
its shares, and prohibit banks generally from underwriting securities, but do
not prohibit such a bank holding company or affiliate from acting as
investment adviser, transfer agent, or custodian to such an investment company
or from purchasing shares of such a company as agent for and upon the order of
a customer. The Adviser and the Trust believe that the Adviser may perform the
advisory, custodial and transfer agency services for the Trust described in
this Prospectus, and that the Adviser, subject to such banking laws and
regulations, may perform the shareholder services contemplated by this
Prospectus, without violation of such banking laws or regulations. However,
future changes in legal requirements relating to the permissible activities of
banks and their affiliates, as well as future interpretations of present
requirements, could prevent the Adviser from continuing to perform investment
advisory, custodial or transfer agency services for the Trust or require the
Adviser to alter or discontinue the services provided by it to shareholders.
If the Adviser were prohibited from performing investment advisory,
custodial or transfer agency services for the Trust, it is expected that the
Board of Trustees of the Trust would recommend that shareholders approve new
-43-
<PAGE>
agreements with another entity or entities qualified to perform such services
and selected by the Board. If the Adviser or its affiliates were required to
discontinue all or part of its shareholder servicing activities, their
customers would be permitted to remain the beneficial owners of Portfolio
shares and alternative means for continuing the servicing of such customers
would be sought. The Trust does not anticipate that investors would suffer any
adverse financial consequences as a result of these occurrences.
Sponsors and Co-Distributors
FoM, a Delaware corporation and a wholly owned subsidiary of First of
Michigan Capital Corporation, is a sponsor and Co-Distributor of the Trust's
shares. It is engaged in the securities underwriting and securities and
commodities brokerage business and is a member of the New York Stock Exchange,
Inc., other major securities and commodities exchanges, and the National
Association of Securities Dealers, Inc. FoM participates as a member of
various selling groups or as agent of other investment companies, executes
orders on behalf of investment companies for the purchase and sale of their
securities and sells securities to such companies as a broker or dealer in
securities. On December 31, 1995, FoM had a net worth of $37,231,000.
Essex, a New York corporation, is a wholly owned subsidiary of CUC
International, Inc. Essex is engaged in the business of securities brokerage
through financial institutions and is a member of the National Association of
Securities Dealers, Inc. Essex has entered into dealer agreements with the
distributors of various investment companies and executes orders on behalf of
such companies for the purchase and sale of their securities. As of December
31, 1995, Essex had a net worth of $1,945,000.
FoM and Essex act as sponsors and Co-Distributors of the Trust's
shares pursuant to the Distribution Agreement with the Trust which has been
entered into pursuant to the Distribution Plan described below.
Service and Distribution Plan
The Trust has adopted its Distribution Plan pursuant to Rule 12b-1
under the 1940 Act (the "Plan"). Under the Plan, the Trust incurs expenses
primarily intended to result in the sale of the Trust's shares in an amount
not to exceed .35 of 1% of the value of each portfolio's average daily net
assets calculated as follows in the case of each Portfolio: (i) fees payable
to the Co- Distributors pursuant to the Distribution Agreement; (ii) the
actual costs and expenses in connection with advertising and marketing the
Portfolio's shares; and (iii) fees pursuant to agreements with securities
dealers, financial institutions and other professionals ("Service Agents") for
administration or servicing of Portfolio shareholders ("Servicing"). Servicing
may include, among other things: answering client inquiries regarding the
Trust and the Portfolios; assisting clients in changing dividend options,
account designations and addresses; performing sub-accounting; establishing
and maintaining shareholder accounts and records; processing purchase and
redemption transactions; investing client cash account balances automatically
in Portfolio shares; providing periodic statements showing a client's account
balance and integrating such statements with those of other transactions and
balances in the client's other accounts serviced by the Service Agent;
arranging for bank wires; and such other services as the Trust may request, to
the extent the Service Agent is permitted by applicable statute, rule or
regulation. Under the Plan, the Trust also bears the cost of preparing and
printing Prospectuses for use in selling shares of the Trust and costs
associated with implementing and operating the Plan. These costs are included
in computing the .35 of 1% limitation set forth above.
Pursuant to the Distribution Agreement, FoM is entitled to receive a
fee at the annual rate of .005% of a Portfolio's average net assets, and Essex
is entitled to receive a fee at the annual rate of .10% of the aggregate
average net
-44-
<PAGE>
assets of the Trust's investment portfolios attributable to investments by
clients of Essex. The payments to be made to the Co-Distributors which are
based on a percentage of the net assets of the Portfolios are designed to
compensate the Co-Distributors for their participation in the distribution of
the Portfolios' shares and to reimburse the Co-Distributors for certain
distribution costs. Nonreimbursable expenses of the Co-Distributors include
salaries of executives, sales and clerical personnel performing services for
the Trust, and overhead expenses. Such costs are by their nature not subject
to precise quantification and the Trustees have determined that the fees to be
paid to the Co-Distributors are reasonable under the circumstances.
If current restrictions under the Glass-Steagall Act were relaxed, the
Trust expects that NBD would consider the possibility of offering to perform
some or all of the services now provided by the Co-Distributors. Legislation
modifying such restrictions has been proposed in past Sessions of Congress
which, if enacted, would permit a bank holding company to establish a non-bank
subsidiary having the authority to organize, sponsor and distribute shares of
an investment company. If such legislation were enacted, the Trust expects
that NBD's parent bank holding company would consider the possibility of one
of its non-bank subsidiaries offering to perform some or all of the services
now provided by the Co-Distributors. It is not possible, of course, to predict
whether or in what form legislation might be enacted or the terms upon which
NBD or such a non-bank affiliate might offer to provide such services.
Shareholder Servicing Plan
Pursuant to a Shareholder Servicing Plan ("Servicing Plan") adopted by
its Board of Trustees, the Trust may enter into agreements ("Servicing
Agreements") with banks and financial institutions, which may include the
Adviser and its affiliates ("Shareholder Servicing Agents"), under which they
will render shareholder administrative support services for their customers
who beneficially own Class A shares of the Portfolios. Such services, which
are described more fully in the Statement of Additional Information, may
include processing purchase and redemption requests from customers, placing
net purchase and redemption orders with a Co-Distributor, processing, among
other things, distribution payments from the Trust, providing necessary
personnel and facilities to establish and maintain customer accounts and
records, and providing information periodically to customers showing their
positions in Class A shares.
For these services, the Trust will pay fees to Shareholder Servicing
Agents at an annual rate of up to .25% of the average daily net asset value of
Class A shares held by such Shareholder Servicing Agents for the benefit of
their customers and, at the Trust's option, it may reimburse the Shareholder
Servicing Agents' out-of-pocket expenses. Shareholder Servicing Agents are
required to provide their customers with a schedule of any credits, fees or
other conditions that may be applicable to the investment of customer assets
in Class A shares. The fees payable under such servicing agreements will be
allocated exclusively to the Class A shares in each Portfolio.
Conflict of interest restrictions may apply to the receipt of
compensation paid by the Trust to a Shareholder Servicing Agent in connection
with the investment of fiduciary funds in Portfolio shares. Banks and other
institutions regulated by the Comptroller of the Currency or other federal or
state bank regulatory agencies, and investment advisers and other money
managers subject to the jurisdiction of the SEC, the Department of Labor or
state securities commissions, are urged to consult legal counsel before
entering into Servicing Agreements.
-45-
<PAGE>
Trust Expenses
The Trust is responsible for the payment of its expenses. These
include, for example, fees payable to NBD as Adviser, or expenses otherwise
incurred by the Trust in connection with the management of the investment of
the Trust's assets such as brokerage fees, commissions and other transaction
charges, the fees and expenses of NBD as the Trust's Custodian and as its
Transfer Agent, the fees payable to the Co-Distributors under the Distribution
Agreement, the fees and expenses of Trustees, expenses associated with the
Trust's Distribution Plan and Shareholder Servicing Plan, outside auditing and
legal expenses, all taxes and corporate fees payable by the Trust, SEC fees,
state securities qualification fees, costs of preparing and printing
prospectuses for regulatory purposes and for distribution to shareholders,
costs of shareholder reports and shareholder meetings, and any extraordinary
expenses. Each Portfolio also pays for brokerage commissions and transfer
taxes (if any) in connection with the purchase and sale of portfolio
securities. Expenses attributable to a particular Portfolio of the Trust will
be charged to that Portfolio, and expenses not readily identifiable as
belonging to a particular Portfolio will be allocated by the Board of Trustees
among one or more Portfolios in such a manner as it shall deem fair and
equitable. For the fiscal year ended December 31, 1995, the Growth/Value,
Opportunity, Intrinsic Value, Capital Growth, Balanced and International
Equity Portfolios' total expenses were .84%, .89%, .91%, .86%, .91% and 1.16%
(after fee waivers, if any) of their average net assets, respectively. The
Statement of Additional Information describes in more detail the fees and
expenses borne by the Trust.
OTHER INFORMATION
The Trust was organized as a Massachusetts business trust on April 21,
1987 under a Declaration of Trust which was amended and restated as of May 1,
1992. The Trust is a series fund having seventeen series of shares of
beneficial interest, each of which evidences an interest in a separate
investment portfolio. The Declaration of Trust permits the Board of Trustees
to issue an unlimited number of full and fractional shares and to create an
unlimited number of series of shares ("Series") representing interests in a
portfolio and an unlimited number of classes of shares within a Series. In
addition to the Portfolios described herein, the Trust offers the following
investment portfolios: the Woodward Money Market Fund, Government Fund,
Treasury Money Market Fund, Tax- Exempt Money Market Fund, Michigan Tax-Exempt
Money Market Fund, Intermediate Bond Fund, Bond Fund, Short Bond Fund,
Municipal Bond Fund, Michigan Municipal Bond Fund and Equity Index Fund. The
Trust has established the following two distinct classes of shares within each
Portfolio described herein: Class I shares (Original Class) and Class A shares
(Special Class 1). A sales person and any other person or institution entitled
to receive compensation for selling or servicing shares may receive different
compensation with respect to different classes of shares in the Series. Each
share has $.10 par value, represents an equal proportionate interest in the
related Portfolio with other shares of the same class outstanding, and is
entitled to such dividends and distributions out of the income earned on the
assets belonging to such Portfolio as are declared in the discretion of the
Board of Trustees.
Shareholders are entitled to one vote for each full share held, and a
proportionate fractional vote for each fractional share held, and each Series
entitled to vote on a matter will vote thereon in the aggregate and not by
Series, except as otherwise expressly required by law or when the Board of
Trustees determines that the matter to be voted on affects only the interests
of shareholders of a particular Series. In addition, shareholders of each of
the Series have equal voting rights except that only shares of a particular
class within a Series are entitled to vote on matters affecting only that
class. Voting rights are not cumulative, and accordingly, the holders of more
than 50% of the aggregate number of shares of all Trust portfolios may elect
all of the Trustees.
-46-
<PAGE>
As of March 29, 1996, NBD held beneficially or of record
approximately 84.53%, 80.72%, 79.93%, 89.57%, 88.25% and 89.56% of the
outstanding shares of the Growth/Value, Opportunity, Intrinsic Value, Capital
Growth, Balanced and International Equity Portfolios, respectively, and
therefore may be considered to be a controlling person of the Trust for
purposes of the 1940 Act.
Because NBD serves the Trust as both Custodian and as Adviser, the
Trustees have established a procedure requiring three annual verifications,
two of which are unannounced, of all investments held pursuant to the
Custodian Agreement, to be conducted by the Trust's independent accountants.
The Trust does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Trust's By-Laws provide that special meetings of shareholders of any Series
shall be called at the written request of shareholders entitled to cast at
least 10% of the votes of a Series entitled to be cast at such meeting. The
Trust also stands ready to assist shareholder communications in connection
with any meeting of shareholders as prescribed in Section 16(c) of the 1940
Act.
-47-
<PAGE>
[ BACK COVER, COLUMN 1 ]
No person has been authorized to give
any information or to make any
representations not contained in this
Prospectus, or in the Portfolios'
Statement of Additional Information
incorporated herein by reference, in
connection with the offering made by
this Prospectus and, if given or
made, such information or
representations must not be relied
upon as having been authorized by the
Trust, Adviser or Sponsors and Co-
Distributors. This Prospectus does
not constitute an offering by the
Portfolios or by their Co-
Distributors, in any jurisdiction in
which such offering may not lawfully
be made.
TABLE OF CONTENTS Page
EXPENSE SUMMARY............................. 2
BACKGROUND.................................. 4
FINANCIAL HIGHLIGHTS........................ 5
INTRODUCTION................................ 11
PROPOSED REORGANIZATION..................... 11
INVESTMENT OBJECTIVES, POLICIES AND
RISK FACTORS.......................... 11
OTHER INVESTMENT POLICIES................... 16
PURCHASE OF SHARES.......................... 30
PUBLIC OFFERING PRICE....................... 32
REDEMPTION OF SHARES........................ 34
SHAREHOLDER SERVICES........................ 35
PERFORMANCE INFORMATION..................... 38
DIVIDENDS AND DISTRIBUTIONS................. 38
TAXES .................................... 39
MANAGEMENT.................................. 40
OTHER INFORMATION........................... 46
Investment Adviser:
NBD Bank
Detroit, Michigan 48226
Sponsors and Co-Distributors:
First of Michigan Corporation
Detroit, Michigan 48243
Essex National Securities, Inc.
Napa, California 94558
Custodian and Transfer Agent:
NBD Bank
Troy, Michigan 48007-7058
Legal Counsel:
Drinker Biddle & Reath
Philadelphia, Pennsylvania
19107-3496
<PAGE>
[ BACK COVER, COLUMN 2 ]
CLASS A SHARES OF THE:
WOODWARD GROWTH/VALUE FUND
WOODWARD OPPORTUNITY FUND
WOODWARD INTRINSIC VALUE FUND
WOODWARD CAPITAL GROWTH FUND
WOODWARD BALANCED FUND
WOODWARD INTERNATIONAL EQUITY FUND
THE WOODWARD FUNDS(R)
Prospectus
April 15, 1996
-48-
Exhibit (17)(f)
- - ------------------------------------------------------------------------------
PROSPECTUS April 15, 1996
- - ------------------------------------------------------------------------------
THE WOODWARD FUNDS
c/o NBD Bank, Transfer Agent
P.O. Box 7058
Troy, Michigan 48007-7058
24 Hour yield and performance information
Purchase and Redemption orders:
(800) 688-3350
- - ------------------------------------------------------------------------------
The Woodward Funds (the "Trust") is offering in this Prospectus shares
in the following seven investment portfolios (the "Portfolios"), each having
its own investment objective and policies as described in this Prospectus:
Class I shares of the:
Woodward Growth/Value Fund
Woodward Opportunity Fund
Woodward Intrinsic Value Fund
Woodward Capital Growth Fund
Woodward Balanced Fund
Woodward Equity Index Fund
Woodward International Equity Fund
Each of the Portfolios is advised by NBD Bank ("NBD" or the "Adviser")
and is sponsored and distributed by First of Michigan Corporation ("FoM" or
"Co-Distributor") and Essex National Securities, Inc. ("Essex" or
"Co-Distributor").
This Prospectus sets forth concisely information that a prospective
investor should consider before investing. Investors should read this
Prospectus and retain it for future reference. Additional information about
the Trust, contained in a Statement of Additional Information, has been filed
with the Securities and Exchange Commission (the "SEC") and is available upon
request without charge by writing to The Woodward Funds at the address above.
The Statement of Additional Information bears the same date as this Prospectus
and is incorporated by reference in its entirety into the Prospectus.
- - ------------------------------------------------------------------------------
SHARES OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED OR OTHERWISE SUPPORTED BY, NBD BANK, ITS PARENT COMPANY
OR ITS AFFILIATES, AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S.
GOVERNMENT, FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY GOVERNMENTAL AGENCY.
INVESTMENT IN THE TRUST INVOLVES RISKS, INCLUDING THE LOSS OF PRINCIPAL.
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.
- - ------------------------------------------------------------------------------
INVESTMENT ADVISER:
NBD Bank
<PAGE>
EXPENSE SUMMARY
The Trust currently offers Class I shares (formerly known as
"Institutional Shares") and Class A shares (formerly known as "Retail Shares")
in each of the Woodward Growth/Value Fund ("Growth/Value Portfolio"), Woodward
Opportunity Fund ("Opportunity Portfolio"), Woodward Intrinsic Value Fund
("Intrinsic Value Portfolio"), Woodward Capital Growth Fund ("Capital Growth
Portfolio"), Woodward Balanced Fund ("Balanced Portfolio"), Woodward Equity
Index Fund ("Equity Index Portfolio") and Woodward International Equity Fund
("International Equity Portfolio"). Class I shares are sold primarily to NBD
and its affiliated and correspondent banks acting on behalf of their
respective customers. Class A shares are sold to the general public primarily
through financial institutions such as banks, brokers and dealers. Class A
shares are offered in a separate Prospectus. Investors should call (800)
688-3350, a Co-Distributor or their financial institutions if they would like
to obtain more information concerning Class I shares and/or Class A shares of
the Portfolios. The following table is provided to assist investors in
understanding the various costs and expenses that an investor will indirectly
incur as a beneficial owner of Class I shares in each of the Portfolios.
<TABLE>
<CAPTION>
Inter-
Growth/ Oppor- Intrinsic Capital Equity national
Value tunity Value Growth Balanced Index Equity
Portfolio(1) Portfolio(1) Portfolio(1) Portfolio(1) Portfolio(1) Portfolio(1) Portfolio(1)
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shareholder Transaction
Expenses
Maximum Sales Load
Imposed on Purchases
(as a percentage of
offering price....... None None None None None None None
Sales Load Imposed on
Reinvested Dividends. None None None None None None None
Deferred Sales Load..... None None None None None None None
Redemption Fee.......... None None None None None None None
Exchange Fee............ None None None None None None None
Annual Operating Expenses
(as a percentage of
average net assets)
Management Fees......... .75% .75% .75% .75% .75% .10% .75%
12b-1 Fees.............. .011% .015% .011% .005% .013% .03% .004%
Other Expenses(2)
(before no fee waivers
and/or expense
reimbursements)...... .039% .035% .089% .145% .327% .03% 0.596%
(after fee waivers
and/or expense
reimbursements)...... N/A N/A N/A .125% .187% N/A .406%
Total Operating Expenses
(before fee waivers
and/or expense
reimbursements)...... .80% .80% .85% .90% 1.09% .16% 1.35%
(after fee waivers
and/or expense
reimbursements....... N/A N/A N/A .88% .95% N/A 1.16%
<FN>
- - ---------------------
1. The expenses for each Portfolio have been restated to reflect
current expenses.
-2-
<PAGE>
2. Credits or charges not reflected in the expense table may be
incurred directly by customers of financial institutions in connection with an
investment in the Portfolios.
- - -------------------
</TABLE>
<TABLE>
<CAPTION>
Inter-
Growth/ Oppor- Intrinsic Capital Equity national
Value tunity Value Growth Balanced Index Equity
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- ------------------- --------- --------- ---------
Example
You would pay the following
expenses on a $1,000
investment, assuming:
(1) a 5% annual return
and (2) redemption at the
end of each time period:
<S> <C> <C> <C> <C> <C> <C> <C>
One Year:..... $ 8.20 $ 8.20 $ 8.71 $ 9.02 $ 9.73 $ 1.64 $ 11.89
Three Years:.. 25.64 25.64 27.23 28.18 30.40 5.16 37.04
Five Years:... 44.57 44.57 47.31 48.95 52.76 9.03 64.15
Ten Years:.... 99.27 99.27 105.22 108.78 117.05 20.47 141.50
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR RATES OF RETURN. ACTUAL EXPENSES OR RATE OF RETURN MAY BE
GREATER OR LESSER THAN THOSE SHOWN.
The example demonstrates the projected dollar amount of total
cumulative expenses that would be incurred over various periods with respect
to a hypothetical investment in Class I shares in each of the Portfolios,
based upon payment by the Portfolios of operating expenses at the respective
levels set forth in the expense table. For more complete descriptions of
Portfolio expenses, see "Investment Adviser, Custodian and Transfer Agent,"
"Sponsors and Co-Distributors," "Service and Distribution Plan" and "Trust
Expenses" under the heading "Management" in this Prospectus and the financial
statements and related notes contained in the Statement of Additional
Information.
-3-
<PAGE>
BACKGROUND
Shares of each Portfolio have been classified into two separate
classes of shares -- Class I shares and Class A shares. Only the Class I
shares are offered pursuant to this Prospectus. Until April 15, 1996, Class I
shares and Class A shares represented equal pro rata interests in a Portfolio.
As of such date, the Trust implemented its Shareholder Servicing Plan with
respect to Class A shares only and began to allocate Servicing Fees
attributable to such shares exclusively to them.
-4-
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below provide supplementary information to the Portfolios'
financial statements contained in their Statement of Additional Information
and set forth certain information concerning the historic investment results
of Portfolio shares. They present a per share analysis of how each Portfolio's
net asset value has changed during the periods presented. The tables have been
derived from the Portfolios' financial statements which have been audited by
Arthur Andersen LLP, the Trust's independent public accountants, whose report
thereon is contained in the Statement of Additional Information along with the
financial statements. The financial data included in these tables should be
read in conjunction with the financial statements and related notes included
in the Statement of Additional Information. Further information about the
performance of the Portfolios is available in annual reports to shareholders.
The Statement of Additional Information and annual reports to shareholders may
be obtained from the Trust free of charge by calling (800) 688-3350.
<TABLE>
<CAPTION>
Growth/Value Portfolio
June 1, 1991
(Commencement
Year Ended Year Ended Year Ended Year Ended of Operations) to
December December December December December 31,
31, 1995 31, 1994 31, 1993 31, 1992 1991
---------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period .................. $ 10.67 $ 11.16 $ 10.51 $ 9.86 $ 10.00
Income from investment
operations:
Net investment income ...... 0.21 0.23 0.20 0.22 0.14
Net realized and unrealized
gains (losses) on
investments .............. 2.76 (0.17) 1.24 0.75 (0.14)
--------------- --------------- --------------- --------------- ---------------
Total from investment
operations ............... $ 2.97 $ 0.06 $ 1.44 $ 0.97 $ 0.00
--------------- --------------- --------------- --------------- ---------------
Less distributions:
From net investment
income ................... $ (0.22) $ (0.21) $ (0.20) $ (0.22) $ (0.14)
From realized
gains .................... (0.26) (0.30) (0.59) (0.10) 0.00
In excess
of realized gains ......... 0.00 (0.01) 0.00 0.00 0.00
Tax return of capital ....... 0.00 (0.03) 0.00 0.00 0.00
--------------- --------------- --------------- --------------- ---------------
Total distributions ........ $ (0.48) $ (0.55) $ (0.79) $ (0.32) $ (0.14)
--------------- --------------- --------------- --------------- ---------------
Net asset value, end of
period ..................... $ 13.16 $ 10.67 $ 11.16 $ 10.51 $ 9.86
=============== =============== =============== =============== ===============
Total return ................. 28.04% 0.55% 13.79% 9.87% 0.17%(a)
Ratios/Supplemental Data
Net assets, end of period .... $ 737,167,067 $ 571,370,711 $ 429,635,045 $ 287,344,809 $ 238,085,630
Ratio of expenses to average
net assets ................. 0.84% 0.84% 0.83% 0.83% 0.85%(a)
Ratio of net investment income
to average net assets ...... 1.73% 2.07% 1.84% 2.20% 2.56%(a)
Portfolio turnover rate ...... 26.80% 28.04% 42.31% 16.28% 0.94%
Average Commission Rate ...... $ 0.04
<FN>
- - ---------------
(a) Annualized for periods less than one year for comparability
purposes. Actual annual values may be less than or greater than those shown.
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Opportunity Portfolio
June 1, 1991
(Commencement
Year Ended Year Ended Year Ended Year Ended of Operations) to
December December December December December 31,
31, 1995 31, 1994 31, 1993 31, 1992 1991
---------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period .................. $ 13.34 $ 14.49 $ 12.37 $ 10.40 $ 10.00
Income from investment
operations:
Net investment income ...... 0.06 0.07 0.10 0.11 0.09
Net realized and unrealized
gains (losses) on
investments .............. 2.57 (0.54) 2.87 2.43 0.43
------------ ------------ ------------ ------------ ------------
Total from investment
operations ............... $ 2.63 $ (0.47) $ 2.97 $ 2.54 $ 0.52
------------ ------------ ------------ ------------ ------------
Less distributions:
From net investment
income ................... $ (0.06) $ (0.07) $ (0.10) $ (0.11) $ (0.09)
From realized
gains .................... (0.76) (0.49) (0.75) (0.46) (0.03)
In excess
of realized gains ......... 0.00 (0.02) 0.00 0.00 0.00
Tax return of capital ...... 0.00 (0.10) 0.00 0.00 0.00
------------ ------------ ------------ ------------ ------------
Total distributions ........ $ (0.82) $ (0.68) $ (0.85) $ (0.57) $ (0.12)
------------ ------------ ------------ ------------ ------------
Net asset value, end of
period ..................... $ 15.15 $ 13.34 $ 14.49 $ 12.37 $ 10.40
============ ============ ============ ============ ============
Total return ................. $ 19.88% (3.27%) 24.01% 24.56% 8.92%(a)
Ratios/Supplemental Data
Net assets, end of period .... $650,952,268 $524,999,120 $365,664,513 $166,423,073 $108,046,450
Ratio of expenses to average
net assets ................. 0.89% 0.90% 0.86% 0.84% O.84%(a)
Ratio of net investment income
to average net assets ...... 0.37% 0.53% 0.71% 1.09% 1.56%(a)
Portfolio turnover rate ...... 53.55% 37.51% 33.99% 34.44% 2.92%
Average Commission Rate ...... $ 0.04
<FN>
- - ------------
(a) Annualized for periods less than one year for comparability
purposes. Actual annual values may be less than or greater than those shown.
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Intrinsic Value Portfolio
June 1, 1991
(Commencement
Year Ended Year Ended Year Ended Year Ended of Operations) to
December December December December December 31,
31, 1995 31, 1994 31, 1993 31, 1992 1991
---------- ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period .................. $ 10.48 $ 11.05 $ 10.40 $ 9.89 $ 10.00
Income from investment
operations:
Net investment income ...... 0.29 0.31 0.29 0.29 0.17
Net realized and unrealized
gains (losses) on
investments .............. 2.24 (0.38) 1.23 1.14 (0.02)
------------ ------------ ------------ ------------ ------------
Total from investment
operations ............... $ 2.53 $ (0.07) $ 1.52 $ 1.43 $ 0.15
------------ ------------ ------------ ------------ ------------
Less distributions:
From net investment
income ................... $ (0.30) $ (0.30) $ (0.28) $ (0.28) $ (0.17)
From realized
gains .................... $ (0.82) $ (0.20) (0.59) (0.64) (0.09)
------------ ------------ ------------ ------------ ------------
Total distributions ........ $ (1.12) $ (0.50) $ (0.87) $ (0.92) $ (0.26)
------------ ------------ ------------ ------------ ------------
Net asset value, end of
period ..................... $ 11.89 $ 10.48 $ 11.05 $ 10.40 $ 9.89
============ ============ ============ ============ ============
Total return ................. 24.38% (0.60%) 14.71% 14.56% 2.70%(a)
Ratios/Supplemental Data
Net assets, end of period .... $255,884,859 $220,028,096 $192,555,183 $107,260,873 $ 77,450,163
Ratio of expenses to average
net assets ................. 0.91% 0.91% 0.86% 0.84% 0.84%(a)
Ratio of net investment income
to average net assets ...... 2.49% 2.92% 2.67% 2.78% 3.03%(a)
Portfolio turnover rate ...... 45.55% 58.62% 63.90% 48.52% 1.80%
Average Commission Rate ...... $ 0.03
<FN>
- - ------------
(a) Annualized for periods less than one year for comparability
purposes. Actual annual values may be less than or greater than those shown.
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
Capital Growth Portfolio
July 2, 1994
(Commencement
Year Ended of Operations) to
December 31, December 31,
1995 1994
------------ ----------------
<S> <C> <C>
Net asset value, beginning of period ....... $ 10.44 $ 10.00
Income from investment operations:
Net investment income .................... 0.08 0.05
Net realized and unrealized gains (losses)
on investments ......................... 2.93 0.43
------------ ------------
Total from investment operations ......... $ 3.01 $ 0.48
------------ ------------
Less distributions:
From net investment income ............... $ (0.08) $ (0.04)
From net realized gains .................. (0.11) 0.00
------------ ------------
Total distributions ...................... $ (0.19) $ (0.04)
------------ ------------
Net asset value, end of period ............. $ 13.26 $ 10.44
============ ============
Total return ............................... 28.90% 9.62%(a)
Ratios/Supplemental Data
Net assets, end of period .................. $195,861,178 $ 81,269,604
Ratio of expenses to average net assets .... 0.86% 0.85%(a)
Ratio of net investment income to average
net assets ................................ 0.65% 1.25%(a)
Ratio of expenses to average net assets
without fee waivers/reimbursed
expenses .................................. 0.90% 0.95%(a)
Ratio of net investment income to average
net assets without fee waivers/reimbursed
expenses ................................. 0.61% 1.15%(a)
Portfolio turnover rate .................... 6.97% 3.29%
Average Commission Rate .................... $ 0.04
<FN>
- - ------------
(a) Annualized for periods less than one year for comparability
purposes. Actual annual values may be less than or greater than those shown.
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
Balanced Portfolio
Year Ended Year Ended
December 31, December 31,
1995 1994
------------ -----------
<S> <C> <C>
Net asset value, beginning
of period .............................. $ 9.53 $ 10.00
Income from investment
operations:
Net investment income .................. 0.35 0.28
Net realized and unrealized
gains (losses) on
investments .......................... 1.83 (0.48)
------------ ------------
Total from investment
operations ........................... $ 2.18 $ (0.20)
------------ ------------
Less distributions:
From net investment
income ............................... $ (0.35) $ (0.27)
From realized
gains ................................ (0.12) 0.00
------------ ------------
Total distributions .................... $ (0.47) $ (0.27)
------------ ------------
Net asset value, end of
period ................................. $ 11.24 $ 9.53
============ ============
Total return ............................. 23.18% (1.95%)
Ratios/Supplemental Data
Net assets, end of period ................ $ 93,623,801 $ 54,167,192
Ratio of expenses to average
net assets ............................. 0.91% 0.85%
Ratio of net investment income
to average net assets .................. 3.40% 3.41%
Ratio of expenses to average net assets
without fee waivers/reimbursed expenses 1.09% 1.56%
Ratio of net investment income to average
net assets without fee waivers/reimbursed
expenses ................................ 3.22% 2.70%
Portfolio turnover rate .................. 31.76% 37.49%
Average Commission Rate .................. $ 0.05
- - ------------
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
Equity Index Fund
July 10, 1992
(Commencement of
Year Ended Year Ended Year Ended Operations) to
December 31, December 31, December 31, December 31,
1995 1994 1993 1992
------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period ................... $ 10.65 $ 11.15 $ 10.52 $ 10.00
Income from investment
operations:
Net investment income ....... 0.30 0.31 0.28 0.12
Net realized and unrealized
gains (losses) on
investments ............... 3.65 (0.20) 0.75 0.52
------------ ------------ ------------ ------------
Total from investment
operations ................ $ 3.95 $ 0.11 $ 1.03 $ 0.64
------------ ------------ ------------ ------------
Less distributions:
Dividends from net investment
income .................... $ (0.31) $ (0.30) $ (0.27) $ (0.12)
Distributions from realized
gains ..................... $ (0.14) $ (0.23) (0.13) 0.00
Distributions in excess of
realized gains ............ (0.00) (0.08) 0.00 0.00
------------ ------------ ------------ ------------
Total distributions ......... $ (0.45) $ (0.61) $ (0.40) $ (0.12)
------------ ------------ ------------ ------------
Net asset value, end of
period ...................... $ 14.15 $ 10.65 $ 11.15 $ 10.52
============ ============ ============ ============
Total return .................. 37.35% 1.02% 9.77% 13.61%(a)
Ratios/Supplemental Data
Net assets, end of period ..... $528,202,913 $340,808,050 $325,328,903 $242,057,866
Ratio of expenses to average
net assets .................. 0.15% 0.17% 0.20% O.22%(a)
Ratio of net investment income
to average net assets ....... 2.39% 2.71% 2.59% 2.71%(a)
Portfolio turnover rate ....... 10.66% 24.15% 16.01% 0.50%
Average Commission Rate ....... $ 0.03
<FN>
- - ------------
(a) Annualized for periods less than one year for comparability
purposes. Actual annual values may be less than or greater than those shown.
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
International Equity Portfolio
December 3, 1994
(Commencement
Year Ended of Operations) to
December 31, 1995 December 31, 1994
----------------- -----------------
<S> <C> <C>
Net asset value, beginning
of period ........................................ $ 10.01 $ 10.00
Income from investment
operations:
Net investment income ............................ 0.10 0.01
Net realized and unrealized
gains (losses) on
investments .................................... 1.05 0.00
------------ ------------
Total from investment
operations ..................................... $ 1.15 $ 0.01
------------ ------------
Less distributions:
From net investment
income ......................................... $ (0.11) $ 0.00
From realized
gains .......................................... (0.00) 0.00
------------ ------------
Total distributions .............................. $ (0.11) $ 0.00
------------ ------------
Net asset value, end of
period ........................................... $ 11.05 $ 10.01
============ ============
Total return ....................................... 11.47% 1.26%(a)
Ratios/Supplemental Data
Net assets, end of period .......................... $107,288,301 $ 36,545,470
Ratio of expenses to average
net assets ....................................... 1.16% 1.15%(a)
Ratio of net investment income
to average net assets ............................ 1.43% 1.18%(a)
Ratio of expenses to average net assets without fee
waivers/reimbursed expenses ...................... 1.24% 1.92%(a)
Ratio of net investment income to average net assets
without fee waivers/reimbursed expenses .......... 1.35% 0.41%(a)
Portfolio turnover rate ............................ 2.09% 0.30%
Average Commission Rate ............................ $ 0.05
<FN>
- - ------------
(a) Annualized for periods less than one year for comparability
purposes. Actual annual values may be less than or greater than those shown.
</TABLE>
-11-
<PAGE>
INTRODUCTION
The Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"). The
Trust currently consists of seventeen investment portfolios, each of which
consists of a separate pool of assets with separate investment objectives and
policies. However, only the Class I shares of the Growth/Value, Opportunity,
Intrinsic Value, Capital Growth, Balanced, Equity Index and International
Equity Portfolios are offered pursuant to this Prospectus. Each such Portfolio
is classified as a diversified investment portfolio under the 1940 Act.
PROPOSED REORGANIZATION
On December 1, 1995, NBD's parent, NBD Bancorp, Inc., merged with
First Chicago Corporation and the combined company was renamed First Chicago
NBD Corporation ("FCNBD"). An affiliate of FCNBD serves as the investment
adviser to Prairie Funds, Prairie Institutional Funds, Prairie Intermediate
Bond Fund and Prairie Municipal Bond Fund, Inc. (collectively, "Prairie").
FCNBD has recommended to both the Board of Trustees of the Trust and the Board
of Trustees/Directors of Prairie that the portfolios of the Trust and Prairie
be reorganized as described below. In light of this recommendation and after
considering various matters, the Trust's Board and Prairie's Board have
authorized certain Agreements and Plans of Reorganization (the
"Reorganization").
A Special Meeting of the Shareholders of each Prairie portfolio is
expected to be held in June 1996 to consider the approval or disapproval of
the Reorganization. The Reorganization generally provides for the transfer of
substantially all of each Prairie portfolio's assets and liabilities to a
corresponding portfolio of the Trust in exchange for such portfolio's shares.
In connection with the proposed Reorganization, a Special Meeting of
the Shareholders of the Trust is to expected be held in June 1996 to consider
proposals relating to investment policies, service agreements, the election of
two new trustees, and other matters. Proxy materials describing these matters
will be mailed to the Trust's shareholders of record for the meeting.
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The investment objective of a Portfolio may not be changed without
approval of the holders of at least a majority of the outstanding shares of
such Portfolio. See "Other Information." Except as noted below under
"Investment Limitations," a Portfolio's investment policies may be changed
without a vote of shareholders. There can be no assurance that a Portfolio
will achieve its objective.
Growth/Value Portfolio
The investment objective of the Growth/Value Portfolio is to achieve
long-term capital appreciation and, secondarily, to produce current income
approximating that prevailing within the general equity market. The Portfolio
seeks to achieve this objective by investing primarily in equity securities of
relatively large companies. The Adviser believes that well managed, larger
companies historically have provided investors with attractive returns, high
liquidity and lower than average volatility. The Portfolio invests in
companies which the Adviser believes have earnings growth expectations that
exceed those implied by the market's current valuation. In addition, the
Portfolio seeks to maintain a portfolio of companies whose earnings will
increase at a faster rate than within the general equity market. The equity
portion of the portfolio generally will be constructed in a "bottom-up"
manner. "Bottom-up" refers to an analytical approach to securities selection
which first focuses on the company and company-related matters as contrasted
to a "top-down" analysis which first
-12-
<PAGE>
focuses on the industry or the economy. In the Adviser's opinion this
procedure may generally be expected to result in a portfolio characterized by
lower price/earnings ratios, above average growth prospects, and average
market risk.
Opportunity Portfolio
The investment objective of the Opportunity Portfolio is to achieve
long-term capital appreciation and, secondarily, to maintain a moderate level
of dividend income. The Portfolio seeks to achieve this objective by investing
primarily in equity securities of companies with small to intermediate market
capitalization. The Adviser believes that there are many companies in this
size range that enjoy enhanced growth prospects, operate in more stable market
niches, and have greater ability to respond to new business opportunities, all
of which increase their likelihood of attaining superior levels of
profitability and investment returns. However, they may escape many investors'
attention because they are less well known than some larger companies. Shares
of these companies may also be more volatile than those of larger companies,
so the Opportunity Portfolio can be expected to exhibit somewhat greater
volatility than market indices dominated by very large companies. The Adviser
intends to reduce the volatility and enhance the potential return of the
Portfolio's holdings by concentrating on companies which have demonstrated
records of superior profitability, maintain conservative balance sheets, and
are, in general, of above-average quality, although stocks of lesser quality
may be purchased by the Portfolio if the Adviser believes they offer
sufficient opportunity for capital appreciation.
Intrinsic Value Portfolio
The investment objective of the Intrinsic Value Portfolio is to
provide long-term capital growth, with income a secondary consideration. The
Portfolio seeks to achieve this objective by investing primarily in equity
securities of companies believed by the Adviser to represent a value or
potential worth which is not fully recognized by prevailing market prices. In
selecting investments for the Portfolio, screening techniques are employed to
isolate issues believed to be attractively priced. The Adviser then evaluates
the underlying earning power and dividend paying ability of these potential
investments. The Portfolio's holdings are usually characterized by lower
price/earnings, price/cash flow and price/book value ratios and by above
average current dividend yields relative to the equity market. Companies
purchased by the Portfolio are often deemed by the Adviser to be overlooked
and out of favor by the marketplace at the time of purchase. In general the
Portfolio's investments are diversified among industry groups that meet the
Portfolio's valuation criteria to attempt to reduce certain of the risks
inherent in common stock investments.
Capital Growth Portfolio
The investment objective of the Capital Growth Portfolio is to
maximize long-term capital appreciation with current income not a significant
consideration. The Portfolio seeks to achieve this objective by investing
primarily in equity securities of companies with a market capitalization of at
least $1 billion. In selecting investments for the Portfolio, the Adviser will
employ screening techniques and a research intensive approach emphasizing
superior, sustainable annual earnings growth which is supported by strong
revenue growth, margin expansion and conservative financial leverage. Because
of this growth orientation, certain market sectors may be over represented in
the Portfolio's investments; however, investments will be diversified among
industry groups and individual issuers. The value of the Portfolio's
investments will fluctuate based on market and specific industry conditions,
and other factors such as investment-style preferences. It is anticipated
that, generally, the dividend yield of the Portfolio will be less than or
equal to that of the broad equity market and will likely fluctuate. Therefore,
the Portfolio is intended for investors seeking long-term capital
appreciation.
-13-
<PAGE>
Investment Policies Applicable to the Growth/Value, Opportunity, Intrinsic
Value and Capital Growth Portfolios
The Growth/Value, Opportunity, Intrinsic Value and Capital Growth
Portfolios invest primarily in publicly traded common stocks of companies
incorporated in the United States, although each such Portfolio may also
invest up to 25% of its total assets in the securities of foreign issuers,
either directly or through American Depository Receipts. In addition, they may
invest in securities convertible into common stock, such as certain bonds and
preferred stocks, and may invest up to 5% of their respective net assets in
other types of securities having common stock characteristics (such as rights
and warrants to purchase equity securities). The Portfolios may also enter
into futures contracts and related options and may utilize options. Under
normal market conditions, each Portfolio expects to invest at least 65% of the
value of its total assets in equity securities. Each Portfolio may also hold
up to 35% of its total assets in investment grade short-term obligations
issued or guaranteed by the U.S. Government, or its agencies or
instrumentalities, money market instruments, repurchase agreements and cash.
Balanced Portfolio
The investment objective of the Balanced Portfolio is to achieve
long-term total return through a combination of capital appreciation and
current income. The Portfolio seeks to achieve its investment objective by
investing its assets primarily in three major asset groups: equity securities;
fixed income securities; and cash equivalent securities. In pursuing the
Portfolio's investment objective, the Adviser allocates the Portfolio's
investments primarily based on its evaluation of the long-term relative
attractiveness of the major asset groups. The Adviser bases its evaluations of
relative attractiveness on its outlook for the capital market. This outlook
includes, but is not limited to, judgments about where the economy appears to
be in the business cycle together with expectations for inflation, interest
rates, and long-term corporate earnings growth.
Under normal market conditions, the Portfolio's policy is to invest at
least 25% of the value of its total assets in fixed income senior securities
and no more than 75% in equity securities. Compliance with these percentage
requirements may limit the ability of the Portfolio to maximize total return.
The actual percentage of assets invested in equity securities, fixed income
securities and cash equivalent securities will vary from time to time,
depending on the judgment of the Adviser as to general market and economic
conditions, trends in yields, interest rates and changes in fiscal and
monetary developments.
Equity Securities. The equity securities in which the Balanced
Portfolio normally invests are common stocks, preferred stocks, rights,
warrants and securities convertible into common or preferred stocks. The
equity portion of the Balanced Portfolio's investments will be invested
primarily in publicly traded stocks of companies incorporated in the United
States, although up to 20% of its total assets may be invested in the equity
securities of foreign issuers, either directly or through American Depository
Receipts.
The Adviser selects equity securities for the Portfolio based on such
factors as general financial condition, price/earnings, price/cash flow and
price/book value ratios, above average current dividend yields relative to the
equity market, market share, product leadership and other investment criteria.
The Portfolio invests in the equity securities of companies which the Adviser
believes have earnings growth expectations that exceed those implied by the
market's current valuation and that will increase at a faster rate than within
the general equity market. The Adviser may also select equity securities,
generally listed on a national exchange, of companies with small to
intermediate market capitalizations generally above $100 million which enjoy
enhanced growth prospects, operate in market niches, and have greater ability
to respond to new
-14-
<PAGE>
business opportunities, all of which increase their likelihood of attaining
superior levels of profitability and investment returns. The Adviser may also
select equity securities of companies it believes represent a value or
potential worth which is not fully recognized by prevailing market prices.
Debt Securities. The Balanced Portfolio invests the fixed income
portion of its portfolio of investments in a broad range of debt securities
rated "investment grade" or higher at the time of purchase, or unrated
investments deemed by the Adviser to be of comparable quality. Debt securities
in which the Portfolio normally invests are: (i) obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities; (ii)
corporate, bank and commercial obligations; (iii) securities issued or
guaranteed by foreign governments, their agencies or instrumentalities; (iv)
securities issued by supranational banks; (v) mortgage backed securities; and
(vi) securities representing interests in pools of assets. Investments include
fixed and variable-rate bonds, zero coupon bonds, debentures, and various
types of demand instruments. Obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities may include mortgage backed
securities, as well as "stripped securities" (both interest-only and
principal-only) and custodial receipts for Treasury securities. Most fixed
income obligations acquired by the Portfolio will be issued by companies or
governmental entities located within the United States. Up to 15% of the total
assets of the Portfolio may, however, be invested in dollar-denominated debt
obligations (including cash equivalent securities) of foreign issuers.
The Adviser manages the fixed income portion of the Portfolio based on
anticipated interest rate changes and the use of active management strategies
such as sector rotation, intra-sector adjustments and yield curve and
convexity considerations. In use of such active management strategies, the
Adviser seeks value in investment grade fixed income securities. Sector
rotation involves the Adviser selecting among different economic or industry
sectors based upon apparent or relative attractiveness. Thus at times a sector
offers yield advantages relative to other sectors. An intra-sector adjustment
occurs when the Adviser determines to select a particular issue within a
sector. Yield curve considerations involve the Adviser attempting to compare
the relationship between time to maturity and yield to maturity in order to
identify the relative value in the relationship. Convexity considerations
consist of the Adviser seeking securities that rise in price more quickly, or
decline in price less quickly, than the typical security of that price risk
level and therefore enable the Adviser to obtain an additional return when
interest rates change dramatically.
In acquiring particular fixed income securities for the Portfolio, the
Adviser will consider, among other things, historical yield relationships
between private and governmental debt securities, intermarket yield
relationships among various industry sectors, current economic cycles and the
attractiveness and creditworthiness of particular issuers. Depending upon the
Adviser's analysis of these and other factors, the Portfolio's holdings of
issues in particular industry sectors may be overweighted when compared to the
relative industry weightings in the Lehman Brothers Aggregate Bond Index, or
other recognized indices. The value of the fixed income portion of the
Portfolio can be expected to vary inversely with changes in prevailing
interest rates.
Cash Equivalent Securities and Other Investments. The cash equivalent
securities in which the Balanced Portfolio normally invests are short-term
obligations issued or guaranteed by the U.S. Government, or its agencies or
instrumentalities, "high quality" money market instruments such as
certificates of deposit, bankers' acceptances, time deposits, repurchase
agreements, reverse repurchase agreements, short-term obligations issued by
state and local governmental issuers which carry yields that are competitive
with those of other types of high quality money market instruments, commercial
paper, notes, other short-term obligations and variable rate master demand
notes. "High quality" money market instruments are money market instruments
which are rated at the time
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of purchase within the two highest rating categories or which are unrated at
such time but are deemed by the Adviser to be of comparable quality. Such
investments may include obligations of foreign banks and foreign branches of
U.S. banks. The Portfolio may also invest its cash balances in securities
issued by other investment companies which invest in high-quality, short-term
debt securities. As a shareholder of another investment company, the Portfolio
would bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would
be in addition to the advisory and other expenses that the Portfolio bears
directly in connection with its own operations.
The Balanced Portfolio may also enter into futures contracts
and related options and utilize options as more fully described below.
Equity Index Portfolio
The investment objective of the Equity Index Portfolio is to provide
an investment return which substantially duplicates the price and yield
performance of domestically traded common stocks in the aggregate, as
represented by the Standard & Poor's Composite Stock Price Index (the "S&P 500
Index" or "Index"). The Portfolio uses the S&P 500 Index as a benchmark for
comparison because it represents roughly two-thirds of the market value of all
publicly traded common stocks in the United States, is well known to investors
and is a widely accepted measure of common stock investment returns. The Index
contains a representative sample of common stocks that trade on the New York
and American Stock Exchanges and also contains over-the-counter stocks that
are a part of the National Market System. The S&P 500 Index is constructed
using a "bottom-up" approach through identification of important industry
categories and allocation of a representative sample of stocks to these
categories.
The Portfolio seeks to achieve a 95% correlation coefficient between
its performance and that of the Index. Therefore, the Portfolio's price
changes are expected to closely match movements in the underlying Index. In
addition, the total return of the Portfolio is expected to substantially match
that of the Index. However, there is no assurance that the Portfolio's
objective will be attained. Deviations from the performance of the Index
("tracking error") may result from shareholder purchases and redemptions of
shares of the Portfolio that occur daily, as well as from the expenses borne
by the Portfolio. To the extent that a cash reserve is held to meet expected
redemptions or pending investment in securities, to the extent that securities
must be sold to meet redemption requests, and to the extent that purchases and
sales are made to conform the Portfolio's holdings more closely with that of
the Index in response to cash inflows or outflows and associated brokerage
costs are incurred, these daily inflows or outflows of cash may increase the
Portfolio's tracking error. In addition, tracking error may occur due to
changes made in the S&P 500 Index and the manner in which the Index is
calculated by S&P among other factors. In the event the performance of the
Portfolio is not comparable to the performance of the Index, the Board of
Trustees will examine the reasons for the deviation and the availability of
corrective measures. These measures may include adjustments to the Adviser's
portfolio management practices. If substantial deviation in the Portfolio's
performance were to continue for extended periods, it is expected that the
Board of Trustees would consider possible changes to the Portfolio's
investment objective.
The Portfolio will not be managed by using traditional economic,
financial or market analysis. Instead, the Portfolio utilizes a sampling
methodology to determine which stocks to purchase or sell in order to closely
replicate the performance of the S&P 500 Index. Stocks are selected for the
Portfolio based on both capitalization weighing in the Index and industry
representation. Larger market capitalization securities in the Index are added
to the Portfolio according to their relative weight. Smaller capitalization
securities are then added to the Portfolio in equal weights according to an
analysis of the industry
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diversification of the Index. Therefore, while all industry weights in the
Portfolio are essentially matched to those of the S&P 500 Index, not
necessarily all 500 stocks are held in the Portfolio. The Adviser believes
that a sampling methodology allows the Portfolio to maintain a close
correlation to the performance of the S&P 500 Index while at the same time
controlling the portfolio turnover and transaction costs of the Portfolio.
Under normal market conditions, the Portfolio invests substantially
all of its total assets in the common stocks that comprise the Index in
accordance with their relative capitalization and sector weightings as
described above. It is possible, that if an issuer drops in ranking, or is
eliminated entirely from the Index, the Adviser may be required to sell some
or all of the common stock of such issuer then held by the Portfolio. Sales of
portfolio securities may be made at times when, if the Adviser were not
required to effect purchases and sales of portfolio securities in accordance
with the Index, such securities might not be sold. Such sales may result in
lower prices for such securities than may have been realized or in losses that
may not have been incurred if the Adviser were not required to effect the
purchases and sales. The failure of an issuer to declare or pay dividends, the
institution against an issuer of materially adverse legal proceedings, the
existence or threat of defaults materially and adversely affecting an issuer's
future declaration and payment of dividends, or the existence of other
materially adverse credit factors will not necessarily be the basis for the
disposition of portfolio securities, unless such event causes the issuer to be
eliminated entirely from the Index. The Portfolio may receive from time to
time as part of a "spin-off" or corporate restructuring of an issuer included
in the Index, securities that are themselves outside of the Index. Such
securities will be disposed of by the Portfolio in due course consistent with
the Portfolio's investment objective. In addition, the Portfolio may invest up
to 25% of its assets in the securities of foreign issuers through American
Depository Receipts. An investment in the Portfolio involves risks similar to
those of investing in common stocks.
Pending investment and to meet anticipated redemption requests, the
Portfolio may hold up to 5% of its total assets in short-term obligations
issued or guaranteed by the U.S. Government, or its agencies or
instrumentalities, money market instruments, repurchase agreements and cash.
In addition, up to 5% of the Portfolio's total assets may be invested in
futures contracts and related options in an effort to maintain exposure to
price movements in the Index pending investment of funds or while maintaining
liquidity to meet potential shareholder redemptions.
International Equity Portfolio
The investment objective of the International Equity Portfolio is to
achieve long-term capital appreciation and, secondarily, to produce current
income. The Portfolio seeks to achieve its objective by investing primarily in
equity securities of foreign issuers. The Portfolio may exhibit more
volatility than the U.S. equity market in general.
The Adviser's investment approach to managing the Portfolio's assets
emphasizes active country selection involving global economic and political
assessments together with valuation analysis of selected countries' securities
markets. This country allocation approach is based on absolute/relative
valuations, changing fundamentals and expected total returns including
currency. In situations where an investment's attractiveness outweighs
prospects for currency weakness, the Adviser will take suitable hedging
measures. An index approach is typically used at the stock selection level.
The Adviser employs quantitative techniques in conjunction with its
judgment and experience to determine the foreign equity markets that the
Portfolio will be invested in and the percentage of total assets the Portfolio
will hold by country. This investment approach focuses on economic
developments
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in foreign countries, fundamental analysis at the country level and the
political environment. After the country weightings have been determined,
investments are typically made in country "baskets" of equity securities. A
country "basket" is comprised of equity securities of a particular country and
is constructed using a quantitatively-oriented sampling technique to replicate
the performance of an individual country's stock market index. The Morgan
Stanley Capital International Country Indexes have, for some time, been the
accepted benchmarks in the U.S. for international equity fund country
comparisons. The Portfolio may also invest in individual equity securities the
Adviser believes offer opportunity for capital appreciation.
The Portfolio's investments will generally be allocated among
countries and geographic regions. The Portfolio's assets may be invested in
equity securities located in but not limited to the United Kingdom and
European continent, Japan, other Far East areas and Latin America. The
Portfolio may also invest in other regions seeking to capitalize on investment
opportunities in other parts of the world. The Portfolio's assets will be
invested at all times in the securities of issuers located in at least three
different foreign countries. Investments in a particular country may exceed
25% of the Portfolio's total assets, thus making its performance more
dependent upon the political and economic circumstances of a particular
country than a more widely diversified portfolio.
The Portfolio will be primarily invested in equity securities of
foreign companies consisting of common stocks, preferred stocks, rights,
warrants, and securities convertible into common or preferred stock. Equity
investments also include American Depository Receipts, European Depository
Receipts and similar securities that are either sponsored or unsponsored.
Under normal market conditions, the Portfolio expects to invest at least 65%
of the value of its total assets in equity securities of foreign issuers. The
Portfolio may hold up to 35% of its total assets in debt securities, and cash
equivalent holdings consisting of short-term debt obligations and cash.
However, the Portfolio does not expect to have a substantial portion of its
assets invested in debt securities and cash equivalent holdings under normal
market conditions. Debt securities in which the Portfolio may invest consist
of: (i) debt securities of foreign issuers, foreign governments and agencies
that the Adviser believes, based on market conditions, the financial condition
of the issuer, general economic conditions and other relevant factors, offer
opportunities for capital appreciation; (ii) obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities; (iii) corporate,
bank and commercial obligations; (iv) mortgage backed securities; and (v)
securities representing interests in pools of assets. In the event the Adviser
determines that unusual and adverse market conditions exist, the Portfolio may
adopt a temporary defensive posture and invest without limitation in debt
securities and cash equivalent holdings. To the extent the Portfolio is so
invested, its investment objective may not be achieved.
The Portfolio may also enter into futures contracts, related options,
foreign currency transactions and forward contracts, and utilize options.
OTHER INVESTMENT POLICIES
Ratings
If not rated as commercial paper, debt obligations acquired by
any of the Portfolios will be investment grade at the time of purchase, i.e.,
obligations rated AAA, AA, A or BBB by Standard & Poor's Rating Group,
Division of McGraw Hill ("S&P"), Fitch Investors Service, Inc. ("Fitch"),
Duff & Phelps Credit Co. ("Duff") or IBCA, Inc. ("IBCA") or Aaa, Aa, A or
Baa by Moody's Investors Service, Inc. ("Moody's") (each a "Rating Agency")
or be unrated but deemed by the Adviser to be comparable in quality at the
time of purchase to instruments that are so rated. Obligations rated in
the lowest of the top four rating
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categories (Baa by Moody's or BBB by S&P, Fitch, Duff or IBCA) are considered
to have less capacity to pay interest and repay principal and have certain
speculative characteristics. The debt ratings are described in the Statement
of Additional Information.
Short-Term Investments
Each Portfolio may hold the types of short-term investments described
under "Balanced Portfolio - Cash Equivalent Securities and Other Investments"
above.
U.S. Government Obligations
The Portfolios may invest in all types of U.S. Government securities,
including U.S. Treasury bonds, notes and bills, and obligations of Federal
Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage
Association, Federal National Mortgage Association, General Services
Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks, Tennessee Valley Authority, Resolution Funding Corporation and
Maritime Administration. The Portfolios may also invest in interests in the
foregoing securities, including collateralized mortgage obligations guaranteed
by a U.S. Government agency or instrumentality, and in Government-backed
trusts which hold obligations of foreign governments that are guaranteed or
backed by the full faith and credit of the United States.
Obligations of certain U.S. Government agencies and instrumentalities
such as those of the Government National Mortgage Association, are supported
by the full faith and credit of the U.S. Treasury; others, such as the
Export-Import Bank of the United States, are supported by the right of the
issuer to borrow from the Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the discretionary authority of
the U.S. Government to purchase the agency's obligations; still others, such
as those of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality.
Securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities have historically involved little risk of loss of
principal if held to maturity. The value of these securities may fluctuate
significantly, which may result in a significant decline in a Portfolio's net
asset value. In such event, an investor potentially may suffer a loss if the
investor liquidates his portfolio shares. No assurance can be given that the
U.S. Government would provide financial support to U.S. Government-sponsored
instrumentalities if it is not legally obligated to do so.
Stripped Government Obligations
To the extent consistent with their respective investment objectives,
the Balanced and International Equity Portfolios may purchase Treasury
receipts and other "stripped" securities that evidence ownership in either the
future interest payments or the future principal payments on U.S. Government
obligations. These participations, which may be issued by the U.S. Government
(or a U.S. Government agency or instrumentality) or by private issuers such as
banks and other institutions, are issued at a discount to their "face value,"
and may include stripped mortgage backed securities ("SMBS"), which are
derivative multi-class mortgage securities. Stripped securities, particularly
SMBS, may exhibit greater price volatility than ordinary debt securities
because of the manner in which their principal and interest are returned to
investors.
SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions from a pool of
mortgage
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backed obligations. A common type of SMBS will have one class receiving all of
the interest, while the other class will receive all of the principal.
However, in some instances, one class will receive some of the interest and
most of the principal while the other class will receive most of the interest
and the remainder of the principal. If the underlying obligations experience
greater than anticipated prepayments of principal, a Portfolio may fail to
fully recoup its initial investment in these securities. The market value of
the class consisting entirely of principal payments generally is extremely
volatile in response to changes in interest rates. The yields on a class of
SMBS that receives all or most of the interest are generally higher than
prevailing market yields on other mortgage backed obligations because their
cash flow patterns are more volatile and there is a greater risk that the
initial investment will not be fully recouped.
Custodial Receipts for Treasury Securities
The Balanced and International Equity Portfolios may purchase
participations in trusts that hold U.S. Treasury securities (such as TIGRs and
CATs) where the trust participations evidence ownership in either the future
interest payments or the future principal payments on the U.S. Treasury
obligations. These participations are normally issued at a discount to their
"face value," and may exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest are
returned to investors.
Repurchase and Reverse Repurchase Agreements
To increase its income, each Portfolio may agree to purchase portfolio
securities from financial institutions subject to the seller's agreement to
repurchase them at a mutually agreed-upon date and price ("repurchase
agreements"). No Portfolio will enter into repurchase agreements with the
Adviser, the Co-Distributors, or any of their affiliates. The seller under a
repurchase agreement will be required to maintain the value of the securities
subject to the agreement at not less than the repurchase price, marked to
market daily. Default by the seller would, however, expose a Portfolio to
possible loss because of adverse market action or delay in connection with the
disposition of the underlying obligations.
Each Portfolio may also obtain funds for temporary purposes by
entering into reverse repurchase agreements. Pursuant to such agreements the
Portfolios will sell portfolio securities to financial institutions such as
banks and broker-dealers and agree to repurchase them at a particular date and
price. Reverse repurchase agreements involve the risk that the market value of
the securities sold by a Portfolio may decline below the price of the
securities it is obligated to repurchase.
Lending Portfolio Securities
To increase income or offset expenses, each Portfolio may lend its
portfolio securities to financial institutions such as banks and
broker-dealers in accordance with the investment limitations described below.
Agreements would require that the loans be continuously secured by collateral
equal at all times in value to at least the market value of the securities
loaned plus accrued interest. Collateral for such loans could include cash or
securities of the U.S. Government, its agencies or instrumentalities. Such
loans will not be made if, as a result, the aggregate of all outstanding loans
of a particular Portfolio exceeds one-third of the value of its total assets.
Loans of securities involve risks of delay in receiving additional collateral
or in recovering the securities loaned or possible loss of rights in the
collateral should the borrower of the securities become insolvent. Loans will
be made only to borrowers that provide the requisite collateral comprised of
liquid assets and when, in the Adviser's judgment, the income to be earned
from the loan justifies the attendant risks.
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Illiquid Securities
In accordance with their fundamental investment limitation described
below, the Growth/Value, Opportunity, Intrinsic Value and Equity Index
Portfolios will not knowingly invest more than 10% and the Capital Growth,
Balanced and International Equity Portfolios will not knowingly invest more
than 15% of the value of their respective total assets in securities that are
illiquid. Securities having legal or contractual restrictions on resale or no
readily available market, and instruments (including repurchase agreements,
variable and floating rate instruments and time deposits) that do not provide
for payment to the Portfolios within seven days after notice are subject to
this limitation. Securities that have legal or contractual restrictions on
resale but have a readily available market are not deemed to be illiquid for
purposes of this limitation.
The Portfolios may purchase securities which are not registered under
the Securities Act of 1933, as amended (the "1933 Act"), but which can be sold
to "qualified institutional buyers" in accordance with Rule 144A under the
1933 Act. Any such security will not be considered to be illiquid so long as
it is determined by the Board of Trustees or the Adviser, acting under
guidelines approved and monitored by the Board, that an adequate trading
market exists for that security. This investment practice could have the
effect of increasing the level of illiquidity in a Portfolio during any period
that qualified institutional buyers become uninterested in purchasing these
restricted securities. The ability to sell to qualified institutional buyers
under Rule 144A is a recent development, and it is not possible to predict how
this market will develop. The Board of Trustees will carefully monitor any
investments by a Portfolio in these securities.
Borrowings
The Portfolios may borrow money for temporary purposes in accordance
with the investment limitations described below. Borrowings may be effected
through reverse repurchase agreements under which the Portfolios would sell
portfolio securities to financial institutions such as banks and
broker-dealers and agree to repurchase them at a particular date and price.
Reverse repurchase agreements involve the risk that the market value of the
securities sold by a Portfolio may decline below the price of the securities
it is obligated to repurchase.
Foreign Securities
As stated above, the Growth/Value, Opportunity, Intrinsic Value,
Capital Growth, Balanced and International Equity Portfolios may invest up to
25%, 25%, 25%, 25%, 20% and 100% of their respective total assets (exclusive
of short-term cash investments) in foreign securities. In addition the Equity
Index Portfolio may invest up to 25% of its total assets in American
Depository Receipts. Investments in foreign securities, whether made directly
or indirectly, involve certain inherent risks, such as political or economic
instability of the issuer or the country of issue, the difficulty of
predicting international trade patterns, changes in exchange rates of foreign
currencies and the possibility of adverse changes in investment or exchange
control regulations. There may be less publicly available information about a
foreign company than about a U.S. company. Listed foreign companies generally
are not subject to uniform accounting, auditing and financial reporting
standards comparable to those applicable to domestic companies. Further,
foreign stock markets are generally not as developed or efficient as those in
the U.S. and in most foreign markets volume and liquidity are less than in the
U.S. Fixed commissions on foreign stock exchanges are generally higher than
the negotiated commissions on U.S. exchanges, and there is generally less
government supervision and regulation of foreign stock exchanges, brokers and
listed companies than in the U.S. With respect to certain foreign countries,
there is a possibility of expropriation or confiscatory taxation, limitations
on the removal of funds or other assets or
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diplomatic developments that could affect investment within those countries.
Because of these and other factors, securities of foreign companies acquired
by a Portfolio may be subject to greater fluctuation in price than securities
of domestic companies.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in U.S.
dollars may be affected favorably or unfavorably by changes in currency rates
and exchange control regulations. Some currency exchange costs may be incurred
when a Portfolio changes investments from one country to another.
Furthermore, some securities may be subject to brokerage taxes levied
by foreign governments, which have the effect of increasing the costs of such
investments and reducing the realized gain or increasing the realized loss on
such securities at the time of sale. Income received by the Portfolios from
sources within foreign countries may be reduced by withholding or other taxes
imposed by such countries. Tax conventions between certain countries and the
United States, however, may reduce or eliminate such taxes. All such taxes
paid by a Portfolio will reduce its net income available for distribution to
investors.
American Depository Receipts ("ADRs")
Each Portfolio may invest in securities of foreign issuers in the form
of ADRs or similar securities representing securities of foreign issuers.
These securities may not be denominated in the same currency as the securities
they represent. ADRs are receipts typically issued by a United States bank or
trust company evidencing ownership of the underlying foreign securities and
are denominated in U.S. dollars. Certain such institutions issuing ADRs may
not be sponsored by the issuer. A non-sponsored depository may not provide the
same shareholder information that a sponsored depository is required to
provide under its contractual arrangements with the issuer.
European Depository Receipts ("EDRs")
The Capital Growth and International Equity Portfolios may invest in
securities of foreign issuers in the form of EDRs or similar securities
representing securities of foreign issuers. These securities may not be
denominated in the same currency as the securities they represent. EDRs are
receipts issued by a European financial institution evidencing ownership of
the underlying foreign securities and are generally denominated in foreign
currencies. Generally, EDRs, in bearer form, are designed for use in the
European securities markets.
Supranational Bank Obligations
The Balanced Portfolio may invest in obligations of supranational
banks. Supranational banks are international banking institutions designed or
supported by national governments to promote economic reconstruction,
development or trade between nations (e.g., the World Bank). Obligations of
supranational banks may be supported by appropriated but unpaid commitments of
their member countries and there is no assurance that these commitments will
be undertaken or met in the future.
Convertible Securities
A convertible security is a security that may be converted either at a
stated price or rate within a specified period of time into a specified number
of shares of common stock. By investing in convertible securities, a Portfolio
seeks the opportunity, through the conversion feature, to participate in the
capital appreciation of the common stock into which the securities are
convertible, while earning higher current income than is available from the
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common stock. Convertible securities acquired by a Portfolio will be rated
investment grade by a Rating Agency, or if unrated, will be of comparable
quality as determined by the Adviser. Subsequent to its purchase by a
Portfolio, a rated security may cease to be rated or its rating may be reduced
below the minimum rating required for purchase by the Portfolio. The Adviser
will consider such an event in determining whether the Portfolio involved
should continue to hold the security. The Adviser expects, however, to
promptly sell any securities that are non-investment grade as a result of
these events that exceed 5% of a Portfolio's net assets where it has
determined that such sale is in the best interest of the Portfolio.
Warrants
Each Portfolio may invest up to 5% of its assets at the time of
purchase in warrants and similar rights (other than those that have been
acquired in units or attached to other securities). Warrants represent rights
to purchase securities at a specified price valid for a specified period of
time. The prices of warrants do not necessarily correlate with the prices of
the underlying securities.
When-Issued Purchases and Forward Commitments
The Portfolios may purchase securities on a "when-issued" basis and
may purchase or sell securities on a "forward commitment" basis. These
transactions, which involve a commitment by a Portfolio to purchase or sell
particular securities with payment and delivery taking place at a future date
(perhaps one or two months later), permit the Portfolio to lock-in a price or
yield on a security it owns or intends to purchase, regardless of future
changes in interest rates. When-issued and forward commitment transactions
involve the risk, however, that the yield obtained in a transaction may be
less favorable than the yield available in the market when the securities
delivery takes place. Each Portfolio's forward commitments and when-issued
purchases are not expected to exceed 25% of the value of its total assets
absent unusual market conditions. The Portfolios do not earn income with
respect to these transactions until the subject securities are delivered to
the Portfolios. The Portfolios do not intend to engage in when-issued
purchases and forward commitments for speculative purposes but only in
furtherance of their investment objectives.
Asset Backed Securities
Asset backed securities held by the Balanced and International Equity
Portfolios arise through the grouping by governmental, government-related and
private organizations of loans, receivables and other assets originated by
various lenders ("Asset Backed Securities") as described below.
The yield characteristics of Asset Backed Securities differ from
traditional debt securities. A major difference is that the principal amount
of the obligations may be prepaid at any time because the underlying assets
(i.e., loans) generally may be prepaid at any time. As a result, if an Asset
Backed Security is purchased at a premium, a prepayment rate that is faster
than expected will reduce yield to maturity, while a prepayment rate that is
slower than expected will have the opposite effect of increasing yield to
maturity. Conversely, if an Asset Backed Security is purchased at a discount,
faster than expected prepayments will increase, while slower than expected
prepayments will decrease, yield to maturity. In calculating the average
weighted maturity of the Portfolios, the maturity of Asset Backed Securities
will be based on estimates of average life.
Prepayments on Asset Backed Securities generally increase with falling
interest rates and decrease with rising interest rates. Prepayment rates are
also influenced by a variety of economic and social factors. In general, the
collateral supporting non-mortgage backed securities is of shorter maturity
than
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mortgage loans and is less likely to experience substantial prepayments. Like
other fixed income securities, when interest rates rise the value of an Asset
Backed Security generally will decline; however, when interest rates decline,
the value of an Asset Backed Security with prepayment features may not
increase as much as that of other fixed income securities, and, as noted
above, changes in market rates of interest may accelerate or retard
prepayments and thus affect maturities.
These characteristics may result in a higher level of price volatility
for these assets under certain market conditions. In addition, while the
trading market for short-term mortgages and Asset Backed Securities is
ordinarily quite liquid, in times of financial stress the trading market for
these securities sometimes becomes restricted.
Mortgage Backed Securities. Asset Backed Securities acquired by the
Balanced and International Equity Portfolios consist of both mortgage and
non-mortgage backed securities. Mortgage backed securities represent an
ownership interest in a pool of mortgages, the interest on which is in most
cases issued and guaranteed by an agency or instrumentality of the U.S.
Government, although not necessarily by the U.S. Government itself. Mortgage
backed securities include collateralized mortgage obligations and mortgage
pass-through certificates.
Collateralized mortgage obligations ("CMOs") provide the holder with a
specified interest in the cash flow of a pool of underlying mortgages or other
mortgage backed securities. Issuers of CMOs ordinarily elect to be taxed as
pass-through entities known as real estate mortgage investment conduits
("REMICs"). CMOs are issued in multiple classes, each with a specified fixed
or floating interest rate and a final distribution date. The relative payment
rights of the various CMO classes may be structured in a variety of ways.
These multiple class securities may be issued or guaranteed by U.S. Government
agencies or instrumentalities, including the Government National Mortgage
Association ("GNMA"), Federal National Mortgage Association ("FNMA") and
Federal Home Loan Mortgage Corporation ("FHLMC"), or issued by trusts formed
by private originators of, or investors in, mortgage loans. Classes in CMOs
which the Portfolios may hold are known as "regular" interests. CMOs also
issue "residual" interests, which in general are junior to and more volatile
than regular interests. The Portfolios do not intend to purchase residual
interests.
Mortgage pass-through certificates provide the holder with a pro rata
interest in the underlying mortgages. One type of such certificate in which
the Portfolios may invest is GNMA Certificate which is backed as to the timely
payment of principal and interest by the full faith and credit of the U.S.
Government. Another type is a FNMA Certificate, the principal and interest of
which are guaranteed only by FNMA itself, not by the full faith and credit of
the U.S. Government. Another type is a FHLMC Participation Certificate which
is guaranteed by FHLMC as to timely payment of principal and interest.
However, like a FNMA security, it is not guaranteed by the full faith and
credit of the U.S. Government. Privately issued mortgage backed securities
will carry a rating at the time of purchase of at least A by S&P or by Moody's
or, if unrated, will be in the Adviser's opinion equivalent in credit quality
to such rating. Mortgage backed securities issued by private issuers, whether
or not such obligations are subject to guarantees by the private issuer, may
entail greater risk than obligations directly or indirectly guaranteed by the
U.S. Government.
Non-Mortgage Backed Securities. The Balanced and International Equity
Portfolios may also invest in non-mortgage backed securities including
interests in pools of receivables, such as motor vehicle installment purchase
obligations and credit card receivables. Such securities are generally issued
as pass-through certificates, which represent undivided fractional ownership
interests in the underlying pools of assets. Such securities may also be debt
instruments, which are also known as collateralized obligations and are
generally issued as
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the debt of a special purpose entity organized solely for the purpose of
owning such assets and issuing such debt. Non-mortgage backed securities are
not issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
Non-mortgage backed securities involve certain risks that are not
presented by mortgage backed securities. Primarily, these securities do not
have the benefit of the same security interest in the underlying collateral.
Credit card receivables are generally unsecured and the debtors are entitled
to the protection of a number of state and federal consumer credit laws. Most
issuers of motor vehicle receivables permit the servicers to retain possession
of the underlying obligations. If the servicer were to sell these obligations
to another party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the related motor vehicle receivables. In
addition, because of the large number of vehicles involved in a typical
issuance and technical requirements under state laws, the trustee for the
holders of the motor vehicle receivables may not have an effective security
interest in all of the obligations backing such receivables. Therefore, there
is a possibility that recoveries on repossessed collateral may not, in some
cases, be able to support payments on these securities.
Variable and Floating Rate Instruments
The Balanced Portfolio may invest in inverse floating rate debt
instruments ("inverse floaters") which may or may not be leveraged. The
interest rate of an inverse floater resets in the opposite direction from the
market rate of interest to which it is indexed. An inverse floater may be
considered to be leveraged to the extent that its interest rate varies by a
magnitude that exceeds the magnitude of the change in the index rate of
interest. The higher degree of leverage inherent in inverse floaters is
associated with greater volatility in their market values.
The absence of an active secondary market with respect to particular
variable and floating rate instruments could make it difficult for the
Balanced Portfolio to dispose of the instruments if the issuer defaulted on
its payment obligation or during periods that the Portfolio is not entitled to
exercise demand rights, and the Portfolio could, for these or other reasons,
suffer a loss with respect to such instruments. Variable and floating rate
instruments (including inverse floaters) will be subject to the Portfolio's
limitation on illiquid investments. See "Illiquid Securities."
Zero Coupon Obligations
Each Portfolio may invest in zero coupon obligations which are
discount debt obligations that do not make periodic interest payments although
income is generally imputed to the holder on a current basis. Such obligations
may have higher price volatility than those which require the payment of
interest periodically. The Adviser will consider the liquidity needs of a
Portfolio when any investment in zero coupon obligations is made.
Foreign Currency Transactions
The International Equity and Balanced Portfolios may engage in
currency exchange transactions to the extent consistent with their respective
investment objectives or to hedge their portfolios. The Portfolios will
conduct their currency exchange transactions either on a spot (i.e., cash)
basis at the rate prevailing in the currency exchange market, or through
entering into forward contracts to purchase or sell currencies. A forward
currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date, which must be more than two days from the
date of the contract, at a price set at the time of the contract. Forward
currency exchange contracts are entered into in the interbank market conducted
directly between currency traders (typically commercial banks or other
financial institutions) and their customers.
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They may be used to reduce the level of volatility caused by changes in
foreign currency exchange rates or when such transactions are economically
appropriate for the reduction of risks in the ongoing management of the
Portfolios. Although forward currency exchange contracts may be used to
minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time they tend to limit any potential gain that might be
realized should the value of such currency increase. The Portfolios also may
combine forward currency exchange contracts with investments in securities
denominated in other currencies.
The International Equity Portfolio also may maintain short positions
in forward currency exchange transactions, which would involve the Portfolio
agreeing to exchange an amount of a currency it did not currently own for
another currency at a future date in anticipation of a decline in the value of
the currency sold relative to the currency the Portfolio contracted to receive
in the exchange.
Each of the International Equity and Balanced Portfolios will maintain
in a segregated custodial account cash or U.S. Government securities or other
high quality liquid debt securities at least equal to the aggregate amount of
its short positions (in the case of the International Equity Portfolio) and of
its total assets committed to consummation of its forward currency exchange
contracts, plus accrued interest, in accordance with applicable requirements
of the SEC.
Options on Foreign Currency
The International Equity and Balanced Portfolios may purchase and sell
call and put options on foreign currency for the purpose of hedging against
changes in future currency exchange rates. Call options convey the right to
buy the underlying currency at a price which is expected to be lower than the
spot price of the currency at the time the option expires. Put options convey
the right to sell the underlying currency at a price which is anticipated to
be higher than the spot price of the currency at the time the option expires.
The Portfolios may use foreign currency options for the same purposes as
forward currency exchange and futures transactions, as described herein. See
also "Options" and "Currency Futures and Options on Currency Futures" below.
Futures Contracts and Related Options
Each Portfolio may trade futures contracts and options on futures
contracts in U.S. domestic markets, such as the Chicago Board of Trade and the
International Monetary Market of the Chicago Mercantile Exchange. To the
extent permitted under applicable law, the International Equity Portfolio may
also trade futures contracts and related options on exchanges located outside
the United States, such as the London International Financial Futures Exchange
and the Sydney Futures Exchange Limited. Foreign markets may offer advantages
such as trading in commodities that are not currently traded in the United
States or arbitrage possibilities not available in the United States. Foreign
markets, however, may have greater risk potential than domestic markets.
Each Portfolio may purchase and sell futures contracts which obligate
it to take or make delivery of certain securities at maturity, as well as
stock index futures contracts which are bilateral agreements pursuant to which
two parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the difference between the stock index value
(which assigns relative values to the common stocks included in the index) at
the close of the last trading day of the contract and the price at which the
futures contract is originally struck. No physical delivery of the underlying
stocks in the index is made. The Capital Growth, Balanced and International
Equity Portfolios may enter into contracts for the future delivery of fixed
income securities commonly known as interest rate futures contracts.
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A Portfolio may sell a futures contract in order to offset an expected
decrease in the value of its portfolio that might otherwise result from a
market decline or currency exchange fluctuation. A Portfolio may do so either
to hedge the value of its securities portfolio as a whole, or to protect
against declines occurring prior to sales of securities in the value of the
securities to be sold. In addition, a Portfolio may utilize futures contracts
in anticipation of changes in the composition of its holdings or in currency
exchange rates.
The Capital Growth, Balanced, Equity Index and International Equity
Portfolios may also purchase options on futures contracts and may purchase and
write put and call options on stock indices listed on U.S. and, in the case of
the International Equity Portfolio foreign exchanges, or traded in the
over-the-counter market. A futures option gives the holder, in return for the
premium paid, the right to buy (call) from or sell (put) to the writer of the
option a futures contract at a specified price at any time during the period
of the option.
When a Portfolio sells an option on a futures contract, it becomes
obligated to purchase or sell a futures contract if the option is exercised.
In anticipation of a market advance, a Portfolio may purchase call options on
futures contracts as a substitute for the purchase of futures contracts to
hedge against a possible increase in the price of securities which the
Portfolio intends to purchase. Similarly, if the value of a Portfolio's
portfolio securities is expected to decline, the Portfolio might purchase put
options or sell call options on futures contracts rather than sell futures
contracts.
The Portfolios' commodities transactions must constitute bona fide
hedging or other permissible transactions pursuant to regulations promulgated
by the Commodities and Futures Trading Commission ("CFTC"). In addition, a
Portfolio may not engage in such transactions if the sum of the amount of
initial margin deposits and premiums paid for unexpired commodity options,
other than for bona fide hedging transactions, would exceed 5% of the
liquidation value of its assets, after taking into account unrealized profits
and unrealized losses on such contracts it has entered into; provided,
however, that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the
percentage limitation. Pursuant to SEC requirements, the Portfolios will be
required to segregate cash or high quality money market instruments in
connection with their commodities transactions in an amount generally equal to
the value of the underlying commodity. The Trust intends to comply with the
regulations of the CFTC exempting the Portfolios from registration as a
"commodity pool operator."
For a more detailed description of futures contracts and related
options, see Appendix B to the Statement of Additional Information.
Currency Futures and Options on Currency Futures
The International Equity and Balanced Portfolios may purchase and sell
currency futures contracts and options thereon. By selling foreign currency
futures, a Portfolio can establish the number of U.S. dollars that it will
receive in the delivery month for a certain amount of a foreign currency. In
this way, if a Portfolio anticipates a decline of a foreign currency against
the U.S. dollar, the Portfolio can attempt to fix the U.S. dollar value of
some or all of its securities that are denominated in that currency. By
purchasing foreign currency futures, a Portfolio can establish the number of
U.S. dollars that it will be required to pay for a specified amount of a
foreign currency in the delivery month. Thus, if a Portfolio intends to buy
securities in the future and expects the U.S. dollar to decline against the
relevant foreign currency during the period before the purchase is effected,
the Portfolio, for the price of the currency future, can attempt to fix the
price in U.S. dollars of the securities it intends to acquire.
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The purchase of options on currency futures will allow a Portfolio,
for the price of the premium it must pay for the option, to decide whether or
not to buy (in the case of a call option) or to sell (in the case of a put
option) a futures contract at a specified price at any time during the period
before the option expires. If the Portfolios, in purchasing an option, have
been correct in their judgment concerning the direction in which the price of
a foreign currency would move as against the U.S. dollar, they may exercise
the option and thereby take a futures position to hedge against the risk they
had correctly anticipated or close out the option position at a gain that will
offset, to some extent, currency exchange losses otherwise suffered by the
Portfolios. If exchange rates move in a way a Portfolio did not anticipate,
the Portfolio will have incurred the expense of the option without obtaining
the expected benefit. As a result, a Portfolio's profits on the underlying
securities transactions may be reduced or overall losses may be incurred.
Options
The Capital Growth, Balanced and International Equity Portfolios may
purchase and sell put and call options listed on a national securities
exchange and issued by the Options Clearing Corporation for hedging purposes.
Such transactions may be effected on a principal basis with primary reporting
dealers in U.S. Government securities in an amount not exceeding 5% of a
Portfolio's net assets, as described further in the Statement of Additional
Information. Such options may relate to particular securities or to various
stock indices or bond indices. Purchasing options is a specialized investment
technique which entails a substantial risk of a complete loss of the amounts
paid as premiums to the writer of the option. Each such Portfolio may also
purchase and write put and call options on stock indices listed on foreign
exchanges or traded in the over-the-counter market.
The Capital Growth, Balanced and International Equity Portfolios may
purchase and sell put options on portfolio securities at or about the same
time that they purchase the underlying security or at a later time. By buying
a put, a Portfolio limits its risk of loss from a decline in the market value
of the security until the put expires. Any appreciation in the value of and
yield otherwise available from the underlying security, however, will be
partially offset by the amount of the premium paid for the put option and any
related transaction costs. Call options may be purchased by a Portfolio in
order to acquire the underlying security at a later date at a price that
avoids any additional cost that would result from an increase in the market
value of the security. A Portfolio may also purchase call options to increase
its return to investors at a time when the call is expected to increase in
value due to anticipated appreciation of the underlying security. Prior to its
expiration, a purchased put or call option may be sold in a closing sale
transaction (a sale by a Portfolio, prior to the exercise of an option that it
has purchased, of an option of the same series), and profit or loss from the
sale will depend on whether the amount received is more or less than the
premium paid for the option plus the related transaction costs.
In addition, the Capital Growth, Balanced and International Equity
Portfolios may write covered call and secured put options. A covered call
option means that a Portfolio owns or has the right to acquire the underlying
security subject to call at all times during the option period. A secured put
option means that a Portfolio maintains in a segregated account with its
custodian cash or U.S. Government securities in an amount not less than the
exercise price of the option at all times during the option period. Such
options will be listed on a national securities exchange and issued by the
Options Clearing Corporation and may be effected on a principal basis with
primary reporting dealers in U.S. Government securities. The aggregate value
of the securities subject to options written by a Portfolio will not exceed
25% of the value of its net assets. In order to close out an option position
prior to maturity, a Portfolio may enter into a "closing purchase transaction"
by purchasing a call or put option
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(depending upon the position being closed out) on the same security with the
same exercise price and expiration date as the option which it previously
wrote.
By writing a covered call option, a Portfolio forgoes the opportunity
to profit from an increase in the market price of the underlying security
above the exercise price except insofar as the premium represents such a
profit, and it is not able to sell the underlying security until the option
expires or is exercised or the Portfolio effects a closing purchase
transaction by purchasing an option of the same series. If a Portfolio writes
a secured put option, it assumes the risk of loss should the market value of
the underlying security decline below the exercise price of the option. The
use of covered call and secured put options will not be a primary investment
technique of the Portfolios.
For additional information relating to option trading practices,
including particular risks thereof, see the Statement of Additional
Information.
Risk Factors Associated with Futures, Options and Currency Futures and Options
To the extent a Portfolio is engaging in a futures transaction as a
hedging device, due to the risk of an imperfect correlation between securities
in its portfolio that are the subject of a hedging transaction and the futures
contract used as a hedging device, it is possible that the hedge will not be
fully effective. For example, losses on the portfolio securities may be in
excess of gains on the futures contract or losses on the futures contract may
be in excess of gains on the portfolio securities that were the subject of the
hedge. In futures contracts based on indices, the risk of imperfect
correlation increases as the composition of the Portfolio varies from the
composition of the index. In an effort to compensate for the imperfect
correlation of movements in the price of the securities being hedged and
movements in the price of futures contracts, the Portfolio may buy or sell
futures contracts in a greater or lesser dollar amount than the dollar amount
of the securities being hedged if the historical volatility of the futures
contract has been less or greater than that of the securities. Such "over
hedging" or "under hedging" may adversely affect the Portfolio's net
investment results if market movements are not as anticipated when the hedge
is established.
Successful use of futures by a Portfolio also is subject to the
Adviser's ability to predict correctly movements in the direction of
securities prices, interest rates, currency exchange rates and other economic
factors. For example, if the Portfolio has hedged against the possibility of a
decline in the market adversely affecting the value of securities held in its
portfolio and prices increase instead, the Portfolio will lose part or all of
the benefit of the increased value of securities which it has hedged because
it will have offsetting losses in its futures positions. In addition, in such
situations, if the Portfolio has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. Such sales of
securities may, but will not necessarily, be at increased prices which reflect
the rising market. The Portfolio may have to sell securities at a time when it
may be disadvantageous to do so.
Although a Portfolio intends to enter into futures contracts and
options transactions only if there is an active market for such contracts, no
assurance can be given that a liquid market will exist for any particular
contract at any particular time. See "Illiquid Securities" above. Many futures
exchanges and boards of trade limit the amount of fluctuation permitted in
futures contract prices during a single trading day. Once the daily limit has
been reached in a particular contract, no trades may be made that day at a
price beyond that limit or trading may be suspended for specified periods
during the trading day. Futures contracts prices could move to the limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and potentially subjecting the
Portfolio to substantial losses. If it is not possible, or the Portfolio
determines not, to close a futures position in
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anticipation of adverse price movements, it will be required to make daily
cash payments of variation margin. In such circumstances, an increase in the
value of the portion of the portfolio being hedged, if any, may offset
partially or completely losses on the futures contract.
Currency exchange rates may fluctuate significantly over short periods
of time. They generally are determined by the forces of supply and demand in
the foreign exchange markets and the relative merits of investments in
different countries, actual or perceived changes in interest rates and other
complex factors as seen from an international perspective. Currency exchange
rates also can be affected unpredictably by intervention by U.S. or foreign
governments or central banks, or the failure to intervene, or by currency
controls or political developments in the United States or abroad. The foreign
currency market offers less protection against defaults in the forward trading
of currencies than is available when trading in currencies occurs on an
exchange. Since a forward currency contract is not guaranteed by an exchange
or clearinghouse, a default on the contract would deprive the Portfolio of
unrealized profits or force the Portfolio to cover its commitments for
purchase or resale, if any, at the current market price.
Unlike trading on domestic commodity exchanges, trading on foreign
commodity exchanges is not regulated by the CFTC and may be subject to greater
risks than trading on domestic exchanges. For example, some foreign exchanges
are principal markets so that no common clearing facility exists and a trader
may look only to the broker for performance of the contract. In addition,
unless the Portfolio hedges against fluctuations in the exchange rate between
the U.S. dollar and the currencies in which trading is done on foreign
exchanges, any profits that the Portfolio might realize in trading could be
eliminated by adverse changes in the exchange rate, or the Portfolio could
incur losses as a result of those changes. Transactions on foreign exchanges
may include both commodities which are traded on domestic exchanges and those
which are not.
Risk Factors Associated with Derivative Instruments
Each Portfolio may purchase certain "derivative instruments."
Derivative instruments are instruments that derive value from the performance
of underlying assets, interest or currency exchange rates, or indices, and
include, but are not limited to, futures contracts, options, forward currency
contracts and structured debt obligations (including collateralized mortgage
obligations and other types of asset backed securities, "stripped" securities
and various floating rate instruments, including inverse floaters).
Derivative instruments present, to varying degrees, market risk that
the performance of the underlying assets, exchange rates or indices will
decline; credit risk that the dealer or other counterparty to the transaction
will fail to pay its obligations; volatility and leveraging risk that, if
interest or exchange rates change adversely, the value of the derivative
instrument will decline more than the assets, rates or indices on which it is
based; liquidity risk that a Portfolio will be unable to sell a derivative
instrument when it wants because of lack of market depth or market disruption;
pricing risk that the value of a derivative instrument (such as an option)
will not correlate exactly to the value of the underlying assets, rates or
indices on which it is based; and operations risk that loss will occur as a
result of inadequate systems and controls, human error or otherwise. Some
derivative instruments are more complex than others, and for those instruments
that have been developed recently, data are lacking regarding their actual
performance over complete market cycles.
The Adviser will evaluate the risks presented by the derivative
instruments purchased by the Portfolios, and will determine, in connection
with its day-to-day management of the Portfolios, how they will be used in
furtherance of the Portfolios' investment objectives. It is possible, however,
that the Adviser's evaluations will prove to be inaccurate or incomplete and,
even when accurate and
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complete, it is possible that the Portfolios will, because of the risks
discussed above, incur loss as a result of their investments in derivative
instruments.
Portfolio Turnover
Generally, the Portfolios will purchase securities for capital
appreciation or investment income, or both, and not for short-term trading
profits. However, a Portfolio may sell a portfolio investment soon after its
acquisition if the Adviser believes that such a disposition is consistent with
or in furtherance of the Portfolio's investment objective. Portfolio
investments may be sold for a variety of reasons, such as more favorable
investment opportunities or other circumstances. As a result, such Portfolios
are likely to have correspondingly greater brokerage commissions and other
transaction costs which are borne indirectly by shareholders. Portfolio
turnover may also result in the realization of substantial net capital gains.
(See "Taxes-Federal" in the Prospectus and "Additional Information Concerning
Taxes" in the Statement of Additional Information.) While it is not possible
to accurately predict portfolio turnover rates, the annual turnover rates for
the Growth/Value, Opportunity, Intrinsic Value, Capital Growth and
International Equity Portfolios are not expected to exceed 100% and the annual
turnover rate for the Balanced Portfolio is not expected to exceed 75%. Equity
index funds typically have lower levels of turnover than actively managed
funds.
Investment Limitations
Each Portfolio is subject to a number of investment limitations. The
following investment limitations are matters of fundamental policy and may not
be changed with respect to a particular Portfolio without the affirmative vote
of the holders of a majority of the Portfolio's outstanding shares. Other
investment limitations that cannot be changed without a vote of shareholders
are contained in the Statement of Additional Information under "Investment
Objectives, Policies and Risk Factors."
No Portfolio may:
1. Purchase securities of any one issuer (other than securities issued
or guaranteed by the U.S. Government, its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of a Portfolio's
total assets would be invested in the securities of such issuer, or more than
10% of the issuer's outstanding voting securities would be owned by a
Portfolio, except that up to 25% of the value of the Portfolio's total assets
may be invested without regard to these limitations.
2. Purchase any securities which would cause 25% or more of the value
of the Portfolio's total assets at the time of purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no limitation with
respect to obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and repurchase agreements secured by such
instruments; (b) wholly-owned finance companies will be considered to be in
the industries of their parents if their activities are primarily related to
financing the activities of the parents; and (c) utilities will be divided
according to their services, for example, gas, gas transmission, electric and
gas, electric and telephone will each be considered a separate industry.
3. Make loans, except that each Portfolio may purchase and hold debt
instruments and enter into repurchase agreements in accordance with its
investment objective and policies and may lend portfolio securities in an
amount not exceeding one-third of its total assets.
4. Borrow money or issue senior securities, except that each Portfolio
may borrow from banks and enter into reverse repurchase agreements for
temporary
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purposes in amounts not in excess of 10% of the value of its total assets at
the time of such borrowing; or mortgage, pledge or hypothecate any assets,
except in connection with any such borrowing and in amounts not in excess of
the lesser of the dollar amounts borrowed or 10% of the value of the
Portfolio's total assets at the time of such borrowing. No Portfolio will
purchase securities while its borrowings (including reverse repurchase
agreements) in excess of 5% of its total assets are outstanding. Securities
held in escrow or separate accounts in connection with a Portfolio's
investment practices described in the Statement of Additional Information or
in this Prospectus are not deemed to be pledged for purposes of this
limitation.
In addition, the Growth/Value, Opportunity, Intrinsic Value and Equity
Index Portfolios may not invest more than 10% of their respective total assets
in illiquid investments. The Capital Growth, Balanced and International Equity
Portfolios may invest up to 15% of their respective total assets in illiquid
securities. See "Illiquid Securities" above.
Generally, if a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in the value of a Portfolio's portfolio securities will not constitute
a violation of such limitation for purposes of the 1940 Act.
In order to permit the sale of a Portfolio's shares in certain states,
the Portfolios may make commitments more restrictive than the investment
policies and limitations described above. Should a Portfolio determine that
any such commitment is no longer in the best interests of the Portfolio, it
will revoke the commitment by terminating sales of its shares in the state
involved.
PURCHASE OF SHARES
In General
Each Portfolio's shares are offered and sold on a continuous basis by
FoM and Essex, as the Trust's Co-Distributors. FoM is a registered
broker/dealer with offices at 100 Renaissance Center, 26th Floor, Detroit,
Michigan 48243. Essex is a registered broker/dealer with offices at 215
Gateway Road West, Napa, California 94558.
Class I shares are sold primarily to NBD and its affiliated and
correspondent banks (the "Banks") acting on behalf of their respective
customers. The Banks may impose different minimum investment and other
requirements, as well as account charges, on their customers and may establish
separate operational arrangements by which shares may be purchased and
redeemed. Customers should contact their Banks for further information.
It is the responsibility of the Banks to transmit their customers'
purchase orders to NBD acting as transfer agent (the "Transfer Agent") and to
deliver required funds on a timely basis. Class I shares will normally be held
of record by the Banks. Confirmations of share purchases and redemptions will
be sent to the Banks. Beneficial ownership of Class I shares will be recorded
by the Banks and reflected in the account statements provided by them to their
customers.
Purchase orders which are accompanied by payment (by check or wire
transfer) and received by the Transfer Agent in proper form on a Business Day
(as defined below) prior to the close of the New York Stock Exchange
("Exchange") are priced at the net asset value of the particular Portfolio
determined on that Business Day. Purchase orders which are received by the
Transfer Agent after the close of trading on the Exchange on a Business Day or
on non-Business Days will be executed as of the determination of net asset
value on the next Business Day.
Questions concerning the purchase of shares should be directed to
the Transfer Agent at (800) 688-3350.
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Net Asset Value and Pricing of Shares
The net asset value of each Portfolio for purposes of pricing purchase
and redemption orders is determined as of the close of trading on the floor
of the New York Stock Exchange ("Exchange") (currently 4:00 p.m., New York
Time), on each day the Exchange is open for business ("Business Day") except:
(i) those holidays which the Exchange observes (currently New Year's Day,
Day, Presidents' Day, Good Friday, Memorial Day (observed), Independence
Day, Labor Day, Thanksgiving Day and Christmas Day); and (ii) those
Business Days on which the Exchange closes prior to the close of
its regular trading hours ("Early Closing Time"), in which event the
net asset value of each Portfolio will be determined and its shares
will be priced as of such Early Closing Time. Net asset value per
Class I share of a Portfolio is calculated by dividing the value
of all securities and other assets belonging to the Portfolio allocable
to that Class I, less the liabilities charged to that Class I, by the
number of the outstanding shares of such Class I.
Securities held by the Portfolios which are traded on a recognized
U.S. stock exchange are valued at the last sale price on the securities
exchange on which such securities are primarily traded or at the last sale
price on the national securities market. Securities which are primarily traded
on foreign securities exchanges are generally valued at the latest closing
price on their respective exchanges, except when an occurrence subsequent to
the time a value was established is likely to have changed such value, in
which case the fair value of those securities will be determined through
consideration of other factors by the Adviser under the supervision of the
Board of Trustees. Securities, whether U.S. or foreign, traded on only
over-the-counter markets and securities for which there were no transactions
are valued at the average of the current bid and asked prices. Fixed income
securities held by the Portfolios are valued according to the broadest and
most representative market, which ordinarily will be the over-the-counter
markets, whether in the United States or in foreign countries. Such securities
are valued at the average of the current bid and asked prices. Securities for
which accurate market quotations are not readily available, and other assets
are valued at fair value by the Adviser under the supervision of the Board of
Trustees. Securities may be valued on the basis of prices provided by
independent pricing services when the Adviser believes such prices reflect the
fair market value of such securities. The prices provided by pricing services
take into account institutional size trading in similar groups of securities
and any developments related to specific securities. For valuation purposes,
the value of assets and liabilities expressed in foreign currencies will be
converted to U.S. dollars equivalent at the prevailing market rate on the day
of valuation. A Portfolio's open futures contracts will be "marked-to-
market."
REDEMPTION OF SHARES
Redemption orders are effected at the net asset value next determined
after receipt by the Transfer Agent of a proper notice of redemption. It is
the responsibility of the Banks to transmit redemption orders to the Transfer
Agent and credit their customers' accounts with the redemption proceeds on a
timely basis.
The Trust will make payment for redeemed shares within the time period
prescribed by the settlement requirements of the Securities Exchange Act of
1934 after receipt by the Transfer Agent of a request in proper form. If
shares to be redeemed were purchased by check, the Trust will transmit the
redemption proceeds promptly upon clearance of such check, which could take up
to fifteen days from the purchase date. A shareholder of record having
purchased shares by wire must have filed an account application before any
redemption requests can be honored.
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Written requests to redeem shares having a net asset value of more
than $50,000 must have all signatures of the registered owner(s) or their
authorized legal representative guaranteed by a commercial bank or trust
company which is a member of the Federal Reserve System or FDIC, a member firm
of a national securities exchange or a savings and loan association. A
signature guaranteed by a savings bank or notarized by a notary public is not
acceptable. A signature guarantee will also be required for a redemption
request (in any amount) if the address of record for the account has been
changed within the previous 15 days or which requests that the proceeds be
paid to an account other than the one preauthorized on the application, a
payee or payees other than the registered owners of the account, or an address
other than the address of record. The Trust may require additional supporting
documents for redemptions made by corporations, fiduciaries, executors,
administrators, trustees, guardians and institutional investors.
Currently, the Trust imposes no charge when shares are redeemed.
However, Banks may charge a fee for providing services in connection with
investments in Portfolio shares. The Trust reserves the right to redeem
Portfolio shares involuntarily, after sixty days notice, if redemptions cause
an account's value to remain at $1,000 or less. Under certain circumstances,
the Trust may make payment for redemptions in securities or other property.
Questions concerning the proper form for redemption requests should be
directed to the Transfer Agent at (800) 688-3350.
PERFORMANCE INFORMATION
From time to time, in advertisements or in reports to shareholders the
performance of each class of shares of the Portfolios may be compared to the
performance of other mutual funds with similar investment objectives and to
stock or other relevant indices or to rankings prepared by independent
services or other financial or industry publications that monitor the
performance of mutual funds. For example, performance may be compared to data
prepared by Lipper Analytical Services, Inc. In addition, the performance of
the Portfolios may be compared to the Standard & Poor's 500 Index, an index of
unmanaged groups of common stocks, the Consumer Price Index, or the Dow Jones
Industrial Average, a recognized unmanaged index of common stocks of thirty
industrial companies listed on the New York Stock Exchange. Performance data
as reported in national financial publications such as Money Magazine, Forbes,
Barron's, The Wall Street Journal and The New York Times, or in publications
of a local or regional nature, may also be used in comparing the performance
of a Portfolio.
The Portfolios calculate their total returns on an "average annual
total return" basis for various periods from the date they commenced
investment operations and for other periods as permitted under the rules of
the SEC. Average annual total return of a class reflects the average annual
percentage change in value of an investment in the class over the measuring
period. Total returns may also be calculated on an "aggregate total return
basis" for various periods. Aggregate total return reflects the total
percentage change in value over the measuring period. Both methods of
calculating total return also reflect changes in the price of the shares and
assume that any dividends and capital gain distributions made by the class
during the period are reinvested in shares of the class. When considering
average total return figures for periods longer than one year, it is important
to note that a class' annual total return for any one year in the period might
have been greater or less than the average for the entire period.
Performance of each class of shares is based on historical earnings
and will fluctuate and is not intended to indicate future performance. The
investment return and principal value of an investment in a class will
fluctuate so that a shareholder's shares, when redeemed, may be worth more or
less than their original cost. Performance data may not provide a basis for
comparison with bank
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deposits and other investments which provide a fixed yield for a stated period
of time. Performance data should also be considered in light of the risks
associated with a Portfolio's portfolio composition, quality, maturity,
operating expenses and market conditions. Any fees charged by financial
institutions directly to their customer accounts in connection with
investments in shares will not be reflected in performance calculations.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income are declared and paid quarterly
by each Portfolio, except the International Equity Portfolio which declares
and pays dividends annually. Each Portfolio's net realized capital gains are
distributed at least annually.
Dividends and distributions will reduce a class' net asset value by
the amount of the dividend or distribution. All dividends and distributions
are automatically reinvested in additional Class I shares of the same
Portfolio at their net asset value per share determined on the payment date,
unless the holder has notified the Bank in writing that he elects to have
dividends or capital gain distributions (or both) paid in cash. Shareholders
must make such election, or any revocation thereof, in writing to their
financial institutions. If an account is established with telephone
privileges, the registered owner or his preauthorized legal representative
may change the election to receive dividends in cash to an election to
receive dividends in shares by telephoning the Transfer Agent at
(800) 688-3350. The election will become effective with respect to
dividends paid after its receipt by the Transfer Agent.
TAXES
Federal
Each Portfolio intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification will relieve the Portfolios of liability for federal income
taxes to the extent their earnings are distributed in accordance with the
Code.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that each Portfolio distribute to
its shareholders an amount equal to at least the sum of 90% of its investment
company taxable income and 90% of its net tax-exempt interest income for such
year. In general, a Portfolio's investment company taxable income will be its
taxable income, subject to certain adjustments and excluding the excess of any
net long-term capital gain for the taxable year over the net short-term
capital loss, if any, for such year. Each Portfolio intends to distribute as
dividends substantially all of its investment company taxable income and any
net tax-exempt interest income each year. Such dividends will be taxable as
ordinary income to the Portfolio's shareholders who are not currently exempt
from federal income taxes regardless of whether a distribution is received in
cash or reinvested in additional shares. (Federal income taxes for
distributions to an IRA are deferred under the Code.) Such ordinary income
distributions will qualify for the dividends received deduction for
corporations to the extent of the total qualifying dividends received by the
distributing Portfolio from domestic corporations for the taxable year.
Substantially all of each Portfolio's net realized long-term capital
gains, if any, will be distributed at least annually to its shareholders. The
Portfolios will generally have no tax liability with respect to such gains and
the distributions will be taxable to Portfolio shareholders who are not
currently exempt from federal income taxes as long-term capital gains,
regardless of how
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long the shareholders have held the shares and whether such gains are received
in cash or reinvested in additional shares.
Dividends declared in October, November or December of any year
payable to shareholders of record on a specified date in such months will be
deemed for federal tax purposes to have been paid by the Portfolio and
received by the shareholders on December 31 of such year if such dividends are
paid during January of the following year.
Prior to purchasing shares of a Portfolio, the impact of dividends or
distributions which are expected to be declared or have been declared, but not
paid, should be carefully considered. Any dividend or distribution declared
shortly after the purchase of shares prior to the record date will have the
effect of reducing the per share net asset value by the per share amount of
the dividend or distribution. All or a portion of such amounts, although in
effect a return of capital, is subject to tax.
A taxable gain or loss may be realized by a shareholder upon his
redemption, transfer or exchange of shares of a Portfolio depending upon the
tax basis and their price at the time of redemption, transfer or exchange. If
a shareholder has held shares for six months or less and during that time
received a distribution taxable as a long-term capital gain, then any loss the
shareholder might realize on the sale of those shares will be treated as a
long-term loss to the extent of the earlier capital gain distribution.
Generally, a shareholder may include sales charges incurred upon the purchase
of Portfolio shares in his tax basis for such shares for the purpose of
determining gain or loss on a redemption, transfer or exchange of such shares.
However, if the shareholder effects an exchange of such shares for shares of
another Portfolio within 90 days of the purchase and is able to reduce the
sales charges applicable to the new shares (by virtue of the Trust's exchange
privilege), the amount equal to such reduction may not be included in the tax
basis of the shareholder's exchanged shares but may be included under certain
circumstances in the tax basis of the new shares.
It is expected that dividends and certain interest income earned by
the International Equity Portfolio from foreign securities will be subject to
foreign withholding taxes or other taxes. So long as more than 50% of the
value of the Portfolio's total assets at the close of any taxable year
consists of equity or debt securities of foreign corporations, the Portfolio
may elect, for U.S. federal income tax purposes, to treat certain foreign
taxes paid by it, including generally any withholding taxes and other foreign
income taxes, as paid its shareholders. The Portfolio may make this election.
As a consequence, the amount of such foreign taxes paid by the Portfolio will
be included in its shareholders' income pro rata (in addition to taxable
distributions actually received by them), and the shareholders will be
entitled (a) to credit their proportionate amounts of such taxes against their
U.S. federal income tax liabilities, or (b) if they itemize their deductions,
to deduct such proportionate amounts from their U.S. income.
Shareholders will be advised at least annually as to the federal
income tax consequences of distributions made to them each year.
The foregoing discussion summarizes some of the important tax
considerations generally affecting the Portfolios and their shareholders and
is not intended as a substitute for careful tax planning. Accordingly,
potential investors in the Portfolios should consult their tax advisers with
specific reference to their own tax situation.
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State and Local
The Trust may be subject to state or local taxes in jurisdictions in
which the Trust may be deemed to be doing business. In addition, in those
states or localities which have income tax laws, the treatment of the Trust
and its shareholders under such laws may differ from treatment under federal
income tax laws. Shareholders are advised to consult their tax advisers
concerning the application of state and local taxes, which may have different
consequences from those of the federal income tax law described above.
MANAGEMENT
Trustees and Officers of the Trust
The Board of Trustees of the Trust is responsible for the management
of the business and affairs of the Trust. The Trustees and executive officers
of the Trust and their principal occupations for the last five years are set
forth below. Each Trustee has an address at The Woodward Funds, c/o NBD Bank,
611 Woodward Avenue, Detroit, Michigan 48226.
*Earl I. Heenan, Jr., Chairman and President
Director (since 1995), Vice Chairman (1988-1995) and President
(1955-1988), Detroit Mortgage & Realty Company; President (1989-1992) and
Trustee (since 1966), Cottage Hospital of Grosse Pointe (affiliate of
Henry Ford Health System); Trustee, Henry Ford Health Sciences Center
(since 1987); Trustee, Henry Ford Continuing Care Corporation (since 1980);
Trustee, Earhart Foundation (since 1980). He is 77 years old and his
address is 333 West Fort Street, Detroit, Michigan 48226.
*Eugene C. Yehle, Trustee and Treasurer
Retired; Director of Investor Relations and Pension Investments, Dow
Chemical Company (1972-1985); Trustee, Alma College (since 1978); Trustee
(since 1977) and Chairman (since 1983), Charles J. Strosacker Foundation;
Trustee (1989-1993), Higgins Lake Foundation. He is 75 years old and his
address is 4501 Linden Drive, Midland, Michigan 48640.
Will M. Caldwell, Trustee
Retired; Executive Vice President, Chief Financial Officer and
Director, Ford Motor Company (1979-1985); Director, First Nationwide Bank
(1986-1991); Director, Air Products & Chemicals, Inc. (since 1985); Director,
Zurich Holding Company of America (since 1990); Director, The Batts Group,
Ltd. (since 1986); Trustee and Vice Chairman, Detroit Medical Center
(1986-1991); Trustee Emeritus and Chairman of the Pension Investment
Sub-Committee, Detroit Medical Center (since 1991). He is 70 years old and his
address is 2733 Glenbrook Court, Bloomfield Hills, Michigan 48302.
Nicholas J. De Grazia, Trustee
Consultant, Lionel L.L.C. (since 1995); President, Chief Operating
Officer and Director, Lionel Trains, Inc. (1990-1995); Vice President-Finance
and Treasurer, University of Detroit (1981-1990); President (1986-1990) and
Director (1986-1995), Polymer Technologies, Inc.; President, Florence
Development Company (1987-1990); Chairman (since 1994) and Director
(1992-1995), Central Macomb County Chamber of Commerce; Vice Chairman, Michigan
Higher Education Facilities
- - --------
* Trustees who are "interested persons" of the Trust, as defined in the 1940
Act.
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Authority (since 1991). He is 53 years old and his address is 3650 Shorewood
Drive, North Lakeport, Michigan 48059.
John P. Gould, Trustee
Steven G. Rothmeier Professor (since January, 1996); Distinguished
Service Professor of Economics of the University of Chicago Graduate
School of Business (since 1984); Dean of the University of Chicago Graduate
School of Business (1983-1993); Member of Economic Club of Chicago and
Commercial Club of Chicago; Director of Harbor Capital Advisors and
Dimensional Fund Advisors; Trustee, Prairie Family of Funds. He is 57
years old and his address is University of Chicago Graduate School of
Business, 1101 East 58th Street, Chicago, Illinois 60637.
Marilyn McCoy, Trustee
Vice President of Administration and Planning of Northwestern
University (since 1985); Director of Planning and Policy Development for the
University of Colorado (1981-1985); Member of the Board of Directors of
Evanston Hospital, Chicago Metropolitan YMCA, Chicago Network and United
Charities; Member of the Chicago Economics Club; Trustee, Prairie Family of
Funds. She is 48 years old and her address is 1100 North Lake Shore Drive,
Chicago, Illinois 60611.
Julius L. Pallone, Trustee
President, J.L. Pallone Associates, Consultants (since 1994); Chairman
of the Board (1974-1993), Maccabees Life Insurance Company; President and
Chief Executive Officer, Royal Financial Services (1991-1993); Director,
American Council of Life Insurance of Washington, D.C. (life insurance
industry association) (1988-1993); Director, Crowley, Milner and Company
(department store) (since 1988); Trustee, Lawrence Institute of Technology
(since 1982); Director, Detroit Symphony Orchestra (since 1985); Director,
Oakland Commerce Bank (since 1984) and Michigan Opera Theater (since 1981). He
is 65 years old, and his address is 26957 Northwestern Highway, Suite 288,
Southfield, Michigan 48034.
*Donald G. Sutherland, Trustee
Partner of the law firm Ice, Miller, Donadio & Ryan, Indianapolis,
Indiana. He is 67 years old, and his address is One American Square, 34th
Floor, Indianapolis, Indiana 46204.
Donald L. Tuttle, Trustee
Vice President (since 1995), Senior Vice President (1992-1995),
Association for Investment Management and Research; Senior Professor
of Finance, Indiana University (1970-1991); Vice President, Trust &
Investment Advisers, Inc. (1990-1991); Director, Federal Home Loan
Bank of Indianapolis (1981 to 1985). He is 61 years old, and his
address is 5 Boar's Head Lane, Charlottesville, Virginia 22903.
W. Bruce McConnel, III, Secretary
Partner of the law firm Drinker Biddle & Reath, Philadelphia,
Pennsylvania. He is 53 years old, and his address is 1345 Chestnut Street,
Philadelphia, Pennsylvania 19107.
- - --------------------------------
* Trustees who are "interested persons" of the Trust, as defined in the 1940
Act.
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The Trustees receive fees and are reimbursed for their expenses in
connection with each meeting of the Board of Trustees they attend. Additional
information on the compensation paid by the Trust to its Trustees and officers
is included in the Statement of Additional Information.
Investment Adviser, Custodian and Transfer Agent
The investment adviser for each Portfolio is NBD, a wholly owned
subsidiary of First Chicago NBD Corporation, a bank holding company. NBD has
offices at 611 Woodward Avenue, Detroit, Michigan 48226. As of December 31,
1995, NBD was providing investment management and advisory services for
accounts aggregating approximately $37.9 billion. NBD has been in the business
of providing such services since 1933. Included among NBD's accounts are
pension and profit sharing funds for major corporations and state and local
governments, commingled trust funds and a variety of institutional and
personal advisory accounts, estates and trusts. NBD also acts as investment
adviser for other registered investment company portfolios.
NBD provides investment advisory and certain administrative services
to each Portfolio pursuant to an Advisory Agreement. Subject to the overall
supervision of the Board of Trustees, NBD makes investment decisions for each
of the Portfolios.
Jeffrey C. Beard, First Vice President, and Gary L. Konsler, First
Vice President are primarily responsible for the day-to-day management of the
Growth/Value and Capital Growth Portfolios. Mr. Beard joined NBD in 1982
after receiving an MBA in Finance from Michigan State University. Mr. Konsler
joined NBD in 1973 after receiving a JD from Indiana University.
Ronald L. Doyle, First Vice President, and Joseph R. Gatz, Vice
President, are primarily responsible for the day-to-day management of the
Opportunity Portfolio. Mr. Doyle joined NBD in 1982 after receiving his MBA in
Finance from Michigan State University. Mr. Gatz joined NBD in 1986 after
receiving an MBA from Indiana University.
Chris M. Gassen, Vice President, and F. Richard Neumann, Vice
President, are primarily responsible for the day-to-day management of the
Intrinsic Value Portfolio. Mr. Gassen joined NBD in 1985 after receiving
an MBA in Finance from Indiana University. Mr. Neumann joined NBD in
1981 after receiving an MBA in Finance/Accounting from the University of
Chicago.
Claude B. Erb, First Vice President, is primarily responsible for the
day-to-day portfolio management of the Balanced Portfolio. Mr. Erb joined
First Chicago NBD Corporaiton in 1993, after receiving his MBA in Finance
from the University of California.
F. Richard Neumann, Vice President and Henry Kaczmarek, Assistant
Vice President, are primarily responsible for the day-to-day management
of the Equity Index Portfolio. Mr. Kaczmarek joined NBD in 1993 after receiving
an MBA in Finance from Indiana University.
Richard P. Kost, First Vice President, and Clyde L. Carter, Jr.,
Assistant Vice President are primarily responsible for the day-to-day
portfolio management of the International Equity Portfolio. Mr. Kost joined
NBD in 1964, after receiving his MBA from the University of Michigan.
Mr. Carter joined NBD in 1987 after he received his MBA from Western
Michigan University.
For its services under the Advisory Agreement, NBD is entitled to
receive advisory fees, computed daily and payable monthly, at an annual rate
of .75% of the average daily net assets of each of the Growth/Value,
Opportunity, Intrinsic Value, Capital Growth, Balanced and International
Equity Portfolios and .10% of the average daily net assets of the Equity Index
Portfolio. In addition, NBD is entitled to 4/10ths of the gross income earned
by each Portfolio on each loan of securities (excluding capital gains and
losses, if any). NBD may voluntarily waive its fees in whole or in part with
respect to any particular Portfolio.
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NBD also receives compensation as the Trust's Custodian and Transfer
Agent under separate agreements. The fees payable by the Portfolios for these
services are described in the Statement of Additional Information.
Banking laws and regulations currently prohibit a bank holding company
registered under the Bank Holding Company Act of 1956 or any affiliate thereof
from sponsoring, organizing, controlling, or distributing the shares of a
registered open-end investment company continuously engaged in the issuance of
its shares, and prohibit banks generally from underwriting securities, but do
not prohibit such a bank holding company or affiliate from acting as
investment adviser, transfer agent, or custodian to such an investment company
or from purchasing shares of such a company as agent for and upon the order of
a customer. The Adviser and the Trust believe that the Adviser may perform the
advisory, custodial and transfer agency services for the Trust described in
this Prospectus, and that the Adviser, subject to such banking laws and
regulations, may perform the shareholder services contemplated by this
Prospectus, without violation of such banking laws or regulations. However,
future changes in legal requirements relating to the permissible activities of
banks and their affiliates, as well as future interpretations of present
requirements, could prevent the Adviser from continuing to perform investment
advisory, custodial or transfer agency services for the Trust or require the
Adviser to alter or discontinue the services provided by it to shareholders.
If the Adviser were prohibited from performing investment advisory,
custodial or transfer agency services for the Trust, it is expected that the
Board of Trustees would recommend that shareholders approve new agreements
with another entity or entities qualified to perform such services and
selected by the Board. If the Adviser or its affiliates were required to
discontinue all or part of its shareholder servicing activities, their
customers would be permitted to remain the beneficial owners of Portfolio
shares and alternative means for continuing the servicing of such customers
would be sought. The Trust does not anticipate that investors would suffer any
adverse financial consequences as a result of these occurrences.
Sponsors and Co-Distributors
FoM, a Delaware corporation and a wholly owned subsidiary of First of
Michigan Capital Corporation, is a sponsor and Co-Distributor of the Trust's
shares. It is engaged in the securities underwriting and securities and
commodities brokerage business and is a member of the New York Stock Exchange,
Inc., other major securities and commodities exchanges and the National
Association of Securities Dealers, Inc. FoM participates as a member of
various selling groups or as agent of other investment companies, executes
orders on behalf of investment companies for the purchase and sale of their
securities and sells securities to such companies as a broker or dealer in
securities. On December 31, 1995, FoM had a net worth of $37,231,000.
Essex, a New York corporation, is a wholly owned subsidiary of CUC
International, Inc. Essex is engaged in the business of securities brokerage
through financial institutions and is a member of the National Association of
Securities Dealers, Inc. Essex has entered into dealer agreements with the
distributors of various investment companies and executes orders on behalf of
such companies for the purchase and sale of their securities. As of December
31, 1995, Essex had a net worth of $1,945,000.
FoM and Essex act as sponsors and Co-Distributors of the Trust's
shares pursuant to the Distribution Agreement with the Trust which has been
entered into pursuant to the Distribution Plan described below.
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Service and Distribution Plan
The Trust has adopted its Distribution Plan pursuant to Rule 12b-1
under the 1940 Act (the "Plan"). Under the Plan, the Trust incurs expenses
primarily intended to result in the sale of the Trust's shares in an amount
not to exceed .35 of 1% of the value of each portfolio's average daily net
assets calculated as follows in the case of each Portfolio: (i) fees payable
to the Co-Distributors pursuant to the Distribution Agreement; (ii) the
actual costs and expenses in connection with advertising and marketing the
Portfolio's shares; and (iii) fees pursuant to agreements with securities
dealers, financial institutions and other professionals ("Service Agents") for
administration or servicing of Portfolio shareholders ("Servicing"). Servicing
may include, among other things: answering client inquiries regarding the
Trust and the Portfolios; assisting clients in changing dividend options,
account designations and addresses; performing sub-accounting; establishing
and maintaining shareholder accounts and records; processing purchase and
redemption transactions; investing client cash account balances automatically
in Portfolio shares; providing periodic statements showing a client's account
balance and integrating such statements with those of other transactions and
balances in the client's other accounts serviced by the Service Agent;
arranging for bank wires; and such other services as the Trust may request, to
the extent the Service Agent is permitted by applicable statute, rule or
regulation. Under the Plan, the Trust also bears the cost of preparing and
printing Prospectuses for use in selling shares of the Trust and costs
associated with implementing and operating the Plan. These costs are included
in computing the .35 of 1% limitation set forth above.
Pursuant to the Distribution Agreement, FoM is entitled to receive a
fee at the annual rate of .005% of a Portfolio's average net assets, and Essex
is entitled to receive a fee at the annual rate of .10% of the aggregate
average net assets of the Trust's investment portfolios attributable to
investments by clients of Essex. The payments to be made to the
Co-Distributors which are based on a percentage of the net assets of the
Portfolios are designed to compensate the Co-Distributors for their
participation in the distribution of the Portfolios' shares and to reimburse
the Co-Distributors for certain distribution costs. Nonreimbursable expenses
of the Co-Distributors include salaries of executives, sales and clerical
personnel performing services for the Trust, and overhead expenses. Such costs
are by their nature not subject to precise quantification and the Trustees
have determined that the fees to be paid to the Co-Distributors are reasonable
under the circumstances.
If current restrictions under the Glass-Steagall Act were relaxed, the
Trust expects that NBD would consider the possibility of offering to perform
some or all of the services now provided by the Co-Distributors. Legislation
modifying such restrictions has been proposed in past Sessions of Congress
which, if enacted, would permit a bank holding company to establish a non-bank
subsidiary having the authority to organize, sponsor and distribute shares of
an investment company. If such legislation were enacted, the Trust expects
that NBD's parent bank holding company would consider the possibility of one
of its non-bank subsidiaries offering to perform some or all of the services
now provided by the Co-Distributors. It is not possible, of course, to predict
whether or in what form legislation might be enacted or the terms upon which
NBD or such a non-bank affiliate might offer to provide such services.
Trust Expenses
The Trust is responsible for the payment of its expenses. These
include, for example, fees payable to NBD as Adviser, or expenses otherwise
incurred by the Trust in connection with the management of the investment of
the Trust's assets such as brokerage fees, commissions and other transaction
charges, the fees and expenses of NBD as the Trust's Custodian and as its
Transfer Agent, the fees payable to the Co-Distributors under the Distribution
Agreement, the fees and expenses of Trustees, expenses associated with the
Trust's Distribution Plan
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and Shareholder Servicing Plan, outside auditing and legal expenses, all taxes
and corporate fees payable by the Trust, SEC fees, state securities
qualification fees, costs of preparing and printing prospectuses for
regulatory purposes and for distribution to shareholders, costs of shareholder
reports and shareholder meetings, and any extraordinary expenses. Each
Portfolio also pays for brokerage commissions and transfer taxes (if any) in
connection with the purchase and sale of portfolio securities. Expenses
attributable to a particular Portfolio of the Trust will be charged to that
Portfolio and expenses not readily identifiable as belonging to a particular
Portfolio will be allocated by the Board of Trustees among one or more
Portfolios in such a manner as it shall deem fair and equitable. For the
fiscal year ended December 31, 1995, the Growth/Value, Opportunity, Intrinsic
Value, Capital Growth, Balanced, Equity Index and International Equity
Portfolios' total expenses were .84%, .89%, .91%, .86%, .91%, .15% and 1.16%
(after fee waivers, if any) of their average net assets, respectively. The
Statement of Additional Information describes in more detail the fees and
expenses borne by the Trust.
OTHER INFORMATION
The Trust was organized as a Massachusetts business trust on April 21,
1987 under a Declaration of Trust which was amended and restated as of May 1,
1992. The Trust is a series fund having seventeen series of shares of
beneficial interest, each of which evidences an interest in a separate
investment portfolio. The Declaration of Trust permits the Board of Trustees
to issue an unlimited number of full and fractional shares and to create an
unlimited number of series of shares ("Series") representing interests in a
portfolio and an unlimited number of classes of shares within a Series. In
addition to the Portfolios described herein, the Trust offers the following
investment portfolios: the Woodward Money Market Fund, Government Fund,
Treasury Money Market Fund, Tax-Exempt Money Market Fund, Michigan Tax-Exempt
Money Market Fund, Intermediate Bond Fund, Bond Fund, Short Bond Fund,
Municipal Bond Fund and Michigan Municipal Bond Fund. The Trust has
established the following two distinct classes of shares within each
Portfolio described herein: Class I shares (Original Class) and Class A
shares (Special Class 1). A sales person and any other person or institution
entitled to receive compensation for selling or servicing shares may receive
different compensation with respect to different classes of shares in the
Series. Each share has $.10 par value, represents an equal proportionate
interest in the related Portfolio with other shares of the same class
outstanding, and is entitled to such dividends and distributions out of
the income earned on the assets belonging to such Portfolio as are declared
in the discretion of the Board of Trustees.
Shareholders are entitled to one vote for each full share held, and a
proportionate fractional vote for each fractional share held, and each Series
entitled to vote on a matter will vote thereon in the aggregate and not by
Series, except as otherwise expressly required by law or when the Board of
Trustees determines that the matter to be voted on affects only the interests
of shareholders of a particular Series. In addition, shareholders of each of
the Series have equal voting rights except that only shares of a particular
class within a Series are entitled to vote on matters affecting only that
class. Voting rights are not cumulative, and accordingly the holders of more
than 50% of the aggregate number of shares of all Trust portfolios may elect
all of the Trustees.
As of March 29, 1996, NBD held beneficially or of record
approximately 84.53%, 80.72%, 79.93%, 89.57%, 88.25%, 91.41% and 89.56% of the
outstanding shares of the Growth/Value, Opportunity, Intrinsic Value, Capital
Growth, Balanced, Equity Index and International Equity Portfolios,
respectively, and therefore may be considered to be a controlling person of
the Trust for purposes of the 1940 Act.
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Because NBD serves the Trust as both Custodian and as Adviser, the
Trustees have established a procedure requiring three annual verifications,
two of which are unannounced, of all investments held pursuant to the
Custodian Agreement, to be conducted by the Trust's independent accountants.
The Trust does not presently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Trust's By-Laws provide that special meetings of shareholders of any Series
shall be called at the written request of shareholders entitled to cast at
least 10% of the votes of a Series entitled to be cast at such meeting. The
Trust also stands ready to assist shareholder communications in connection
with any meeting of shareholders as prescribed in Section 16(c) of the 1940
Act.
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<PAGE>
[ BACK COVER, COLUMN 1 ]
No person has been authorized to give
any information or to make any
representations not contained in this
Prospectus, or in the Portfolios'
Statement of Additional Information
incorporated herein by reference, in
connection with the offering made by
this Prospectus and, if given or
made, such information or
representations must not be relied
upon as having been authorized by the
Trust, Adviser or Sponsors and Co-
Distributors. This Prospectus does
not constitute an offering by the
Portfolios or by their Co-
Distributors, in any jurisdiction in
which such offering may not lawfully
be made.
TABLE OF CONTENTS Page
EXPENSE SUMMARY............................. 2
BACKGROUND.................................. 4
FINANCIAL HIGHLIGHTS........................ 5
INTRODUCTION................................ 12
PROPOSED REORGANIZATION..................... 12
INVESTMENT OBJECTIVES, POLICIES AND
RISK FACTORS............................ 12
OTHER INVESTMENT POLICIES................... 18
PURCHASE OF SHARES.......................... 32
REDEMPTION OF SHARES........................ 33
PERFORMANCE INFORMATION..................... 34
DIVIDENDS AND DISTRIBUTIONS................. 35
TAXES .................................... 35
MANAGEMENT.................................. 37
OTHER INFORMATION........................... 42
Investment Adviser:
NBD Bank
Detroit, Michigan 48226
Sponsors and Co-Distributors:
First of Michigan Corporation
Detroit, Michigan 48243
Essex National Securities, Inc.
Napa, California 94558
Custodian and Transfer Agent:
NBD Bank
Troy, Michigan 48007-7058
Legal Counsel:
Drinker Biddle & Reath
Philadelphia, Pennsylvania
19107-3496
<PAGE>
[ BACK COVER, COLUMN 1 ]
CLASS I SHARES OF THE:
WOODWARD GROWTH/VALUE FUND
WOODWARD OPPORTUNITY FUND
WOODWARD INTRINSIC VALUE FUND
WOODWARD CAPITAL GROWTH FUND
WOODWARD BALANCED FUND
WOODWARD EQUITY INDEX FUND
WOODWARD INTERNATIONAL EQUITY FUND
THE WOODWARD FUNDS(R)
Prospectus
April 15, 1996
-44-
Exhibit (17)(g)
STATEMENT OF ADDITIONAL INFORMATION
April 15, 1996
for
CLASS I AND CLASS A SHARES OF THE:
WOODWARD GROWTH/VALUE FUND
WOODWARD OPPORTUNITY FUND
WOODWARD INTRINSIC VALUE FUND
WOODWARD CAPITAL GROWTH FUND
WOODWARD BALANCED FUND
WOODWARD INTERNATIONAL EQUITY FUND
of
THE WOODWARD FUNDS
c/o NBD Bank
Transfer Agent
P.O. Box 7058
Troy, Michigan 48007-7058
(800) 688-3350
This Statement of Additional Information (the "Additional
Statement") is meant to be read in conjunction with The Woodward Funds'
Prospectuses dated April 15, 1996 pertaining to Class I and Class A classes of
shares of the Woodward Growth/Value Fund (the "Growth/Value Portfolio"),
Woodward Opportunity Fund (the "Opportunity Portfolio"), Woodward Intrinsic
Value Fund (the "Intrinsic Value Portfolio"), Woodward Capital Growth Fund
(the "Capital Growth Portfolio"), Woodward Balanced Fund (the "Balanced
Portfolio"), and Woodward International Equity Fund (the "International Equity
Portfolio") (each, a "Portfolio" and collectively, the "Portfolios"). Because
this Additional Statement is not itself a prospectus, no investment in shares
of the Portfolios should be made solely upon the information contained herein.
Copies of the Portfolios' Prospectuses may be obtained from any office of the
Co- Distributors by writing or calling the Co-Distributors or the Trust.
Capitalized terms used but not defined herein have the same meanings as in the
Prospectuses.
<PAGE>
TABLE OF CONTENTS
Page
Investment Objectives, Policies and Risk Factors................. 1
Additional Purchase and Redemption Information................... 16
Description of Shares............................................ 18
Additional Information Concerning Taxes.......................... 21
Management....................................................... 23
Independent Public Accountants................................... 29
Counsel.......................................................... 29
Additional Information on Performance............................ 29
Appendix A....................................................... A-1
Appendix B....................................................... B-1
Report of Independent Public Accountants and Financial
Statements..................................................... FS-1
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<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RISK FACTORS
The following policies supplement the Portfolios' respective
investment objectives and policies as set forth in their Prospectuses.
Additional Information on Portfolio Instruments
Attached to this Additional Statement is Appendix A which
contains descriptions of the rating symbols used by Rating Agencies for
securities in which the Portfolios may invest.
Portfolio Transactions
Subject to the general supervision of the Trust's Board of
Trustees, the Adviser is responsible for, makes decisions with respect to, and
places orders for all purchases and sales of portfolio securities for each
Portfolio.
The annualized portfolio turnover rate for each Portfolio is
calculated by dividing the lesser of purchases or sales of portfolio
securities for the reporting period by the monthly average value of the
portfolio securities owned during the reporting period. The calculation
excludes all securities, including options, whose maturities or expiration
dates at the time of acquisition are one year or less. Portfolio turnover of
the Portfolios may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements which enable the Portfolios to receive favorable
tax treatment. Portfolio turnover will not be a limiting factor in making
portfolio decisions, and the Portfolios may engage in short term trading to
achieve their respective investment objectives.
Purchases of money market instruments by the Portfolios are
made from dealers, underwriters and issuers. The Portfolios currently do not
expect to incur any brokerage commission expense on such transactions because
money market instruments are generally traded on a "net" basis acting as
principal for their own accounts without a stated commission. The price of the
security, however, usually includes a profit to the dealer. Securities
purchased in underwritten offerings include a fixed amount of compensation to
the underwriter, generally referred to as the underwriter's concession or
discount. When securities are purchased directly from or sold directly to an
issuer, no commissions or discounts are paid.
Transactions on U.S. stock exchanges involve the payment of
negotiated brokerage commissions. On exchanges on which commissions are
negotiated, the cost of transactions may vary among different brokers.
Transactions in the over-the-
<PAGE>
counter market are generally on a net basis (i.e., without commission) through
dealers, or otherwise involve transactions directly with the issuer of an
instrument.
For the fiscal year ended December 31, 1995, the Growth/Value,
Opportunity, Intrinsic Value, Capital Growth, Balanced and International Equity
Portfolios paid brokerage commissions of $504,214, $866,286, $209,816,
$120,761, $81,178 and $72,856, respectively. For the fiscal years ended
December 31, 1994 and 1993, the Trust paid brokerage commissions of: (i)
$519,412 and $423,124 with respect to the Growth/Value Portfolio; (ii)
$683,613 and $330,962 with respect to the Opportunity Fund; and (iii) $325,912
and $320,121 with respect to the Intrinsic Value Portfolio. For the period
from the Capital Growth Portfolio's commencement of investment operations on
July 2, 1994 through December 31, 1994, the Capital Growth Portfolio paid
brokerage commissions of $27,188. For the period from the Balanced Portfolio's
commencement of investment operations on January 1, 1994 through December 31,
1994, the Balanced Portfolio paid brokerage commissions of $123,890. For the
period from the International Equity Portfolio's commencement of investment
operations on December 3, 1994 through December 31, 1994, the International
Equity Portfolio paid brokerage commissions of $4,492.
The Portfolios may participate, if and when practicable, in
bidding for the purchase of portfolio securities directly from an issuer in
order to take advantage of the lower purchase price available to members of a
bidding group. A Portfolio will engage in this practice, however, only when
the Adviser, in its sole discretion, believes such practice to be otherwise in
the Portfolio's interests.
The Advisory Agreement for the Portfolios provides that, in
executing portfolio transactions and selecting brokers or dealers, the Adviser
will seek to obtain the best overall terms available for each Portfolio. In
assessing the best overall terms available for any transaction, the Adviser
shall consider factors it deems relevant, including the breadth of the market
in the security, the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. In addition, the Agreement authorizes the Adviser to cause a Portfolio
to pay a broker-dealer which furnishes brokerage and research services a
higher commission than that which might be charged by another broker-dealer
for effecting the same transaction, provided that the Adviser determines in
good faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in
terms of either the particular transaction or the overall responsibilities of
the Adviser to the Portfolios. Such brokerage and research
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<PAGE>
services might consist of reports and statistics relating to specific
companies or industries, general summaries of groups of stocks or bonds and
their comparative earnings and yields, or broad overviews of the stock, bond
and government securities markets and the economy.
Supplementary research information so received is in addition
to, and not in lieu of, services required to be performed by the Adviser and
does not reduce the advisory fees payable by the Portfolios. The Trustees will
periodically review any commissions paid by the Portfolios to consider whether
the commissions paid over representative periods of time appear to be
reasonable in relation to the benefits inuring to the Portfolios. It is
possible that certain of the supplementary research or other services received
will primarily benefit one or more other investment companies or other
accounts for which investment discretion is exercised by the Adviser.
Conversely, a Portfolio may be the primary beneficiary of the research or
services received as a result of portfolio transactions effected for such
other account or investment company.
The Trust will not execute portfolio transactions through,
acquire portfolio securities issued by, make savings deposits in or enter into
repurchase or reverse repurchase agreements with the Adviser, the
Co-Distributors or an affiliated person of any of them (as such term is
defined in the 1940 Act) acting as principal, except to the extent permitted
by the SEC or its staff. In addition, a Portfolio will not purchase securities
during the existence of any underwriting or selling group relating thereto of
which a Co-Distributor or the Adviser, or an affiliated person of either of
them, is a member, except to the extent permitted by the SEC or its staff.
Under certain circumstances, the Portfolios may be at a disadvantage because
of these limitations in comparison with other investment companies which have
similar investment objectives but are not subject to such limitations.
Investment decisions for each Portfolio are made independently
from those for the other Portfolios and for any other investment companies and
accounts advised or managed by the Adviser. Such other investment companies
and accounts may also invest in the same securities as the Portfolios. To the
extent permitted by law, the Adviser may aggregate the securities to be sold
or purchased for the Portfolios with those to be sold or purchased for other
investment companies or accounts in executing transactions. When a purchase or
sale of the same security is made at substantially the same time on behalf of
one or more of the Portfolios and another investment company or account, the
transaction will be averaged as to price and available investments allocated
as to amount, in a manner which the Adviser believes to be equitable to each
Portfolio and such other investment company or account. In some instances,
this
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<PAGE>
investment procedure may adversely affect the price paid or received by a
Portfolio or the size of the position obtained or sold by the Portfolio.
Government Obligations
As stated in the Prospectuses, pursuant to their respective
investment objectives, the Portfolios may invest in U.S. Government
Obligations.
Stripped U.S. Government Obligations
Within the past several years, the Treasury Department has
facilitated transfers of ownership of zero coupon securities by accounting
separately for the beneficial ownership of particular interest coupon and
principal payments on Treasury securities through the Federal Reserve
book-entry record-keeping system. The Federal Reserve program as established
by the Treasury Department is known as "STRIPS" or "Separate Trading of
Registered Interest and Principal of Securities." To the extent consistent
with their respective investment objectives, the Balanced and International
Equity Portfolios may purchase securities registered in the STRIPS program.
Under the STRIPS program, the Balanced and International Equity Portfolios
will be able to have their beneficial ownership of zero coupon securities
recorded directly in the book-entry record-keeping system in lieu of having to
hold certificates or other evidences of ownership of the underlying U.S.
Treasury securities.
In addition, the Balanced and International Portfolios may
acquire U.S. Government obligations and their unmatured interest coupons that
have been separated ("stripped") by their holder, typically a custodian bank
or investment brokerage firm. Having separated the interest coupons from the
underlying principal of the U.S. Government obligations, the holder will
resell the stripped securities in custodial receipt programs with a number of
different names, including "Treasury Income Growth Receipts" ("TIGRs") and
"Certificate of Accrual on Treasury Securities" ("CATS"). The stripped coupons
are sold separately from the underlying principal, which is usually sold at a
deep discount because the buyer receives only the right to receive a future
fixed payment on the security and does not receive any rights to periodic
interest (cash) payments. The underlying U.S. Treasury bonds and notes
themselves are held in book-entry form at the Federal Reserve Bank or, in the
case of bearer securities (i.e., unregistered securities which are ostensibly
owned by the bearer or holder), in trust on behalf of the owners. Counsel to
the underwriters of these certificates or other evidences of ownership of U.S.
Treasury securities have stated that, in their opinion, purchasers of the
stripped securities most likely will be deemed the beneficial holders of the
underlying U.S. Government obligations for federal tax purposes. The Trust is
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<PAGE>
not aware of any binding legislative, judicial or administrative
authority on this issue.
As described in their Prospectuses, the Portfolios may also
purchase stripped mortgage-backed securities ("SMBS"). SMBS that are interest
only or principal only and not issued by the U.S. Government may be considered
illiquid securities if they can not be disposed of promptly in the ordinary
course of business at a value reasonably close to that used in the calculation
of net asset value per share.
Bank Obligations
In accordance with their respective investment objectives, the
Portfolios may purchase bank obligations, which include bankers' acceptances,
negotiable certificates of deposit and non-negotiable time deposits, including
U.S. dollar-denominated instruments issued or supported by the credit of U.S.
or foreign banks or savings institutions. Although the Portfolios invest in
obligations of foreign banks or foreign branches of U.S. banks only where the
Adviser deems the instrument to present minimal credit risks, such investments
may nevertheless entail risks that are different from those of investments in
domestic obligations of U.S. banks due to differences in political, regulatory
and economic systems and conditions. All investments in bank obligations are
limited to the obligations of financial institutions having more than $1.0
billion in total assets at the time of purchase.
Commercial Paper
Commercial paper, including variable and floating rate notes
and other short term corporate obligations, must be rated in one of the two
highest categories by at least two Rating Agencies, or if not rated, have been
issued by a corporation having an outstanding bond issue rated A or higher by
a Rating Agency. Bonds and other short term obligations (if not rated as
commercial paper) purchased by the Portfolios must be rated BBB or Baa, or
higher, by a Rating Agency, respectively, or if unrated, be of comparable
investment quality in the judgment of the Adviser.
Variable and Floating Rate Instruments
With respect to variable and floating rate obligations that may
be acquired by the Portfolios, the Adviser will consider the earning power,
cash flows and other liquidity ratios of the issuers and guarantors of such
notes and will continuously monitor their financial status to meet payment on
demand. The absence of an active secondary market with respect to particular
variable and floating rate instruments could make it difficult for a Portfolio
to dispose of instruments if the issuer defaulted
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<PAGE>
on its payment obligation or during periods that the Portfolio is not entitled
to exercise its demand rights, and the Portfolio could, for these or other
reasons, suffer a loss with respect to such instruments.
Other Investment Companies
Subject to 1940 Act limitations and pursuant to applicable SEC
requirements, the Portfolios may invest from time to time in securities issued
by other investment companies which invest in high quality, short term debt
securities. Each of the Portfolios intends to limit its investments so that,
as determined immediately after a securities purchase is made: (a) not more
than 5% of the value of the Portfolio's total assets will be invested in the
securities of any one investment company; (b) not more than 10% of the value
of the Portfolio's total assets will be invested in the aggregate in
securities of investment companies as a group; and (c) not more than 3% of the
outstanding voting stock of any one investment company will be owned by the
Portfolio or the Trust as a whole.
Lending Securities
When a Portfolio lends its securities, it continues to receive
interest or dividends on the securities loaned and may simultaneously earn
interest on the investment of the cash collateral. Although voting rights, or
rights to consent, attendant to securities on loan pass to the borrower, such
loans will be called so that the securities may be voted by a Portfolio if a
material event affecting the investment is to occur.
Repurchase Agreements and Reverse Repurchase Agreements
The repurchase price under the repurchase agreements described
in the Prospectuses generally equals the price paid by a Portfolio plus
interest negotiated on the basis of current short term rates (which may be
more or less than the rate on the securities underlying the repurchase
agreement). Securities subject to repurchase agreements are held by the
Trust's Custodian, in the Federal Reserve/Treasury book-entry system or by
another authorized securities depository. Repurchase agreements are considered
to be loans under the 1940 Act.
Reverse repurchase agreements are considered to be borrowings
by the Portfolios under the 1940 Act. At the time a Portfolio enters into a
reverse repurchase agreement, it will place in a segregated custodial account
liquid assets such as U.S. Government securities or other liquid high-grade
debt securities having a value equal to or greater than the repurchase price
(including accrued interest) and will subsequently monitor the account to
ensure that such value is maintained. Reverse repurchase agreements involve
the risk that the market value of
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<PAGE>
the securities sold by the Portfolio may decline below the price
of the securities it is obligated to repurchase.
American Depository Receipts ("ADRs")
The Portfolios may invest in ADRs, which are receipts issued by
an American bank or trust company evidencing ownership of underlying
securities issued by a foreign issuer. ADRs may be listed on a national
securities exchange or may trade in the over-the-counter market. Although ADR
prices are denominated in U.S. dollars, the underlying security may be
denominated in a foreign currency. The underlying security may be subject to
foreign government taxes which would reduce the yield on such securities.
When-Issued Purchases and Forward Commitments
A Portfolio will purchase securities on a when-issued basis or
purchase or sell securities on a forward commitment basis only with the
intention of completing the transaction and actually purchasing or selling the
securities. If deemed advisable as a matter of investment strategy, however, a
Portfolio may dispose of or renegotiate a commitment after it is entered into,
and may sell securities it has committed to purchase before those securities
are delivered to the Portfolio on the settlement date. In these cases the
Portfolio may realize a capital gain or loss.
When a Portfolio engages in when-issued and forward commitment
transactions, it relies on the other party to consummate the trade. Failure of
such party to do so may result in the Portfolio's incurring a loss or missing
an opportunity to obtain a price considered to be advantageous.
Mortgage Backed Securities
Mortgage Backed Securities Generally. Mortgage backed
securities held by the Balanced and International Equity Portfolios represent
an ownership interest in a pool of residential mortgage loans. These
securities are designed to provide monthly payments of interest and principal
to the investor. The mortgagor's monthly payments to his lending institution
are "passed-through" to an investor such as the Portfolios. Most issuers or
poolers provide guarantees of payments, regardless of whether or not the
mortgagor actually makes the payment. The guarantees made by issuers or
poolers are supported by various forms of credit, collateral, guarantees or
insurance, including individual loan, title, pool and hazard insurance
purchased by the issuers or poolers so that they can meet their obligations
under the policies. Mortgage backed securities issued by private issuers or
poolers, whether or not such securities are subject to guarantees, may entail
greater
-7-
<PAGE>
risk than securities directly or indirectly guaranteed by the
U.S. Government.
Interests in pools of mortgage backed securities differ from
other forms of debt securities, which normally provide for periodic payment of
interest in fixed amounts with principal payments at maturity or specified
call dates. Instead, these securities provide a monthly payment which consists
of both interest and principal payments. In effect, these payments are a
"pass-through" of the monthly payments made by the individual borrowers on
their residential mortgage loans, net of any fees paid. Additional payments
are caused by repayments resulting from the sale of the underlying residential
property, refinancing or foreclosure net of fees or costs which may be
incurred. Some mortgage backed securities are described as "modified
pass-through". These securities entitle the holders to receive all interest
and principal payments owed on the mortgages in the pool, net of certain fees,
regardless of whether or not the mortgagors actually make the payments.
Residential mortgage loans are pooled by the Federal Home Loan
Mortgage Corporation ("FHLMC"). FHLMC is a corporate instrumentality of the
U.S. Government and was created by Congress in 1970 for the purpose of
increasing the availability of mortgage credit for residential housing. Its
stock is owned by the twelve Federal Home Loan Banks. FHLMC issues
Participation Certificates ("PC's"), which represent interests in mortgages
from FHLMC's national portfolio. FHLMC guarantees the timely payment of
interest and ultimate collection of principal.
The Federal National Mortgage Association ("FNMA") is a U.S.
Government sponsored corporation owned entirely by private stockholders. It is
subject to general regulation by the Secretary of Housing and Urban
Development. FNMA purchases residential mortgages from a list of approved
seller/servicers which include state and federally-chartered savings and loan
credit unions and mortgage bankers. Pass-through securities issued by FNMA are
guaranteed as to timely payment of principal and interest by FNMA.
The principal guarantor of mortgage-backed securities is the
Government National Mortgage Association ("GNMA"). GNMA is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban Development.
GNMA is authorized to guarantee, with the full faith and credit of the U.S
Government, the timely payment of principal and interest on securities issued
by approved institutions and backed by pools of FHA-insured or VA-guaranteed
mortgages.
Commercial banks, savings and loan institutions, private
mortgage insurance companies, mortgage bankers and other secondary market
issuers also create pass-through pools of
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<PAGE>
conventional residential mortgage loans. Pools created by such
non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or
indirect government guarantees of payments in the former pools. However,
timely payment of interest and principal of these pools is supported by
various forms of insurance or guarantees, including individual loan, title,
pool and hazard insurance purchased by the issuer. The insurance and
guarantees are issued by governmental entities, private insurers and the
mortgage poolers. There can be no assurance that the private insurers or
mortgage poolers can meet their obligations under the policies.
The Trust expects that governmental or private entities may
create mortgage loan pools offering pass-through investments in addition to
those described above. The mortgages underlying these securities may be
alternative mortgage instruments, that is, mortgage instruments whose
principal or interest payment may vary or whose terms to maturity may be
shorter than previously customary. As new types of mortgage backed securities
are developed and offered in the market, the Trust may consider making
investments in such new types of securities.
Underlying Mortgages. Pools consist of whole mortgage loans or
participations in loans. The majority of these loans are made to purchasers of
one to four family homes. The terms and characteristics of the mortgage
instruments are generally uniform within a pool but may vary among pools. For
example, in addition to fixed-rate, fixed-term mortgages, the Balanced and
International Equity Portfolios may purchase pools of variable rate mortgages
("VRM"), growing equity mortgages ("GEM"), graduated payment mortgages ("GPM")
and other types where the principal and interest payment procedures vary.
VRM's are mortgages which reset the mortgage's interest rate periodically with
changes in open market interest rates. To the extent that a Portfolio is
actually invested in VRM's, its interest income will vary with changes in the
applicable interest rate on pools of VRM's. GPM and GEM pools maintain
constant interest rates, with varying levels of principal repayment over the
life of the mortgage. These different interest and principal payment
procedures should not impact the Portfolios' net asset value since the prices
at which these securities are valued will reflect the payment procedures.
All poolers apply standards for qualification to local lending
institutions which originate mortgages for the pools. Poolers also establish
credit standards and underwriting criteria for individual mortgages included
in the pools. In addition, some mortgages included in pools are insured
through private mortgage insurance companies.
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<PAGE>
Average Life. The average life of pass-through pools varies
with the maturities of the underlying mortgage instruments. In addition, a
pool's term may be shortened by unscheduled or early payments of principal and
interest on the underlying mortgages. The occurrence of mortgage prepayments
is affected by factors including the level of interest rates, general economic
conditions, the location and age of the mortgage and other social and
demographic conditions.
Returns on Mortgage Backed Securities. Yields on mortgage
backed pass-through securities are typically quoted based on the maturity of
the underlying instruments and the associated average life assumption.
Reinvestment of prepayments may occur at higher or lower
interest rates than the original investment, thus affecting the yields of the
Balanced and International Equity Portfolios. The compounding effect from
reinvestments of monthly payments received by the Portfolios will increase
their respective yields to shareholders, compared to bonds that pay interest
semi-annually.
Foreign Currency Transactions
At or before the maturity of a forward contract, the
International Equity Portfolio either may sell a security and make delivery of
the currency, or retain the security and offset its contractual obligation to
deliver the currency by purchasing a second contract pursuant to which the
Portfolio will obtain, on the same maturity date, the same amount of the
currency which it is obligated to deliver. If the Portfolio retains the
security and engages in an offsetting transaction, at the time of execution of
the offsetting transaction, the Portfolio will incur a gain or loss to the
extent movement has occurred in forward contract prices. Should forward prices
decline during the period between the Portfolio's entering into a forward
contract for the sale of a currency and the date it enters into an offsetting
contract for the purchase of the currency, it will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of
the currency it has agreed to purchase. Should forward prices increase, the
Portfolio will suffer a loss to the extent the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
The cost of currency transactions varies with factors such as
the currency involved, the length of the contract period and the market
conditions then prevailing. Because transactions in currency exchange usually
are conducted on a principal basis, no fees or commissions are involved. The
use of forward currency exchange contracts does not eliminate fluctuations in
the underlying prices of the securities, but it does establish a rate of
exchange that can be achieved in the future. If a devaluation
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<PAGE>
generally is anticipated, the International Equity Portfolio may
not be able to contract to sell the currency at a price above the
devaluation level it anticipates. The requirements for
qualification as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the "Code"), may cause
the Portfolio to restrict the degree to which it engages in
currency transactions. See "Additional Information Concerning
Taxes."
Futures Contracts and Related Options
See Appendix B to this Additional Statement for a discussion of
futures contracts and related options.
Options Trading
As stated in the Prospectuses, the Capital Growth, Balanced and
International Equity Portfolios may purchase and sell put and call options
listed on a national securities exchange and issued by the Options Clearing
Corporation. Such transactions may be effected on a principal basis with
primary reporting dealers in U.S. Government securities in an amount not
exceeding 5% of a Portfolio's net assets. This is a highly specialized
activity which entails greater than ordinary investment risks. Regardless of
how much the market price of the underlying security increases or decreases,
the option buyer's risk is limited to the amount of the original investment
for the purchase of the option. However, options may be more volatile than the
underlying securities, and therefore, on a percentage basis, an investment in
options may be subject to greater fluctuation than an investment in the
underlying securities. A listed call option gives the purchaser of the option
the right to buy from a clearing corporation, and a writer has the obligation
to sell to the clearing corporation, the underlying security at the stated
exercise price at any time prior to the expiration of the option, regardless
of the market price of the security. The premium paid to the writer is in
consideration for undertaking the obligations under the option contract. A
listed put option gives the purchaser the right to sell to a clearing
corporation the underlying security at the stated exercise price at any time
prior to the expiration date of the option, regardless of the market price of
the security. Put and call options purchased by a Portfolio will be valued at
the last sale price or, in the absence of such a price, at the mean between
bid and asked prices.
A Portfolio's obligation to sell a security subject to a
covered call option written by it, or to purchase a security subject to a
secured put option written by it, may be terminated prior to the expiration
date of the option by the Portfolio executing a closing purchase transaction,
which is effected by purchasing on an exchange an option of the same series
(i.e.,
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<PAGE>
same underlying security, exercise price and expiration date) as the option
previously written. Such a purchase does not result in the ownership of an
option. A closing purchase transaction will ordinarily be effected to realize
a profit on an outstanding option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to permit the
writing of a new option containing different terms on such underlying
security. The cost of such a liquidation purchase plus transaction costs may
be greater than the premium received upon the original option, in which event
the Portfolio will have incurred a loss in the transaction. An option position
may be closed out only on an exchange which provides a secondary market for an
option of the same series. There is no assurance that a liquid secondary
market on an exchange will exist for any particular option. A covered call
option writer, unable to effect a closing purchase transaction, will not be
able to sell the underlying security until the option expires or the
underlying security is delivered upon exercise with the result that the writer
in such circumstances will be subject to the risk of market decline in the
underlying security during such period. A Portfolio will write an option on a
particular security only if the Adviser believes that a liquid secondary
market will exist on an exchange for options of the same series which will
permit the Portfolio to make a closing purchase transaction in order to close
out its position.
When a Portfolio writes a covered call option, an amount equal
to the net premium (the premium less the commission) received by the Portfolio
is included in the liability section of the Portfolio's statement of assets
and liabilities as a deferred credit. The amount of the deferred credit will
be subsequently marked-to-market to reflect the current value of the option
written. The current value of the traded option is the last sale price or, in
the absence of a sale, the average of the closing bid and asked prices. If an
option expires on the stipulated expiration date or if the Portfolio enters
into a closing purchase transaction, it will realize a gain (or loss if the
cost of a closing purchase transaction exceeds the net premium received when
the option is sold) and the deferred credit related to such option will be
eliminated. Any gain on a covered call option may be offset by a decline in
the market price of the underlying security during the option period. If a
covered call option is exercised, the Portfolio may deliver the underlying
security held by it or purchase the underlying security in the open market. In
either event, the proceeds of the sale will be increased by the net premium
originally received and the Portfolio will realize a gain or loss. If a
secured put option is exercised, the amount paid by the Portfolio involved for
the underlying security will be partially offset by the amount of the premium
previously paid to the Portfolio. Premiums from expired options written by a
Portfolio and net gains from closing purchase transactions are treated as
short-term capital gains for
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<PAGE>
federal income tax purposes, and losses on closing purchase transactions are
short-term capital losses.
Stock Index Options
The Capital Growth, Balanced and International Equity
Portfolios may purchase and write put and call options on stock indexes listed
on U.S. securities exchanges or traded in the over-the-counter market. The
International Equity Portfolio may also purchase and write put and call
options on stock indexes list on foreign securities exchange. A stock index
fluctuates with changes in the market values of the stocks included in the
index.
Options on stock indexes are similar to options on stock except
that (a) the expiration cycles of stock index options are generally monthly,
while those of stock options are currently quarterly, and (b) the delivery
requirements are different. Instead of giving the right to take or make
delivery of a stock at a specified price, an option on a stock index gives the
holder the right to receive a cash "exercise settlement amount" equal to (i)
the amount, if any, by which the fixed exercise price of the option exceeds
(in the case of a put) or is less than (in the case of a call) the closing
value of the underlying index on the date of exercise, multiplied by (ii) a
fixed "index multiplier." Receipt of this cash amount will depend upon the
closing level of the stock index upon which the option is based being greater
than, in the case of a call, or less than, in the case of a put, the exercise
price of the option. The amount of cash received will be equal to such
difference between the closing price of the index and the exercise price of
the option expressed in dollars times a specified multiple. The writer of the
option is obligated, in return for the premium received, to make delivery of
this amount. The writer may offset its position in stock index options prior
to expiration by entering into a closing transaction on an exchange or it may
let the option expire unexercised.
Municipal Securities
To the extent consistent with its investment objective, the
Balanced Portfolio may invest in municipal securities including general
obligation securities, revenue securities, notes, and moral obligation bonds,
which are normally issued by special purpose authorities ("Municipal
Securities"). There are, of course, variations in the quality of Municipal
Securities, both within a particular classification and between
classifications, and the yields on Municipal Securities depend in part on a
variety of factors, including general market conditions, the financial
condition of the issuer, general conditions of the municipal bond market, the
size of a particular offering, the maturity of the obligation and the rating
of the
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<PAGE>
issue. The ratings of Municipal Securities by Rating Agencies represent their
opinions as to the quality of Municipal Securities. It should be emphasized,
however, that ratings are general and are not absolute standards of quality,
and Municipal Securities with the same maturity, interest rate and rating may
have different yields while Municipal Securities with the same maturity and
interest rate with different ratings may have the same yield. Subsequent to
its purchase by the Balanced Portfolio, a Municipal Security may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase by the Portfolio. The Adviser will consider such an event in
determining whether the Balanced Portfolio should continue to hold the
obligation.
The payment of principal and interest on most Municipal
Securities purchased by the Balanced Portfolio will depend upon the ability of
the issuers to meet their obligations. The District of Columbia, each state,
each possession and territory of the United States, each of their political
subdivisions, agencies, instrumentalities and authorities and each state
agency of which a state is a member is a separate "issuer" as that term is
used in this Additional Statement and in the Prospectuses. The
non-governmental user of facilities financed by a private activity bond is
also considered to be an "issuer". An issuer's obligations under its Municipal
Securities are subject to the provisions of bankruptcy, insolvency, and other
laws affecting the rights or remedies of creditors, such as the Federal
Bankruptcy Code, and laws, if any, which may be enacted by Federal or state
legislatures extending the time for payment of principal or interest, or both,
or imposing other constraints upon enforcement of such obligations or upon the
ability of municipalities to levy taxes. The power or ability of an issuer to
meet its obligations for the payment of interest or principal of its Municipal
Securities may be materially adversely affected by litigation or other
conditions.
Certain of the Municipal Securities held by the Balanced
Portfolio may be insured at the time of issuance as to the timely payment of
principal and interest. The insurance policies will usually be obtained by the
issuer of the Municipal Securities at the time of original issuance. In the
event that the issuer defaults with respect to interest or principal payments,
the insurer will be notified and will be required to make payment to the
bondholders. There is, however, no guarantee that the insurer will meet its
obligations. In addition, such insurance will not protect against market
fluctuations caused by changes in interest rates and other factors.
-14-
<PAGE>
Additional Investment Limitations
In addition to the investment limitations disclosed in the
Prospectuses, the Portfolios are subject to the following investment
limitations which may not be changed without approval of the holders of the
majority of the outstanding shares of the affected Portfolio (as defined under
"Miscellaneous" below).
None of the Portfolios may:
1. Purchase or sell real estate, except that each Portfolio may
purchase securities of issuers which deal in real estate and may purchase
securities which are secured by interests in real estate.
2. Acquire any other investment company or investment company
security except in connection with a merger, consolidation, reorganization or
acquisition of assets or where otherwise permitted by the 1940 Act.
3. Act as an underwriter of securities within the meaning of
the Securities Act of 1933 except insofar as a Portfolio might be deemed to be
an underwriter upon the disposition of portfolio securities acquired within
the limitation on purchases of restricted securities and except to the extent
that the purchase of obligations directly from the issuer thereof in
accordance with the Portfolio's investment objective, policies and limitations
may be deemed to be underwriting.
4. Write or sell put options, call options, straddles, spreads,
or any combination thereof, except for, with respect to all Portfolios,
transactions in options on securities, indices of securities, futures
contracts and options on futures contracts, and with respect to the Capital
Growth, Balanced and International Equity Portfolios, foreign currencies or
indices, forward foreign currency exchange contracts, other contracts for the
future delivery of foreign currency, and similar instruments.
5. Purchase securities on margin, make short sales of
securities or maintain a short position, except that (a) this investment
limitation shall not apply to the Growth/Value, Opportunity and Intrinsic
Value Portfolios' transactions in futures contracts and related options, (b)
this investment limitation shall not apply to the Capital Growth, Balanced and
International Equity Portfolios' transactions in options on securities,
foreign currencies or indices, indices of securities, futures contracts,
options on futures contracts, forward foreign currency exchange contracts,
other contracts for the future delivery of foreign currency and similar
instruments, and (c) the Portfolios may obtain short-term credit as may be
necessary for the clearance of purchases and sales of portfolio securities.
-15-
<PAGE>
6. Purchase securities of companies for the purpose
of exercising control.
7. Purchase or sell commodity contracts, or invest in oil, gas
or mineral exploration or development programs, except that (a) the
Growth/Value, Opportunity and Intrinsic Value Portfolios may, to the extent
appropriate to their respective investment objectives, purchase publicly
traded securities of companies engaging in whole or in part in such activities
and may enter into futures contracts and related options, and (b) the Capital
Growth, Balanced and International Equity Portfolios may, to the extent
appropriate to their respective investment objectives, purchase publicly
traded securities of companies engaging in whole or in part in such activities
and may enter into transactions in options on securities, foreign currencies
or indices, indices of securities, futures contracts, options on futures
contracts, forward foreign currency exchange contracts, other contracts for
the future delivery of foreign currency and similar instruments.
In order to permit the sale of a Portfolio's shares in certain
states, the Trust may make commitments with respect to a Portfolio more
restrictive than the investment policies and limitations described above and
in its Prospectuses. Should the Trust determine that any such commitment is no
longer in the best interests of a particular Portfolio, it will revoke the
commitment by terminating sales of the Portfolio's shares in the state
involved and, in the case of investors in Texas, give notice of such action.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Portfolios are offered and sold on a continuous
basis by the Trust's sponsors and Co-Distributors, FoM and Essex, acting as
agent. As described in their respective Prospectuses, Class I shares of the
Portfolios are sold primarily to NBD and its affiliated and correspondent
banks acting on behalf of their respective customers. Class A shares of the
Portfolios are sold to the public ("Investors") primarily through financial
institutions such as banks, brokers and dealers. The Co-Distributors may be
entitled to a sales charge on the sale of Class A shares of the Portfolios as
described in the Prospectuses.
An illustration of the computation of the public offering price
per Class A share of the Growth/Value, Opportunity, Intrinsic Value, Capital
Growth, Balanced and International Equity Portfolios, based on the value of
each Portfolio's total net assets and total number of shares outstanding on
March 15, 1996, is as follows:
-16-
<PAGE>
<TABLE>
<CAPTION>
TABLE
Intrinsic Capital International
Growth/Value Opportunity Value Growth Balanced Equity
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
------------ ----------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Assets.................... $755,773,349 $673,796,161 $263,483,860 $218,424,035 $102,628,589 $131,098,847
------------ ------------ ------------ ------------ ------------ ------------
Number of Shares Outstanding.. 54,835,428 42,359,638 21,290,453 15,486,301 8,884,575 11,862,721
============ ============ ============ ============ ============ ============
Net Asset Value Per Share..... $ 13.78 $ 15.91 $ 12.38 $ 14.10 $ 11.55 $ 11.05
------------ ----------- ------------ ------------ ------------ ------------
Sales Charge, 5.00 percent
of offering price (5.26
percent of net asset value
per share)................... $ .73 $ .84 $ .65 $ .74 $ .60 $ .58
------------ ------------ ------------ ------------ ------------- -------------
Offering Price to Public...... $ 14.51 $ 16.75 $ 13.03 $ 14.84 $ 12.16 $ 11.63
============ ============ ============ ============ ============== ==============
</TABLE>
Under the 1940 Act, the Trust may suspend the right of
redemption or postpone the date of payment for shares during any period when:
(a) trading on the New York Stock Exchange is restricted by applicable rules
and regulations of the SEC; (b) the Exchange is closed for other than
customary weekend and holiday closings; (c) the SEC has by order permitted
such suspension; or (d) an emergency exists as determined by the SEC. (The
Trust may also suspend or postpone the recordation of the transfer of shares
upon the occurrence of any of the foregoing conditions).
In addition to the situations described in the Prospectuses
under "Redemption of Shares," the Trust may redeem shares involuntarily to
reimburse the Portfolios for any loss sustained by reason of the failure of a
shareholder to make full payment for shares purchased by the shareholder or to
collect any charge relating to a transaction effected for the benefit of a
shareholder which is applicable to Portfolio shares as provided in the
Prospectuses from time to time.
The Trust normally redeems shares for cash. However, the
Trustees can determine that conditions exist making cash payments undesirable.
If they should so determine, redemption payments could be made in securities
valued at the value used in determining net asset value. There may be
brokerage and other costs incurred by the redeeming shareholder in selling
such securities. The Trust has elected to be covered by Rule 18f-1 under the
1940 Act, pursuant to which the Trust is obligated to redeem shares solely in
cash up to the lesser of $250,000 or 1% of net asset value during any 90-day
period for any one shareholder.
Total sales charges paid by shareholders of the Growth/Value,
Opportunity, Intrinsic Value, Capital Growth, Balanced and International
Equity Portfolios for the fiscal year ended December 31, 1995, were $92,788,
$122,061, $17,964,
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<PAGE>
$55,755, $37,984 and $13,659, respectively. Total sales charges paid by
shareholders of the International Equity Portfolio for the period from January
1, 1995 through June 30, 1995 were $0. Total sales charges paid by
shareholders of the Growth/Value, Opportunity, Intrinsic Value, Capital
Growth, Balanced and International Equity Portfolios for the fiscal year or
period ended December 31, 1994 were $431,841, $544,053, $87,757, $38,718,
$286,056, and $0, respectively. For the fiscal year ended December 31, 1993,
the sales charges for the Growth/Value, Opportunity and Intrinsic Value
Portfolios were $735,713, $1,266,118, and $249,653, respectively.
DESCRIPTION OF SHARES
The Trust is an unincorporated business trust organized under
Massachusetts law on April 21, 1987. The Trust's Declaration of Trust, which
was amended and restated as of May 1, 1992, authorizes the Board of Trustees
to divide shares into two or more series, each series relating to a separate
portfolio of investments, and divide the shares of any series into two or more
classes. The number of shares of each series and/or of a class within each
series shall be unlimited. The Trust does not intend to issue share
certificates.
In the event of a liquidation or dissolution of the Trust or an
individual Portfolio, shareholders of a particular Portfolio would be entitled
to receive the assets available for distribution belonging to such Portfolio.
If there are any assets, income, earnings, proceeds, funds or payments, which
are not readily identifiable as belonging to any particular Portfolio, the
Trustees shall allocate them among any one or more of the Portfolios as they,
in their sole discretion, deem fair and equitable.
Rule 18f-2 under the 1940 Act provides that any matter required
to be submitted to the holders of the outstanding voting securities of an
investment company such as the Trust shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each Portfolio affected by the matter. A Portfolio is
affected by a matter unless it is clear that the interests of each Portfolio
in the matter are substantially identical or that the matter does not affect
any interest of the Portfolio. Under the Rule, the approval of an investment
advisory agreement or any change in a fundamental investment policy would be
effectively acted upon with respect to a Portfolio only if approved by a
majority of the outstanding shares of such Portfolio. However, the Rule also
provides that the ratification of the appointment of independent accountants,
the approval of principal underwriting contracts and the election of Trustees
may be effectively acted upon by shareholders of the Trust voting together in
the aggregate without regard to particular Portfolios.
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<PAGE>
When used in the Prospectuses or in this Additional Statement,
a "majority" of shareholders means, with respect to the approval of an
investment advisory agreement, a distribution plan or a change in a
fundamental investment policy, the vote of the lesser of (1) 67% of the shares
of the Trust, or the applicable Portfolio, present at a meeting if the holders
of more than 50% of the outstanding shares are present in person or by proxy,
or (2) more than 50% of the outstanding shares of the Trust or the applicable
portfolio.
As of March 29, 1996, Trussal & Co., a nominee of NBD's
Trust Division, 900 Tower Drive, 10th Floor, Troy, Michigan 48098, held of
record 92.83%, 88.86%, 92.68%, 97.42%, 90.05% and 98.82%, of the outstanding
shares of the Growth/Value, Opportunity, Intrinsic Value, Capital Growth,
Balanced and International Equity Portfolios, respectively. The Trustees and
officers of the Trust, as a group, owned less than 1% of the outstanding
shares of each Portfolios. Furthermore, as of March 29, 1996, with respect
to the Growth/Value, Opportunity, Intrinsic Value, Balanced and International
Equity Portfolios, the following persons may have beneficially owned 5% or
more of the outstanding shares of such Portfolios:
<TABLE>
<CAPTION>
Percent of
Outstanding
Number of Shares Shares
---------------- -----------
<S> <C> <C>
Growth/Value Portfolio
NBD Bancorp, Inc. Employees' 4,256,469 7.80%
Savings and Investment Plan
Trust Administration
611 Woodward Avenue
Detroit, MI 48232
Opportunity Portfolio
Employees Retirement Plan of 4,399,872 10.49%
NBD Bank
Trust Administration
611 Woodward Avenue
Detroit, MI 48232
NBD Bancorp, Inc. Employees' 3,923,604 9.35%
Savings & Investment Plan
Trust Administration
611 Woodward Avenue
Detroit, MI 48232
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Percent of
Outstanding
Number of Shares Shares
---------------- -----------
<S> <C> <C>
Intrinsic Value Portfolio
Employees Retirement Plan of 3,334,458 15.60%
NBD Bank
Trust Administration
611 Woodward Avenue
Detroit, MI 48232
Capital Growth Portfolio
Employees Retirement Plan of 2,957,605 18.97%
of NBD Bank
Trust Administration
611 Woodward Avenue
Detroit, MI 48232
Balanced Portfolio
NBD Bancorp., Inc. Employees 1,938,845 21.30%
Savings and Investment Plan
Trust Administration
611 Woodward Avenue
Detroit, MI 48232
Dickinson, Wright, Moon, Van Dusen 1,072,198 11.78%
& Freeman
1 Detroit Center
500 Woodward Avenue, Suite 4000
Detroit, MI 48226-3425
International Equity Portfolio
Employees Retirement Plan of 4,269,535 35.22%
NBD Bank
Trust Administration
611 Woodward Avenue
Detroit, MI 48232
</TABLE>
When issued for payment as described in the Portfolios'
Prospectuses and this Additional Statement, shares of the Portfolios will be
fully paid and non-assessable by the Trust.
The Declaration of Trust provides that the Trustees, officers,
employees and agents of the Trust will not be liable to the Trust or to a
shareholder, nor will any such person be liable to any third party in
connection with the affairs of the Trust, except as such liability may arise
from his or its own bad faith, willful misfeasance, gross negligence, or
reckless disregard of duties. It also provides that all third parties shall
look solely to the Trust property for satisfaction of claims arising in
connection with the affairs of the Trust. With the exceptions stated, the
Declaration of Trust provides that a Trustee,
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<PAGE>
officer, employee or agent is entitled to be indemnified against all liability
in connection with the affairs of the Trust.
ADDITIONAL INFORMATION CONCERNING TAXES
Taxes In General
The following summarizes certain additional tax considerations
generally affecting the Portfolios and their shareholders that are not
described in the Prospectuses. No attempt is made to present a detailed
explanation of the tax treatment of the Portfolios or their shareholders, and
the discussion here and in the Prospectuses is not intended as a substitute
for careful tax planning and is based on tax laws and regulations which are in
effect on the date hereof; such laws and regulations may be changed by
legislative or administrative action. Investors are advised to consult their
tax advisers with specific reference to their own tax situations.
Each Portfolio is treated as a separate corporate entity under
the Code and intends to qualify as a regulated investment company. In order to
so qualify, each Portfolio must satisfy, in addition to the distribution
requirement described in the Prospectuses, certain requirements with respect
to the source of its income for a taxable year. At least 90% of the gross
income of each Portfolio must be derived from dividends, interest, payments
with respect to securities loans, gains from the sale or other disposition of
stocks, securities or foreign currencies, and other income (including but not
limited to gains from options, futures, or forward contracts) derived with
respect to the Portfolio's business of investing in such stock, securities or
currencies. The Treasury Department may by regulation exclude from qualifying
income foreign currency gains which are not directly related to the
Portfolio's principal business of investing in stock or securities, or options
and futures with respect to stock or securities. Any income derived by a
Portfolio from a partnership or trust is treated as derived with respect to
the Portfolio's business of investing in stock, securities or currencies only
to the extent that such income is attributable to items of income which would
have been qualifying income if realized by the Portfolio in the same manner as
by the partnership or trust.
Another requirement for qualification as a regulated investment
company under the Code is that less than 30% of a Portfolio's gross income for
a taxable year must be derived from gains realized on the sale or other
disposition of the following investments held for less than three months: (1)
stock and securities (as defined in Section 2(a)(36) of the 1940 Act); (2)
options, futures and forward contracts other than those on foreign currencies;
and (3) foreign currencies (and options, futures and forward contracts on
foreign currencies) that are not
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<PAGE>
directly related to a Portfolio's principal business of investing in stock and
securities (and options and futures with respect to stocks and securities).
Interest (including original issue discount and accrued market discount)
received by a Portfolio upon maturity or disposition of a security held for
less than three months will not be treated as gross income derived from the
sale or other disposition of such security within the meaning of this
requirement. However, any other income which is attributable to realized
market appreciation will be treated as gross income from the sale or other
disposition of securities for this purpose.
Each Portfolio will designate any distribution of long term
capital gains as a capital gain dividend in a written notice mailed to
shareholders within 60 days after the close of the Portfolio's taxable year.
Shareholders should note that, upon the sale or exchange of Portfolio shares,
if the shareholder has not held such shares for at least six months, any loss
on the sale or exchange of those shares will be treated as long term capital
loss to the extent of the capital gain dividends received with respect to the
shares.
Ordinary income of individuals is taxable at a maximum nominal
rate of 39.6%; however, because of limitations on itemized deductions
otherwise allowable and the phase-out of personal exemptions, the maximum
effective marginal rate of tax for some taxpayers may be higher. An
individual's long term capital gains are taxable at a maximum nominal rate of
28%. For corporations, long term capital gains and ordinary income are both
taxable at a maximum nominal rate of 35% (or at a maximum effective marginal
rate of 39% in the case of corporations having taxable income between $100,000
and $335,000).
A 4% nondeductible excise tax is imposed on regulated
investment companies that fail to currently distribute an amount equal to
specified percentages of their ordinary taxable income and capital gain net
income (excess of capital gains over capital losses). Each Portfolio intends
to make sufficient distributions or deemed distributions of its ordinary
taxable income and any capital gain net income prior to the end of each
calendar year to avoid liability for this excise tax.
If for any taxable year a Portfolio does not qualify for the
special federal income tax treatment afforded regulated investment companies,
all of its taxable income will be subject to federal income tax at regular
corporate rates (without any deduction for distributions to its shareholders).
In such event, dividend distributions (whether or not derived from interest on
Municipal Securities) would be taxable as ordinary income to shareholders to
the extent of the Portfolio's current and accumulated earnings and profits and
would be eligible for the dividends received deduction for corporations.
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<PAGE>
Each Portfolio may be required in certain cases to withhold and
remit to the U.S. Treasury 31% of taxable dividends or gross proceeds realized
upon sale paid to shareholders who have failed to provide a correct tax
identification number in the manner required, who are subject to withholding
by the Internal Revenue Service for failure properly to include on their
return payments of taxable interest or dividends, or who have failed to
certify to the Portfolio that they are not subject to backup withholding when
required to do so or that they are "exempt recipients."
Depending upon the extent of the Portfolios' activities in
states and localities in which their offices are maintained, in which their
agents or independent contractors are located or in which they are otherwise
deemed to be conducting business, the Portfolios may be subject to the tax
laws of such states or localities. In addition, in those states and localities
which have income tax laws, the treatment of the Portfolios and their
shareholders under such laws may differ from their treatment under federal
income tax laws.
MANAGEMENT
Trustees and Officers of the Trust
The Trustees and executive officers of the Trust and their
principal occupations for the last five years are set forth in the
Prospectuses. Each Trustee has an address at The Woodward Funds, c/o NBD Bank,
611 Woodward Avenue, Detroit, Michigan 48226. Each Trustee also serves as a
trustee of The Woodward Variable Annuity Fund, a registered investment Company
advised by NBD Bank.
Effective May 1, 1995, each Trustee receives from the Trust and
The Woodward Variable Annuity Fund a total annual fee of $17,000 and a fee of
$2,000 for each Board of Trustees meeting attended. The Chairman is entitled
to additional compensation of $4,250 per year for his services to the Trusts
in that capacity. These fees are allocated among the investment portfolios of
the Trust and The Woodward Variable Annuity Fund based on their relative net
assets. All Trustees are reimbursed for out of pocket expenses incorrect in
connection with attendance at meetings. Drinker Biddle & Reath, of which Mr.
McConnel is a partner, receives legal fees as counsel to the Trusts.
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<PAGE>
The following table summarizes the compensation for each of the
Trustees for the Trust's fiscal year ending December 31, 1995 are as follows:
<TABLE>
<CAPTION>
(3)
Total
Compensation
(2) From Fund and
Aggregate Fund Complex**
(1) Compensation Paid to Board
Name of Board Member from Fund* Member
-------------------- ------------- --------------
<S> <C> <C>
Will M. Caldwell, Trustee $21,250 $21,250(2)+
Nicholas J. DeGrazia, Trustee $21,250 $21,250(2)+
John P. Gould, Trustee *** $30,000(4)+
Earl I. Heenan, Jr., $24,437.50 $24,437.50(2)+
Chairman and President++
Marilyn McCoy, Trustee *** $30,000(4)+
Julius L. Pallone, Trustee++ $21,250 $21,250(2)+
Donald G. Sutherland, Trustee++ $21,250 $21,250(2)+
Donald L. Tuttle, Trustee++ $21,250 $21,250(2)+
Eugene C. Yehle, Trustee $21,250 $21,250(2)+
and Treasurer
<FN>
- - ---------
* Amount does not include reimbursed expenses for attending Board meeting,
which are estimated to be approximately $350 for all Trustees as a group.
** The Fund Complex consists of the Trust, Woodward Variable Annuity Fund,
Prairie Funds, Prairie Institutional Funds, Prairie Intermediate Bond Fund and
Prairie Municipal Bond Fund, Inc.
*** Mr. Gould and Mrs. McCoy were not trustees of the Trust during the fiscal
year ended December 31, 1995.
+ Total number of other investment companies within the Fund Complex from
which the Trustee receives compensation for serving as a trustee.
++ Deferred compensation in the amounts of $24,437.50, $21,500, $21,500, and
$21,500 accrued during The Woodward Funds' fiscal year ended December 31,
1995 for Earl I. Heenan, Jr., Julius L. Pallone, Donald G. Sutherland and
Donald L. Tuttle, respectively.
</TABLE>
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<PAGE>
Investment Adviser
Information about NBD and its duties and compensation as
Adviser is contained in the Prospectuses. For the fiscal years ended December
31, 1995, 1994 and 1993, the Trust paid NBD fees for advisory services as
follows: (i) $4,951,664, $4,032,266 and $2,624,744 with respect to the
Growth/Value Portfolio; (ii) $4,490,930, $3,670,337 and $1,926,219 with
respect to the Opportunity Portfolio; and (iii) $1,817,833, $1,615,375 and
$1,119,400 with respect to the Intrinsic Value Portfolio. For the fiscal year
ended December 31, 1995 and the fiscal period from July 2, 1994 (commencement
of operations) through December 31, 1994, the Trust paid NBD fees for advisory
services aggregating $1,064,273 and $247,589, respectively on behalf of the
Capital Growth Portfolio. For the fiscal years ended December 31, 1995
and 1994, the Trust paid NBD $570,525 and $260,903, respectively on
behalf of the Balanced Portfolio. For the fiscal year ended December 31,
1995 and the fiscal period from December 3, 1994 (commencement of
operations) through December 31, 1994, the Trust paid NBD fees for
advisory services aggregating $529,312 and $20,568, respectively on
behalf of the International Equity Portfolio. For the fiscal year
ended December 31, 1995, NBD reimbursed the Capital Growth, Balanced and
International Equity Portfolios in the amounts of $58,424, $136,954 and
$51,707, respectively, for certain other expenses.
NBD's own investment portfolio may include bank certificates of
deposit, bankers' acceptances, corporate debt obligations, equity securities
and other investments any of which may also be purchased by the Trust. Joint
purchase of investments for the Trust and for NBD's own investment portfolio
will not be made. NBD's Commercial Banking Department may have deposit, loan
and other commercial banking relationships with issuers of securities
purchased by the Trust, including outstanding loans to such issuers which may
be repaid in whole or in part with the proceeds of securities purchased by the
Trust.
Investment decisions for the Trust and other fiduciary accounts
are made by NBD's Trust Investment Division solely from the standpoint of the
independent interest of the Trust and such other fiduciary accounts. NBD's
Trust Investment Division performs independent analyses of publicly available
information, the results of which are not made publicly available. In making
investment decisions for the Trust, personnel of NBD's Trust Investment
Division do not obtain information from any other division or department of
NBD or otherwise, which is not publicly available. NBD's Trust Investment
Division executes transactions for the Trust only with unaffiliated dealers
but such dealers may be customers of other divisions of NBD. NBD may make bulk
purchases of securities for the Trust and for other customer accounts (but not
for its own investment
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<PAGE>
portfolio), in which case the Trust will be charged a pro rata share of the
transaction costs incurred in making the bulk purchase. See "Investment
Objectives, Policies and Risk Factors - Portfolio Transactions" above.
NBD has agreed as Adviser that it will reimburse the Trust such
portions of its fees as may be required to satisfy any expense limitations
imposed by state securities laws or other applicable laws. Restrictive
limitations may be imposed on the Trust as a result of changes in current
state laws and regulations in those states where the Trust has qualified its
shares, or by a decision of the Trustees to qualify the shares in other states
having restrictive expense limitations. To the Trust's knowledge, of the
expense limitations in effect on the date of this Additional Statement none is
more restrictive than two and one-half percent (2-1/2%) of the first $30
million of a Portfolio's average annual net assets, two percent (2%) of the
next $70 million of the average annual net assets and one and one-half percent
(1-1/2%) of the remaining average annual net assets.
Under the terms of the Advisory Agreement, NBD is obligated to
manage the investment of each Portfolio's assets in accordance with applicable
laws and regulations, including, to the extent applicable, the regulations and
rulings of the various regulatory governmental bank agencies.
NBD will not accept Trust shares as collateral for a loan which
is for the purpose of purchasing Trust shares, and will not make loans to the
Trust. Inadvertent overdrafts of the Trust's account with the Custodian
occasioned by clerical error or by failure of a shareholder to provide
available funds in connection with the purchase of shares will not be deemed
to be the making of a loan to the Trust by NBD.
Under the Advisory Agreement, NBD is not liable for any error
of judgment or mistake of law or for any loss suffered by the Trust in
connection with the performance of such Agreement, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation
for services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of NBD in the performance of its duties or from its
reckless disregard of its duties and obligations under the Agreement.
Shareholder Servicing Plan
As stated in the Prospectuses for Class A shares of the
Portfolio, the Trust may enter into Servicing Agreements with Shareholder
Servicing Agents which may include NBD and its affiliates. The Servicing
Agreements provide that the Shareholder Servicing Agents will render
shareholder
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<PAGE>
administrative support services to their customers who are the beneficial
owners of Class A shares in consideration for the Portfolios' payment of up to
.25% (on an annualized basis) of the average daily net asset value of Class A
shares beneficially owned by such customers and held by the Shareholder
Servicing Agents and, at the Trust's option, it may reimburse the Shareholder
Servicing Agents' out-of-pocket expenses. Such services may include: (i)
processing dividend and distribution payments from a Portfolio; (ii) providing
information periodically to customers showing their share positions; (iii)
arranging for bank wires; (iv) responding to customer inquiries; (v) providing
subaccounting with respect to shares beneficially owned by customers or the
information necessary for such subaccounting; (vi) forwarding shareholder
communications; (vii) processing share exchange and redemption requests from
customers; (viii) assisting customers in changing dividend options, account
designations and addresses; and (ix) other similar services requested by the
Trust. Banks acting as Shareholder Servicing Agents are prohibited from
engaging in any activity primarily intended to result in the sale of Portfolio
shares. However, Shareholder Servicing Agents other than banks may be
requested to provide marketing assistance (e.g., forwarding sales literature
and advertising to their customers) in connection with the distribution of
Portfolio shares.
The Board of Trustees reviews, at least quarterly, a written
report of the amounts expended in connection with the Trust's arrangements
with Shareholder Servicing Agents and the purposes for which the expenditures
were made. In addition, such arrangements are approved annually by a majority
of the Trustees, including a majority of the Trustees who are not "interested
persons" of the Trust as defined in the 1940 Act and have no direct or
indirect financial interest in such arrangements (the "Disinterested
Trustees").
Any material amendment to the Trust's arrangements with
Shareholder Servicing Agents under the Shareholder Servicing Agreements must
be approved by a majority of the Board of Trustees (including a majority of
the Disinterested Trustees).
Custodian and Transfer Agent
As Custodian and as Transfer Agent for the Trust, NBD (i)
maintains a separate account or accounts in the name of each Portfolio, (ii)
collects and makes disbursements of money on behalf of each Portfolio, (iii)
issues and redeems shares of each Portfolio, (iv) collects and receives all
income and other payments and distributions on account of the portfolio
securities of each Portfolio, (v) addresses and mails all communications by
the Trust to its shareholders, including reports to shareholders, dividend and
distribution notices and proxy materials for any meeting of shareholders, (vi)
maintains
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<PAGE>
shareholder accounts, (vii) makes periodic reports to the Trust's Board of
Trustees concerning the Trust's operations, and (viii) maintains on-line
computer capability for determining the status of shareholder accounts.
For its services as Custodian, NBD is entitled to receive from
the Growth/Value, Opportunity, Intrinsic Value, Capital Growth, Balanced and
International Equity Portfolios at the following annual rates based on the
aggregate market value of such Portfolios' portfolio securities, held as
Custodian: .03% of the first $20 million; .025% of the next $20 million; .02%
of the next $20 million; .015% of the next $40 million; .0125% of the next
$200 million; and .01% of the balance over $300,000,000. NBD will receive an
annual account fee of $1,000 and $1.54 per month per asset held in each of
these Portfolios. In addition, NBD, as Custodian, is entitled to receive $50
for each cash statement and inventory statement and $13 for each pass-through
certificate payment, $30 for each option transaction requiring escrow receipts
and $20 for all other security transactions.
For its services as Transfer Agent, NBD is entitled to receive
a minimum annual fee from each Portfolio of $11,000, $12 annually per account
in each such Portfolio for the preparation of statements of account, and $1.00
for each confirmation of purchase and redemption transactions. Charges for
providing computer equipment and maintaining a computerized investment system
are expected to approximate $350 per month for each Portfolio.
Sponsors and Co-Distributors
The Trust's shares are offered on a continuous basis through
FoM and Essex, which act under the Distribution Agreement as sponsors and
Co-Distributors for the Trust. For the fiscal year ended December 31, 1995,
the Growth/Value, Opportunity, Intrinsic Value, Capital Growth, Balanced and
International Equity Portfolios paid FoM for its services a fee of $33,011,
$29,940, $12,119, $7,095, $3,804 and $3,676, respectively. For the fiscal year
ended December 31, 1994, the Growth/Value, Opportunity, Intrinsic Value and
Balanced Portfolios paid FoM for its services a fee of $21,826, $19,861,
$8,798 and $1,284. For the fiscal year ended December 31, 1993, the
Growth/Value, Opportunity and Intrinsic Value Portfolios paid FoM for its
services a fee of $34,731, $25,518 and $14,822, respectively. For the fiscal
year ended December 31, 1995, such Portfolios paid Essex for its services a
fee of $34,229, $50,523, $12,521, $2,360, $7,344 and $387, respectively. For
the fiscal period from April 20, 1994 (date of original Distribution Agreement
with Essex) to December 31, 1994, the Growth/Value, Opportunity, Intrinsic
Value and Balanced Portfolios paid Essex for its services a fee of $27,976,
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<PAGE>
$40,223, $10,418 and $5,646, respectively. For the fiscal period from July 2,
1994 (commencement of operations through December 31, 1994, the Capital Growth
Portfolio paid FoM and Essex for their respective services a fee of $1,004 and
$953. For the fiscal period from December 3, 1994 (commencement of operations)
to December 31, 1994, the International Equity Portfolio paid FoM and Essex
for their respective services a fee of $147 and $0. For the fiscal years ended
December 31, 1995, 1994 and 1993, FoM incurred expenses of $0 with respect to
each of the Growth/Value, Opportunity, Intrinsic Value, Capital Growth,
Balanced and International Equity Portfolios for the printing and mailing of
prospectuses to other than current shareholders. For the fiscal year ended
December 31, 1995 and for the fiscal period from April 20, 1994 through
December 31, 1994, Essex incurred expenses of $0 with respect to each of the
Portfolios. Additional information concerning fees for services performed by
FoM and Essex, the review of such fees under the Trust's plan for the payment
of distribution expenses and the services provided by FoM and Essex are
described in the Prospectuses.
As stated in the Prospectus, the Trust's Board of Trustees is
permitted, among other things, to allocate distribution fees which are
attributable to the Class A Shares in a Portfolio exclusively to such shares.
As of the date hereof, the Board of Trustees has not exercised its discretion
to make any such allocations for the current fiscal year.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, 500
Woodward Avenue, Detroit, Michigan 48226-3424, serves as auditors for the
Trust. The financial statements included in this Statement of Additional
Information and the financial highlights included in the Prospectuses have
been audited by Arthur Andersen LLP, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of
said firm as experts in giving said reports.
COUNSEL
Drinker Biddle & Reath (of which Mr. McConnel, Secretary of the
Trust, is a partner), 1345 Chestnut Street, Philadelphia, Pennsylvania
19107-3496, are counsel to the Trust.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of each class of shares of
each Portfolio and the yield of the Balanced Portfolio for various periods may
be quoted in advertisements, shareholder
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<PAGE>
reports or other communications to shareholders. Performance information is
generally available by calling (800)688-3350.
Total Return Calculations. Each Portfolio computes its "average
annual total return" for a class by determining the average annual compounded
rates of return during specified periods that equate the initial amount
invested to the ending redeemable value of such investment. This is done by
dividing the ending redeemable value of a hypothetical $1,000 initial payment
by $1,000 and raising the quotient to a power equal to one divided by the
number of years (or fractional portion thereof) covered by the computation and
subtracting one from the result. This calculation can be expressed as follows:
ERV 1/n
T = [(-----) - 1]
P
Where: T = average annual total return.
ERV = ending redeemable value at the end of
the period covered by the computation of a
hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, ex-
pressed in terms of years.
The Portfolios compute their aggregate total returns for each
class by determining the aggregate rates of return during specified periods
that likewise equate the initial amount invested to the ending redeemable
value of such investment. The formula for calculating aggregate total return
is as follows:
ERV
T = (------) - 1
P
The calculations of average annual total return and aggregate
total return assume the reinvestment of all dividends and capital gain
distributions on the reinvestment dates during the period, and include all
recurring fees charged to all shareholder accounts, assuming an account size
equal to a Portfolio's mean (or median) account size for any fees that vary
with the size of the account. The ending redeemable value (variable "ERV" in
each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the
end of the period covered by the computation. Each Portfolio's average annual
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<PAGE>
total return may reflect the deduction of the maximum sales load
imposed on purchases.
The average annual total returns for the Growth/Value,
Opportunity, Intrinsic Value, Capital Growth, Balanced and International
Equity Portfolios for the one year period ended December 31, 1995 (if
applicable) and the period since
commencement of operations are shown below:
<TABLE>
<CAPTION>
Average Annual Average Annual Average Annual Average Annual
Total Return Total Return Total Return Total Return
For One Year For One Year From Inception From Inception
Ended 12/31/95 Ended 12/31/95 Through 12/31/95 Through 12/31/95
(with Deduction (without Deduc- (with Deduction (without Deduc-
of Maximum tion for Any of Maximum tion for Any
Sales Charge) Sales Charge) Sales Charge) Sales Charge)
--------------- --------------- ---------------- -------------
<S> <C> <C> <C> <C>
Growth/Value Portfolio 21.62% 28.02% 9.71% 10.94%
- - ------------------------
Inception: June 1, 1991
Opportunity Portfolio 13.90% 19.90% 13.51% 14.79%
- - ------------------------
Inception: June 1, 1991
Intrinsic Value Portfolio 18.16% 24.38% 10.28% 11.52%
- - -------------------------
Inception: June 1, 1991
Capital Growth Portfolio 22.46% 28.90% 18.09% 22.19%
- - -------------------------
Inception: July 2, 1994
Balanced Portfolio 17.01% 23.16% 7.08% 9.86%
- - ---------------------------
Inception: January 1, 1994
International Equity Portfolio 5.90% 11.47% 5.50% 10.66%
- - ------------------------------
Inception: December 3, 1994
</TABLE>
The aggregate annual total returns for the Portfolios for the one
year period ended December 31, 1995 (if applicable) and the period since
commencement of operations are shown below:
<TABLE>
<CAPTION>
Aggregate Total Aggregate Total
Return From Return From
Inception Inception
Through 12/31/95 Through 12/31/95
(with Deduction (without Deduc-
of Maximum tion for Any
Sales Charge) Sales Charge)
---------------- ----------------
<S> <C> <C>
Growth/Value Portfolio 53.01% 61.05%
- - ------------------------
Inception: June 1, 1991
Opportunity Portfolio 78.89% 88.30%
- - ------------------------
Inception: June 1, 1991
Intrinsic Value Portfolio 56.68% 64.92%
- - -------------------------
Inception: June 1, 1991
Capital Growth Portfolio 28.36% 35.11%
- - -------------------------
Inception: July 2, 1994
Balanced Portfolio 14.67% 20.70%
- - ---------------------------
Inception: January 1, 1994
International Equity Portfolio 5.95% 11.53%
- - ------------------------------
Inception: December 3, 1994
</TABLE>
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<PAGE>
The Portfolios may also from time to time include in
advertisements, sales literature, communications to shareholders and other
materials ("Literature") total return figures that are not calculated
according to the formulas set forth above in order to compare more accurately
a Portfolio's performance with other measures of investment return. For
example, in comparing the Portfolios' total returns with data published by
Lipper Analytical Services, Inc., CDA Investment Technologies, Inc. or
Weisenberger Investment Company Service, or with the performance of an index,
the Portfolios may calculate their returns for the period of time specified in
the advertisement or communication by assuming the investment of $10,000 in
shares and assuming the reinvestment date. Percentage increases are determined
by subtracting the initial value of the investment from the ending value and
by dividing the remainder by the beginning value. The Portfolios do not, for
these purposes, deduct from the initial value invested any amount representing
sales charges. The Portfolios will, however, disclose the maximum sales charge
and will also disclose that the performance data does not reflect sales
charges and that inclusion of sales charges would reduce the performance
quoted.
The Portfolios may also from time to time include discussions or
illustrations of the effects of compounding in advertisements. "Compounding"
refers to the fact that, if dividends or other distributions on a Portfolio
investment are reinvested by being paid in additional Portfolio shares, any
future income or capital appreciation of a Portfolio would increase the value,
not only of the original Portfolio investment, but also of the additional
Portfolio shares received through reinvestment. As a result, the value of the
Portfolio investment would increase more quickly than if dividends or other
distributions had been paid in cash.
The Portfolios may also include discussions or illustrations of the
potential investment goals of a prospective investor, investment management
strategies, techniques, policies or investment suitability of a Portfolio
(such as value investing, market timing, dollar cost averaging, asset
allocation, constant ratio transfer, automatic accounting rebalancing, the
advantages and disadvantages of investing in tax-deferred and taxable
instruments), economic conditions, the relationship between sectors of the
economy and the economy as a whole, various securities markets, the effects of
inflation and historical performance of various asset classes, including but
not limited to, stocks, bonds and Treasury bills. From time to time
advertisements or communications to shareholders may summarize the substance
of information contained in shareholder reports (including the investment
composition of a Portfolio), as well as the view of the Trust as to current
market, economy, trade and interest rate trends, legislative, regulatory and
monetary developments, investment strategies and related matters believed to
be of relevance to a Portfolio. The Portfolios may also include in
advertisements charts, graphs or drawings which compare the investment
objective, return potential, relative
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<PAGE>
stability and/or growth possibilities of the Portfolio and/or other mutual
funds, or illustrate the potential risks and rewards of investment in various
investment vehicles, including but not limited to, stocks, bonds, treasury
bills and shares of a Portfolio. In addition, advertisements or shareholder
communications may include a discussion of certain attributes or benefits to
be derived by an investment in a Portfolio and/or other mutual funds,
shareholder profiles and hypothetical investor scenarios, timely information
on financial management, tax and retirement planning and investment
alternatives to certificates of deposit and other financial instruments. Such
advertisements or communicators may include symbols, headlines or other
material which highlight or summarize the information discussed in more detail
therein.
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<PAGE>
APPENDIX A
Commercial Paper Ratings
A Standard & Poor's commercial paper rating is a current assessment
of the likelihood of timely payment of debt considered short-term in the
relevant market. The following summarizes the rating categories used by
Standard and Poor's for commercial paper:
"A-1" - Issue's degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics are denoted "A-1+."
"A-2" - Issue's capacity for timely payment is satisfactory.
However, the relative degree of safety is not as high as for issues designated
"A-1."
"A-3" - Issue has an adequate capacity for timely payment. It is,
however, somewhat more vulnerable to the adverse effects of changes in
circumstances than an obligation carrying a higher designation.
"B" - Issue has only a speculative capacity for timely payment.
"C" - Issue has a doubtful capacity for payment.
"D" - Issue is in payment default.
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of 9 months. The following summarizes the rating categories
used by Moody's for commercial paper:
"Prime-1" - Issuer or related supporting institutions are
considered to have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by the
following characteristics: 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 earning 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.
"Prime-2" - Issuer or related supporting institutions are
considered to have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by
A-1
<PAGE>
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 alternative liquidity is maintained.
"Prime-3" - Issuer or related supporting institutions have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
"Not Prime" - Issuer does not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D- 1+," "D-1" and "D-1-," within the highest
rating category. The following summarizes the rating categories used by Duff &
Phelps for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"D-3" - Debt possesses satisfactory liquidity, and other protection
factors qualify issue as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
A-2
<PAGE>
"D-5" - Issuer has failed to meet scheduled principal and/or
interest payments.
Fitch short-term ratings apply to debt obligations that are payable
on demand or have original maturities of generally up to three years. The
following summarizes the rating categories used by Fitch for short-term
obligations:
"F-1+" - Securities possess exceptionally strong credit quality.
Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
"F-1" - Securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly less
in degree than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues assigned
this rating have a satisfactory degree of assurance for timely payment, but
the margin of safety is not as great as the "F-1+" and "F-1" categories.
"F-3" - Securities possess fair credit quality. Issues assigned
this rating have characteristics suggesting that the degree of assurance for
timely payment is adequate; however, near-term adverse changes could cause
these securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues assigned
this rating have characteristics suggesting a minimal degree of assurance for
timely payment and are vulnerable to near-term adverse changes in financial
and economic conditions.
"D" - Securities are in actual or imminent payment default.
Fitch may also use the symbol "LOC" with its short-term ratings to
indicate that the rating is based upon a letter of credit issued by a
commercial bank.
Thomson BankWatch short-term ratings assess the likelihood of an
untimely or incomplete payment of principal or interest of unsubordinated
instruments having a maturity of one year or less which are issued by United
States commercial banks, thrifts and non-bank banks; non-United States banks;
and broker-dealers. The following summarizes the ratings used by Thomson
BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's highest
rating category and indicates a very high degree of likelihood that principal
and interest will be paid on a timely basis.
A-3
<PAGE>
"TBW-2" - This designation indicates that while the degree of
safety regarding timely payment of principal and interest is strong, the
relative degree of safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents the lowest investment grade
category and indicates that while the debt is more susceptible to adverse
developments (both internal and external) than obligations with higher
ratings, capacity to service principal and interest in a timely fashion is
considered adequate.
"TBW-4" - This designation indicates that the debt is regarded as
non-investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt with an
original maturity of less than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for short-term debt ratings:
"A1+" - Obligations supported by the highest capacity for timely
repayment.
"A1" - Obligations are supported by the highest capacity for timely
repayment.
"A2" - Obligations are supported by a satisfactory capacity for
timely repayment, although such capacity may be susceptible to adverse changes
in business, economic or financial conditions.
"A3" - Obligations are supported by a satisfactory capacity for
timely repayment. Such capacity is more susceptible to adverse changes in
business, economic or financial conditions than for obligations in higher
categories.
"B" - Obligations for which the capacity for timely repayment is
susceptible to adverse changes in business, economic or financial conditions.
"C" - Obligations for which there is an inadequate capacity to
ensure timely repayment.
"D" - Obligations which have a high risk of default or which are
currently in default.
Corporate and Municipal Long-Term Debt Ratings
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
A-4
<PAGE>
"AAA" - This designation represents the highest rating assigned by
Standard & Poor's to a debt obligation and indicates an extremely strong
capacity to pay interest and repay principal.
"AA" - Debt is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in small degree.
"A" - Debt is considered to have a strong capacity to pay interest
and repay principal although such issues are somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt
in higher-rated categories.
"BBB" - Debt is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues 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 debt in this category than in higher-rated categories.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "C" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
"BB" - Debt has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
"B" - Debt has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
"CCC" - Debt has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The "CCC" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "B" or "B-" rating.
A-5
<PAGE>
"CC" - This rating is typically applied to debt subordinated to
senior debt that is assigned an actual or implied "CCC" rating.
"C" - This rating is typically applied to debt subordinated to
senior debt which is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
"CI" - This rating is reserved for income bonds on which no
interest is being paid.
"D" - Debt is in payment default. This rating is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. "D" rating is also used upon
the filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid, and
certain other obligations that S & P believes may experience high volatility
or high variability in expected returns due to non-credit risks. Examples of
such obligations are: securities whose principal or interest return is indexed
to equities, commodities, or currencies; certain swaps and options; and
interest only and principal only mortgage securities.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." 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 are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally 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 possess many favorable investment attributes and are to
be considered as upper medium-grade
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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 considered 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.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates some speculative elements; "B" indicates a general lack of
characteristics of desirable investment; "Caa" represents a poor standing;
"Ca" represents obligations which are speculative in a high degree; and "C"
represents the lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be
in default.
Con. (---) - Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes probable
credit stature upon completion of construction or elimination of basis of
condition.
(P)... - When applied to forward delivery bonds, indicates that the
rating is provisional pending delivery of the bonds. The rating may be revised
prior to delivery if changes ooccur in the legal documents or the underlying
credit quality of the bonds.
The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below average protection factors but such
protection factors are still considered sufficient for
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prudent investment. Considerable variability in risk is present during
economic cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt
rated "B" possesses the risk that obligations will not be met when due. Debt
rated "CCC" is well below investment grade and has considerable uncertainty as
to timely payment of principal, interest or preferred dividends. Debt rated
"DD" is a defaulted debt obligation, and the rating "DP" represents preferred
stock with dividend arrearages.
To provide more detailed indications of credit quality, the "AA,"
"A," "BBB," "BB" and "B" ratings may be modified by the addition of a plus (+)
or minus (-) sign to show relative standing within these major categories.
The following summarizes the highest four ratings used by Fitch for
corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
"AA" - Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated "F-1+."
"A" - Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the ratings
of these bonds will fall below investment grade is higher than for bonds with
higher ratings.
"BB," "B," "CCC," "CC," "C," "DDD," "DD," and "D" Bonds that
possess one of these ratings are considered by Fitch to be speculative
investments. The ratings "BB" to "C" represent Fitch's assessment of the
likelihood of timely payment of principal and interest in accordance with the
terms of obligation
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for bond issues not in default. For defaulted bonds, the rating "DDD" to "D"
is an assessment of the ultimate recovery value through reorganization or
liquidation.
To provide more detailed indications of credit quality, the Fitch
ratings from and including "AA" to "C" may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within these major rating
categories.
IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.
"AA" - Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial conditions may
increase investment risk albeit not very significantly.
"A" - Obligations for which there is a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
strong, although adverse changes in business, economic or financial conditions
may lead to increased investment risk.
"BBB" - Obligations for which there is currently a low expectation
of investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial
conditions are more likely to lead to increased investment risk than for
obligations in other categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one of
these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C" represents the highest degree
of speculation and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating to
denote relative status within major rating categories.
Thomson BankWatch assesses the likelihood of an untimely repayment
of principal or interest over the term to
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maturity of long term debt and preferred stock which are issued by United
States commercial banks, thrifts and non-bank banks; non-United States banks;
and broker-dealers. The following summarizes the rating categories used by
Thomson BankWatch for long-term debt ratings:
"AAA" - This designation represents the highest category assigned
by Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis with limited incremental risk
compared to issues rated in the highest category.
"A" - This designation indicates that the ability to repay
principal and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC," - These designations are assigned by
Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term
debt is in default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
Municipal Note Ratings
A Standard and Poor's rating reflects the liquidity concerns and
market access risks unique to notes due in three years or less. The following
summarizes the ratings used by Standard & Poor's Ratings Group for municipal
notes:
"SP-1" - The issuers of these municipal notes exhibit very strong
or strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given a plus (+) designation.
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"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest.
"SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:
"MIG-1"/"VMIG-1" - Loans bearing this designation are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
"MIG-2"/"VMIG-2" - Loans bearing this designation are of high
quality, with margins of protection ample although not so large as in the
preceding group.
"MIG-3"/"VMIG-3" - Loans bearing this designation are of favorable
quality, with all security elements accounted for but lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well
established.
"MIG-4"/"VMIG-4" - Loans bearing this designation are of adequate
quality, carrying specific risk but having protection commonly regarded as
required of an investment security and not distinctly or predominantly
speculative.
"SG" - Loans bearing this designation are of speculative quality
and lack margins of protection.
Fitch and Duff & Phelps use the short-term ratings described under
Commercial Paper Ratings for municipal notes.
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APPENDIX B
As stated in their Prospectuses, each of the Portfolios may enter
into futures contracts for hedging purposes. The International Equity,
Balanced and Capital Growth Portfolios may enter into related options for
hedging purposes.
I. Interest Rate Futures Contracts
Use of Interest Rate Futures Contracts. Bond prices are established
in both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within five business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the
future for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, the Balanced Portfolio may use
interest rate futures as a defense, or hedge, against anticipated interest
rate changes and not for speculation. As described below, this would include
the use of futures contract sales to protect against expected increases in
interest rates and futures contract purchases to offset the impact of interest
rate declines.
The Balanced Portfolio presently could accomplish a similar result
to that which they hope to achieve through the use of futures contracts by
selling bonds with long maturities and investing in bonds with short
maturities when interest rates are expected to increase, or conversely,
selling short-term bonds and investing in long-term bonds when interest rates
are expected to decline. However, because of the liquidity that is often
available in the futures market the protection is more likely to be achieved,
perhaps at a lower cost and without changing the rate of interest being earned
by the Portfolio, through using futures contracts.
Description of Interest Rate Futures Contracts. An interest rate
futures contract sale would create an obligation by the Balanced Portfolio, as
seller, to deliver the specific type of financial instrument called for in the
contract at a specific future time for a specified price. A futures contract
purchase would create an obligation by the Portfolio, as purchaser, to take
delivery of the specific type of financial instrument at a specific future
time at a specific price. The specific securities delivered or taken,
respectively, at settlement date, would not be determined until at or near
that date. The determination would be in accordance with the rules of the
exchange on which the futures contract sale or purchase was made.
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Although interest rate futures contracts by their terms call for
actual delivery or acceptance of securities, in most cases the contracts are
closed out before the settlement date without the making or taking of delivery
of securities. Closing out a futures contract sale is effected by the
Portfolio's entering into a futures contract purchase for the same aggregate
amount of the specific type of financial instrument and the same delivery
date. If the price in the sale exceeds the price in the offsetting purchase,
the Portfolio is paid the difference and thus realizes a gain. If the
offsetting purchase price exceeds the sale price, the Portfolio pays the
difference and realizes a loss. Similarly, the closing out of a futures
contract purchase is effected by the Portfolio's entering into a futures
contract sale. If the offsetting sale price exceeds the purchase price, the
Portfolio realizes a gain, and if the purchase price exceeds the offsetting
sale price, the Portfolio realizes a loss.
Interest rate futures contracts are traded in an auction
environment on the floors of several exchanges principally, the Chicago Board
of Trade, the Chicago Mercantile Exchange and the New York Futures Exchange.
The Portfolio would deal only in standardized contracts on recognized
exchanges. Each exchange guarantees performance under contract provisions
through a clearing corporation, a nonprofit organization managed by the
exchange membership.
A public market now exists in futures contracts covering various
financial instruments including long-term United States Treasury Bonds and
Notes; three-month United States Treasury Bills; and ninety-day commercial
paper. The Balanced Portfolio may trade in any futures contract for which
there exists a public market, including, without limitation, the foregoing
instruments.
Examples of Futures Contract Sale. The Balanced Portfolio would
engage in an interest rate futures contract sale to maintain the income
advantage from continued holding of a long-term bond while endeavoring to
avoid part or all of the loss in market value that would otherwise accompany a
decline in long-term securities prices. Assume that the market value of a
certain security in the Portfolio tends to move in concert with the futures
market prices of long-term United States Treasury bonds ("Treasury bonds").
The Adviser wishes to fix the current market value of this portfolio security
until some point in the future. Assume the portfolio security has a market
value of 100, and the Adviser believes that, because of an anticipated rise in
interest rates, the value will decline to 95. The Portfolio might enter into
futures contract sales of Treasury bonds for an equivalent of 98. If the
market value of the portfolio security does indeed decline from 100 to 95, the
equivalent futures market price for the Treasury bonds might also decline from
98 to 93.
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In that case, the five-point loss in the market value of the
portfolio security would be offset by the five-point gain realized by closing
out the futures contract sale. Of course, the futures market price of Treasury
bonds might well decline to more than 93 or to less than 93 because of the
imperfect correlation between cash and futures prices mentioned below.
The Adviser could be wrong in its forecast of interest rates and
the equivalent futures market price could rise above 98. In this case, the
market value of the portfolio securities, including the portfolio security
being protected, would increase. The benefit of this increase would be reduced
by the loss realized on closing out the futures contract sale.
If interest rate levels did not change, the Portfolio in the above
example might incur a loss of 2 points (which might be reduced by an
offsetting transaction prior to the settlement date). In each transaction,
transaction expenses would also be incurred.
Examples of Futures Contract Purchase. The Balanced Portfolio would
engage in an interest rate futures contract purchase when it is not fully
invested in long-term bonds but wishes to defer for a time the purchase of
long-term bonds in light of the availability of advantageous interim
investments, e.g., shorter-term securities whose yields are greater than those
available on long-term bonds. The Portfolio's basic motivation would be to
maintain for a time the income advantage from investing in the short-term
securities; the Portfolio would be endeavoring at the same time to eliminate
the effect of all or part of an expected increase in market price of the
long-term bonds that the Portfolio may purchase.
For example, assume that the market price of a long-term bond that
the Portfolio may purchase, currently yielding 10%, tends to move in concert
with futures market prices of Treasury bonds. The Adviser wishes to fix the
current market price (and thus 10% yield) of the long-term bond until the time
(four months away in this example) when it may purchase the bond. Assume the
long-term bond has a market price of 100, and the Adviser believes that,
because of an anticipated fall in interest rates, the price will have risen to
105 (and the yield will have dropped to about 9 1/2%) in four months. The
Portfolio might enter into futures contracts purchases of Treasury bonds for
an equivalent price of 98. At the same time, the Portfolio would assign a pool
of investments in short-term securities that are either maturing in four
months or earmarked for sale in four months, for purchase of the long-term
bond at an assumed market price of 100. Assume these short-term securities are
yielding 15%. If the market price of the long-term bond does indeed rise from
100 to 105, the equivalent futures market price for Treasury bonds might also
rise from 98 to 103. In that case, the 5-point increase in the price that the
Portfolio pays for the long-term
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bond would be offset by the 5-point gain realized by closing out the futures
contract purchase.
The Adviser could be wrong in its forecast of interest rates;
long-term interest rates might rise to above 10%; and the equivalent futures
market price could fall below 98. If short-term rates at the same time fall to
10% or below, it is possible that the Portfolio would continue with its
purchase program for long-term bonds. The market price of available long-term
bonds would have decreased. The benefit of this price decrease, and thus yield
increase, will be reduced by the loss realized on closing out the futures
contract purchase.
If, however, short-term rates remained above available long-term
rates, it is possible that the Portfolio would discontinue its purchase
program for long-term bonds. The yield on short-term securities in the
portfolio, including those originally in the pool assigned to the particular
long-term bond, would remain higher than yields on long-term bonds. The
benefit of this continued incremental income will be reduced by the loss
realized on closing out the futures contract purchase.
In each transaction, expenses would also be incurred.
II. Index Futures Contracts
A stock or bond index assigns relative values to the stocks or
bonds included in the index and the index fluctuates with changes in the
market values of the stocks or bonds included. Some stock index futures
contracts are based on broad market indexes, such as the Standard & Poor's 500
or the New York Stock Exchange Composite Index. In contrast, certain exchanges
offer futures contracts on narrower market indexes, such as the Standard &
Poor's 100 or indexes based on an industry or market segment, such as oil and
gas stocks. Futures contracts are traded on organized exchanges regulated by
the Commodity Futures Trading Commission. Transactions on such exchanges are
cleared through a clearing corporation, which guarantees the performance of
the parties to each contract.
The Portfolios may sell index futures contracts in order to offset
a decrease in market value of its portfolio securities that might otherwise
result from a market decline. A Portfolio may do so either to hedge the value
of its portfolio as a whole, or to protect against declines, occurring prior
to sales of securities, in the value of the securities to be sold. Conversely,
the Portfolios may purchase index futures contracts in anticipation of
purchases of securities. In a substantial majority of these transactions, the
Portfolios may purchase such securities upon termination of the long futures
position, but a long futures position may be terminated without a
corresponding purchase of securities.
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In addition, the Portfolios may utilize index futures contracts in
anticipation of changes in the composition of their portfolio holdings. For
example, in the event that a Portfolio expects to narrow the range of industry
groups represented in its holdings it may, prior to making purchases of the
actual securities, establish a long futures position based on a more
restricted index, such as an index comprised of securities of a particular
industry group. The Portfolio may also sell futures contracts in connection
with this strategy, in order to protect against the possibility that the value
of the securities to be sold as part of the restructuring of the portfolio
will decline prior to the time of sale.
The following are examples of transactions in stock index futures
(net of commissions and premiums, if any).
ANTICIPATORY PURCHASE HEDGE: Buy the Future
Hedge Objective: Protect Against Increasing Price
Portfolio Futures
--------- -------
-Day Hedge is Placed-
Anticipate Buying $62,500 Buying 1 Index Futures
Equity Portfolio at 125
Value of Futures =
$62,500/Contract
-Day Hedge is Lifted-
Buy Equity Portfolio with Sell 1 Index Futures at 130
Actual Cost = $65,000 Value of Futures = $65,000/
Increase in Purchase Price = Contract
$2,500 Gain on Futures = $2,500
HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Portfolio
Factors:
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Portfolio Beta Relative to the Index = 1.0
Portfolio Futures
--------- -------
-Day Hedge is Placed-
Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Portfolio-Own Buy 16 Index Futures at 120
Stock with Value = $960,000 Value of Futures = $960,000
Loss in Portfolio Value = $40,000 Gain on Futures = $40,000
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If, however, the market moved in the opposite direction, that is,
market value decreased and the Portfolio had entered into an anticipatory
purchase hedge, or market value increased and the Portfolio had hedged its
stock portfolio, the results of the Portfolio's transactions in stock index
futures would be as set forth below.
ANTICIPATORY PURCHASE HEDGE: Buy the Future
Hedge Objective: Protect Against Increasing Price
Portfolio Futures
--------- -------
-Day Hedge is Placed-
Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures = $62,500/
Contract
-Day Hedge is Lifted-
Buy Equity Portfolio with Sell 1 Index Futures at 120
Actual Cost - $60,000 Value of Futures = $60,000/
Decrease in Purchase Price = $2,500 Contract
Loss on Futures = $2,500
HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Portfolio
Factors:
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Portfolio Beta Relative to the Index = 1.0
Portfolio Futures
--------- -------
-Day Hedge is Placed-
Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Portfolio-Own Buy 16 Index Futures at 130
Stock with Value = $1,040,000 Value of Futures = $1,040,000
Gain in Portfolio = $40,000 Loss of Futures = $40,000
III. Margin Payments
Unlike when a Portfolio purchases or sells a security, no price is
paid or received by the Portfolio upon the purchase or sale of a futures
contract. Initially, the Portfolio will be required to deposit with the broker
or in a segregated account with the Portfolio's Custodian an amount of cash or
cash equivalents, the value of which may vary but is generally equal to 10% or
less of the value of the contract. This amount is known as initial margin. The
nature of initial margin in futures
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transactions is different from that of margin in security transactions in that
futures contract margin does not involve the borrowing of funds by the
customer to finance the transactions. Rather, the initial margin is in the
nature of a performance bond or good faith deposit on the contract which is
returned to the Portfolio upon termination of the futures contract assuming
all contractual obligations have been satisfied. Subsequent payments, called
variation margin, to and from the broker, will be made on a daily basis as the
price of the underlying security or index fluctuates making the long and short
positions in the futures contract more or less valuable, a process known as
marking to the market. For example, when a Portfolio has purchased a futures
contract and the price of the contract has risen in response to a rise in the
underlying instruments, that position will have increased in value and the
Portfolio will be entitled to receive from the broker a variation margin
payment equal to that increase in value. Conversely, where a Portfolio has
purchased a futures contract and the price of the future contract has declined
in response to a decrease in the underlying instruments, the position would be
less valuable and the Portfolio would be required to make a variation margin
payment to the broker. At any time prior to expiration of the futures
contract, the Adviser may elect to close the position by taking an opposite
position, subject to the availability of a secondary market, which will
operate to terminate the Portfolio's position in the futures contract. A final
determination of variation margin is then made, additional cash is required to
be paid by or released to the Portfolio, and the Portfolio realizes a loss or
gain.
IV. Risks of Transactions in Futures Contracts
There are several risks in connection with the use of futures by a
Portfolio as a hedging device. One risk arises because of the imperfect
correlation between movements in the price of the future and movements in the
price of the securities which are the subject of the hedge. The price of the
future may move more than or less than the price of the securities being
hedged. If the price of the future moves less than the price of the securities
which are the subject of the hedge, the hedge will not be fully effective but,
if the price of the securities being hedged has moved in an unfavorable
direction, the Portfolio would be in a better position than if it had not
hedged at all. If the price of the securities being hedged has moved in a
favorable direction, this advantage will be partially offset by the loss on
the future. If the price of the future moves more than the price of the hedged
securities, the Portfolio involved will experience either a loss or gain on
the future which will not be completely offset by movements in the price of
the securities which are the subject of the hedge. To compensate for the
imperfect correlation of movements in the price of securities being hedged and
movements in the price of futures contracts, a Portfolio may buy or sell
futures contracts in a greater dollar amount than the
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dollar amount of securities being hedged if the volatility over a particular
time period of the prices of such securities has been greater than the
volatility over such time period of the future, of if otherwise deemed to be
appropriate by the Adviser. Conversely, a Portfolio may buy or sell fewer
futures contracts if the volatility over a particular time period of the
prices of the securities being hedged is less than the volatility over such
time period of the futures contract being used, or if otherwise deemed to be
appropriate by the Adviser. It is also possible that, where a Portfolio has
sold futures to hedge its portfolio against a decline in the market, the
market may advance and the value of securities held by the Portfolio may
decline. If this occurred, the Portfolio would lose money on the future and
also experience a decline in value in its portfolio securities.
Where futures are purchased to hedge against a possible increase in
the price of securities before a Portfolio is able to invest its cash (or cash
equivalents) in securities (or options) in an orderly fashion, it is possible
that the market may decline instead; if the Portfolio then concludes not to
invest in securities or options at that time because of concern as to possible
further market decline or for other reasons, the Portfolio will realize a loss
on the futures contract that is not offset by a reduction in the price of
securities purchased.
In instances involving the purchase of futures contracts by a
Portfolio, an amount of cash and cash equivalents, equal to the market value
of the futures contracts (or options), will be deposited in a segregated
account with the Portfolio's Custodian and/or in a margin account with a
broker to collateralize the position and thereby insure that the use of such
futures is unleveraged.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and
the securities being hedged, the price of futures may not correlate perfectly
with movement in the cash market due to certain market distortions. Rather
than meeting additional margin deposit requirements, investors may close
futures contracts through off-setting transactions which could distort the
normal relationship between the cash and futures markets. Second, with respect
to financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or
taking delivery. To the extent participants decide to make or take delivery,
liquidity in the futures market could be reduced thus producing distortions.
Third, from the point of view of speculators, the deposit requirements in the
futures market are less onerous than margin requirements in the securities
market. Therefore, increased participation by speculators in the futures
market may also cause temporary price distortions. Due to the possibility of
price distortion in the futures market, and because of the imperfect
correlation between the movements in the
B-8
<PAGE>
cash market and movements in the price of futures, a correct forecast of
general market trends or interest rate movements by the Adviser may still not
result in a successful hedging transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board
of trade which provides a secondary market for such futures. Although a
Portfolio intends to purchase or sell futures only on exchanges or boards of
trade where there appear to be active secondary markets, there is no assurance
that a liquid secondary market on any exchange or board of trade will exist
for any particular contract or at any particular time. In such event, it may
not be possible to close a futures investment position, and in the event of
adverse price movements, a Portfolio would continue to be required to make
daily cash payments of variation margin. However, in the event futures
contracts have been used to hedge portfolio securities, such securities will
not be sold until the futures contract can be terminated. In such
circumstances, an increase in the price of the securities, if any, may
partially or completely offset losses on the futures contract. However, as
described above, there is no guarantee that the price of the securities will
in fact correlate with the price movements in the futures contract and thus
provide an offset on a futures contract.
Further, it should be noted that the liquidity of a secondary
market in a futures contract may be adversely affected by "daily price
fluctuation limits" established by commodity exchanges which limit the amount
of fluctuation in a futures contract price during a single trading day. Once
the daily limit has been reached in the contract, no trades may be entered
into at a price beyond the limit, thus preventing the liquidation of open
futures positions.
Successful use of futures by a Portfolio is also subject to the
Adviser's ability to predict correctly movements in the direction of the
market. For example, if a Portfolio has hedged against the possibility of a
decline in the market adversely affecting securities held in its portfolio and
securities prices increase instead, the Portfolio will lose part or all of the
benefit to the increased value of its securities which it has hedged because
it will have offsetting losses in its futures positions. In addition, in such
situations, if the Portfolio has insufficient cash, it may have to sell
securities to meet daily variation margin requirements. Such sales of
securities may be, but will not necessarily be, at increased prices which
reflect the rising market. A Portfolio may have to sell securities at a time
when it may be disadvantageous to do so.
B-9
<PAGE>
V. Options on Futures Contracts
The Balanced, Capital Growth and International Equity Portfolios
may purchase options on the futures contracts described above. A futures
option gives the holder, in return for the premium paid, the right to buy
(call) from or sell (put) to the writer of the option a futures contract at a
specified price at any time during the period of the option. Upon exercise,
the writer of the option is obligated to pay the difference between the cash
value of the futures contract and the exercise price. Like the buyer or seller
of a futures contract, the holder, or writer, of an option has the right to
terminate its position prior to the scheduled expiration of the option by
selling, or purchasing, an option of the same series, at which time the person
entering into the closing transaction will realize a gain or loss.
Investments in futures options involve some of the same
considerations that are involved in connection with investments in futures
contracts (for example, the existence of a liquid secondary market). In
addition, the purchase of an option also entails the risk that changes in the
value of the underlying futures contract will not be fully reflected in the
value of the option purchased. Depending on the pricing of the option compared
to either the futures contract upon which it is based, or upon the price of
the securities being hedged, an option may or may not be less risky than
ownership of the futures contract or such securities. In general, the market
prices of options can be expected to be more volatile than the market prices
on the underlying futures contract. Compared to the purchase or sale of
futures contracts, however, the purchase of call or put options on futures
contracts may frequently involve less potential risk to a Portfolio because
the maximum amount at risk is the premium paid for the options (plus
transaction costs). Although permitted by their fundamental investment
policies, the Balanced, Capital Growth and International Equity Portfolios do
not currently intend to write futures options, and will not do so in the
future absent any necessary regulatory approvals.
VI. Accounting and Tax Treatment
Accounting for futures contracts and options will be in accordance
with generally accepted accounting principles.
Generally, futures contracts held by a Portfolio at the close of
the Portfolio's taxable year will be treated for federal income tax purposes
as sold for their fair market value on the last business day of such year, a
process known as "marking-to- market." Forty percent of any gain or loss
resulting from such constructive sale will be treated as short-term capital
gain or loss and 60% of such gain or loss will be treated as long-term capital
gain or loss without regard to the length of time the Portfolio holds the
futures contract ("the 40%-60% rule"). The
B-10
<PAGE>
amount of any capital gain or loss actually realized by a Portfolio in a
subsequent sale or other disposition of those futures contracts will be
adjusted to reflect any capital gain or loss taken into account by the
Portfolio in a prior year as a result of the constructive sale of the
contracts. With respect to futures contracts to sell, which will be regarded
as parts of a "mixed straddle" because their values fluctuate inversely to the
values of specific securities held by the Portfolio, losses as to such
contracts to sell will be subject to certain loss deferral rules which limit
the amount of loss currently deductible on either part of the straddle to the
amount thereof which exceeds the unrecognized gain (if any) with respect to
the other part of the straddle, and to certain wash sales regulations. Under
short sales rules, which will also be applicable, the holding period of the
securities forming part of the straddle will (if they have not been held for
the long-term holding period) be deemed not to begin prior to termination of
the straddle. With respect to certain futures contracts, deductions for
interest and carrying charges will not be allowed. Notwithstanding the rules
described above, with respect to futures contracts to sell which are properly
identified as such, a Portfolio may make an election which will exempt (in
whole or in part) those identified futures contracts from being treated for
federal income tax purposes as sold on the last business day of the
Portfolio's taxable year, but gains and losses will be subject to such short
sales, wash sales, loss deferral rules and the requirement to capitalize
interest and carrying charges. Under temporary regulations, a Portfolio would
be allowed (in lieu of the foregoing) to elect either (1) to offset gains or
losses from portions which are part of a mixed straddle by separately
identifying each mixed straddle to which such treatment applies, or (2) to
establish a mixed straddle account for which gains and losses would be
recognized and offset on a periodic basis during the taxable year. Under
either election, the 40%-60% rule will apply to the net gain or loss
attributable to the futures contracts, but in the case of a mixed straddle
account election, not more than 50% of any net gain may be treated as
long-term and no more than 40% of any net loss may be treated as short-term.
Options on futures generally receive federal tax treatment similar to that
described above.
Certain foreign currency contracts entered into by a Portfolio may
be subject to the "marking-to-market" process and the 40%-60% rule in a manner
similar to that described in the preceding paragraph for futures contracts. To
receive such federal income tax treatment, a foreign currency contract must
meet the following conditions: (1) the contract must require delivery of a
foreign currency of a type in which regulated futures contracts are traded or
upon which the settlement value of the contract depends; (2) the contract must
be entered into at arm's length at a price determined by reference to the
price in the interbank market; and (3) the contract must be traded in the
interbank market. The Treasury Department has broad authority to
B-11
<PAGE>
issue regulations under the provisions respecting foreign currency contracts.
As of the date of this Additional Statement, the Treasury Department has not
issued any such regulations. Other foreign currency contracts entered into by
a Portfolio may result in the creation of one or more straddles for federal
income tax purposes, in which case certain loss deferral, short sales, and
wash sales rules and the requirement to capitalize interest and carrying
charges may apply.
Some of the Portfolios' investments may be subject to special rules
which govern the federal income tax treatment of certain transactions
denominated in terms of a currency other than the U.S. dollar or determined by
reference to the value of one or more currencies other than the U.S. dollar.
The types of transactions covered by the special rules include the following:
(1) the acquisition of, or becoming the obligor under, a bond or other debt
instrument (including, to the extent provided in Treasury regulations,
preferred stock); (2) the accruing of certain trade receivables and payables;
and (3) the entering into or acquisition of any forward contract, futures
contract, option or similar financial instrument. The disposition of a
currency other than the U.S. dollar by a U.S. taxpayer is also treated as a
transaction subject to the special currency rules. However, foreign
currency-related regulated futures contracts and nonequity options are
generally not subject to the special currency rules if they are or would be
treated as sold for their fair market value at year-end under the
marking-to-market rules, unless an election is made to have such currency
rules apply. With respect to transactions covered by the special rules,
foreign currency gain or loss is calculated separately from any gain or loss
on the underlying transaction and is normally taxable as ordinary gain or
loss. A taxpayer may elect to treat as capital gain or loss foreign currency
gain or loss arising from certain identified forward contracts, futures
contracts and options that are capital assets in the hands of the taxpayer and
which are not a part of a straddle. In accordance with Treasury regulations,
certain transactions that are part of a "section 988 hedging transaction" (as
defined in the Code and the Treasury regulations) may be integrated and
treated as a single transaction or otherwise treated consistently for purposes
of the Code. "Section 988 hedging transactions" are not subject to the
mark-to-market or loss deferral rules under the Code. Gain or loss
attributable to the foreign currency component of transactions engaged in by a
Portfolio which are not subject to the special currency rules (such as foreign
equity investments other than certain preferred stocks) will be treated as
capital gain or loss and will not be segregated from the gain or loss on the
underlying transaction.
As described more fully in "Additional Information Concerning
Taxes", a regulated investment company must derive less than 30% of its gross
income from gains realized on the sale or other disposition of securities and
certain other investments
B-12
<PAGE>
held for less than three months. With respect to futures contracts and other
financial instruments subject to the marking-to-market rules, the Internal
Revenue Service has ruled in private letter rulings that a gain realized from
such a futures contract or financial instrument will be treated as being
derived from a security held for three months or more (regardless of the
actual period for which the contract or instrument is held) if the gain arises
as a result of a constructive sale under the marking-to-market rules, and will
be treated as being derived from a security held for less than three months
only if the contract or instrument is terminated (or transferred) during the
taxable year (other than by reason of marking-to-market) and less than three
months have elapsed between the date the contract or instrument is acquired
and the termination date. In determining whether the 30% test is met for a
taxable year, increases and decreases in the value of each Portfolio's futures
contracts and other investments that qualify as part of a "designated hedge,"
as defined in the Code, may be netted.
B-13
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
EQUITY FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
GROWTH/VALUE
FUND
------------
<S> <C>
ASSETS:
Investment in securities:
At cost $598,057,275
============
At value (Note 2) $738,017,171
Cash --
Receivable for shares purchased 10,466
Receivable for securities sold --
Income receivable 1,492,249
Deferred organization costs, net (Note 2) 7,429
Prepaids and other assets 5,141
------------
TOTAL ASSETS 739,532,456
------------
LIABILITIES:
Payable for securities purchased 1,109,508
Payable for shares redeemed 56,779
Accrued investment advisory fee 463,866
Accrued distribution fees 3,092
Accrued custodial fee 8,632
Dividends payable 612,601
Other payables and accrued expenses 110,911
------------
TOTAL LIABILITIES 2,365,389
------------
NET ASSETS $737,167,067
============
Net assets consist of:
Capital shares (unlimited number of shares
authorized, par value $.10 per share) $ 5,599,664
Additional paid-in capital 585,240,911
Accumulated undistributed net investment income 40,678
Accumulated undistributed net realized gains 6,325,918
Net unrealized appreciation on investments 139,959,896
------------
TOTAL NET ASSETS $737,167,067
============
Shares of capital stock outstanding 55,996,649
============
Net asset value and redemption price per share $ 13.16
============
Maximum offering price per share $ 13.85
============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPPORTUNITY INTRINSIC VALUE CAPITAL GROWTH BALANCED
FUND FUND FUND FUND
------------- --------------- --------------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in securities:
At cost $544,177,289 $231,447,596 $164,013,755 $ 83,617,256
============ ============ ============ ============
At value (Note 2) $643,022,640 $258,251,034 $196,462,000 $ 93,092,772
Cash 17,377 -- -- 79,791
Receivable for shares purchased 24,818 1,900 22,908 10,020
Receivable for securities sold 8,064,596 -- -- 126,207
Income receivable 630,474 841,061 179,422 487,653
Deferred organization costs, net (Note 2) 3,243 2,323 28,388 28,315
Prepaids and other assets 5,141 5,945 43,804 35,774
------------ ------------ ------------ ------------
TOTAL ASSETS 651,768,289 259,102,263 196,736,522 93,860,532
------------ ------------ ------------ ------------
LIABILITIES:
Payable for securities purchased -- 2,638,759 459,114 115,985
Payable for shared redeemed -- 10,509 218,571 9,057
Accrued investment advisory fee 404,734 159,538 123,751 59,011
Accrued distribution fees 2,698 1,064 825 393
Accrued custodial fee 8,431 3,766 2,805 6,415
Dividends payable 122,691 301,351 56,269 38,528
Other payables and accrued expenses 277,467 102,417 14,009 7,342
------------ ------------ ------------ ------------
TOTAL LIABILITIES 816,021 3,217,404 875,344 236,731
------------ ------------ ------------ ------------
NET ASSETS $650,952,268 $255,884,859 $195,861,178 $ 93,623,801
============ ============ ============ ============
Net assets consist of:
Capital shares (unlimited number of shares
authorized, par value $.10 per share) $ 4,296,018 $ 2,152,537 $ 1,476,584 $ 832,868
Additional paid-in capital 546,076,193 224,411,095 161,372,369 83,021,763
Accumulated undistributed net investment income 977 110,249 11,301 28,937
Accumulated undistributed net realized gains 1,733,729 2,407,540 552,679 264,717
Net unrealized appreciation on investments 98,845,351 26,803,438 32,448,245 9,475,516
------------ ------------ ------------ ------------
TOTAL NET ASSETS $650,952,268 $255,884,859 $195,861,178 $ 93,623,801
============ ============ ============ ============
Shares of capital stock outstanding 42,960,183 21,525,367 14,765,837 8,328,682
============ ============ ============ ============
Net asset value and redemption price per share $ 15.15 $ 11.89 $ 13.26 $ 11.24
============ ============ ============ ============
Maximum offering price per share $ 15.95 $ 12.52 $ 13.96 $ 11.83
============ ============ ============ ============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
EQUITY FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1995
GROWTH/VALUE
FUND
------------
<S> <C>
INVESTMENT INCOME (Note 2)
Interest $ 2,809,867
Dividends 14,058,482
------------
TOTAL INVESTMENT INCOME 16,868,349
------------
EXPENSES (Notes 2, 3 and 5):
Investment advisory fee 4,951,664
Distribution fees 67,240
Professional fees 53,872
Custodial fee 96,218
Transfer and dividend disbursing agent fees 78,475
Amortization of deferred organization costs 17,828
Marketing expenses 40,193
Registration, filing fees and other expenses 207,105
Less:
Expense reimbursement --
------------
NET EXPENSES 5,512,595
------------
NET INVESTMENT INCOME 11,355,754
------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS:
Net realized gains 21,032,338
Net change in unrealized appreciation on
investments 130,722,828
------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 151,755,166
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $163,110,920
============
<FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPPORTUNITY INTRINSIC VALUE CAPITAL GROWTH BALANCED
FUND FUND FUND FUND
----------- --------------- -------------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME (Note 2)
Interest $ 1,558,492 $ 2,056,046 $ 436,419 $ 2,380,276
Dividends 5,940,727 6,149,838 1,676,890 806,598
------------- ------------ ------------ ------------
TOTAL INVESTMENT INCOME 7,499,219 8,205,884 2,113,309 3,186,874
------------ ------------ ------------ ------------
EXPENSES (Notes 2, 3 and 5):
Investment advisory fee 4,490,930 1,817,833 1,064,273 570,525
Distribution fees 80,463 24,640 9,455 11,148
Professional fees 53,872 53,872 56,031 59,307
Custodial fee 97,189 46,198 30,473 73,464
Transfer and dividend disbursing agent fees 134,736 35,266 12,933 18,045
Amortization of deferred organization costs 7,783 5,575 8,111 9,434
Marketing expenses 45,500 34,242 32,082 31,058
Registration, filing fees and other expenses 403,502 176,642 51,617 35,253
Less:
Expense reimbursement -- -- (58,424) (136,954)
------------ ------------ ------------ ------------
NET EXPENSES 5,313,975 2,194,268 1,206,551 671,280
------------ ------------ ------------ ------------
NET INVESTMENT INCOME 2,185,244 6,011,616 906,758 2,515,594
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS:
Net realized gains 33,998,949 18,391,186 2,343,100 1,548,275
Net change in unrealized appreciation on
investments 70,828,164 28,180,120 30,092,839 11,071,176
------------ ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 104,827,113 46,571,306 32,435,939 12,619,451
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $107,012,357 $ 52,582,922 $ 33,342,697 $ 15,135,045
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
EQUITY FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
GROWTH/VALUE OPPORTUNITY
FUND FUND
-------------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 11,355,754 $ 10,988,308 $ 2,185,244 $ 2,549,199
Net realized gains (losses) 21,032,338 12,792,234 33,998,949 16,116,289
Net change in unrealized appreciation
(depreciation) on investments 130,722,828 (21,338,549) 70,828,164 (35,552,031)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets from
operations 163,110,920 2,441,993 107,012,357 (16,886,543)
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (Note 2):
From net investment income (11,928,616) (10,560,126) (2,383,890) (2,336,343)
From realized gains (14,216,458) (15,490,059) (31,302,346) (18,160,909)
In excess of realized gains -- (489,962) -- (962,874)
Tax return of capital -- (1,387,986) -- (3,857,441)
------------- ------------- ------------- -------------
Total distributions (26,145,074) (27,928,133) (33,686,236) (25,317,567)
------------- ------------- ------------- -------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 129,170,938 236,571,313 138,422,625 239,540,057
Net asset value of shares issued in reinvestment of
distributions to shareholders 22,736,385 25,441,184 32,652,833 24,557,678
------------- ------------- ------------- -------------
151,907,323 262,012,497 171,075,458 264,097,735
Less: payments for shares redeemed (123,076,813) (94,790,691) (118,448,431) (62,559,018)
------------- ------------- ------------- -------------
Net increase in net assets from capital share
transactions 28,830,510 167,221,806 52,627,027 201,538,717
------------- ------------- ------------- -------------
NET INCREASE IN NET ASSETS 165,796,356 141,735,666 125,953,148 159,334,607
NET ASSETS:
Beginning of period 571,370,711 429,635,045 524,999,120 365,664,513
------------- ------------- ------------- -------------
End of period $ 737,167,067 $ 571,370,711 $ 650,952,268 $ 524,999,120
============= ============= ============= =============
CAPITAL SHARE TRANSACTIONS:
Shares sold 10,922,667 21,126,574 9,374,983 16,685,198
Shares issued in reinvestment of distributions to
shareholders 1,788,703 2,363,365 2,199,921 1,834,826
------------- ------------- ------------- -------------
12,711,370 23,489,939 11,574,904 18,520,024
Less: shares redeemed (10,251,504) (8,442,703) (7,969,587) (4,398,758)
------------- ------------- ------------- -------------
NET INCREASE IN SHARES OUTSTANDING 2,459,866 15,047,236 3,605,317 14,121,266
CAPITAL SHARES:
Beginning of period 53,536,783 38,489,547 39,354,866 25,233,600
------------- ------------- ------------- -------------
End of period 55,996,649 53,536,783 42,960,183 39,354,866
============= ============= ============= =============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTRINSIC VALUE CAPITAL GROWTH BALANCED
FUND FUND FUND
----------------------------- ---------------------------- -----------------------------
Year Ended Year Ended Year Ended Period Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 6,011,616 $ 6,245,776 $ 906,758 $ 418,787 $ 2,515,594 $ 1,181,465
Net realized gains (losses) 18,391,186 4,420,719 2,343,100 (174,336) 1,548,275 (295,624)
Net change in unrealized
appreciation (depreciation)
on investments 28,180,120 (11,608,354) 30,092,839 2,355,406 11,071,176 (1,595,660)
------------- ------------ ------------ ----------- ------------ ------------
Net increase (decrease) in net
assets from operations 52,582,922 (941,859) 33,342,697 2,599,857 15,135,045 (709,819)
------------- ------------ ------------ ----------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
(Note 2):
From net investment income (6,247,197) (6,000,928) (933,730) (380,514) (2,524,322) (1,143,800)
From realized gains (16,471,970) (4,141,890) (1,616,085) -- (987,934) --
In excess of realized gains -- -- -- -- -- --
Tax return of capital -- -- -- -- -- --
------------- ------------ ------------ ----------- ------------ ------------
Total distributions (22,719,167) (10,142,818) (2,549,815) (380,514) (3,512,256) (1,143,800)
------------- ------------ ------------ ----------- ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 39,975,498 66,411,165 116,265,186 89,598,698 47,232,261 61,358,453
Net asset value of shares issued
in reinvestment of distributions
to shareholders 21,049,306 8,927,141 2,306,069 262,019 3,343,276 1,087,022
------------- ------------ ------------ ----------- ------------ ------------
61,024,804 75,338,306 118,571,255 89,860,717 50,575,537 62,445,475
Less: payments for shares redeemed (55,031,796) (36,780,716) (34,772,563) (10,810,456) (22,741,717) (6,424,664)
------------- ------------ ------------ ----------- ------------ ------------
Net increase in net assets from
capital share transactions 5,993,008 38,557,590 83,798,692 79,050,261 27,833,820 56,020,811
------------- ------------ ------------ ----------- ------------ ------------
NET INCREASE IN NET ASSETS 35,856,763 27,472,913 114,591,574 81,269,604 39,456,609 54,167,192
NET ASSETS:
Beginning of period 220,028,096 192,555,183 81,269,604 -- 54,167,192 --
------------- ------------ ------------ ----------- ------------ ------------
End of period $ 255,884,859 $220,028,096 $195,861,178 $81,269,604 $ 93,623,801 $ 54,167,192
============= ============ ============ =========== ============ ============
CAPITAL SHARE TRANSACTIONS:
Shares sold 3,432,079 6,127,697 9,733,178 8,792,790 4,495,916 6,238,090
Shares issued in reinvestment
of distributions to shareholders 1,777,948 845,552 177,953 25,058 306,837 113,081
------------- ------------ ------------ ----------- ------------ ------------
5,210,027 6,973,249 9,911,131 8,817,848 4,802,753 6,351,171
Less: shares redeemed (4,687,782) (3,402,089) (2,927,524) (1,035,618) (2,160,736) (664,506)
------------- ------------ ------------ ----------- ------------ ------------
NET INCREASE IN SHARES OUTSTANDING 522,245 3,571,160 6,983,607 7,782,230 2,642,017 5,686,665
CAPITAL SHARES:
Beginning of period 21,003,122 17,431,962 7,782,230 -- 5,686,665 --
------------- ------------ ------------ ----------- ------------ ------------
End of period 21,525,367 21,003,122 14,765,837 7,782,230 8,328,682 5,686,665
============= ============ ============ =========== ============ ============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
GROWTH/VALUE FUND
PORTFOLIO OF INVESTMENTS
December 31, 1995
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 3.30%
Salomon Brothers, Revolving Repurchase Agreement,
5.93%, 1/2/96 (secured by various U.S.
Treasury Strips with maturities ranging from
2/15/96 through 11/15/05 and U.S. Treasury
Notes, 5.50%, 11/15/98, all held at Chemical
Bank) $ 24,354,633 $ 24,354,633
------------
(Cost $24,354,633)
Shares
------------
COMMON STOCKS -- 96.70%
Aerospace -- 3.13%
Boeing Co. 295,000 23,120,625
------------
Apparel -- 1.76%
Russell Corp. 467,000 12,959,250
------------
Banks -- 4.73%
Barnett Banks, Inc. 254,000 14,986,000
Fleet Financial Group, Inc. 489,000 19,926,750
------------
34,912,750
------------
Business Machines -- 0.71%
Autodesk, Inc. 153,900 5,271,075
------------
Business Services -- 7.14%
Deluxe Corp. 454,000 13,166,000
Dun & Bradstreet Corp. 240,000 15,540,000
Interpublic Group of Companies, Inc. 227,100 9,850,463
WMX Technologies, Inc. 473,000 14,130,875
------------
52,687,338
------------
Chemicals -- 6.31%
Dow Chemical Co. 199,000 14,004,625
Great Lakes Chemical Corp. 274,000 19,728,000
Sigma-Aldrich Corp. 259,000 12,820,500
------------
46,553,125
------------
Construction -- 7.30%
Masco Corp. 489,000 15,342,375
Stanley Works 315,000 16,222,500
York International Corp. 474,000 22,278,000
------------
53,842,875
------------
Consumer Durables -- 2.21%
Rubbermaid, Inc. 640,000 16,320,000
------------
Containers -- 1.07%
Crown Cork & Seal Co., Inc. * 189,000 7,890,750
------------
Drugs and Medicine -- 12.07%
Abbott Laboratories Corp. 337,000 14,069,750
Bristol-Myers Squibb Co. 218,000 18,720,750
Merck & Co., Inc. 227,000 14,925,250
Schering-Plough Corp. 405,000 22,173,750
U.S. HealthCare, Inc. 412,000 19,158,000
------------
89,047,500
------------
Electronics -- 2.95%
General Motors Corp. Class E 419,000 21,788,000
------------
Energy and Utilities -- 3.55%
Entergy Corp. 237,000 6,932,250
MCN Corp. 830,000 19,297,500
------------
26,229,750
------------
Energy Raw Materials -- 4.88%
Burlington Resources, Inc. 310,000 12,167,500
Schlumberger Ltd. 344,000 23,822,000
------------
35,989,500
------------
Food and Agriculture -- 4.00%
ConAgra, Inc. 265,000 10,931,250
Sysco Corp. 573,000 18,622,500
------------
29,553,750
------------
Insurance -- 7.85%
American International Group, Inc. 185,000 17,112,500
Chubb Corp. 237,000 22,929,750
First Colony Corp. 706,000 17,914,750
------------
57,957,000
------------
International Oil -- 1.53%
Royal Dutch Petroleum Co., N.Y. Registry 80,000 11,290,000
------------
Liquor -- 2.31%
Anheuser-Busch Companies, Inc. 255,000 17,053,125
------------
Media -- 4.99%
Gannett Co., Inc. 310,000 19,026,250
Washington Post Co. Class B 63,000 17,766,000
------------
36,792,250
------------
Motor Vehicles -- 1.96%
General Motors Corp. 273,000 14,434,875
------------
Non-Durables and Entertainment -- 1.38%
Cracker Barrel Old Country Store, Inc. 592,000 10,212,000
------------
Producer Goods -- 4.25%
General Electric Co. 221,000 15,912,000
Stewart & Stevenson Services, Inc. 612,000 15,453,000
------------
31,365,000
------------
Retail -- 1.52%
Toys R Us * 517,000 11,244,750
------------
Telephone -- 7.04%
AT&T Corp. 211,000 13,662,250
Century Telephone Enterprises, Inc. 486,000 15,430,500
MCI Communications Corp. 874,000 22,833,250
------------
51,926,000
------------
Trucking and Freight -- 2.06%
Ryder System, Inc. 615,000 15,221,250
------------
TOTAL COMMON STOCKS 713,662,538
------------
(Cost $573,702,642)
TOTAL INVESTMENTS $738,017,171
============
(Cost $598,057,275)
<FN>
* Non-income producing security.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS
December 31, 1995
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 1.37%
Salomon Brothers, Revolving Repurchase Agreement,
5.93%, 1/2//96 (secured by various U.S. Treasury
Strips with maturities ranging from 2/15/96
through 11/15/05, and U.S. Treasury Notes, 5.50%,
11/15/98, all held at Chemical Bank) $8,833,683 $ 8,833,683
-------------
(Cost $8,833,683)
Shares
------
COMMON STOCKS -- 98.63%
Air Transport -- 1.57%
Air Express International Corp. 438,500 10,085,500
-------------
Apparel -- 1.24%
Nine West Group, Inc. * 212,850 7,981,875
-------------
Banks -- 4.66%
Charter One Financial, Inc. 385,000 11,790,625
Commerce Bancshares, Inc. 139,255 5,326,511
TCF Financial Corp. 387,600 12,839,250
-------------
29,956,386
-------------
Business Machines -- 5.88%
Autodesk, Inc. 221,330 7,580,552
Diebold, Inc. 182,250 10,092,094
InterVoice, Inc. * 175,000 3,325,000
Komag, Inc. * 185,200 8,542,350
Xilinx, Inc. * 271,200 8,271,600
-------------
37,811,596
-------------
Business Services -- 8.37%
American Management Systems, Inc. * 316,700 9,501,000
CDI Corp. * 207,300 3,731,400
DST Systems, Inc. * 120,100 3,422,850
G & K Services, Inc. Class A 248,700 6,341,850
Omnicom Group, Inc. 239,220 8,910,945
SunGard Data Systems, Inc. * 335,300 9,556,050
Zilog, Inc. * 337,900 12,375,587
-------------
53,839,682
-------------
Chemicals -- 1.50%
RPM, Inc. 584,673 9,647,096
-------------
Construction -- 2.37%
Crane Co. 413,146 15,234,759
-------------
Consumer Durables -- 2.12%
Durakon Industries, Inc. * 314,892 3,936,150
Invacare Corp. 122,600 3,095,650
Leggett & Platt, Inc. 270,910 6,569,567
-------------
13,601,367
-------------
Containers -- 1.88%
AptarGroup, Inc. 323,200 12,079,600
-------------
Drugs and Medicine -- 5.90%
Community Health System, Inc. * 186,600 6,647,625
Health Care & Retirement Corp. * 189,556 6,634,460
Scherer (R.P.) Corp. * 149,464 7,342,419
Sybron International Corp. * 383,000 9,096,250
Vivra, Inc. * 326,400 8,200,800
-------------
37,921,554
-------------
Electronics -- 9.59%
Allen Group, Inc. 373,947 8,367,064
Belden, Inc. 530,000 13,647,500
Dynatech Corp. * 601,200 10,220,400
Holophane Corp. * 412,000 8,961,000
MEMC Electronic Materials * 182,600 5,957,325
Molex, Inc. Class A Non-Voting 246,607 7,552,339
3COM Corp. * 66,748 3,112,126
Vishay Intertechnology, Inc. * 121,900 3,839,850
-------------
61,657,604
-------------
Energy Raw Materials -- 2.93%
Apache Corp. 382,374 11,280,033
Southwestern Energy Co. 593,074 7,561,694
-------------
18,841,727
-------------
Food and Agriculture -- 1.19%
Universal Foods Corp. 191,001 7,663,915
-------------
Insurance -- 3.24%
Citizens Corp. 498,502 9,284,600
Transatlantic Holdings, Inc. 157,746 11,574,613
-------------
20,859,213
-------------
Media -- 1.59%
Banta Corp. 232,510 10,230,440
-------------
Miscellaneous and Conglomerates -- 11.78%
Arctco, Inc. 351,316 4,567,108
Culligan Water Technologies, Inc. * 280,000 6,790,000
DENTSPLY International, Inc. 274,200 10,968,000
Department 56, Inc. * 96,800 3,714,700
Greenfield Industries, Inc. 404,900 12,653,125
Health Management Associates, Inc. Class A * 343,075 8,962,834
Littlefuse, Inc. * 247,500 9,095,625
Minerals Technologies, Inc. 215,665 7,871,773
Wolverine Tube, Inc. * 297,000 11,137,500
-------------
75,760,665
-------------
Miscellaneous Finance -- 12.53%
A.G. Edwards, Inc. 401,580 9,587,723
CMAC Investment Corp. 186,000 8,184,000
Executive Risk, Inc. 368,300 10,680,700
FINOVA Group, Inc. 384,165 18,535,961
Idex Corp. 171,329 7,024,468
PMI Group, Inc. 235,300 10,647,325
Prudential Reinsurance Holdings 422,700 9,880,613
Scotsman Industries, Inc. 342,000 6,027,750
-------------
80,568,540
-------------
Motor Vehicles -- 5.11%
Excel Industries, Inc. 496,065 6,944,910
Harley-Davidson, Inc. 483,474 13,899,878
Myers Industries, Inc. 358,120 5,864,215
Superior Industries International 232,444 6,130,71
-------------
32,839,714
-------------
Non-Durables and Entertainment -- 1.53%
Lancaster Colony Corp. 263,796 9,826,401
-------------
Non-Ferrous Metals -- 0.86%
DT Industries, Inc. 408,500 5,514,750
-------------
Producer Goods -- 8.55%
Hubbell, Inc. Class B 234,413 15,412,655
Juno Lighting, Inc. 505,611 8,089,776
Stewart & Stevenson Services, Inc. 267,000 6,741,750
Teleflex, Inc. 108,760 4,459,160
Trimas Corp. 439,465 8,294,902
Watts Industries, Inc. Class A 515,002 11,973,796
-------------
54,972,039
-------------
Retail -- 2.80%
Cato Corp. Class A 1,019,082 7,897,885
Kohls Corp. * 122,118 6,411,195
Talbots, Inc. 128,701 3,700,154
-------------
18,009,234
-------------
Travel and Recreation -- 1.44%
Callaway Golf Co. 410,400 9,285,300
-------------
TOTAL COMMON STOCKS 634,188,957
-------------
(Cost $535,343,601)
TOTAL INVESTMENTS $643,022,640
============
(Cost $544,177,289)
<FN>
* Non-income producing security.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
INTRINSIC VALUE FUND
PORTFOLIO OF INVESTMENTS
December 31, 1995
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 6.44%
Salomon Brothers, Revolving Repurchase Agreement,
5.93%, 1/2/96 (secured by various U.S. Treasury
Strips with maturities ranging from 2/15/96
through 11/15/05 and U.S. Treasury Notes, 5.50%,
11/15/98, all held at Chemical Bank) $16,639,265 $ 16,639,265
------------
(Cost $16,639,265)
CONVERTIBLE BONDS -- 9.26%
Chubb Capital Corp., 6.00%, 5/15/98 5,650,000 6,384,500
Consolidated Natural Gas Co., 7.25%, 12/15/15 5,218,500 5,414,194
Price Co., 6.75%, 3/1/01 5,400,000 5,487,750
Unifi, Inc., 6.00%, 3/15/02 6,566,000 6,615,245
------------
(Cost $23,403,674) 23,901,689
------------
Shares
------
COMMON STOCKS -- 84.30%
Apparel -- 3.13%
Reebok International Ltd. 128,530 3,630,972
Unifi Inc. 82,900 1,834,163
V. F. Corp. 49,600 2,616,400
------------
8,081,535
------------
Banks -- 4.36%
Bancorp Hawaii, Inc. 156,400 5,610,850
First Union Corp. 101,500 5,645,938
------------
11,256,788
------------
Business Services -- 5.34%
Angelica Corp. 120,200 2,464,100
Harland (John H.) Co. 247,500 5,166,562
National Service Industries, Inc. 190,200 6,157,725
------------
13,788,387
------------
Chemicals -- 2.21%
NCH Corp. 98,800 5,705,700
------------
Consumer Durables -- 4.29%
Hillenbrand Industries, Inc. 90,800 3,075,850
National Presto Industries, Inc. 78,800 3,132,300
Thiokol Corp. 143,700 4,867,838
------------
11,075,988
------------
Domestic Oil -- 4.61%
Atlantic Richfield Co. 37,200 4,119,900
MAPCO, Inc. 142,700 7,794,988
------------
11,914,888
------------
Drugs and Medicine -- 2.84%
Block Drug, Inc. Class A 45,700 1,588,075
Bristol-Myers Squibb Co. 66,800 5,736,450
------------
7,324,525
------------
Energy and Utilities -- 5.34%
American Water Works Co., Inc. 76,435 2,971,411
Equitable Resources, Inc. 128,200 4,006,250
Sierra Pacific Resources 291,900 6,823,162
------------
13,800,823
------------
Energy Raw Materials -- 1.09%
Ashland Coal, Inc. 131,300 2,806,537
------------
Insurance -- 13.18%
Allmerica Property & Casualty Co. 129,500 3,496,500
AMBAC, Inc. 94,600 4,434,375
Financial Security Assurance Holdings 126,500 3,146,688
Home Beneficial Corp. Class B 246,900 5,925,600
Marsh & McLennan Companies, Inc. 34,200 3,035,250
Mid Ocean Ltd. 76,100 2,825,213
Old Republic International Corp. 223,900 7,948,450
SAFECO Corp. 93,600 3,229,200
------------
34,041,276
------------
International Oil -- 3.62%
Amoco Corp. 61,900 4,449,062
Texaco, Inc. 62,500 4,906,250
------------
9,355,312
------------
Liquor -- 1.44%
Anheuser-Busch Companies, Inc. 55,800 3,731,625
------------
Media -- 1.64%
Gannett Co., Inc. 69,000 4,234,875
------------
Miscellaneous Finance -- 7.91%
Federal National Mortgage Association 75,800 9,408,675
Fund American Enterprises Holdings, Inc. 112,365 8,371,192
Salomon, Inc. 74,300 2,637,650
------------
20,417,517
------------
Motor Vehicles -- 1.01%
Ford Motor Co. 89,798 2,604,142
------------
Non-Durables and Entertainment -- 3.53%
Hasbro, Inc. 181,000 5,611,000
Luby's Cafeterias, Inc. 37,800 841,050
Sbarro, Inc. 123,700 2,659,550
------------
9,111,600
------------
Railroads and Shipping -- 3.23%
Alexander & Baldwin, Inc. 252,600 5,809,800
Norfolk Southern Corp. 31,900 2,532,062
------------
8,341,862
------------
Retail -- 7.89%
May Department Stores Co. 155,900 6,586,775
Melville Corp. 201,500 6,196,125
Mercantile Stores, Inc. 62,000 2,867,500
Stanhome, Inc. Voting 162,200 4,724,075
------------
20,374,475
------------
Soaps and Cosmetics -- 2.33%
Unilever N. V. 42,800 6,024,100
------------
Tires and Rubber Goods -- 1.13%
Bandag, Inc. Class A 54,900 2,909,700
------------
Tobacco -- 4.18%
Loews Corp. 77,400 6,066,225
Philip Morris Companies, Inc. 52,400 4,742,200
------------
10,808,425
------------
TOTAL COMMON STOCKS 217,710,080
------------
(Cost $191,404,657)
TOTAL INVESTMENTS $258,251,034
============
(Cost $231,447,596)
<FN>
* Non-income producing security.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
CAPITAL GROWTH FUND
PORTFOLIO OF INVESTMENTS
December 31, 1995
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 2.52%
Salomon Brothers, Revolving Repurchase Agreement,
5.93%, 1/2/96, (secured by various U.S. Treasury
Strips with maturities ranging from 2/15/96
through 11/15/05 and U.S. Treasury Notes, 5.50%,
11/15/98, all held at Chemical Bank) $4,958,619 $ 4,958,619
------------
(Cost $4,958,619)
Shares
COMMON STOCKS -- 97.48%
Banks -- 3.67%
Banc One Corp. 80,000 3,020,000
Norwest Corp. 127,000 4,191,000
------------
7,211,000
------------
Business Machines -- 4.03%
Autodesk, Inc. 90,400 3,096,200
Microsoft Corp. * 55,000 4,826,250
------------
7,922,450
------------
Business Services -- 6.26%
Automatic Data Processing, Inc. 58,000 4,306,500
Interpublic Group of Companies, Inc. 105,000 4,554,375
WMX Technologies, Inc. 115,000 3,435,625
------------
12,296,500
------------
Chemicals -- 3.56%
Great Lakes Chemical Corp. 58,000 4,176,000
Sigma-Aldrich Corp. 57,000 2,821,500
------------
6,997,500
------------
Construction -- 4.84%
Fluor Corp. 73,000 4,818,000
York International Corp. 100,000 4,700,000
------------
9,518,000
------------
Consumer Durables -- 2.88%
Newell Co. 140,000 3,622,500
Rubbermaid, Inc. 80,000 2,040,000
------------
5,662,500
------------
Containers -- 2.13%
Crown Cork & Seal Co., Inc. * 100,000 4,175,000
------------
Drugs and Medicine -- 12.79%
Johnson & Johnson 70,000 5,993,750
Medtronic, Inc. 67,000 3,743,625
Pall Corp. 225,000 6,046,875
Stryker Corp. 83,000 4,357,500
United Healthcare Corp. 76,000 4,978,000
------------
25,119,750
------------
Electronics -- 6.26%
General Motors Corp., Class E 95,000 4,940,000
Hewlett-Packard Co. 37,000 3,098,750
Intel Corp. 75,000 4,256,250
------------
12,295,000
------------
Energy and Utilities -- 1.94%
Enron Corp. 100,000 3,812,500
------------
Energy Raw Materials -- 4.15%
Schlumberger Ltd. 52,000 3,601,000
Western Atlas, Inc. * 90,000 4,545,000
------------
8,146,000
------------
Food and Agriculture -- 3.86%
CPC International, Inc. 57,000 3,911,625
Sysco Corp. 113,000 3,672,500
------------
7,584,125
------------
Insurance -- 4.84%
AFLAC, Inc. 100,000 4,337,500
American International Group, Inc. 56,000 5,180,000
------------
9,517,500
------------
Media -- 2.20%
Donnelley (R.R.) & Sons Co. 110,000 4,331,250
------------
Miscellaneous and Conglomerates -- 2.37%
Duracell International, Inc. 90,000 4,657,500
------------
Non-Durables and Entertainment -- 6.05%
Cracker Barrel Old Country Store, Inc. 250,000 4,312,500
CUC International, Inc *. 73,650 2,513,306
Service Corp. International 115,000 5,060,000
------------
11,885,806
------------
Producer Goods -- 3.57%
Illinois Tool Works, Inc. 76,000 4,484,000
Stewart & Stevenson Services, Inc. 100,000 2,525,000
------------
7,009,000
------------
Retail -- 8.95%
Albertsons, Inc. 132,000 4,339,500
Home Depot, Inc. 135,000 6,463,125
Toys R Us * 130,000 2,827,500
Walgreen Co. 132,000 3,943,500
------------
17,573,625
------------
Telephone -- 4.77%
AirTouch Communications, Inc. * 170,000 4,802,500
MCI Communications Corp. 175,000 4,571,875
------------
9,374,375
------------
Tobacco -- 1.87%
UST, Inc. 110,000 3,671,250
------------
Travel and Recreation -- 6.49%
Carnival Corp. Class A 180,000 4,387,500
Disney (Walt) Co. 80,000 4,720,000
Gaylord Entertainment Co. Class A 131,000 3,635,250
------------
12,742,750
------------
TOTAL COMMON STOCKS 191,503,381
------------
(Cost $159,055,136)
TOTAL INVESTMENTS $196,462,000
============
(Cost $164,013,755)
<FN>
* Non-income producing security
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
BALANCED FUND
PORTFOLIO OF INVESTMENTS
December 31, 1995
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 11.13%
Salomon Brothers, Revolving Repurchase Agreement,
5.93%, 1/2/96 (secured by various U.S. Treasury
Strips with maturities ranging from 2/15/96
through 11/15/05, and U.S. Treasury Notes, 5.50%,
11/15/98, all held at Chemical Bank) $10,363,688 $10,363,688
-----------
(Cost $10,363,688)
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 33.62%
U.S. Treasury Securities -- 15.64%
Principal Strips from U.S. Treasury Securities
due:
8/15/98 500,000 436,475
5/15/18 600,000 149,664
11/15/18 600,000 145,734
8/15/20 4,765,000 1,037,245
Strips from U.S. Treasury Securities due:
5/15/98 200,000 176,984
2/15/99 100,000 84,995
2/15/11 600,000 242,940
5/15/11 1,083,000 431,077
2/15/12 280,000 105,795
8/15/12 750,000 273,848
5/15/13 760,000 264,290
2/15/14 200,000 66,210
U.S. Treasury Bonds:
12.750%, 11/15/10 395,000 601,632
10.375%, 11/15/12 495,000 684,338
U.S. Treasury Notes:
7.375%, 5/15/96 350,000 352,681
7.250%, 11/15/96 200,000 203,312
8.500%, 4/15/97 165,000 171,626
8.625%, 8/15/97 850,000 894,625
8.750%, 10/15/97 200,000 211,968
8.875%, 11/15/97 800,000 851,496
7.875%, 1/15/98 2,400,000 2,521,872
7.875%, 4/15/98 3,870,000 4,086,488
5.375%, 5/31/98 350,000 351,148
6.875%, 7/31/99 200,000 210,000
-----------
(Cost $13,572,976) 14,556,443
-----------
Agency Obligations -- 17.98%
Federal Home Loan Mortgage Corp. Participation
Ctf.
#555238, 12.000%, 7/1/19 177,465 198,989
Federal Home Loan Mortgage Corp. Gtd. Multi-Class
Mortgage Participation Ctfs.:
Series 22 Class C, 9.500%, 4/15/20 138,110 156,469
Series 11 Class D, 9.500%,7/15/19 200,000 222,572
Series 99 Class Z, 9.500%, 1/15/21 109,086 117,377
Series 1051 Class D, 7.000%, 11/15/19 194,946 197,330
Series 1065 Class J, 9.000%, 4/15/21 100,000 108,781
Series 1084 Class F, AR, 5/15/21 250,000 254,990
Series 1084 Class S, IF, 5/15/21 175,000 227,500
Series 1144 Class KB, 8.500%, 9/15/21 250,000 264,635
Series 1295 Class JB, 4.500%, 3/15/07 300,000 271,701
Series 1297 Class H, 7.500%, 1/15/20 130,723 133,925
Series 1360 Class PK, 10.000%, 12/15/20 150,000 172,192
Series 1370 Class F, 6.750%, 3/15/19 260,000 262,743
Series 1378 Class H, 10.000%, 1/15/21 100,000 115,208
Series 1378 Class JZ, 7.500%, 11/15/21 253,428 257,659
Series 1456 Class G, 6.500%,12/15/18 300,000 300,315
Series 1465 Class SA, IF, 2/15/08 1,584,527 78,228
Series 1483 Class E, 6.500%, 2/15/20 367,500 367,283
Series 1489 Class L, 5.500%, 4/15/08 208,713 203,631
Series 1491 Class F, 5.000%, 8/15/19 400,000 375,472
Series 1508 Class KB, IO, IF, 5/15/23 709,793 45,689
Series 1531 Class K, 6.000%, 4/15/08 346,816 336,404
Series 1554 Class KA, PO, 8/15/08 84,308 66,971
Series 1583 Class NS, IF, 9/15/23 115,888 85,757
Series 1585 Class NB, IF, 9/15/23 144,996 117,446
Series 1586 Class A, 6.000%, 9/15/08 167,962 161,611
Series 1595 Class S, IO, IF, 10/15/13 1,582,125 64,266
Series 1604 Class SE, IF, 11/15/08 187,033 149,626
Series 1606 Class LD, IF, 5/15/08 393,649 295,358
Series 1681 Class K, 7.000%, 8/15/23 446,020 436,243
Series 1686 Class A, 5.000%, 2/15/24 92,449 82,440
Series 1689 Class SD, IF, 10/15/23 100,000 89,000
Series 1706 Class LA, 7.000%, 3/15/24 425,008 416,402
Series 1757-A, Class A, 9.500%, 5/15/23 176,610 187,868
Series 1796-A, Class S, IF, 2/15/09 100,000 75,500
Federal Housing Administration Merrill Lynch
Project Pool 170 Pass thru Ctf., 7.430%, 8/1/20 228,368 235,931
Federal National Mortgage Assn. Pass Thru
Securities Pool #116612, AR, 3/1/19 120,860 125,058
Federal National Mortgage Assn. Pass Thru
Securities Guaranteed Remic Trust:
1989 Class 34-D, 9.850%, 7/25/13 100,480 101,805
1989 Class 69-G, 7.600%, 10/25/19 800,000 825,385
1989 Class 78-H, 9.400%, 11/25/19 250,000 278,605
1990 Class 1-D, 8.800%, 1/25/20 150,000 159,384
1990 Class 140-K, HB, 652.1454%, 12/25/20 1,859 34,111
1990 Class 143-J, 8.750%, 12/25/20 125,000 134,010
1991 Class 144-PZ, 8.500%, 6/25/21 213,482 225,832
1991 Class 161-H, 7.500%, 2/25/21 195,157 198,564
1992 Class 204-B, 6.000%, 10/25/20 250,000 241,885
1993 Class 13-G, 6.000%, 6/25/20 200,000 196,274
1993 Class 15-K, 7.000%, 02/25/08 198,103 197,104
1993 Class 19-G, 5.000%, 5/25/19 250,000 237,095
1993 Class 32-K, 6.000%, 3/25/23 398,757 383,429
1993 Class 38-S, IO, IF, 11/25/22 1,167,204 32,098
1993 Class 44-S, IO, IF, 4/25/23 440,206 19,395
1993 Class 58-J, 5.500%, 4/25/23 172,150 160,876
1993 Class 94-K, 6.750%, 5/25/23 129,919 127,147
1993 Class 139-SG, IF, 8/25/23 242,431 187,959
1993 Class 155-LA, 6.500%, 5/25/23 347,178 342,498
1993 Class 155-SB, IO, IF, 9/25/23 855,151 46,495
1993 Class 190-SE, IF, 10/25/08 49,847 38,740
1993 Class 207-SC, IF, 11/25/23 286,295 208,995
1993 Class 209-KB, 5.659%, 8/25/08 186,995 178,470
1993 Class 214-L, 6.000%, 12/25/08 167,752 165,801
1993 Class 220-SD, IF, 11/25/13 49,707 38,631
1993 Class 223-FB, AR, 12/25/23 371,360 365,790
1993 Class 223-SB, IF, 12/25/23 165,265 132,212
1994 Class 8-G, PO, 11/25/23 259,594 188,206
1994 Class 19-C, 5.000%, 1/25/24 341,483 315,697
1994 Class 30-LA, 6.500%, 2/25/09 84,934 83,897
1994 Class 36-SE, IF, 11/25/23 136,624 109,299
1994 Class 39-F, AR, 3/25/24 226,630 225,071
1994 Class 39-S, IF, 3/25/24 87,166 77,413
1994 Class 53-CA, PO, 11/25/23 460,000 318,550
1994 Class 59-PK, 6.000%, 3/25/24 176,633 171,714
1994 Class 82-SA, IO, 5/25/23 1,931,538 51,900
1995 Class 13-B, 6.500%, 3/25/09 576,322 563,533
1992-G Class 15-Z, 7.000%, 1/25/22 196,015 190,649
1992-G Class 42-Z, 7.000%, 7/25/22 633,918 624,341
1992-G Class 59-C, 6.000%, 12/25/21 200,000 194,128
1993-G Class 19-K, 6.500%, 6/25/19 254,799 250,365
1994-G Class 13-ZB, 7.000%, 11/17/24 107,229 102,640
Government National Mortgage Assn. Pass Thru
Securities
Guaranteed Remic Trust:
1994 Class 4-SA, IO, IF, 10/16/22 600,000 38,250
Government National Mortgage Assn. Pass Thru:
Pool #297628, 8.000%, 9/15/22 190,467 198,974
Pool #313110, 7.500%, 11/15/22 499,859 515,218
-----------
(Cost $15,517,459) 16,737,005
-----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS 31,293,448
-----------
(Cost $29,090,435)
CORPORATE BONDS AND NOTES -- 1.95%
Finance -- 1.12%
Associates Corp. of North America:
9.125%, 4/1/00 85,000 95,937
8.150%, 8/1/09 200,000 227,996
Ford Credit Grantor Trust Asset Backed Ctf.
Series 1994-A, Class A, 6.350%, 5/15/99 272,012 274,846
Merrill Lynch Trust 43 E CMO, Series 43-E,
6.500%, 8/27/15 200,000 198,998
Nationsbank Auto Grantor Trust Asset Backed Ctf.
Series 1995-A, Class A, 5.850%, 6/15/02 96,427 96,983
Standard Credit Card Master Trust Asset Backed
Ctf. Series 1995-5, Class A, AR, 5/8/00 150,000 150,046
-----------
(Cost $1,000,850) 1,044,806
-----------
Industrial -- 0.42%
Boeing Co., 7.950%, 8/15/24 110,000 129,493
Proctor & Gamble Co., 8.000%, 10/26/96 220,000 262,544
-----------
(Cost $360,295) 392,037
-----------
Public Utility -- 0.41%
New England Telephone & Telegraph Co., 7.875%,
11/15/29 250,000 294,213
Nippon Telegraph & Telephone Corp., 9.500%,
7/27/98 80,000 87,370
-----------
(Cost $351,127) 381,583
-----------
TOTAL CORPORATE BONDS AND NOTES 1,818,426
-----------
(Cost $1,712,272)
CONVERTIBLE BONDS -- 0.52%
Chubb Capital Corp., 6.00%, 5/15/98 121,000 136,730
Consolidated Natural Gas Co., 7.25%, 12/15/15 98,100 101,779
Price Co., 6.75%, 3/1/01 112,000 113,820
Unifi, Inc., 6.00%, 3/15/02 130,000 130,975
-----------
(Cost $473,776) 483,304
-----------
Shares
------
COMMON STOCKS -- 52.78%
Aerospace -- 1.06%
Boeing Co. 12,600 987,525
-----------
Air Transport -- 0.15%
Air Express International Corp. 6,225 143,175
-----------
Apparel -- .90%
Nine West Group, Inc. * 2,950 110,625
Reebok International Ltd. 2,780 78,535
Russell Corp. 20,000 555,000
Unifi Inc. 1,640 36,285
V.F. Corp. 1,050 55,388
-----------
835,833
-----------
Banks -- 2.58%
Banc One Corp. 3,100 117,025
Bancorp Hawaii, Inc. 3,390 121,616
Barnett Banks, Inc. 10,800 637,200
Charter One Financial Inc. 5,200 159,250
Commerce Bancshares, Inc. 1,975 75,530
First Union Corp. 2,200 122,375
Fleet Financial Group, Inc. 20,900 851,675
Norwest Corp. 4,000 132,000
TCF Financial Corp. 5,600 185,500
-----------
2,402,171
-----------
Business Machines -- 1.01%
Autodesk, Inc. 12,370 423,673
Diebold, Inc. 2,613 144,695
InterVoice, Inc. * 2,500 47,500
Komag, Inc. * 2,700 124,538
Microsoft Corp. * 1,100 96,525
Xilinx, Inc. * 3,350 102,174
-----------
939,105
-----------
Business Services -- 3.94%
American Management System, Inc. * 4,500 135,000
Angelica Corp. 2,600 53,300
Automatic Data Processing, Inc. 1,800 133,650
CDI Corp. * 2,900 52,200
Deluxe Corp. 19,400 562,600
DST Systems, Inc. * 1,600 45,600
Dun & Bradstreet Corp. 10,300 666,925
G & K Services, Inc. Class A 3,400 86,700
Harland (John H.) Co. 5,360 111,890
Interpublic Group of Companies, Inc. 12,600 546,525
National Service Industries, Inc. 4,120 133,385
Omnicom Group, Inc. 3,380 125,905
SunGard Data Systems, Inc. * 4,500 128,250
WMX Technologies, Inc. 23,500 702,063
Zilog, Inc. * 5,000 183,125
-----------
3,667,118
-----------
Chemicals -- 2.64%
Dow Chemical Co. 8,500 598,188
Great Lakes Chemical Corp. 13,600 979,200
NCH Corp. 2,140 123,585
RPM, Inc. 8,265 136,372
Sigma-Aldrich Corp. 12,500 618,750
-----------
2,456,095
-----------
Construction -- 3.00%
Crane Co. 5,604 206,648
Fluor Corp. 2,100 138,600
Masco Corp. 20,900 655,737
Stanley Works 13,500 695,250
York International Corp. 23,300 1,095,100
-----------
2,791,335
-----------
Consumer Durables -- 1.43%
Durakon Industries, Inc. * 4,508 56,350
Hillenbrand Industries, Inc. 1,970 66,734
Invacare Corp. 1,700 42,925
Leggett & Platt, Inc. 3,840 93,120
National Presto Industries, Inc. 1,710 67,973
Newell Co. 4,300 111,263
Rubbermaid, Inc. 30,700 782,850
Thiokol Corp. 3,110 105,350
-----------
1,326,565
-----------
Containers -- 0.65%
AptarGroup, Inc. 4,600 171,925
Crown Cork & Seal Co., Inc. * 10,400 434,200
-----------
606,125
-----------
Domestic Oil -- 0.27%
Atlantic Richfield Co. 810 89,708
MAPCO, Inc. 2,940 160,597
-----------
250,305
-----------
Drugs and Medicine -- 5.52%
Abbott Laboratories 14,400 601,200
Block Drug, Inc. Class A 1,000 34,750
Bristol-Myers Squibb Co. 10,790 926,591
Community Health System 2,600 92,625
Health Care & Retirement Corp. * 2,594 90,790
Johnson & Johnson 1,700 145,563
Medtronic, Inc. 2,400 134,100
Merck & Co., Inc. 9,700 637,775
Pall Corp. 5,800 155,875
Scherer (R.P.) Corp. * 2,286 112,300
Schering-Plough Corp. 17,300 947,175
Stryker Corp. 900 47,250
Sybron International Corp. * 5,400 128,250
United Healthcare Corp. 2,400 157,200
U.S. HealthCare, Inc. 17,600 818,400
Vivra, Inc. * 4,500 113,062
-----------
5,142,906
-----------
Electronics -- 2.28%
Allen Group, Inc. 5,393 120,668
Belden, Inc. 7,500 193,125
Dynatech Corp. * 8,000 136,000
General Motors Corp. Class E 20,400 1,060,800
Hewlett Packard Co. 1,500 125,625
Holophane Corp. * 5,100 110,925
Intel Corp. 1,600 90,800
MEMC Electronic Materials * 2,500 81,563
Molex, Inc. Class A Non-Voting 3,550 108,719
3COM Corp. * 952 44,387
Vishay Intertechnology, Inc. * 1,700 53,550
-----------
2,126,162
-----------
Energy and Utilities -- 1.62%
American Water Works Co., Inc. 1,800 69,975
Enron Corp. 1,500 57,188
Entergy Corp. 10,200 298,350
Equitable Resources, Inc. 2,770 86,563
MCN Corp. 36,300 843,974
Sierra Pacific Resources 6,320 147,730
-----------
1,503,780
-----------
Energy Raw Materials -- 2.27%
Apache Corp. 5,076 149,742
Ashland Coal, Inc. 2,810 60,064
Burlington Resources, Inc. 13,300 522,025
Schlumberger Ltd. 16,500 1,142,625
Southwestern Energy Co. 8,476 108,069
Western Atlas, Inc. * 2,500 126,250
-----------
2,108,775
-----------
Food and Agriculture -- 1.71%
ConAgra, Inc. 11,300 466,125
CPC International, Inc. 1,500 102,938
Sysco Corp. 28,300 919,750
Universal Foods Corp. 2,549 102,278
-----------
1,591,091
-----------
Insurance -- 3.97%
AFLAC, Inc. 1,400 60,725
Allmerica Property & Casualty Co. 2,800 75,600
AMBAC, Inc. 2,050 96,094
American International Group, Inc. 9,400 869,500
Chubb Corp. 10,200 986,850
Citizens Corp. 6,548 121,957
Financial Security Assurance Holdings 2,440 60,695
First Colony Corp. 30,200 766,325
Home Beneficial Corp. Class B 5,350 128,400
Marsh & McLennan Companies, Inc. 740 65,675
Mid Ocean Ltd. 1,570 58,286
Old Republic International Corp. 4,880 173,240
SAFECO Corp. 2,020 69,690
Transatlantic Holdings, Inc. 2,254 165,387
-----------
3,698,424
-----------
International Oil -- 0.73%
Amoco Corp. 1,340 96,313
Royal Dutch Petroleum Co., N.Y. Registry 3,400 479,825
Texaco, Inc. 1,350 105,975
-----------
682,113
-----------
Liquor -- 0.87%
Anheuser Busch Companies, Inc. 12,120 810,525
-----------
Media -- 2.04%
Banta Corp. 3,290 144,760
Donnelley (R.R.) & Sons Co. 2,200 86,625
Gannett Co., Inc. 14,790 907,736
Washington Post Co. Class B 2,700 761,400
-----------
1,900,521
-----------
Miscellaneous and Conglomerates -- 1.24%
Arctco, Inc. 4,983 64,779
Culligan Water Technologies, Inc. * 3,700 89,725
DENTSPLY International, Inc. 3,700 148,000
Department 56, Inc. * 1,200 46,050
Duracell International, Inc. 2,200 113,850
Greenfield Industries, Inc. 5,700 178,125
Health Management Associates, Inc. Class A * 4,862 127,020
Littlefuse, Inc. * 3,500 128,625
Minerals Technologies, Inc. 3,085 112,602
Wolverine Tube, Inc. * 4,000 150,000
-----------
1,158,776
-----------
Miscellaneous Finance -- 1.68%
A.G. Edwards, Inc. 5,755 137,401
CMAC Investment Corp. 2,300 101,200
Executive Risk, Inc. 5,200 150,800
Federal National Mortgage Association 1,640 203,565
FINOVA Group, Inc. 5,535 267,064
Fund American Enterprises Holdings, Inc. 2,310 172,095
Idex Corp. 2,472 101,332
PMI Group, Inc. 3,200 144,800
Prudential Reinsurance Holding 6,000 140,250
Salomon, Inc. 1,610 57,154
Scotsman Industries, Inc. 4,900 86,362
-----------
1,562,023
-----------
Motor Vehicles -- 1.22%
Excel Industries, Inc. 7,035 98,490
Ford Motor Co. 1,861 53,969
General Motors Corp. 11,700 618,638
Harley-Davidson, Inc. 6,926 199,123
Myers Industries, Inc. 4,520 74,014
Superior Industries International 3,338 88,040
-----------
1,132,274
-----------
Non-Durables and Entertainment -- 1.12%
Cracker Barrel Old Country Store, Inc. 32,000 552,000
CUC International, Inc. 2,250 76,781
Hasbro, Inc. 3,920 121,520
Lancaster Colony Corp. 3,764 140,209
Luby's Cafeterias, Inc. 820 18,245
Sbarro, Inc. 2,280 49,020
Service Corp. International 2,000 88,000
-----------
1,045,775
-----------
Non-Ferrous Metals -- 0.08%
DT Industries, Inc. 5,200 70,200
-----------
Producer Goods -- 2.52%
General Electric Co. 9,500 684,000
Hubbell, Inc. Class B 3,351 220,328
Illinois Tool Works, Inc. 2,100 123,900
Juno Lighting, Inc. 7,239 115,824
Stewart & Stevenson Services, Inc. 33,400 843,350
Teleflex, Inc. 1,590 65,190
Trimas Corp. 6,235 117,686
Watts Industries, Inc. Class A 7,398 172,003
-----------
2,342,281
-----------
Railroads and Shipping -- 0.19%
Alexander & Baldwin, Inc. 5,470 125,810
Norfolk Southern Corp. 690 54,769
-----------
180,579
-----------
Retail -- 1.70%
Albertsons, Inc. 3,200 105,200
Cato Corp. Class A 14,518 112,515
Home Depot, Inc. 2,500 119,688
Kohls Corp. * 1,732 90,930
May Department Stores Co. 3,380 142,805
Melville Corp. 4,360 134,070
Mercantile Stores Inc. 1,200 55,500
Stanhome, Inc. Voting 3,510 102,229
Talbots, Inc. 1,949 56,034
Toys R Us * 24,900 541,575
Walgreen Co. 4,200 125,474
-----------
1,586,020
-----------
Soaps and Cosmetics -- 0.12%
Unilever N. V. 810 114,007
-----------
Telephone -- 2.64%
AT&T Corp. 9,000 582,750
AirTouch Communications, Inc. * 3,300 93,225
Century Telephone Enterprises, Inc. 21,500 682,625
MCI Communications Corp. 42,000 1,097,250
-----------
2,455,850
-----------
Tires and Rubber Goods -- 0.06%
Bandag, Inc. Class A 1,050 55,650
-----------
Tobacco -- 0.38%
Loews Corp. 1,700 133,238
Philip Morris Companies, Inc. 1,130 102,265
UST, Inc. 3,500 116,812
-----------
352,315
-----------
Travel and Recreation -- 0.49%
Callaway Golf Co. 5,600 126,700
Carnival Corp. Class A 5,000 121,875
Disney (Walt) Co. 1,600 94,400
Gaylord Entertainment Co. Class A 4,130 114,608
-----------
457,583
-----------
Trucking and Freight -- 0.70%
Ryder System, Inc. 26,300 650,924
-----------
TOTAL COMMON STOCKS 49,133,906
-----------
(Cost $41,977,085)
TOTAL INVESTMENTS $93,092,772
===========
(Cost $83,617,256)
<FN>
* Non-income producing security.
</TABLE>
<PAGE>
THE WOODWARD FUNDS
BALANCED FUND
PORTFOLIO OF INVESTMENTS (Continued)
Notes to Portfolio of Investments
The Fund invests in securities whose value is derived from an underlying pool
of mortgages or consumer loans. Some of these securities are collateralized
mortgage obligations (CMOs). CMOs are debt securities issued by U.S.
government agencies or by financial institutions and other mortgage lenders
which are collateralized by a pool of mortgages held under an indenture.
Descriptions of certain collateralized mortgage obligations are as follows:
Adjustable Rate (AR)
Inverse Floaters (IF) represent securities that pay interest at a rate that
increases (decreases) with a decline (increase) in a specified index.
Interest Only (IO) represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. The face amount shown
represents the par value on the underlying pool. The yields on these
securities are generally higher than prevailing market yields on other
mortgage-backed securities because their cash flow patterns are more volatile
and there is a greater risk that the initial investment will not be fully
recouped. These securities are subject to accelerated principal paydowns as a
result of prepayments or refinancing of the underlying pool of mortgage
instruments. As a result, interest income may be reduced considerably.
High Coupon Bonds (HB) (a.k.a. "IOettes") represent the right to receive
interest payments on an underlying pool of mortgages with similar risks as
those associated with IO securities. Unlike IO's, the owner also has a right
to receive a very small portion of principal. The high interest rate results
from taking interest payments from other classes in the REMIC Trust and
allocating them to the small principal of the HB class.
Principal Only (PO) represents the right to receive the principal portion only
on an underlying pool of mortgage loans. The market value of these securities
is extremely volatile in response to changes in market interest rates. As
prepayments on the underlying mortgages of these securities increase, the
yield on these securities increases.
<PAGE>
THE WOODWARD FUNDS
EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Commencement of Operations
The Woodward Funds (Woodward) was organized as a Massachusetts business
trust on April 21, 1987, and registered under the Investment Company Act of
1940, as amended, as an open-end investment company. As of December 31, 1995,
Woodward consisted of seventeen separate series. The five Equity Funds (Equity
Funds) included in these financial statements are described below.
Woodward Growth/Value Fund
Woodward Opportunity Fund
Woodward Intrinsic Value Fund
Woodward Capital Growth Fund
Woodward Balanced Fund
The Growth/Value, Opportunity and Intrinsic Value Funds commenced
operations on June 1, 1991, the Balanced Fund commenced operations on
January 1, 1994, and the Capital Growth Fund commenced operations on
July 2, 1994.
The remaining two Woodward Equity Funds, the Equity Index and
International Equity Funds, are each included on separate stand alone
financial statements.
(2) Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Equity Funds in preparation of the financial statements. The policies are
in conformity with generally accepted accounting principles for investment
companies. Following generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Investments
The Equity Funds value investment securities at market value which is
determined by a pricing service based upon quoted market prices or dealer
quotes. Securities for which market prices or dealer quotes are not readily
available are valued by the investment advisor, NBD Bank (NBD) in accordance
with procedures approved by the Board of Trustees.
Investment security purchases and sales are accounted for on the day
after trade date.
Woodward invests in securities subject to repurchase agreements. Such
transactions are entered into only with institutions included on the Federal
Reserve System's list of institutions with whom the Federal Reserve open
market desk will do business. NBD, acting under the supervision of the Board
of Trustees, has established the following additional policies and procedures
relating to Woodward's investments in securities subject to repurchase
agreements: 1) the value of the underlying collateral is required to equal or
exceed 102% of the funds advanced under the repurchase agreement including
accrued interest; 2) collateral is marked to market daily by NBD to assure its
value remains at least equal to 102% of the repurchase agreement amount; and
3) funds are not disbursed by Woodward or its agent unless collateral is
presented or acknowledged by the collateral custodian.
Investment Income
Interest income is recorded daily on the accrual basis adjusted for
amortization of premium and accretion of discount on debt instruments. Bond
premiums and discounts are amortized/accreted as required by the Internal
Revenue Code. Premiums and discounts on mortgage-backed securities are
amortized/accreted using the effective interest rate method. As prepayments on
the underlying mortgages increase or decrease the expected life, the yield is
adjusted to amortize/accrete the security to its new expected life. Dividends
are recorded on the ex-dividend date.
Federal Income Taxes
It is Woodward's policy to comply with the requirements of Subchapter M
of the Internal Revenue Code, as amended, applicable to regulated investment
companies and to distribute net investment income and realized gains to
its shareholders. Therefore, no federal income tax provision is required in
the accompanying financial statements.
Net realized gains differ for financial statement and tax purposes
primarily because of the recognition of wash sale transactions and
post-October 31 capital losses. Also, due to the timing of dividend
distributions, the fiscal year in which amounts are distributed may differ
from the year that the income or realized gains were recorded by the Fund.
Certain book-to-tax timing differences for the funds are reflected as excess
distributions in the Statements of Changes in Net Assets. These distributions
do not constitute a tax return of capital.
Shareholder Dividends
Dividends from net investment income are declared and paid quarterly by
the Equity Funds. Net realized capital gains are distributed annually.
Distributions from net investment income and net realized gains are made
during each year to avoid the 4% excise tax imposed on regulated investment
companies by the Internal Revenue Code.
Deferred Organization Costs
Organization costs are being amortized on a straight-line basis over the
five year period beginning with the commencement of operations of each series.
Expenses
Expenses are charged daily as a percentage of the respective Fund's net
assets. Woodward monitors the rate at which expenses are charged to ensure
that a proper amount of expense is charged to income each year. This
percentage is subject to revision if there is a change in the estimate of the
future net assets of Woodward or a change in expectations as to the level of
actual expenses.
(3) Transactions with Affiliates
First of Michigan Corporation (FoM) and Essex National Securities, Inc.
(Essex) act as sponsors and co-distributors of Woodward's shares. Pursuant to
their Distribution Agreement with Woodward, FoM is entitled to receive a fee
at the annual rate of .005% of the Equity Funds' average net assets and Essex
is entitled to receive a fee at the annual rate of .10% of the aggregate
average net assets of Woodward's investment portfolios attributable to
investments by clients of Essex.
NBD is the investment advisor pursuant to the Advisory Agreement. For
its advisory services to Woodward, NBD is entitled to a fee, computed daily
and payable monthly. Under the Advisory Agreement, NBD also provides Woodward
with certain administrative services, such as maintaining Woodward's general
ledger and assisting in the preparation of various regulatory reports. NBD
receives no additional compensation for such services.
A reorganization of Woodward and The Prairie Funds is being considered
by the Board of Trustees of both funds. In connection with the proposed
reorganization, the Board of Trustees of Woodward and the Board of Trustees of
Prairie must approve certain reorganization agreements. The transaction is
intended to be effected as a tax-free reorganization under the Internal
Revenue Code, so that none of the Funds' shareholders will recognize taxable
gains or losses as a result of the reorganization. A proxy
statement/prospectus describing the reorganization and the reasons therefore
will be sent to shareholders.
NBD, FoM, and Essex have agreed that they may waive their fees in whole
or in part; and, if in part, may specify the particular fund to which such
waiver relates as may be required to satisfy any expense limitation imposed by
state securities laws or other applicable laws. At present, no restrictive
expense limitation is imposed on Woodward. Restrictive limitations could be
imposed as a result of changes in current state laws and regulations in those
states where Woodward has qualified its shares, or by a decision of the
Trustees to qualify the shares in other states having restrictive expense
limitations. For the period ended December 31, 1995, NBD reimbursed the
Capital Growth Fund and Balanced Fund for certain expenses in the amounts of
$58,424 and $136,954, respectively.
NBD is also compensated for its services as Woodward's Custodian,
Transfer Agent and Dividend Disbursing Agent, and is reimbursed for certain
out of pocket expenses incurred on behalf of Woodward.
<PAGE>
On March 10, 1994, Woodward adopted The Woodward Funds Deferred
Compensation Plan (the "Plan"), an unfunded, nonqualified deferred
compensation plan. The Plan allows an individual Trustee to elect to defer
receipt of all or a percentage of fees which otherwise would be payable for
services performed.
See Note 5 for a summary of fee rates and expenses pursuant to these
agreements.
(4) Investment Securities Transactions
Information with respect to investment securities and security
transactions based on the aggregate cost of investments for federal income tax
purposes, excluding short-term securities, is as follows:
<TABLE>
<CAPTION>
Growth/Value Opportunity Intrinsic Value
Fund Fund Fund
------------ ------------ ---------------
<S> <C> <C> <C>
Gross Unrealized Gains $151,285,779 $121,714,875 $ 32,487,357
Gross Unrealized Losses (11,595,221) (23,828,874) (5,683,919)
------------ ------------ ------------
$139,690,558 $ 97,886,001 $ 26,803,438
============ ============ ============
Federal Income Tax Cost $598,326,613 $545,136,639 $231,447,596
Purchases $226,974,931 $334,152,727 $100,553,869
Sales, at value $164,369,937 $305,957,872 $104,699,734
</TABLE>
<TABLE>
<CAPTION>
Capital Growth Balanced
Fund Fund
------------- --------
<S> <C> <C>
Gross Unrealized Gains $ 36,159,065 $10,960,819
Gross Unrealized Losses (3,710,820) (1,616,652)
------------ -----------
$ 32,448,245 $ 9,344,167
============ ===========
Federal Income Tax Cost $164,013,755 $83,748,605
Purchases $ 94,109,852 $38,447,984
Sales, at value $ 9,347,828 $20,747,860
</TABLE>
<PAGE>
(5) Expenses
Following is a summary of total expense rates charged, advisory fee
rates payable to NBD, and amounts paid to NBD, FoM, and Essex pursuant to the
agreements described in Note 3 for the year ended December 31, 1995. The rates
shown are stated as a percentage of each fund's average net assets.
<TABLE>
<CAPTION>
Growth/Value Opportunity Intrinsic Value
Effective Date Fund Fund Fund
-------------- ------------ ----------- --------------
<S> <C> <C> <C>
Expense Rates:
January 1 0.84% 0.90% 0.91%
August 9 0.83% 0.88% 0.90%
November 9 0.83% 0.86% 0.90%
NBD Advisory Fee:
January 1 0.75% 0.75% 0.75%
Amounts Paid:
Advisory Fee to NBD $4,951,664 $4,490,930 $1,817,833
Distribution Fees to FoM & Essex $ 67,240 $ 80,463 $ 24,640
Other Fees & Out of Pocket Expenses to NBD $ 183,590 $ 247,535 $ 85,169
</TABLE>
<TABLE>
<CAPTION>
Capital Growth Balanced
Effective Date Fund Fund
-------------- -------------- --------
<S> <C> <C>
Expense Rates:
January 1 0.85% 0.87%
March 21 0.85% 0.90%
August 9 0.85% 0.90%
November 9 0.87% 0.92%
NBD Advisory Fee:
January 1 0.75% 0.75%
Amounts Paid:
Advisory Fee to NBD $1,064,273 $ 570,525
Distribution Fees to FoM & Essex $ 9,455 $ 11,148
Other Fees & Out of Pocket
Expenses to NBD $ 44,622 $ 93,196
Expense Reimbursements by NBD $ (58,424) $(136,954)
</TABLE>
<PAGE>
THE WOODWARD FUNDS
EQUITY FUNDS
FINANCIAL HIGHLIGHTS
The Financial Highlights present a per share analysis of how the Equity
Funds' net asset values have changed during the periods presented. Additional
quantitative measures expressed in ratio form analyze important relationships
between certain items presented in the financial statements. These financial
highlights have been derived from the financial statements of the Equity Funds
and other information for the periods presented.
<TABLE>
<CAPTION>
Growth/Value Fund
Year Ended Year Ended Year Ended Year Ended Period Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.67 $ 11.16 $ 10.51 $ 9.86 $ 10.00
Income from investment operations:
Net investment income 0.21 0.23 0.20 0.22 0.14
Net realized and unrealized
gains (losses) on investments 2.76 (0.17) 1.24 0.75 (0.14)
------------ ------------ ------------ ------------ ------------
Total from investment operations 2.97 0.06 1.44 0.97 --
------------ ------------ ------------ ------------ ------------
Less distributions:
From net investment income (0.22) (0.21) (0.20) (0.22) (0.14)
From realized gains (0.26) (0.30) (0.59) (0.10) --
In excess of realized gains -- (0.01) -- -- --
Tax return of capital -- (0.03) -- -- --
------------ ------------ ------------ ------------ ------------
Total distributions (0.48) (0.55) (0.79) (0.32) (0.14)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 13.16 $ 10.67 $ 11.16 $ 10.51 $ 9.86
============ ============ ============ ============ ============
Total Return (b) 28.04% 0.55% 13.79% 9.87% 0.17%(a)
Ratios/Supplemental Data
Net assets, end of period $737,167,067 $571,370,711 $429,635,045 $287,344,809 $238,085,630
Ratio of expenses to average net assets 0.84% 0.84% 0.83% 0.83% 0.85%(a)
Ratio of net investment income to
average net assets 1.73% 2.07% 1.84% 2.20% 2.56%(a)
Portfolio turnover rate 26.80% 28.04% 42.31% 16.28% 0.94%
<FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
Opportunity Fund
-----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Period Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 13.34 $ 14.49 $ 12.37 $ 10.40 $ 10.00
Income from investment operations:
Net investment income 0.06 0.07 0.10 0.11 0.09
Net realized and unrealized gains
losses) on investments 2.57 (0.54) 2.87 2.43 0.43
------------ ------------ ------------ ------------ ------------
Total from investment operations 2.63 (0.47) 2.97 2.54 0.52
------------ ------------ ------------ ------------ ------------
Less distributions:
From net investment income (0.06) (0.07) (0.10) (0.11) (0.09)
From realized gains (0.76) (0.49) (0.75) (0.46) (0.03)
In excess of realized gains -- (0.02) -- -- --
Tax return of capital -- (0.10) -- -- --
------------ ------------ ------------ ------------ ------------
Total distributions (0.82) (0.68) (0.85) (0.57) (0.12)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 15.15 $ 13.34 $ 14.49 $ 12.37 $ 10.40
============ ============ ============ ============ ============
Total Return (b) 19.88% (3.27%) 24.01% 24.56% 8.92%(a)
Ratios/Supplemental Data
Net assets, end of period $650,952,268 $524,999,120 $365,664,513 $166,423,073 $108,046,450
Ratio of expenses to average net assets 0.89% 0.90% 0.86% 0.84% 0.84%(a)
Ratio of net investment income
to average net assets 0.37% 0.53% 0.71% 1.09% 1.56(a)
Portfolio turnover rate 53.55% 37.51% 33.99% 34.44% 2.92%
Average commission rate $ 0.04
</TABLE>
<TABLE>
<CAPTION>
Intrinsic Value Fund
-----------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Period Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.48 $ 11.05 $ 10.40 $ 9.89 $ 10.00
Income from investment operations:
Net investment income 0.29 0.31 0.29 0.29 0.17
Net realized and unrealized gains
(losses) on investments 2.24 (0.38) 1.23 1.14 (0.02)
------------ ------------ ------------ ------------ ------------
Total from investment operations 2.53 (0.07) 1.52 1.43 0.15
------------ ------------ ------------ ------------ ------------
Less distributions:
From net investment income (0.30) (0.30) (0.28) (0.28) (0.17)
From realized gains (0.82) (0.20) (0.59) (0.64) (0.09)
------------ ------------ ------------ ------------ ------------
Total distributions (1.12) (0.50) (0.87) (0.92) (0.26)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 11.89 $ 10.48 $ 11.05 $ 10.40 $ 9.89
============ ============ ============ ============ ===========
Total Return (b) 24.38% (0.60%) 14.71% 2.70%(a)
Ratios/Supplemental Data
Net assets, end of period $255,884,859 $220,028,096 $192,555,183 $107,260,873 $77,450,163
Ratio of expenses to average net assets 0.91% 0.91% 0.86% 0.84 0.84%(a)
Ratio of net investment income
to average net assets 2.49% 2.92% 2.67% 2.78% 3.03%(a)
Portfolio turnover rate 45.55% 58.62% 63.90% 48.52% 1.80%
Average commission rate $ 0.03
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Capital Growth Fund Balanced Fund
----------------------------- -----------------------------
Year Ended Period Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.44 $ 10.00 $ 9.53 $ 10.00
Income from investment operations:
Net investment income 0.08 0.05 0.35 0.28
Net realized and unrealized gains
(losses) on investments 2.93 0.43 1.83 (0.48)
------------ ----------- ----------- -----------
Total from investment operations 3.01 0.48 2.18 (0.20)
------------ ----------- ----------- -----------
Less distributions:
From net investment income (0.08) (0.04) (0.35) (0.27)
From realized gains (0.11) -- (0.12) --
------------ ----------- ----------- -----------
Total distributions (0.19) (0.04) (0.47) (0.27)
------------ ----------- ----------- -----------
Net asset value, end of period $ 13.26 $ 10.44 $ 11.24 $ 9.53
============ =========== =========== ===========
Total Return (b) 28.90% 9.62%(a) 23.18% (1.95)%
Ratios/Supplemental Data
Net assets, end of period $195,861,178 $81,269,604 $93,623,801 $54,167,192
Ratio of expenses to average net assets 0.86% 0.85%(a) 0.91% 0.85%
Ratio of net investment income to
average net assets 0.65% 1.25%(a) 3.40% 3.41%
Ratio of expenses to average net assets
without fee waivers/ reimbursed expenses 0.90% 0.95%(a) 1.09% 1.56%
Ratio of net investment income to
average net assets without fee waivers/
reimbursed expenses 0.61% 1.15%(a) 3.22% 2.70%
Portfolio turnover rate 6.97% 3.29% 31.76% 37.49%
Average commission rate $ 0.04 $ 0.05
<FN>
(a) Annualized for periods less than one year for comparability purposes.
Actual annual values may be less than or greater than those shown.
(b) Total returns as presented do not include any applicable sales load.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees and Shareholders of
The Woodward Equity Funds:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the Equity Funds of THE WOODWARD
FUNDS (comprising, as indicated in Note 1, the Growth/Value, Opportunity,
Intrinsic Value, Capital Growth and Balanced Funds) as of December 31, 1995,
and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods from
inception (as indicated in Note 1) through December 31, 1995. These financial
statements and financial highlights are the responsibility of the Funds'
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 audits 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 physical counts and
confirmation of securities owned as of December 31, 1995, by inspection and
correspondence with custodians, banks 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 each of the respective funds constituting the Equity Funds of The
Woodward Funds as of December 31, 1995, the results of their operations for
the year then ended, the changes in their net assets for each of the two years
in the period then ended and the financial highlights for each of the periods
from inception (as indicated in Note 1) through December 31, 1995 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
February 19, 1996.
<PAGE>
THE WOODWARD FUNDS
INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investment in securities:
At cost $100,165,227
============
At value (Note 2) $107,690,899
Cash 364,232
Receivable for securities sold 8,253
Unrealized appreciation on foreign exchange contracts 52
Withholding tax receivable 140,894
Income receivable 178,985
Deferred organization costs, net (Note 2) 49,159
Prepaids and other assets 27,321
------------
TOTAL ASSETS 108,459,795
------------
LIABILITIES:
Payable for securities purchased 770,234
Unrealized depreciation on foreign exchange contracts 267
Accrued investment advisory fee 67,327
Accrued distribution fees 516
Accrued custodial fee 14,528
Dividends payable 306,527
Other payables and accrued expenses 12,095
------------
TOTAL LIABILITIES 1,171,494
------------
NET ASSETS $107,288,301
============
Net assets consist of:
Capital shares (unlimited number of shares
authorized, par value $.10 per share) $ 971,289
Additional paid-in capital 98,938,436
Accumulated undistributed net investment income 803
Accumulated undistributed net realized losses from
investments and foreign currency transactions (154,256)
Net unrealized appreciation on investments and
foreign currency translation 7,532,029
------------
TOTAL NET ASSETS $107,288,301
============
Shares of capital stock outstanding 9,712,891
============
Net asset value and redemption price per share $ 11.05
============
Maximum offering price per share $ 11.63
============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
<S> <C> <C>
INVESTMENT INCOME (Note 2)
Interest $ 538,478
Dividends (net of foreign taxes withheld of $98,515) 1,279,198
----------
TOTAL INVESTMENT INCOME 1,817,676
----------
EXPENSES (Notes 2, 3 and 5):
Investment advisory fee 529,312
Distribution fees 4,063
Professional fees 66,313
Custodial fee 133,650
Amortization of deferred organization costs 10,714
Marketing expenses 46,449
Registration, filing fees and other expenses 77,246
Less: Expense reimbursement (51,707)
----------
NET EXPENSES 816,040
----------
NET INVESTMENT INCOME 1,001,636
----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized loss on:
Investment securities (147,589)
Foreign currency transactions (475) (148,064)
---------
Net change in unrealized appreciation on:
Investment securities 7,523,087
Assets and liabilities denominated in foreign
currencies 6,376 7,529,463
--------- ----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS
AND FOREIGN CURRENCY 7,381,399
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $8,383,035
==========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
INTERNATIONAL EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Period Ended
Dec. 31, 1995 Dec. 31, 1994
------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 1,001,636 $ 32,338
Net realized losses on investments and foreign
currency transactions (148,064) (2,937)
Net change in unrealized appreciation on
investments and foreign currency translation 7,529,463 2,566
------------ -----------
Net increase in net assets from operations 8,383,035 31,967
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1,033,171) --
In excess of realized gains (3,255) --
------------ -----------
Total distributions (1,036,426) --
------------ -----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 74,411,073 36,626,877
Net asset value of shares issued in reinvestment of
distributions to shareholders 720,012 --
------------ -----------
75,131,085 36,626,877
Less: payments for shares redeemed (11,734,863) (113,374)
------------ -----------
Net increase in net assets from capital share
transactions 63,396,222 36,513,503
------------ -----------
NET INCREASE IN NET ASSETS 70,742,831 36,545,470
NET ASSETS:
Beginning of period 36,545,470 --
------------ -----------
End of period $107,288,301 $36,545,470
============ ===========
CAPITAL SHARE TRANSACTIONS:
Shares sold 7,102,657 3,664,087
Shares issued in reinvestment of distributions to
shareholders 65,214 --
------------ -----------
7,167,871 3,664,087
Less: shares redeemed (1,107,679) (11,388)
------------ -----------
NET INCREASE IN SHARES OUTSTANDING 6,060,192 3,652,699
------------ -----------
CAPITAL SHARES:
Beginning of period 3,652,699 --
------------ -----------
End of period 9,712,891 3,652,699
============ ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
THE WOODWARD FUNDS
INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
December 31, 1995
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 4.48%
Salomon Brothers, Revolving Repurchase Agreement,
5.875%, 1/3/95 (secured by various U.S. Treasury
Strips with maturities ranging from 2/15/95
through 5/15/99, all held at Chemical Bank) $4,819,555 $4,819,555
---------- ----------
(Cost $4,819,555)
Shares
------
<S> <C> <C>
COMMON STOCKS -- 95.52%
AUSTRALIA -- 2.42%
BANKS
National Australia Bank 38,710 348,421
Westpac Bank Corp 55,410 245,657
CHEMICALS
Ici Australia 11,453 87,751
CONSTRUCTION
Boral Limited 17,000 42,996
Csr Limited 27,466 89,488
Pioneer International 13,882 35,832
ENERGY & RAW MATERIALS
Broken Hill Pty 28,140 397,716
Santos Limited 33,203 97,066
FOOD & AGRICULTURE
Amcor Limited 9,799 69,247
Goodman Fielder Limited 23,031 23,128
LIQUOR & TOBACCO
Coca-Cola Amatil 14,487 115,631
Fosters Brewing Gp 22,347 36,737
MEDIA
News Corporation (Aust Listing) 37,765 201,702
News Corporation Preferred Limited Voting
Shares 30,504 142,726
MISCELLANEOUS
Pacific Dunlop Limited 44,367 103,960
NON-FERROUS METALS
Cra Limited 10,619 155,938
Mim Holding Limited 23,841 32,986
Western Mining Corp 36,388 233,866
RAILROAD & SHIPPING
Brambles Inds Ltd. 8,027 89,565
RETAIL
Coles Myer Ltd. 18,791 58,568
----------
2,608,981
----------
BELGIUM -- 4.30%
BANKS
Generale De Banque 1,300 460,514
Kredietbank 1,550 423,985
CHEMICALS
Solvay 850 459,240
ENERGY & UTILITIES
Electrabel 4,250 1,010,905
Tractebel Inv Cap 1,300 536,714
INSURANCE
Fortis Ag 3,700 450,099
Fortis Ag(VVPR) 80 9,745
INTERNATIONAL OIL
Petrofina Sa 2,160 661,305
NON-FERROUS METALS
Union Miniere * 1,804 120,761
OTHER ENERGY SOURCES
Gpe Bruxelles Lam 2,300 319,259
PRODUCER GOODS
Bekaert Sa 220 181,282
----------
4,633,809
----------
DENMARK -- 2.11%
BANKS
Den Danske Bank 3,641 251,634
Unidanmark 'A' (Reg'd) 3,535 175,417
BUSINESS MACHINE
Iss International Series 'B' 2,800 63,156
Sophus Berendsen 'B' 1,175 132,516
DRUGS & MEDICINE
Novo-Nordisk As 'B' 2,449 335,855
FOOD & AGRICULTURE
Danisco 3,695 178,689
LIQUOR & TOBACCO
Carlsberg 'A' 275 15,383
Carlsberg 'B' 2,018 112,884
RAILROAD & SHIPPING
D/S 1912 'B' 15 286,910
D/S Svendborg 'B' 9 248,475
TELEPHONE
Tele Danmark 'B' 8,786 480,378
----------
2,281,297
----------
FINLAND -- 3.55%
BANKS
Unitas Ser 'A' * 119,766 303,414
CONSTRUCTION
Metro AB 'A' 2,000 82,450
ELECTRONICS
Nokia (AB) Oy Series 'K' 18,600 736,802
Nokia (AB) Oy Series 'A' 24,500 964,876
FOOD & AGRICULTURE
Cultor Oy Series '2' 500 20,728
Cultor Oy Series '1' 2,500 103,639
INSURANCE
Pohjola Series 'B' 3,800 49,010
Sampo 'A' 2,200 118,056
NON-FERROUS METALS
Outokumpo Oy 'A' 19,500 309,880
PAPER & FOREST PRODUCTS
Kymmene Corp 12,500 331,068
Repola 23,400 441,915
PRODUCER GOODS
Kone Corp 'B' 700 58,521
RETAIL
Kesko 12,000 149,516
Stockmann Oy 'A' 1,600 91,386
TRAVEL & RECREATION
Amer Group 'A' 3,800 59,424
----------
3,820,685
----------
FRANCE -- 4.91%
BANKS
Banque National Paris 3,615 163,291
Cie De Suez 1,251 51,673
Cie Fin Paribas 'A' 2,318 127,267
Society Generale 1,829 226,270
CHEMICALS
Air Liquide ('L') 996 165,173
Rhone Poulenc Sa 'A' 5,686 121,966
CONSTRUCTION
Cie De St Gobain 1,834 203,262
Lafarge Coppee Sa (Br) 1,800 116,126
CONSUMER DURABLES
Printemps (Av) 600 119,868
DRUGS & MEDICINE
L'Oreal 985 264,056
Sanofi 2,339 150,134
ELECTRONICS
Alcatel Alsthom (Cge) 2,544 219,631
Csf (Thomson) 3,520 78,528
Legrand 500 77,295
Schneider Sa (Ex-Sp) 3,630 124,257
ENERGY & UTILITIES
Eaux (Cie Generale) 2,307 230,635
Lyonnaise Des Eaux 1,753 169,013
FOOD & AGRICULTURE
Danone (Ex Bsn) 1,520 251,138
Eridania Beghin Sa 861 147,890
Saint Louis 350 93,040
INSURANCE
Axa 1,981 133,677
INTERNATIONAL OIL
Elf Auqitaine (Soc Nat) 5,566 410,646
Total B 4,716 318,715
LIQUOR & TOBACCO
Lvmh Moet-Hennessy 2,000 417,146
Pernod-Ricard 1,114 63,395
MOTOR VEHICLES
Peugeot Sa 793 104,752
PRODUCER GOODS
Carnaud Metal Box 766 35,086
Michelin (Cgde) Class 'B' (Brwn Bds)(Reg'd) 2,150 85,861
REAL PROPERTY
Sefimeg (Reg'd) 986 65,527
RETAIL
Carrefour 586 356,006
Promodes 433 101,912
TRAVEL & RECREATION
Accor 757 98,139
----------
5,291,375
----------
GERMANY -- 4.93%
AIR TRANSPORT
Lufthansa Ag 1,707 236,739
BANKS
Bayer Vereinsbank (Var) 5,140 154,422
Deutsche Bank (Var) 10,440 496,734
Dresdner Bank (Var) 7,140 191,810
CHEMICALS
Basf (Var) 1,026 231,540
Bayer (Var) 1,100 292,662
Schering 1,350 89,888
CONSTRUCTION
Hochtief 357 152,899
ELECTRONICS
Siemens (Var) 704 387,592
SAP N/V Pref 600 91,303
ENERGY & UTILITIES
Rwe (Var) 516 188,010
Veba (Var) 10,150 435,422
INSURANCE
Munchener Ruckvers Reg Vink * 145 313,042
Allianz (Regd) 250 491,869
MOTOR VEHICLES
Daimler-Benz (Var) 384 194,243
Volkswagen (Var) 506 170,048
PRODUCER GOODS
Linde 156 92,645
Mannesmann (Var) 1,146 365,512
RETAIL
Kaufhof Holding 402 122,739
STEEL
Preussag Br (Var) 1,074 303,153
Thyssen * 716 130,917
Viag (Var) 419 173,014
----------
5,306,203
----------
HONG KONG -- 2.40%
AIR TRANSPORT
Cathay Pacific Airways 37,000 56,467
BANKS
Hang Seng Bank 39,400 352,881
ENERGY & UTILITIES
China Light & Power 34,700 159,769
Hong Kong Electric 20,000 65,572
Hong Kong & China Gas 34,800 56,035
MISCELLANEOUS
Hutchinson Whampoa 56,000 341,131
MISCELLANEOUS FINANCE
Swire Pacific 'A' 23,500 182,361
Wharf (Holding) 30,000 99,910
Wing Lung Bank 16,848 94,351
REAL PROPERTY
Cheung Kong (Holdings) 40,000 243,665
Hopewell Holdings 50,000 28,777
Hysan Development 10,000 26,449
New World Infrastr * 52 100
New World Development Co 31,366 136,710
Sun Hung Kai Properties 45,700 373,842
TELEPHONE
Hong Kong Telecomm 203,600 363,386
----------
2,581,406
----------
IRELAND -- 1.95%
BANKS
Allied Irish Banks 82,680 447,907
Bank of Ireland (Dublin Listing) 26,825 193,904
CONSTRUCTION
Crh 48,929 367,014
FOOD & AGRICULTURE
Greencore 24,349 209,568
Kerry Group 'A' 28,760 218,954
INSURANCE
Irish Life 56,656 215,211
MEDIA
Independent News 18,405 117,406
PAPER & FOREST PRODUCTS
Smurfit(Jefferson) (Dublin Listing) 139,859 329,517
----------
2,099,481
----------
JAPAN -- 30.54%
AIR TRANSPORT
Japan Airlines Co * 46,000 305,472
BANK
Asahi Bank 34,000 428,495
Bank of Tokyo 28,000 491,315
Dai-Ichi Kangyo Bank 40,000 787,190
Fuji Bank 43,000 950,445
Industrial Bank of Japan 23,000 697,904
Joyo Bank 36,000 289,671
Sakura Bank 19,000 241,295
Sumitomo Bank 37,000 785,542
Tokai Bank 25,000 349,001
BUSINESS MACHINE
Canon Inc 21,000 380,702
Fujitsu 10,000 111,486
Ricoh Co. 55,000 602,511
CHEMICALS
Asahi Chemical Industries 63,000 482,493
Dainippon Ink & Chemical 19,000 88,598
Mitsubishi Gas Chemical 19,000 85,651
Sekisui Chemical 15,000 221,034
Shin-Etsu Chemical Co. 13,000 269,700
Showa Denko Kk * 102,000 320,383
Sumitomo Chemical 92,000 459,324
Toray Industries Inc 20,000 131,845
CONSTRUCTION
Chichibu Onoda Cement 6,000 32,050
Fujita Corp 6,000 27,106
Haseko Corp 57,000 230,428
Kajima Corp 11,000 108,772
Nihon Cement Co 30,000 200,675
Obayashi Corp 8,000 63,596
Sato Kogyo Co 12,000 73,872
Sekisui House 43,000 550,258
Shimizu Corp 25,000 254,480
Taisei Corp 47,000 313,936
Toto 15,000 209,400
CONSUMER DURABLES
Matsushita Electric Industries 56,000 912,055
Sanyo Electric Co 34,000 196,119
Sharp Corp 24,000 383,901
DRUGS & MEDICINE
Daiichi Pharmacy Co 33,000 470,278
Sankyo Co 15,000 337,367
Takeda Chemical Industries 24,000 395,534
ELECTRONICS
Hitachi * 78,000 786,415
Kyocera 11,000 817,922
Mitsubishi Electric Corp 48,000 345,743
Omron Corp 17,000 392,238
ENERGY & UTILITIES
Kansai Electric Power 13,900 336,883
Osaka Gas Co 124,000 429,154
Tokyo Electric Power 36,600 979,296
Tokyo Gas Co 15,000 52,932
FOOD & AGRICULTURE
Ajinomoto Co., Inc. 36,000 401,351
Yamazaki Baking Co 14,000 260,587
INTERNATIONAL OIL
Japan Energy Corp 19,000 63,731
Nippon Oil Co 86,000 540,253
MEDIA
Dai Nippon Printing 33,000 559,855
MULTI-INDUSTRY
Itochu Corp 38,000 256,031
Marubeni Corp 68,000 368,506
Mitsubishi 26,000 320,111
Sumitomo Corp 34,000 346,092
MISCELLANEOUS FINANCE
Daiwa Securities 34,000 520,786
Mitsubishi Trust & Banking 11,000 183,419
Nomura Securities 44,000 959,752
Yamaichi Securities Co. 34,000 264,678
MOTOR VEHICLES
Honda Motor Co 27,000 557,528
Nissan Motor Co 53,000 407,449
Toyota Motor Corp 56,000 1,188,929
NON-FERROUS METALS
Mitsubishi Steel * 17,000 88,995
Tostem Corp 5,000 166,260
PAPER & FOREST PRODUCTS
Daishowa Paper Manufacturing * 13,000 100,822
Honshu Paper Co 48,000 294,091
PRODUCER GOODS
Bridgestone Corp 31,000 492,866
Komatsu 33,000 271,930
Kubota Corp 60,000 386,809
Mitsubishi Heavy Industries 79,000 630,305
Nippondenso Co 25,000 467,758
Sumitomo Heavy Industries * 83,000 298,522
Toyo Seikan Kaisha 12,000 359,471
Toyoda Auto Loom 12,000 215,217
RAILROAD & SHIPPING
Hankyu Corp * 65,000 356,029
Mitsui Osk Lines * 63,000 202,159
Nagoya Railroad Co 61,000 307,508
Tokyu Corp 47,000 332,161
REAL PROPERTY
Mitsubishi Estate 49,000 612,787
RETAIL
Ito-Yokado Co 6,000 369,941
Nichii Co 47,000 624,226
Seven-Elevan Japan Npv 7,000 494,030
STEEL
Kawasaki Steel Corp 47,000 164,030
Kobe Steel * 34,000 105,146
Nippon Steel Corp 108,000 370,638
Nkk Corp * 48,000 129,362
Sumitomo Metal Industries * 156,000 473,360
----------
32,893,948
----------
MALAYSIA -- 2.03%
AIR TRANSPORT
Malaysian Airline Systems 8,000 25,995
BANKS
Ammb Holdings Berhad 6,000 68,534
Commerce Asset Holding 5,000 25,208
Dcb Holdings Berhad 17,000 49,549
Malayan Bkg Berhad 32,000 269,723
Public Bank Berhad 14,000 19,631
Public Bank Berhad (Alien Market) 51,000 97,625
CONSTRUCTION
Hume Inds (M) Berhad 16,000 76,884
United Engineers Berhad 8,000 51,046
CONSUMER DURABLES
Tech Res Inds Berhad * 21,000 62,035
ENERGY & UTILITIES
Tenaga Nasional 74,000 291,465
FOOD & AGRICULTURE
Golden Hope Plants 31,000 51,770
Nestle Malay Berhad 2,000 14,652
LIQUOR & TOBACCO
Rothmans Pall Mall 10,000 82,319
MISCELLANEOUS
Malayan Utd Inds 28,000 22,718
MOTOR VEHICLES
Edaran Otomobil 17,000 127,890
MULTI-INDUSTRY
Sime Darby Berhad 52,200 138,780
PRODUCER GOODS
Leader Univ Holdings 41,333 94,423
RAILROAD & SHIPPING
Malaysian Int Ship (Alien Market) 22,000 57,623
REAL PROPERTY
Hong Leong Properties 7,000 7,279
TELEPHONE
Telekom Malaysia 41,000 319,744
TRAVEL & RECREATION
Landmarks Berhad 6,000 7,988
Magnum Corp Berhad 61,500 116,271
Resorts World Berhad 19,000 101,775
----------
2,180,927
----------
MEXICO -- 1.03%
BANKS
Gpo Financiero Banamex-Ac Series 'B' 13,700 22,831
Gpo Financiero Banamex-Ac Series 'L' 685 1,006
CONSTRUCTION
Cemex Sa Ser 'A' 29,937 98,692
FOOD & AGRICULTURE
Grupo Ind Bimbo Series 'A' 12,000 49,061
MEDIA
Fomento Economico Mexico Series 'B' 17,000 39,274
Grupo Televisa Ptg Certs Repr 1 A,L,D Shs 11,500 130,452
MISCELLANEOUS FINANCE
Grupo Financiero Bancomer Series 'B' 55,000 15,490
Grupo Financiero Bancomer Series 'L' 2,037 523
Grupo Carso Series 'A1' * 16,000 85,350
MULTI-INDUSTRY
Alfa Sa Series 'A' (Cpo) 3,500 44,791
NON-FERROUS METALS
Industrias Penoles 10,000 41,273
PAPER & FOREST PRODUCTS
Kimberly Clark Mexico 'A' 11,000 166,326
RETAIL
Cifra Sa De Cv 'B' * 147,000 154,542
TELEPHONE
Telefonos De Mexico Series 'L' (Ltd Voting) 162,000 258,620
----------
1,108,231
----------
NETHERLANDS -- 6.11%
AIR TRANSPORT
KLM 2,341 82,366
BANK
ABN Amro Holding 11,227 511,977
CHEMICALS
Akzo Nobel Nv 2,562 296,638
ELECTRONICS
Philips Electronic 11,082 400,974
FOOD & AGRICULTURE
Ahold (kon) Nv 4,389 179,340
Unilever Nv Cva 5,151 724,616
INSURANCE
ING Groep Nv Cva 8,743 584,689
INTERNATIONAL OIL
Royal Dutch Petroleum (Br) 16,546 2,314,186
LIQUOR & TOBACCO
Heineken Nv 1,734 307,968
MEDIA
Elsevier Nv 23,480 313,460
Wolters Kluwer Cva 2,079 196,877
PAPER & FOREST PRODUCTS
KNP BT (Kon) Nv 2,446 62,867
STEEL
Kon Hoogovens Nv Cva 1,568 52,528
TELEPHONE
Kon Ptt Nederland 15,198 552,744
----------
6,581,230
----------
NORWAY -- 3.41%
CHEMICALS
Dyno Industrier 4,900 114,786
DRUGS & MEDICINE
Hafslund Nycomed Series 'A' 10,010 262,218
Hafslund Nycomed Series 'B' 6,018 152,882
FOOD & AGRICULTURE
Orkla As 'A' 6,150 306,631
Orkla As 'B' 1,200 57,361
INSURANCE
Uni Storebrand As 'A' * 51,053 282,826
INTERNATIONAL OIL
Norsk Hydro As 35,100 1,477,812
Transocean * 14,721 255,142
PAPER & FOREST PRODUCTS
Norske Skogsindust 'A' 4,100 120,706
PRODUCER GOODS
Kvaerner As Series 'A' 5,750 203,867
Kvaerner As Series 'B' 3,900 130,867
RAILROAD & SHIPPING
Bergesen Dy As 'A' 7,100 141,599
Bergesen Dy As 'B' Non-Voting 2,400 47,105
Leif Hoegh & Co 4,600 68,441
Unitor As 4,000 55,081
----------
3,677,324
----------
SINGAPORE -- 3.35%
AIR TRANSPORT
Singapore Airlines (Alien Market) 48,000 447,943
BANK
Dev Bank Singapore (Alien Market) 35,250 438,611
Overseas Chinese Bank (Alien Market) 33,833 423,371
United Overseas Bank (Alien Market) 40,804 392,328
CONSUMER DURABLES
Jardine Matheson (Sing Quote) 2,041 13,981
LIQUOR & TOBACCO
Fraser & Neave 18,000 229,062
Straits Trading Co 36,000 84,498
MEDIA
Singapore Press Holdings (Alien Market) 16,000 282,792
MOTOR VEHICLES
Cycle & Carriage 30,000 299,053
MULTI-INDUSTRY
Straits Steamship 44,000 148,692
PRODUCER GOODS
Jurong Shipyard (Nl) 13,000 100,179
Keppel Corp 45,000 400,858
REAL PROPERTY
City Developments 37,600 273,799
Hong Kong Land Holdings (Sing Quote) 25,975 48,054
RETAIL
Dairy Farms Intl (Sing Quote) 21,831 20,084
----------
3,603,305
----------
SPAIN -- 2.31%
BANKS
Argentaria Corp Banc 3,909 161,108
Banco Bilbao Vizcaya (Reg'd) 5,568 200,568
Banco Central Hispan (Reg'd) 3,721 75,453
Banco Santander (Reg'd) 4,588 230,315
CONSTRUCTION
Fomento Const Y Contra 588 45,076
ENERGY & UTILITIES
Empresa Nac Electricid 6,839 387,285
Gas Natural Sdg Sa 1,341 208,916
Iberdrola Sa 19,807 181,227
Union Electrical Fenosa 12,958 77,973
INSURANCE
Corporation Mapfre (Reg'd) 947 53,003
INTERNATIONAL OIL
Repsol Sa 8,351 273,626
LIQUOR & TOBACCO
Tabacalera Sa Series 'A' (Reg'd) 1,599 60,630
NON-FERROUS METALS
Acerinox Sa (Reg'd) 401 40,557
PRODUCER GOODS
Zardoya-Otis 310 33,858
RAILROAD & SHIPPING
Autopistas Cesa 6,059 68,923
REAL PROPERTY
Vallehermoso Sa 2,815 52,325
TELEPHONE
Telefonica De Espana 24,037 332,867
----------
2,483,710
----------
SWITZERLAND -- 5.46%
BANKS
Cs Holding (Reg'd) 6,034 620,102
Schweiz Bangesellsch (Br) 566 614,870
Schweiz Bangesellsch (Reg'd) 252 57,380
Schweiz Bankverein (Reg'd) 700 143,267
CHEMICALS
Ciba-Geigy (Br) 120 105,332
Ciba-Geigy (Reg'd) 380 335,202
CONSTRUCTION
Holderbank Fn Glarus (Br) 135 103,833
Holderbank Fn Glarus Wts (Pur Br) * 55 50
CONSUMER DURABLES
Smh Ag Neuenburg (Reg'd) 475 62,334
Smh Ag Neuenburg (Br) 25 14,992
DRUGS & MEDICINE
Roche Holdings Genusscheine Npv 113 896,124
Roche Holdings (Br) 44 617,564
Sandoz (Reg'd) 835 766,314
ELECTRONICS
Bbc Brown Boveri (Br) 240 279,494
Sgs Holding (Br) 24 47,764
FOOD & AGRICULTURE
Merkur Hldg Ag (Reg'd) 80 17,590
Nestle Sa (Reg'd) 673 746,315
INSURANCE
Zurich Versicherun (Reg'd) 1,200 359,796
NON-FERROUS METALS
Alusuisse-Lonza Holdings (Reg'd) 108 85,788
PRODUCER GOODS
Sulzer Ag Ptg 13 6,947
----------
5,881,058
----------
UNITED KINGDOM -- 14.71%
AIR TRANSPORT
British Airways 44,575 322,505
BANKS
Abbey National 38,813 383,260
Barclays 34,087 391,104
Hsbc Holdings (UK Reg'd) 42,779 652,231
Hsbc Holdings (UK Reg'd) 24,871 388,464
LLoyds Bank 74,113 381,450
CHEMICALS
Boc Group 13,799 193,033
Imperial Chemical Industries 17,053 202,016
CONSTRUCTION
English China Clay 33,609 165,415
Rmc Group 19,470 299,571
Taylor Woodrow 91,386 166,716
DRUGS & MEDICINE
Glaxo Holdings 63,234 898,321
Smithkline Beecham/ Bec Unts (1bch 'B'
12.5P&1sbc Pfd) 22,566 245,953
Smithkline Beecham 'A' 24,860 274,043
Zeneca Group 17,984 347,908
ELECTRONICS
General Electric Co 59,140 325,964
ENERGY & UTILITIES
British Gas 123,228 485,962
National Power 34,132 238,205
Thames Water 26,744 233,358
FOOD & AGRICULTURE
Associated British Foods 33,128 189,793
Cadbury Schweppes 27,535 227,434
Kingfisher 11,117 93,551
Sainsbury (J) 32,305 197,116
Tesco 47,446 218,784
Unilever 14,698 301,910
INSURANCE
Prudential Corp 68,435 440,947
INTERNATIONAL OIL
British Petroleum 125,393 1,049,353
LIQUOR & TOBACCO
BAT Industries 67,568 595,342
Bass 24,550 274,056
Grand Metropolitan 47,103 339,333
Guinness 59,179 435,517
MEDIA
Reuters Holdings 39,031 357,537
MULTI-INDUSTRY
Hanson 107,145 320,230
Inchcape 11,605 44,865
PRODUCER GOODS
Btr * 78,087 398,873
Rolls Royce 54,712 160,548
Rtz Corp (Reg'd) 27,830 404,435
Smiths Industries 22,799 225,130
REAL PROPERTY
Mepc 15,356 94,175
RETAIL
Argos 17,988 166,452
Boots Co 16,552 150,594
Great Univ Stores 19,328 205,559
Marks & Spencer 53,864 376,332
Sears 50,391 81,367
STEEL
British Steel 37,990 95,995
TELEPHONE
British Telecom 130,594 717,771
Cable & Wireless 52,660 376,096
Vodafone Group 74,958 268,255
TRAVEL & RECREATION
Ladbroke Group 64,565 146,857
Thorn Emi 12,257 288,688
------------
15,838,374
------------
TOTAL COMMON STOCKS 102,871,344
(COST $95,345,672) ------------
TOTAL INVESTMENTS $107,690,899
(COST $100,165,227) ============
<FN>
* Non Income producing security
</TABLE>
<PAGE>
THE WOODWARD FUNDS
INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1995
Notes to Portfolio of Investments
At December 31, 1995, industry diversification of the Woodward
International Equity Fund investments was as follows:
<TABLE>
<CAPTION>
% of
Sector Diversification Investments
---------------------- -----------
<S> <C>
Banks/Finance 22.51%
Materials and Services 14.89
Consumer Non-Durables 14.01
Utilities 8.39
International Oil 6.87
Drugs and Medicine 5.96
Capital Goods 5.74
Electronics 5.73
Consumer Durables 4.52
Temporary Cash Investment 4.48
Transportation 3.47
Miscellaneous 2.33
Technology 0.59
Energy 0.51
------
Total Investments 100.00%
======
</TABLE>
<PAGE>
THE WOODWARD FUNDS
INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Commencement of Operations
The Woodward Funds (Woodward) was organized as a Massachusetts business
trust on April 21, 1987, and registered under the Investment Company Act of
1940, as amended, as an open-end investment company. As of December 31, 1995,
Woodward consisted of seventeen separate series. The Woodward International
Equity Fund (International Fund) commenced operations on December 3, 1994.
(2) Significant Accounting Policies
The following is a summary of significant accounting policies followed
in the preparation of the financial statements. The policies are in conformity
with generally accepted accounting principles for investment companies.
Following generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date
of the financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Investments
The International Fund values investment securities at market value
which is determined by a pricing service based upon quoted market prices or
dealer quotes at the close of the respective foreign securities exchange.
Securities for which market prices or dealer quotes are not readily available
are valued by the investment advisor, NBD Bank, (NBD) in accordance with
procedures approved by the Board of Trustees.
Investment security purchases and sales are accounted for on the day
after trade date.
Woodward invests in securities subject to repurchase agreements. Such
transactions are entered into only with institutions included on the Federal
Reserve System's list of institutions with whom the Federal Reserve open
market desk will do business. NBD, acting under the supervision of the Board
of Trustees, has established the following additional policies and procedures
relating to Woodward's investments in securities subject to repurchase
agreements: 1) the value of the underlying collateral is required to equal or
exceed 102% of the funds advanced under the repurchase agreement including
accrued interest; 2) collateral is marked to market daily by NBD to assure its
value remains at least equal to 102% of the repurchase agreement amount; and
3) funds are not disbursed by Woodward or its agent unless collateral is
presented or acknowledged by the collateral custodian.
Investment Income
Interest income is recorded daily on the accrual basis. Dividends are
recorded on the ex-dividend date or upon receipt of ex-dividend notification
in the case of certain foreign securities. Investment income is recorded net
of foreign taxes withheld where recovery of such taxes is uncertain.
Forward Foreign Currency Contracts
The International Fund may enter into a forward foreign currency
contract which is an agreement between two parties to buy and sell a currency
at a set price on a future date. The market value of the contract will
fluctuate with changes in currency exchange rates. The contract is
"marked-to-market" daily using the prevailing exchange rate and the change in
market value is recorded as an unrealized gain or loss. When the contract is
closed, a realized gain or loss is recorded equal to the difference between
the value of the contract at the time it was entered into and the value at the
time it was closed.
The International Fund may enter into forward foreign currency contracts
with the objective of minimizing its risk from adverse changes in the
relationship between currencies or to enhance income. The International Fund
may also enter into a forward contract in relation to a security denominated
in a foreign currency when it anticipates receipt in a foreign currency of
dividend payments in order to "lock in" the U.S. dollar price of a security or
the U.S. dollar equivalent of such dividend payments.
These contracts involve market risk in excess of the amounts reflected
in the International Fund's Statement of Assets and Liabilities. The face or
contract amount in U.S. dollars, as reflected in Footnote 6, reflects the
total exposure the fund has in that particular currency contract. Losses may
arise due to changes in the value of the foreign currency or if the
counterparty does not perform under the contract.
Foreign Currency Translations
The accounting records of the International Fund are maintained in U.S.
dollars. Foreign currency-denominated assets and liabilities are
"marked-to-market" daily using the prevailing exchange rate and the change in
value is recorded as an unrealized gain or loss. Upon receipt or payment, a
realized gain or loss is recorded equal to the difference between the original
value and the settlement value of the asset or liability. Purchases and sales
of securities, income, and expenses are translated into U.S. dollars at
prevailing exchange rate on the respective date of the transaction.
Net realized gains and losses on foreign currency transactions represent
gains and losses from sales and maturities of forward foreign currency
contracts, disposition of foreign currencies and currency gains and losses
realized between trade and settlement dates on securities transactions and
between the ex, pay and settlement dates on dividend income. Exchange rate
fluctuations on investments are not segregated in the statement of operations
from changes arising in market price movements. The effects of changes in
foreign currency exchange rates on investments in securities are included
within the net realized gain or loss on securities sold and net unrealized
appreciation or depreciation on investment securities held.
Federal Income Taxes
It is Woodward's policy to comply with the requirements of Subchapter M
of the Internal Revenue Code, as amended, applicable to regulated investment
companies and to distribute net investment income and realized gains to its
shareholders. Therefore, no federal income tax provision is required in the
accompanying financial statements.
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes primarily due to differing treatments for
foreign currency transactions, wash sales and post October 31 capital losses.
Also, due to the timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the net investment
income or realized gains (losses) were recorded by the Fund. Certain
book-to-tax timing differences for the Fund are reflected as excess
distributions in the Statement of Changes in Net Assets. These distributions
do not constitute a tax return of capital.
Shareholder Dividends
Dividends from net investment income are declared and paid annually. Net
realized capital gains are distributed annually. Distributions from net
investment income and net realized gains are made during each year to avoid
the 4% excise tax imposed on regulated investment companies by the Internal
Revenue Code.
Deferred Organization Costs
Organization costs are being amortized on a straight-line basis over the
five year period beginning with the commencement of operations of the Fund.
Expenses
Expenses are charged daily as a percentage of the Fund's assets.
Woodward monitors the rate at which expenses are charged to ensure that a
proper amount of expense is charged to income each year. This percentage is
subject to revision if there is a change in the estimate of the future net
assets of the International Fund or change in expectations as to the level of
actual expenses.
Concentration of Risk
Investing in securities of foreign issuers and currency transactions may
involve certain considerations and risks not typically associated with
investing in U.S. companies and U.S. government securities. These risks
include revaluation of currencies, adverse fluctuations in foreign currency
values and possible adverse political, social and economic developments,
including those particular to a specific industry, country or region, which
could cause the securities and their markets to be less liquid and price more
volatile than those of comparable U.S. companies and U.S. government
securities.
(3) Transactions with Affiliates
First of Michigan Corporation (FoM) and Essex National Securities, Inc.
(Essex) act as sponsors and co-distributors of Woodward's shares. Pursuant to
their Distribution Agreement with Woodward, FoM is entitled to receive
a fee at the annual rate of .005% of the International Fund's average net
assets and Essex is entitled to receive a fee at the annual rate of .10% of
the aggregate average net assets of Woodward's investment portfolios,
attributable to investments by clients of Essex.
NBD is the investment advisor pursuant to the Advisory Agreement. For
its advisory services to Woodward, NBD is entitled to a fee, computed daily
and payable monthly. Under the Advisory Agreement, NBD also provides Woodward
with certain administrative services, such as maintaining Woodward's general
ledger and assisting in the preparation of various regulatory reports. NBD
receives no additional compensation for such services.
A reorganization of Woodward and The Prairie Funds is being considered
by the Board of Trustees of both funds. In connection with the proposed
reorganization, the Board of Trustees of Woodward and the Board of Trustees of
Prairie must approve certain reorganization agreements. The transaction is
intended to be effected as a tax-free reorganization under the Internal
Revenue Code, so that none of the Fund's shareholders will recognize taxable
gains or losses as a result of the reorganization. A proxy
statement/prospectus describing the reorganization and the reasons therefore
will be sent to shareholders.
NBD, FoM, and Essex have agreed that they may waive their fees in whole
or in part; and, if in part, may specify the particular fund to which such
waiver relates as may be required to satisfy any expense limitation imposed by
state securities laws or other applicable laws. At present, no restrictive
expense limitation is imposed on Woodward. Restrictive limitations could be
imposed as a result of changes in current state laws and regulations in those
states where Woodward has qualified its shares, or by a decision of the
Trustees to qualify the shares in other states having restrictive expense
limitations. For the year ended December 31, 1995, NBD reimbursed the
International Fund for certain expenses in the amount of $51,707.
NBD is also compensated for its services as Woodward's Custodian,
Transfer Agent and Dividend Disbursing Agent, and is reimbursed for certain
out of pocket expenses incurred on behalf of Woodward.
On March 10, 1994, Woodward adopted the Woodward Funds Deferred
Compensation Plan (the "Plan"), an unfunded, nonqualified deferred
compensation plan. The Plan allows an individual trustee to elect to defer
receipt of all or a percentage of fees which otherwise would be payable for
services performed.
See Note 5 for a summary of fee rates and expenses pursuant to these
agreements.
<PAGE>
(4) Investment Securities Transactions
Information with respect to investment securities and security
transactions based on the aggregate cost of investments for federal income tax
purposes, excluding short-term securities, is as follows:
<TABLE>
<S> <C>
Gross Unrealized Gains $ 10,121,293
Gross Unrealized Losses (2,595,621)
------------
$ 7,525,672
============
Federal Income Tax Cost $100,165,227
Purchases $ 65,664,939
Sales, at value $ 1,353,172
</TABLE>
(5) Expenses
Following is a summary of total expense rates charged, advisory fee
rates payable to NBD, and amounts paid to NBD, FoM, and Essex pursuant to the
agreements described in Note 3 for the year ended December 31, 1995. The rates
shown are stated as a percentage of the Fund's average net assets.
<TABLE>
<CAPTION>
Effective Date
- - --------------
<S> <C>
Expense Rates:
January 1 1.15%
November 9 1.17%
NBD Advisory Fee:
January 1 0.75%
Amounts Paid:
Advisory Fee to NBD $529,312
Distribution Fees to FoM & Essex $ 4,063
Other
Fees & Out of Pocket Expenses to NBD $140,786
Expense reimbursements by NBD $(51,707)
</TABLE>
<PAGE>
(6) Forward Foreign Currency Contracts
As of December 31, 1995, the Fund had entered into two forward foreign
currency exchange contracts that obligate the Fund to deliver currencies at
specified future dates.
Outstanding contracts as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
U.S. Dollar U.S. Dollar
Currency To Value As Of Currency To Value as of Unrealized
Settlement Date Be Delivered Dec. 31, 1995 Be Received Dec. 31, 1995 Gain (Loss)
- - --------------- ------------ ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Jan. 2, 1996 770,501 $770,501 3,344,361 $770,234 $(267)
U.S. Dollars Finnish Marks
Jan. 3, 1996 5,349 (8,305) 8,253 (8,253) 52
G.B. Pounds U.S. Dollars
-------- -------- -----
$762,196 $761,981 $(215)
======== ======== =====
</TABLE>
<PAGE>
THE WOODWARD FUNDS
INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
The Financial Highlights present a per share analysis of how the International
Equity Fund's net asset values have changed during the periods presented.
Additional quantitative measures expressed in ratio form analyze important
relationships between certain items presented in the financial statements.
These Financial Highlights have been derived from the financial statements of
the International Equity Fund and other information for the periods presented.
<TABLE>
<CAPTION>
Year Ended Period ended
Dec. 31, 1995 Dec. 31, 1994
------------- -------------
<S> <C> <C>
Net asset value, beginning of period $ 10.01 $ 10.00
Income from investment operations:
Net investment income 0.10 0.01
Net realized and unrealized gains on investments 1.05 --
------------ -----------
Total from investment operations 1.15 0.01
------------ -----------
Less distributions:
From net investment income (0.11) --
In excess of realized gains (0.00) --
------------ -----------
Total distributions (0.11) --
------------ -----------
Net asset value, end of period $ 11.05 $ 10.01
============ ===========
Total Return (b) 11.47% 1.26%(a)
Ratios/Supplemental Data
Net assets, end of period $107,288,301 $36,545,470
Ratio of expenses to average net assets 1.16% 1.15%(a)
Ratio of net investment income to average net assets 1.43% 1.18%(a)
Ratio of expenses to average net assets without
reimbursed expenses 1.24% 1.92%(a)
Ratio of net investment income to average net assets
without reimbursed expenses 1.35% 0.41%(a)
Portfolio turnover rate 2.09% 0.30%
Average commission rate $ 0.05
<FN>
- - ----------------
(a) Annualized for periods less than one year for comparability purposes.
Actual annual values may be less than or greater than those shown.
(b) Total returns as presented do not include any applicable sales load.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees and Shareholders of
The Woodward International Equity Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of The Woodward International Equity
Fund as of December 31, 1995, and the related statement of operations for the
year then ended, the statements of changes in net assets and the financial
highlights for each of the periods from inception (as indicated in Note 1)
through December 31, 1995. 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 audit 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 physical counts and
confirmation of securities owned as of December 31, 1995, by inspection and
correspondence with custodians, banks 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 The Woodward International Equity Fund as of December 31, 1995,
the results of its operations for the year then ended, the changes in its net
assets and the financial highlights for each of the periods from inception (as
indicated in Note 1) through December 31, 1995 in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
February 19, 1996.
Exhibit (17)(h)
Prospectus APRIL 11, 1996
[PRAIRIE FUNDS LOGO]
The Prairie Funds are open-end, management investment companies. Through
this Prospectus, investors may invest in any of 14 separate funds (the "Funds"),
divided into five general fund types: Asset Allocation; Equity; Bond; Municipal
Bond; and Money Market.
First Chicago Investment Management Company ("FCIMCO" or the "Investment
Adviser") serves as each Fund's investment adviser and administrator. The
Investment Adviser has engaged ANB Investment Management and Trust Company
("ANB-IMC") to serve as sub-investment adviser to the International Equity Fund
and to provide day-to-day management of that Fund's investments.
Concord Financial Group, Inc. (the "Distributor") serves as each Fund's
distributor. By this Prospectus, Class A shares of each Fund, Class B shares of
each Fund other than the U.S. Government Money Market and Municipal Money Market
Funds, and Class I shares of each Fund other than the Money Market Funds, are
being offered.
Class A shares of each Fund, other than the Money Market Funds,
are subject to a sales charge imposed at the time of purchase and Class B shares
of each such Fund are subject to a contingent deferred sales charge imposed on
redemptions made within up to six years of purchase. Class A and Class B shares
are offered to any investor. Each 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. Class B shares of the Money Market Fund may be
acquired only through the exchange of Class B shares of the other Funds.
Class I shares are offered without a sales charge and are sold only to
qualified trust, custody and/or agency account clients of The First National
Bank of Chicago ("FNBC"), American National Bank and Trust Company ("ANB") or
their affiliates and to certain qualified employee benefit plans or other
programs.
Other differences between the Classes include the services offered to and
expenses borne by each Class and certain voting rights, as described herein.
Fund shares are not deposits or obligations of, or guaranteed by, any bank,
and are not federally insured by the Federal Deposit Insurance Corporation
("FDIC"), the Federal Reserve Board, or any other agency. Fund shares involve
certain investment risks, including the possible loss of principal. For all
Funds other than the Money Market Funds, investors should recognize that the
share price, yield and investment return of each Fund fluctuate and are not
guaranteed.
For the Money Market Funds, investors should recognize that an investment
in a Money Market Fund is neither insured nor guaranteed by the U.S. Government.
There can be no assurance that the Money Market Funds will be able to maintain a
stable net asset value of $1.00 per share.
This Prospectus sets forth concisely information about the Funds that an
investor should know before investing. It should be read and retained for future
reference.
The Statement of Additional Information, dated April 11, 1996, 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 Prairie Funds at Three First
National Plaza, Chicago, Illinois 60670, or call 1-800-224-4800.
----------------------------------------------
ASSET ALLOCATION FUNDS
The Managed
Assets Income Fund
The Managed
Assets Fund
EQUITY FUNDS
The Equity Income Fund
The Growth Fund
The Special Opportunities Fund
The International Equity Fund
BOND FUNDS
The Intermediate Bond Fund
The Bond Fund
The International Bond Fund
MUNICIPAL BOND FUNDS
The Intermediate Municipal
Bond Fund
The Municipal Bond Fund
MONEY MARKET FUNDS
The U.S. Government
Money Market Fund
The Money Market Fund
The Municipal
Money Market Fund
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
4 Fee Table
8 Condensed Financial Information
18 Highlights
22 Description of the Funds
27 Risk Factors
30 Alternative Purchase Methods
31 How to Buy Shares
34 Shareholder Services
35 How to Redeem Shares
38 Management of the Funds
40 Distribution Plans and
Shareholder
Services Plans
40 Dividends, Distributions and
Taxes
41 Performance Information
42 General Information
A-1 Appendix
The Prairie Funds
ASSET ALLOCATION FUNDS
These Funds will follow an asset allocation strategy by investing in equity
securities, fixed-income securities and short-term instruments of domestic and
foreign issuers:
The Managed Assets Income Fund
seeks to maximize current income; capital appreciation is a secondary, but
nonetheless important, goal.
The Managed Assets Fund
seeks to maximize total return, consisting of capital appreciation and current
income, without assuming undue risk.
EQUITY FUNDS
These Funds will invest principally in equity securities:
The Equity Income Fund
seeks to provide income; capital appreciation and growth of earnings are
secondary, but nonetheless important, goals. This Fund will invest primarily in
income-producing equity securities of domestic issuers.
The Growth Fund
seeks long-term capital appreciation. This Fund will invest primarily in equity
securities of domestic issuers believed by the Fund's investment adviser to have
above-average growth characteristics.
The Special Opportunities Fund
seeks long-term capital appreciation. This Fund will invest primarily in equity
securities of small- to medium-sized emerging growth domestic issuers that the
Fund's investment adviser believes are undervalued in the marketplace.
The International Equity Fund
seeks long-term capital appreciation. This Fund will invest primarily in equity
securities of foreign issuers.
BOND FUNDS
These Funds will invest principally in fixed-income securities:
The Intermediate Bond Fund
seeks to provide as high a level of current income as is consistent with the
preservation of capital. This Fund will invest primarily in a portfolio of U.S.
dollar denominated investment grade fixed-income securities of domestic and
foreign issuers which, under normal market conditions, will have a
dollar-weighted average maturity expected to range between three and ten years.
The Bond Fund
seeks to provide as high a level of current income as is consistent with the
preservation of capital. This Fund will invest primarily in a portfolio of U.S.
dollar denominated investment grade fixed-income securities of domestic and
foreign issuers, without regard to maturity.
The International Bond Fund
seeks to provide both long-term capital appreciation and current income. This
Fund will invest primarily in investment grade debt securities of foreign
issuers.
MUNICIPAL BOND FUNDS
These Funds will invest principally in Municipal Obligations:
The Intermediate Municipal Bond Fund
seeks to provide as high a level of current income exempt from Federal income
tax as is consistent with the preservation of capital. This Fund will invest
primarily in a portfolio of investment grade Municipal Obligations which, under
normal conditions, will have a dollar-weighted average maturity expected to
range between three and ten years.
The Municipal Bond Fund
seeks to provide as high a level of current income exempt from Federal income
tax as is consistent with the preservation of capital. This Fund will invest
primarily in a portfolio of investment grade Municipal Obligations without
regard to maturity.
MONEY MARKET FUNDS
These Funds will invest in various kinds of money market instruments and will
seek a stable net asset value of $1.00 per share:
The U.S. Government Money Market Fund
seeks to provide as high a level of current income as is consistent with the
preservation of capital and the maintenance of liquidity. This Fund will invest
only in short-term securities issued or guaranteed as to principal or interest
by the U.S. Government, its agencies and instrumentalities, and repurchase
agreements in respect of such securities.
The Money Market Fund
seeks to provide as high a level of current income as is consistent with the
preservation of capital and the maintenance of liquidity. This Fund will invest
in short-term money market instruments.
The Municipal Money Market Fund
seeks to provide as high a level of current income exempt from Federal income
tax as is consistent with the preservation of capital and the maintenance of
liquidity. This Fund will invest in short-term Municipal Obligations.
The Prairie Funds
Fee Table
<TABLE>
<CAPTION>
------------------------------ ------------------------- ---------
CLASS A CLASS B CLASS I
- - ------------------------------------------------------------------------------------------------------------------------
All Other
Money Intermediate All Funds All Funds
SHAREHOLDER Market Bond Other Intermediate Offering Offering
TRANSACTION EXPENSES Funds Funds Funds Bond Funds Class B Class I
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge
Imposed On Purchases
(as a percentage of offering price) None 3.00% 4.50% None None None
Sales Charge On
Reinvested Dividends None None None None None None
Maximum Deferred Sales
Charge Imposed On Redemptions
(as a percentage of the amount
subject to charge) None None* None* 3.00% 5.00% None
Redemption Fees None None None None None None
Exchange Fees None None None None None None
</TABLE>
* A contingent deferred sales charge of up to 1.00% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge as
part of an investment of $1 million or more.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
- - --------------------------------
Class A Shares
<TABLE>
<CAPTION>
EXAMPLE
An investor would pay the following
expenses on a $1,000 investment,
assuming
(1) 5% annual return and (2) redemption
TOTAL at the end of each time period:
MANAGEMENT 12b-1 OTHER OPERATING 5 10
FEES* FEES EXPENSES* EXPENSES* 1 YEAR 3 YEARS YEARS YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSET ALLOCATION FUNDS:
Managed Assets Income Fund 0.65% none 0.40% 1.05% $55 $77 $100 $167
Managed Assets Fund 0.65% none 0.40% 1.05% $55 $77 $100 $167
EQUITY FUNDS:
Equity Income Fund 0.50% none 0.40% 0.90% $54 $72 $ 93 $151
Growth Fund 0.65% none 0.40% 1.05% $55 $77 $100 $167
Special Opportunities Fund 0.70% none 0.40% 1.10% $56 $78 $103 $173
International Equity Fund 0.80% none 0.50% 1.30% $58 $84 $113 $195
BOND FUNDS:
Intermediate Bond Fund 0.40% none 0.40% 0.80% $38 $55 $ 73 $126
Bond Fund 0.55% none 0.40% 0.95% $54 $74 $ 95 $156
International Bond Fund 0.70% none 0.50% 1.20% $57 $81 $108 $184
MUNICIPAL BOND FUNDS:
Intermediate Municipal Bond Fund 0.40% none 0.40% 0.80% $38 $55 $ 73 $126
Municipal Bond Fund 0.40% none 0.40% 0.80% $53 $69 $ 87 $140
MONEY MARKET FUNDS:
U.S. Government Money Market Fund 0.40% none 0.40% 0.80% $8 $26 $44 $99
Money Market Fund 0.40% none 0.40% 0.80% $8 $26 $44 $99
Municipal Money Market Fund 0.40% none 0.30% 0.70% $7 $22 $39 $87
</TABLE>
* After expense reimbursements or fee waivers.
- - - THE PRAIRIE FUNDS
- - --------------------------------
Class B Shares
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT 12b-1 OTHER OPERATING
FEES* FEES EXPENSES* EXPENSES*
- - ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSET ALLOCATION FUNDS:
Managed Assets Income Fund 0.65% 0.75% 0.40% 1.80%
Managed Assets Fund 0.65% 0.75% 0.40% 1.80%
EQUITY FUNDS:
Equity Income Fund 0.50% 0.75% 0.40% 1.65%
Growth Fund 0.65% 0.75% 0.40% 1.80%
Special Opportunities Fund 0.70% 0.75% 0.40% 1.85%
International Equity Fund 0.80% 0.75% 0.50% 2.05%
BOND FUNDS:
Intermediate Bond Fund 0.40% 0.75% 0.40% 1.55%
Bond Fund 0.55% 0.75% 0.40% 1.70%
International Bond Fund 0.70% 0.75% 0.50% 1.95%
MUNICIPAL BOND FUNDS:
Intermediate Municipal Bond Fund 0.40% 0.75% 0.40% 1.55%
Municipal Bond Fund 0.40% 0.75% 0.40% 1.55%
MONEY MARKET FUNDS:
Money Market Fund 0.40% 0.75% 0.40% 1.55%
<CAPTION>
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:
10
1 YEAR 3 YEARS 5 YEARS YEARS+
- - -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSET ALLOCATION FUNDS:
Managed Assets Income Fund $68/$18** $87/$57** $117/$ 97** $183
Managed Assets Fund $68/$18** $87/$57** $117/$ 97** $183
EQUITY FUNDS:
Equity Income Fund $67/$17** $82/$52** $110/$ 90** $166
Growth Fund $68/$18** $87/$57** $117/$ 97** $183
Special Opportunities Fund $69/$19** $88/$58** $120/$100** $188
International Equity Fund $71/$21** $94/$64** $130/$110** $210
BOND FUNDS:
Intermediate Bond Fund $46/$16** $69/$49** $ 94/$ 84** $146
Bond Fund $67/$17** $84/$54** $112/$ 92** $172
International Bond Fund $70/$20** $91/$61** $125/$105** $199
MUNICIPAL BOND FUNDS:
Intermediate Municipal Bond Fund $46/$16** $69/$49** $ 94/$84** $146
Municipal Bond Fund $66/$16** $79/$49** $104/$84** $155
MONEY MARKET FUNDS:
Money Market Fund $16 $49 $84 $155
</TABLE>
* After expense reimbursements or fee waivers.
** Assuming no redemption of Class B shares.
+ Ten-year figures assume conversion of Class B shares to Class A shares.
- - --------------------------------
Class I Shares
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT 12b-1 OTHER OPERATING
FEES* FEES EXPENSES* EXPENSES*
- - ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSET ALLOCATION FUNDS:
Managed Assets Income Fund 0.65% none 0.15% 0.80%
Managed Assets Fund 0.65% none 0.15% 0.80%
EQUITY FUNDS:
Equity Income Fund 0.50% none 0.15% 0.65%
Growth Fund 0.65% none 0.15% 0.80%
Special Opportunities Fund 0.70% none 0.15% 0.85%
International Equity Fund 0.80% none 0.25% 1.05%
BOND FUNDS:
Intermediate Bond Fund 0.40% none 0.15% 0.55%
Bond Fund 0.55% none 0.15% 0.70%
International Bond Fund 0.70% none 0.25% 0.95%
MUNICIPAL BOND FUNDS:
Intermediate Municipal Bond Fund 0.40% none 0.15% 0.55%
Municipal Bond Fund 0.40% none 0.15% 0.55%
<CAPTION>
EXAMPLE
An investor would pay the following
expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption
at the end of each time period:
10
1 YEAR 3 YEARS 5 YEARS YEARS
<S> <C> <C> <C> <C>
ASSET ALLOCATION FUNDS:
Managed Assets Income Fund $8 $26 $44 $99
Managed Assets Fund $8 $26 $44 $99
EQUITY FUNDS:
Equity Income Fund $7 $21 $36 $81
Growth Fund $8 $26 $44 $99
Special Opportunities Fund $9 $27 $47 $105
International Equity Fund $11 $33 $58 $128
BOND FUNDS:
Intermediate Bond Fund $6 $18 $31 $69
Bond Fund $7 $22 $39 $87
International Bond Fund $10 $30 $53 $117
MUNICIPAL BOND FUNDS:
Intermediate Municipal Bond Fund $6 $18 $31 $69
Municipal Bond Fund $6 $18 $31 $69
</TABLE>
* After expense reimbursements or fee waivers.
THE AMOUNTS LISTED IN THE EXAMPLES SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
INDICATED. MOREOVER, WHILE EACH EXAMPLE ASSUMES A 5% ANNUAL RETURN, A FUND'S
ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN GREATER OR LESS
THAN 5%.
The purpose of the foregoing tables is to assist investors in understanding
the costs and expenses that investors in a Fund will bear, directly or
indirectly, the payment of which will reduce investors' annual return. With
respect to each Fund, Total Operating Expenses noted above have been restated to
reflect an undertaking by the Investment Adviser that if, in the fiscal year
ending December 31, 1996, Fund expenses, including the investment advisory fee,
exceed the Total Operating Expenses noted in the tables above for such Fund for
the fiscal year, the Investment Adviser may waive its investment advisory fee or
bear certain other expenses to the extent of such excess expense. Long-term
investors in Class B shares of a Fund could pay more in 12b-1 fees than the
economic equivalent of paying a front-end sales charge. FCIMCO, FNBC, ANB and
their affiliates 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 tables. See "How to Buy Shares," "Management of the
Funds" and "Distribution Plans and Shareholder Services Plans." The Other
Expenses and Total Operating Expenses noted in the foregoing tables for each
Fund, without expense reimbursements or fee waivers, and estimated 1996 Total
Operating Expenses are as follows:
- - --------------------------------
Class A Shares
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING ESTIMATED 1996 TOTAL
EXPENSES EXPENSES OPERATING EXPENSES
<S> <C> <C> <C>
ASSET ALLOCATION FUNDS:
Managed Assets Income Fund 0.89% 1.54% 1.53%
Managed Assets Fund 2.50% 3.15% 2.61%
EQUITY FUNDS:
Equity Income Fund 0.94% 1.44% 1.00%
Growth Fund 0.74% 1.39% 1.18%
Special Opportunities Fund 1.86% 2.56% 1.31%
International Equity Fund 1.16% 1.96% 1.45%
BOND FUNDS:
Intermediate Bond Fund 0.75% 1.15% 0.95%
Bond Fund 1.02% 1.57% 1.18%
International Bond Fund 2.95% 3.65% 2.16%
MUNICIPAL BOND FUNDS:
Intermediate Municipal Bond Fund 0.57% 0.97% 0.88%
Municipal Bond Fund 0.64% 1.04% 0.90%
MONEY MARKET FUNDS:
U.S. Government Money Market Fund 0.67% 1.07% 1.25%
Money Market Fund 0.67% 1.07% 1.17%
Municipal Money Market Fund 0.54% 0.94% 0.94%
</TABLE>
- THE PRAIRIE FUNDS
Class B Shares
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING ESTIMATED 1996 TOTAL
EXPENSES EXPENSES OPERATING EXPENSES
<S> <C> <C> <C>
ASSET ALLOCATION FUNDS:
Managed Assets Income Fund 0.72% 2.12% 2.28%
Managed Assets Fund 5.44% 6.84% 3.36%
EQUITY FUNDS:
Equity Income Fund 1.40% 2.65% 1.75%
Growth Fund 1.20% 2.60% 1.93%
Special Opportunities Fund 8.07% 9.52% 2.06%
International Equity Fund 2.28% 3.83% 2.20%
BOND FUNDS:
Intermediate Bond Fund 0.63% 1.78% 1.70%
Bond Fund 2.61% 3.91% 1.93%
International Bond Fund 7.24% 8.69% 2.91%
MUNICIPAL BOND FUNDS:
Intermediate Municipal Bond Fund 0.86% 2.01% 1.63%
Municipal Bond Fund 0.89% 2.04% 1.65%
MONEY MARKET FUNDS:
Money Market Fund 0.87% 2.02% 1.92%
</TABLE>
- - --------------------------------
Class I Shares
<TABLE>
<CAPTION>
TOTAL
OTHER OPERATING ESTIMATED 1996 TOTAL
EXPENSES EXPENSES OPERATING EXPENSES
<S> <C> <C> <C>
ASSET ALLOCATION FUNDS:
Managed Assets Income Fund 0.57% 1.22% 1.28%
Managed Assets Fund 3.47% 4.12% 2.36%
EQUITY FUNDS:
Equity Income Fund 0.27% 0.77% 0.75%
Growth Fund 0.27% 0.92% 0.93%
Special Opportunities Fund 0.39% 1.09% 1.06%
International Equity Fund 0.58% 1.38% 1.20%
BOND FUNDS:
Intermediate Bond Fund 0.27% 0.67% 0.70%
Bond Fund 0.32% 0.87% 0.93%
International Bond Fund 1.23% 1.93% 1.91%
MUNICIPAL BOND FUNDS:
Intermediate Municipal Bond Fund 0.28% 0.68% 0.63%
Municipal Bond Fund 0.27% 0.67% 0.65%
</TABLE>
Condensed Financial Information
The information in the following tables has been audited by Ernst & Young
LLP, each Fund's independent auditors, whose report thereon appear in the
Statement of Additional Information. Further financial data and related notes
are included in the Statement of Additional Information, available upon request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data, total investment
return, ratios to average net assets and other supplemental data for a share of
Class A, Class B and Class I of the Managed Asset Income Fund (including its
predecessor fund--First Prairie Diversified Asset Fund) for the periods
indicated. This information has been derived from information provided in the
Funds' financial statements.
MANAGED ASSETS INCOME FUND(1):
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------
Fiscal Year Ended December 31,
--------------------------------------------------------
1986(2) 1987 1988 1989 1990 1991
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning
period $10.00 $10.75 $9.73 $10.66 $11.54 $10.79
INVESTMENT OPERATIONS:
Investment income-net 0.63 0.70 0.78 0.88 0.86 0.83
Net realized and unrealized
gain (loss) on investments 0.70 (0.85) 0.92 1.10 (0.54) 1.77
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS 1.33 (0.15) 1.70 1.98 0.32 2.60
DIVIDENDS AND DISTRIBUTIONS:
Dividends from investment
income-net (0.58) (0.77) (0.74) (0.89) (0.88) (0.83)
Distributions from net realized
gain on investments -- (0.10) (0.03) (0.21) (0.19) --
TOTAL DIVIDENDS AND
DISTRIBUTIONS (0.58) (0.87) (0.77) (1.10) (1.07) (0.83)
Net asset value, end of period $10.75 $9.73 $10.66 $11.54 $10.79 $12.56
TOTAL INVESTMENT RETURN(7) 13.59%(8) (1.73%) 17.78% 19.08% 2.94% 24.87%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets -- -- -- -- -- --
Ratio of net investment income
to average net assets 5.90%(8) 6.61% 7.38% 7.74% 7.71% 7.04%
Decrease reflected in above
expense ratios due to
undertakings 1.41%(8) 2.69% 2.62% 2.96% 2.58% 2.16%
Portfolio Turnover Rate 15.19%(8) 23.99% 15.71% 49.46% 29.97% 26.02%
Net Assets, end of period
(000's omitted) $2,212 $4,989 $5,900 $7,407 $8,950 $14,038
<CAPTION>
CLASS A
--------------------------------------------
Fiscal Year Ended December 31,
--------------------------------------------
1992 1993 1994 1995
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning
period $12.56 $12.68 $13.11 $12.13
INVESTMENT OPERATIONS:
Investment income-net 0.79 0.72 0.73 0.64
Net realized and unrealized
gain (loss) on investments 0.26 0.61 (0.98) 2.48
TOTAL FROM INVESTMENT
OPERATIONS 1.05 1.33 (0.25) 3.12
DISTRIBUTIONS:
Dividends from investment
income-net (0.77) (0.72) (0.72) (0.68)
Dividends from net realized
gain on investments (0.16) (0.18) (0.01) (0.03)
TOTAL DISTRIBUTIONS (0.93) (0.90) (0.73) (0.71)
Net asset value, end of period $12.68 $13.11 $12.13 $14.54
TOTAL INVESTMENT RETURN(7) 8.68% 10.70% (1.92%) 26.40%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets 0.02% 0.39% 0.63% 1.17%
Ratio of net investment income
to average net assets 6.24% 5.54% 5.77% 4.88%
Decrease reflected in above
expense ratios due to
undertakings 1.86% 1.26% 1.04% 0.37%
Portfolio Turnover Rate 22.14% 16.40% 28.69% 8.23%
Net Assets, end of period
(000's omitted) $34,262 $51,586 $44,367 $51,997
<CAPTION>
CLASS I
--------
CLASS B Fiscal
------------------ Period
Fiscal Period Ended Ended
------------------------ ------
December December
December 31, 31,
2, 1994(3) 1995(4) 1995(5)
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning
period $13.05 $12.42 $12.42
INVESTMENT OPERATIONS:
Investment income-net 0.51 0.45 0.57
Net realized and unrealized
gain (loss) on investments (0.91) 2.17 2.18
TOTAL income (loss) from
INVESTMENT OPERATIONS (0.40) 2.62 2.75
DIVIDENDS AND DISTRIBUTIONS:
Dividends from investment
income-net (0.54) (0.45) (0.57)
Distributions from net realized
gain on investments (0.01) (0.03) (0.03)
TOTAL DIVIDENDS AND
DISTRIBUTIONS (0.55) (0.48) (0.60)
Net asset value, end of period $12.10(6) $14.56 $14.57
TOTAL INVESTMENT RETURN(7) (3.13%)(8) 21.42% 22.55%(8)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets 1.21%(9) 1.92% 0.77%(9)
Ratio of net investment income
to average net assets 4.10%(9) 3.89% 5.12%(9)
Decrease reflected in above
expense ratios due to
undertakings 0.96%(9) 0.20% 0.45%(9)
Portfolio Turnover Rate 28.69% 8.23% 8.23%(8)
Net Assets, end of period
(000's omitted) -- $2,175 $1,294
</TABLE>
(1) On March 3, 1995, all of the assets and liabilities of First Prairie
Diversified Asset Fund were transferred to the Managed Assets Income Fund in
exchange for Class A shares of the Managed Assets Income Fund. The financial
data provided above for periods prior to such date is for First Prairie
Diversified Asset Fund.
(2) From January 23, 1986 (commencement of operations) to December 31, 1986.
(3) For the period February 8, 1994 (initial offering date of Class B
shares) through December 2, 1994. On December 2, 1994, the Fund terminated its
offering of the then-existing Class B shares and converted Class B shares
outstanding at that time to Class A shares. The Fund commenced offering Class B
shares under the current sales load structure on March 3, 1995.
(4) From March 3, 1995 (re-offering date of Class B shares) to December 31,
1995.
(5) From March 3, 1995 (initial offering date of Class I shares) to December 31,
1995.
(6) Conversion to Class A shares. See note 3 above.
(7) Excludes sales charges.
(8) Not annualized.
(9) Annualized.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data, total investment
return, ratios to average net assets and other supplemental data for a share of
Class A, Class B and Class I of the Intermediate Bond Fund for the periods
indicated. This information has been derived from information provided in the
Funds' financial statements.
INTERMEDIATE BOND FUND(1):
<TABLE>
<CAPTION>
CLASS A CLASS B
---------------------------------- ----------------------
Fiscal Fiscal Eleven-Month Fiscal Fiscal
Period Year Period Period Period
Ended Ended Ended Ended Ended
January January December December December
31, 31, 31, 2, 31,
1994(3) 1995 1995(4) 1994(5) 1995(6)
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period $8.36 $8.25 $7.68 $8.16 $8.13
INVESTMENT OPERATIONS:
Investment income-net 0.47 0.52 0.44 0.40 0.24
Net realized and unrealized
gain (loss) on investments (0.09) (0.57) 0.72 (0.55) 0.27
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS 0.38 (0.05) 1.16 (0.15) 0.51
DIVIDENDS AND DISTRIBUTIONS:
Dividends from investment
income-net (0.47) (0.52) (0.44) (0.40) (0.24)
Distributions from net realized
gain on investments (0.02) -- (0.22) -- (0.22)
TOTAL DIVIDENDS AND
DISTRIBUTIONS (0.49) (0.52) (0.66) (0.40) (0.46)
Net asset value, end of period $8.25 $7.68 $8.18 $7.61(7) $8.18
TOTAL INVESTMENT RETURN(8) 5.16%(9) (0.45%) 15.55%(10) (1.82%)(10) 6.41%(10)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets -- 0.04% 0.94%(9) -- 1.60%(9)
Ratio of net investment income
to average net assets 5.96%(9) 6.70% 5.72%(9) 6.48%(9) 5.00%(9)
Decrease reflected in above
expense ratios due to
undertakings 3.67%(9) 2.74% 0.21%(9) 2.58%(9) 0.18%(9)
Portfolio Turnover Rate 26.54%(10) 71.65% 173.26%(10) 71.65%(10) 173.26%(10)
Net Assets, end of period (000's
omitted) $65 $69 $6,095 -- $259
<CAPTION>
CLASS I (2)
--------------------------------------
Fiscal Eleven-Month
Fiscal Year Period
Period Ended Ended
Ended January December
January 31, 31, 31,
1994(3) 1995 1995(4)
<S> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period $8.36 $8.25 $7.68
INVESTMENT OPERATIONS:
Investment income-net 0.47 0.52 0.47
Net realized and unrealized
(loss) on investments (0.09) (0.57) 0.72
TOTAL GAIN (LOSS) FROM
INVESTMENT OPERATIONS 0.38 (0.05) 1.19
DIVIDENDS AND DISTRIBUTIONS:
Dividends from investment
income-net (0.47) (0.52) (0.47)
Distributions from net realized
gain on investments (0.02) -- (0.22)
TOTAL DIVIDENDS AND
DISTRIBUTIONS (0.49) (0.52) (0.69)
Net asset value, end of period $8.25 $7.68 $8.18
TOTAL INVESTMENT RETURN(8) 5.16%(9) (0.48%) 15.90%(10)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets -- 0.04% 0.55%(9)
Ratio of net investment income
to average net assets 6.21%(9) 6.70% 6.34%(9)
Decrease reflected in above
expense ratios due to
undertakings 2.64%(9) 2.66% 0.12%(9)
Portfolio Turnover Rate 26.54% 71.65% 173.26%(10)
Net Assets, end of period (000's
omitted) $5,128 $7,101 $191,930
</TABLE>
(1) On January 17, 1995, the management policies of the Intermediate Bond Fund
were changed as described under "General Information."
(2) Formerly, Class F shares.
(3) From March 5, 1993 (commencement of operations) to January 31, 1994.
(4) Effective February 1, 1995, the Fund changed its fiscal year-end from
January 31 to December 31. The figures presented are from February 1, 1995
to December 31, 1995.
(5) For the period February 8, 1994 (initial offering date of Class B
shares) through December 2, 1994. On December 2, 1994, the Fund terminated its
offering of the then-existing Class B shares and converted Class B shares
outstanding at that time to Class A shares. The Fund commenced offering Class B
shares under the current sales load structure on May 31, 1995.
(6) From May 31, 1995 (re-offering date of Class B shares) to December 31,
1995.
(7) Conversion to Class A shares. See note 5 above.
(8) Excludes sales charges.
(9) Annualized.
(10) Not annualized.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data, total investment
return, ratios to average net assets and other supplemental data for a share of
Class A, Class B and Class I of the Intermediate Municipal Bond Fund (including
its predecessor fund--the Intermediate Series of First Prairie Municipal Bond
Fund, Inc.) for the periods indicated. This information has been derived from
information provided in the Funds' financial statements.
INTERMEDIATE MUNICIPAL BOND FUND(1):
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------
Ten-
Month
Period
Ended
Fiscal Year Ended February 28/29, December
----------------------------------------------------------- 31,
1989(2) 1990 1991 1992 1993 1994 1995 1995(3)
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period $11.46 $11.43 $11.65 $11.95 $12.25 $12.79 $12.18 $11.79
INVESTMENT OPERATIONS:
Investment income-net 0.79 0.78 0.80 0.76 0.64 0.61 0.55 0.44
Net realized and
unrealized gain
(loss) on investments (0.03) 0.22 0.31 0.37 0.68 0.01 (0.36) 0.56
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS 0.76 1.00 1.11 1.13 1.32 0.62 0.19 1.00
DIVIDENDS AND DISTRIBUTIONS:
Dividends from
investment income-net (0.79) (0.78) (0.80) (0.76) (0.64) (0.61) (0.55) (0.44)
Distributions from net
realized gain on
investments -- -- (0.01) (0.07) (0.14) (0.62) (0.03) (0.10)
TOTAL DIVIDENDS AND
DISTRIBUTIONS (0.79) (0.78) (0.81) (0.83) (0.78) (1.23) (0.58) (0.54)
Net asset value, end
of period $11.43 $11.65 $11.95 $12.25 $12.79 $12.18 $11.79 $12.25
TOTAL INVESTMENT
RETURN(9) 6.82%(10) 9.00% 9.94% 9.78% 11.26% 4.94% 1.64% 8.58%(11)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets -- -- -- -- -- 0.06% 0.29% 0.83%(10)
Ratio of net
investment income to
average net assets 6.83%(10) 6.62% 6.76% 6.15% 5.16% 4.78% 4.73% 4.30%(10)
Decrease reflected in
above expense ratios
due to undertakings 2.25%(10) 2.75% 2.75% 1.72% 1.31% 1.21% 1.09% 0.14%(10)
Portfolio Turnover
Rate 101.17%(11) 46.68% 12.22% 86.91% 63.67% 167.95% 128.02% 44.75%(11)
Net Assets, end of
period (000's
omitted) $2,593 $4,582 $7,251 $18,310 $27,885 $28,826 $17,243 $17,777
<CAPTION>
CLASS B CLASS I
--------------------------------------------------- -----------------------
Ten- Ten-
Month Month
Fiscal Period Fiscal Period
Period Period Period Ended Period Ended
Ended Ended Ended December Ended December
February December February 31, February 31,
28, 1994(4) 2, 1994(5) 28, 1995(6) 1995(3) 28, 1995(7) 1995(3)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period $12.32 $12.18 $11.57 $11.80 $11.57 $11.80
INVESTMENT OPERATIONS:
Investment income-net 0.03 0.37 0.04 0.37 0.04 0.47
Net realized and
unrealized gain
(loss) on investments (0.14) (0.72) 0.23 0.55 0.23 0.55
TOTAL INCOME (LOSS) FROM INVESTMENT
OPERATIONS (0.11) (0.35) 0.27 0.92 0.27 1.02
DIVIDENDS AND DISTRIBUTIONS:
Dividends from
investment income-net (0.03) (0.37) (0.04) (0.37) (0.04) (0.47)
Distributions from net
realized gain on
investments -- (0.03) -- (0.10) -- (0.10)
TOTAL DIVIDENDS AND
DISTRIBUTIONS (0.03) (0.40) (0.04) (0.47) (0.04) (0.57)
Net asset value, end
of period $12.18 $11.43(8) $11.80 $12.25 $11.80 $12.25
TOTAL INVESTMENT
RETURN(9) (0.93%)(11) (2.98%) 2.30%(11) 7.75% 2.37%(11) 8.76%(11)
RATIOS/SUPPLEMENTAL DATE
Ratio of expenses to
average net assets 0.75%(10) 0.76%(10) 1.36%(10) 1.71% 0.50%(10) 0.55%(10)
Ratio of net
investment income to
average net assets 1.68%(10) 4.03%(10) 3.72%(10) 3.36%(10) 4.79%(10) 4.78%(10)
Decrease reflected in
above expense ratios
due to undertakings 2.25%(10) 1.24%(10) 0.28%(10) 0.30%(10) 0.10%(10) 0.13%(10)
Portfolio Turnover
Rate 167.95% 128.02% 128.02% 44.75%(11) 128.02% 44.75%(11)
Net Assets, end of
period (000's
omitted) $12 -- $6 341 $365,801 $373,753
</TABLE>
(1) On January 31, 1995, all of the assets and liabilities of the Intermediate
Series of First Prairie Municipal Bond Fund, Inc. were transferred to the
Intermediate Municipal Bond Fund in exchange for Class A shares of the
Intermediate Municipal Bond Fund. The financial data provided above for
periods prior to such date is for the Intermediate Series of First Prairie
Municipal Bond Fund, Inc.
(2) From March 1, 1988 (commencement of operations) to February 28, 1989.
(3) Effective March 1, 1995, the Fund changed its fiscal year-end from February
28/29 to December 31. The figures presented are from March 1, 1995 to
December 31, 1995.
(4) For the period February 8, 1994 (initial offering date of Class B
shares) to February 28, 1994.
(5) For the period March 1, 1994 through December 2, 1994. On December 2, 1994,
the Fund terminated its offering of the then-existing Class B shares and
converted Class B shares outstanding at that time to Class A shares. The
Fund commenced offering Class B shares under the current sales load
structure on January 30, 1995. See note 5 below.
(6) For the period January 30, 1995 (re-offering date of Class B shares) to
February 28, 1995.
(7) For the period January 30, 1995 (initial offering date of Class I
shares) to February 28, 1995.
(8) Conversion to Class A shares. See note 5 above.
(9) Excludes sales charges.
(10) Annualized.
(11) Not annualized.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data, total investment
return, ratios to average net assets and other supplemental data for a share of
Class A, Class B and Class I of the Municipal Bond Fund for the periods
indicated. This information has been derived from information provided in the
Funds' financial statements.
MUNICIPAL BOND FUND(1):
<TABLE>
<CAPTION>
Fiscal Year Ended February 28/29
----------------------------------------------------------
1989(2) 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period $11.94 $11.82 $11.77 $12.10 $12.49 $13.25 $12.13
INVESTMENT OPERATIONS:
Investment income-net 0.89 0.81 0.81 0.76 0.70 0.63 0.60
Net realized and unrealized
gain (loss) on investments (0.12) 0.28 0.33 0.47 1.01 (0.15) (0.07)
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS 0.77 1.09 1.14 1.23 1.71 0.48 0.53
DIVIDENDS AND DISTRIBUTIONS:
Dividends from investment
income-net (0.89) (0.81) (0.81) (0.76) (0.70) (0.63) (0.60)
Distributions from net realized
gain on investments -- (0.33) -- (0.08) (0.25) (0.96) --
Distributions from excess net
realized gain on investments -- -- -- -- -- (0.01) --
TOTAL DIVIDENDS AND
DISTRIBUTIONS (0.89) (1.14) (0.81) (0.84) (0.95) (1.60) (0.60)
Net asset value, end of period $11.82 $11.77 $12.10 $12.49 $13.25 $12.13 $12.06
TOTAL INVESTMENT RETURN(9) 6.82%(10) 9.39% 10.13% 10.50% 14.37% 3.70% 4.45%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets -- -- -- -- -- -- 1.98%
Ratio of net investment income
to average net assets 7.46%(10) 6.60% 6.87% 5.99% 5.49% 4.85% 5.09%
Decrease reflected in above
expense ratios due to
undertakings 2.25%(10) 2.75% 2.75% 2.75% 1.59% 1.44% 1.91%
Portfolio Turnover Rate 36.19%(11) 85.07% 32.40% 66.28% 88.53% 175.06% 60.78%
Net Assets, end of period
(000's omitted) $673 $1,192 $2,244 $6,591 $11,290 $9,234 $6,840
<CAPTION>
CLASS A CLASS I
-------- CLASS B -------------------
------------------------------ Ten-
Ten- Fiscal Fiscal Fiscal Month
Month Year Period Period Period
Period Ended Ended Ended Ended
Ended February December December February December
December 28, 2, 31, 28, 31,
31, 1995(3) 1994(4) 1994(5) 1995(6) 1995(7) 1995(3)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period $12.06 $12.37 $12.14 $12.17 $12.06 $12.06
INVESTMENT OPERATIONS:
Investment income-net 0.48 0.03 0.41 0.34 0.05 0.52
Net realized and unrealized
gain (loss) on investments 0.82 (0.23) (0.70) 0.72 -- 0.81
TOTAL INCOME GAIN (LOSS) FROM
INVESTMENT OPERATIONS 1.30 (0.20) (0.29) 1.06 0.05 1.33
DIVIDENDS AND DISTRIBUTIONS:
Dividends from investment
income-net (0.48) (0.03) (0.41) (0.34) (0.05) (0.52)
Distributions from net realized
gain on investments (0.24) -- -- (0.24) -- (0.24)
Distributions from excess net
realized gain on investments -- -- -- -- -- --
TOTAL DIVIDENDS AND
DISTRIBUTIONS (0.72) (0.03) (0.41) (0.58) (0.05) (0.76)
Net asset value, end of period $12.64 $12.14 $11.44 $12.65 $12.06 $12.63
TOTAL INVESTMENT RETURN(9) 10.95%(11) (1.64%)(11) (4.30%) 8.81%(11) 0.39%(11) 11.20%(11)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets 0.89%(10) 0.50%(10) 3.18%(10) 1.66%(10) 0.65%(10) 0.54%(10)
Ratio of net investment income
to average net assets 4.57%(10) 4.10%(10) 4.51%(10) 3.61%(10) 5.45%(10) 4.95%(10)
Decrease reflected in above
expense ratios due to
undertakings 0.15%(10) 2.41%(10) 2.67%(10) 0.38%(10) 0.14%(10) 0.13%(10)
Portfolio Turnover Rate 69.31%(11) 175.06% 60.78% 69.31%(11) 60.78% 69.31%(11)
Net Assets, end of period
(000's omitted) $7,426 $2 -- $238 $220,143 $240,160
</TABLE>
(1) On September 12, 1989 and on January 17, 1995, the management policies of
the Municipal Bond Fund were changed as described under "General
Information."
(2) From March 1, 1988 (commencement of operations) to February 28, 1989.
(3) Effective March 1, 1995, the Fund changed its fiscal year-end from February
28/29 to December 31. The figures presented are from March 1, 1995 to
December 31, 1995.
(4) From February 8, 1994 (commencement of initial offering of Class B
shares) to February 28, 1994.
(5) For the period March 1, 1994 through December 2, 1994. On December 2, 1994,
the Fund terminated its offering of the then-existing Class B shares and
converted Class B shares outstanding at that time to Class A shares. The
Fund commenced offering Class B shares under the current sales load
structure on April 4, 1995.
(6) From April 4, 1995 (re-offering date of Class B shares) to December 31,
1995.
(7) From February 1, 1995 (commencement of initial offering of Class I) to
February 28, 1995.
(8) Conversion to Class A shares. See note 5 above.
(9) Excludes sales charges.
(10) Annualized.
(11) Not annualized.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data, total investment
return, ratios to average net assets and other supplemental data for a share of
the U.S. Government Money Market Fund (including its predecessor fund--the
Government Money Market Series of First Prairie Money Market Fund) for the
periods indicated. This information has been derived from information provided
in the Funds' financial statements for its U.S. Government Money Market Series.
U.S. GOVERNMENT MONEY MARKET FUND(1):
<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
------------------------------------------------------
1987(2) 1988 1989 1990 1991
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period $1.0000 $1.0004 $1.0001 $1.0000 $1.0000
INVESTMENT OPERATIONS:
Investment income-net 0.0409 0.0652 0.0811 0.0715 0.0498
Net realized gain (loss) on
investments 0.0004 -- -- -- --
TOTAL INCOME FROM
INVESTMENT OPERATIONS 0.0413 0.0652 0.0811 0.0715 0.0498
DIVIDENDS AND DISTRIBUTIONS:
Dividends from investment
income-net (0.0409) (0.0652) (0.0811) (0.0715) (0.0498)
Distributions from net realized gain
on investments -- (0.0003) (0.0001) -- --
TOTAL DIVIDENDS AND DISTRIBUTIONS (0.0409) (0.0655) (0.0812) (0.0715) (0.0498)
CAPITAL CONTRIBUTION FROM AN
AFFILIATE OF THE INVESTMENT
ADVISER -- -- -- -- --
Net asset value, end of period $1.0004 $1.0001 $1.0000 $1.0000 $1.0000
TOTAL INVESTMENT RETURN 6.21%(3) 6.75% 8.43% 7.39% 5.10%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets 0.56%(3) 0.80% 0.93% 0.93% 0.90%
Ratio of net investment income to
average net assets 6.11%(3) 6.56% 8.05% 7.09% 4.97%
Decrease reflected in above expense
ratios due to expense
reimbursements 0.42(3) 0.17% 0.02% -- --
Net Assets, end of period (000's
omitted) $99,904 $141,348 $272,578 $777,257 $990,897
<CAPTION>
1992 1993 1994 1995
<S> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period $1.0000 $1.0000 $0.9999 $0.9996
INVESTMENT OPERATIONS:
Investment income-net 0.0283 0.0249 0.0379 0.0498
Net realized gain (loss) on
investments -- (0.0001) (0.0083) 0.0001
TOTAL INCOME FROM INVESTMENT OPERATIONS 0.0283 0.0248 0.0296 0.0499
DIVIDENDS AND DISTRIBUTIONS:
Dividends from investment
income-net (0.0283) (0.0249) (0.0379) (0.0498)
Distributions from net realized gain on
investments -- -- -- --
TOTAL DIVIDENDS AND DISTRIBUTIONS (0.0283) (0.0249) (0.0379) (0.0498)
CAPITAL CONTRIBUTION FROM AN
AFFILIATE OF THE INVESTMENT
ADVISER -- -- 0.0080 --
Net asset value, end of period $1.0000 $0.9999 $0.9996 $0.9997
TOTAL INVESTMENT RETURN 2.87% 2.52% 3.86% 5.09%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net
assets 0.91% 0.74% 0.86% 0.78%
Ratio of net investment income to
average net assets 2.87% 2.48% 3.73% 4.97%
Decrease reflected in above expense
ratios due to expense
reimbursements -- 0.14% 0.02% 0.29%
Net Assets, end of period (000's
omitted) $548,733 $154,613 $116,353 $57,264
</TABLE>
(1) On May 20, 1995, all of the assets and liabilities of the U.S. Government
Money Market Series of First Prairie Money Market Fund were transferred to
the U.S. Government Money Market Fund in exchange for shares of the U.S.
Government Money Market Fund. The financial data provided above for periods
prior to such date is for the U.S. Government Money Market Series of First
Prairie Money Market Fund.
(2) From May 1, 1987 (commencement of operations) to December 31, 1987.
(3) Annualized.
(4) Had there not been a capital contribution from an affiliate of the
Investment Adviser during the year, the Fund's total return would have been
2.83%.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data, total investment
return, ratios to average net assets and other supplemental data for a share of
Class A and Class B of the Money Market Fund (including its predecessor
fund--the Money Market Series of First Prairie Money Market Fund) for the
periods indicated. This information has been derived from information provided
in the Funds' financial statements.
MONEY MARKET FUND(1):
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------
Fiscal Year Ended December 31,
-------------------------------------------------------------
1986(2) 1987 1988 1989 1990 1991
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period $1.0000 $1.0000 $0.9999 $1.0000 $1.0000 $1.0000
INVESTMENT OPERATIONS:
Investment income-net 0.0552 0.0585 0.0679 0.0842 0.0734 0.0543
Net realized gain (loss)
on investments -- (0.0001) 0.0001 -- -- --
TOTAL INCOME FROM INVESTMENT
OPERATIONS 0.0552 0.0584 0.0680 0.0842 0.0734 0.0543
DIVIDENDS AND DISTRIBUTIONS:
Dividends from
investment income-net (0.0552) (0.0585) (0.0679) (0.0842) (0.0734) (0.0543)
Distributions from net
realized gain on
investments -- -- -- -- -- --
TOTAL DIVIDENDS AND
DISTRIBUTIONS (0.0552) (0.0585) (0.0679) (0.0842) (0.0734) (0.0543)
CAPITAL CONTRIBUTION
FROM AN AFFILIATE OF
THE INVESTMENT
ADVISER -- -- -- -- -- --
Net asset value, end of
period $1.0000 $0.9999 $1.0000 $1.0000 $1.0000 $1.0000
TOTAL INVESTMENT
RETURN 6.26%(4) 6.01% 7.01% 8.75% 7.59% 5.57%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets 0.88%(4) 0.96% 0.98% 0.95% 0.96% 0.97%
Ratio of net investment
income to average net
assets 5.73%(4) 5.82% 6.82% 8.34% 7.33% 5.42%
Decrease reflected in
above expense ratios
due to expense
reimbursements 0.23%(4) 0.03% 0.01% -- -- --
Net Assets, end of
period (000's omitted) $174,024 $128,485 $159,814 $355,260 $414,258 $456,791
<CAPTION>
CLASS B
---------
Fiscal
CLASS A Period
------------------------------------------------- Ended
Fiscal Year Ended December 31, December
------------------------------------------------- 31,
1992 1993 1994 1995 1995(3)
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of period $1.0000 $1.0000 $1.0001 $0.9998 $1.0000
INVESTMENT OPERATIONS:
Investment income-net 0.0313 0.0274 0.0355 0.0514 0.0162
Net realized gain (loss)
on investments -- 0.0001 (0.0109) 0.0010 0.0008
TOTAL INCOME FROM INVESTMENT
OPERATIONS 0.0313 0.0275 0.0246 0.0524 0.0170
DIVIDENDS AND DISTRIBUTIONS:
Dividends from
investment income-net (0.0313) (0.0274) (0.0355) (0.0514) (0.0162)
Distributions from net
realized gain on
investments -- -- (0.0002) (0.0006) (0.0006)
TOTAL DIVIDENDS AND
DISTRIBUTIONS (0.0313) (0.0274) (0.0357) (0.0520) (0.0168)
CAPITAL CONTRIBUTION
FROM AN AFFILIATE OF
THE INVESTMENT
ADVISER -- -- 0.0108 -- --
Net asset value, end of
period $1.0000 $1.0001 $0.9998 $1.0002 $1.0002
TOTAL INVESTMENT
RETURN 3.18% 2.77% 3.63%(5) 5.33% 1.69%(6)
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to
average net assets 0.98% 0.94% 1.02% 0.79% 1.51%(4)
Ratio of net investment
income to average net
assets 3.17% 2.73% 3.51% 5.12% 4.33%(4)
Decrease reflected in
above expense ratios
due to expense
reimbursements -- 0.05% -- 0.28% 0.51%(4)
Net Assets, end of
period (000's omitted) $260,865 $162,623 $119,400 $203,994 $65
</TABLE>
(1) On May 20, 1995, all of the assets and liabilities of the Money Market
Series of First Prairie Money Market Fund were transferred to the Money
Market Fund in exchange for Class A shares of the Money Market Fund. The
financial data provided above for periods prior to such date is for the
Money Market Series of First Prairie Money Market Fund.
(2) From February 5, 1986 (commencement of operations) to December 31, 1986.
(3) From May 20, 1995 (initial offering date of Class B shares) to December
31, 1995.
(4) Annualized.
(5) Had there not been a capital contribution from an affiliate of the
Investment Adviser during the year, the Fund's total return would have been
2.61%.
(6) Not annualized.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data, total investment
return, ratios to average net assets and other supplemental data for a share of
the Municipal Money Market Fund (including its predecessor fund--First Prairie
Municipal Money Market Fund) for the periods indicated. This information has
been derived from information provided in the Funds' financial statements.
MUNICIPAL MONEY MARKET FUND(1):
<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
----------------------------------------------------
1986(2) 1987 1988 1989 1990
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning
of period $1.0000 $0.9998 $0.9999 $0.9999 $0.9999
INVESTMENT OPERATIONS:
Investment income-net 0.0383 0.0410 0.0480 0.0580 0.0527
Net realized and unrealized
gain (loss)
on investments (0.0002) 0.0001 -- -- --
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS 0.0381 0.0411 0.0480 (0.0580) (0.0527)
DIVIDENDS AND DISTRIBUTIONS:
Dividends from investment
income-net (0.0383) (0.0410) (0.0480) (0.0580) (0.0527)
Net asset value, end of
period $0.9998 $0.9999 $0.9999 $0.9999 $0.9999
TOTAL INVESTMENT RETURN 4.30% 4.18% 4.91% 5.96% 5.40%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets 0.71% 0.96% 0.98% 0.98% 1.00%
Ratio of net investment
income
to average net assets 4.02% 4.08% 4.79% 5.79% 5.27%
Decrease reflected in above
expense ratios due to
undertakings 0.34% -- -- -- --
Net Assets, end of period
(000's omitted) $211,271 $145,524 $142,806 $158,515 $176,009
<CAPTION>
Fiscal Year Ended December 31,
----------------------------------------------------
1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning
of period $0.9999 $0.9999 $0.9999 $0.9999 $0.9997
INVESTMENT OPERATIONS:
Investment income-net 0.0413 0.0236 0.0174 0.0234 0.0322
Net realized and unrealized
gain (loss) on investments -- -- -- (0.0002) 0.0001
TOTAL INCOME (LOSS) FROM INVESTMENT
OPERATIONS 0.0413 0.0236 0.0174 0.0232 0.0323
DIVIDENDS AND DISTRIBUTIONS:
Dividends from investment
income-net (0.0413) (0.0236) (0.0174) (0.0234) (0.0322)
Net asset value, end of
period $0.9999 $0.9999 $0.9999 $0.9997 $0.9998
TOTAL INVESTMENT RETURN 4.21% 2.38% 1.75% 2.36% 3.26%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets 0.98% 0.95% 0.79% 0.68% 0.70%
Ratio of net investment
income
to average net assets 4.11% 2.38% 1.74% 2.33% 3.21%
Decrease reflected in above
expense ratios due to
undertakings -- 0.01% 0.16% 0.25% 0.24%
Net Assets, end of period
(000's omitted) $233,675 $210,000 $177,698 $173,130 $228,511
</TABLE>
(1) On May 20, 1995, all of the assets and liabilities of First Prairie
Municipal Money Market Fund were transferred to the Municipal Money Market
Fund in exchange for shares of the Municipal Money Market Fund. The
financial data provided above for periods prior to such date is for First
Prairie Municipal Money Market Fund.
(2) From February 5, 1986 (commencement of operations) to December 31, 1986.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data, total investment
return, ratios to average net assets and other supplemental data for the Class,
Fund and periods indicated. This information has been derived from information
provided in the Funds' financial statements.
Class A Shares
<TABLE>
<CAPTION>
For the Fiscal Period Ended December 31, 1995
------------------------------------------------------------------------
Equity Special International International Managed
Income Growth Opportunities Bond Bond Equity Assets
Fund(1) Fund(1) Fund(1) Fund(1) Fund(2) Fund(3) Fund(4)
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Investment income-net 0.36 0.11 0.02 0.98 0.57 0.10 0.14
Net realized and unrealized gain
on investments 2.57 2.86 2.45 1.10(5) 1.20 1.40(5) 1.50
TOTAL INCOME FROM INVESTMENT OPERATIONS 2.93 2.97 2.47 2.08 1.77 1.50 1.64
DIVIDENDS AND DISTRIBUTIONS:
Dividends from investment income-net (0.36) (0.11) (0.02) (0.98) (0.57) (0.09) (0.14)
In excess of net investment income (0.01) - - (0.01) - - -
Distributions from net realized gains on
investments and foreign currency transactions (0.34) (0.89) (0.25) (0.34) (0.39) (0.25) -
Net asset value, end of period $12.22 $11.97 $12.20 $10.75 $10.81 $11.16 $11.50
TOTAL INVESTMENT RETURN(5) 29.78% 29.98% 24.80% 21.10% 18.22% 15.16% 16.48%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets(6) 1.11% 1.21% 1.25% 1.33% 1.02% 1.50% 1.26%
Ratio of net investment income
to average net assets(6) 3.33% 0.86% 0.19% 4.91% 5.94% 1.19% 2.45%
Decrease reflected in above expense ratios due to fee
waivers and expense reimbursements(6) 0.33% 0.18% 1.31% 2.32% 0.55% 0.46% 1.89%
Portfolio Turnover Rate(7) 44.07% 106.02% 38.89% 48.03% 156.11% 5.65% 2.25%
Net Assets, end of period (000's omitted) $2,873 $4,329 $672 $487 $1,847 $2,749 $8,356
</TABLE>
(1)For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(2)For the period February 10, 1995 (commencement of operations) through
December 31, 1995.
(3)For the period March 3, 1995 (commencement of operations) through December
31, 1995.
(4)For the period April 3, 1995 (commencement of operations) through December
31, 1995.
(5)The total return figures provided are not annualized and do not include the
effect of any sales charges.
(6) Annualized.
(7) Not annualized.
Class B Shares
<TABLE>
<CAPTION>
For the Fiscal Period Ended December 31, 1995
---------------------------------------------------------------------------
Equity Special International International Managed
Income Growth Opportunities Bond Bond Equity Assets
Fund(1) Fund(1) Fund(1) Fund(1) Fund(2) Fund(3) Fund(4)
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Investment income-net 0.29 0.06 (0.03) 0.91 0.50 0.05 0.13
Net realized and unrealized gain on investments 2.56 2.84 2.40 1.16 1.20 1.39 1.45
TOTAL INCOME FROM INVESTMENT OPERATIONS 2.85 2.90 2.37 2.07 1.70 1.44 1.58
DIVIDENDS AND DISTRIBUTIONS:
Dividends from investment income-net (0.29) (0.06) - (0.91) (0.50) (0.05) (0.13)
In excess of net investment income - - - (0.01) - - -
Distributions from net realized gains on
investments and foreign currency transactions (0.34) (0.89) (0.25) (0.34) (0.39) (0.25) -
Net asset value, end of period $12.22 $11.95 $12.12 $10.81 $10.81 $11.14 $11.45
TOTAL INVESTMENT RETURN(5) 28.97% 29.15% 23.76% 20.90% 17.41% 14.52% 15.83%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets(6) 1.90% 2.04% 2.00% 2.03% 1.87% 2.28% 2.00%
Ratio of net investment income to average net
assets(6) 2.65% 0.02% (0.51)% 4.39% 5.22% 0.40% 1.69%
Decrease reflected in above expense ratios due to
fee waivers and expense reimbursements(6) 0.75% 0.56% 7.52% 6.66% 2.04% 1.55% 4.84%
Portfolio Turnover Rate(7) 44.07% 106.02% 38.89% 48.03% 156.11% 5.65% 2.25%
Net Assets, end of period (000's omitted) $593 $268 $15 $4 $61 $193 $833
</TABLE>
(1)For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(2)For the period February 10, 1995 (commencement of operations) through
December 31, 1995.
(3)For the period March 3, 1995 (commencement of operations) through December
31, 1995.
(4)For the period April 3, 1995 (commencement of operations) through December
31, 1995.
(5)The total return figures provided are not annualized and do not include the
effect of any sales charges.
(6) Annualized.
(7) Not annualized.
Class I Shares
<TABLE>
<CAPTION>
For the Fiscal Period Ended December 31, 1995
----------------------------------------------------------------------------
Equity Special International International Managed
Income Growth Opportunities Bond Bond Equity Assets
Fund(1) Fund(1) Fund(1) Fund(1) Fund(2) Fund(3) Fund(4)
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Investment income-net 0.42 0.15 0.06 1.02 0.61 0.14 0.22
Net realized and unrealized gain on investments 2.55 2.86 2.44 1.16 1.20 1.40 1.46
TOTAL INCOME FROM INVESTMENT OPERATIONS 2.97 3.01 2.50 2.18 1.81 1.54 1.68
DIVIDENDS AND DISTRIBUTIONS:
Dividends from investment income-net (0.42) (0.15) (0.06) (1.02) (0.61) (0.12) (0.22)
In excess of net investment income - - - (0.01) - - -
Distributions from net realized gains on
investments and foreign currency transactions (0.34) (0.89) (0.25) (0.34) (0.39) (0.25) -
Net asset value, end of period $12.21 $11.97 $12.19 $10.81 $10.81 $11.17 $11.46
TOTAL INVESTMENT RETURN(5) 30.27% 30.38% 25.08% 22.13% 18.57% 15.62% 16.90%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets(6) 0.65% 0.80% 0.85% 0.95% 0.70% 1.05% 0.80%
Ratio of net investment income to average net
assets(6) 4.08% 1.46% 0.59% 5.71% 6.48% 1.70% 3.06%
Decrease reflected in above expense ratios due to
fee waivers and expense reimbursements(6) 0.12% 0.12% 0.24% 0.98% 0.17% 0.33% 3.32%
Portfolio Turnover Rate(7) 44.07% 106.02% 38.89% 48.03% 156.11% 5.65% 2.25%
Net Assets, end of period (000's omitted) $283,927 $293,944 $92,926 $14,504 $125,401 $101,448 $411
</TABLE>
(1)For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(2)For the period February 10, 1995 (commencement of operations) through
December 31, 1995.
(3)For the period March 3, 1995 (commencement of operations) through December
31, 1995.
(4)For the period April 1, 1995 (commencement of operations) through December
31, 1995.
(5)The total return figures provided are not annualized and do not include the
effect of any sales charges.
(6) Annualized.
(7) Not annualized.
Further information about performance is contained in the Fund's annual
report, which 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 FUNDS
Each of the Intermediate Bond Fund and Municipal Bond Fund is a separate
open-end, management investment company organized under the name Prairie
Intermediate Bond Fund and Prairie Municipal Bond Fund, Inc., respectively. The
remaining Funds are series of Prairie Funds, an open-end, management investment
company.
PROPOSED REORGANIZATION
On December 1, 1995, FCIMCO's ultimate parent company, First Chicago
Corporation, merged with NBD Bancorp, Inc., with the combined company renamed
First Chicago NBD Corporation ("FCNBD"). FCNBD has now begun the process of
reorganizing their proprietary mutual funds: Prairie Funds, Prairie
Institutional Funds and The Woodward Funds (whose investment adviser is NBD
Bank, a wholly-owned subsidiary of FCNBD). A Special Meeting of Shareholders of
each Fund will be held in June 1996 to consider an Agreement and Plan of
Reorganization ("Reorganization"). The proposed Reorganization generally
provides for the transfer of all or substantially all of each Fund's assets,
subject to liabilities, to a corresponding series of The Woodward Funds, which
would be co-advised by FCIMCO and an affiliate, in a tax free exchange for
shares of such series of The Woodward Funds, and the assumption by such series
of stated liabilities. Shares of The Woodward Funds' series would be distributed
to the relevant Fund's shareholders and the Funds would be dissolved. A
Prospectus/Proxy Statement which describes The Woodward Funds and the
transactions contemplated with respect to the proposed Reorganization will be
mailed to Fund shareholders.
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
Each Fund's investment objective is set forth on the cover page of this
Prospectus. The differences in objectives and policies among the Funds determine
the types of portfolio securities in which each Fund invests and can be expected
to affect the degree of risk to which each Fund is subject and each Fund's yield
or return. The Funds' management policies are described on the page of this
Prospectus indicated below.
NAME OF FUND PAGE
Managed Assets Income Fund 23
Managed Assets Fund 23
Equity Income Fund 24
Growth Fund 24
Special Opportunities Fund 24
International Equity Fund 24
Intermediate Bond Fund 25
Bond Fund 25
International Bond Fund 25
Intermediate Municipal Bond Fund 26
Municipal Bond Fund 26
U.S. Government Money Market Fund 26
Money Market Fund 26
Municipal Money Market Fund 26
INVESTMENT ADVISER AND ADMINISTRATOR
FCIMCO is each Fund's investment adviser and administrator. Each Fund has
agreed to pay the Investment Adviser an annual fee as set forth under
"Management of the Funds." The Investment Adviser has engaged ANB-IMC to serve
as sub-investment adviser to the International Equity Fund.
ALTERNATIVE PURCHASE METHODS
Each Fund offers Class A shares; each Fund, other than the U.S. Government
Money Market and Municipal Money Market Funds, offers Class B shares; and each
Fund, other than the Money Market Funds, offers Class I shares. Each Class A,
Class B and Class I share represents an identical pro rata interest in the
relevant Fund's investment portfolio. Class A shares are sold at net asset value
per share plus, for each Fund, other than the Money Market Funds, an initial
sales charge imposed at the time of purchase. The initial sales charge may be
reduced or waived for certain purchases. See "How to Buy Shares--Class A
Shares." Class A shares of each Fund are subject to an annual service fee. Class
A shares held by investors who after purchasing Class A shares establish a
Fiduciary Account (as defined below) automatically will convert to Class I
shares, based on the relative net asset values for shares of each such Class.
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 contingent
deferred sales charge ("CDSC"), which is assessed only if the Class B shares are
redeemed within six years (five years in the case of the Intermediate Bond Fund
and Intermediate Municipal Bond Fund) of purchase. Class B shares of the Money
Market Fund may be acquired only through the exchange of Class B shares of the
other Funds and are subject to the CDSC, if any, of the shares with which the
exchange is made. See "How to Redeem Shares--Contingent Deferred Sales
Charge--Class B Shares." Class B shares are subject to an annual distribution
fee and service fee. The distribution fee paid by Class B will cause Class B to
have a higher expense ratio and to pay lower dividends than Class A.
Approximately eight years (seven years in the case of the Intermediate Bond Fund
and Intermediate Municipal Bond Fund) 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 such Class, and will no longer be subject to a
distribution fee. Class I shares are sold at net asset value with no sales
charge. Class I shares are offered exclusively to qualified trust, custody
and/or agency account clients of FNBC, ANB or their affiliates ("Fiduciary
Accounts") and qualified benefit plans or other programs with assets of at least
$100 million invested in shares of the Funds or other investment companies or
accounts advised by the Investment Adviser ("Eligible Retirement Plans"). Class
I shares held by investors who after purchasing Class I shares withdraw from
their Fiduciary Accounts automatically will convert to Class A shares, based on
the relative net asset values for shares of each such Class, and will be subject
to the annual service fee charged Class A. See "Alternative Purchase Methods."
HISTORICAL PERFORMANCE INFORMATION
Composite performance for the Funds or predecessor funds, as the case may
be, for various periods ended December 31, 1995.
- - ---------------------------
Class A Shares
(Maximum Offering Price)
<TABLE>
<CAPTION>
Average Annual Total Return
3 5 10
1 Year Years Years Years
<S> <C> <C> <C> <C>
ASSET ALLOCATION FUNDS:
Managed Assets Fund (1) 11.25% N/A N/A N/A
Managed Assets Income Fund (2) 20.83% 9.02% 11.94% 11.10%(3)
EQUITY FUNDS:
Equity Income Fund (4) 23.95% 10.19% 13.63% 10.90%
Growth Fund (4) 24.14% 10.63% 15.63% 12.40%
Special Opportunities Fund (4) 19.20% 7.95% 18.20% 12.75%
International Equity Fund (1) 9.99% N/A N/A N/A
BOND FUNDS:
Intermediate Bond Fund 13.61% 5.65%(5) N/A N/A
Bond Fund (4) 14.66% 6.49% 8.23% 8.21%
International Bond Fund (4) 15.66% 11.36% 10.09% N/A
MUNICIPAL BOND FUNDS:
Intermediate Municipal Bond Fund (2) 9.21% 5.47% 7.08% 7.46%(6)
Municipal Bond Fund 11.67% 6.60% 8.21% 8.30%(6)
MONEY MARKET FUNDS:
U.S. Government Money Market Fund (2) 5.09% 3.82% 3.88% 5.31%(7)
Money Market Fund (2) 5.33% 3.90% 4.08% 5.58%(8)
Municipal Money Market Fund (2) 3.26% 2.46% 2.79% 3.86%(8)
</TABLE>
- - --------------------------
Class A Shares
(Net Asset Value)
<TABLE>
<CAPTION>
Average Annual Total Return
3 5 10
1 Year Years Years Years
<S> <C> <C> <C> <C>
ASSET ALLOCATION FUNDS:
Managed Assets Fund (1) 16.48% N/A N/A N/A
Managed Assets Income Fund (2) 26.50% 10.89% 12.98% 11.62%(3)
EQUITY FUNDS:
Equity Income Fund(4) 29.78% 11.91% 14.69% 11.42%
Growth Fund (4) 30.57% 12.82% 14.09% 12.67%
Special Opportunities Fund (4) 24.80% 9.63% 19.29% 13.26%
International Equity Fund (1) 15.16% N/A N/A N/A
BOND FUNDS:
Intermediate Bond Fund 17.19% 6.80%(5) N/A N/A
Bond Fund (4) 20.07% 8.13% 9.24% 8.71%
International Bond Fund (4) 21.09% 13.05% 11.12% N/A
MUNICIPAL BOND FUNDS:
Intermediate Municipal Bond Fund(2) 12.55% 6.54% 7.72% 7.88%(6)
Municipal Bond Fund 16.89% 8.26% 9.20% 8.94%(6)
MONEY MARKET FUNDS:
U.S. Government Money Market Fund (2) 5.09% 3.82% 3.88% 5.31%(7)
Money Market Fund (2) 5.33% 3.90% 4.08% 5.58%(8)
Municipal Money Market Fund (2) 3.26% 2.46% 2.79% 3.86%(8)
</TABLE>
THE PRAIRIE FUNDS
---------------------------
Class B Shares
(Net Asset Value/With CDSc)
<TABLE>
<CAPTION>
Average Annual Total Return
3 5 10
1 Year Years Years Years
<S> <C> <C> <C> <C>
ASSET ALLOCATION FUNDS:
Managed Assets Fund (1) 15.84%/10.83% N/A N/A N/A
Managed Assets Income Fund (2) 25.69%/21.69% 11.40%/9.47% N/A N/A
EQUITY FUNDS:
Equity Income Fund (4) 28.97%/24.97% 11.12%/10.58% 13.87% 10.61%
Growth Fund (4) 29.15%/25.15% 11.55%/11.01% 15.51% 12.08%
Special Opportunities Fund (4) 23.76%/19.76% 8.77%/ 8.21% 18.38% 12.41%
International Equity Fund (1) 14.52%/ 9.52% N/A N/A N/A
BOND FUNDS:
Intermediate Bond Fund 16.68%/13.68% 7.71%/ 6.22%(9) N/A N/A
Bond Fund (4) 19.18%/15.18% 7.32%/ 6.74% 8.43% 7.90%
International Bond Fund (4) 20.90%/16.90% 12.43%/11.90% 10.42% N/A
MUNICIPAL BOND FUNDS:
Intermediate Municipal Bond Fund (2) 8.40%/ 5.40% 4.21%/ 2.68%(9) N/A N/A
Municipal Bond Fund 16.22%/12.22% 6.65%/ 4.64%(9) N/A N/A
MONEY MARKET FUND:
Money Market Fund (10) 1.69% N/A N/A N/A
</TABLE>
- - ---------------------------
Class I Shares
<TABLE>
<CAPTION>
Average Annual Total Return
3 5 10
1 Year Years Years Years
<S> <C> <C> <C> <C>
ASSET ALLOCATION FUNDS:
Managed Assets Fund (1) 16.90% N/A N/A N/A
Managed Assets Income Fund (10) 22.55% N/A N/A N/A
EQUITY FUNDS:
Equity Income Fund (4) 30.27% 12.45% 15.26% 11.99%
Growth Fund (4) 30.38% 13.86% 16.91% 13.48%
Special Opportunities Fund (4) 25.08% 10.09% 19.84% 13.82%
International Equity Fund (1) 15.62% N/A N/A N/A
BOND FUNDS:
Intermediate Bond Fund 17.53% 6.91%(5) N/A N/A
Bond Fund (4) 20.48% 8.63% 9.78% 9.27%
International Bond Fund (4) 22.13% 13.77% 11.78% N/A
MUNICIPAL BOND FUNDS:
Intermediate Municipal Bond Fund(2) 11.33%(11) N/A N/A N/A
Municipal Bond Fund 14.20%(12) N/A N/A N/A
</TABLE>
(1) No predecessor fund existed; thus, the average annual total return
information for the Fund presented is for the Fund since its
inception on April 3, 1995 for Managed Assets Fund and on March 3,
1995 for International Equity Fund.
(2) The Fund commenced operations through a transfer of assets from a
predecessor investment company advised by FNBC, using substantially the
same investment objective, policies, restrictions and methodologies as the
Fund. The predecessor funds were: for Managed Assets Income Fund, First
Prairie Diversified Asset Fund; for Intermediate Municipal Bond Fund, the
Intermediate Series of First Prairie Municipal Bond Fund; for U.S.
Government Money Market Fund, the Government Series of First Prairie Money
Market Fund; for Money Market Fund, the Money Market Series of First
Prairie Money Market Fund; and for Municipal Money Market Fund, First
Prairie Municipal Money Market Fund. The performance shown is that of the
predecessor fund and, in the case of the Intermediate Municipal Bond Fund
only, the Fund.
(3) From commencement of operations on January 23, 1986.
(4) The Fund commenced operations through a transfer of assets from a common
trust fund managed by FNBC, using substantially the same investment
objective, policies, restrictions and methodologies as the Fund. The common
trust fund did not charge any expenses. The performance information
reflects the maximum operating expenses that may be charged as more fully
set forth in the Fee Table above.
(5) From commencement of operations on March 5, 1993.
(6) From commencement of operations on March 1, 1988.
(7) From commencement of operations on May 1, 1987.
(8) From commencement of operations on February 5, 1986.
(9) From date of initial offering on February 8, 1994.
(10) No predecessor class existed; thus, the performance information for
the Class presented is for the Class since its initial offering date on
May 20, 1995 for Money Market Fund and March 3, 1995 for Managed Assets
Income Fund.
(11) From date of initial offering on January 30, 1995.
(12) From date of initial offering on February 1, 1995.
The historical pro-forma performance information presented above for each
Fund listed is deemed relevant because the predecessor fund was advised by FNBC
which reorganized the personnel responsible for advising the predecessor fund
into FCIMCO, its wholly-owned subsidiary, which manages the Fund, using
substantially the same investment objective, policies, restrictions and
methodologies as those used by the Fund. However, this performance information
is not necessarily indicative of the future performance of any Fund. Because
each Fund will be actively managed, its investments will vary from time to time
and will not be identical to the past portfolio investments of the predecessor
fund. Each Fund's performance will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
HOW TO BUY SHARES
Orders for the purchase of Class A and Class B shares may be placed through
a number of institutions including FCIMCO, FNBC, ANB and their affiliates,
including First Chicago Investment Services, Inc. ("FCIS"), a registered
broker-dealer, the Distributor and certain banks, securities dealers and other
industry professionals such as investment advisers, accountants and estate
planning firms (collectively, "Service Agents").
Investors purchasing Class I shares through their Fiduciary Accounts at FNBC,
ANB or their affiliates should contact such entity directly for appropriate
instructions, as well as for information about conditions pertaining to the
account and any related fees. Class I shares may be purchased for a Fiduciary
Account or Eligible Retirement Plan only by a custodian, trustee, investment
manager or other entity authorized to act on behalf of such Account or Plan.
The minimum initial investment is $1,000. All subsequent investments must
be at least $100. See "How to Buy Shares."
SHAREHOLDER SERVICES
The Funds offer shareholders certain services and privileges including:
Exchange Privilege, Letter of Intent and Automatic Investment Plan. Certain
services and privileges may not be available through all Service Agents.
HOW TO REDEEM SHARES
Generally, investors should contact their representatives at FCIMCO, FNBC,
ANB or appropriate Service Agent for redemption instructions. Investors who are
not clients of FCIMCO, FNBC, ANB or a Service Agent may redeem Fund shares by
written request to the transfer agent. See "How to Redeem Shares."
Description of the Funds
GENERAL
Each of the Intermediate Bond Fund and Municipal Bond Fund is a separately
organized mutual fund. Each of the remaining Funds is a separate portfolio of
Prairie Funds (the "Trust"), which is a mutual fund divided into separate
portfolios known as a "series fund." Each portfolio is treated as a separate
entity for certain matters under the Investment Company Act of 1940, as amended
(the "1940 Act"), and for other purposes, and a shareholder of one portfolio is
not deemed to be a shareholder of any other portfolio. As described below, for
certain matters Trust shareholders vote together as a group; as to others they
vote separately by portfolio. By this Prospectus, shares of 12 of the Trust's
portfolios and shares of the Intermediate Bond Fund and Municipal Bond Fund are
being offered: five of the Funds are diversified investment companies (the
"Diversified Funds")--Managed Assets Income Fund, Managed Assets Fund, U.S.
Government Money Market Fund, Money Market Fund and Municipal Money Market
Fund--and nine of the Funds are non-diversified investment companies (the
"Non-Diversified Funds")--Equity Income Fund, Special Opportunities Fund, Growth
Fund, International Equity Fund, Intermediate Bond Fund, Bond Fund,
International Bond Fund, Intermediate Municipal Bond Fund and Municipal Bond
Fund.
INVESTMENT OBJECTIVES
Each Fund's investment objective is set forth on the cover page of this
Prospectus. The differences in objectives and policies among the Funds determine
the types of portfolio securities in which each Fund invests and can be expected
to affect the degree of risk to which each Fund is subject and each Fund's yield
or return. See "Management Policies" below, and "Appendix." Each Fund's
investment objective cannot be changed without approval by the holders of a
majority (as defined in the 1940 Act) of such Fund's outstanding voting
securities. There can be no assurance that each Fund's investment objective will
be achieved.
MANAGEMENT POLICIES
The following section should be read in conjunction with "Certain Portfolio
Securities" and "Investment Techniques" in the Appendix.
Asset Allocation Funds
Each of the Managed Assets Income Fund and Managed Assets Fund will follow
an asset allocation strategy by investing in equity, fixed-income and short-term
securities of domestic and foreign issuers. For each Asset Allocation Fund, the
asset classes, market sectors, securities and portfolio strategies selected will
be those that the Investment Adviser believes prudent and offer the greatest
potential for achieving the relevant Asset Allocation Fund's investment
objective. The Investment Adviser has broad latitude in selecting investments
and portfolio strategies. See "Risk Factors--Investing in Foreign Securities"
below. The equity securities in which each Asset Allocation Fund may invest
consist of common stocks, preferred stocks and convertible securities, including
those in the form of depositary receipts, as well as warrants to purchase such
securities (collectively, "Equity Securities"). The fixed-income securities in
which each Asset Allocation Fund may invest include bonds and debentures
(including those that are convertible), notes, mortgage-related securities,
asset-backed securities, municipal obligations and convertible debt obligations
(collectively, "Fixed-Income Securities"), with maturities of more than three
years. The short-term securities which may be purchased by an Asset Allocation
Fund include fixed-income securities with maturities of less than three years at
the time of purchase, and money market instruments of the type in which the
Money Market Fund invests (collectively, "Money Market Instruments"), as
described below.
Each Asset Allocation Fund's portfolio of debt securities will consist
primarily of those which are rated no lower than Baa by Moody's Investors
Service, Inc. ("Moody's") or BBB by Standard & Poor's Ratings Group ("S&P"),
Fitch Investors Service, L.P. ("Fitch") or Duff & Phelps Credit Rating Co.
("Duff "), or, if unrated, deemed to be of comparable quality by the Investment
Adviser. Debt securities rated Baa by Moody's or BBB by S&P, Fitch or Duff are
considered investment grade obligations which lack outstanding investment
characteristics and have speculative characteristics as well. The Managed Assets
Fund may invest up to 20% of its net assets in debt securities rated below
investment grade and the Managed Assets Income Fund may invest up to 5% of its
net assets in convertible bonds rated below investment grade. See "Risk
Factors-- Lower Rated Securities" below.
The following table sets forth for each Asset Allocation Fund the asset
classes, benchmark percentages and asset class strategy ranges within which the
Investment Adviser intends to manage the Fund's assets:
<TABLE>
<CAPTION>
MANAGED ASSETS INCOME FUND MANAGED ASSETS FUND
-------------------------- ----------------------
ASSET Benchmark Strategy Benchmark Strategy
CLASS Percentage Range Percentage Range
<S> <C> <C> <C> <C>
Equity 40% 25-55% 60% 45-75%
Fixed-Income
and Money Market
Instruments 60% 45-75% 40% 25-55%
</TABLE>
"Benchmark percentage" represents the asset mix the Investment Adviser would
expect to maintain when its assessment of economic conditions and investment
opportunities indicate that the financial markets are fairly valued relative to
each other. The asset class "strategy range" indicates ordinarily expected
variations from this benchmark and reflects the fact that the Investment Adviser
expects to make policy weight shifts within specific asset classes. Under normal
conditions, the Investment Adviser expects to adhere to the asset class strategy
ranges set forth above; however, the Investment Adviser reserves the right to
vary the asset class mix and the percentage of securities invested in any asset
class or market from the benchmark percentages and asset class strategy ranges
set forth above as the risk/return characteristics of either markets or asset
classes, as assessed by the Investment Adviser, vary over time. When the
Investment Adviser determines that adverse market conditions exist, each Asset
Allocation Fund may adopt a temporary defensive posture and invest its entire
portfolio in Money Market Instruments. Each Asset Allocation Fund will invest in
substantially the same securities within an investment class. The amount of each
Asset Allocation Fund's aggregate assets invested in a particular investment
class, and thus in particular securities, will differ, but the relative
percentage that a particular security comprises within an investment class
ordinarily will remain substantially the same. The asset allocation mix selected
will be a primary determinant in the respective Asset Allocation Fund's
investment performance. Under certain market conditions, limiting the Asset
Allocation Fund's asset allocation among these asset classes may inhibit their
ability to achieve their respective investment objectives.
Each Asset Allocation Fund also may engage in futures and options
transactions and other derivative securities transactions, such as interest rate
and equity index swaps, leveraging, short-selling, foreign exchange transactions
and lending portfolio securities, each of which involves risk. See "Risk
Factors" below and "Appendix--Investment Techniques."
Equity Funds
Each of the Equity Income Fund, Growth Fund, Special Opportunities Fund and
International Equity Fund (the "Equity Funds") will invest at least 65% of the
value of its total assets (except when maintaining a temporary defensive
position) in Equity Securities, as defined under "Asset Allocation Funds" above.
Each Equity Fund may invest, in anticipation of otherwise investing cash
positions, to meet asset segregation or margin requirements or as otherwise
noted below, in Money Market Instruments. Under normal market conditions, no
Equity Fund expects to have a substantial portion of its assets invested in
Money Market Instruments. However, when the Investment Adviser determines that
adverse market conditions exist, an Equity Fund may adopt a temporary defensive
posture and invest entirely in Money Market Instruments.
Each Equity Fund also may invest in Fixed-Income Securities (as defined under
"Asset Allocation Funds" above) to the extent described below.
Each Equity Fund also may engage in futures and options transactions and
other derivative securities transactions, such as equity index swaps,
leveraging, short-selling and lending portfolio securities, and, except for the
Equity Income Fund, may engage in foreign exchange transactions, each of which
involves risk. See "Risk Factors" below and "Appendix--Investment Techniques."
The EQUITY INCOME FUND will invest primarily in income-producing Equity
Securities of domestic issuers. The Investment Adviser will be particularly
alert to companies which pay above-average dividends, yet offer opportunities
for capital appreciation and growth of earnings. In addition, the Fund may
invest up to 35% of the value of its total assets in convertible debt securities
that generally have features similar to both common stocks and bonds and offer
the potential for current income and capital appreciation over time.
While the Fund will invest primarily in Equity Securities of domestic
issuers, the Fund also may invest in depositary receipts of foreign issuers. See
"Risk Factors--Investing in Foreign Securities" below. The Fund also may invest
in Fixed-Income Securities and Money Market Instruments based on the Investment
Adviser's assessment of economic conditions and investment opportunities. The
Fixed-Income Securities, other than convertible debt securities, in which the
Fund may invest must be rated investment grade, or, if unrated, deemed to be of
comparable quality by the Investment Adviser. The convertible debt securities in
which the Fund may invest may be rated lower than investment grade. See "Risk
Factors--Lower Rated Securities" below.
The GROWTH FUND will invest primarily in Equity Securities of domestic
issuers believed by the Investment Adviser to have above-average growth
characteristics. The Investment Adviser will consider some of the following
factors in making its investment decisions: the development of new or improved
products or services, a favorable outlook for growth in the industry, patterns
of increasing sales and earnings, the probability of increased operating
efficiencies, cyclical conditions, or other signs that the company is expected
to show greater than average earnings growth and capital appreciation.
While the Fund will invest primarily in Equity Securities of domestic
issuers, the Fund also may invest in depositary receipts of foreign issuers and
may invest up to 20% of its total assets (valued at the time of investment) in
Equity Securities of foreign issuers. See "Risk Factors--Investing in Foreign
Securities" below. The Fund also may invest in Fixed-Income Securities which,
other than convertible debt securities, are rated investment grade, or, if
unrated, deemed to be of comparable quality by the Investment Adviser. The Fund
may invest in convertible debt securities rated lower than investment grade. See
"Risk Factors-- Lower Rated Securities" below.
The SPECIAL OPPORTUNITIES FUND will invest primarily in Equity Securities of
small- to medium-sized emerging growth domestic issuers (typically with market
capitalizations of $100 million to $750 million) that the Investment Adviser
believes are undervalued in the marketplace. The Investment Adviser will
consider some of the following factors in making its investment decisions: high
quality management, significant equity ownership positions by management, a
leading or dominant position in a major product line, a sound financial position
and a relatively high rate of return on invested capital. The Fund also may
invest in companies that offer the possibility of accelerating earnings growth
because of management changes, new products or structural changes in industry or
the economy.
While the Fund will invest primarily in Equity Securities of domestic
issuers, the Fund also may invest in depositary receipts of foreign issuers and
may invest up to 20% of its total assets (valued at the time of investment) in
Equity Securities of foreign issuers. See "Risk Factors--Investing in Foreign
Securities" below. The Fund also may invest in Fixed-Income Securities which,
other than convertible debt securities, are rated investment grade, or, if
unrated, deemed to be of comparable quality by the Investment Adviser. The Fund
may invest in convertible debt securities rated lower than investment grade. See
"Risk Factors-- Lower Rated Securities" below.
The INTERNATIONAL EQUITY FUND will invest in Equity Securities of issuers
located throughout the world, except the United States. As a neutral position,
the Fund will hold Equity Securities of issuers located in the countries which
constitute the Morgan Stanley Capital International-Europe, Australia and Far
East ("EAFE") Index. The EAFE Index is a broadly diversified international index
composed of the Equity Securities of approximately 1,000 companies located
outside the United States. Building on this base, the Investment Adviser and
ANB-IMC will shift the Fund's holdings to emphasize or de-emphasize regions of
the international market based on such region's relative attractiveness. In
making these shifts, the Investment Adviser and ANB-IMC will use a
computer-based model which takes into account a number of factors, including
relative economic strength, relative inflation rates, relative valuation of
equity markets, bond yield differentials, forecasts of trade flows and financial
market volatility. See "Risk Factors--Investing in Foreign Securities" below.
The Fund will seek to identify those countries offering the greatest relative
potential investment return, rather than selecting individual companies in each
country which will outperform the major stock index of their respective
countries. Thus, the individual stocks selected will generally be chosen through
a statistical procedure to approximate the investment performance of the
relevant country index. The Fund is not an index fund and is neither sponsored
by nor affiliated with Morgan Stanley Capital International.
Bond Funds
Each of the Intermediate Bond Fund, Bond Fund and International Bond Fund
(the "Bond Funds") will invest at least 65% of the value of its total assets
(except when maintaining a temporary defensive position) in bonds, debentures
and other debt instruments. Each Bond Fund will invest in Fixed-Income
Securities. When management believes it advisable for temporary defensive
purposes or in anticipation of otherwise investing cash positions, each Bond
Fund may invest in Money Market Instruments.
Each Bond Fund also may engage in futures and options transactions and other
derivative securities transactions, such as interest rate swaps, leveraging,
short-selling and lending portfolio securities, and the International Bond Fund
may engage in foreign exchange transactions, each of which involves risk. See
"Risk Factors" below and "Appendix--Investment Techniques."
The INTERMEDIATE BOND FUND invests in a portfolio of U.S. dollar denominated
Fixed-Income Securities of domestic and foreign issuers which, under normal
market conditions, will have a dollar-weighted average maturity expected to
range between three and ten years. Under normal market conditions, at least 65%
of the value of the Intermediate Bond Fund's total assets will consist of Fixed-
Income Securities rated A or better by Moody's, S&P, Fitch or Duff. The
remainder of the Fund's assets may be invested in investment grade Fixed-Income
Securities and Money Market Instruments rated within the two highest rating
categories by Moody's, S&P, Fitch or Duff. The Fund also may invest in
Fixed-Income Securities which, while not rated, are determined by the Investment
Adviser to be of comparable quality to those rated securities in which the Fund
may invest. The Fund is not limited in the maturities of the securities in which
it invests and the maturity of a portfolio security may range from overnight to
40 years. See "Risk Factors--Lower Rated Securities" and "--Investing in Foreign
Securities" below.
The BOND FUND will invest in a broad range of U.S. dollar denominated
Fixed-Income Securities of domestic and foreign issuers, without regard to
maturity. Under normal market conditions, at least 65% of the value of the
Fund's total assets will consist of Fixed-Income Securities rated A or better by
Moody's, S&P, Fitch or Duff. The remainder of the Fund's assets may be invested
in Fixed-Income Securities rated no lower than B by Moody's, S&P, Fitch and
Duff. The Fund also may invest in Fixed-Income Securities which, while not
rated, are determined by the Investment Adviser to be of comparable quality to
those rated securities in which the Fund may invest. See "Risk Factors--Lower
Rated Securities" and "--Investing in Foreign Securities" below.
The INTERNATIONAL BOND FUND will invest in Fixed-Income Securities of issuers
located throughout the world, except the United States. The Fund also may invest
in convertible preferred stocks. The Fund may hold foreign currency, and may
purchase debt securities or hold currencies in combination with forward currency
exchange contracts. The Fund will be alert to opportunities to profit from
fluctuations in currency exchange rates. The Fund will be particularly alert to
favorable arbitrage opportunities (such as those resulting from favorable
interest rate differentials) arising from the relative yields of the various
types of securities in which the Fund may invest and market conditions
generally. The Fund may invest without restriction in companies in, or
governments of, developing countries. Developing countries have economic
structures that are generally less diverse and mature, and political systems
that are less stable, than those of developed countries. The markets of
developing countries may be more volatile than the markets of more mature
economies; however, such markets may provide higher rates of return to
investors. See "Risk Factors--Investing in Foreign Securities" below.
Under normal market conditions, at least 65% of the value of the Fund's total
assets will consist of Fixed-Income Securities rated A or better by Moody's,
S&P, Fitch or Duff. The remainder of the Fund's assets may be invested in
Fixed-Income Securities rated no lower than B by Moody's, S&P, Fitch and Duff.
The Fund also may invest in Fixed-Income Securities which, while not rated, are
determined by the Investment Adviser to be of comparable quality to those rated
securities in which the Fund may invest. See "Risk Factors--Lower Rated
Securities" below.
Municipal Funds
It is a fundamental policy of each of the Intermediate Municipal Bond Fund
and Municipal Bond Fund (the "Municipal Bond Funds" and, together with the
Municipal Money Market Fund, the "Municipal Funds") that it will invest (except
when maintaining a temporary defensive position) at least 80% of the value of
its net assets in Municipal Obligations and at least 65% of the value of its
total assets in bonds, debentures and other debt instruments. Municipal
Obligations in which the Municipal Funds will invest are debt obligations issued
by states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities, or
multi-state agencies or authorities, the interest from which is, in the opinion
of bond counsel to the issuer, exempt from Federal income tax. From time to
time, each Municipal Fund may invest more than 25% of the value of its total
assets in industrial development bonds which, although issued by industrial
development authorities, may be backed only by the assets and revenues of the
non-governmental users. Interest on Municipal Obligations (including certain
industrial development bonds) which are specified private activity bonds, as
defined in the Internal Revenue Code of 1986, as amended (the "Code"), issued
after August 7, 1986, while exempt from Federal income tax, is a preference item
for the purpose of the alternative minimum tax. Where a regulated investment
company receives such interest, a proportionate share of any exempt-interest
dividend paid by the investment company may be treated as such a preference item
to the shareholder. Each Municipal Fund may invest without limitation in such
Municipal Obligations if the Investment Adviser determines that their purchase
is consistent with the Fund's investment objective. See "Risk Factors--Municipal
Obligations" below.
From time to time, on a temporary basis other than for temporary defensive
purposes (but not to exceed 20% of the value of the Fund's net assets) or for
temporary defensive purposes, each Municipal Fund may invest in taxable Money
Market Instruments. Dividends paid by the Fund that are attributable to income
earned by it from these securities will be taxable to investors. See "Dividends,
Distributions and Taxes." Under normal market conditions, it is anticipated that
not more than 5% of the value of a Municipal Fund's total assets will be
invested in any one category of these securities.
Each Municipal Bond Fund also may engage in futures and options transactions
and lending portfolio securities, each of which involves risk. Futures and
options transactions involve derivative securities. See "Risk Factors" below and
"Appendix--Investment Techniques."
The INTERMEDIATE MUNICIPAL BOND FUND will invest in a portfolio of Municipal
Obligations which, under normal market conditions, will have a dollar-weighted
average maturity expected to range between three and ten years. The Fund will
purchase Municipal Obligations only if rated investment grade, or, if unrated,
determined by the Investment Adviser to be of comparable quality to the rated
securities in which the Fund may invest.
The MUNICIPAL BOND FUND will invest in a portfolio of Municipal Obligations
without regard to maturity. The Fund will purchase Municipal Obligations only if
rated at least Baa, MIG-2/VMIG-2 or Prime-1 (P-1) by Moody's, BBB, SP-2 or A-1
by S&P, BBB or F-2 by Fitch or BBB or Duff-2 by Duff or, if unrated, determined
by the Investment Adviser to be of comparable quality to the rated securities in
which the Fund may invest.
Money Market Funds
Each of the U.S. Government Money Market Fund, Money Market Fund and
Municipal Money Market Fund (the "Money Market Funds") seeks to maintain a net
asset value of $1.00 per share for purchases and redemptions. To do so, each
Money Market Fund uses the amortized cost method of valuing its securities
pursuant to Rule 2a-7 under the 1940 Act, certain requirements of which are
summarized below. In accordance with Rule 2a-7, each Money Market Fund is
required to maintain a dollar-weighted average portfolio maturity of 90 days or
less, purchase only instruments having remaining maturities of 13 months or less
and invest only in U.S. dollar denominated securities determined in accordance
with procedures established by the Board to present minimal credit risks and, in
the case of the Money Market Fund and Municipal Money Market Fund, which are
rated in one of the two highest rating categories for debt obligations by at
least two nationally recognized statistical rating organizations (or one rating
organization if the instrument was rated by only one such organization) or, if
unrated, are of comparable quality as determined in accordance with procedures
established by the Board. The nationally recognized statistical rating
organizations currently rating instruments of the type the Money Market Fund and
Municipal Money Market Fund may purchase are Moody's, S&P, Duff, Fitch, IBCA
Limited and IBCA Inc., and Thomson BankWatch, Inc. and their rating criteria are
described in the Appendix to the Statement of Additional Information. For
further information regarding the amortized cost method of valuing securities,
see "Determination of Net Asset Value" in the Statement of Additional
Information. There can be no assurance that each Money Market Fund will be able
to maintain a stable net asset value of $1.00 per share.
The U.S. GOVERNMENT MONEY MARKET FUND will invest only in short-term
securities issued or guaranteed as to principal or interest by the U.S.
Government, its agencies or instrumentalities and may enter into repurchase
agreements. The Fund also may lend securities from its portfolio as described
under "Appendix--Investment Techniques."
The MONEY MARKET FUND will invest in short-term money market obligations,
including securities issued or guaranteed by the U.S. Government or its agencies
or instrumentalities, certificates of deposit, time deposits, bankers'
acceptances and other short-term obligations issued by domestic banks, foreign
branches of domestic banks, foreign subsidiaries of domestic banks, domestic and
foreign branches of foreign banks and thrift institutions, repurchase
agreements, and high quality domestic and foreign commercial paper and other
short-term corporate obligations, including those with floating or variable
rates of interest. See "Risk Factors--Investing in Foreign Securities" below. In
addition, the Money Market Fund is permitted to lend portfolio securities and
enter into reverse repurchase agreements to the extent described under
"Appendix--Investment Techniques." During normal market conditions, at least 25%
of the Fund's total assets will be invested in bank obligations.
The MUNICIPAL MONEY MARKET FUND will invest at least 80% of the value of its
net assets (except when maintaining a temporary defensive position) in
short-term Municipal Obligations. Subject to the requirements of Rule 2a-7, the
Fund will engage in management policies that are substantially identical to
those of the Intermediate Municipal Bond Fund. See "Appendix--Certain Portfolio
Securities--Municipal Obligations." The Fund also may lend securities from its
portfolio as described under "Appendix--Investment Techniques."
CERTAIN FUNDAMENTAL POLICIES
Each Fund may (i) borrow money to the extent permitted under the 1940 Act,
which currently limits borrowing to no more than 33 1/3% of the value of the
Fund's total assets; and (ii) invest up to 25% of the value of its total assets
in the securities of issuers in a single industry, provided there is no
limitation on the purchase of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or, in the case of the Municipal
Funds, Municipal Obligations. In addition, (i) each of the Diversified Funds may
invest up to 5% of its total assets in the obligations of any one issuer, except
that up to 25% of the value of the Fund's total assets may be invested (subject,
in the case of the Money Market Funds, to the provisions of Rule 2a-7), and
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities may be purchased, without regard to any such limitation; and
(ii) the Money Market Fund will invest, except when it has adopted a temporary
defensive position, at least 25% of its total assets in securities issued by
banks, including foreign banks and branches. This paragraph describes
fundamental policies that cannot be changed as to a Fund without approval by the
holders of a majority (as defined in the 1940 Act) of such Fund's outstanding
voting shares. See "Investment Objectives and Management Policies--Investment
Restrictions" in the Statement of Additional Information.
CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES
Each 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 such Fund's investments in all such
companies to exceed 10% 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% (10% in the case of the Money
Market Funds) of the value 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.
RISK FACTORS
General
Since each Fund will pursue different types of investments, the risks of
investing will vary depending on the Fund selected for investment. Before
selecting a Fund in which to invest, the investor should assess the risks
associated with the types of investments made by the Fund. The net asset value
per share of each Fund, other than a Money Market Fund, is not fixed and should
be expected to fluctuate. Investors should consider each Fund as a supplement to
an overall investment program and should invest only if they are willing to
undertake the risks involved. See also the Appendix beginning on page A-1 for a
further discussion of certain considerations.
Investment Techniques
Each Fund may engage in various investment techniques to the extent
described herein. The use of investment techniques such as short-selling,
engaging in financial futures and options transactions, leverage through
borrowing, purchasing securities on a forward commitment basis, and lending
portfolio securities--techniques that are not necessarily employed by each
Fund--involves greater risk than that incurred by many other funds with similar
objectives that do not engage in such techniques. See "Appendix-- Investment
Techniques." Futures and options transactions involve derivative securities.
Using these techniques may produce higher than normal portfolio turnover and may
affect the degree to which a Fund's net asset value fluctuates. Higher portfolio
turnover rates are likely to result in comparatively greater brokerage
commissions or transaction costs. In addition, short-term gains realized from
portfolio transactions are taxable to shareholders as ordinary gains. A Fund's
ability to engage in certain short-term transactions may be limited by the
requirement that, to qualify as a regulated investment company, it must earn
less than 30% of its gross income from the disposition of securities held for
less than three months. This 30% test limits the extent to which a Fund may sell
securities held for less than three months and invest in certain futures
contracts, among other strategies. However, portfolio turnover will not
otherwise be a limiting factor in making investment decisions. See "Portfolio
Transactions" in the Statement of Additional Information.
Equity Securities
(Asset Allocation and Equity Funds only) Investors should be aware that
Equity Securities fluctuate in value, often based on factors unrelated to the
value of the issuer of the securities, and that fluctuations can be pronounced.
Changes in the value of a Fund's portfolio securities will result in changes in
the value of such Fund's shares and thus the Fund's yield and total return to
investors. The securities of the smaller companies may be subject to more abrupt
or erratic market movements than larger, more-established companies, both
because the securities typically are traded in lower volume and because the
issuers typically are subject to a greater degree to changes in earnings and
prospects.
Fixed-Income Securities
(Asset Allocation, Equity, Bond and Municipal Bond Funds and, to a limited
extent, each Money Market Fund) Investors should be aware that even though
interest-bearing securities are investments which promise a stable stream of
income, the prices of such securities are inversely affected by changes in
interest rates and, therefore, are subject to the risk of market price
fluctuations. The values of Fixed-Income Securities also may be affected by
changes in the credit rating or financial condition of the issuing entities.
Certain securities that may be purchased by these Funds, such as those rated Baa
by Moody's and BBB by S&P, Fitch and Duff, may be subject to such risk with
respect to the issuing entity and to greater market fluctuations than certain
lower yielding, higher rated Fixed-Income Securities. See "Lower Rated
Securities" below and "Appendix-- Certain Portfolio Securities--Ratings" and
Appendix in the Statement of Additional Information.
Lower Rated Securities
(Asset Allocation, Equity Income, Growth, Special Opportunities, Bond and
International Bond Funds only) Investors should carefully consider the relative
risks of investing in the higher yielding (and, therefore, higher risk) debt
securities rated below investment grade by Moody's, S&P, Fitch or Duff (commonly
known as junk bonds). Each of the Bond Fund and International Bond Fund may
invest up to 35% of its net assets in debt securities rated as low as B by
Moody's, S&P, Fitch and Duff. The Managed Assets Fund may invest up to 20% of
its net assets in debt securities, and each of the Equity Income, Growth and
Special Opportunities Funds may invest up to 35%, and the Managed Assets Income
Fund may invest up to 5%, of its net assets in convertible securities, rated as
low as the lowest rating assigned by Moody's, S&P, Fitch or Duff. The Bond Fund,
International Bond Fund, Equity Income Fund, Growth Fund and Special
Opportunities Fund each intend to invest less than 35% of the value of its net
assets in such securities. Securities rated below investment grade generally are
not meant for short-term investing and may be subject to certain risks with
respect to the issuing entity and to greater market fluctuations than certain
lower yielding, higher rated fixed-income securities. Securities rated Ba by
Moody's are judged to have speculative elements; their future cannot be
considered as well assured and often the protection of interest and principal
payments may be very moderate. Securities rated BB by S&P, Fitch or Duff are
regarded as having predominantly speculative characteristics and, while such
obligations have less near-term vulnerability to default than other speculative
grade debt, they face major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payments. Securities rated C by
Moody's are regarded as having extremely poor prospects of ever attaining any
real investment standing. Securities rated D by S&P, Fitch and Duff are in
default and the payment of interest and/or repayment of principal is in arrears.
Such securities, though high yielding, are characterized by great risk. See
Appendix in the Statement of Additional Information for a general description of
securities ratings. Although these ratings may be an initial criterion for
selection of portfolio investments, the Investment Adviser also will evaluate
these securities and the ability of the issuers of such securities to pay
interest and principal. The Fund's ability to achieve its investment objectives
may be more dependent on the Investment Adviser's credit analysis than might be
the case for a fund that invested in higher rated securities. See
"Appendix--Certain Portfolio Securities--Fixed-Income Securities--Ratings." The
market price and yield of securities rated Ba or lower by Moody's and BB or
lower by S&P, Fitch or Duff are more volatile than those of higher rated
securities. Factors adversely affecting the market price and yield of these
securities will adversely affect the Fund's net asset value. In addition, the
retail secondary market for these securities may be less liquid than that of
higher rated securities; adverse conditions could make it difficult at times for
the Fund to sell certain securities or could result in lower prices than those
used in calculating such Fund's net asset value. The market values of certain
lower rated debt securities tend to reflect specific developments with respect
to the issuer to a greater extent than do higher rated securities, which react
primarily to fluctuations in the general level of interest rates, and tend to be
more sensitive to economic conditions than are higher rated securities. Issuers
of such debt securities often are highly leveraged and may not have available to
them more traditional methods of financing. Therefore, the risk associated with
acquiring the securities of such issuers generally is greater than is the case
with higher rated securities.
Municipal Obligations
(Municipal Funds only) Certain provisions in the Code relating to the
issuance of Municipal Obligations may reduce the volume of Municipal Obligations
qualifying for Federal tax exemption. One effect of these provisions could be to
increase the cost of the Municipal Obligations available for purchase by the
Municipal Funds and thus reduce the available yield. Shareholders of the
Municipal Funds should consult their tax advisers concerning the effect of these
provisions on an investment in the Fund. Proposals that may restrict or
eliminate the income tax exemption for interest on Municipal Obligations may be
introduced in the future. If any such proposal were enacted that would reduce
the availability of Municipal Obligations for investment by any of these Funds
so as to adversely affect its shareholders, the Board would reevaluate the
affected Fund's investment objective and policies and submit possible changes in
the Fund's structure to shareholders for their consideration. If legislation
were enacted that would treat a type of Municipal Obligation as taxable, the
Municipal Funds would treat such security as a permissible taxable investment
within the applicable limits set forth herein. Each Municipal Fund may invest
more than 25% of the value of its total assets in Municipal Obligations which
are related in such a way that an economic, business or political development or
change affecting one such security also would affect the other securities; for
example, securities the interest upon which is paid from revenues of similar
types of projects, or securities of issuers that are located in the same state.
As a result, each Municipal Fund may be subject to greater risk as compared to a
fund that does not follow this practice. Certain municipal lease/purchase
obligations in which the Municipal Funds may invest may contain
"non-appropriation" clauses which provide that the municipality has no
obligation to make lease payments in future years unless money is appropriated
for such purpose on a yearly basis. Although "non-appropriation" lease/purchase
obligations are secured by the leased property, disposition of the leased
property in the event of foreclosure might prove difficult. In evaluating the
credit quality of a municipal lease/purchase obligation that is unrated, the
Investment Adviser will consider, on an ongoing basis, a number of factors
including the likelihood that the issuing municipality will discontinue
appropriating funding for the leased property.
Foreign Securities
(Asset Allocation, Growth, Special Opportunities, International Equity and
International Bond Funds and, to a limited extent, Equity Income, Bond,
Intermediate Bond and Money Market Funds only) Foreign securities markets
generally are not as developed or efficient as those in the United States.
Securities of some foreign issuers are less liquid and more volatile than
securities of comparable U.S. issuers. Similarly, volume and liquidity in most
foreign securities markets are less than in the United States and, at times,
volatility of price can be greater than in the United States. In addition, there
may be less publicly available information about a non-U.S. issuer, and non-U.S.
issuers generally are not subject to uniform accounting and financial reporting
standards, practices and requirements comparable to those applicable to U.S.
issuers. See "Appendix--Certain Portfolio Securities--Taxable Money Market
Securities--Bank Obligations." Because evidences of ownership of such securities
usually are held outside the United States, each of these Funds will be subject
to additional risks which include possible adverse political and economic
developments, possible seizure or nationalization of foreign deposits and
possible adoption of governmental restrictions which might adversely affect the
payment of principal and interest on the foreign securities or might restrict
the payment of principal and interest to investors located outside the country
of the issuers, whether from currency blockage or otherwise. Custodial expenses
for a portfolio of non-U.S. securities generally are higher than for a portfolio
of U.S. securities. Many developing countries have experienced substantial, and
in some periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain of these countries.
In an attempt to control inflation, wage and price controls have been imposed in
certain countries. To the extent a Fund invests in sovereign debt obligations,
the Fund will be exposed to the direct or indirect consequences of political,
social and economic changes in various developing countries. Political changes
in a country may affect the willingness of a foreign government to make or
provide for timely payments of its obligations. The country's economic status,
as reflected, among other things, in its inflation rate, the amount of its
external debt and its gross domestic product, also will affect the government's
ability to honor its obligations. Since foreign securities often are purchased
with and payable in currencies of foreign countries, the value of these assets
as measured in U.S. dollars may be affected favorably or unfavorably by changes
in currency rates and exchange control regulations. Some currency exchange costs
generally will be incurred when a Fund changes investments from one country to
another. Furthermore, some of these securities may be subject to brokerage or
stamp taxes levied by foreign governments, which have the effect of increasing
the cost of such investment and reducing the realized gain or increasing the
realized loss on such securities at the time of sale. Income received by a Fund
from sources within foreign countries may be reduced by withholding and other
taxes imposed by such countries. Tax conventions between certain countries and
the United States, however, may reduce or eliminate such taxes. All such taxes
paid by a Fund will reduce its net income available for distribution to its
shareholders.
Foreign Currency Exchange
(Asset Allocation, Growth, Special Opportunities, International Equity and
International Bond Funds only) Currency exchange rates may fluctuate
significantly over short periods of time. They generally are determined by the
forces of supply and demand in the foreign exchange markets and the relative
merits of investments in different countries, actual or perceived changes in
interest rates and other complex factors, as seen from an international
perspective. Currency exchange rates also can be affected unpredictably by
intervention by U.S. or foreign governments or central banks, or the failure to
intervene, or by currency controls or political developments in the United
States or abroad. The foreign currency market offers less protection against
defaults in the forward trading of currencies than is available when trading in
currencies occurs on an exchange. Since a forward currency contract is not
guaranteed by an exchange or clearinghouse, a default on the contract would
deprive the Fund of unrealized profits or force such Fund to cover its
commitments for purchase or resale, if any, at the current market price.
Foreign Commodity Transactions
(Asset Allocation, Growth, Special
Opportunities, International Equity and International Bond Funds only) Unlike
trading on domestic commodity exchanges, trading on foreign commodity exchanges
is not regulated by the Commodity Futures Trading Commission (the "CFTC") and
may be subject to greater risks than trading on domestic exchanges. For example,
some foreign exchanges are principal markets so that no common clearing facility
exists and an investor may look only to the broker for performance of the
contract. In addition, any profits that the Fund might realize in trading could
be eliminated by adverse changes in the exchange rate, or such Fund could incur
losses as a result of those changes. Transactions on foreign exchanges may
include both commodities which are traded on domestic exchanges and those which
are not.
Mortgage-Related Securities
(Asset Allocation, Equity and Bond Funds only) No assurance can be given as
to the liquidity of the market for certain mortgage-backed securities, such as
collateralized mortgage obligations and stripped mortgage-backed securities.
Determination as to the liquidity of interest-only and principal-only fixed
mortgage-backed securities issued by the U.S. Government or its agencies and
instrumentalities will be made in accordance with guidelines established by the
Board. In accordance with such guidelines, the Investment Adviser will monitor
investments in such securities with particular regard to trading activity,
availability of reliable price information and other relevant information. Each
of these Funds intends to treat other stripped mortgage-backed securities as
illiquid securities. Mortgage-related securities are a form of derivative
security. See "Appendix--Certain Portfolio Securities--Fixed-Income
Securities--Mortgage-Related Securities" and "--Illiquid Securities."
Zero Coupon Securities
(Asset Allocation, Equity, Bond and Municipal Bond Funds only) Federal
income tax law requires the holder of a zero coupon security or of certain
pay-in-kind bonds to accrue income with respect to these securities prior to the
receipt of cash payments. To maintain its qualification as a regulated
investment company and avoid liability for Federal income taxes, each Fund that
invests in such securities may be required to distribute such income accrued
with respect to these securities and may have to dispose of portfolio securities
under disadvantageous circumstances in order to generate cash to satisfy these
distribution requirements. Such Fund will not be able to purchase additional
income producing securities with cash used to make such distributions and its
current income may be reduced as a result.
Other Investment Considerations
The classification of each Non-Diversified Fund as a "non-diversified"
investment company means that the proportion of such Fund's assets that may be
invested in the securities of a single issuer is not limited by the 1940 Act. A
"diversified" investment company is required by the 1940 Act generally, with
respect to 75% of its total assets, to invest not more than 5% of such assets in
the securities of a single issuer and to hold not more than 10% of the voting
securities of any single issuer. However, each Fund intends to conduct its
operations so as to qualify as a "regulated investment company" for purposes of
the Code, which requires that, at the end of each quarter of its taxable year,
(i) at least 50% of the market value of its total assets be invested in cash,
U.S. Government securities, the securities of other regulated investment
companies and other securities, with such other securities of any one issuer
limited for the purposes of this calculation to an amount not greater than 5% of
the value of each such Fund's total assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its total
assets be invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies). Since a relatively high percentage of each Non-Diversified Fund's
assets may be invested in the securities of a limited number of issuers, some of
which may be within the same industry or economic sector, its portfolio
securities may be more susceptible to any single economic, political or
regulatory occurrence than the portfolio securities of a diversified investment
company. Investment decisions for each Fund are made independently from those of
the other investment companies or investment advisory accounts that may be
advised by the Investment Adviser. However, if such other investment companies
or managed accounts are prepared to invest in, or desire to dispose of,
securities in which a 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, a Fund or the price paid or received
by a Fund.
Alternative Purchase Methods
This Prospectus offers investors three methods of purchasing Fund shares.
Orders for purchases of Class I shares, however, may be placed only for certain
eligible investors as described below. An investor who is not eligible to
purchase Class I shares may choose from Class A and Class B 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, Class B and Class I share represents an identical
pro rata interest in a Fund's investment portfolio. Class A shares are sold at
net asset value per share plus, for each Fund other than a Money Market Fund, a
maximum initial sales charge of 4.50% (3.00% in the case of the Intermediate
Bond Fund and Intermediate Municipal Bond Fund) 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 Shares-- Class A Shares." Class A
shares of each Fund are subject to an annual service fee at the rate of up to
.25% of the value of the average daily net assets of Class A. See "Distribution
Plans and Shareholder Services Plans." Class A shares held by investors who
after purchasing Class A shares establish a Fiduciary Account will convert to
Class I shares automatically upon the establishment of such Account, based on
the relative net asset values for shares of each such Class. 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 5.00% (3.00% in the case of the
Intermediate Bond Fund and Intermediate Municipal Bond Fund) CDSC, which is
assessed only if Class B shares are redeemed within six years (five years in the
case of the Intermediate Bond Fund and Intermediate Municipal Bond Fund) of
purchase. Class B shares of the Money Market Fund may be acquired only through
exchanges with Class B shares of the other Funds and are subject to the CDSC, if
any, of the shares with which the exchange is made. See "How to Buy
Shares--Class B Shares" and "How to Redeem Shares--Contingent Deferred Sales
Charge--Class B Shares." Class B shares are subject to an annual service fee and
distribution fee. See "Distribution Plans and Shareholder Services Plans."
Approximately eight years (seven years in the case of the Intermediate Bond Fund
and Intermediate Municipal Bond Fund) 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 such 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. Class I
shares are sold at net asset value with no sales charge. Class I shares are sold
exclusively to qualified trust, custody and/or agency account clients of FNBC,
ANB or their affiliates ("Fiduciary Accounts") and to qualified benefit plans or
other programs with assets of at least $100 million invested in shares of the
Funds or other investment companies or accounts advised by the Investment
Adviser ("Eligible Retirement Plans"). Class I shares are not subject to an
annual service fee or distribution fee. Class I shares held by investors who
after purchasing Class I shares for their Fiduciary Accounts withdraw from such
Accounts will convert to Class A shares automatically upon such withdrawal,
based on the relative net asset values for shares of each such Class, and will
be subject to the annual service fee charged Class A. Class B shares will
receive lower per share dividends and at any given time the performance of Class
B should be expected to be lower than for shares of each other Class because of
the higher expenses borne by Class B. Similarly, Class A shares will receive
lower per share dividends and the performance of Class A should be expected to
be lower than Class I shares because of the higher expenses borne by Class A.
See "Fee Table." An investor who is not eligible to purchase Class I shares
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, if any,
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. Additionally, 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 $500,000 or more in Fund shares.
How to Buy Shares
INFORMATION APPLICABLE TO ALL PURCHASERS
When purchasing Fund shares, an investor must specify the Class of shares
being purchased. If no Class of shares is specified, Class A shares will be
purchased.
Class A and Class B shares are offered to the general public and may be
purchased through a number of institutions, including FCIMCO, FNBC, ANB and
their affiliates, other Service Agents, and directly through the Distributor.
Class B shares of the Money Market Fund may be acquired only through the
exchange of Class B shares of the other Funds.
Orders for purchases of Class I shares may be placed only for clients of
FNBC, ANB or their affiliates for their Fiduciary Accounts maintained at FNBC,
ANB or one of their affiliates and Eligible Retirement Plans with assets of at
least $100 million invested in shares of the Funds or other investment companies
or accounts advised by the Investment Adviser. Class I shares may be purchased
for a Fiduciary Account or Eligible Retirement Plan only by a custodian,
trustee, investment manager or other entity authorized to act on behalf of such
Account or Plan.
Share certificates will not be issued. It is not recommended that any of the
Municipal Funds be used as a vehicle for Keogh, IRA or other qualified
retirement plans. The Funds reserve the right to reject any purchase order.
The minimum initial investment for each Class is $1,000. However, for IRAs
and other retirement plans, the minimum initial purchase is $250. All subsequent
investments must be at least $100. The initial investment must be accompanied by
the Account Application. FCIMCO 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.
As to each Fund, 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. See "Determination of Net Asset Value" in the Statement of
Additional Information.
Each Money Market Fund's net asset value per share is determined as of 12:00
Noon, New York time, on each 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).
Shares of each Money Market Fund are sold on a continuous basis at the net
asset value per share next determined after an order in proper form and Federal
Funds (moneys of member banks within the Federal Reserve System which are held
on deposit at a Federal Reserve Bank) are received by the Transfer Agent. If an
investor does not remit Federal Funds, his payment must be converted into
Federal Funds. This usually occurs within one business day of receipt of a bank
wire and within two business days of receipt of a check drawn on a member bank
of the Federal Reserve System. Checks drawn on banks which are not members of
the Federal Reserve System may take considerably longer to convert into Federal
Funds. Prior to receipt of Federal Funds, the investor's money will not be
invested.
For each Fund, other than the Money Market Funds, shares are sold on a
continuous basis at the public offering price (i.e., net asset value plus the
applicable sales load, if any, set forth below). Net asset value per share of
these Funds 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.
For purposes of determining net asset value per share, options and futures
contracts will be valued 15 minutes after the close of trading on the New York
Stock Exchange. Each of these Funds' investments are valued each business day by
one or more independent pricing services approved by the Board and are valued at
fair value as determined by the pricing service. Each pricing service's
procedures are reviewed under the general supervision of the Board.
For each Fund, other than the Money Market Funds, 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, 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 that day. Otherwise, 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.
Federal regulations require that an investor provide a certified Taxpayer
Identification Number ("TIN") upon opening or reopening an account. See
"Dividends, Distributions and Taxes" and the 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").
Class A Shares
The public offering price for Class A shares of each Fund, other than the
Money Market Funds, is the net asset value per share of that Class plus a sales
load as shown below:
ASSET ALLOCATION FUNDS, EQUITY FUNDS, BOND FUND,
INTERNATIONAL BOND FUND AND MUNICIPAL BOND FUND
- - ---------------------------------------------------------
<TABLE>
<CAPTION>
Total Sales Load
--------------------------------- Dealers'
As a % of As a % of Reallowance
offering price net asset value as a % of
AMOUNT OF TRANSACTION per share per share offering price
<S> <C> <C> <C>
Less than $50,000 4.50 4.70 4.00
$50,000 to less than $100,000 4.00 4.20 3.50
$100,000 to less than $250,000 3.00 3.10 2.50
$250,000 to less than $500,000 2.00 2.00 1.50
$500,000 to less than $1,000,000 1.50 1.50 1.25
$1,000,000 and above none none none
<CAPTION>
INTERMEDIATE BOND FUND AND
INTERMEDIATE MUNICIPAL BOND FUND
- - -------------------------------------------------------------------------------
Total Sales Load
--------------------------------- Dealers'
As a % of As a % of Reallowance
offering price net asset value as a % of
AMOUNT OF TRANSACTION per share per share offering price
<S> <C> <C> <C>
Less than $50,000 3.00 3.10 2.75
$50,000 to less than $100,000 2.50 2.60 2.25
$100,000 to less than $250,000 2.00 2.00 1.75
$250,000 to less than $500,000 1.50 1.50 1.25
$500,000 to less than $1,000,000 1.00 1.00 0.75
$1,000,000 and above none none none
</TABLE>
There is no initial sales charge on purchases of $1,000,000 or more of
Class A shares. However, if an investor purchases Class A shares without an
initial sales charge as part of an investment of at least $1,000,000 and redeems
those shares within a certain period after purchase, a CDSC will be imposed at
the time of redemption as described below. The terms set forth under "How to
Redeem Fund Shares--Contingent Deferred Sales Charge--Class B" (other than the
amount of the CDSC and its time periods) are applicable to the Class A shares
subject to a CDSC. Letter of Intent and Right of Accumulation apply to such
purchases of Class A shares. The following table sets forth the rates of such
CDSC for the indicated time periods:
<TABLE>
<CAPTION>
AMOUNT OF CDSC as a % of
TRANSACTION AT Amount Invested or Year Since Purchase
OFFERING PRICE Redemption Proceeds Payment Was Made
<S> <C> <C>
$1,000,000 to
less than $2,500,000 1.00% First or Second
$2,500,000 to
less than $5,000,000 0.50% First
$5,000,000 and above 0.25% First
</TABLE>
The dealer reallowance may be changed from time to time but will remain the
same for all dealers. With respect to purchases of $1,000,000 or more of Class A
shares made through Service Agents, the Distributor may pay such Service Agents
from its own funds a fee of up to .75% for the Intermediate Bond Fund and
Intermediate Municipal Bond Fund and 1.00% for each other Fund of the amount
invested to compensate such Service Agents for their distribution assistance in
connection with such purchases.
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 or custodian, 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
accounts registered under the Uniform Gifts to Minors Act or Uniform Transfers
to Minors Act which are opened through FCIS and 401(k) and other defined
contribution or qualified retirement plan accounts for which FNBC or ANB, since
at least June 1, 1995, or any of their affiliates, since at least January 1,
1996, has served as administrator or trustee. Class A shares are also offered at
net asset value to directors and full-time or part-time employees 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 Investment Adviser,
including members of the Funds' Board, or the spouse or minor child of any of
the foregoing.
Class A shares may be purchased at net asset value through certain
broker-dealers, registered investment advisers and other financial institutions
which have entered into an agreement with the Distributor, which includes a
requirement that such shares be sold for the benefit of clients participating in
a "wrap account" or a similar program under which such clients pay a fee to such
broker-dealer, registered investment adviser or other financial institution.
FCIMCO will pay a fee of up to 1% of the amount invested by a participant in its
Investment Architect Account, or any other wrap account, to FCIS, FNBC or other
third-parties.
Class A shares also may be purchased at net asset value, without a sales
charge, with the proceeds from the redemption of shares of an investment company
sold with a sales charge or commission and not distributed by the Distributor or
annuity contract or guaranteed investment contract subject to a surrender
charge. This also includes shares of an investment company that were or would be
subject to a contingent deferred sales charge upon redemption. The purchase must
be made within 60 days of the redemption, and the Distributor must be notified
in writing by the investor, or by the investor's investment professional, at the
time the purchase is made.
Class A shares also 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 200 employees eligible for
participation in such plans or programs or (ii) such plan's or program's assets
exceed one million dollars ("Eligible Benefit Plans").
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 Shares." The Distributor 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 the Distributor,
in part, would be used to defray these expenses.
Class I Shares
The public offering price for Class I shares is the net asset value per
share of that Class. No sales charge is imposed for Class I shares.
Purchasing Shares Through Accounts with FCIMCO, FNBC, ANB or a Service
Agent Investors who desire to purchase shares through their accounts at FCIMCO,
FNBC, ANB or their 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,
FCIMCO, FNBC and ANB may charge clients direct fees for effecting transactions
in shares, as well as fees for other services provided to clients in connection
with accounts through which shares are purchased. These fees, if any, would be
in addition to fees received by a Service Agent under a Shareholder Services
Plan or fees received by FCIMCO under an Investment Advisory Agreement or
Administration Agreement. Each Service Agent has agreed to transmit to its
clients a schedule of such fees. In addition, Service Agents, FCIMCO, FNBC and
ANB may 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. Certain investor accounts with FNBC, ANB and their
affiliates and certain Service Agents may be eligible for an automatic
investment privilege, commonly called a "sweep," under which amounts in excess
of a certain minimum held in these accounts will be invested automatically in
shares at predetermined intervals. Each investor desiring to use this privilege
should consult FNBC, ANB or his Service Agent for details. It is the
responsibility of FNBC, ANB and Service Agents to transmit orders on a timely
basis.
Copies of the Prospectus and Statement of Additional Information may be
obtained from the Distributor, FCIMCO, certain affiliates of FCIMCO or certain
Service Agents, as well as from the 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 shares of such Fund,
shares of other Funds, and shares of certain other investment companies advised
by the Investment Adviser purchased with a sales load or acquired by a previous
exchange of shares purchased 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, is $50,000 or more. If, for example, an
investor previously purchased and still holds Class A shares of the Equity
Income 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 such 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 the investor's holdings through a check of appropriate records.
Shareholder Services
The Exchange Privilege and Automatic Investment Plan are available to
shareholders of any Class. The Letter of Intent and Reinstatement Privilege are
available only for Class A and Class B shareholders, respectively. In addition,
such services and privileges may not be available to clients of certain Service
Agents and some Service Agents may impose certain conditions on their clients
which are different from those described in this Prospectus. Each investor
should consult his Service Agent in this regard.
EXCHANGE PRIVILEGE
The Exchange Privilege enables an investor to purchase, in exchange for
shares of a Fund, shares of the same Class of the other Funds. This privilege
may be expanded to permit exchanges between a Fund and other funds that, in the
future, may be advised by the Investment Adviser. Exchanges may be made to the
extent the shares being received in the exchange are offered for sale in the
shareholder's state of residence.
Shares of the same Class of Funds purchased by exchange will be purchased on
the basis of relative net asset value per share as follows:
A. Shares of Funds purchased with or without a sales load may be exchanged
without a sales load for shares of other Funds sold without a sales load.
B. Shares of Funds purchased without a sales load may be exchanged for shares
of other Funds sold with a sales load, and the applicable sales load will be
deducted.
C. Shares of Funds purchased with a sales load, shares of Funds acquired by a
previous exchange from shares purchased with a sales load and additional shares
acquired through reinvestment of dividends or distributions of any such Funds
(collectively referred to herein as "Purchased Shares") may be exchanged for
shares of other Funds sold with a sales load (referred to herein as "Offered
Shares"), provided that, if the sales load applicable to the Offered Shares
exceeds the maximum sales load that could have been imposed in connection with
the Purchased Shares (at the time the Purchased Shares were acquired), without
giving effect to any reduced loads, the difference will be deducted.
D. Shares of Funds subject to a CDSC that are exchanged for shares of another
Fund will be subject to the higher applicable CDSC of the two Funds, and for
purposes of calculating CDSC rates and conversion periods, if any, will be
deemed to have been held since the date the shares being exchanged were
initially purchased.
To accomplish an exchange under item C above, shareholders must notify the
Transfer Agent of their prior ownership of Fund shares and their account number.
No fees currently are charged shareholders directly in connection with
exchanges although the Funds reserve 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 Funds reserve 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.
LETTER OF INTENT--CLASS A SHARES
By signing a Letter of Intent form, available from the Distributor, FCIMCO,
certain affiliates of FCIMCO, 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 (beginning up to 30 days before the
date of execution of the Letter of Intent) pursuant to the terms and 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. Assuming completion of the total minimum
investment specified under a Letter of Intent, an adjustment will be made to
reflect any reduced sales load applicable to shares purchased during the 30-day
period before submission of the Letter of Intent. In addition, 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 Trust
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, the
investor must indicate his or her intention to do so under a Letter of Intent.
AUTOMATIC INVESTMENT PLAN
The Automatic Investment Plan permits an investor to purchase shares at
regular intervals selected by the investor. Provided the investor's bank or
other financial institution allows automatic withdrawals, shares may be
purchased by transferring funds from the bank account designated by the
investor. At the investor's option, the account designated will be debited in
the specified amount, and 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 Investment Plan
account, the investor must check the appropriate box and supply the necessary
information on the Account Application. Investors may obtain the necessary
applications from the Distributor. Investors should be aware that periodic
investment plans do not guarantee a profit and will not protect an investor
against loss in a declining market. An investor may cancel his or her
participation in the Plan or change the amount of purchase at any time by
mailing written notification to Primary Funds Service Corp., P.O. Box 9743,
Providence, Rhode Island 02940-9743, and such notification will be effective
three business days following receipt. The Funds may modify or terminate the
Automatic Investment Plan at any time or charge a service fee. No such fee
currently is contemplated.
REINSTATEMENT PRIVILEGE
The Reinstatement Privilege enables investors who have redeemed Class A or
Class B shares to purchase, within 30 days of such redemption, Class A shares
without the imposition of a sales load in an amount not to exceed the redemption
proceeds received. Class A shares so reinstated or purchased will be offered at
a purchase price equal to the then-current net asset value of Class A determined
after a reinstatement request and payment for Class A shares are received by the
Transfer Agent. This privilege also enables such investors to reinstate their
account for the purpose of exercising the Exchange Privilege. To use the
Reinstatement Privilege, an investor must submit a written reinstatement request
to the Transfer Agent. The reinstatement request and payment must be received
within 30 days of the trade date of the redemption. There currently are no
restrictions on the number of times an investor may use this privilege.
How to Redeem Shares
GENERAL
An investor may request redemption of his shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. An
investor who has purchased shares through his Fiduciary Account or as a
participant in an Eligible Retirement Plan must redeem shares by following
instructions pertaining to such Account or Plan. It is the responsibility of the
entity authorized to act on behalf of such Account or Plan to transmit the
redemption order to the Transfer Agent and credit the investor's account with
the redemption proceeds on a timely basis. 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, Class A shares
will be redeemed first. 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 Funds impose no charges when shares are redeemed. However, the
Distributor may impose a CDSC as described below. 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.
A Fund ordinarily will make payment for all shares redeemed within seven days
after receipt by the Transfer Agent of a redemption request in proper form,
except as provided by the rules of the Securities and Exchange Commission.
HOWEVER, IF AN INVESTOR HAS PURCHASED FUND SHARES BY CHECK OR THROUGH THE
AUTOMATIC INVESTMENT PLAN 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 OR
AUTOMATIC INVESTMENT PLAN ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR
MORE. IN ADDITION, THE FUND WILL NOT HONOR REDEMPTION CHECKS FOR A PERIOD OF
EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK OR
AUTOMATIC INVESTMENT PLAN ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED.
THESE PROCEDURES WILL NOT APPLY IF THE INVESTOR OTHERWISE HAS A SUFFICIENT
COLLECTED BALANCE IN HIS OR HER 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.
Each 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 $1,000 or less ($500 or less in the case of the Municipal Bond Fund)
and remains so during the notice period.
CONTINGENT DEFERRED SALES CHARGE--
CLASS B
A CDSC payable to the Distributor may be imposed on redemptions of Class B
shares depending on the number of years such shares were held by the investor.
The following tables set forth the rates of the CDSC applied for the indicated
Funds:
ASSET ALLOCATION FUNDS, EQUITY FUNDS, BOND FUND,
INTERNATIONAL BOND FUND AND MUNICIPAL BOND FUND
- - ---------------------------------------------------------
<TABLE>
<CAPTION>
CDSC as a % of
Amount Invested
or
Year Since Redemption
Purchase Payment Was Made Proceeds
<S> <C>
First 5.00
Second 4.00
Third 3.00
Fourth 3.00
Fifth 2.00
Sixth 1.00
Seventh None
Eighth *
</TABLE>
* Conversion to Class A shares.
INTERMEDIATE BOND FUND AND INTERMEDIATE MUNICIPAL BOND FUND
- - ---------------------------------------------------------
<TABLE>
<CAPTION>
CDSC as a % of
Amount Invested
or
Year Since Redemption
Purchase Payment Was Made Proceeds
<S> <C>
First 3.00
Second 3.00
Third 2.00
Fourth 2.00
Fifth 1.00
Sixth None
Seventh *
</TABLE>
* Conversion to Class A shares.
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. Class B
shares redeemed will not be subject to a CDSC to the extent that the value of
such shares represents capital appreciation or reinvestment of dividends or
distributions. It will be assumed that the redemption is made first of Class B
shares acquired pursuant to the reinvestment of dividends and distributions or
representing any capital appreciation in the value of the Class B shares held by
the investor; then of Class B shares held for the longest period of time.
WAIVER OF CDSC
The CDSC will be waived in connection with (a) redemptions made within one
year after the death of the shareholder, (b) redemptions by shareholders after
age 70-1/2 for purposes of the minimum required distribution from an IRA, Keogh
plan or custodial account pursuant to Section 403(b) of the Code, (c)
distributions from a qualified plan upon retirement or termination of
employment, (d) redemptions of shares acquired through a contribution in excess
of permitted amounts, (e) in-service withdrawals from tax qualified plans by
participants and (f) redemptions initiated by a Fund of accounts with net assets
of less than $1,000 ($500 in the case of the Municipal Bond Fund).
CONVERSION OF CLASS B SHARES
Class B shares automatically convert to Class A shares (and thus become
subject to the lower expenses borne by Class A shares) in the eighth year
(seventh year in the case of the Intermediate Bond Fund and Intermediate
Municipal Bond Fund) after the date of purchase, together with the pro rata
portion of all Class B shares representing dividends and other distributions
paid in additional Class B shares. The conversion will be effected at the
relative net asset values per share of the two Classes on the first business day
of the month following the seventh anniversary (sixth anniversary in the case of
the Intermediate Bond Fund and Intermediate Municipal Bond Fund) of the original
purchase. If any exchanges of Class B shares during the eight-year or
seven-year, as the case may be, period occurred, the holding period for the
shares exchanged will be counted toward the eight-year or seven-year, as the
case may be, period. At the time of the conversion the net asset value per share
of the Class A shares may be higher or lower than the net asset value per share
of the Class B shares; as a result, depending on the relative net asset values
per share, a shareholder may receive fewer or more Class A shares than the
number of Class B shares converted.
Each Fund reserves the right to cease offering Class B shares for sale at any
time or reject any order for the purchase of Class B shares and to cease
offering any services provided by a Service Agent.
PROCEDURES
An investor who has purchased shares through his account at FCIMCO, FNBC 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 redemption 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 described
below. It is the responsibility of FCIMCO, FNBC 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.
An investor may redeem or exchange shares by telephone if the investor has
checked the appropriate box on the Account Application. 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 Funds will require
the Transfer Agent to employ reasonable procedures, such as requiring a form of
personal identification, to confirm that instructions are genuine and, if it
does not follow such procedures, the Fund or the Transfer Agent may be liable
for any losses due to unauthorized or fraudulent instructions. Neither the Fund
nor the Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, an investor 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.
WRITTEN REDEMPTION REQUESTS
Investors may redeem shares by written request mailed to The Prairie Family
of Funds, P.O. Box 9743, Providence, Rhode Island 02940-9743. 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.
CHECK REDEMPTION PRIVILEGE
Class A of Money Market Funds only
A Money Market Fund shareholder may request on the Account Application or
by later written request to the Fund that the Money Market Fund provide
Redemption Checks drawn on the Fund's account. Redemption Checks may be made
payable to the order of any person in the amount of $500 or more. Redemption
Checks should not be used to close an account. Redemption Checks are free, but
the Transfer Agent will impose a fee for stopping payment of a Redemption Check
at the investor's request or if the Transfer Agent cannot honor the Redemption
Check due to insufficient funds or other valid reason. An investor should date
his Redemption Checks with the current date when the investor writes them.
Please do not postdate Redemption Checks. If an investor does, the Transfer
Agent will honor, upon presentment, even if presented before the date of the
check, all postdated Redemption Checks which are dated within six months of
presentment of payment, if they are otherwise in good order. This Privilege may
be modified or terminated at any time by the Fund or the Transfer Agent upon
notice to shareholders.
Management of the Funds
INVESTMENT ADVISER AND ADMINISTRATOR
First Chicago Investment Management Company, located at Three First
National Plaza, Chicago, Illinois 60670, is each Fund's investment adviser and
administrator. FCIMCO is a registered investment adviser and a wholly-owned
subsidiary of The First National Bank of Chicago ("FNBC"), which in turn is a
wholly-owned subsidiary of First Chicago NBD Corporation, a registered bank
holding company. As of December 31, 1995, FCIMCO provided investment management
services to portfolios containing approximately $71 billion in assets.
FCIMCO serves as investment adviser for each Fund pursuant to an Investment
Advisory Agreement. Under the relevant Investment Advisory Agreement, FCIMCO
provides the day-to-day management of each Fund's investments, subject to the
overall authority of the Board and in conformity with applicable state law and
the stated policies of the Fund. FCIMCO is responsible for making investment
decisions for each Fund, placing purchase and sale orders (which may be
allocated to various dealers based on their sales of Fund shares) and providing
research, statistical analysis and continuous supervision of each Fund's
investment portfolio. FCIMCO has advised the Funds that in making its investment
decisions FCIMCO does not obtain or use material inside information in its or
any of its affiliate's possession.
FCIMCO has engaged ANB-IMC, located at 1 North LaSalle Street, Chicago,
Illinois 60690, to serve as the International Equity Fund's sub-investment
adviser. ANB-IMC, a registered investment adviser formed in 1973, is a
wholly-owned subsidiary of American National Bank and Trust Company, which in
turn is a wholly-owned subsidiary of FCNBD. As of December 31, 1995, ANB-IMC
managed approximately $ 21 billion in assets, including over $358 million in
international equities, primarily for pension funds. ANB-IMC, subject to the
supervision and approval of FCIMCO, provides investment advisory assistance and
the day-to-day management of the International Equity Fund's investments, as
well as investment research and statistical information, under a Sub-Investment
Advisory Agreement with FCIMCO, subject to the overall authority of the Board in
accordance with Massachusetts law.
The Funds' primary portfolio managers currently are: for Managed Assets
Income Fund and Managed Assets Fund, Claude B. Erb (since inception of the
Fund), who has been employed by FNBC since 1993 and, prior thereto, was Deputy
Chief Investment Officer and Senior Vice President for Trust Services of America
and TSA Capital Management; for Equity Income Fund, Chris M. Gassen (since March
1996), who has been employed by NBD Bank, a wholly-owned subsidiary of FCNBD,
since 1985, and F.Richard Neumann (since March 1996), who has been employed by
NBD Bank since 1981; for Growth Fund, Jeffrey C. Beard (since March 1996), who
has been employed by NBD Bank since 1982, and Gary L. Konsler (since March
1996), who has been employed by NBD Bank since 1973; for Special Opportunities
Fund, Ronald L. Doyle (since March 1996), who has been employed by NBD Bank
since 1982, and Joseph R. Gatz (since March 1996), who has been employed by NBD
Bank since 1986; for International Equity Fund, Peter M. Jankovskis (since
inception of the Fund), who has been employed by ANB-IMC since 1992 and, prior
thereto, was a faculty member of the University of California at Santa Barbara;
for Bond Fund, Douglas S. Swanson (since March 1996), who has been employed by
NBD Bank since 1983; for Intermediate Bond Fund, Ricardo F. Cipicchio (since
March 1996), who has been employed by NBD Bank since 1989; for International
Bond Fund, Claude B. Erb (since inception of the Fund); and for Intermediate
Municipal Bond Fund and Municipal Bond Fund, Robert T. Grabowski (since March
1996), who has been employed by NBD Bank since 1970.
Under the terms of the relevant Investment Advisory Agreement, FCIMCO
receives a monthly fee at the annual rate of .65% of the value of each Asset
Allocation Fund's average daily net assets; .50% of the value of the Equity
Income Fund's average daily net assets; .65% of the value of the Growth Fund's
average daily net assets; .70% of the value of the Special Opportunities Fund's
average daily net assets; .80% of the value of the International Equity Fund's
average daily net assets; .55% of the value of the Bond Fund's average daily net
assets; .70% of the value of the International Bond Fund's average daily net
assets; .40% of the value of each of the Intermediate Bond, Intermediate
Municipal Bond and Municipal Bond Fund's average daily net assets; and .40% of
the value of each Money Market Fund's average daily net assets. The investment
advisory fee payable by the International Equity Fund is higher than that paid
by most other funds. For the fiscal year ended December 31, 1995, each Fund paid
FCIMCO an investment advisory fee at the effective annual rate set forth below
pursuant to undertakings in effect:
<TABLE>
<CAPTION>
Effective Annual Rate
As a Percentage of
Name of Fund Average Daily Net Assets
<S> <C>
Managed Assets Income .30%
Managed Assets .05%
Equity Income .37%
Growth .53%
Special Opportunities .46%
International Equity .47%
Intermediate Bond .27%
Bond .38%
International Bond .10%
Intermediate Municipal Bond .28%
Municipal Bond .26%
U. S. Government Money Market .14%
Money Market .13%
Municipal Money Market .17%
</TABLE>
For the fiscal year ended December 31, 1995, FCIMCO paid ANB-IMC a
sub-investment advisory fee at the annual rate of .40% of the value of
the International Equity Fund's average daily net assets.
FCIMCO serves as each Fund's administrator pursuant to an Administration
Agreement. Under the Administration Agreement, FCIMCO generally assists in all
aspects of the Funds' operations, other than providing investment advice,
subject to the overall authority of the Board in accordance with applicable
state law. Under the terms of the relevant Administration Agreement, FCIMCO
receives a monthly fee at the annual rate of .15% of the value of each Fund's
average daily net assets. For the fiscal year ended December 31, 1995, each Fund
paid FCIMCO an administrative fee at the effective annual rate set forth below
pursuant to undertakings in effect:
<TABLE>
<CAPTION>
Effective Annual Rate
As a Percentage of
Name of Fund Average Daily Net Assets
<S> <C>
Managed Assets Income .15%
Managed Assets .09%
Equity Income .15%
Growth .15%
Special Opportunities .15%
International Equity .15%
Intermediate Bond .14%
Bond .15%
International Bond .12%
Intermediate Municipal Bond .15%
Municipal Bond .15%
U. S. Government Money Market .13%
Money Market .15%
Municipal Money Market .15%
</TABLE>
FCIMCO has engaged Concord Holding Corporation, a wholly-owned subsidiary of
The BISYS Group, Inc., located at 3435 Stelzer Road, Columbus, Ohio 43219-3035
(the "Sub-Administrator"), to assist it in providing certain administrative
services for the Funds pursuant to a Master Sub-Administration Agreement between
FCIMCO and the Sub-Administrator. FCIMCO, from its own funds, will pay the
Sub-Administrator for the Sub-Administrator's services.
DISTRIBUTOR
Concord Financial Group, Inc., located at 3435 Stelzer Road, Columbus, Ohio
43219-3035, serves as principal underwriter and distributor of each Fund's
shares. The Distributor, a wholly-owned subsidiary of the Sub-Administrator, was
organized to distribute shares of mutual funds to institutional and retail
investors. The Distributor distributes the shares of other investment companies
with over $80 billion in assets.
TRANSFER AND DIVIDEND DISBURSING
AGENT AND CUSTODIAN
Primary Funds Service Corp., 100 Financial Park, Franklin, Massachusetts
02038, is the Funds' Transfer and Dividend Disbursing Agent (the "Transfer
Agent"). The Bank of New York, 90 Washington Street, New York, New York 10286,
is the Funds' Custodian.
EXPENSES
All expenses incurred in the operation of the Trust, Prairie Intermediate
Bond Fund and Prairie Municipal Bond Fund are borne by such company, except to
the extent specifically assumed by FCIMCO. The expenses borne by the Trust,
Prairie Intermediate Bond Fund and Prairie Municipal Bond Fund, Inc. include:
organizational costs, taxes, interest, loan commitment fees, interest and
distributions paid on securities sold short, brokerage fees and commissions, if
any, fees of Board members, Securities and Exchange Commission fees, state Blue
Sky qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of maintaining each
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, costs of preparing and
printing prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders, and any extraordinary
expenses. In addition, Class B shares are subject to an annual distribution fee
for advertising, marketing and distributing such shares and 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. See "Distribution Plans and Shareholder Services Plans."
Expenses attributable to a particular Fund, in the case of the Trust's series,
or Class are charged against the assets of that Fund or Class, respectively;
other expenses of the Trust are allocated among such Funds on the basis
determined by the Board, including, but not limited to, proportionately in
relation to the net assets of each such Fund. The imposition of the advisory
fee, as well as other operating expenses, including the fees paid under any
Distribution Plan and Shareholder Services Plan, will have the effect of
reducing the yield to investors. From time to time, FCIMCO may waive receipt of
its fees and/or voluntarily assume certain expenses of a Fund, which would have
the effect of lowering that Fund's overall expense ratio and increasing yield to
investors at the time such amounts are waived or assumed, as the case may be.
The Fund will not pay FCIMCO at a later time for any amounts which may be
waived, nor will the Fund reimburse FCIMCO for any amounts which may be assumed.
Distribution Plans and
Shareholder Services Plans
Class B shares of each Fund are subject to an annual distribution fee
pursuant to a Distribution Plan. Class A and Class B shares of each Fund are
subject to an annual service fee pursuant to a Shareholder Services Plan.
DISTRIBUTION PLANS
(Class B only) Under separate Distribution Plans, adopted pursuant to Rule
12b-1 under the 1940 Act, each of the Trust, Prairie Intermediate Bond Fund and
Prairie Municipal Bond Fund has agreed to pay the Distributor for advertising,
marketing and distributing shares of the relevant Fund at an aggregate annual
rate of .75% of the value of the average daily net assets of Class B. The
Distributor may pay one or more Service Agents in respect of these services.
FCIMCO, FNBC, ANB and their affiliates may act as Service Agents and receive
fees under the relevant Distribution Plan. The Distributor determines the
amounts, if any, to be paid to Service Agents under the Distribution Plan and
the basis on which such payments are made. The fees payable under each
Distribution Plan are payable without regard to actual expenses incurred.
SHAREHOLDER SERVICES PLANS
(Class A and Class B) Under separate Shareholder Services Plans, each of
the Trust, Prairie Intermediate Bond Fund and Prairie Municipal Bond Fund pays
the Distributor for the provision of certain services to the holders of these
shares a fee at an annual rate of .25% of the value of the average daily net
assets of Class A or 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. Under each
Shareholder Services Plan, the Distributor may make payments to Service Agents
in respect of these services. FCIMCO, FNBC, ANB and their affiliates may act as
Service Agents and receive fees under the Shareholder Services Plan. The
Distributor 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 Funds pursuant to the Shareholder Services Plan and any other compensation
payable by their clients in connection with the investment of their assets in
Fund shares.
Dividends, Distributions and Taxes
MANAGED ASSETS, GROWTH, SPECIAL OPPORTUNITIES AND INTERNATIONAL EQUITY FUNDS
- - --Declare and pay dividends from net investment income quarterly.
MANAGED ASSETS INCOME AND EQUITY INCOME FUNDS -- Declare and pay dividends from
net investment income monthly, usually on the last calendar day of the month.
BOND, MUNICIPAL BOND AND MONEY MARKET FUNDS -- Declare dividends from net
investment income on each day the New York Stock Exchange is open for business,
except for the Money Market Fund on Martin Luther King, Jr. Day, Columbus Day
and Veterans Day. Dividends usually are paid on the last calendar day of each
month. Shares begin accruing dividends on the next business day after the
purchase order is effective. The earnings for Saturdays, Sundays and holidays
are declared as dividends on the preceding business day.
APPLICABLE TO ALL FUNDS --Each Fund will make distributions from net realized
securities gains, if any, once a year, but 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 1940 Act. Dividends are
automatically reinvested in additional Fund shares of the same Class from which
they were paid at net asset value, unless payment in cash is requested.
Dividends paid by each Fund, other than a Municipal Fund, derived from net
investment income and dividends paid by a Municipal Fund derived from taxable
investments, together with distributions from any net realized short-term
securities gains, will be taxable to U.S. investors as ordinary income whether
or not reinvested in additional Fund shares. Distributions from net realized
long-term securities gains, if any, will be taxable to U.S. shareholders as
long-term capital gains for Federal income tax purposes, regardless of how long
investors have held shares and whether such distributions are received in cash
or reinvested in additional shares.
Except for dividends from taxable investments, it is anticipated that
substantially all dividends paid by a Municipal Fund will not be subject to
Federal income tax. Dividends and distributions paid by a Municipal Fund may be
subject to the alternative minimum tax and to certain state and local taxes.
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 such investor's account which will include information as to
dividends and distributions from securities gains, if any, paid during the year.
Participants in a Retirement Plan should receive periodic statements from the
trustee, custodian or administrator of their Plan.
Federal regulations generally require the Funds 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.
Management believes that each Fund has qualified as a "regulated investment
company" for the fiscal year ended December 31, 1995. Each 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. In addition, each 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 or her tax adviser regarding specific
questions as to Federal, state or local taxes.
Performance Information
SPECIAL OPPORTUNITIES, GROWTH AND INTERNATIONAL EQUITY FUNDS --For purposes
of advertising, performance of these Funds may be calculated on the bases of
average annual total return and/or total return. Average annual total return is
calculated pursuant to a standardized formula which assumes that an investment
in such 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 a Fund's performance will include such Fund's
average annual total return for one, five and ten year periods, or for shorter
time periods depending upon the length of time during which the Fund has
operated. Computations of average annual total return for periods of less than
one year represent an annualization of the Fund's actual total return for the
applicable period.
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 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 also may 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 applicable
sales charge which, if reflected, would reduce the performance quoted.
ASSET ALLOCATION, EQUITY INCOME, BOND AND MUNICIPAL BOND FUNDS --For purposes of
advertising, performance of these Funds may be calculated on several bases,
including current yield, average annual total return and/or total return.
Current yield refers to the Fund's annualized net investment income per share
over a 30-day period, expressed as a percentage of the net asset value per share
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.
The Municipal Bond Funds may advertise tax equivalent yield, which is
calculated by determining the pre-tax yield which, after being taxed at a
certain rate, would be equivalent to a stated current yield calculated as
described above.
Average annual total return and total return will be calculated as described
above.
MONEY MARKET FUNDS --From time to time, each Money Market Fund may advertise its
yield and effective yield. Both yield figures are based on historical earnings
and are not intended to indicate future performance. It can be expected that
these yields will fluctuate substantially. The yield of the Fund refers to the
income generated by an investment in the Fund over a seven-day period (which
period will be stated in the advertisement). This income is then annualized.
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The effective yield is calculated similarly but,
when annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment.
The Municipal Money Market Fund also may advertise tax equivalent yield,
which would be calculated as described above.
APPLICABLE TO ALL FUNDS --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 the type and quality of portfolio
securities held by the Fund and is affected by operating expenses. Yield and
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. Performance for each Class will be
calculated separately.
Comparative performance information may be used from time to time in
advertising or marketing a Fund's shares, including data from Lipper Analytical
Services, Inc., Bank Rate Monitor(TM), N. Palm Beach, Fla. 33408, Bond 20-Bond
Index, Moody's Bond Survey Bond Index, Lehman Corporate Bond Index,
IBC/Donoghue's Money Fund Report(R), S&P 500 Index, Lehman Brothers
Government/Corporate Bond Index, the Dow Jones Industrial Average,
CDA/Wiesenberger Investment Companies Service, Mutual Fund Values; Mutual Fund
Forecaster, Schabacker Investment Management, Inc., Morningstar, Inc. and other
industry publications.
General Information
The Trust and Prairie Intermediate Bond Fund are organized as
unincorporated business trusts under the laws of the Commonwealth of
Massachusetts and Prairie Municipal Bond Fund, Inc. is incorporated under
Maryland law. The Trust, Prairie Intermediate Bond Fund and Prairie Municipal
Bond Fund, Inc. commenced operations on January 17, 1995, March 5, 1993 and
March 1, 1988, respectively. The Trust and Prairie Intermediate Bond Fund are
authorized to issue an unlimited number of shares of beneficial interest and
Prairie Municipal Bond Fund, Inc. is authorized to issue 10 billion shares of
common stock, each with a par value of $.001 per share. Shares of each Fund are
classified into three classes. Each share has one vote and shareholders will
vote in the aggregate and not by class except as otherwise required by law or
with respect to any matter which affects only one class.
Prior to January 17, 1995, Prairie Intermediate Bond Fund's name was First
Prairie U.S. Government Income Fund and it was required to invest at least 65%
of its assets in U.S. Government securities and was a diversified investment
company. Any reference herein and in the Statement of Additional Information to
Prairie Intermediate Bond Fund, including any financial information and
performance data, relating to such periods reflect the Fund's portfolio as
constituted prior to such revisions.
Prior to January 17, 1995, Prairie Municipal Bond Fund, Inc.'s name was First
Prairie Tax Exempt Bond Fund, Inc. and, from September 12, 1989 to January 17,
1995, its shares were offered as the Insured Series and it invested at least 65%
of the value of its total assets in Municipal Obligations insured as to timely
payment of principal and interest by recognized insurers of Municipal
Obligations. Prior to September 12, 1989, the Fund was not required to invest
such portion of its assets in insured Municipal Obligations and, under normal
market conditions, the dollar-weighted average maturity of its portfolio
exceeded ten years and it invested in Municipal Obligations rated A or better by
Moody's or S&P. Any reference herein and in the Statement of Additional
Information to Prairie Municipal Bond Fund, Inc., including any financial
information and performance data, relating to such periods reflect the Fund's
portfolio as constituted prior to such revisions.
To date, the Trust's Board has authorized the creation of 12 separate
portfolios of shares for the Trust. All consideration received by the Trust for
shares of one of the portfolios and all assets in which such consideration is
invested will belong to that portfolio (subject only to the rights of creditors
of the Trust) and will be subject to the liabilities related thereto. The income
attributable to, and the expenses of, one portfolio (and as to classes within a
portfolio) are treated separately from those of the other portfolios (and
classes). The Trust has the ability to create, from time to time, new portfolios
without shareholder approval which may be sold pursuant to other offering
documents.
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of a Massachusetts business trust.
However, the Trust Agreement for each of Prairie Intermediate Bond Fund and the
Trust disclaims shareholder liability for acts or obligations of such entities
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by such entities or a Trustee.
Each 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 Trust and Prairie Intermediate Bond Fund in such a way so as
to avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Trust or Prairie Intermediate Bond Fund, as the case may be.
The Funds ordinarily will not hold shareholder meetings; however,
shareholders under certain circumstances have the right to call a meeting of
shareholders for the purpose of voting to remove Board members.
Although each Fund is offering only its own shares, it is possible that a
Fund might become liable for any misstatement in this Prospectus about another
Fund. The Funds' Board has considered this factor in approving the use of this
single combined Prospectus.
The Transfer Agent maintains a record of each investor's ownership and sends
confirmations and statements of account.
Investor inquiries may be made by writing to the address shown on page one or
by calling the appropriate telephone number.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE FUNDS'
OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUNDS' SHARES,
AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
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Appendix
CERTAIN PORTFOLIO SECURITIES
Equity Securities
American, European and Continental Depositary Receipts-- (Asset Allocation,
Equity Income, Growth, International and Special Opportunities Funds only)
Securities of foreign issuers may be sold in the form of American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs"). These securities
may not necessarily be denominated in the same currency as the securities into
which they may be converted. ADRs are receipts typically issued by a United
States bank or trust company which evidence ownership of underlying securities
issued by a foreign corporation. EDRs, which are sometimes referred to as
Continental Depositary Receipts ("CDRs"), are receipts issued in Europe
typically by non-United States banks and trust companies that evidence ownership
of either foreign or domestic securities. Generally, ADRs in registered form are
designed for use in the United States securities markets and EDRs and CDRs in
bearer form are designed for use in Europe. Warrants--(Asset Allocation and
Equity Funds only) 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. Each
of these Funds may invest up to 5% of its net assets in warrants, valued at the
lesser of cost or market, except that this limitation does not apply to warrants
acquired in units or attached to securities. Included in such amount, but not to
exceed 2% of the value of the Fund's net assets, may be warrants which are not
listed on the New York or American Stock Exchange.
Fixed-Income Securities
Convertible Securities--(Asset Allocation, Equity and Bond Funds only)
Convertible securities may be converted at either a stated price or stated rate
into underlying shares of common stock. Convertible securities have general
characteristics similar to both fixed-income and equity securities. Although to
a lesser extent than with fixed-income securities generally, the market value of
convertible securities tends to decline as interest rates increase and,
conversely, tends to increase as interest rates decline. In addition, because of
the conversion feature, the market value of convertible securities tends to vary
with fluctuations in the market value of the underlying common stock, and,
therefore, also will react to variations in the general market for equity
securities. A unique feature of convertible securities is that as the market
price of the underlying common stock declines, convertible securities tend to
trade increasingly on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock. When the market
price of the underlying common stock increases, the prices of the convertible
securities tend to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.
As fixed-income securities, convertible securities are investments that
provide for a stable stream of income with generally higher yields than common
stocks. Of course, like all fixed-income securities, there can be no assurance
of current income because the issuers of the convertible securities may default
on their obligations. Convertible securities, however, generally offer lower
interest or dividend yields than non-convertible securities of similar quality
because of the potential for capital appreciation. A convertible security, in
addition to providing fixed income, offers the potential for capital
appreciation through the conversion feature, which enables the holder to benefit
from increases in the market price of the underlying common stock. There can be
no assurance of capital appreciation, however, because securities prices
fluctuate. Convertible securities generally are subordinated to other similar
but non-convertible securities of the same issuer, although convertible bonds,
as corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.
U.S. Government Securities--These securities are described under "Taxable Money
Market Instruments-- U.S. Government Securities" below and may be purchased
without regard to maturity. Zero Coupon and Stripped Securities--(Asset
Allocation, Equity, Bond and Municipal Bond Funds only) Zero coupon U.S.
Treasury securities are Treasury Notes and Bonds that have been stripped of
their unmatured interest coupons, the coupons themselves and receipts or
certificates representing interests in such stripped debt obligations and
coupons. Zero coupon securities also are issued by corporations and financial
institutions which constitute a proportionate ownership of the issuer's pool of
underlying U.S. Treasury securities. A zero coupon security pays no interest to
its holder during its life and is sold at a discount to its face value at
maturity. The amount of the discount fluctuates with the market price of the
security. The market prices of zero coupon securities generally are more
volatile than the market prices of securities that pay interest periodically and
are likely to respond to a greater degree to changes in interest rates than
non-zero coupon securities having similar maturities and credit qualities.
Participation Interests--(Asset Allocation, Equity, Bond and Money Market Funds
only) A participation interest gives the purchaser an undivided interest in a
security in the proportion that such purchaser's participation interest bears to
the total principal amount of the security. These instruments may have fixed,
floating or variable rates of interest, with, in the case of the Money Market
Fund, remaining maturities of 13 months or less. If the participation interest
is unrated, or has been given a rating below that which is permissible for
purchase by a Fund, the participation interest will be backed by an irrevocable
letter of credit or guarantee of a bank, or the payment obligation otherwise
will be collateralized by U.S. Government securities, or, in the case of unrated
participation interests, the Investment Adviser must have determined that the
instrument is of comparable quality to those instruments in which such Fund may
invest.
Mortgage-Related Securities--(Asset Allocation, Equity and Bond Funds only)
Mortgage-related securities are securities collateralized by pools of mortgage
loans assembled for sale to investors by various governmental agencies, such as
the Government National Mortgage Association and government-related
organizations such as the Federal National Mortgage Association and the Federal
Home Loan Mortgage Corporation, as well as by private issuers such as commercial
banks, savings and loan institutions, mortgage banks and private mortgage
insurance companies, and similar foreign entities. Mortgage-related securities
are a form of derivative security. The mortgage-related securities which may be
purchased include those with fixed, floating and variable interest rates, those
with interest rates that change based on multiples of changes in interest rates
and those with interest rates that change inversely to changes in interest
rates, as well as stripped mortgage-backed securities. Stripped mortgage-backed
securities usually are structured with two classes that receive different
proportions of interest and principal distributions on a pool of mortgage-backed
securities or whole loans. A common type of stripped mortgage-backed security
will have one class receiving some of the interest and most of the principal
from the mortgage collateral, while the other class will receive most of the
interest and the remainder of the principal. In the most extreme case, one class
will receive all of the interest (the interest-only or "IO" class), while the
other class will receive all of the principal (the principal-only or "PO"
class). Although certain mortgage-related securities are guaranteed by a third
party or otherwise similarly secured, the market value of the security, which
may fluctuate, is not so secured. If a mortgage-related security is purchased at
a premium, all or part of the premium may be lost if there is a decline in the
market value of the security, whether resulting from changes in interest rates
or prepayments in the underlying mortgage collateral. As with other
interest-bearing securities, the prices of certain of these securities are
inversely affected by changes in interest rates. However, though the value of a
mortgage-related security may decline when interest rates rise, the converse is
not necessarily true, since in periods of declining interest rates the mortgages
underlying the security are more likely to prepay. For this and other reasons, a
mortgage-related security's stated maturity may be shortened by unscheduled
prepayments on the underlying mortgages, and, therefore, it is not possible to
predict accurately the security's return to a Fund. Moreover, with respect to
stripped mortgage-backed securities, if the underlying mortgage securities
experience greater than anticipated prepayments of principal, the Fund may fail
to fully recoup its initial investment in these securities even if the
securities are rated in the highest rating category by a nationally recognized
statistical rating organization. In addition, regular payments received in
respect of mortgage-related securities include both interest and principal. No
assurance can be given as to the return the Fund will receive when these amounts
are reinvested. For further discussion concerning the investment considerations
involved, see "Description of the Funds-- Risk Factors--Fixed-Income Securities"
and "Illiquid Securities" below and "Investment Objectives and Management
Policies--Portfolio Securities--Mortgage-Related Securities" in the Statement of
Additional Information.
Asset-Backed Securities--(Asset Allocation, Equity and Bond Funds only) The
securitization techniques used for asset-backed securities are similar to those
used for mortgage-related securities. Asset-backed securities are a form of
derivative security. These securities include debt securities and securities
with debt-like characteristics. The collateral for these securities has included
home equity loans, automobile and credit card receivables, boat loans, computer
leases, airplane leases, mobile home loans, recreational vehicle loans and
hospital account receivables. These Funds may invest in these and other types of
asset-backed securities that may be developed in the future.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities do not have the benefit
of the same security interest in the related collateral. Credit card receivables
generally are unsecured and the debtors are entitled to the protection of a
number of state and Federal consumer credit laws, many of which give such
debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the balance due. Most issuers of asset-backed securities backed by
automobile receivables permit the servicers of such receivables to retain
possession of the underlying obligations. If the servicer were to sell these
obligations to another party, there is a risk that the purchaser would acquire
an interest superior to that of the holders of the related asset-backed
securities. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee for
the holders of asset-backed securities backed by automobile receivables may not
have a proper security interest in all of the obligations backing such
receivables. Therefore, there is the possibility that recoveries on repossessed
collateral may not, in some cases, be available to support payments on these
securities.
Municipal Obligations--(Asset Allocation, Equity, Bond and Municipal Funds
only) Municipal Obligations generally include debt obligations issued to obtain
funds for various public purposes as well as certain industrial development
bonds issued by or on behalf of public authorities. While in general, Municipal
Obligations are tax exempt securities having relatively low yields as compared
to taxable, non-municipal obligations of similar quality, certain issues of
Municipal Obligations, both taxable and non-taxable, offer yields comparable and
in some cases greater than the yields available on other permissible
investments. Dividends received by shareholders of a Fund, other than a
Municipal Fund, which are attributable to interest income received by it from
Municipal Obligations generally will be subject to Federal income tax. Municipal
Obligations bear fixed, floating or variable rates of interest, which are
determined in some instances by formulas under which the Municipal Obligation's
interest rate will change directly or inversely to changes in interest rates or
an index, or multiples thereof, in many cases subject to a maximum and minimum.
Municipal Obligations the interest rates for which are determined by such
formulas are a form of derivative security. Each of these Funds, other than the
Municipal Funds, currently intends to invest no more than 25% of its respective
assets in Municipal Obligations. However, this percentage may be varied from
time to time without shareholder approval.
Investment Companies-- Each Fund may invest in securities issued by
investment companies which invest in securities in which the Fund invests. Under
the 1940 Act, the Fund's investment in such securities, subject to certain
exceptions, currently is limited to (i) 3% of the total voting stock of any one
investment company, (ii) 5% of the Fund's total assets with respect to any one
investment company and (iii) 10% of the Fund's total assets in the aggregate.
Such purchases will be made in the open market where no commission or profit to
a sponsor or dealer results from the purchase other than the customary brokers'
commissions. Investments in the securities of other investment companies may
involve duplication of advisory fees and certain other expenses.
Unregistered Notes--(Asset Allocation, Equity, Bond and Money Market Funds
only) Each of these Funds may purchase unsecured promissory notes ("Notes")
which are not readily marketable and have not been registered under the
Securities Act of 1933, as amended, provided such investments are consistent
with such Fund's goal.
Foreign Government Obligations; Securities of Supranational
Entities--(Asset Allocation, International Equity, Growth, Special
Opportunities, Bond and Money Market Funds only) Each of these Funds may invest
in obligations issued or guaranteed by one or more foreign governments or any of
their political subdivisions, agencies or instrumentalities that are determined
by the Investment Adviser to be of comparable quality to the other obligations
in which such Fund may invest. Such securities also include debt obligations of
supranational entities. Supranational entities include international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and international banking institutions
and related government agencies. Examples include the International Bank for
Reconstruction and Development (the World Bank), the European Coal and Steel
Community, the Asian Development Bank and the InterAmerican Development Bank.
The percentage of a Fund's assets invested in securities issued by foreign
governments will vary depending on the relative yields of such securities, the
economic and financial markets of the countries in which the investments are
made and the interest rate climate of such countries.
Ratings--The ratings of Moody's, S&P, Fitch and Duff represent their
opinions as to the quality of the obligations which they undertake to rate. It
should be emphasized, however, that ratings are relative and subjective and,
although ratings may be useful in evaluating the safety of interest and
principal payments, they do not evaluate the market value risk of such
obligations. Therefore, although these ratings may be an initial criterion for
selection of portfolio investments, the Investment Adviser also will evaluate
such obligations and the ability of their issuers to pay interest and principal.
Each Fund will rely on the Investment Adviser's judgment, analysis and
experience in evaluating the creditworthiness of an issuer. In this evaluation,
the Investment Adviser will take into consideration, among other things, the
issuer's financial resources, its sensitivity to economic conditions and trends,
the quality of the issuer's management and regulatory matters. It also is
possible that a rating agency might not timely change the rating on a particular
issue to reflect subsequent events. Once the rating of a security held by a Fund
has been changed, the Investment Adviser will consider all circumstances deemed
relevant in determining whether such Fund should continue to hold the security.
Taxable Money Market Instruments
Each Fund may invest, in the circumstances described under "Description of
the Funds--Management Policies," in the following types of Money Market
Instruments, each of which at the time of purchase must have or be deemed to
have under the rules of the Securities and Exchange Commission remaining
maturities of 13 months or less.
U.S. Government Securities--Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury securities
that differ in their interest rates, maturities and times of issuance. Treasury
Bills have initial maturities of one year or less; Treasury Notes have initial
maturities of one to ten years; and Treasury Bonds generally have initial
maturities of greater than ten years. Some obligations issued or guaranteed by
U.S. Government agencies and instrumentalities, for example, Government National
Mortgage Association pass-through certificates, are supported by the full faith
and credit of the U.S. Treasury; others, such as those of the Federal Home Loan
Banks, by the right of the issuer to borrow from the U.S. Treasury; others, such
as those issued by the Federal National Mortgage Association, by discretionary
authority of the U.S. Government to purchase certain obligations of the agency
or instrumentality; and others, such as those issued by the Student Loan
Marketing Association, only by the credit of the agency or instrumentality.
These securities bear fixed, floating or variable rates of interest. 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, because it is not so obligated by law.
Bank Obligations--(each Fund, except U.S. Government Money Market Fund)
Bank obligations include certificates of deposit, time deposits, bankers'
acceptances and other short-term obligations of domestic banks, foreign
subsidiaries of domestic banks, foreign branches of domestic banks, and domestic
and foreign branches of foreign banks, domestic savings and loan associations
and other banking institutions. With respect to such securities issued by
foreign branches of domestic banks, foreign subsidiaries of domestic banks, and
domestic and foreign branches of foreign banks, a Fund may be subject to
additional investment risks 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.
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 at a stated interest rate. Time deposits which
may be held by each 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.
Repurchase Agreements--Repurchase agreements involve the acquisition by a
Fund of an underlying debt instrument, subject to an obligation of the seller to
repurchase, and such Fund to resell, the instrument at a fixed price usually not
more than one week after its purchase. Certain costs may be incurred by a Fund
in connection with the sale of the securities if the seller does not repurchase
them in accordance with the repurchase agreement. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the securities,
realization on the securities by a Fund may be delayed or limited. Pursuant to
an order obtained from the Securities and Exchange Commission, each Fund also is
permitted to enter into overnight repurchase agreements with FNBC or an
affiliate of FNBC subject to the terms and conditions of such order.
Certain Corporate Obligations--(each Fund, except U.S. Government Money
Market Fund) Commercial paper consists of short-term, unsecured promissory notes
issued by domestic or foreign entities to finance short-term credit needs.
Floating and variable rate demand notes and bonds are obligations ordinarily
having stated maturities in excess of one year, but which permit the holder to
demand payment of principal at any time or at specified intervals. Variable rate
demand notes include variable amount master demand notes, which are obligations
that permit a Fund to invest fluctuating amounts at varying rates of interest
pursuant to direct arrangements between the Fund, as lender, and the borrower.
These notes 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 obligations are not secured by letters of
credit or other credit support arrangements, a Fund's right to redeem is
dependent on the ability of the borrower to pay principal and interest on
demand.
Tax Exempt Money Market Instruments
Tax Exempt Participation Interests--(Municipal Funds only) A participation
interest in Municipal Obligations (such as industrial development bonds and
municipal lease/purchase agreements) gives the purchaser an undivided interest
in the Municipal Obligation in the proportion that such purchaser's
participation interest bears to the total principal amount of the Municipal
Obligation. These instruments may have fixed, floating or variable rates of
interest, with remaining maturities of 13 months or less. If the participation
interest is unrated, or has been given a rating below that which otherwise is
permissible for purchase by a Fund, the participation interest will be backed by
an irrevocable letter of credit or guarantee of a bank that the Board has
determined meets the prescribed quality standards for banks set forth above, or
the payment obligation otherwise will be collateralized by U.S. Government
securities. For certain participation interests, a Fund will have the right to
demand payment, on not more than seven days' notice, for all or any part of such
Fund's participation interest in the Municipal Obligation, plus accrued
interest. As to these instruments, each Fund intends to exercise its right to
demand payment only upon a default under the terms of the Municipal Obligation,
as needed to provide liquidity to meet redemptions, or to maintain or improve
the quality of its investment portfolio. No Fund will invest more than 15% (10%
in the case of the Municipal Money Market Fund) of the value of its net assets
in participation interests that do not have this demand feature, and in other
illiquid securities.
Tender Option Bonds--(Municipal Funds only) A tender option bond is a
Municipal Obligation (generally held pursuant to a custodial arrangement) having
a relatively long maturity and bearing interest at a fixed rate substantially
higher than prevailing short-term tax exempt rates, that has been coupled with
the agreement of a third party, such as a bank, broker-dealer or other financial
institution, pursuant to which such institution grants the security holders the
option, at periodic intervals, to tender their securities to the institution and
receive the face value thereof. As consideration for providing the option, the
financial institution receives periodic fees equal to the difference between the
Municipal Obligation's fixed coupon rate and the rate, as determined by a
remarketing or similar agent at or near the commencement of such period, that
would cause the securities, coupled with the tender option, to trade at par on
the date of such determination. Thus, after payment of this fee, the security
holder effectively holds a demand obligation that bears interest at the
prevailing short-term tax exempt rate. The Investment Adviser, on behalf of a
Fund, will consider on an ongoing basis the creditworthiness of the issuer of
the underlying Municipal Obligation, of any custodian and of the third party
provider of the tender option. In certain instances and for certain tender
option bonds, the option may be terminable in the event of a default in payment
of principal or interest on the underlying Municipal Obligations and for other
reasons. No Fund will invest more than 15% (10% in the case of the Money Market
Funds) of the value of its net assets in securities that are illiquid, which
would include tender option bonds as to which it cannot exercise the tender
feature on not more than seven days' notice if there is no secondary market
available for these obligations.
Stand-By Commitments--(Municipal Funds only) Each Municipal Fund may
acquire "stand-by commitments" with respect to Municipal Obligations held in its
portfolio. Under a stand-by commitment, the Fund obligates a broker, dealer or
bank to repurchase, at the Fund's option, specified securities at a specified
price and, in this respect, stand-by commitments are comparable to put options.
The exercise of a stand-by commitment therefore is subject to the ability of the
seller to make payment on demand. Each Municipal Fund will acquire stand-by
commitments solely to facilitate portfolio liquidity and does not intend to
exercise its rights thereunder for trading purposes. Each Municipal Fund may pay
for stand-by commitments if such action is deemed necessary, thus increasing to
a degree the cost of the underlying Municipal Obligation and similarly
decreasing such security's yield to investors.
Illiquid Securities
Each Fund may invest up to 15% (10% in the case of the Money Market Funds)
of the value of its net assets in securities as to which a liquid trading market
does not exist, provided such investments are consistent with the Fund's
investment objective. Such securities may include securities that are not
readily marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, repurchase agreements providing for
settlement in more than seven days after notice, and certain options traded in
the over-the-counter market and securities used to cover such options. As to
these securities, a Fund is subject to a risk that should such 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 such Fund's net assets could be
adversely affected.
INVESTMENT TECHNIQUES
Leverage Through Borrowing--(Asset Allocation, Equity, Bond and, to a
limited extent, Money Market Funds only) Borrowing for investment purposes is
known as leveraging and generally will be unsecured, except to the extent a Fund
enters into reverse repurchase agreements described below. The Money Market Fund
may borrow for investment purposes only through entering into reverse repurchase
agreements. Leveraging will exaggerate the effect on net asset value of any
increase or decrease in the market value of the Fund's portfolio. Money borrowed
for leveraging will be subject to interest costs that may or may not be
recovered by appreciation of the securities purchased; in certain cases,
interest costs may exceed the return received on the securities purchased.
Among the forms of borrowing in which a Fund may engage is the entry into
reverse repurchase agreements with banks, brokers or dealers. These transactions
involve the transfer by the Fund of an underlying debt instrument in return for
cash proceeds based on a percentage of the value of the security. The Fund
retains the right to receive interest and principal payments on the security. At
an agreed upon future date, the Fund repurchases the security at principal, plus
accrued interest. In certain types of agreements, there is no agreed upon
repurchase date and interest payments are calculated daily, often based on the
prevailing overnight repurchase rate.
Short-Selling--(Asset Allocation, Equity and Bond Funds only) Each of these
Funds may make short sales, which are transactions in which the Fund sells a
security it does not own in anticipation of a decline in the market value of
that security. To complete such a transaction, the Fund must borrow the security
to make delivery to the buyer. The Fund then is obligated to replace the
security borrowed by purchasing it at the market price at the time of
replacement. The price at such time may be more or less than the price at which
the security was sold by the Fund. The Fund will incur a loss as a result of the
short sale if the price of the security increases between the date of the short
sale and the date on which the Fund replaces the borrowed security. The Fund
will realize a gain if the security declines in price between those dates.
Each Fund may purchase call options to provide a hedge against an increase in
the price of a security sold short by such Fund. When a Fund purchases a call
option it has to pay a premium to the person writing the option and a commission
to the broker selling the option. If the option is exercised by the Fund, the
premium and the commission paid may be more than the amount of the brokerage
commission charged if the security were to be purchased directly. See "Options
Transactions" below.
It is expected that the frequency of short sales on behalf of each Fund will
vary substantially under different market conditions, and it is not intended
that any specified portion of a Fund's assets, as a matter of practice, will be
invested in short sales. However, no securities will be sold short if, after
effect is given to any such short sale, the total market value of all securities
sold short would exceed 25% of the value of the Fund's net assets. A Fund will
not sell short the securities of any single issuer listed on a national
securities exchange to the extent of more than 2% of the value of such Fund's
net assets and will not sell short the securities of any class of an issuer to
the extent, at the time of transaction, of more than 2% of the outstanding
securities of that class.
In addition to the short sales discussed above, each Fund may make short
sales "against the box," a transaction in which a Fund enters into a short sale
of a security which such Fund owns. The proceeds of the short sale will be held
by a broker until the settlement date at which time the Fund delivers the
security to close the short position. The Fund receives the net proceeds from
the short sale. At no time will a Fund have more than 15% of the value of its
net assets in deposits on short sales against the box.
Options Transactions--(Asset Allocation, Equity and Bond Funds only) Each
of these Funds is permitted to invest up to 5% of its total assets, represented
by the premium paid, in the purchase of call and put options. Options
transactions are a form of derivative security.
Each of these Funds is permitted to purchase call and put options in
respect of specific securities (or groups or "baskets" of specific securities)
in which the Fund may invest. Each Fund may write (i.e. sell) covered call
option contracts on securities owned by the Fund not exceeding 20% of the market
value of its net assets at the time such option contracts are written. Each Fund
also may purchase call options to enter into closing purchase transactions. Each
Fund also may write covered put option contracts to the extent of 20% of the
value of its net assets at the time such option contracts are written. 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 put option
sold by a Fund exposes the Fund during the term of the option to a decline in
price of the underlying security or securities. A put option sold by a Fund is
covered when, among other things, cash or liquid securities are placed in a
segregated account with the Fund's custodian to fulfill the obligation
undertaken.
Each of these Funds also may purchase and sell call and put options on
foreign currency for the purpose of hedging against changes in future currency
exchange rates. Call options convey the right to buy the underlying currency at
a price which is expected to be lower than the spot price of the currency at the
time the option expires. Put options convey the right to sell the underlying
currency at a price which is anticipated to be higher than the spot price of the
currency at the time the option expires.
Each of these Funds also may purchase cash-settled options on interest rate
swaps, interest rate swaps denominated in foreign currency and equity index
swaps. See "Interest Rate and Equity Index Swaps" below. A cash-settled option
on a swap gives the purchaser the right, but not the obligation, in return for
the premium paid, to receive an amount of cash equal to the value of the
underlying swap as of the exercise date. These options typically are purchased
in privately negotiated transactions from financial institutions, including
securities brokerage firms.
Each of these Funds may purchase and sell call and put options on stock
indexes listed on U.S. securities exchanges or traded in the over-the-counter
market. A stock index fluctuates with changes in the market values of the stocks
included in the index. Because the value of an index option depends upon
movements in the level of the index rather than the price of a particular stock,
whether a Fund will realize a gain or loss from the purchase or writing of
options on an index depends upon movements in the level of stock prices in the
stock market generally or, in the case of certain indexes, in an industry or
market segment, rather than movements in the price of a particular stock.
Successful use by a Fund of options will be subject to the Investment
Adviser's ability to predict correctly movements in the direction of individual
stocks, the stock market generally, foreign currencies or interest rates. To the
extent the Investment Adviser's predictions are incorrect, the Fund may incur
losses which could adversely affect the value of a shareholder's investment.
Futures Contracts and Options on Futures Contracts--(Asset Allocation,
Equity, Bond and Municipal Bond Funds only) Each of these Funds may enter into
stock index futures contracts, interest rate futures contracts and currency
futures contracts, and options with respect thereto. See "Options Transactions"
above. These transactions will be entered into as a substitute for comparable
market positions in the underlying securities or for hedging purposes. Although
none of these Funds would be a commodity pool, each would be subject to rules of
the CFTC limiting the extent to which it could engage in these transactions.
Futures and options transactions are a form of derivative security.
Each of these Funds' commodities transactions must constitute bona fide
hedging or other permissible transactions pursuant to regulations promulgated by
the CFTC. In addition, a Fund may not engage in such transactions if the sum of
the amount of initial margin deposits and premiums paid for unexpired commodity
options, other than for bona fide hedging transactions, would exceed 5% of the
liquidation value of the Fund's assets, after taking into account unrealized
profits and unrealized losses on such contracts it has entered into; provided,
however, that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%. To the
extent a Fund engages in the use of futures and options on futures for other
than bona fide hedging purposes, the Fund may be subject to additional risk.
Engaging in these transactions involves risk of loss to a Fund which could
adversely affect the value of a shareholder's investment. Although each of these
Funds intends to purchase or sell futures contracts only if there is an active
market for such contracts, no assurance can be given that a liquid market will
exist for any particular contract at any particular time. Many futures exchanges
and boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified periods during the
trading day. Futures contract prices could move to the limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and potentially subjecting the Fund to
substantial losses. In addition, engaging in futures transactions in foreign
markets may involve greater risks than trading in domestic exchanges.
Successful use of futures by a Fund also is subject to the Investment
Adviser's ability to predict correctly movements in the direction of the market,
interest rates or foreign currencies and, to the extent the transaction is
entered into for hedging purposes, to ascertain the appropriate correlation
between the transaction being hedged and the price movements of the futures
contract. For example, if a Fund has hedged against the possibility of a decline
in the market adversely affecting the value of securities held in its portfolio
and prices increase instead, the Fund will lose part or all of the benefit of
the increased value of securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such situations, if
the Fund has insufficient cash, it may have to sell securities to meet daily
variation margin requirements. Such sales of securities may, but will not
necessarily, be at increased prices which reflect the rising market. A Fund may
have to sell securities at a time when it may be disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities and
Exchange Commission, each of these Funds may be required to segregate cash or
high quality money market instruments in connection with its commodities
transactions in an amount generally equal to the value of the underlying
commodity. The segregation of such assets will have the effect of limiting the
Fund's ability otherwise to invest those assets.
Interest Rate and Equity Index Swaps--(Asset Allocation, Equity and Bond
Funds only) Each of these Funds may enter into interest rate swaps and equity
index swaps, to the extent described under "Description of the Funds--Management
Policies," in pursuit of their respective investment objectives. Interest rate
swaps involve the exchange by a Fund with another party of their respective
commitments to pay or receive interest (for example, an exchange of
floating-rate payments for fixed-rate payments). Equity index swaps involve the
exchange by a Fund with another party of cash flows based upon the performance
of an index or a portion of an index which usually includes dividends. In each
case, the exchange commitments can involve payments to be made in the same
currency or in different currencies. Swaps are a form of derivative security.
Each of these Funds usually will enter into swaps on a net basis. In so
doing, the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments. If a Fund
enters into a swap, it would maintain a segregated account in the full amount
accrued on a daily basis of the Fund's obligations with respect to the swap.
Each of these Funds will enter into swap transactions with counterparties only
if: (i) for transactions with maturities under one year, such counterparty has
outstanding short-term paper rated at least A-1 by S&P, Prime-1 by Moody's, F-1
by Fitch or Duff-1 by Duff, or (ii) for transactions with maturities greater
than one year, the counterparty has outstanding debt securities rated at least
Aa by Moody's or AA by S&P, Fitch or Duff. If there is a default by the other
party to such a transaction, the Fund will have contractual remedies pursuant to
the agreements related to the transaction.
The use of swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
security transactions. There is no limit on the amount of swap transactions that
may be entered into by a Fund. These transactions do not involve the delivery of
securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to swaps is limited to the net amount of payments that a Fund
is contractually obligated to make. If the other party to a swap defaults, the
relevant Fund's risk of loss consists of the net amount of payments that such
Fund contractually is entitled to receive.
Foreign Currency Transactions--(Asset Allocation, Growth, International
Equity, Special Opportunities and International Bond Funds only) Each of these
Funds may engage in currency exchange transactions either on a spot (i.e., cash)
basis at the rate prevailing in the currency exchange market, or through
entering into forward contracts to purchase or sell currencies. A forward
currency exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which must be more than two days from the date of the
contract, at a price set at the time of the contract. These contracts are
entered into in the interbank market conducted directly between currency traders
(typically commercial banks or other financial institutions) and their
customers.
Each of these Funds also may combine forward currency exchange contracts with
investments in securities denominated in other currencies.
Each of these Funds also may maintain short positions in forward currency
exchange transactions, which would involve it agreeing to exchange an amount of
a currency it did not currently own for another currency at a future date in
anticipation of a decline in the value of the currency sold relative to the
currency such Fund contracted to receive in the exchange.
Future Developments--(Asset Allocation, Equity, Bond and Municipal Bond
Funds only) Each of these Funds may take advantage of opportunities in the area
of options and futures contracts, options on futures contracts and any other
derivative investments which are not presently contemplated for use by a Fund or
which are not currently available but which may be developed, to the extent such
opportunities are both consistent with a Fund's investment objective and legally
permissible for such Fund. Before entering into such transactions or making any
such investment, the Fund will provide appropriate disclosure in its prospectus.
Lending Portfolio Securities--From time to time, each 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 a Fund's total assets. In
connection with such loans, a Fund will receive collateral consisting of cash,
U.S. Government securities or, except in the case of the U.S. Government Money
Market Fund, irrevocable letters of credit which will be maintained at all times
in an amount equal to at least 100% of the current market value of the loaned
securities. Each Fund can increase its income through the investment of such
collateral. A Fund continues to be entitled to payments in amounts equal to the
interest, dividends and 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. A Fund might experience risk of loss if the
institution with which it has engaged in a portfolio loan transaction breaches
its agreement with such Fund.
Forward Commitments--Each Fund may purchase securities on a when-issued or
forward commitment basis, which means that the price is fixed at the time of
commitment, but delivery and payment ordinarily take place a number of days
after the date of the commitment to purchase. A Fund will make commitments to
purchase such securities only with the intention of actually acquiring the
securities, but the Fund may sell these securities before the settlement date if
it is deemed advisable. The Fund will not accrue income in respect of a security
purchased on a forward commitment basis prior to its stated delivery date.
Securities purchased on a when-issued or forward commitment basis and
certain other securities held in a Fund's portfolio are subject to changes in
value (both generally changing in the same way, i.e., appreciating when interest
rates decline and depreciating when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Securities purchased on a
when-issued or forward commitment basis may expose a Fund to risk because they
may experience such fluctuations prior to their actual delivery. Purchasing
securities on a when-issued or forward commitment basis can involve the
additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself. A
segregated account of each Fund consisting of cash or U.S. Government securities
or other high quality liquid debt securities of the type in which the Fund
invests at least equal at all times to the amount of the when-issued or forward
commitments will be established and maintained at the Fund's custodian bank.
Purchasing securities on a forward commitment basis when a Fund is fully or
almost fully invested may result in greater potential fluctuation in the value
of such Fund's net assets and its net asset value per share.
Borrowing Money--As a fundamental policy, each Fund is permitted to borrow
to the extent permitted under the 1940 Act. However, each of the Municipal Bond
Fund, Intermediate Municipal Bond Fund, Municipal Money Market Fund and U.S.
Government Money Market Fund currently intends to borrow money only for
temporary or emergency (not leveraging) purposes, in an amount up to 15% of the
value of its 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 such Fund's total
assets, the Fund will not make any additional investments.
Exhibit (17)(i)
- - ------------------------------------------------------------------------------
THE PRAIRIE FUNDS
CLASS A, CLASS B AND CLASS I SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
APRIL 11, 1996
- - ------------------------------------------------------------------------------
This Statement of Additional Information, which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectus for 14 separate funds (each, a "Fund"), dated April 11, 1996, as it
may be revised from time to time. To obtain a copy of the Prospectus, please
write to the Prairie Funds at Three First National Plaza, Chicago, Illinois
60670, or call toll free 1-800-370-9446.
First Chicago Investment Management Company (the
"Investment Adviser" or "FCIMCO") serves as each Fund's
investment adviser and administrator.
Concord Financial Group, Inc. (the "Distributor")
serves as the distributor of the Funds' shares.
TABLE OF CONTENTS
Page
Investment Objectives and Management Policies............................ B-2
Management of the Funds.................................................. B-23
Management Arrangements.................................................. B-25
Purchase of Shares....................................................... B-34
Distribution Plans and Shareholder Services Plans........................ B-36
Redemption of Shares..................................................... B-40
Determination of Net Asset Value......................................... B-40
Portfolio Transactions................................................... B-43
Dividends, Distributions and Taxes....................................... B-45
Yield and Performance Information..........................................B-48
Information About the Funds................................................B-53
Counsel and Independent Auditors...........................................B-63
Appendix...................................................................B-64
Financial Statements.......................................................B-73
Report of Independent Auditors.............................................B-
<PAGE>
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the sections in the Prospectus entitled "Description of the Funds" and
"Appendix."
General
The Prairie Funds are divided into five general fund types: Asset
Allocation (Managed Assets Income Fund and Managed Assets Fund); Equity (Equity
Income Fund, Growth Fund, Special Opportunities Fund and International Equity
Fund); Bond (Bond Fund, Intermediate Bond Fund and International Bond Fund);
Municipal Bond (Municipal Bond Fund and Intermediate Municipal Bond Fund); and
Money Market (U.S. Government Money Market Fund, Money Market Fund and Municipal
Money Market Fund). Each of the Intermediate Bond Fund and Municipal Bond Fund
is a separate open-end, management investment company organized under the name
Prairie Intermediate Bond Fund and Prairie Municipal Bond Fund, Inc.,
respectively. The remaining Funds are series of Prairie Funds (the "Trust"), an
open-end, management investment company.
Portfolio Securities
Bank Obligations. (Each Fund, except the U.S. Government Money Market Fund)
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 each Fund are insured
by the FDIC (although such insurance may not be of material benefit to a Fund,
depending on the principal amount of the CDs of each bank held by such 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 generally are
required, among other things, to maintain specified levels of reserves, are
limited in the amounts which they can loan to a single borrower and are subject
to other regulation designed to promote financial soundness. However, not all of
such laws and regulations apply to the foreign branches of domestic banks.
Obligations of foreign branches of domestic banks, foreign subsidiaries of
domestic banks and domestic 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 branch, 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.
These 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 record keeping 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 bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation or by Federal or state regulation
as well as governmental 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 purchase 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 Investment Adviser carefully evaluates such investments on a
case-by-case basis.
Repurchase Agreements. The Funds' custodian or sub-custodian will have
custody of, and will hold in a segregated account, securities acquired by a 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, each 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 the resale price. The Investment Adviser will monitor on an
ongoing basis the value of the collateral to assure that it always equals or
exceeds the repurchase price. The Fund will consider on an ongoing basis the
creditworthiness of the institutions with which the Fund enters into repurchase
agreements.
Commercial Paper and Other Short-Term Corporate Obligations. (Each Fund,
except the U.S. Government Money Market Fund) Variable rate demand notes include
variable amount master demand notes, which are obligations that permit a Fund to
invest fluctuating amounts at varying rates of interest pursuant to direct
arrangements between the Fund, as lender, and the borrower. These notes 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 obligations are not secured by letters of credit or
other credit support arrangements, a 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 rate demand obligations, the Investment 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 a Fund may invest in them only if at the time of an investment the borrower
meets the criteria set forth in the Prospectus for other commercial paper
issuers.
Mortgage-Related Securities (Asset Allocation, Equity and Bond
Funds only)
Government Agency Securities. Mortgage-related securities issued by the
Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA is a wholly-owned
U.S. Government corporation within the department of Housing and Urban
Development. GNMA certificates also are supported by the authority of GNMA to
borrow funds from the U.S. Treasury to make payments under its guarantee.
Government Related Securities. Mortgage-related securities issued by the
Federal National Mortgage Association ("FNMA") include FNMA Guaranteed Mortgage
Pass-Through Certificates (also known as "Fannie Maes") which are solely the
obligations of the FNMA and are not backed by or entitled to the full faith and
credit of the United States. The FNMA is a government-sponsored organization
owned entirely by private stockholders. Fannie Maes are guaranteed as to timely
payment of principal and interest by FNMA.
Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also
known as "Freddie Macs" or "PCs"). The FHLMC is a corporate instrumentality of
the United States created pursuant to an Act of Congress, which is owned
entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the
United States or by any Federal Home Loan Bank and do not constitute a debt or
obligation of the United States or of any Federal Home Loan Bank. Freddie Macs
entitle the holder to timely payment of interest, which is guaranteed by the
FHLMC. The FHLMC guarantees either ultimate collection or timely payment of all
principal payments on the underlying mortgage loans. When the FHLMC does not
guarantee timely payment of principal, FHLMC may remit the amount due on account
of its guarantee of ultimate payment of principal at any time after default on
an underlying mortgage, but in no event later than one year after it becomes
payable.
Municipal Obligations. (Asset Allocation, Equity, Bond and Municipal Funds
only) Municipal Obligations are classified as general obligation bonds, revenue
bonds and notes. General obligation bonds are secured by the issuer's pledge of
its faith, credit and taxing power for the payment of principal and interest.
Revenue bonds are payable from the revenue derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special excise or
other specific revenue source, but not from the general taxing power. Industrial
development bonds, in most cases, are revenue bonds and generally do not carry
the pledge of the credit of the issuing municipality, but generally are
guaranteed by the corporate entity on whose behalf they are issued. Notes are
short-term instruments which are obligations of the issuing municipalities or
agencies and are sold in anticipation of a bond sale, collection of taxes or
receipt of other revenues. Municipal Obligations include municipal
lease/purchase agreements which are similar to installment purchase contracts
for property or equipment issued by municipalities. Certain Municipal
Obligations are subject to redemption at a date earlier than their stated
maturity pursuant to call options, which may be separated from the related
Municipal Obligation and purchased and sold separately. Each of these Funds will
invest in Municipal Obligations, the ratings of which correspond with the
ratings of other permissible Fund investments.
For the purpose of diversification under the Investment Company Act of
1940, as amended (the "1940 Act"), the identification of the issuer of Municipal
Obligations depends on the terms and conditions of the security. When the assets
and revenues of an agency, authority, instrumentality or other political
subdivision are separate from those of the government creating the subdivision
and the security is backed only by the assets and revenues of the subdivision,
such subdivision would be deemed to be the sole issuer. Similarly, in the case
of an industrial development bond, if that bond is backed only by the assets and
revenues of the non-governmental user, then such non-governmental user would be
deemed to be the sole issuer. If, however, in either case, the creating
government or some other entity guarantees a security, such a guaranty would be
considered a separate security and will be treated as an issue of such
government or other entity.
The yields on Municipal Obligations are dependent on a variety of factors,
including general economic and monetary conditions, money market factors,
conditions in the Municipal Obligations market, size of a particular offering,
maturity of the obligation, and rating of the issue. The imposition of the
Fund's advisory and administration fees, as well as other operating expenses,
will have the effect of reducing the yield to investors.
Municipal lease obligations or installment purchase contract obligations
(collectively, "lease obligations") have special risks not ordinarily associated
with Municipal Obligations. Although lease obligations do not constitute general
obligations of the municipality for which the municipality's taxing power is
pledged, a lease obligation ordinarily is backed by the municipality's covenant
to budget for, appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non- appropriation" clauses which
provide that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such purpose
on a yearly basis. Although "non-appropriation" lease obligations are secured by
the leased property, disposition of the property in the event of foreclosure
might prove difficult. The Municipal Money Market Fund will seek to minimize
these risks by investing only in those lease obligations that (1) are rated in
one of the two highest categories for debt obligations by at least two
nationally recognized statistical rating organizations (or one rating
organization if the lease obligation was rated by only one such organization);
or (2) if unrated, are purchased principally from the issuer or domestic banks
or other responsible third parties, in each case only if the seller shall have
entered into an agreement with the Municipal Money Market Fund providing the
seller or other responsible third party will either remarket or repurchase the
lease obligations within a short period after demand by the Fund. With respect
to the Intermediate Municipal Bond Fund and Municipal Bond Fund, the Board has
established guidelines for the Investment Adviser to determine the liquidity and
appropriate valuation of lease obligations based on factors which include: (1)
the frequency of trades and quotes for the lease obligation or similar
securities; (2) the number of dealers willing to purchase or sell the lease
obligation or similar securities and the number of other potential buyers; (3)
the willingness of dealers to undertake to make a market in the security or
similar securities; and (4) the nature of the marketplace trades, including the
time needed to dispose of the security, the method of soliciting offers, and the
mechanics of transfer. Not more than 15% (10% in the case of the Municipal Money
Market Fund) of the value of the Fund's net assets will be invested in lease
obligations that are illiquid and in other illiquid securities. See "Investment
Restrictions" below.
Each of the Intermediate Municipal Bond Fund and Municipal Bond Fund will
purchase tender option bonds only when it is satisfied that the custodial and
tender option arrangements, including the fee payment arrangements, will not
adversely affect the tax exempt status of the underlying Municipal Obligations
and that payment of any tender fees will not have the effect of creating taxable
income for the Fund. Based on the tender option bond agreement, each such Fund
expects to be able to value the tender option bond at par; however, the value of
the instrument will be monitored to assure that is valued at fair value.
The Municipal Money Market Fund will not purchase tender option bonds
unless (a) the demand feature applicable thereto is exercisable by the Fund
within 13 months of the date of such purchase upon no more than 30 days' notice
and thereafter is exercisable by the Fund no less frequently than annually upon
no more than 30 days' notice and (b) at the time of such purchase, the
Investment Adviser reasonably expects (i) based upon its assessment of current
and historical interest rate trends, that prevailing short-term tax exempt rates
will not exceed the stated interest rate on the underlying Municipal Obligations
at the time of the next tender option to terminate the tender option would not
occur prior to the time of the next tender opportunity. At the time of each
tender opportunity, the Fund will exercise the tender option with respect to any
tender option bonds unless the Investment Adviser reasonably expects, (x) based
upon its assessment of current and historical interest rate trends, that
prevailing short-term tax exempt rates will not exceed the stated interest rate
on the underlying Municipal Obligations at the time of the next tender fee
adjustment, and (y) that the circumstances which might entitle the grantor of a
tender option to terminate the tender option would not occur prior to the time
of the next tender opportunity. The Municipal Money Market Fund will exercise
the tender feature with respect to tender option bonds, or otherwise dispose of
its tender option bonds, prior to the time the tender option is scheduled to
expire pursuant to the terms of the agreement under which the tender option is
granted. The Municipal Money Market Fund otherwise will comply with the
provisions of Rule 2a-7 in connection with the purchase of tender option bonds,
including, without limitation, the requisite determination by the Board that the
tender option bonds in question meet the quality standards described in Rule
2a-7, which, in the case of a tender option bond subject to a conditional demand
feature, would include a determination that the security has received both the
required short-term and long-term quality rating or is determined to be of
comparable quality. In the event of a default of the Municipal Obligation
underlying a tender option bond, or the termination of the tender option
agreement, the Municipal Money Market Fund would look to the maturity date of
the underlying security for purposes of compliance with Rule 2a-7 and, if its
remaining maturity was greater than 13 months, the Fund would sell the security
as soon as would be practicable. The Municipal Money Market Fund will purchase
tender option bonds only when it is satisfied that the custodial and tender
option arrangements, including the fee payment arrangements, will not adversely
affect the tax exempt status of the underlying Municipal Obligations and that
payment of any tender fees will not have the effect of creating taxable income
for the Fund. Based on the tender option bond agreement, the Municipal Money
Market Fund expects to be able to value the tender option bond at par; however,
the value of the instrument will be monitored to assure that it is valued at
fair value.
If, subsequent to its purchase by the Municipal Money Market Fund, (a) an
issue of rated Municipal Obligations ceases to be rated in the highest rating
category by at least two ratings organizations (or one rating organization if
the instrument was rated by only one such organization), or the Board determines
that it is no longer of comparable quality; or (b) the Investment Adviser
becomes aware that any portfolio security not so highly rated or any unrated
security has been given a rating by any rating organization below the rating
organization's second highest rating category, the Board will reassess promptly
whether such security presents minimal credit risk and will cause the Fund to
take such action as it determines is in the best interest of the Fund and its
shareholders, provided that the reassessment required by clause (b) is not
required if the portfolio security is disposed of or matures within five
business days of the Investment Adviser becoming aware of the new rating and the
Board is subsequently notified of the Investment Adviser's actions.
To the extent that the ratings given by Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Ratings Group ("S&P") or Fitch Investors Service,
L.P. ("Fitch") for Municipal Obligations may change as a result of changes in
such organizations or their rating systems, the Municipal Funds will attempt to
use comparable ratings as standards for its investments in accordance with the
investment policies contained in the Prospectus and this Statement of Additional
Information. The ratings of Moody's, S&P and Fitch represent their opinions as
to the quality of the Municipal Obligations which they undertake to rate. It
should be emphasized, however, that ratings are relative and subjective and are
not absolute standards of quality. Although these ratings may be an initial
criterion for selection of portfolio investments, the Investment Adviser will
also evaluate these securities and the creditworthiness of the issuers of such
securities.
For the Municipal Bond Fund, the average distribution of investments (at
value) in Municipal Obligations by ratings for the fiscal year ended December
31, 1995, computed on a monthly basis, was as follows:
Fitch or Moody's or S&P Percentage of Value
AAA Aaa AAA 50%
AA Aa AA 14%
A A A 20%
BBB Baa BBB 16%
---
100.0%
Convertible Securities. (Asset Allocation, Equity and Bond Funds only) In
general, the market value of a convertible security is the higher of its
"investment value" (i.e., its value as a fixed-income security) or its
"conversion value" (i.e., the value of the underlying shares of common stock if
the security is converted). As a fixed-income security, the market value of a
convertible security generally increases when interest rates decline and
generally decreases when interest rates rise. However, the price of a
convertible security also is influenced by the market value of the security's
underlying common stock. Thus, the price of a convertible security generally
increases as the market value of the underlying stock increases, and generally
decreases as the market value of the underlying stock declines. Investments in
convertible securities generally entail less risk than investments in the common
stock of the same issuer.
Illiquid Securities. 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 a 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, where a substantial market of qualified
institutional buyers develops for certain unregistered securities purchased by a
Fund pursuant to Rule 144A under the Securities Act of 1933, as amended, such
Fund intends to treat them as liquid securities in accordance with procedures
approved by the Board. Because it is not possible to predict with assurance how
the market for restricted securities pursuant to Rule 144A will develop, the
Board has directed the Investment Adviser to monitor carefully each 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 restricted securities pursuant to Rule 144A, a Fund's investing in
such securities may have the effect of increasing the level of illiquidity in
such Fund during such period.
Management Policies
Leveraging. (Asset Allocation, Equity, Bond and, to a limited extent, Money
Market Funds only) Each of these Funds may borrow for investment purposes. The
Money Market Fund may borrow for investment purposes only through entering into
reverse repurchase agreements. The 1940 Act requires the Fund to maintain
continuous asset coverage (that is, total assets including borrowings, less
liabilities exclusive of borrowings) of 300% of the amount borrowed. If the 300%
asset coverage should decline as a result of market fluctuations or other
reasons, the Fund may be required to sell some of its portfolio holdings within
three days to reduce the debt and restore the 300% asset coverage, even though
it may be disadvantageous from an investment standpoint to sell securities at
that time. The Fund also may be required to maintain minimum average balances in
connection with such borrowings or to pay a commitment or other fee to maintain
a line of credit; either of these requirements would increase the cost of
borrowing over the stated interest rate.
With respect to repurchase agreements, the Fund will maintain in a
segregated custodial account cash or U.S. Government securities or other high
quality liquid debt securities at least equal to the aggregate amount of its
reverse repurchase obligations, plus accrued interest, in certain cases, in
accordance with releases promulgated by the Securities and Exchange Commission.
The Securities and Exchange Commission views reverse repurchase transactions as
collateralized borrowings by the Fund. These agreements, which are treated as if
reestablished each day, are expected to provide the Fund with a flexible
borrowing tool.
Short-Selling. (Asset Allocation, Equity and Bond Funds only) Each of these
Funds may engage in short-selling. Until the Fund replaces a borrowed security
in connection with a short sale, the Fund will: (a) maintain daily a segregated
account, containing cash, cash equivalents or U.S. Government securities, at
such a level that the amount deposited in the account plus the amount deposited
with the broker as collateral always equals the current value of the security
sold short; or (b) otherwise cover its short position.
Options Transactions. (Asset Allocation, Equity and Bond Funds only) Each
of these Funds may engage in options transactions, such as purchasing or writing
covered call or put 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 a Fund's 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. Similarly, the principal reason for writing covered put options is to
realize income in the form of premiums. The writer of a covered put option
accepts the risk of a decline in the price of the underlying security. The size
of the premiums that a 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. Each Fund may write (a) in-the-money call options when the
Investment 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 Investment 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 Investment 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 a Fund's obligation as the writer of an option continues, such
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 a Fund
effects a closing purchase transaction. A 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, each Fund generally will purchase or
write only those options for which the Investment 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 otherwise may 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 a 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.
Stock Index Options. (Asset Allocation and Equity Funds only) Each of these
Funds may purchase and write put and call options on stock indexes listed on a
securities exchange or traded in the over-the-counter market. A stock index
fluctuates with changes in the market values of the stocks included in the
index.
Options on stock indexes are similar to options on stock except that (a)
the expiration cycles of stock index options are generally monthly, while those
of stock options are currently quarterly, and (b) the delivery requirements are
different. Instead of giving the right to take or make delivery of a stock at a
specified price, an option on a stock index gives the holder the right to
receive a cash "exercise settlement amount" equal to (i) the amount, if any, by
which the fixed exercise price of the option exceeds (in the case of a put) or
is less than (in the case of a call) the closing value of the underlying index
on the date of exercise, multiplied by (ii) a fixed "index multiplier." Receipt
of this cash amount will depend upon the closing level of the stock index upon
which the option is based being greater than, in the case of a call, or less
than, in the case of a put, the exercise price of the option. The amount of cash
received will be equal to such difference between the closing price of the index
and the exercise price of the option expressed in dollars times a specified
multiple. The writer of the option is obligated, in return for the premium
received, to make delivery of this amount. The writer may offset its position in
stock index options prior to expiration by entering into a closing transaction
on an exchange or it may let the option expire unexercised.
Futures Contracts and Options on Futures Contracts. (Asset Allocation,
Equity, Bond and Municipal Bond Funds Only) Each of these Funds may trade
futures contracts and options on futures contracts in U.S. domestic markets,
such as the Chicago Board of Trade and the International Monetary Market of the
Chicago Mercantile Exchange, or, to the extent permitted under applicable law,
on exchanges located outside the United States, such as the London International
Financial Futures Exchange and the Sydney Futures Exchange Limited. Foreign
markets may offer advantages such as trading in commodities that are not
currently traded in the United States or arbitrage possibilities not available
in the United States.
Initially, when purchasing or selling futures contracts a Fund will be
required to deposit with the Fund's custodian in the broker's name an amount of
cash or cash equivalents up to approximately 10% of the contract amount. This
amount is subject to change by the exchange or board of trade on which the
contract is traded and members of such exchange or board of trade may impose
their own higher requirements. This amount is known as "initial margin" and is
in the nature of a performance bond or good faith deposit on the contract which
is returned to the Fund upon termination of the futures position, assuming all
contractual obligations have been satisfied. Subsequent payments, known as
"variation margin," to and from the broker will be made daily as the price of
the index or securities underlying the futures contract fluctuates, making the
long and short positions in the futures contract more or less valuable, a
process known as "marking-to-market." At any time prior to the expiration of a
futures contract, the Fund may elect to close the position by taking an opposite
position, at the then prevailing price, which will operate to terminate the
Fund's existing position in the contract.
Although each of these Funds intends to purchase or sell futures contracts
only if there is an active market for such contracts, no assurance can be given
that a liquid market will exist for any particular contract at any particular
time. Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit or trading may be suspended for specified periods
during the trading day. Futures contract prices could move to the limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and potentially subjecting a Fund to
substantial losses. If it is not possible, or the Fund determines not, to close
a futures position in anticipation of adverse price movements, the Fund will be
required to make daily cash payments of variation margin. In such circumstances,
an increase in the value of the portion of the portfolio being hedged, if any,
may offset partially or completely losses on the futures contract. However, no
assurance can be given that the price of the securities being hedged will
correlate with the price movements in a futures contract and thus provide an
offset to losses on the futures contract.
In addition, to the extent a Fund is engaging in a futures transaction as a
hedging device, due to the risk of an imperfect correlation between securities
owned by the Fund that are the subject of a hedging transaction and the futures
contract used as a hedging device, it is possible that the hedge will not be
fully effective in that, for example, losses on the portfolio securities may be
in excess of gains on the futures contract or losses on the futures contract may
be in excess of gains on the portfolio securities that were the subject of the
hedge. In futures contracts based on indexes, the risk of imperfect correlation
increases as the composition of a Fund's investments varies from the composition
of the index. In an effort to compensate for the imperfect correlation of
movements in the price of the securities being hedged and movements in the price
of futures contracts, the Fund may buy or sell futures contracts in a greater or
lesser dollar amount than the dollar amount of the securities being hedged if
the historical volatility of the futures contract has been less or greater than
that of the securities. Such "over hedging" or "under hedging" may adversely
affect a Fund's net investment results if market movements are not as
anticipated when the hedge is established.
Upon exercise of an option, the writer of the option will deliver to the
holder of the option the futures position and the accumulated balance in the
writer's futures margin account, which represents the amount by which the market
price of the futures contract exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option on the futures contract.
The potential loss related to the purchase of options on futures contracts is
limited to the premium paid for the option (plus transaction costs). Because the
value of the option is fixed at the time of sale, there are no daily cash
payments to reflect changes in the value of the underlying contract; however,
the value of the option does change daily and that change would be reflected in
the net asset value of each Fund.
Foreign Currency Transactions. (Asset Allocation, Growth, International
Equity, Special Opportunities and International Bond Funds only) If a Fund
enters into a currency transaction, it will deposit, if so required by
applicable regulations, with its custodian cash or readily marketable securities
in a segregated account of the Fund in an amount at least equal to the value of
the Fund's total assets committed to the consummation of the forward contract.
If the value of the securities placed in the segregated account declines,
additional cash or securities will be placed in the account so that the value of
the account will equal the amount of the Fund's commitment with respect to the
contract.
At or before the maturity of a forward contract, the Fund either may sell a
security and make delivery of the currency, or retain the security and offset
its contractual obligation to deliver the currency by purchasing a second
contract pursuant to which the Fund will obtain, on the same maturity date, the
same amount of the currency which it is obligated to deliver. If the Fund
retains the portfolio security and engages in an offsetting transaction, such
Fund, at the time of execution of the offsetting transaction, will incur a gain
or loss to the extent movement has occurred in forward contract prices. Should
forward prices decline during the period between the Fund's entering into a
forward contract for the sale of a currency and the date it enters into an
offsetting contract for the purchase of the currency, the Fund will realize a
gain to the extent the price of the currency it has agreed to sell exceeds the
price of the currency it has agreed to purchase. Should forward prices increase,
the Fund will suffer a loss to the extent the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
The cost to each of these Funds of engaging in currency transactions varies
with factors such as the currency involved, the length of the contract period
and the market conditions then prevailing. Because transactions in currency
exchange usually are conducted on a principal basis, no fees or commissions are
involved. The use of forward currency exchange contracts does not eliminate
fluctuations in the underlying prices of the securities, but it does establish a
rate of exchange that can be achieved in the future. If a devaluation generally
is anticipated, a Fund may not be able to contract to sell the currency at a
price above the devaluation level it anticipates. The requirements for
qualification as a regulated investment company under the Internal Revenue Code
of 1986, as amended (the "Code"), may cause the Fund to restrict the degree to
which each Fund engages in currency transactions. See "Dividends, Distributions
and Taxes."
Lending Portfolio Securities. To a limited extent, each Fund may lend its
portfolio securities to brokers, dealers and other financial institutions,
provided it receives cash collateral which at all times is maintained in an
amount equal to at least 100% of the current market value of the securities
loaned. By lending its portfolio securities, a Fund can increase its income
through the investment of the cash collateral. For purposes of this policy, each
Fund considers collateral consisting of U.S. Government securities or, except in
the case of the U.S. Government Money Market Fund, irrevocable letters of credit
issued by banks whose securities meet the standards for investment by such Fund
to be the equivalent of cash. From time to time, the Fund may return to the
borrower 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 Board 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
Applicable to Trust only. Each Fund that is a series of the Trust has
adopted investment restrictions numbered 1 through 7 as fundamental policies. In
addition, the Money Market Fund has adopted investment restrictions numbered 14
and 15, the Municipal Funds have adopted investment restriction number 16, the
Diversified Funds, other than the Money Market Fund, have adopted investment
restrictions numbered 17 and 18, and each Fund, other than the Money Market Fund
and Municipal Funds, have adopted investment restriction number 19 as additional
fundamental policies. These restrictions cannot be changed, as to a Fund,
without approval by the holders of a majority (as defined in the 1940 Act) of
such Fund's outstanding voting shares. Investment restrictions numbered 8
through 13 and 20 through 22 are not fundamental policies and may be changed by
vote of a majority of the Trust's Trustees at any time. No Fund may:
1. Invest in commodities, except that each Fund may purchase and sell
options, forward contracts, futures contracts, including those relating to
indexes, and options on futures contracts or indexes.
2. Purchase, hold or deal in real estate, including real estate
limited partnership interests, or oil, gas or other mineral leases or
exploration or development programs, but each Fund may purchase and sell
securities that are secured by real estate or issued by companies that
invest or deal in real estate.
3. Borrow money, except to the extent permitted under the 1940 Act.
For purposes of this investment restriction, a Fund's entry into options,
forward contracts, futures contracts, including those relating to indexes,
and options on futures contracts or indexes shall not constitute borrowing.
4. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements. However, each Fund
may lend its 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
Trust's Board of Trustees.
5. Act as an underwriter of securities of other issuers, except to the
extent a Fund may be deemed an underwriter under the Securities Act of
1933, as amended, by virtue of disposing of portfolio securities, and
except that the Fund may bid separately or as part of a group for the
purchase of Municipal Obligations directly from an issuer for its own
portfolio to take advantage of the lower purchase price available.
6. Issue any senior security (as such term is defined in Section 18(f)
of the 1940 Act), except to the extent the activities permitted under
Investment Restriction Nos. 1, 3, 9 and 10 may be deemed to give rise to
senior securities.
7. Purchase securities on margin, but each Fund may make margin
deposits in connection with transactions in options, forward contracts,
futures contracts, including those relating to indexes, and options on
futures contracts or indexes.
8. Invest in the securities of a company for the purpose of exercising
management or control, but each Fund will vote the securities it owns in
its portfolio as a shareholder in accordance with its views.
9. 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.
10. Purchase, sell or write puts, calls or combinations thereof,
except as described in the Prospectus and this Statement of Additional
Information.
11. 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% (10% in the case of a Money Market Fund) of
the value of the Fund's net assets would be so invested.
12. Invest in securities of other investment companies, except to the
extent permitted under the 1940 Act.
13. Purchase securities of any company having less than three years'
continuous operations (including operations of any predecessors) if such
purchase would cause the value of the Fund's investments in all such
companies to exceed 10% of the value of its total assets.
The following investment restrictions numbered 14 and 15 apply only to
the Money Market Fund. The Money Market Fund may not:
14. Invest more than 5% of its assets in the obligations of any one
issuer, except that up to 25% of the value of the Money Market Fund's total
assets may be invested (subject to Rule 2a-7 under the 1940 Act) without
regard to any such limitation.
15. Invest less than 25% of its total assets in securities issued by
banks or invest more than 25% of its assets in the securities of issuers in
any other industry, provided that there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. Notwithstanding the foregoing, for temporary
defensive purposes, the Money Market Fund may invest less than 25% of its
total assets in bank obligations.
The following investment restriction number 16 applies only to the
Municipal Funds. None of these Funds may:
16. Invest more than 25% of its total assets in the securities of
issuers in any single industry, provided that there shall be no such
limitation on the purchase of Municipal Obligations and, for temporary
defensive purposes, obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
The following investment restrictions numbered 17 and 18 apply only to
the Diversified Funds, other than the Money Market Fund. None of these
Funds may:
17. Invest more than 5% of its assets in the obligations of any single
issuer, except that up to 25% of the value of the Fund's total assets may
be invested, and securities issued or guaranteed by the U.S. Government, or
its agencies or instrumentalities may be purchased, without regard to any
such limitation.
18. Hold more than 10% of the outstanding voting securities of any
single issuer. This Investment Restriction applies only with respect to 75%
of the Fund's total assets.
The following investment restriction number 19 applies to each Fund,
other than the Money Market Fund and Municipal Funds. None of these Funds
may:
19. Invest more than 25% of its assets in the securities of issuers in
any single industry, except that, there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
The following investment restriction number 20, which is not a
fundamental policy, applies only to the Money Market Funds. None of these
Funds may:
20. Sell securities short.
The following investment restriction number 21, which is not a
fundamental policy, applies only to the Municipal Money Market Fund. The
Municipal Money Market Fund may not:
21. Purchase securities other than municipal obligations and taxable
Money Market Instruments.
The following investment restriction number 22, which is not a
fundamental policy, applies only to the U.S. Government Money Market Fund.
The U.S. Government Money Market Fund may not:
22. Purchase common stocks, preferred stocks, warrants or other equity
securities, or purchase corporate bonds (except as set forth in the
Prospectus) or debentures, state bonds, municipal bonds or industrial
revenue bonds.
For purposes of Investment Restriction No. 16, industrial development
bonds, where the payment of principal and interest is the ultimate
responsibility of companies within the same industry, are grouped together as an
"industry."
Applicable to Prairie Intermediate Bond Fund only. The Intermediate Bond
Fund has adopted investment restrictions numbered 1 through 7 as fundamental
policies. These restrictions cannot be changed without approval by the holders
of a majority (as defined in the 1940 Act) of the Intermediate Bond Fund's
outstanding voting shares. Investment restrictions numbered 8 through 11 are not
fundamental policies and may be changed by vote of a majority of the Fund's
Trustees at any time. The Intermediate Bond Fund may not:
1. 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.
2. Purchase, hold or deal in real estate, real estate limited
partnership interests, or oil, gas or other mineral leases or
exploration or development programs, but the Fund may purchase and sell
securities that are secured by real estate and may purchase and sell
securities issued by companies that invest or deal in real estate.
3. Borrow money, except to the extent permitted under the 1940
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 shall not constitute
borrowing.
4. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements. However, the Fund
may lend its portfolio securities in an amount not to exceed 33-1/3% of
the value of its total assets. Any loans of portfolio securities will
be made according to guidelines established by the Securities and
Exchange Commission and the Fund's Board of Trustees.
5. Act as an underwriter of securities of other
issuers.
6. Invest more than 25% of its assets in the securities of
issuers in any single industry, provided that there shall be no
limitation on the purchase of obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.
7. Issue any senior security (as such term is defined in
Section 18(f) of the 1940 Act), except to the extent the activities
permitted in Investment Restriction Nos. 1, 3, 8 and 9 may be deemed to
give rise to a senior security.
8. 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 delayed- delivery basis and collateral and initial or
variation margin arrangements with respect to options, forward
contracts, futures contracts, including those related to indexes, and
options on futures contracts or indexes.
9. Purchase, sell or write puts, calls or combinations
thereof, except as described in the Prospectus and this Statement of
Additional Information.
10. 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.
11. Purchase securities of other investment
companies, except to the extent permitted under the 1940
Act.
Applicable to Prairie Municipal Bond Fund, Inc. only. The Municipal Bond
Fund has adopted investment restrictions numbered 1 through 8 as fundamental
policies. These restrictions cannot be changed without approval by the holders
of a majority (as defined in the 1940 Act) of the Municipal Bond Fund's
outstanding voting shares. Investment restrictions numbered 9 through 13 are not
fundamental policies and may be changed by vote of a majority of the Fund's
Directors at any time. The Municipal Bond Fund may not:
1. Invest more than 25% of its assets in the securities of
issuers in any single industry; provided that there shall be no such
limitation on the purchase of Municipal Obligations and, for temporary
defensive purposes, obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
2. Borrow money, except to the extent permitted under the 1940
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.
3. Purchase or sell real estate, or oil and gas interests, but
the Fund may invest in Municipal Obligations secured by real estate or
interests therein.
4. Underwrite the securities of other issuers, except that the
Fund may bid separately or as part of a group for the purchase of
Municipal Obligations directly from an issuer for its own portfolio to
take advantage of the lower purchase price available, and except to the
extent the Fund may be deemed an underwriter under the Securities Act
of 1933, as amended, by virtue of disposing of portfolio securities.
5. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements; however, the Fund
may lend its portfolio securities in an amount not to exceed 33-1/3% of
the value of its total assets. Any loans of portfolio securities will
be made according to guidelines established by the Securities and
Exchange Commission and the Fund's Board of Directors.
6. Issue any senior security (as such term is defined in
Section 18(f) of the 1940 Act), except to the extent that the
activities permitted in Investment Restriction Nos. 2, 7, 8 and 11 may
be deemed to give rise to a senior security.
7. 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
futures contracts or indexes.
8. Invest in commodities, except that the Fund may purchase
and sell forward contracts, futures contracts, including those relating
to indexes, and options on futures contracts or indexes.
9. Purchase securities other than Municipal Obligations and
taxable Money Market Instruments and those arising out of transactions
in futures and options or as otherwise provided in the Prospectus.
10. Invest in securities of other investment
companies, except to the extent permitted under the 1940
Act.
11. Pledge, hypothecate, mortgage or otherwise encumber its
assets, except to the extent necessary to secure permitted borrowings
and to the extent related to the deposit of assets in escrow in
connection with the purchase of securities on a when-issued or
delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to options, forward contracts, futures
contracts, including those related to indexes and options on futures
contracts, or indexes.
12. Enter into repurchase agreements providing for settlement
in more than seven days after notice or purchase securities which are
illiquid (which securities could include participation interests
(including municipal lease/purchase agreements) that are not subject to
the demand feature described in the Prospectus and floating and
variable rate demand notes and bonds as to which the Fund cannot
exercise the demand feature described in the Prospectus on less than
seven day's notice and as to which there is no secondary market), if,
in the aggregate, more than 15% of its net assets would be so invested.
13. Invest in companies for the purpose of exercising
control.
For purposes of Investment Restriction No. 1, industrial development bonds,
where the payment of principal and interest is the ultimate responsibility of
companies within the same industry, are grouped together as an "industry."
-------------------------------
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values or
assets will not constitute a violation of such restriction.
A Fund may make commitments more restrictive than the restrictions listed
above so as to permit the sale of Fund shares in certain states. Should a Fund
determine that a commitment is no longer in the best interests of the Fund and
its shareholders, each Fund reserves the right to revoke the commitment by
terminating the sale of such Fund's shares in the state involved.
MANAGEMENT OF THE FUNDS
Board members and officers of each Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below.
Board Members of the Funds
JOHN P. GOULD, Board Member. Distinguished Service Professor of
Economics of the University of Chicago Graduate School of
Business. From 1983 to 1993, Dean of the University of
Chicago Graduate School of Business. Dean Gould also
serves as Director of Harpor Capital Advisors. Mr. Gould
is also a Board member of The Woodward Funds and all four
funds in the Prairie Family of Funds. He is 57 years old
and his address is 1101 East 58th Street, Chicago, Illinois
60637.
MARILYN McCOY, Board Member. Vice President of Administration and Planning of
Northwestern University. From 1981 to 1985, she was the Director of
Planning and Policy Development for the University of Colorado. She
also serves on the Board of Directors of Evanston Hospital, the Chicago
Metropolitan YMCA, the Chicago Network and United Charities. Mrs. McCoy
is a member of the Chicago Economics Club. Mrs. McCoy is also a Board
member of The Woodward Funds and all four funds in the Prairie Family
of Funds. She is 47 years old and her address is 1100 North Lake Shore
Drive, Chicago, Illinois 60611.
RAYMOND D. ODDI, Board Member. 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
Inter- national, Inc., a company engaged in the production
of medical care products. He also is a member of the
Illinois Society of Certified Public Accountants. Mr. Oddi
is a Board member of all four funds in the Prairie Family
of Funds. He is 68 years old and his address is 1181 Loch
Lane, Lake Forest, Illinois 60045.
For so long as a plan described in the section captioned "Distribution
Plans and Shareholder Services Plans" remains in effect, the Board members who
are not "interested persons" of the Fund, as defined in the 1940 Act, will be
selected and nominated by the Board members who are not "interested persons" of
the Fund.
Officers of the Funds
MARK A. DILLON, President. An employee of BISYS Fund Services, which is a
affiliate of Concord Holding Corporation, the Funds' sub-administrator
(the "Sub-Administrator"). He is 33 years old and his address is 3435
Stelzer Road, Columbus, Ohio 43219.
ANN E. BERGIN, Vice President. An employee of the Sub-
Administrator and an officer of other investment companies
administered by the Sub-Administrator. She is 35 years old
and her address is 125 West 55th Street, New York, New York
10019.
D'RAY BREWER, Vice President. An employee of BISYS Fund Services, and an
officer of other investment companies administered by the
Sub-Administrator. She is 36 years old and her address is 3435 Stelzer
Road, Columbus, Ohio 43219.
MARTIN R. DEAN, Treasurer. An employee of BISYS Fund Services, since May 1994,
and an officer of other investment companies administered by the
Sub-Administrator. Prior thereto, he was a Senior Manager at KPMG Peat
Marwick LLP. He is 32 years old and his address is 3435 Stelzer Road,
Columbus, Ohio 43219.
GEORGE O. MARTINEZ, Secretary. Senior Vice President and Director of Legal and
Compliance Services with BISYS Fund Services, since April 1995, and an
officer of other investment companies administered by the
Sub-Administrator. Prior thereto, he was Vice President and Associate
General Counsel with Alliance Capital Management L.P. He is 36 years
old and his address is 3435 Stelzer Road, Columbus, Ohio 43219.
ROBERT L.TUCH, Assistant Secretary. An employee of BISYS Fund Services, since
June 1991, and an officer of other investment companies administered by
the Sub-Administrator. From July 1990 to June 1991, he was Vice
President and Associate General Counsel with National Securities
Research Corp. Prior thereto, he was an Attorney with the Securities
and Exchange Commission. He is 44 years old and his address is 3435
Stelzer Road, Columbus, Ohio 43219.
Each Fund pays the Board members its allocable share of the aggregate of a
fixed fee of $25,000 per annum and a per meeting fee of $1,000 for all funds in
the Prairie Family of Funds. The aggregate amount of compensation payable to
each Board member by the Trust, Prairie Intermediate Bond Fund and Prairie
Municipal Bond Fund, Inc. and all other funds in the Prairie Family of Funds for
which such person is a Board member for the fiscal year ended December 31, 1995
were as follows:
<TABLE>
<CAPTION>
(3) (5)
(2) Pension or (4) Total Compensation
(1) Aggregate Retirement Benefits Estimated Annual From Fund and
Name of Board Compensation from Accrued as Part of Benefits Upon Fund Complex Paid
Member Fund Fund's Expenses Retirement to Board Member
<S> <C> <C> <C> <C>
John P. Gould
Trust $21,175 None None $30,000
Prairie Intermediate Bond Fund $ 1,765 None None
Prairie Municipal Bond Fund,
Inc. $ 1,765 None None
Marilyn McCoy $30,000
Trust $21,175 None None
Prairie Intermediate Bond Fund $ 1,765 None None
Prairie Municipal Bond Fund,
Inc. $ 1,765 None None
Raymond D. Oddi $30,000
Trust $21,175 None None
Prairie Intermediate Bond Fund $ 1,765 None None
Prairie Municipal Bond Fund,
Inc. $ 1,765 None None
</TABLE>
Board members and officers of the Funds, as a group, owned less than 1% of
any Fund's shares outstanding on March 27, 1996.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "Management of the Funds."
Investment Advisory Agreements. FCIMCO provides investment advisory
services pursuant to separate Investment Advisory Agreements (each, an
"Agreement") dated as of November 30, 1995 with the Trust, Prairie Intermediate
Bond Fund and Prairie Municipal Bond Fund, Inc. As to each Fund, the Agreement
is subject to annual approval by (i) the Board or (ii) vote of a majority (as
defined in the 1940 Act) of the outstanding voting securities of such Fund,
provided that in either event the continuance also is approved by a majority of
the Board members who are not "interested persons" (as defined in the 1940 Act)
of the Fund or FCIMCO, by vote cast in person at a meeting called for the
purpose of voting on such approval. Shareholders of each Fund approved the
respective Agreement on November 28, 1995. The Board, including a majority of
the Board members who are not "interested persons" of any party to the
Agreement, last approved the Agreement at a meeting held on September 19, 1995.
As to each Fund, the Agreement is terminable without penalty, on 60 days'
notice, by the Board or by vote of the holders of a majority of such Fund's
shares, or, on not less than 90 days' notice, by FCIMCO. The Agreement will
terminate automatically, as to the relevant Fund, in the event of its assignment
(as defined in the 1940 Act).
FCIMCO is responsible for investment decisions for each Fund in accordance
with the stated policies of such Fund, subject to the approval of the Board. All
purchases and sales are reported for the Board member's review at the meeting
subsequent to such transactions.
The following persons are officers and/or directors of FCIMCO: J. Stephen
Baine, Chairman of the Board of Directors, Chief Executive Officer and
President; Alan F. Delp, William G. Jurgensen, Thomas H. Hodges and David J.
Vitale, Directors; Terrall J. Janeway, Treasurer, Chief Financial and Accounting
Officer and Managing Director; Bradford M. Markham, Secretary and Chief Legal
Officer; and George Abel, Timothy Kerr, Ronald Doyle, Deborah L. Edwards, Marco
Hanig, David R. Kling and Stephen P. Manus, Managing Directors.
Sub-Investment Advisory Agreement. ANB Investment Management and Trust
Company ("ANB-IMC") provides investment advisory assistance and day-to-day
management of the International Equity Fund's investments pursuant to the Sub-
Investment Advisory Agreement dated as of November 30, 1995 between ANB-IMC and
FCIMCO. The Sub-Investment Advisory Agreement is subject to annual approval by
(i) the Board or (ii) vote of a majority (as defined in the 1940 Act) of the
International Equity Fund's outstanding voting securities, provided that in
either event the continuance also is approved by a majority of the Board members
who are not "interested persons" (as defined in the 1940 Act) of the Trust or
ANB-IMC, by vote cast in person at a meeting called for the purpose of voting on
such approval. Shareholders of the International Equity Fund approved the
Sub-Investment Advisory Agreement on November 28, 1995. The Board, including a
majority of the Board members who are not "interested persons" of any party to
the Sub-Investment Advisory Agreement last approved the Sub- Investment Advisory
Agreement at a meeting held on September 19, 1995. The Sub-Investment Advisory
Agreement is terminable without penalty, (i) by FCIMCO on 60 days' notice, (ii)
by the Board or by vote of the holders of a majority of the Fund's outstanding
voting securities on 60 days' notice, or (iii) upon not less than 90 days'
notice, by ANB-IMC. The Sub-Investment Advisory Agreement will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
ANB-IMC provides day-to-day management of the International Equity Fund's
investments, subject to the supervision of FCIMCO and the Board. As compensation
for ANB- IMC's services, FCIMCO has agreed to pay ANB-IMC a sub- investment
advisory fee, computed daily and paid monthly, at an annual rate of .40 of 1% of
the value of the International Equity Fund's average daily net assets. For the
period March 3, 1995 (commencement of operations of International Equity Fund)
through December 31, 1995, the sub-investment advisory fee payable by FCIMCO to
ANB-IMC amounted to $254,628.
The following persons are officers and/or directors of ANB-IMC: Terrall J.
Janeway, Neil R. Wright, Stephen P. Manus, Alan F. Delp, David P. Bolger, Thomas
P. Michaels and J. Stephen Baine.
Administration and Sub-Administration Agreements. Pursuant to separate
Administration Agreements dated November 30, 1995 with the Trust, Prairie
Intermediate Bond Fund and Prairie Municipal Bond Fund, Inc., FCIMCO assists in
all aspects of the Funds' operations, other than providing investment advice,
subject to the overall authority of the Board in accordance with applicable
state law. FCIMCO has engaged the Sub-Administrator to assist it in providing
certain administrative services to the Funds. Pursuant to its agreement with
FCIMCO (the "Sub-Administration Agreement"), the Sub- Administrator assists
FCIMCO in furnishing the Funds clerical help and accounting, data processing,
bookkeeping, internal auditing and legal services and certain other services
required by the Funds, preparing reports to the Funds' shareholders, tax
returns, reports to and filings with the Securities and Exchange Commission and
state Blue Sky authorities, calculating the net asset value of each Fund's
shares and generally in providing for all aspects of operation, other than
providing investment advice. The fees payable to the Sub-Administrator for its
services are paid by FCIMCO.
Each Fund has agreed that FCIMCO, ANB-IMC and the Sub-Administrator will
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the matters to which respective
agreements relate, except for a loss resulting from wilful misfeasance, bad
faith or gross negligence on the part of FCIMCO in the performance of its
obligations or from reckless disregard by it of its obligations and duties under
its agreements or on the part of ANB-IMC or the Sub-Administrator in the
performance of their respective obligations or from reckless disregard by either
of its obligations and duties under its agreement.
Expenses and Expense Information. All expenses incurred in the operation of
the Trust, Prairie Intermediate Bond Fund and Prairie Municipal Bond Fund, Inc.
are borne by such company, except to the extent specifically assumed by FCIMCO.
The expenses borne by the Trust, Prairie Intermediate Bond Fund and Prairie
Municipal Bond Fund, Inc. include: organizational costs, taxes, interest,
brokerage fees and commissions, if any, fees of Board members, Securities and
Exchange Commission fees, state Blue Sky qualification fees, advisory fees,
charges of custodians, transfer and dividend disbursing agents' fees, certain
insurance premiums, industry association fees, outside auditing and legal
expenses, costs of maintaining the Fund's existence, costs of independent
pricing services, costs attributable to investor services (including, without
limitation, telephone and personnel expenses), costs of shareholders' reports
and meetings, costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to existing
shareholders, and any extraordinary expenses. In addition, Class A and Class B
are subject to an annual distribution and/or service fee. Expenses attributable
to a particular Fund or Class are charged against the assets of that Fund or
Class, respectively; other expenses of the Trust are allocated among the Funds
that are series of the Trust on the basis determined by the Board, including,
but not limited to, proportionately in relation to the net assets of each such
Fund.
The Agreement provides that if, in any fiscal year, the aggregate expenses
of a Fund, exclusive of taxes, brokerage, interest on borrowings and (with the
prior written consent of the necessary state securities commissions)
extraordinary expenses, but including the advisory fee, exceed the expense
limitation of any state having jurisdiction over the Fund, the Fund may deduct
from the payment to be made to FCIMCO under the Agreement, or FCIMCO will bear,
such excess expense to the extent required by state law. Such deduction or
payment, if any, will be estimated daily, and reconciled and effected or paid,
as the case may be, on a monthly basis.
The aggregate of the fees payable to FCIMCO is not subject to reduction as
the value of a Fund's net assets increases.
As compensation for FCIMCO's investment advisory services, each Fund has
agreed to pay FCIMCO an advisory fee, computed daily and paid monthly, at an
annual rate as set forth below. Except as otherwise noted, for the period
January 17, 1995 (effective date of the Investment Advisory Agreement) through
December 31, 1995, the advisory fee payable, the reduction in the fee payable
pursuant to undertakings and the net fee paid were as follows:
<TABLE>
<CAPTION>
Annual Fee
Payable As a % Reduction Net
of Average Amount of In Fee Fee
Name of Fund Daily Net Assets Fee Payable Payable Paid
- - ------------ ---------------- ----------- --------- ----
<S> <C> <C> <C> <C>
Managed Assets Income .65% $ 321,175 $178,658 $ 142,517
Managed Assets .65% $ 25,214(1) $ 23,352 $ 1,862
Equity Income .50% $1,106,755(2) $277,716 $ 829,039
Growth .65% $1,714,489(2) $314,740 $1,399,749
Special Opportunities .70% $ 487,653(2) $168,733 $ 318,920
International Equity .80% $ 506,306(3) $213,520 $ 292,786
Intermediate Bond .40% $ 612,316 $185,678 $ 426,638
Bond .55% $ 571,383(4) $178,730 $ 392,653
International Bond .70% $ 79,134(2) $ 68,517 $ 10,617
Intermediate Municipal
Bond .40% $1,368,542 $429,888 $ 938,654
Municipal Bond .40% $ 870,774 $304,953 $ 565,821
U.S. Government Money
Market .40% $ 281,056 $187,035 $ 94,021
Money Market .40% $ 616,814 $429,314 $ 187,527
Municipal Money Market .40% $ 826,343 $489,926 $ 336,417
- - ------------------------------
(1) For the period April 3, 1995 (commencement of operations)
through December 31, 1995.
(2) For the period January 27, 1995 (commencement of
operations) through December 31, 1995.
(3) For the period March 3, 1995 (commencement of operations)
through December 31, 1995.
(4) For the period February 10, 1995 (commencement of
operations) through December 31, 1995.
</TABLE>
As compensation for FCIMCO's administrative services, each Fund has agreed
to pay FCIMCO an administrative fee, computed daily and paid monthly, at an
annual rate of .15 of 1% of the value of the Fund's average daily net assets.
Except as otherwise noted, for the period January 17, 1995 (effective date of
the Administration Agreement) through December 31, 1995, the administrative fee
payable, the reduction in the fee payable pursuant to undertakings and the net
fee paid were as follows:
<TABLE>
<CAPTION>
Reduction Net
Amount of In Fee Fee
Name of Fund Fee Payable Payable Paid
<S> <C> <C> <C>
Managed Assets Income $ 70,857 $ 0 $ 70,857
Managed Assets $ 5,818(1) $2,274 $ 3,544
Equity Income $332,027(2) $ 0 $332,027
Growth $395,652(2) $ 0 $395,652
Special Opportunities $104,497(2) $ 0 $104,497
International Equity $ 94,410(3) $ 0 $ 94,410
Intermediate Bond $229,619 $ 0 $229,619
Bond $155,832(4) $ 0 $155,832
International Bond $ 16,958(2) $4,407 $ 12,551
Intermediate Municipal Bond $475,635 $ 0 $475,635
Municipal Bond $310,972 $ 0 $310,972
U.S. Government Money Market $ 94,631 $8,954 $ 85,677
Money Market $220,431 $ 0 $220,431
Municipal Money Market $292,778 $ 0 $292,778
- - ------------------------------
(1) For the period April 3, 1995 (commencement of operations)
through December 31, 1995.
(2) For the period January 27, 1995 (commencement of
operations) through December 31, 1995.
(3) For the period March 3, 1995 (commencement of operations)
through December 31, 1995.
(4) For the period February 10, 1995 (commencement of
operations) through December 31, 1995.
</TABLE>
Prairie Intermediate Bond Fund only. Prior to January 17, 1995, The First
National Bank of Chicago ("FNBC") provided management services to the Fund
pursuant to a management agreement (the "Prior Management Agreement"). Under the
terms of the Prior Management Agreement, Prairie Intermediate Bond Fund agreed
to pay FNBC a monthly fee at the annual rate of .60 of 1% of the value of the
Fund's average daily net assets. For the fiscal years ended January 31, 1993 and
1994 and the period from February 1, 1994 through January 17, 1995, no fees were
paid by the Fund to FNBC pursuant to various undertakings by FNBC.
Prior to January 17, 1995, The Dreyfus Corporation ("Dreyfus") provided the
Fund administrative services pursuant to an administration agreement between
FNBC and Dreyfus. FNBC paid Dreyfus for Dreyfus' services.
Prairie Municipal Bond Fund, Inc. only. Prior to January 17, 1995, FNBC
provided advisory services to the Fund pursuant to an investment advisory
agreement (the "Prior Advisory Agreement"). Under the terms of the Prior
Advisory Agreement, Prairie Municipal Bond Fund, Inc. agreed to pay FNBC a
monthly fee at the annual rate of .40 of 1% of the value of the Fund's average
daily net assets. For the fiscal years ended February 28/29, 1993 and 1994 and
for the period from March 1, 1994 through January 17, 1995, no fees were paid by
the Fund to FNBC pursuant to various undertakings by FNBC.
Prior to January 17, 1995, Dreyfus provided the Fund administrative
services pursuant to an administration agreement (the "Prior Administration
Agreement"). As compensation for Dreyfus' services to the Fund, the Fund agreed
to pay Dreyfus pursuant to the Prior Administration Agreement a fee, computed
daily and paid monthly, at an annual rate of .20 of 1% of the value of the
Fund's average daily net assets. For the fiscal years ended February 28/29, 1993
and 1994, no administration fees were paid by the Fund to Dreyfus pursuant to
various undertakings by Dreyfus. For the period March 1, 1994 through January
17, 1995, the Fund paid Dreyfus $25,853 pursuant to the Prior Administration
Agreement.
Intermediate Municipal Bond Fund only. Prior to January 17, 1995, FNBC
provided advisory services to the Intermediate Series of First Prairie Municipal
Bond Fund, Inc. (the predecessor fund of the Intermediate Municipal Bond Fund)
pursuant to an investment advisory agreement (the "Prior Advisory Agreement").
Under the terms of the Prior Advisory Agreement, the Intermediate Series agreed
to pay FNBC a monthly fee at the annual rate of .40 of 1% of the value of the
Intermediate Series' average daily net assets. For the fiscal years ended
February 28/29, 1993 and 1994 and for the period from March 1, 1994 through
January 17, 1995, no fees were paid by the Intermediate Series to FNBC pursuant
to various undertakings by FNBC.
Prior to January 17, 1995, Dreyfus provided the Intermediate Series of
First Prairie Municipal Bond Fund, Inc. administrative services pursuant to an
administration agreement (the "Prior Administration Agreement"). As compensation
for Dreyfus' services to the Intermediate Series, the Intermediate Series agreed
to pay Dreyfus pursuant to the Prior Administration Agreement a fee, computed
daily and paid monthly, at an annual rate of .20 of 1% of the value of the
Intermediate Series' average daily net assets. For the fiscal years ended
February 28/29, 1993 and 1994, no administration fees were paid by the
Intermediate Series to Dreyfus pursuant to various undertakings by Dreyfus. For
the period March 1, 1994 through January 17, 1995, the Intermediate Series paid
Dreyfus $46,815 pursuant to the Prior Administration Agreement.
Managed Assets Income Fund only. Prior to January 17, 1995, FNBC provided
advisory services to First Prairie Diversified Asset Fund (the predecessor fund
of the Managed Assets Income Fund) pursuant to an investment advisory agreement
(the "Prior Advisory Agreement"). Under the terms of the Prior Advisory
Agreement, First Prairie Diversified Asset Fund agreed to pay FNBC 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 years ended December 31, 1992, 1993 and 1994, no fees
were paid by First Prairie Diversified Asset Fund to FNBC pursuant to various
undertakings by FNBC.
Prior to January 17, 1995, Dreyfus provided First Prairie Diversified Asset
Fund administrative services pursuant to an administration agreement (the "Prior
Administration Agreement"). As compensation for Dreyfus' services to First
Prairie Diversified Asset Fund, the fund agreed to pay Dreyfus pursuant to the
Prior Administration Agreement a fee, computed 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, 1992 and 1993, no administration fees
were paid by First Prairie Diversified Asset Fund to Dreyfus pursuant to various
undertakings by Dreyfus. For the period January 1, 1994 through December 31,
1994, First Prairie Diversified Asset Fund paid Dreyfus $26,667 pursuant to the
Prior Administration Agreement.
Municipal Money Market Fund only. From May 1, 1993 to January 17, 1995,
FNBC provided management services to First Prairie Municipal Money Market Fund
(the predecessor fund of the Municipal Money Market Fund) pursuant to a
management agreement (the "Prior Agreement") with the fund and engaged Dreyfus
to provide administrative services. Pursuant to the Prior Agreement, First
Prairie Municipal Money Market Fund agreed to pay FNBC a management fee at the
annual rate of .55 of 1% of the value of the fund's average daily net assets.
Prior to April 30, 1993, FNBC provided investment advisory services to First
Prairie Municipal Money Market Fund pursuant to an investment advisory agreement
(the "Prior Advisory Agreement") with the fund and Dreyfus provided
administrative services to the fund pursuant to an administration agreement (the
"Prior Administration Agreement") with First Prairie Municipal Money Market
Fund. Pursuant to the Prior Advisory Agreement, First Prairie Municipal Money
Market Fund agreed to pay FNBC an advisory fee at the annual rate of .40 of 1%
of the value of the fund's average daily net assets. Pursuant to the Prior
Administration Agreement, First Prairie Municipal Money Market Fund agreed to
pay Dreyfus an administration fee at the annual rate of .20 of 1% of the value
of the fund's average daily net assets.
The fees paid to FNBC pursuant to the Prior Advisory Agreement for the
fiscal year ended December 31, 1992 was $914,834. For the period January 1, 1993
through April 29, 1993, the fee payable to FNBC pursuant to the Prior Advisory
Agreement was $266,582. For the period from April 30, 1993 (effective date of
the Prior Agreement) through December 31, 1993 and for the fiscal year ended
December 31, 1994, the fees payable to FNBC were $699,072 and $1,069,636,
respectively. For the fiscal years ended December 31, 1992, 1993 and 1994, the
fees payable to FNBC were reduced pursuant to undertakings in effect resulting
in net fees paid of $895,911 in fiscal 1992, $647,661 in fiscal 1993 and
$485,987 in fiscal 1994.
The fee paid to Dreyfus pursuant to the Prior Administration Agreement for
the fiscal year ended December 31, 1992 was $457,417. For the period January 1,
1993 through April 29, 1993, the fee payable to Dreyfus pursuant to the Prior
Administration Agreement was $133,291.
Money Market Fund only. From May 1, 1993 to January 17, 1995, FNBC provided
management services to the Money Market Series of First Prairie Money Market
Fund (the predecessor fund of the Money Market Fund) pursuant to a management
agreement (the "Prior Agreement") with the fund and engaged Dreyfus to provide
administrative services. Pursuant to the Prior Agreement, the Money Market
Series agreed to pay FNBC a fee at the annual rate of .55 of 1% of the value of
the Money Market Series' average daily net assets. Prior to April 30, 1993, FNBC
provided investment advisory services to the Money Market Series pursuant to an
investment advisory agreement (the "Prior Advisory Agreement") with the fund and
Dreyfus provided administrative services to the Money Market Series pursuant to
an administration agreement (the "Prior Administration Agreement") with the
fund. Pursuant to the Prior Advisory Agreement, the Money Market Series agreed
to pay FNBC an advisory fee at the annual rate of .40 of 1% of the value of the
Money Market Series' average daily net assets. Pursuant to the Prior
Administration Agreement, the Money Market Series agreed to pay Dreyfus an
administration fee at the annual rate of .20 of 1% of the value of the Money
Market Series' average daily net assets.
The fees paid to FNBC pursuant to the Prior Advisory Agreement with respect
to the Money Market Series for the fiscal year ended December 31, 1992 was
$1,565,674. For the period January 1, 1993 through April 29, 1993, the fee
payable to FNBC pursuant to the Prior Advisory Agreement was $345,615. For the
period from April 30, 1993 (effective date of the Prior Agreement) through
December 31, 1993 and for the fiscal year ended December 31, 1994, the fees
payable to FNBC were $649,937 and $859,905, respectively. For the fiscal year
ended December 31, 1993, the fee payable to FNBC was reduced by $70,345,
pursuant to an undertaking in effect resulting in net fees paid of $925,207.
The fee paid to Dreyfus pursuant to the Prior Administration Agreement with
respect to the Money Market Series for the fiscal year ended December 31, 1992
was $782,837. For the period January 1, 1993 through April 29, 1993, the fee
payable to Dreyfus pursuant to the Prior Administration Agreement was $172,808;
however, pursuant to an undertaking in effect, Dreyfus reduced its fee by
$32,272, resulting in a net fee of $140,536.
Government Money Market Fund only. From May 1, 1993 to January 17, 1995,
FNBC provided management services to the Government Money Market Series of First
Prairie Money Market Fund (the predecessor fund of the Government Money Market
Fund) pursuant to a management agreement (the "Prior Agreement") with the fund
and engaged Dreyfus to provide administrative services. Pursuant to the Prior
Agreement, the Government Money Market Series agreed to pay FNBC a fee at the
annual rate of .55 of 1% of the value of the Government Money Market Series'
average daily net assets. Prior to April 30, 1993, FNBC provided investment
advisory services to the Government Money Market Series pursuant to an
investment advisory agreement (the "Prior Advisory Agreement") with the fund and
Dreyfus provided administrative services to the Government Money Market Series
pursuant to an administration agreement (the "Prior Administration Agreement")
with the fund. Pursuant to the Prior Advisory Agreement, the Government Money
Market Series agreed to pay FNBC an advisory fee at the annual rate of .40 of 1%
of the value of the Government Money Market Series' average daily net assets.
Pursuant to the Prior Administration Agreement, the Government Money Market
Series agreed to pay Dreyfus an administration fee at the annual rate of .20 of
1% of the value of the Government Money Market Series' average daily net assets.
The fees paid to FNBC pursuant to the Prior Advisory Agreement
with respect to the Government Money Market Series for the fiscal year ended
December 31, 1992 was $2,661,832. For the period January 1, 1993 through April
29, 1993, the fee payable to FNBC pursuant to the Prior Advisory Agreement was
$730,686. For the period from April 30, 1993 (effective date of the Prior
Agreement) through December 31, 1993 and for the fiscal year ended December 31,
1994 the fees payable to FNBC were $1,635,057 and $692,452, respectively. For
the fiscal years ended December 31, 1993 and 1994, the fees payable to FNBC were
reduced by $567,879 and $29,785, respectively, pursuant to an undertaking in
effect resulting in net fees paid of $1,797,864 in fiscal 1993 and $662,667 in
fiscal 1994.
The fee paid to Dreyfus pursuant to the Prior Administration Agreement with
respect to the Government Money Market Series for the fiscal year ended December
31, 1992 was $1,330,916. For the period January 1, 1993 through April 29, 1993,
the fee payable to Dreyfus pursuant to the Prior Administration Agreement was
$365,343; however, pursuant to an undertaking in effect, Dreyfus reduced its fee
by $103,746, resulting in a net fee of $261,597.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "How to Buy Shares."
The Distributor. The Distributor serves on a best efforts basis as each
Fund's distributor pursuant to an agreement which is renewable annually.
For the fiscal year ended December 31, 1995, the Distributor retained
$10,669 from sales loads on Fund shares.
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 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.
Set forth below is an example of the method of computing the offering price
of the Class A shares of the Managed Assets Income Fund. The example assumes a
purchase of Class A shares of the Fund aggregating less than $50,000 subject to
the current schedule of sales charges set forth in the Funds' Prospectus at a
price based upon the net asset value of the Managed Assets Income Fund's Class A
shares on December 31, 1995:
Net Asset Value per Share $ 14.54
Per Share Sales Charge - 4.5%
of offering price (4.7% of
net asset value per share) $ .69
-------
Per Share Offering Price to
the Public $ 15.23
=======
Using Federal Funds. Primary Funds Service Corp., the Funds' transfer and
dividend disbursing agent (the "Transfer Agent"), or the Fund may attempt to
notify the investor upon receipt of checks drawn on banks that are not members
of the Federal Reserve System as to the possible delay in conversion into
Federal Funds and may attempt to arrange for a better means of transmitting the
money. If the investor is a customer of a securities dealer, bank or other
financial institution and his order to purchase Fund shares is paid for other
than in Federal Funds, the securities dealer, bank or other financial
institution, acting on behalf of its customer, generally will complete the
conversion into, or itself advance, Federal Funds on the business day following
receipt of the customer order. The order is effective only when so converted and
received by the Transfer Agent. An order for the purchase of Fund shares placed
by an investor with a sufficient Federal Funds or cash balance in his brokerage
account with a securities dealer, bank or other financial institution will
become effective on the day that the order, including Federal Funds, is received
by the Transfer Agent.
DISTRIBUTION PLANS AND SHAREHOLDER SERVICES PLANS
The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "Distribution Plans and Shareholder
Services Plans."
Distribution Plans. Rule 12b-1 (the "Rule") adopted by the Securities and
Exchange Commission under the 1940 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 Board has adopted such a plan
for each of the Trust, Prairie Intermediate Bond Fund and Prairie Municipal Bond
Fund, Inc. with respect to Class B shares of each Fund (the "Distribution
Plan"), pursuant to which the Fund pays the Distributor for advertising,
marketing and distributing Class B shares of the relevant Fund. The Distributor
may pay one or more banks, securities dealers and other industry professionals
such as investment advisers, accountants and estate planning firms
(collectively, "Service Agents"), in respect of these services. In some states,
banks or other institutions effecting transactions in Fund shares may be
required to register as dealers pursuant to state law. The Board believes that
there is a reasonable likelihood that the Distribution Plan will benefit each
Fund and the holders of its Class B shares.
A quarterly report of the amounts expended under each Distribution Plan,
and the purposes for which such expenditures were incurred, must be made to the
Board members for their review. In addition, the Distribution Plan provides that
it may not be amended to increase materially the cost which holders of Class B
shares of the Fund may bear pursuant to the Distribution Plan without the
approval of the shareholders of such Class and that other material amendments of
the Distribution Plan must be approved by the Board and by the Board members who
are not "interested persons" (as defined in the 1940 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 Board members cast in person at a meeting called for the purpose of voting
on the Distribution Plan. Each Distribution Plan was last so approved on
December 6, 1995. The Distribution Plan may be terminated at any time by vote of
a majority of the Board members 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 of the Fund.
Except as otherwise noted, for the period January 17, 1995
(effective date of Distribution Plan) through December 31, 1995, the fee
payable, the reduction in the fee payable pursuant to undertakings and the net
fee paid pursuant to the Distribution Plan with respect to Class B of the
indicated Fund were as follows:
<TABLE>
<CAPTION>
Reduction Net
Amount of In Fee Fee
Name of Fund Fee Payable Payable Paid
<S> <C> <C> <C>
Managed Assets Income $5,831 $ 0 $5,831
Managed Assets $3,325(1) $ 0 $3,325
Equity Income $1,283(2) $ 0 $1,283
Growth $ 670(2) $ 0 $ 670
Special Opportunities $ 56(2) $ 0 $ 56
International Equity $ 379(3) $ 0 $ 379
Intermediate Bond $ 563 $ 0 $ 563
Bond $ 116(4) $ 0 $ 116
International Bond $ 30(2) $ 0 $ 30
Reduction Net
Amount of In Fee Fee
Name of Fund Fee Payable Payable Paid
Intermediate Municipal Bond $ 824 $ 0 $ 824
Municipal Bond $ 600 $ 0 $ 600
Money Market $ 154 $ 0 $ 154
- - ------------------------------
(1) For the period April 3, 1995 (commencement of operations)
through December 31, 1995.
(2) For the period January 27, 1995 (commencement of
operations) through December 31, 1995.
(3) For the period March 3, 1995 (commencement of operations)
through December 31, 1995.
(4) For the period February 10, 1995 (commencement of
operations) through December 31, 1995.
</TABLE>
Shareholder Services Plans. The Trust, Prairie Intermediate Bond Fund and
Prairie Municipal Bond Fund, Inc. have adopted separate Shareholder Services
Plans, pursuant to which each Fund pays the Distributor for the provision of
certain services to the holders of Class A and Class B shares of such Fund. 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. Under each Shareholder Services Plan, the Distributor
may make payments to Service Agents in respect of these services. FCIMCO, FNBC,
ANB and their affiliates may act as Service Agents and receive fees under the
Shareholder Services Plan.
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 Board members for their review. In addition, the Shareholder Services
Plan provides that it may not be amended without approval of the Board, and by
the Board members who are neither "interested persons" (as defined in the 1940
Act) of the Fund nor have any 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 Board members
cast in person at a meeting called for the purpose of voting on the Shareholder
Services Plan. Each Shareholder Services Plan was so approved on December 6,
1995. The Shareholder Services Plan is terminable at any time by vote of a
majority of the Board members 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.
Except as otherwise noted, for the period January 17, 1995
(effective date of Shareholder Services Plan) through December 31, 1995, the fee
payable under the Shareholder Services Plan with respect to Class A and Class B
of the indicated Fund was as follows:
<TABLE>
<CAPTION>
Name of Fund Amount of Fee Payable
Class A Class B
<S> <C> <C>
Managed Assets Income $112,993 $ 1,837
Managed Assets(1) $ 7,918 $ 1,092
Equity Income(2) $ 2,475 $ 407
Growth(2) $ 4,568 $ 219
Special Opportunities(2) $ 741 $ 18
International Equity(3) $ 3,057 $ 109
Intermediate Bond $ 5,960 $ 198
Bond(4) $ 2,105 $ 36
International Bond(2) $ 632 $ 39
Intermediate Municipal Bond $ 38,833 $ 3,950
Municipal Bond $ 16,461 $ 2,240
U.S. Government Money Market $156,897 N/A
Money Market $365,201 $ 50
Municipal Money Market $485,617 N/A
- - ------------------------------
(1) For the period April 3, 1995 (commencement of operations)
through December 31, 1995.
(2) For the period January 27, 1995 (commencement of
operations) through December 31, 1995.
(3) For the period March 3, 1995 (commencement of operations)
through December 31, 1995.
(4) For the period February 10, 1995 (commencement of
operations) through December 31, 1995.
</TABLE>
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "How to Redeem Fund Shares."
Redemption Commitment. Each of the Trust, Prairie Intermediate Bond Fund
and Prairie Municipal Bond Fund, Inc. has committed itself to pay in cash all
redemption requests by any shareholder of record of the Fund, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of such
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 reserves the right to make payments in whole or in part in securities or
other assets 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
securities are 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 closing), (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.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "How to Buy Shares."
Applicable to each Fund, other than the Money Market Funds--Equity
Securities and covered call options written by a Fund are valued at the last
sale price on the securities exchange or national securities market on which
such securities primarily are traded. Equity Securities not listed on an
exchange or national securities market, or securities in which there were no
transactions, are valued at the most recent bid prices. Any securities or other
assets for which recent market quotations are not readily available are valued
at fair value as determined in good faith by the Board.
Fixed-Income Securities are valued each business day using available market
quotations or at fair value as determined by one or more independent pricing
services (collectively, the "Service") approved by the Board. The Service may
use available market quotations, employ electronic data processing techniques
and/or a matrix system to determine valuations. The Service's procedures are
reviewed by the Fund's officers under the general supervision of the Board.
Municipal Obligations are carried at fair value as determined by the
Service, based on methods which include consideration of: yields or prices of
municipal bonds of comparable quality, coupon, maturity and type; indications as
to values from dealers; and general market conditions. The Service also may
employ electronic data processing techniques and/or a matrix system to determine
valuations. When, in the judgment of the Service, quoted bid prices for
investments are readily available and are representative of the bid side of the
market, these investments 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).
Short-term investments are carried at amortized cost, which approximates
value.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or are not valued by a pricing
service approved by the Board, are valued at fair value as determined in good
faith by the Board. The Board will review the method of valuation on a current
basis. In making its good faith valuation of restricted securities, the Board
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 if its members believe that the discount 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.
Any assets or liabilities initially expressed in terms of foreign currency
will be translated into dollars at the midpoint of the New York interbank market
spot exchange rate as quoted on the day of such translation by the Federal
Reserve Bank of New York or if no such rate is quoted on such date, at the
exchange rate previously quoted by the Federal Reserve Bank of New York or at
such other quoted market exchange rate as may be determined to be appropriate by
the Investment Adviser. Forward currency contracts will be valued at the current
cost of offsetting the contract. Because of the need to obtain prices as of the
close of trading on various exchanges throughout the world, the calculation of
net asset value for the International Equity and International Bond Funds does
not take place contemporaneously with the determination of prices of such
securities. In addition, portfolio securities held by such Funds may be traded
actively in securities markets which are open for trading on days when the Fund
will not be determining its net asset value. Accordingly, there may be occasions
when these Funds will not calculate it net asset value but when the value of the
Fund's portfolio securities will be affected by such trading activity.
Expenses and fees of a Fund, including the advisory fee, are accrued daily
and taken into account for the purpose of determining the net asset value of
that Fund's shares.
Money Market Funds. The valuation of each Money Market Fund's investment
securities is based upon their amortized cost which does not take into account
unrealized capital gains or losses. This involves valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the instrument.
The Board has established procedures, as a particular responsibility within
the overall duty of care owed to the Money Market Fund's investors, reasonably
designed to stabilize the Money Market Fund's price per share as computed for
purposes of purchases and redemptions at $1.00. Such procedures include review
of each Money Market Fund's portfolio holdings by the Board, at such intervals
as it deems appropriate, to determine whether the Money Market Fund's net asset
value calculated by using available market quotations or market equivalents
deviates from $1.00 per share based on amortized cost. In such review of the
portfolio of the Money Market Fund and U.S. Government Money Market Fund,
investments for which market quotations are readily available will be valued at
the most recent bid price or yield equivalent for such securities or for
securities of comparable maturity, quality and type, as obtained from one or
more of the major market makers for the securities to be valued. Other
investments and assets of these Money Market Funds will be valued at fair value
as determined in good faith by the Board. Market quotations and market
equivalents used in such review of the Municipal Money Market Fund are obtained
from an independent pricing service (the "Service") approved by the Board. The
Service will value the Municipal Money Market Fund's investments based on
methods which include consideration of: yields or prices of municipal
obligations of comparable quality, coupon, maturity and type; indications of
values from dealers; and general market conditions. The Service also may employ
electronic data processing techniques and/or a matrix system to determine
valuations.
The extent of any deviation between a Money Market Fund's net asset value
based upon available market quotations or market equivalents and $1.00 per share
based on amortized cost will be examined by the Board. If such deviation exceeds
1/2 of 1%, the Board will consider what actions, if any, will be initiated. In
the event the Board determines that a deviation exists which may result in
material dilution or other unfair results to investors or existing shareholders,
it has agreed to take such corrective action as it regards as necessary and
appropriate, including: selling portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity;
withholding dividends or paying distributions from capital or capital gains;
redeeming shares in kind; or establishing a net asset value per share by using
available market quotations or market equivalents.
New York Stock Exchange Closings. The holidays (as observed) on which the
New York Stock Exchange is closed currently are: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
PORTFOLIO TRANSACTIONS
Transactions for a Fund are allocated to various dealers by the Fund's
investment personnel in their best judgment. The primary consideration is prompt
and effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected to act on an agency basis for
research, statistical or other services to enable the Investment Adviser to
supplement its own research and analysis with the views and information of other
securities firms.
Research services furnished by brokers through which the Funds effect
securities transactions may be used by the Investment Adviser in advising other
funds or accounts it advises and, conversely, research services furnished to the
Investment Adviser by brokers in connection with other funds or accounts the
Investment Adviser advises may be used by the Investment Adviser in advising the
Funds. Although it is not possible to place a dollar value on these services, it
is the opinion of the Investment Adviser that the receipt and study of such
services should not reduce the overall expenses of its research department.
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 Investment Adviser might advise being
engaged simultaneously in the purchase or sale of the same security.
When transactions are executed in the over-the-counter market, the
Investment Adviser will deal with the primary market makers unless a more
favorable price or execution otherwise is obtainable.
Portfolio turnover may vary from year to year, as well as within a year.
Higher turnover rates are likely to result in comparatively greater brokerage
expenses. The overall reasonableness of brokerage commissions paid is evaluated
by the Investment Adviser based upon its knowledge of available information as
to the general level of commissions paid by other institutional investors for
comparable services.
Under normal market conditions, the portfolio turnover rate of each Fund,
other than the Money Market Funds, generally will not exceed 100%.
Purchases and sales of Fixed-Income Securities and Money Market Instruments
usually are principal transactions. These portfolio securities ordinarily are
purchased directly from the issuer or from an underwriter or market maker.
Usually no brokerage commissions are paid by the Fund for such purchases and
sales. The prices paid to the underwriters of newly-issued securities usually
include a concession paid by the issuer to the underwriter, and purchases of
securities from market makers may include the spread between the bid and asked
price.
For the fiscal year ended December 31, 1995, the amount of brokerage
commissions paid by each Fund indicated below, none of which was paid to the
Distributor, were as follows:
<TABLE>
<CAPTION>
Total Brokerage
Name of Fund Commissions Paid
<S> <C>
Managed Assets Income $ 13,601
Managed Assets $ 10,462
Equity Income $379,012
Growth $929,747
Special Opportunities $178,632
International Equity $ 89,528
</TABLE>
There were no spreads or concessions on principal transactions. No other
Fund paid brokerage commissions.
Managed Assets Income Fund only. For its portfolio securities transactions
during the fiscal years ended December 31, 1993 and 1994, First Prairie
Diversified Asset Fund (the predecessor fund of the Managed Assets Income Fund)
paid total brokerage commissions of $29,826 and $47,110, respectively, none of
which was paid to the fund's former distributors. There were no spreads or
concessions on principal transactions in fiscal 1993 and 1994.
DIVIDENDS, DISTRIBUTION AND TAXES
The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "Dividends, Distributions and
Taxes."
Management believes that each Fund has qualified for the fiscal year ended
December 31, 1995 as a "regulated investment company" under the Code. Each 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, a Fund must
pay out to its shareholders at least 90% of its net income (consisting of net
investment income from tax exempt obligations and net short-term capital gain),
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. Qualification as a regulated investment
company relieves the Fund from any liability for Federal income taxes to the
extent its earnings are distributed in accordance with the applicable provisions
of the Code. The term "regulated investment company" does not imply the
supervision of management or investment practices or policies by any government
agency.
Any dividend or distribution paid shortly after an investor's purchase may
have the effect of reducing the aggregate net asset value of his shares below
the cost of his investment. Such a distribution would be a return on investment
in an economic sense although taxable as stated in "Dividends, Distributions and
Taxes" in the Prospectus. In addition, the Code provides that if a shareholder
holds shares 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.
Except for dividends from taxable investments, the Fund anticipates that
substantially all dividends paid by a Municipal Fund will not be subject to
Federal income tax. Dividends and distributions paid by a Municipal Fund may be
subject to certain state and local taxes. Although all or a substantial portion
of the dividends paid by a Municipal Fund may be excluded by shareholders of the
Fund from their gross income for Federal income tax purposes, each Municipal
Fund may purchase specified private activity bonds, the interest from which may
be (i) a preference item for purposes of the alternative minimum tax, (ii) a
component of the "adjusted current earnings" preference item for purposes of the
corporate alternative minimum tax as well as a component in computing the
corporate environmental tax or (iii) a factor in determining the extent to which
a shareholder's Social Security benefits are taxable. If a Municipal Fund
purchases such securities, the portion of its dividends related thereto will not
necessarily be tax exempt to shareholders subject to the alternative minimum tax
and/or tax on Social Security benefits and may cause such shareholders to be
subject to such taxes.
Dividends paid by a Fund to qualified Retirement Plans or certain
non-qualified deferred compensation plans ordinarily will not be subject to
taxation until the proceeds are distributed from the Retirement Plan. The Funds
will not report dividends paid by a Fund to such Plans to the IRS. Generally,
distributions from such Retirement Plans, except those representing returns of
non-deductible contributions thereto, will be taxable as ordinary income and, if
made prior to the time the participant reaches age 59-1/2, generally will be
subject to an additional tax equal to 10% of the taxable portion of the
distribution. If the distribution from such a Retirement Plan (other than
certain governmental or church plans) for any taxable year following the year in
which the participant reaches age 70-1/2 is less than the "minimum required
distribution" for that taxable year, an excise tax equal to 50% of the
deficiency may be imposed by the IRS. The administrator, trustee or custodian of
such a Retirement Plan will be responsible for reporting distributions from such
Plans to the IRS. Participants in qualified Retirement Plans will receive a
disclosure statement describing the consequences of a distribution from such a
Plan from the administrator, trustee or custodian of the Plan prior to receiving
the distribution. Moreover, certain contributions to a qualified Retirement Plan
in excess of the amounts permitted by law may be subject to an excise tax.
Taxable dividends derived from net investment income and distributions from
net realized short-term securities gains paid by a 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 benefits of a lower rate specified in a
tax treaty. Distributions from net realized long-term securities gains paid by a
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, 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.
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 non-U.S. dollar denominated securities
(including debt instruments, certain financial futures and options, and certain
preferred stock) may be treated as ordinary income or loss under Section 988 of
the Code.
Under Section 1256 of the Code, gain or loss realized by a Fund from
certain financial futures and options transactions (other than those taxed under
Section 988 of the Code) 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 the
exercise or lapse of such futures and options as well as from closing
transactions. In addition, any such futures or 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 a Fund involving certain contracts or 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 of
the Code. As such, all or a portion of any short-term or long-term capital gain
from certain "straddle" transactions may be recharacterized to ordinary income.
If the Fund were treated as entering into "straddles" by reason of its engaging
in certain forward contracts or options transactions, such "straddles" would be
characterized as "mixed straddles" if the forward contracts or options
transactions comprising a part of such "straddles" were governed by Section 1256
of the Code. A Fund may make one or more elections with respect to "mixed
straddles." Depending on which election is made, if any, the results to the Fund
may differ. If no election is made to the extent the "straddle" and conversion
transactions rules apply to positions established by the Fund, losses realized
by the Fund will be deferred to the extent of unrealized gain in the offsetting
position. 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 gains may be treated as short-term capital gains or ordinary
income.
Investment by a Fund in securities issued or acquired 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 by causing the Fund to recognize
income prior to the receipt of cash payments. For example, the Fund could be
required to accrue a portion of the discount (or deemed discount) at which the
securities were issued and to distribute such income in order to maintain its
qualification as a regulated investment company. In such case, the Fund may have
to dispose of securities which it might otherwise have continued to hold in
order to generate cash to satisfy these distribution requirements.
If a Fund invests in an entity that is classified as a
"passive foreign investment company" ("PFIC") for federal income tax purposes,
the operation of certain provisions of the Code applying to PFICs could result
in the imposition of certain federal income taxes on the Fund. In addition, gain
realized from the sale or other disposition of PFIC securities may be treated as
ordinary income under Section 1291 of the Code.
YIELD AND PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Prospectus entitled "Performance Information."
Special Opportunities, Growth and International Equity Funds. 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 has been deducted from the hypothetical initial investment at the
time of purchase or in the case of Class B the maximum applicable contingent
deferred sales charge ("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 or Class I 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, in the case
of Class B, any applicable CDSC, 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 or Class I 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 with respect to Class A shares or any
applicable CDSC with respect to Class B shares which, if reflected, would reduce
the performance quoted.
The total return for each of these Funds for the period from
inception of the Fund through December 31, 1995 for each Class was as follows:
<TABLE>
<CAPTION>
Class A Class B Class I
Based on Maximum Based on Net Based on Net Based on
Name of Fund Offering Price Asset Value Asset Value Maximum CDSC
- - ------------ ---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Special 19.20% 24.80% 23.76% 18.76% 25.08%
Opportunities(1)
Growth(1) 24.14% 29.98% 29.15% 24.15% 30.38%
International 9.99% 15.16% 14.52% 9.52% 15.62%
Equity(2)
- - ---------------------
(1) For the period January 27, 1995 (commencement of operations) through December 31, 1995.
(2) For the period March 3, 1995 (commencement of operations) through December 31, 1995.
</TABLE>
Asset Allocation, Equity Income, Bond and Municipal Bond Funds. 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 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 net asset value per share 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.
With respect to the Municipal Funds, tax equivalent yield is computed by
dividing that portion of the current yield (calculated as described above) which
is tax-exempt by 1 minus a stated tax rate and adding the quotient to that
portion, if any, of the yield of the Fund that is not tax-exempt. The tax
equivalent yields noted below represent the application of the highest Federal
marginal personal income tax rate presently in effect. The tax equivalent yield
figures, however, do not reflect the potential effect of any state or local
(including, but not limited to, county, district or city) taxes, including
applicable surcharges. In addition, there may be pending legislation which could
affect such stated tax rate or yields. Each investor should consult its tax
adviser, and consider its own factual circumstances and applicable tax laws, in
order to ascertain the relevant tax equivalent yield.
The current yield for each of these Funds for the 30- day period ended
December 31 1995, for each Class outstanding was as follows:
<TABLE>
<CAPTION>
Class A Class B Class I
Net of Net of Net of
Current Absorbed Current Absorbed Current Absorbed
Name of Fund Yield Expenses Yield Expenses Yield Expenses
- - ------------ ------ -------- ------ -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Managed Assets 3.01% 3.01% 2.45% 2.45% 3.59% 3.18%
Income
Managed Assets 1.97% 1.54% 1.32% .91% 2.59% 1.90%
Equity Income 3.11% 3.11% 2.45% .99% 3.74% 3.57%
Intermediate Bond 5.06% 5.06% 4.43% 4.43% 5.55% 5.47%
Bond 5.13% 5.13% 4.47% 1.66% 5.78% 5.63%
International Bond 3.60% 1.09% 2.98% (21.76)% 4.33% 4.05%
Intermediate 3.65% 3.54% 2.83% 2.05% 4.12% 3.90%
Municipal Bond
Municipal Bond 4.02% 4.02% 3.33% 2.81% 4.63% 4.46%
</TABLE>
Based upon a 1995 Federal income tax rate of 39.6%, the tax equivalent
yield for the Municipal Funds for the 30-day period ended December 31, 1995 for
each Class was as follows:
<TABLE>
<CAPTION>
Class A Class B Class I
Tax Net of Tax Net of Tax Net of
Equivalent Absorbed Equivalent Absorbed Equivalent Absorbed
Name of Fund Yield Expenses Yield Expenses Yield Expenses
- - ------------ ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Intermediate 6.04% 5.86% 4.69% 3.39% 6.82% 6.46%
Municipal Bond
Municipal Bond 6.66% 6.66% 5.51% 4.65% 7.67% 7.38%
</TABLE>
Average annual total return and total return is calculated as described
above.
The average annual total return for the indicated Funds and periods ended
December 31, 1995 for each Class outstanding was as follows:
<TABLE>
<CAPTION>
Class A Class B Class I
Name of Fund 1-Year 5-Year 10-Year 1-Year 5-Year 10-Year 1-Year 5-Year 10-Year
- - ------------ ------ ------ ------- ------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Managed Assets 20.83% 11.94% 11.10%(1) 21.69%(2) N/A N/A N/A N/A N/A
Income
Intermediate Bond 13.61% 5.65%(3) N/A 13.68%(2) N/A N/A 17.53% 6.91%(3) N/A
Intermediate 9.21% 7.08% 7.46%(4) 5.40% 2.68%(2) N/A N/A N/A N/A
Municipal Bond
Municipal Bond 11.67% 8.21% 8.30%(4) 12.22% 4.64%(2) N/A N/A N/A N/A
- - ---------------------------
(1) For the period January 23, 1986 through December 31, 1995.
(2) For the period February 8, 1994 through December 31, 1995.
(3) For the period March 5, 1993 through December 31, 1995.
(4) For the period March 1, 1988 through December 31, 1995.
</TABLE>
The total return for each of these Funds for the period from inception of
the Fund through December 31, 1995, except where noted, for each Class was as
follows:
<TABLE>
<CAPTION>
Class A Class B Class I
Based on Maximum Based on Net Based on Net Based on
Name of Fund Offering Price Asset Value Asset Value Maximum CDSC
- - ------------ ---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Managed Assets(1) 11.25% 16.48% 15.83% 10.83% 15.62%
Managed Assets 184.94% 198.34% 22.72% 18.72% 22.55%
Income(2)
Equity Income(3) 23.95% 29.78% 28.97% 23.97% 30.27%
Intermediate 16.82% 20.45% 15.11% 12.11% 20.79%
Bond(4)
Bond(5) 12.91% 18.22% 17.41% 12.41% 18.57%
International 15.66% 21.10% 20.49% 15.49% 22.13%
Bond(3)
Intermediate 75.86% 81.22% 8.13% 5.14% 11.33%
Municipal Bond(6)
Municipal Bond(6) 86.92% 95.68% 12.98% 8.98% 14.20%
- - ---------------------
(1) For the period April 3, 1995 (commencement of operations) through December 31, 1995.
(2) For the period January 23, 1986 (commencement of operations) through December 31, 1995.
(3) For the period January 30, 1995 (commencement of operations) through December 31, 1995.
(4) For the period March 5, 1993 (commencement of operations) through December 31, 1995.
(5) For the period February 16, 1995 (commencement of operations) through December 31, 1995.
(6) For the period March 1, 1988 (commencement of operations) through December 31, 1995.
</TABLE>
For purposes of advertising, calculations of average annual total return
and total return for each of the Managed Assets Income Fund and Intermediate
Municipal bond Fund will take into account the performance of its corresponding
predecessor fund--namely First Prairie Diversified Asset Fund and the
Intermediate Series of First Prairie Municipal bond Fund, Inc.--the assets and
liabilities of which were transferred to the relevant Fund in exchange for Class
A shares of such Fund on March 3, 1995 and January 31, 1995, respectively. In
addition, performance figures for the Intermediate Municipal Bond Fund for
periods prior to July 1, 1992 reflect the Intermediate Series' management policy
at the time to invest in municipal obligations rated A or better by Moody's or
S&P.
Performance figures for Prairie Municipal Bond Fund, Inc. (the Municipal
Bond Fund) reflect the fact that for the period September 12, 1989 through
January 17, 1995 the Fund's then existing management policies required it to
invest at least 65% of the value of its total assets in municipal obligations
insured as to timely payment of principal and interest by recognized insurers of
municipal obligations. In addition, prior to September 12, 1989, the Municipal
Bond Fund's management policies required the Fund to invest in municipal
obligations rated A or better by Moody's or S&P.
Performance figures for Prairie Intermediate Bond Fund (the Intermediate
Bond Fund) for periods prior to January 17, 1995 reflect the Intermediate Bond
Fund's fundamental policy at the time to invest at least 65% of the value of its
total assets in U.S. Government securities, which included U.S. Treasury
securities, agency securities and mortgage-related securities issued or
guaranteed by U.S. Government agencies or instrumentalities.
Money Market Funds. Yield will be computed in accordance with a
standardized method which involves determining the net change in the value of a
hypothetical pre-existing Fund account having a balance of one share at the
beginning of a seven calendar day period for which yield is to be quoted,
dividing the net change by the value of the account at the beginning of the
period to obtain the base period return, and annualizing the results (i.e.,
multiplying the base period return by 365/7). The net change in the value of the
account reflects the value of additional shares purchased with dividends
declared on the original share and any such additional shares and fees that may
be charged to shareholder accounts, in proportion to the length of the base
period and the Fund's average account size, but does not include realized gains
and losses or unrealized appreciation and depreciation. Effective annualized
yield is computed by adding 1 to the base period return (calculated as described
above), raising that sum to a power equal to 365 divided by 7, and subtracting 1
from the result.
For the seven-day period ended December 31, 1995, each Money Market Fund's
yield, effective yield and, for the Municipal Money Market Fund only, tax
equivalent yield were as follows:
Tax
Effective Equivalent
Name of Fund Yield Yield Yield
U.S. Government Money Market 4.63% 4.73% N/A
Money Market
Class A 5.03% 5.15% N/A
Class B 4.29% 4.37% N/A
Municipal Money Market 3.85% 3.92% 6.37%
Yields will fluctuate and are not necessarily representative of future
results. Investors should remember that yield is a function of the type and
quality of the instruments held, their maturity and operating expenses. An
investor's principal in a Money Market Fund is not guaranteed. See
"Determination of Net Asset Value" for a discussion of the manner in which the
Money Market Fund's price per share is determined.
All Funds. From time to time, advertising materials for a Fund may refer to
or include commentary by the Fund's portfolio managers relating to investment
strategy, the investment outlook for the Fund, current or past business,
political, economic or financial conditions in general and other matters of
interest to investors. Such materials also may refer to commentary by recognized
authorities on investment strategies in general and provide risk-return
comparisons of various investments. Advertising materials for a Fund also may
provide an investor profile, biographical information on the Fund's portfolio
managers, as well as specific descriptions of the Fund's portfolio, such as its
top holdings and sectors of investment, maturity allocation, composition by
credit quality and other relevant data.
INFORMATION ABOUT THE FUNDS
The following information supplements and should be read in conjunction
with the section in the 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.
As of March 27, 1996, the following shareholders were record owners of 5%
or more of the indicated Fund's outstanding shares:
Percent of Managed
Assets Income Fund
Class B Shares
Name and Address Outstanding
Donaldson Lufkin & Jenrette 21.4%
Securities Corporation
P.O. Box 2052
Jersey City, NJ 07303-2052
Percent of Managed Assets
Income Fund Class I
Name and Address Shares Outstanding
Eagle and Co. 99.4%
c/o American National Bank
Mutual Fund Processing Unit
1 North LaSalle Street, 3rd Floor
Chicago, IL 60690
Percent of Managed
Assets Fund Class A
Name and Address Shares Outstanding
Corelink Financial, Inc. 19.1%
P.O. Box 4054
Concord, PA 94524-4054
Dr. R. Neidballa 18.1%
Dupage Internal Med Empl
Ret Plan
c/o First Chicago
218 E. Wesley, Ste. 2030
Wheaton, IL 60187-5323
First Chicago TTEE 11.4%
FBO Gottlieb Bros Profit SHR/TRU
Gottlieb Bros., Inc.
55 E. Washington Street
Suite 745
Chicago, IL 60602-2107
First Chicago as Trustee 10.9%
Brook Clinic
210 West 22nd Street
Suite 118
Oak Brook, IL 60521-1544
First Chicago TTEE 8.4%
ChemPet Employee's
2100 Clearwater Drive
Suite 102
Oak Brook, IL 60521-1941
First Chicago, as Investment Manager 5.0%
FBO Midaco Corp.
2000 E. Touhy Ave.
Elk Grove, IL 60007-5318
Percent of Managed
Assets Fund Class B
Name and Address Shares Outstanding
First Chicago, as Agent 53.7%
FBO BMC Inc.
Money Purchase PL
3N497 N. 17th Street
St. Charles, IL 60174-1658
Percent of Managed
Assets Fund Class I
Name and Address Shares Outstanding
Eagle & Co. 98.9%
American National Bank
Mutual Fund Processing Unit
1 N. LaSalle Street, 3rd Floor
Chicago, IL 60690
Percent of Equity Income
Fund Class A Shares
Name and Address Outstanding
Donaldson Lufkin & Jenrette 6.5%
Securities Corporation
P.O. Box 2052
Jersey City, NJ 07303-2052
Bank of Homewood TTEE 5.6%
Louise D. Weinberg Trust
3043 Ridge Road
Lansing, IL 60438-3068
First Chicago TTEE 5.0%
Fancy Colours & Co. Savings Plan
218 E. Wesley
Suite 2030
Wheaton, IL 60187-5323
Percent of Equity Income
Fund Class B Shares
Name and Address Outstanding
Corelink Financial, Inc. 21.1%
P.O. Box 4054
Concord, CA 94542-4054
Donaldson Lufkin & Jenrette 20.8%
Securities Corporation
P.O. Box 2052
Jersey City, NJ 07303-2052
Percent of Equity Income
Fund Class I Shares
Name and Address Outstanding
Eagle & Co. 81.8%
American National Bank
Mutual Fund Processing Unit
1 N. LaSalle Street, 3rd Floor
Chicago, IL 60690
Percent of Growth Fund
Class A
Name and Address Shares Outstanding
Corelink Financial, Inc. 24.6%
P.O. Box 4054
Concord, CA 94524-4054
First Chicago, as Custodian for 7.5%
Ravenswood Medical Group
1945 West Wilson
Chicago, IL 60640-5208
First Chicago, as 5.2%
Investment Manager
for ChicagoLand Hygiene PST
37 W. 919 Tanglewood Drive
Batavia, IL 60510-9506
Percent of Growth
Fund Class B
Name and Address Shares Outstanding
Corelink Financial, Inc. 60.1%
P.O. Box 4054
Concord, CA 94524-4054
Donaldson Lufkin & Jenrette 18.4%
Securities Corporation
P.O. Box 2052
Jersey City, NJ 07303-2052
Percent of Growth
Fund Class I
Name and Address Shares Outstanding
Eagle & Co. 97.5%
American National Bank
Mutual Fund Processing Unit
1 N. LaSalle Street, 3rd Floor
Chicago, IL 60690
Percent of Special
Opportunities Fund Class
Name and Address A Shares Outstanding
The Northern Trust Company TTEE 42.3%
Henry B. Babson Trust
P.O. Box 92956
Chicago, IL 60675-0001
First Chicago, as Investment 8.4%
Manager for ChicagoLand Hygiene PST
37 W. 919 Tanglewood Drive
Batavia, IL 60510-9506
Percent of Special
Opportunities Fund Class
Name and Address B Shares Outstanding
Donaldson Lufkin & Jenrette 69.2%
Securities Corporation
P.O. Box 2052
Jersey City, NJ 07303-2052
Concord Holding Corporation 29.4%
125 West 55th Street
11th Floor
New York, NY 10019
Percent of Special
Opportunities Fund Class
Name and Address I Shares Outstanding
Eagle & Co. 98.2%
American National Bank
Mutual Fund Processing Unit
1 N. LaSalle Street, 3rd Floor
Chicago, IL 60690
Percent of International
Equity Fund Class A
Name and Address Shares Outstanding
Corelink Financial, Inc. 17.3%
P.O. Box 4054
Concord, CA 94524-4054
First Chicago, Discretionary 10.4%
Three First National Plaza
Chicago, IL 60670
First Chicago TTEE 5.1%
Hope Publishing Company
380 S. Main Place
Carol Stream, IL 60188-2448
Percent of International
Equity Fund Class B
Name and Address Shares Outstanding
Corelink Financial, Inc. 21.0%
P.O. Box 4054
Concord, CA 94524-4054
Donaldson Lufkin & Jenrette 5.4%
Securities Corporation
P.O. Box 2052
Jersey City, NJ 07303-2052
Percent of International
Equity Fund Class I
Name and Address Shares Outstanding
Eagle & Co. 94.7%
American National Bank
Mutual Fund Processing Unit
1 N. LaSalle Street, 3rd Floor
Chicago, IL 60690
Percent of Intermediate
Bond Fund Class A
Name and Address Shares Outstanding
Corelink Financial, Inc. 12.0%
P.O. Box 4054
Concord, CA 94524-4054
First Chicago TTEE 11.3%
FBO WJ Dennis & Co.
1111 Davis Road
Elgin, IL 60120
First Chicago TTEE 8.1%
McDonough Assoc.
218 E. Wesley
Suite 2030
Wheaton, IL 60187-5323
First Chicago TTEE 5.2%
Hope Publishing Company
380 S. Main Place
Carol Stream, IL 60188-2448
Percent of Intermediate
Bond Fund Class B
Name and Address Shares Outstanding
Donaldson Lufkin & Jenrette 30.0%
Securities Corporation
P.O. Box 2052
Jersey City, NJ 07303-2052
Corelink Financial, Inc. 26.3%
P.O. Box 4054
Concord, CA 94524-4054
Percent of Intermediate
Bond Fund Class I
Name and Address Shares Outstanding
Eagle & Co. 96.5%
American National Bank
Mutual Fund Processing Unit
1 N. LaSalle Street, 3rd Floor
Chicago, IL 60690
Percent of Bond Fund
Class A
Name and Address Shares Outstanding
First Chicago, Discretionary 23.2%
Three First National Plaza
Chicago, IL 60670
First Chicago, as Agent 10.7%
FBO BMC Inc.
3N497 N. 17th Street
St. Charles, IL 60174-1658
First Chicago TTEE 5.3%
Hope Publishing Company
380 S. Main Place
Carol Stream, IL 60188-2448
Percent of Bond Fund
Shares Outstanding
Donaldson Lufkin & Jenrette 89.1%
Securities Corporation
P.O. Box 2052
Jersey City, NJ 07303-2052
Concord Holding Corporation 8.5%
125 West 55th Street
11th Floor
New York, NY 10019
Percent of Bond Fund
Class I
Name and Address Shares Outstanding
Eagle & Co. 99.6%
American National Bank
Mutual Fund Processing Unit
1 N. LaSalle Street, 3rd Floor
Chicago, IL 60690
Percent of International
Bond Fund Class A
Name and Address Shares Outstanding
First Chicago TTEE 19.9%
Hope Publishing Company
380 S. Main Place
Carol Stream, IL 60188-2448
First Chicago, Discretionary 17.0%
Three First National Plaza
Chicago, IL 60670
First Chicago, as Agent 6.8%
FBO BMC Inc.
3N497 N. 17th Street
St. Charles, IL 60174-1658
First Chicago, as Investment Manager 5.3%
for ChicagoLand Hygiene PST
37 W. 919 Tanglewood Drive
Batavia, IL 60510-9506
Percent of International
Bond Fund Class B
Name and Address Shares Outstanding
Concord Holding Corporation 100.0%
125 West 55th Street
11th Floor
New York, NY 10019
Percent of International
Bond Fund Class I
Name and Address Shares Outstanding
Eagle & Co. 96.3%
American National Bank
Mutual Fund Processing Unit
1 N. LaSalle Street, 3rd Floor
Chicago, IL 60690
Percent of Intermediate
Municipal Bond Fund
Class A
Name and Address Shares Outstanding
Leonard Nieder & Mary Nieder 5.4%
JT TEN
6405 N. Kilbourn Avenue
Lincolnwood, IL 60646-3434
Percent of Intermediate
Municipal Bond Fund Class
Name and Address B Shares Outstanding
Donaldson Lufkin & Jenrette 66.7%
Securities Corporation
P.O. Box 2052
Jersey City, NJ 07303-9998
Percent of Intermediate
Municipal Bond Fund Class
Name and Address I Shares Outstanding
Eagle & Co. 98.5%
American National Bank
Mutual Fund Processing Unit
1 N. LaSalle Street, 3rd Floor
Chicago, IL 60690
Percent of Municipal Bond
Fund Class A
Name and Address Shares Outstanding
Hardis A. Ueland 5.2%
317 Patricia Lane
Bartlett, IL 60103-3033
Percent of Municipal Bond
Fund Class B
Name and Address Shares Outstanding
Donaldson Lufkin & Jenrette 66.9%
Securities Corporation
P.O. Box 2052
Jersey City, NJ 07303-2052
Percent of Municipal Bond
Fund Class I
Name and Address Shares Outstanding
Eagle & Co. 99.3%
American National Bank
Mutual Fund Processing Unit
1 N. LaSalle Street, 3rd Floor
Chicago, IL 60690
Percent of Municipal
Money Market Fund
Name and Address Shares Outstanding
Eagle & Co. 42.7%
American National Bank
Mutual Fund Processing Unit
1 N. LaSalle Street, 3rd Floor
Chicago, IL 60690
Craylon Corporation 9.1%
2500 W. Arthington
Chicago, IL 60612-4108
Percent of U.S.
Government Money
Market Fund
Name and Address Shares Outstanding
Potomac Corporation 9.6%
P.O. Box 67-A
100 W. Willow Road
Wheeling, IL 60090-6522
Eagle & Co. 6.0%
American National Bank
Mutual Fund Processing Unit
1 N. LaSalle Street, 3rd Floor
Chicago, IL 60690
Percent of Money Market
Fund Class B
Name and Address Shares Outstanding
Corelink Financial, Inc. 99.9%
P.O. Box 4054
Concord, CA 94524-4054
A shareholder who beneficially owns, directly or indirectly, more than 25%
of a Fund's voting securities may be deemed a "control person" (as defined in
the 1940 Act) of the Fund.
The Prairie Funds may be used in conjunction with other investment products
or services offered by FCIMCO, FNBC or its affiliates. Such products and
services involve fees that differ and may be in addition to the fees charged by
the Prairie Funds. For more information about these products or services please
contact your Service Agent.
Each Fund will send annual and semi-annual financial statements to all its
shareholders.
<PAGE>
COUNSEL AND INDEPENDENT AUDITORS
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York 10004-2696,
as counsel for the Funds, has rendered its opinion as to certain legal matters
regarding the due authorization and valid issuance of the shares being sold
pursuant to the Funds' Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Funds.
<PAGE>
APPENDIX
Description of certain ratings assigned by Standard & Poor's Ratings Group
("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch Investors Service,
L.P. ("Fitch"), Duff & Phelps Credit Rating Co. ("Duff"), IBCA Inc. and IBCA
Limited ("IBCA") and Thomson BankWatch, Inc. ("BankWatch"):
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 to 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.
BB, B, CCC, CC, C
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payment.
B
Debt rated B has a greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions would likely impair capacity or willingness to
pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to meet
timely payments of principal. In the event of adverse business, financial or
economic conditions, it is not likely to have the capacity to pay interest and
repay principal.
CC
The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C
The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating.
D
Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or minus (-): The ratings from AA to CCC 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. Capacity for timely payment on issues with an A-2 designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
Moody's
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.
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and therefore not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca
Bonds which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category and in
categories below B. 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 relating supporting institutions) rated Prime-2 (P-2) have a
strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Fitch
Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to meet
the obligations of a specific debt issue or class of debt. The ratings take into
consideration special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's future financial strength
and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+.
A
Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these bonds
and, therefore, impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B
Bonds rated B are considered highly speculative. While bonds in this class
are currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity throughout
the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC
Bonds rated CC are minimally protected. Default payment of interest and/or
principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or
principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual or imminent default of interest
and/or principal payments. Such bonds are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. DDD represents the highest potential for recovery
on these bonds and D represents the lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the AAA category covering 12-36 months or the DDD, DD
or D categories.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
Although the credit analysis is similar to Fitch's bond rating analysis,
the short-term rating places greater emphasis than bond ratings on the existence
of liquidity necessary to meet the issuer's obligations in a timely manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2
Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payments, but the margin of safety is not as great as
the F-1+ and F-1 categories.
Duff
Bond Ratings
AAA
Bonds rated AAA are considered highest credit quality. The risk factors are
negligible, being only slightly more than for risk-free U.S. Treasury debt.
AA
Bonds rated AA are considered high credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
A
Bonds rated A have protection factors which are average but adequate.
However, risk factors are more variable and greater in periods of economic
stress.
BBB
Bonds rated BBB are considered to have below average protection factors but
still considered sufficient for prudent investment. Considerable variability in
risk during economic cycles.
BB
Bonds rated BB are below investment grade but are deemed by Duff as likely
to meet obligations when due. Present or prospective financial protection
factors fluctuate according to industry conditions or company fortunes. Overall
quality may move up or down frequently within the category.
B
Bonds rated B are below investment grade and possess the risk that
obligations will not be met when due. Financial protection factors will
fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in quality rating within
this category or into a higher or lower quality rating grade.
CCC
Bonds rated CCC are well below investment grade securities. Such bonds may
be in default or have considerable uncertainty as to timely payment of interest,
preferred dividends and/or principal. Protection factors are narrow and risk can
be substantial with unfavorable economic or industry conditions and/or with
unfavorable company developments.
DD
Defaulted debt obligations. Issuer has failed to meet scheduled principal
and/or interest payments.
Plus (+) and minus (-) signs are used with a rating symbol (except AAA) to
indicate the relative position of a credit within the rating category.
Commercial Paper Rating
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor. Paper rated Duff-2 is regarded as having good certainty
of timely payment, good access to capital markets and sound liquidity factors
and company fundamentals. Risk factors are small.
IBCA
Bond and Long-Term Ratings
Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly. Obligations for which there
is a very low expectation of investment risk are rated AA by IBCA. Capacity for
timely repayment of principal and interest is substantial. Adverse changes in
business, economic or financial conditions may increase investment risk albeit
not very significantly.
Commercial Paper and Short-Term Ratings
The designation A1 by IBCA indicates that the obligation is supported by a
very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. Obligations rated A2 are
supported by a strong capacity for timely repayment, although such capacity may
be susceptible to adverse changes in business, economic or financial conditions.
International and U.S. Bank Ratings
An IBCA bank rating represents IBCA's current assessment of the strength of
the bank and whether such bank would receive support should it experience
difficulties. In its assessment of a bank, IBCA uses a dual rating system
comprised of Legal Ratings and Individual Ratings. In addition, IBCA assigns
banks Long- and Short-Term Ratings as used in the corporate ratings discussed
above. Legal Ratings, which range in gradation from 1 through 5, address the
question of whether the bank would receive support provided by central banks or
shareholders if it experienced difficulties, and such ratings are considered by
IBCA to be a prime factor in its assessment of credit risk. Individual Ratings,
which range in gradations from A through E, represent IBCA's assessment of a
bank's economic merits and address the question of how the bank would be viewed
if it were entirely independent and could not rely on support from state
authorities or its owners.
BankWatch
Commercial Paper and Short-Term Ratings
The rating TBW-1 is the highest short-term rating assigned by BankWatch;
the rating indicates that the degree of safety regarding timely repayment of
principal and interest is very strong.
In addition to ratings of short-term obligations, BankWatch assigns a
rating to each issuer it rates, in gradations of A through E. BankWatch examines
all segments of the organization including, where applicable, the holding
company, member banks or associations, and other subsidiaries. In those
instances where financial disclosure is incomplete or untimely, a qualified
rating (QR) is assigned to the institution. BankWatch also assigns, in the case
of foreign banks, a country rating which represents an assessment of the overall
political and economic stability of the country in which the bank is domiciled.
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS INCOME FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS--25.7%
AUTOMOBILES--LEASING--0.9%
Hertz Corp., Junior Subordinate Note.... 6.63% 7/15/00 $ 500 $ 511,596
-----------
BANKING--2.4%
Citicorp, Subordinate Capital Note...... 9.75% 8/1/99 250 281,881
Citicorp, Subordinate Debenture......... 8.63% 12/1/02 350 399,187
NationsBank Corp., Subordinate
Debenture............................. 8.13% 6/15/02 350 386,750
Westpac Banking Limited, Subordinate
Debenture............................. 9.13% 8/15/01 250 285,192
-----------
1,353,010
-----------
BEVERAGES, FOOD AND TOBACCO--4.8%
Grand Metro Investment Corp., Guaranteed
Debenture, Yankee Bond................ 9.00% 8/15/11 250 309,616
Philip Morris Cos., Inc., Corporate
Note.................................. 8.63% 3/1/99 500 539,361
Philip Morris Cos., Inc., Corporate
Note.................................. 7.13% 10/1/04 250 264,357
RJR Nabisco, Inc. ...................... 8.30% 4/15/99 750 799,769
RJR Nabisco, Inc. ...................... 8.63% 12/1/02 700 727,012
-----------
2,640,115
-----------
CONSUMER GOODS AND SERVICES--1.0%
Time Warner, Inc., Corporate Note....... 7.95% 2/1/00 500 528,668
-----------
ENERGY--3.1%
Burlington Resources, Inc., Corporate
Note.................................. 8.50% 10/1/01 250 279,853
Coastal Corp., Senior Debenture......... 10.25% 10/15/04 500 623,257
Occidental Petroleum Corp., Senior Note. 11.13% 8/1/10 400 558,388
Shell Canada Limited, Corporate Note.... 7.38% 6/1/99 250 263,587
-----------
1,725,085
-----------
FINANCIAL SERVICES--9.2%
Barclay American Corp., Senior
Debenture............................. 9.13% 12/1/97 750 796,317
Chemical Banking Corp., Subordinate
Note.................................. 7.63% 1/15/03 500 542,021
Discover Credit Corp., Medium Term Note. 8.37% 4/28/99 250 268,483
General Motors Acceptance Corp.,
Corporate Note........................ 7.75% 4/15/97 250 254,756
General Motors Acceptance Corp.,
Corporate Note........................ 7.00% 3/1/00 500 520,157
</TABLE>
See Notes to Financial Statements.
24
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS INCOME FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
FINANCIAL SERVICES (CONTINUED)
General Motors Acceptance Corp.,
Medium Term Note...................... 8.65% 5/29/96 $ 400 $ 405,094
International Lease Finance,
Corporate Note........................ 8.35% 10/1/98 500 533,594
KFW International Finance, Inc.
Guaranteed Note....................... 8.85% 6/15/99 250 274,728
Progessive Corp., Ohio, Corporate Note.. 6.60% 1/15/04 500 509,013
Salomon Inc., Senior Note............... 7.50% 2/1/03 500 514,213
Wells Fargo & Co., Subordinate Note..... 8.38% 5/15/02 400 447,822
-----------
5,066,198
-----------
HEATH CARE AND HOSPITAL MANAGEMENT--0.5%
Multicare Cos., Inc.,
Subordinate Debenture*................ 7.00% 3/15/03 250 271,250
-----------
RETAIL--0.5%
May Department Stores Co.,
Medium Term Note...................... 9.45% 2/2/99 250 275,701
-----------
STEEL--0.9%
USX-Marathon Group, Corporate Note...... 6.38% 7/15/98 500 505,561
-----------
TECHNOLOGY INDUSTRIES--1.0%
Digital Equipment Corp., Debenture...... 8.63% 11/1/12 500 547,116
-----------
UTILITIES--1.4%
Commonwealth Edison Co., First Mortgage,
Series 81, Corporate Note............. 8.63% 2/1/22 250 275,250
Pacific Bell, Corporate Note............ 7.00% 7/15/04 500 525,940
-----------
801,190
-----------
TOTAL CORPORATE OBLIGATIONS
(COST $13,587,940)..................... 14,225,490
-----------
U.S. GOVERNMENT OBLIGATIONS--3.7%
U.S. Treasury Notes..................... 8.50% 5/15/97 100 104,344
U.S. Treasury Notes..................... 8.13% 2/15/98 500 528,750
U.S. Treasury Notes..................... 6.25% 5/31/00 850 879,218
U.S. Treasury Notes..................... 8.00% 5/15/01 500 560,000
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $1,960,714)...................... 2,072,312
-----------
</TABLE>
See Notes to Financial Statements.
25
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS INCOME FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS--1.7%
Federal National
Mortgage Association.. 7.60% 1/10/97 $ 400 $ 409,250
Federal National
Mortgage Association.. 8.35% 11/10/99 500 547,694
----------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS
(COST $900,628)........ 956,944
----------
<CAPTION>
Shares
------
<S> <C> <C> <C> <C>
PREFERRED CONVERTIBLE
STOCKS--7.0%
AUTOMOBILES--3.1%
Ford Motor Co., Series
A, $4.20.............. 9,000 852,750
General Motors Corp.,
Series C, $3.25....... 12,000 879,000
----------
1,731,750
----------
BANKING AND FINANCE--3.9%
Citicorp, Series 13,
$5.38................. 6,000 1,098,750
First USA, Inc., 6.25%.. 15,000 592,500
National City Corp.,
8.00%................. 6,000 472,500
----------
2,163,750
----------
TOTAL PREFERRED
CONVERTIBLE STOCKS
(COST $2,643,539)...... 3,895,500
----------
COMMON STOCKS--41.9%
AUTOMOBILES--1.7%
Ford Motor Co. ......... 4,000 116,000
General Motors Corp..... 14,886 787,097
----------
903,097
----------
BANKING AND FINANCE--5.1%
Bank of Boston Corp. ... 21,000 971,250
First Union Corp. ...... 11,000 611,875
NationsBank Corp. ...... 13,912 968,623
Citicorp................ 4,280 287,830
----------
2,839,578
----------
BEVERAGE, FOOD AND
TOBACCO--3.3%
Philip Morris Cos.,
Inc. ................. 20,000 1,810,000
----------
</TABLE>
See Notes to Financial Statements.
26
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS INCOME FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
ELECTRICAL AND ELECTRONIC EQUIPMENT--0.6%
Hubbell, Inc., Class B.......................... 5,000 $ 328,750
-----------
HEALTH INDUSTRIES--3.6%
National Health Investors, Inc. ................ 61,000 2,020,625
-----------
INSURANCE--3.1%
AON Corp. ...................................... 28,500 1,421,438
Exel, Ltd. ..................................... 5,200 317,200
-----------
1,738,638
-----------
OIL & GAS--3.9%
Atlantic Richfield Co. ......................... 5,000 553,750
British Petroleum PLC ADR....................... 9,000 919,125
Texaco, Inc. ................................... 9,000 706,500
-----------
2,179,375
-----------
PHARMACEUTICALS--5.8%
Bristol Myers Squibb Co. ....................... 8,000 687,000
Johnson & Johnson............................... 8,000 685,000
Pfizer, Inc. ................................... 20,000 1,260,000
Warner Lambert Co. ............................. 6,000 582,750
-----------
3,214,750
-----------
REAL ESTATE INVESTMENT TRUSTS--2.0%
Amli Residential Property Trust................. 55,000 1,100,000
-----------
TELECOMMUNICATIONS--6.0%
Brittish Telecom PLC ADR........................ 10,000 565,000
GTE Corp. ...................................... 26,000 1,144,000
Sprint Corp. ................................... 20,000 797,500
US West, Inc. .................................. 15,000 536,250
US West Media Group............................. 15,000 285,000
-----------
3,327,750
-----------
UTILITIES--6.8%
Detroit Edison Co. ............................. 20,000 690,000
Entergy Corp. .................................. 20,000 585,000
Peco Energy Co. ................................ 25,000 753,125
</TABLE>
See Notes to Financial Statements.
27
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS INCOME FUND
- - -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
UTILITIES (CONTINUED)
Texas Utilities Co. ................... 30,000 $ 1,233,750
United Illuminating Co. ............... 14,000 523,250
-----------
3,785,125
-----------
TOTAL COMMON STOCKS
(COST $17,046,251).................... 23,247,688
-----------
<CAPTION>
Principal
Maturity Amount
Rate Date (000)
---- -------- ---------
<S> <C> <C> <C> <C>
SHORT TERM INVESTMENT--19.2%
U.S. TREASURY BILL--19.2%
U.S. Treasury Bill (cost $10,607,930).. 5.31%** 2/29/96 $10,700 10,617,075
-----------
TOTAL INVESTMENTS--99.2%
(COST $46,747,002)(A)................. 55,015,009
Other assets in excess of liabilities--
0.8%.................................. 450,318
-----------
NET ASSETS--100.0%...................... $55,465,327
===========
</TABLE>
- - -----------
Percentages indicated are based on net assets of $55,465,327.
* Security 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.
** Yield at purchase.
(a) Represents cost for federal income tax and financial reporting purposes
and differs from value by net unrealized appreciation of securities as
follows:
<TABLE>
<S> <C>
Unrealized appreciation......................................... $8,452,650
Unrealized depreciation......................................... (184,643)
----------
Net unrealized appreciation..................................... $8,268,007
==========
</TABLE>
ADR--American Depository Receipts.
See Notes to Financial Statements.
28
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
COMMON STOCKS--61.4%
ALUMINUM--1.1%
Aluminum Co. of America...................... 1,900 $ 100,462
----------
AUTOMOBILES--0.9%
Ford Motor Co................................ 3,000 87,000
----------
AUTOMOTIVE PARTS & EQUIPMENT--0.9%
Echlin, Inc.................................. 2,400 87,600
----------
BANKING--3.7%
BankAmerica Corp............................. 1,900 123,025
NationsBank Corp............................. 1,700 118,363
State Street Bank(b)......................... 2,600 117,000
----------
358,388
----------
BEVERAGE, FOOD & TOBACCO--4.5%
Anheuser-Busch Cos., Inc..................... 1,200 80,250
Coca-Cola Co................................. 1,600 118,800
PepsiCo, Inc................................. 2,000 111,750
Philip Morris Cos., Inc...................... 1,300 117,650
----------
428,450
----------
BROKERAGE SERVICES--0.7%
Dean Witter, Discover & Co................... 1,400 65,800
----------
BUSINESS & DATA PROCESSING EQUIPMENT--1.6%
International Business Machines.............. 1,700 155,975
----------
CHEMICALS--3.6%
E. I. du Pont de Nemours & Co................ 1,100 76,863
Monsanto Co.................................. 700 85,750
Morton Int'l................................. 2,900 104,037
Praxair, Inc................................. 2,300 77,337
----------
343,987
----------
COMPUTERS-MICRO--0.9%
Compaq Computer Corp.(b)..................... 1,700 81,600
----------
COMPUTERS-SOFTWARE & PERIPHERALS--2.1%
Computer Association Int'l., Inc. ........... 1,550 88,156
Microsoft Corp.(b)........................... 1,300 114,075
----------
202,231
----------
</TABLE>
See Notes to Financial Statements.
29
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
CONGLOMERATES--3.4%
Allied Signal, Inc........................... 1,700 $ 80,750
General Electric Co.......................... 2,500 180,000
ITT Corp..................................... 900 47,700
ITT Industries, Inc.(b)...................... 900 21,600
----------
330,050
----------
CONSUMER GOODS--1.0%
Service Corp. International.................. 2,100 92,400
----------
ELECTRONIC EQUIPMENT--2.7%
Emerson Electric Co.......................... 2,000 163,500
Motorola, Inc................................ 1,700 96,900
----------
260,400
----------
FINANCE COMPANIES--1.1%
Federal Home Loan Mortgage Corp.............. 1,300 108,550
----------
FOOD PROCESSING--0.9%
CPC Int. .................................... 1,300 89,212
----------
FOOD PRODUCTS--0.8%
Hershey Foods................................ 1,200 78,000
----------
HOUSEHOLD & PERSONAL CARE PRODUCTS--1.2%
Procter & Gamble Co. ........................ 1,400 116,200
----------
INSURANCE--1.9%
American International Group, Inc. .......... 1,500 138,750
ITT Hartford Group(b)........................ 900 43,538
----------
182,288
----------
LEISURE & ENTERTAINMENT--1.1%
Walt Disney Co............................... 1,800 106,200
----------
NEWSPAPERS AND PUBLISHING--0.7%
News Corp., Ltd. ADR......................... 3,300 70,538
----------
OIL-DOMESTIC--3.9%
Chevron Corp................................. 2,300 120,750
Mobil Corp................................... 1,200 134,400
Unocal Corp.................................. 4,100 119,413
----------
374,563
----------
</TABLE>
See Notes to Financial Statements.
30
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
OIL-FIELD SERVICES AND EQUIPMENT--0.9%
Schlumberger, Ltd. ........................... 1,200 $ 83,100
----------
OIL & GAS--2.0%
British Petroleum Co. ADR..................... 900 91,913
Royal Dutch Petroleum Co...................... 700 98,788
----------
190,701
----------
PHARMACEUTICALS--5.5%
Bristol Myers Squibb Co....................... 1,200 103,050
Johnson & Johnson............................. 1,500 128,437
Merck & Co., Inc.............................. 1,800 118,350
Pfizer, Inc................................... 1,600 100,800
Smithkline Beecham ADR........................ 1,300 72,150
----------
522,787
----------
POLLUTION CONTROL--0.9%
WMX Technologies.............................. 3,000 89,625
----------
RAILROADS--1.1%
CSX Corp...................................... 2,400 109,500
----------
RESTAURANTS--0.8%
McDonald's Corp............................... 1,600 72,200
----------
RETAIL--3.1%
Home Depot, Inc............................... 2,400 114,900
May Department Stores Co...................... 1,500 63,375
Wal Mart Stores, Inc.......................... 5,400 120,825
----------
299,100
----------
TELECOMMUNICATIONS--6.9%
AT&T Corp..................................... 2,100 135,974
General Instrument Corp.(b)................... 1,300 30,388
GTE Corp...................................... 3,800 167,200
MCI Communications Corp....................... 2,800 73,150
NYNEX Corp.................................... 2,100 113,400
Pacific Telesis Group......................... 1,800 60,525
Telcom Corp. New Zealand ADR.................. 1,200 83,250
----------
663,887
----------
</TABLE>
See Notes to Financial Statements.
31
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
UTILITIES--1.5%
FPL Group, Inc.......................... 3,200 $ 148,400
----------
TOTAL COMMON STOCKS
(COST $5,270,362)...................... 5,899,194
----------
<CAPTION>
Principal
Maturity Amount
Rate Date (000)
----- -------- ---------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--26.0%
U.S. TREASURY NOTES
U.S. Treasury Note...................... 6.25% 5/31/00 $ 800 827,500
U.S. Treasury Note...................... 7.50% 11/15/01 700 771,750
U.S. Treasury Note...................... 6.38% 8/15/02 850 893,296
----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $2,398,249)...................... 2,492,546
----------
SHORT TERM INVESTMENT--11.7%
U.S. TREASURY BILL
U.S. Treasury Bill (cost $1,120,308).... 5.31%* 2/29/96 1,130 1,121,243
----------
TOTAL INVESTMENTS
(COST $8,788,919)(A)--99.1% ........... 9,512,982
Other assets in excess of liabilities--
0.9%................................... 86,019
----------
NET ASSETS--100.0%....................... $9,599,001
==========
</TABLE>
- - -----------
Percentages indicated are based on net assets of $9,599,001.
*Yield at purchase.
(a)Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................... $766,286
Unrealized depreciation........................................... (42,223)
--------
Net unrealized appreciation....................................... $724,063
========
</TABLE>
(b)Represents non-income producing security.
ADR--American Depository Receipts.
See Notes to Financial Statements.
32
<PAGE>
PRAIRIE FUNDS
EQUITY INCOME FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
COMMON STOCKS--87.4%
AUTOMOBILES--1.4%
Ford Motor Co.............................. 140,000 $ 4,060,000
------------
AUTOMOTIVE PARTS & EQUIPMENT--1.7%
Echlin, Inc................................ 135,000 4,927,500
------------
BANKS--5.7%
Bankers Trust.............................. 115,000 7,647,500
First Union Corp. ......................... 90,000 5,006,250
NationsBank Corp........................... 55,000 3,829,375
------------
16,483,125
------------
BEVERAGES, FOOD & TOBACCO--2.8%
ConAgra, Inc............................... 81,418 3,358,492
Philip Morris Cos., Inc.................... 50,841 4,601,111
------------
7,959,603
------------
CHEMICALS--6.3%
ARCO Chemical.............................. 106,000 5,154,250
Dow Chemical............................... 93,000 6,544,875
E. I. du Pont de Nemours & Co.............. 90,000 6,288,750
------------
17,987,875
------------
COMPUTER SOFTWARE AND PERIPHERALS--1.3%
International Business Machines............ 40,000 3,670,000
------------
CONSTRUCTION--0.5%
Vulcan Materials........................... 23,000 1,325,375
------------
CONSUMER PRODUCTS--3.8%
Clorox Co. ................................ 100,000 7,162,500
Southern Co. .............................. 150,000 3,693,750
------------
10,856,250
------------
DEFENSE--1.7%
Lockheed Martin............................ 60,000 4,740,000
------------
ELECTRICAL EQUIPMENT--2.2%
Emerson Electric Co. ...................... 48,000 3,924,000
Hubbell, Inc., Class B..................... 20,000 1,315,000
Thomas & Betts Corp. ...................... 15,000 1,106,250
------------
6,345,250
------------
</TABLE>
See Notes to Financial Statements.
33
<PAGE>
PRAIRIE FUNDS
EQUITY INCOME FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
FOREST AND PAPER PRODUCTS--1.4%
Weyerhaeuser Co............................. 95,000 $ 4,108,750
------------
INSURANCE--5.8%
AON Corp. .................................. 137,000 6,832,875
FPL Group, Inc. ............................ 75,000 3,478,125
Lincoln National Corp. ..................... 120,000 6,450,000
------------
16,761,000
------------
METALS--1.0%
Phelps Dodge Corp. ......................... 45,000 2,801,250
------------
NATURAL GAS--3.0%
National Fuel Gas Co. ...................... 25,000 840,625
Sonat, Inc.................................. 40,000 1,425,000
Tenneco, Inc. .............................. 130,000 6,451,250
------------
8,716,875
------------
OIL & GAS--19.0%
AMOCO Corp.................................. 140,000 10,062,500
Atlantic Richfield Corp..................... 55,000 6,091,250
British Petroleum Co. PLC, ADR.............. 70,000 7,148,750
Exxon Corp.................................. 15,000 1,201,875
Mobil Corp.................................. 105,000 11,760,000
Occidental Petroleum Corp. ................. 195,000 4,168,125
Texaco, Inc................................. 125,000 9,812,500
Unocal Corp................................. 153,000 4,456,125
------------
54,701,125
------------
PHARMACEUTICALS--2.9%
Warner Lambert Co. ......................... 86,000 8,352,750
------------
REAL ESTATE INVESTMENT TRUSTS--3.8%
Amli Residential Properties Trust........... 140,000 2,800,000
Equity Residential Properties Trust ........ 80,000 2,450,000
National Health Investors, Inc. ............ 174,000 5,763,750
------------
11,013,750
------------
RETAIL STORES--2.3%
May Department Stores Co. .................. 156,938 6,630,631
------------
</TABLE>
See Notes to Financial Statements.
34
<PAGE>
PRAIRIE FUNDS
EQUITY INCOME FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
TELECOMMUNICATIONS--8.7%
British Telecom PLC ADR.................. 70,000 $ 3,955,000
GTE Corp. ............................... 210,000 9,240,000
Sprint Corp.............................. 156,938 6,257,903
U.S. West, Inc........................... 156,938 5,610,533
------------
25,063,436
------------
UTILITIES--12.1%
Cinergy Corp............................. 130,000 3,981,250
Detroit Edison Co. ...................... 196,173 6,767,969
Houston Industries....................... 260,000 6,305,000
Pacific Gas & Electric Co................ 54,928 1,558,582
Peco Energy Co. ......................... 129,769 3,909,291
Texas Utilities Co. ..................... 156,938 6,454,075
United Illuminating Co................... 156,938 5,865,558
------------
34,841,725
------------
TOTAL COMMON STOCKS
(COST $213,380,725)..................... 251,346,270
------------
CONVERTIBLE PREFERRED STOCKS--2.9%
AUTOMOBILES--2.2%
Ford Motor Company, Series A, $4.20...... 66,699 6,319,730
------------
STEEL--0.7%
WHX Corp., Series B, $3.00............... 45,694 1,941,995
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(COST $7,461,465)....................... 8,261,725
------------
<CAPTION>
Principal
Maturity Amount
Rate Date (000)
---- -------- ---------
<S> <C> <C> <C> <C>
CONVERTIBLE BOND--2.7%
BANKS--2.7%
Bank of New York, Inc.
Subordinate Convertible Debenture
(cost $4,984,156)...................... 7.50% 8/15/01 $ 3,139 7,816,110
------------
</TABLE>
See Notes to Financial Statements.
35
<PAGE>
PRAIRIE FUNDS
EQUITY INCOME FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENT--7.1%
TIME DEPOSIT--7.1%
Berlin/Frankfurt Bank
(cost $20,271,000).................... 5.81% 1/2/96 $20,271 $ 20,271,000
------------
TOTAL INVESTMENTS
(COST $246,097,346)(A)--100.1%......... 287,695,105
Liabilities in excess of other
assets--(0.1%)......................... (301,578)
------------
NET ASSETS--100.0%....................... $287,393,527
============
</TABLE>
- - -----------
Percentages indicated are based on net assets of $287,393,527.
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................ $42,227,078
Unrealized depreciation........................................ (629,319)
-----------
Net unrealized appreciation.................................... $41,597,759
===========
</TABLE>
ADR--American Depository Receipt.
See Notes to Financial Statements.
36
<PAGE>
PRAIRIE FUNDS
GROWTH FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
COMMON STOCKS--95.5%
ADVERTISING AND MARKETING SERVICES--1.3%
Interpublic Group of Companies, Inc. ........ 55,000 $ 2,385,625
Omnicon Group................................ 40,000 1,490,000
------------
3,875,625
------------
AUTOMOTIVE PARTS & EQUIPMENT--1.0%
Echlin, Inc. ................................ 80,000 2,920,000
------------
BANKING--1.5%
State Street Bank(b)......................... 100,000 4,500,000
------------
BEVERAGES, FOOD AND TOBACCO--16.0%
Coca Cola Co. ............................... 55,000 4,083,750
ConAgra, Inc. ............................... 110,000 4,537,500
General Mills, Inc. ......................... 140,000 8,085,000
Hershey Foods Corp. ......................... 60,000 3,900,000
Hudson Foods, Inc. Class A................... 90,000 1,552,500
PepsiCo, Inc. ............................... 130,000 7,263,750
Philip Morris Cos., Inc. .................... 140,000 12,670,000
Sara Lee Corp. .............................. 170,000 5,418,750
Schweitzer-Mauduit Int'l.(b)................. 8,000 185,000
------------
47,696,250
------------
CHEMICALS--5.9%
Eastman Chemical Co. ........................ 85,000 5,323,125
Morton Int'l ................................ 150,000 5,381,250
Praxair, Inc. ............................... 145,000 4,875,625
Wellman, Inc. ............................... 90,000 2,047,500
------------
17,627,500
------------
COMPUTERS--MICRO--0.7%
Compaq Computer Corp.(b)..................... 40,000 1,920,000
------------
COMPUTER SOFTWARE AND PERIPHERALS--5.2%
Automatic Data Processing, Inc. ............. 80,000 5,940,000
Computer Associates Int'l., Inc. ............ 100,000 5,687,500
Intel Corp. ................................. 70,000 3,972,500
------------
15,600,000
------------
</TABLE>
See Notes to Financial Statements.
37
<PAGE>
PRAIRIE FUNDS
GROWTH FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
CONSUMER GOODS AND SERVICES--10.4%
American Home Products Corp. ................ 70,000 $ 6,790,000
Clorox Co. .................................. 75,000 5,371,875
Hillenbrand Industries, Inc. ................ 100,000 3,387,500
Kimberly-Clark Corp. ........................ 80,000 6,620,000
Service Corp. Int'l. ........................ 115,000 5,060,000
Stewart Enterprises, Inc. ................... 105,000 3,885,000
------------
31,114,375
------------
CONSUMER NON-DURABLES--0.6%
Alberto-Culver Co., Class A.................. 55,000 1,677,500
------------
ELECTRONICS--9.5%
AMP, Inc. ................................... 120,000 4,605,000
Emerson Electric............................. 80,000 6,540,000
General Electric Co. ........................ 180,000 12,960,000
Motorola, Inc. .............................. 75,000 4,275,000
------------
28,380,000
------------
ENTERTAINMENT AND LEISURE--1.5%
Time Warner, Inc. ........................... 120,000 4,545,000
------------
HEALTH INDUSTRIES--3.9%
Horizon HealthCare Corp.(b).................. 145,000 3,661,250
Procter & Gamble Co. ........................ 95,000 7,885,000
------------
11,546,250
------------
INSURANCE--5.4%
American International Group, Inc. .......... 75,000 6,937,500
Chubb Corp. ................................. 65,000 6,288,750
General RE Corp. ............................ 20,000 3,100,000
------------
16,326,250
------------
MANUFACTURING--1.1%
Corning, Inc. ............................... 100,000 3,200,000
------------
MEDICAL CARE & PRODUCTS--0.7%
Sofamor Danek Group(b)....................... 80,000 2,270,000
------------
OIL & GAS--3.4%
British Petroleum Co. ADR.................... 70,000 7,148,750
Unocal Corp. ................................ 100,000 2,912,500
------------
10,061,250
------------
</TABLE>
See Notes to Financial Statements.
38
<PAGE>
PRAIRIE FUNDS
GROWTH FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
PHARMACEUTICALS--12.0%
Elan Corp. PLC ADR(b)......................... 90,000 $ 4,376,250
Forest Labs, Inc.(b).......................... 50,000 2,262,500
Ivax Corp. ................................... 100,000 2,850,000
Johnson & Johnson............................. 95,000 8,134,375
Mylan Labs.................................... 105,000 2,467,500
Pfizer, Inc. ................................. 160,000 10,080,000
Pharmacia & Upjohn(b)......................... 75,000 2,906,250
Smithkline Beecham ADR........................ 50,000 2,775,000
------------
35,851,875
------------
POLLUTION CONTROL--4.1%
Browning-Ferris............................... 185,000 5,457,500
WMX Technologies, Inc. ....................... 230,000 6,871,250
------------
12,328,750
------------
RETAIL--4.2%
Eckerd Corp.(b)............................... 110,000 4,908,750
May Department Stores Co. .................... 110,000 4,647,500
Walgreen Co.(b)............................... 100,000 2,987,500
------------
12,543,750
------------
TELECOMMUNICATIONS--6.5%
AT&T Corp. ................................... 140,000 9,065,000
Century Telephone Enterprises, Inc. .......... 50,000 1,587,500
DSC Communications Corp.(b)................... 40,000 1,475,000
MCI Communications Corp. ..................... 275,000 7,184,375
------------
19,311,875
------------
UTILITIES--0.6%
AES Corp.(b).................................. 80,000 1,910,000
------------
TOTAL COMMON STOCKS
(COST $239,473,384).......................... 285,206,250
------------
</TABLE>
See Notes to Financial Statements.
39
<PAGE>
PRAIRIE FUNDS
GROWTH FUND
- - -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENT--3.6%
TIME DEPOSIT--3.6%
Berlin/Frankfort Bank
(cost $10,663,000).................... 5.81% 1/2/96 $10,663 $ 10,663,000
------------
TOTAL INVESTMENTS
(COST $250,136,384)(A)--99.1%.......... 295,869,250
Other assets in excess of liabilities--
0.9%................................... 2,672,096
------------
NET ASSETS--100.0%....................... $298,541,346
============
</TABLE>
- - -----------
Percentages indicated are based on net assets of $298,541,346.
(a) Represents cost for financial reporting purposes. Cost for federal income
tax purposes was $250,657,238 and differs from value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................ $48,528,373
Unrealized depreciation........................................ (3,316,361)
-----------
Net unrealized appreciation.................................... $45,212,012
===========
</TABLE>
(b) Represents non-income producing security.
ADR--American Depository Receipts.
See Notes to Financial Statements.
40
<PAGE>
PRAIRIE FUNDS
SPECIAL OPPORTUNITIES FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
COMMON STOCKS--93.9%
ADVERTISING AND MARKETING SERVICES--1.3%
Interpublic Group of Companies, Inc. ......... 12,000 $ 520,500
Omnicon Group................................. 20,000 745,000
-----------
1,265,500
-----------
APPAREL--1.1%
Tommy Hilfiger Corp.(b)....................... 24,100 1,021,238
-----------
AUTOMOTIVE PARTS AND EQUIPMENT--3.0%
Borg Warner................................... 30,000 960,000
Simpson Industries............................ 70,000 630,000
Superior Industries Int'l, Inc. .............. 45,000 1,186,875
-----------
2,776,875
-----------
BANKS--13.0%
First of America.............................. 50,000 2,218,750
Firstar Corp.................................. 60,000 2,377,500
Northern Trust Corp. ......................... 50,000 2,800,000
Old Kent Financial............................ 60,000 2,467,500
Southern National............................. 60,000 1,575,000
Southtrust Corp. ............................. 30,000 768,750
-----------
12,207,500
-----------
BEVERAGES, FOOD AND TOBACCO--3.0%
Dean Foods Co. ............................... 35,000 962,500
Hudson Foods, Inc., Class A................... 110,000 1,897,500
-----------
2,860,000
-----------
BUSINESS EQUIPMENT AND SERVICES--1.1%
Proxima Corp.(b).............................. 45,000 995,625
-----------
CHEMICALS--2.0%
Airgas, Inc.(b)............................... 55,000 1,828,750
-----------
CONSUMER GOODS AND SERVICES--2.1%
Service Corp Int'l. .......................... 45,000 1,980,000
-----------
CONSUMER NON-DURABLES--1.8%
Alberto-Culver Co., Class A................... 55,000 1,677,500
-----------
</TABLE>
See Notes to Financial Statements.
41
<PAGE>
PRAIRIE FUNDS
SPECIAL OPPORTUNITIES FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
ELECTRONICS--1.9%
Memec Electric Materials, Inc.(b)............. 14,000 $ 456,750
Methode Electronics, Inc., Class A............ 37,500 534,375
Molex, Inc. .................................. 25,000 793,750
-----------
1,784,875
-----------
ENTERTAINMENT AND LEISURE--1.1%
Royal Caribbean Cruise Ltd. .................. 48,000 1,056,000
-----------
HEALTH CARE PRODUCTS AND SERVICES--14.4%
American Medical Response, Inc.(b)............ 55,000 1,787,500
Amerisource Health Corp., Class A(b).......... 60,000 1,980,000
Genesis Health Ventures, Inc.(b).............. 50,000 1,825,000
Healthcare & Retirement Corp.(b).............. 55,000 1,925,000
Horizon HealthCare Corp.(b)................... 95,000 2,398,750
Multicare Cos., Inc.(b)....................... 50,000 1,200,000
OEA, Inc...................................... 42,000 1,254,750
Summit Care Corp.(b).......................... 50,000 1,143,750
-----------
13,514,750
-----------
INSURANCE--13.6%
Ace Limited................................... 40,000 1,590,000
AMBAC, Inc.................................... 60,000 2,812,500
American Re Corp.............................. 50,000 2,043,750
Integon, Corp................................. 100,000 2,062,500
National Re Corp.............................. 60,000 2,280,000
Sphere Drake Holdings Ltd..................... 68,024 952,336
Western National Corp......................... 60,000 967,500
-----------
12,708,586
-----------
INVESTMENT MANAGEMENT--0.5%
Phoenix Duff & Phelps Corp.................... 62,471 429,488
-----------
MANUFACTURING--1.0%
Holophane(b).................................. 45,000 978,750
-----------
MEDICAL CARE AND PRODUCTS--4.8%
Rural/Metro(b)................................ 80,000 1,810,000
Sofamor Danek Group(b)........................ 95,000 2,695,625
-----------
4,505,625
-----------
</TABLE>
See Notes to Financial Statements.
42
<PAGE>
PRAIRIE FUNDS
SPECIAL OPPORTUNITIES FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
NATURAL GAS--0.4%
Swift Energy Co.(b)............................ 35,000 $ 420,000
-----------
OIL & GAS--3.5%
Noble Affiliates............................... 50,000 1,493,750
Smith Intl., Inc.(b)........................... 75,000 1,762,500
-----------
3,256,250
-----------
PHARMACEUTICALS--7.6%
A.L. Pharmaceuticals, Inc...................... 85,000 2,220,625
Elan Corp. PLC ADR(b).......................... 50,000 2,431,250
Ivax Corp. .................................... 85,000 2,422,500
-----------
7,074,375
-----------
POLLUTION CONTROL--0.7%
Waste Management PLC ADR(b).................... 65,000 698,750
-----------
RAILROAD EQUIPMENT--0.3%
Johnstown America Industries, Inc.(b).......... 60,000 300,000
-----------
REAL ESTATE DEVELOPMENT--1.8%
Stewart Enterprises, Inc., Class A ............ 45,000 1,665,000
-----------
RESTAURANTS--1.9%
IHOP Corp.(b).................................. 60,000 1,560,000
Starbucks Corp................................. 10,000 210,000
-----------
1,770,000
-----------
RETAIL AND WHOLESALE DISTRIBUTION--1.0%
Corporate Express, Inc.(b)..................... 30,000 903,750
-----------
RETAIL STORES--4.1%
Eckerd Corp.(b)................................ 55,000 2,454,375
Officemax, Inc................................. 60,193 1,346,818
-----------
3,801,193
-----------
TELECOMMUNICATIONS--2.8%
Centennial Cellular Corp., Class A(b).......... 30,000 513,750
Century Telephone Enterprises, Inc. ........... 65,000 2,063,750
-----------
2,577,500
-----------
</TABLE>
See Notes to Financial Statements.
43
<PAGE>
PRAIRIE FUNDS
SPECIAL OPPORTUNITIES FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
UTILITIES--4.1%
AES Corp.(b)............................ 80,000 $ 1,910,000
Public Service Co. of New Mexico(b)..... 35,000 616,875
South Industries G&E Co.(b)............. 36,800 1,278,800
-----------
3,805,675
-----------
TOTAL COMMON STOCKS
(COST $72,403,453)..................... 87,863,555
-----------
<CAPTION>
Principal
Maturity Amount
Rate Date (000)
---- -------- ---------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENT--6.3%
TIME DEPOSIT
Berlin/Frankfort Bank
(cost $5,914,000)..................... 5.81% 1/2/96 $5,914 5,914,000
-----------
TOTAL INVESTMENTS
(COST $78,317,453)(A)--100.2%.......... 93,777,555
Liabilities in excess of other assets--
(0.2%)................................. (164,612)
-----------
NET ASSETS--100.0%....................... $93,612,943
===========
</TABLE>
- - -----------
Percentages indicated are based on net assets of $93,612,943.
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................ $16,914,276
Unrealized depreciation........................................ (1,454,174)
-----------
Net unrealized appreciation.................................... $15,460,102
===========
</TABLE>
(b) Represents non-income producing security.
ADR--American Depository Receipts.
See Notes to Financial Statements.
44
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
COMMON STOCKS--71.2%
AUSTRALIA--3.2%
Aberfoyle................................... 2,400 $ 5,266
Adelaide Brighton Limited................... 3,800 3,392
Amcor Limited............................... 15,300 108,121
Ampolex..................................... 6,900 15,090
Ashton Mining Limited....................... 7,000 10,154
Australian National Industries Limited...... 18,800 13,983
Boral Limited............................... 27,500 69,550
Brambles Industries Limited................. 5,500 61,369
Broken Hill Proprietary Co. ................ 47,000 664,270
Burns Philip & Co. ......................... 12,200 27,316
Caltex Limited.............................. 4,300 16,985
Coca-Coca Amatil............................ 9,600 76,623
Coles Myer Limited.......................... 26,612 82,944
CRA Limited................................. 16,017 235,192
Crusader(b)................................. 2,400 2,535
CSR Limited................................. 22,700 73,959
Dominion Mining Limited(b).................. 2,160 1,125
Email Limited............................... 6,900 16,424
Emperor Mines Limited(b).................... 1,600 2,559
FAI Insurances(b)........................... 7,600 4,127
Fosters Brewing Group....................... 48,900 80,387
General Property Trust...................... 15,200 26,910
Gold Mines of Kalgoorlie.................... 23,800 22,129
Goodman Fielder Limited..................... 29,900 30,026
Hardie (James) Industries................... 9,600 16,567
ICI Australia............................... 7,400 56,697
Lend Lease Corp. ........................... 6,000 87,032
MIM Holdings Limited........................ 39,700 54,925
National Australia Bank..................... 34,900 314,124
Newcrest Mining Limited..................... 5,800 24,419
News Corporation Limited.................... 49,700 265,443
North Limited............................... 17,100 47,700
OPSM Protector Limited...................... 3,500 5,467
Pacific Dunlop Limited...................... 28,800 67,481
Pioneer International Holdings.............. 22,100 57,045
QCT Resources............................... 15,100 16,960
RGC Limited................................. 5,000 24,920
</TABLE>
See Notes to Financial Statements.
45
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
AUSTRALIA (CONTINUED)
Rothman's Holdings Limited................. 2,500 $ 10,228
Santos Limited............................. 21,000 61,389
Schroders Property Fund.................... 9,100 14,892
Smith Howard Limited....................... 4,200 19,839
Sons of Gwalia Limited..................... 1,800 9,908
Southcorp Holdings......................... 23,400 54,482
Stockland Trust Group...................... 7,400 17,064
TNT Limited(b)............................. 14,400 19,066
Tubemakers of Australia Limited............ 6,900 21,403
Westfield Trust............................ 23,700 42,662
Westpac Banking Corp....................... 45,500 201,720
WMC Limited................................ 27,600 177,385
------------
3,339,254
------------
FRANCE--3.5%
Accor...................................... 100 12,964
Air Liquide................................ 250 41,459
Alcatel Alsthom............................ 1,700 146,766
AXA........................................ 600 40,488
Banque Nationale de Paris.................. 4,500 203,266
BIC........................................ 100 10,183
Bouygues................................... 100 10,087
Carnaudmetalbox(b)......................... 3,300 151,154
Carrefour(b)............................... 150 91,128
Casino Guich-Perr.......................... 250 7,264
Chargeurs.................................. 50 9,969
Cie De St Gobain........................... 2,300 254,909
Cie De Suez................................ 2,400 99,133
Cie Geophysique(b)......................... 50 1,646
Club Mediterranee(b)....................... 50 3,998
Compagnie Bancaire......................... 1,210 135,589
Compagnie UAP.............................. 3,600 94,152
Comptoirs Modern........................... 50 16,256
CSF (Thomson).............................. 450 10,039
Docks de France............................ 50 7,607
Dollfus-Meig & Cie PV...................... 50 2,044
Eaux-Cie Generale.......................... 2,700 269,924
</TABLE>
See Notes to Financial Statements.
46
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
FRANCE (CONTINUED)
ELF-Aquitane............................... 3,300 $ 243,466
Eridania Beghin-Say........................ 100 17,177
Essilor International...................... 50 9,570
Europe 1(b)................................ 25 5,061
Groupe Danone.............................. 250 41,306
GTM Entrepose.............................. 50 3,512
Imetal..................................... 50 5,981
Lafarge-Coppee............................. 330 21,290
Lagardere Groupe........................... 350 6,441
Legrand.................................... 500 77,295
L'oreal.................................... 250 67,019
LVMH Moet Hennessy......................... 1,600 333,716
Lyonnais Des Eaux-Dumez.................... 100 9,641
Michelin, Class B.......................... 2,300 91,852
Moulinex(b)................................ 100 1,374
Nord Est................................... 50 1,159
Peugeot SA................................. 1,300 171,725
Pinault-Printemps.......................... 100 19,978
Promodes................................... 50 11,768
Rhone Poulenc, Series A.................... 1,250 26,813
Sanofi..................................... 3,300 211,818
Schneider SA............................... 500 17,115
Sefimeg.................................... 50 3,323
Seita...................................... 200 7,259
Simco...................................... 50 4,754
Societe Generale........................... 2,500 309,281
Sodexho(b)................................. 50 14,723
St. Louis.................................. 50 13,291
Total, Class B............................. 4,800 324,392
Union Immobiliere de France................ 50 4,334
------------
3,696,459
------------
GERMANY--3.1%
AMB AAchener & Muench...................... 50 36,331
BASF AG.................................... 600 135,404
Bayer AG................................... 600 159,634
Bayerische Vereinsbank..................... 3,000 90,129
</TABLE>
See Notes to Financial Statements.
47
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
GERMANY (CONTINUED)
Beiersdorf AG, Series ABC................... 50 $ 34,410
Bilfinger & Berger.......................... 50 19,039
Brau Und Brunnen............................ 50 7,616
Bremer Vulkan AG............................ 150 4,192
CKAG Colonial............................... 50 41,921
Commerzbank AG.............................. 500 118,950
Continental AG.............................. 1,000 14,148
Daimler Benz AG............................. 350 177,045
Degussa AG.................................. 100 33,746
Deutsche Bank AG............................ 8,000 380,639
Deutsche Lufthansa AG....................... 400 55,475
Didier-Werke AG(b).......................... 50 4,045
FAG Kugelfischer Georg(b)................... 50 6,428
Heidelberger Zement......................... 55 34,508
Hochtief AG................................. 100 42,829
Kaufhof Holding AG.......................... 300 91,597
Linde AG.................................... 100 59,388
Linotype Hell AG(b)......................... 50 5,153
MAN AG...................................... 100 27,737
Mannesmann AG............................... 450 143,526
Muenchener Ruckvers......................... 100 215,891
Preussag AG................................. 800 225,812
P.W.A. Papier Waldhof(b).................... 50 7,406
RWE AG...................................... 300 109,308
SAP AG...................................... 500 77,553
Schering AG................................. 1,000 66,584
Siemens AG(b)............................... 650 357,862
Thyssen AG(b)............................... 350 63,995
Veba AG..................................... 7,000 300,291
Volkswagon AG............................... 200 67,212
------------
3,215,804
------------
HONG KONG--1.6%
Bank of East Asia........................... 6,000 21,534
Cathay Pacific Airway....................... 23,000 35,100
Cheung Kong Holdings........................ 18,000 109,649
China Light and Power Co., Limited.......... 25,000 115,105
</TABLE>
See Notes to Financial Statements.
48
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
HONG KONG (CONTINUED)
Chinese Estates Holdings................... 12,000 $ 7,837
Dickson Concepts Intl. Limited............. 5,000 4,656
Giordano International Holdings............ 4,000 3,414
Hang Lung Development Co................... 10,000 15,908
Hang Seng Bank Limited..................... 21,800 195,247
Hong Kong Aircraft......................... 1,200 3,104
Hong Kong Telecom.......................... 106,400 189,903
Hopewell Holdings.......................... 35,000 20,143
Hutchison Whampoa.......................... 46,000 280,214
Hysan Development Limited.................. 8,000 21,158
Johnson Electric Holdings.................. 3,000 5,354
Kumagai Gumi............................... 3,000 2,173
Lai Sun Garment International.............. 2,000 1,940
Miramar Hotel & Investment................. 4,000 8,432
New World Development Co................... 13,000 56,661
Oriental Press Group....................... 12,000 3,647
Peregrine Investment Holdings.............. 4,000 5,173
Playmates Toys Holdings.................... 4,000 796
Regal Hotel Holdings....................... 22,000 5,177
Shangri-La Asia............................ 8,000 9,778
Shun Tak Holdings Limited.................. 12,000 8,458
South China Morning Post................... 12,000 7,333
Sun Hung Kai Properties.................... 25,000 204,508
Swire Pacific Limited...................... 20,000 155,200
Television Broadcasts Limited.............. 3,000 10,689
Wharf Holdings Limited..................... 39,000 129,882
Wing Lung Bank............................. 1,200 6,720
Winsor Industrial Corp. Limited............ 2,000 1,693
------------
1,646,586
------------
JAPAN--41.2%
Advantest Corp. ........................... 1,000 51,380
Ajinomoto Co., Inc. ....................... 10,000 111,485
Alps Electric Co.(b)....................... 3,000 34,608
Amada Co. ................................. 28,000 276,871
Aoki Corp.(b).............................. 2,000 8,394
Aoyama Trading............................. 1,000 31,991
</TABLE>
See Notes to Financial Statements.
49
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
JAPAN (CONTINUED)
Asahi Bank Limited(c)....................... 41,000 $ 516,710
Asahi Breweries............................. 8,000 94,617
Asahi Chemical Industries................... 27,000 206,781
Asahi Glass Co. ............................ 33,000 367,903
Ashikaga Bank............................... 10,000 62,431
Bank of Tokyo............................... 36,000 631,687
Bank of Yokohama............................ 20,000 163,836
Banyu Pharmaceutical........................ 2,000 24,624
Bridgestone Corp. .......................... 16,000 254,382
Brother Industries Limited.................. 4,000 21,754
Canon, Inc. ................................ 24,000 435,086
Casio Computer Co. ......................... 1,000 9,791
Chiba Bank.................................. 13,000 117,205
Chichibu Onada Cement....................... 7,000 37,391
Chugai Pharmaceutical Co. .................. 2,000 19,176
Citizen Watch Co. Limited................... 19,000 145,513
Cosmo Oil Co. .............................. 3,000 16,403
Credit Saison............................... 2,000 47,697
Dai Nippon Co. Limited.(b).................. 26,000 441,098
Dai Nippon Ink & Chemical................... 8,000 37,304
Dai Nippon Screen........................... 2,000 17,566
Daicel Chemical Industries.................. 13,000 73,978
Daido Steel Co. Limited..................... 2,000 10,082
Daiei Inc. ................................. 9,000 109,062
Dai-Ichi Kangyo Bank(c)..................... 64,000 1,259,501
Dai-Ichi Pharmaceuticals Co. Limited........ 3,000 42,752
Daikin Industries........................... 27,000 264,368
Daikyo(b)................................... 3,000 22,394
Daimaru(b).................................. 2,000 15,511
Daishowa Paper(b)........................... 1,000 7,756
Daito Trust................................. 1,000 11,827
Daiwa Bank.................................. 20,000 161,896
Daiwa House Industries...................... 14,000 230,727
Daiwa Kosho Lease Co. Limited............... 3,000 29,956
Daiwa Securities............................ 24,000 367,613
Denid Kagaku Kogyo.......................... 3,000 10,906
Ebara Corp. ................................ 2,000 29,277
</TABLE>
See Notes to Financial Statements.
50
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
JAPAN (CONTINUED)
Eisai Co. ................................. 3,000 $ 52,641
Ezaki Glico Co. ........................... 2,000 19,350
Fanuc Co. ................................. 7,000 303,339
Fuji Bank(c)............................... 56,000 1,237,785
Fuji Photo Film Limited(c)................. 11,000 317,783
Fujita Corp. .............................. 3,000 13,553
Fujita Kanko............................... 2,000 44,207
Fujitsu Limited............................ 43,000 479,390
Furukawa Electric.......................... 3,000 14,687
Gakken Co.(b).............................. 2,000 13,184
Gunma Bank................................. 9,000 96,847
Gunze Limited(b)........................... 4,000 24,236
Hankyu Corp.(b)............................ 12,000 65,728
Hanyu Department Stores.................... 1,000 14,833
Haseko Corp.(b)............................ 2,000 8,085
Hazama Corp.(b)............................ 2,000 8,531
Higo Bank.................................. 3,000 24,139
Hitachi Limited(c)......................... 81,000 816,658
Hokkaido Bank.............................. 5,000 16,965
Hokuriku Bank.............................. 11,000 68,995
Honda Motor Co. ........................... 19,000 392,335
Honshu Paper Co. .......................... 2,000 12,254
House Foods Corp.(b)....................... 2,000 36,063
Hoya Corp. ................................ 1,000 34,415
Inax Corp. ................................ 26,000 247,013
Industrial Bank of Japan(c)................ 47,000 1,426,149
Isetan Co. ................................ 2,000 32,961
Ishihara Sangyo Kaisha(b).................. 2,000 6,495
Ito Yokado Co.(c).......................... 13,000 801,537
Itochu Corp. .............................. 26,000 175,178
Itoham Foods............................... 3,000 22,685
Iwantani International Corp.(b)............ 3,000 15,996
Jaccs...................................... 2,000 20,746
Japan Air Lines Co.(b)..................... 33,000 219,143
Japan Energy Corp. ........................ 5,000 16,771
Jeol....................................... 1,000 8,512
JGC Corp.(b)............................... 1,000 10,567
</TABLE>
See Notes to Financial Statements.
51
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
JAPAN (CONTINUED)
Joyo Bank.................................. 14,000 $ 112,650
Jusco Co.(b)............................... 4,000 104,312
Kajima Corp. .............................. 12,000 118,660
Kaken Pharmaceutical....................... 1,000 9,016
Kandenko Limited........................... 1,000 12,506
Kanebo Corp.(b)............................ 9,000 22,335
Kaneka Corp. .............................. 3,000 18,933
Kansai Electric Power(c)................... 20,100 487,146
Kansai Paint Co. Limited................... 2,000 9,307
Kao Corp. ................................. 9,000 111,680
Katokichi.................................. 1,000 20,843
Kawasaki Kisen Kaisha(b)................... 11,000 34,977
Kawasaki Steel Corp........................ 39,000 136,110
Keihin Electric............................ 6,000 36,005
Keio Teito Electric Railway................ 16,000 93,221
Kikkoman Corp.............................. 3,150 23,208
Kinden Corp................................ 2,000 34,124
Kinki Nippon Railway....................... 31,000 234,410
Kirin Brewery Co........................... 19,000 224,717
Kobe Steel(b).............................. 30,000 92,775
Komatsu Limited(c)......................... 9,000 74,162
Konica Corp................................ 1,000 7,251
Kubota Corp................................ 13,000 83,808
Kumagai Gumi Co............................ 5,000 20,116
Kurabo Industries.......................... 5,000 19,147
Kuraray Co. Limited........................ 8,000 87,638
Kureha Chemical Industries Co.(b).......... 2,000 9,404
Kyocera Corp............................... 3,000 223,070
Kyowa Hakko Kogyo.......................... 5,000 47,212
Lion Corp.................................. 2,000 11,808
Maeda Road Construction.................... 6,000 111,098
Makita Corp................................ 2,000 31,992
Marubeni Corp.............................. 28,000 151,738
Marudai Food Co............................ 2,000 14,348
Maruha Co.(b).............................. 4,000 13,533
Marui Co.(b)............................... 5,000 104,215
Matsushita Electric Industries............. 40,000 651,464
</TABLE>
See Notes to Financial Statements.
52
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
JAPAN (CONTINUED)
Meija Milk Products......................... 4,000 $ 23,964
Meiji Seika Kaisha.......................... 5,000 30,150
Misawa Homes................................ 1,000 8,803
Mitsubishi Bank............................. 12,000 282,690
Mitsubishi Chemical Corp.................... 29,000 141,131
Mitsubishi Corp............................. 29,000 357,045
Mitsubishi Electric Corp.................... 32,000 230,493
Mitsubishi Estate........................... 24,000 300,139
Mitsubishi Gas(b)........................... 3,000 13,524
Mitsubishi Heavy Industries Limited......... 68,000 542,538
Mitsubishi Materials........................ 21,000 108,917
Mitsubishi Oil Co........................... 2,000 17,780
Mitsubishi Paper............................ 34,000 204,687
Mitsubishi Steel Manufacturing(b)........... 1,000 5,235
Mitsubishi Trust and Banking Limited........ 24,000 400,186
Mitsui Engine & Shipbuilding(b)............. 1,000 2,782
Mitsui Fire & Marine Insurance.............. 13,000 92,756
Mitsui Fudosan Co. ......................... 15,000 184,679
Mitsui Mining and Smelting(b)............... 9,000 36,122
Mitsui O.S.K. Lines(b)...................... 20,000 64,176
Mitsui Toatsu Chemical...................... 6,000 24,139
Mitsui Trust and Banking Co................. 22,000 241,003
Mitsui & Co. Limited........................ 29,000 254,710
Mitsukoshi Limited(b)....................... 6,000 56,422
Mochida Pharmaceuticals..................... 1,000 13,863
Murata Manufacturing Co..................... 4,000 147,356
Nagase & Co.(b)............................. 1,000 8,609
Nagoya Railroad Co.......................... 11,000 55,452
Nankai Electric Railway..................... 6,000 40,717
NEC Corp. .................................. 30,000 366,450
New Oji Paper............................... 8,000 72,437
NGK Insulators.............................. 44,000 439,349
Nichido Fire and Marine Insurance........... 8,000 64,371
Nichii Co. Limited.......................... 22,000 292,191
Nichirei Corp............................... 5,000 32,476
Nihon Cement Co............................. 4,000 26,756
Nintendo Co................................. 2,600 197,864
</TABLE>
See Notes to Financial Statements.
53
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
JAPAN (CONTINUED)
Nippon Beet Sugar(b)........................ 2,000 $ 8,880
Nippon Communications Systems Corp.(b)...... 1,000 10,567
Nippon Denso................................ 19,000 355,496
Nippon Express Co........................... 16,000 154,179
Nippon Fire and Marine Insurance............ 11,000 74,647
Nippon Light Metal.......................... 10,000 57,391
Nippon Meat Packers......................... 16,000 232,666
Nippon Oil Co. ............................. 11,000 69,102
Nippon Paper Industries..................... 10,000 69,509
Nippon Seiko Kab Kai........................ 2,000 14,542
Nippon Shinpan Co. ......................... 5,000 37,808
Nippon Shokubai Kagaku Kogyo................ 2,000 19,583
Nippon Steel Corp. ......................... 138,000 473,588
Nippon Suisan(b)............................ 4,000 16,558
Nippon Yusen Kab Kai........................ 22,000 127,752
Nishimatsu(b)............................... 2,000 23,460
Nissan Motor Co. ........................... 46,000 353,634
Nisshinbo Industries, Inc. ................. 4,000 38,778
Nissin Food Products Co., Limited(b)........ 2,000 46,921
NKK Corp.(b)................................ 40,000 107,800
NOF Corp. .................................. 2,000 10,877
Nomura Securities........................... 36,000 785,250
NTN Corp. .................................. 1,000 6,689
Obayashi Corp. ............................. 8,000 63,595
Odakyu Electric Railway..................... 10,000 68,345
Okamoto Industries.......................... 3,000 19,486
Okumura(b).................................. 1,000 9,113
Olympus Optical Co., Limited................ 1,000 9,694
Omron Corp. ................................ 3,000 69,218
Onward Kashiyama(b)......................... 3,000 48,860
Orient Corp. ............................... 5,000 28,405
Orix Corp. ................................. 3,000 123,604
Osaka Gas Co. .............................. 117,000 404,925
Penta-Ocean(b).............................. 2,000 15,511
Pioneer Electronic.......................... 8,000 146,580
Q.P. Corp.(b)............................... 2,000 17,431
Renown, Inc. ............................... 5,000 17,402
</TABLE>
See Notes to Financial Statements.
54
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
JAPAN (CONTINUED)
Ricoh Co. .................................. 5,000 $ 54,774
Rohn Company Limited........................ 2,000 113,037
Sagami...................................... 4,000 17,334
Sakura Bank................................. 61,000 774,682
Sankyo Co. ................................. 19,000 427,331
Sankyo Aluminum............................. 2,000 10,722
Sanrio Corp.(b)............................. 1,000 11,536
Sanwo Shutter Corp. ........................ 2,000 14,522
Sanyo Electric Corp......................... 32,000 184,582
Sapporo Corporation......................... 6,000 55,840
Secom Co. .................................. 7,000 487,243
Sega Enterprises............................ 1,000 55,258
Seino Transportation........................ 10,000 167,714
Seiyu(b).................................... 2,000 24,818
Sekisui Chemical............................ 8,000 117,884
Sekisui House............................... 54,000 691,016
Settsu Corp.(b)............................. 1,000 3,151
Seven-Eleven Japan NPV...................... 8,000 564,605
Sharp Corp. ................................ 18,000 287,924
Shimizu Corp. .............................. 9,000 91,612
Shin-Etsu Chemical Co. ..................... 4,000 82,984
Shinmaywa Industries........................ 16,000 132,154
Shiongoi & Co. ............................. 3,000 25,273
Shiseido Co. ............................... 4,000 47,696
Shizuoka Bank............................... 14,000 176,438
Shochiku Co.(b)............................. 1,000 10,955
Shokusan(b)................................. 1,000 3,665
Showa Denko KK(b)........................... 10,000 31,410
Skylark Co. ................................ 2,000 36,839
Snow Brand Milk(b).......................... 5,000 31,992
Sony Corp. ................................. 6,200 372,054
Sumitomo Bank............................... 63,000 1,337,540
Sumitomo Chemical........................... 20,000 99,852
Sumitomo Corp. ............................. 20,000 203,582
Sumitomo Electric Industries................ 22,000 264,464
Sumitomo Forestry........................... 2,000 30,634
Sumitomo Marine and Fire Insurance.......... 12,000 98,651
</TABLE>
See Notes to Financial Statements.
55
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
JAPAN (CONTINUED)
Sumitomo Metal Industries(b)................ 36,000 $ 109,235
Sumitomo Metal Mining....................... 10,000 89,964
Sumitomo Osaka Cement....................... 5,000 23,267
Taisei Corp. ............................... 11,000 73,473
Taisho Pharmaceutical Co. .................. 4,000 79,107
Taiyo Yuden................................. 2,000 21,522
Takara(b)................................... 2,000 22,879
Takara Shuzo(b)............................. 4,000 38,274
Takashimaya Co.(b).......................... 2,000 31,992
Takeda Chemical Industries.................. 32,000 527,376
Tanabe...................................... 2,000 14,406
TDK Corp. .................................. 8,000 408,718
Teijin Limited.............................. 11,000 56,305
TOA Corp.(b)................................ 1,000 7,368
Tobu Railway Co. ........................... 12,000 75,151
Tohoku Electric Power....................... 8,080 195,045
Tokai Bank.................................. 36,000 502,560
Tokio Marine and Fire Insurance............. 29,000 379,538
Tokyo Broadcasting.......................... 3,000 49,442
Tokyo Dome Corp. ........................... 3,000 51,477
Tokyo Electric Power........................ 27,200 727,782
Tokyo Electronics........................... 3,000 116,333
Tokyo Gas Co. .............................. 43,000 151,734
Tokyo Steel Manufacturing Co. Limited....... 20,000 368,388
Tokyo Style Co.(b).......................... 2,000 34,318
Tokyo Tatemono(b)........................... 4,000 19,001
Tokyoto Keiba Co. .......................... 5,000 20,843
Tokyu Corp. ................................ 16,000 113,075
Tonen Corp. ................................ 20,000 292,772
Toppan Printing Co. ........................ 14,000 184,582
Toray Industries Inc. ...................... 90,000 593,298
Toshiba Corp.(c)............................ 88,000 690,166
Tosoh Corp.(b).............................. 5,000 24,091
Tostem Corp. ............................... 3,000 99,756
Toto Limited................................ 4,000 55,840
Toyo Engineering............................ 1,000 6,301
Toyo Kanetsu KK............................. 3,000 15,385
</TABLE>
See Notes to Financial Statements.
56
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
JAPAN (CONTINUED)
Toyo Seikan Kaisha.......................... 2,000 $ 59,912
Toyobo Co.(b)............................... 13,000 46,756
Toyoda Automatic Loom Works Limited......... 2,000 35,869
Toyota Motor Corp.(c)....................... 77,000 1,634,772
UBE Industries(b)........................... 2,000 7,562
Unitika Limited(b).......................... 3,000 9,132
Yamaguchi Bank.............................. 3,000 51,187
Yamaichi Securities Co. .................... 22,000 171,261
Yamanouchi Pharmaceutical................... 4,000 86,087
Yamato Transport............................ 4,000 47,696
Yamazaki Baking Co. ........................ 3,000 55,840
Yasuda Trust and Bank....................... 20,000 118,466
Yokogawa Bridge Works Corp. ................ 7,000 105,863
Yokogawa Electric........................... 4,000 37,847
77 Bank..................................... 6,000 55,084
------------
43,005,659
------------
SINGAPORE--5.1%
Amcol Holdings.............................. 20,000 55,144
Chaun Hup Holdings.......................... 13,000 11,764
City Developments........................... 52,000 378,654
Cycle and Carriage.......................... 16,000 159,494
DBS Land Limited............................ 61,000 206,137
Development Bank Singapore.................. 45,000 559,926
First Capital Corp. ........................ 16,000 44,341
Fraser and Neave Limited.................... 16,000 203,610
Hai Sun Hup Group........................... 29,000 19,476
Haw Par Brothers International.............. 12,000 25,620
Hotel Properties Limited.................... 27,000 41,801
Inchcape Berhad............................. 11,000 35,306
Jurong Shipyard............................. 7,000 53,942
Keppel Corp. ............................... 34,000 302,869
Low Keng Huat Limited....................... 4,000 2,234
Lum Chang Holdings Limited.................. 22,000 18,352
Metro Holdings.............................. 7,000 27,218
Natsteel Limited............................ 22,000 45,104
Neptune Orient Lines........................ 46,000 51,704
Overseas Chinese Banking Corp. ............. 61,000 763,324
</TABLE>
See Notes to Financial Statements.
57
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
SINGAPORE (CONTINUED)
Overseas Union Enterprises................. 8,000 $ 40,439
Parkway Holdings Limited................... 19,000 51,581
Prima Limited.............................. 3,000 11,453
Robinson and Company....................... 4,000 16,684
Shangri-La Hotel........................... 10,000 38,883
Sia Limited Foreign........................ 86,000 802,561
Singapore Press Holdings................... 22,800 402,979
Straits Steamship.......................... 40,000 135,172
Straits Trading Co. ....................... 20,000 46,942
United Industrial Corp. ................... 90,000 88,443
United Overseas Bank....................... 60,600 582,663
United Overseas Land....................... 33,000 62,756
------------
5,286,576
------------
UNITED KINGDOM--13.5%
Abbey National PLC(b)...................... 21,900 216,252
Anglian Water PLC.......................... 3,000 28,180
Argos PLC.................................. 2,900 26,835
Argyll Group............................... 11,000 58,067
Arjo Wiggins............................... 11,100 28,435
Associated British FDS..................... 2,400 13,750
Barclays PLC(b)............................ 26,900 308,643
Bass(b).................................... 27,900 311,450
Bat Industries............................. 35,500 312,791
BBA Group.................................. 3,200 14,383
Bet Pub Limited............................ 48,400 95,435
BICC PLC................................... 2,800 11,998
Blue Circle Industries..................... 9,900 52,644
BOC Group.................................. 6,500 90,928
Boots Co. PLC.............................. 9,300 84,613
BPB Industries............................. 6,800 31,884
British Aerospace.......................... 2,200 27,223
British Airways............................ 13,000 94,056
British Gas................................ 116,800 460,612
British Land Co.(b)........................ 5,000 29,577
British Petroleum.......................... 61,800 517,173
British Steel.............................. 27,500 69,487
</TABLE>
See Notes to Financial Statements.
58
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
British Telecom............................ 131,700 $ 723,850
BTR PLC.................................... 61,600 314,653
Cable & Wireless........................... 18,900 134,982
Cadbury Schweppes PLC...................... 16,400 135,461
Carlton Communities PLC(b)................. 2,300 34,496
Chubb Security(b).......................... 2,800 13,846
Coats Viyella.............................. 15,600 42,385
Commercial Union........................... 11,100 108,228
Courtaulds PLC............................. 5,500 34,755
De La Rue PLC(b)........................... 2,200 22,236
Delta PLC.................................. 1,200 7,434
Electrocomponent PLC....................... 5,800 32,418
English China Clays........................ 4,200 20,671
Forte PLC.................................. 15,800 81,075
General Accident........................... 3,400 34,365
General Electric........................... 46,000 253,538
GKN PLC.................................... 4,700 56,845
Glaxo Holdings PLC......................... 46,900 666,271
Grand Metropolitan......................... 39,300 283,117
Great Universe Stores PLC.................. 9,800 104,226
Guardian Royal Exchange PLC................ 6,600 28,282
Guinness................................... 43,200 317,922
Hammerson PLC.............................. 3,900 21,344
Hanson..................................... 75,200 224,750
Harrison & Crossfield PLC.................. 9,600 23,847
Hepworth Ceramic........................... 3,300 16,344
HSBC Holdings.............................. 43,800 684,117
IMI PLC.................................... 4,400 22,441
Imperial Chemical Industries............... 9,900 117,278
Kingfisher PLC............................. 6,500 54,698
Ladbroke Group PLC(b)...................... 19,400 44,125
Land Securities PLC........................ 6,900 66,099
Lasmo PLC.................................. 74,200 201,601
Legal and General.......................... 9,700 100,903
Lloyds TSB Group........................... 180,086 926,867
London Electricity PLC..................... 3,300 29,409
Lonrho PLC(b).............................. 9,000 24,593
</TABLE>
See Notes to Financial Statements.
59
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Lucas Industries PLC....................... 28,300 $ 79,529
Marks & Spencer PLC........................ 46,700 326,279
Metal Box-Caradon(b)....................... 8,200 24,889
MEPC....................................... 5,500 33,730
National Grid Group(b)..................... 2,910 9,013
National Power............................. 13,000 90,726
Next PLC................................... 3,700 26,195
Northwest Water Group(b)................... 3,800 36,343
P & O Stream Nav(b)........................ 10,100 74,642
Pearson PLC................................ 6,500 62,973
Pilkington Ord PLC......................... 10,800 33,871
Prudential Corp. .......................... 31,700 204,249
Rank Organisation PLC...................... 11,300 81,757
Reckitt and Coleman........................ 22,600 250,182
Redland PLC................................ 7,100 42,881
Reed International......................... 9,400 143,317
Reuters Holdings PLC(b).................... 27,800 254,656
Rexam PLC.................................. 6,800 37,374
RMC Group.................................. 2,700 41,543
Rolls Royce................................ 39,300 115,322
Royal Bank of Scotland PLC................. 13,300 121,006
Royal Insurance PLC........................ 24,200 143,528
RTZ Corp................................... 17,800 258,675
Rugby...................................... 8,700 14,858
Sainsbury (J) PLC.......................... 17,600 107,390
Schroders PLC.............................. 3,200 67,966
Scottish & New Castle PLC(b)............... 1,000 9,517
Scottish Power PLC(b)...................... 13,600 78,127
Sears...................................... 88,800 143,385
Sedgwick Group............................. 24,700 46,401
Seeboard PLC(b)............................ 200 1,633
Slough Estate PLC.......................... 5,300 18,021
Smith Industries........................... 4,100 40,485
Smithkline Beecham, Class A................ 12,900 142,202
Smithkline Beecham......................... 50,400 549,320
Southern Electric PLC(b)................... 200 2,807
Southern Water PLC......................... 1,700 18,159
</TABLE>
See Notes to Financial Statements.
60
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
T & N PLC.................................. 4,200 $ 10,564
Tarmac PLC................................. 12,600 20,148
Tate & Lyle PLC............................ 1,000 7,328
Taylor Woodrow PLC......................... 5,200 9,486
Tesco...................................... 77,700 358,290
Thames Water PLC........................... 22,800 198,944
Thorn EMI PLC(b)........................... 7,100 167,226
TI Group PLC(b)............................ 5,500 39,195
Trafalgar House PLC(b)..................... 12,600 5,428
Unigate Limited............................ 600 3,829
Unilever PLC............................... 13,500 277,301
United Biscuits PLC........................ 1,400 5,564
Vodafone Group............................. 26,200 93,762
Williams Holdings.......................... 7,900 40,231
Willis Corroon PLC......................... 3,200 7,005
Wimpey George PLC.......................... 4,900 10,955
Wolseley................................... 7,500 52,517
Zeneca Group............................... 8,900 172,172
------------
14,106,784
------------
TOTAL COMMON STOCKS
(COST $68,762,442)........................ 74,297,122
------------
PREFERRED STOCKS--0.6%
AUSTRALIA--0.1%
News Corp., Limited Voting Preferred Voting
Shares................................... 24,100 112,761
------------
FRANCE--0.0%
Casino Guich-Perr, Preferred Shares........ 50 1,135
------------
GERMANY--0.5%
Allianz AG, Preferred Shares Nonvoting..... 200 393,495
Kloeckner AG, Preferred Shares Nonvoting... 500 3,022
Lufthansa AG, Preferred Shares Nonvoting... 50 6,550
Man AG, Preferred Shares Nonvoting......... 50 10,753
RWE AG, Preferred Shares Nonvoting......... 150 41,921
</TABLE>
See Notes to Financial Statements.
61
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
GERMANY (CONTINUED)
SAP AG, Preferred Nonvoting........... 500 $ 76,085
Volkswagon AG, Preferred Shares
Nonvoting........................... 50 12,150
------------
543,976
------------
TOTAL PREFERRED STOCKS
(COST $580,168)...................... 657,872
------------
<CAPTION>
Principal
Maturity Amount
Rate Date (000)
---- -------- ---------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE OBLIGATION--12.6%
GERMANY--12.6%
Bundeslaender Versicher
(cost $12,896,203).................. 8.63% 2/20/96 18,700** 13,143,650
------------
SHORT-TERM INVESTMENTS--13.4%
U.S. TREASURY BILLS--13.4%
U.S. Treasury Bill.................... 5.61%* 2/8/96 1,000 994,320
U.S. Treasury Bill.................... 5.48%* 2/15/96 2,000 1,986,675
U.S. Treasury Bill.................... 5.54%* 3/7/96 2,500 2,478,150
U.S. Treasury Bill.................... 5.07%* 3/28/96 1,600 1,581,232
U.S. Treasury Bill(c)................. 5.35%* 5/2/96 3,500 3,441,883
U.S. Treasury Bill.................... 5.65%* 7/25/96 1,500 1,457,802
U.S. Treasury Bill.................... 5.61%* 8/22/96 1,150 1,113,305
U.S. Treasury Bill(c)................. 5.61%* 9/19/96 1,000 964,475
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $14,002,418)................... 14,017,842
------------
TOTAL INVESTMENTS
(COST $96,241,231)(A)--97.8%......... 102,116,486
Other assets in excess of liabilities--
2.2%................................. 2,272,891
------------
NET ASSETS--100.0%..................... $104,389,377
============
</TABLE>
- - -----------
Percentages indicated are based on net assets of $104,389,377.
* Yield at purchase.
** Denominated in local currency.
See Notes to Financial Statements.
62
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................ $ 7,077,639
Unrealized depreciation........................................ (1,202,384)
-----------
Net unrealized appreciation.................................... $ 5,875,255
===========
</TABLE>
(b) Represents non-income producing security.
(c) Securities partially or fully pledged as collateral to cover open futures
positions.
<TABLE>
<CAPTION>
Contract Contract Unrealized
Price Value (Depreciation)
-------- -------- --------------
<S> <C> <C> <C>
FOREIGN CURRENCY INVESTMENTS
CURRENCY PURCHASED:
German Deutsche Mark......................... $0.698600 $328,907 $ (3,032)
Japanese Yen(d).............................. $0.960000 504,385 (69,326)
U.K. Pound Sterling.......................... $1.552600 115,183 (1,442)
-------- --------
TOTAL FOREIGN CURRENCY INVESTMENTS
(COST $1,022,275)........................... $948,475 $(73,800)
======== ========
</TABLE>
(d) Pledged to cover margin requirements for open futures positions.
<TABLE>
<S> <C> <C> <C> <C>
FINANCIAL FUTURES
<CAPTION>
UNREALIZED
MARKET VALUE APPRECIATION
NUMBER OF COVERED (DEPRECIATION)
CONTRACTS BY CONTRACTS EXPIRATION AT 12/31/95
--------- ------------ ---------- --------------
<S> <C> <C> <C> <C>
Financial Futures Purchased
Long:
British Pound--FTSE(1)...... 57 $ 8,134,087 March 1996 $ 54,862
German Deutsche Marks--
DAX(1).................... 3 447,415 March 1996 12,404
Japanese Yen--TOPIX(1)...... 120 18,426,486 March 1996 851,509
Financial Futures Sold Short:
German Deutsche Marks(2).... 130 $11,340,875 March 1996 (71,500)
Japanese Yen(2) 69 8,491,312 March 1996 101,775
--------
$949,050
========
</TABLE>
(1) Exchange traded local currency denominated futures contracts.
(2) U.S. Dollar denominated futures contracts.
See Notes to Financial Statements.
63
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS--33.6%
ASSET-BACKED SECURITIES--7.0%
Advanta Mortgage Loan Trust,
Series 1994-3, Class A2............... 7.60% 7/25/10 $ 3,915 $ 4,045,170
First Federal Savings & Loan
Association, Chicago, Mortgage Backed
Certificates, Series A, Passthrough
Notes(b).............................. 8.75% 6/1/06 7 7,113
Green Tree Home Improvement Loan Trust,
Series 1994-B1, Class A1.............. 7.15% 7/15/14 1,045 1,071,326
MBNA Master Credit Card Trust,
Series 1994-C, Class A................ 6.25% 3/15/04 1,655 1,661,206
Midlantic Auto Grantor Trust,
Series 1992-1, Class A................ 4.30% 9/15/97 125 124,509
Olympic Automobiles Receivables Trust,
Series 1995-D......................... 6.15% 7/15/01 2,300 2,333,781
People's Bank Credit Card Master Trust,
Series 1993-1, Class A................ 4.80% 12/15/99 2,480 2,476,352
Security Pacific Acceptance Corp.,
Series 1995-1......................... 7.25% 4/10/20 2,000 2,119,118
------------
13,838,575
------------
BANKING--11.3%
AAB, Global Bond, Bank Guaranteed....... 7.25% 5/31/05 2,800 2,998,192
Chase Manhattan Corp., Subordinate Note. 9.75% 11/1/01 2,500 2,949,827
Chevy Chase Auto Receivables Trust
Class A............................... 5.80% 6/15/02 3,000 3,015,687
First Union Corp., Subordinate Note..... 6.88% 9/15/05 3,000 3,129,951
Mellon Financial Co., Senior Notes...... 7.63% 11/15/99 2,310 2,449,360
Midland Bank PLC, Subordinate Notes..... 8.63% 12/15/04 2,230 2,568,289
Norwest Corp., Medium Term Note......... 7.75% 3/1/02 1,500 1,639,203
Saloman, Inc. Senior Notes.............. 6.70% 12/1/98 3,700 3,724,901
------------
22,475,410
------------
ENTERTAINMENT--3.2%
News America Holdings................... 8.50% 2/15/05 2,500 2,821,893
Time Warner Entertainment............... 9.63% 5/1/02 3,000 3,476,898
------------
6,298,791
------------
FINANCE--2.2%
Associates Corp., North America,
Corporate Notes....................... 6.63% 6/15/05 1,700 1,757,470
Chemical Master Credit Card Trust,
Series 1995-3, Class A................ 6.23% 4/15/02 2,500 2,556,748
------------
4,314,218
------------
</TABLE>
See Notes to Financial Statements.
64
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
HEALTH CARE & HOSPITAL MANAGEMENT--2.2%
Columbia HCA/Health, Medium Term Note... 6.87% 9/15/03 $ 4,250 $ 4,421,896
------------
HOTELS AND GAMING--1.4%
Marriot International, Inc., Senior
Note.................................. 7.88% 4/15/05 2,500 2,718,953
------------
INDUSTRIAL--3.9%
ITT Corp., Debentures................... 7.38% 11/15/15 5,000 5,132,450
TCI Communications, Senior Notes........ 8.00% 8/1/05 2,500 2,672,875
------------
7,805,325
------------
RETAIL STORES--1.3%
Dayton Hudson Credit Card Master Trust,
Series 1995-1, Class A................ 6.10% 2/25/02 2,500 2,543,247
------------
SUPRANATIONALS--0.6%
European Investment Bank................ 8.88% 3/1/01 1,000 1,143,335
------------
UTILITIES--0.5%
West Texas Utilities.................... 6.38% 10/1/05 1,000 1,017,028
------------
TOTAL CORPORATE OBLIGATIONS
(COST $64,213,422)..................... 66,576,778
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--7.5%
Federal Farm Credit Bank,
Medium Term Note...................... 7.00% 4/18/97 6,000 6,032,004
Federal Home Loan Mortgage Corporation,
Debenture............................. 7.35% 3/22/05 8,000 8,807,624
Federal Home Loan Mortgage Corporation,
Pool #555124 ......................... 9.50% 12/1/18 1 1,010
Government National Mortgage
Association, Pool #304382............. 8.50% 3/15/23 64 67,206
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $14,201,890)..................... 14,907,844
------------
U.S. GOVERNMENT OBLIGATIONS--47.5%
U.S. TREASURY BOND--0.6%
U.S. Treasury Bond...................... 8.13% 8/15/19 1,000 1,257,812
------------
U.S. TREASURY NOTES--46.9%
U.S. Treasury Note...................... 5.88% 5/31/96 2,650 2,657,449
U.S. Treasury Note...................... 7.88% 1/15/98 2,900 3,048,625
U.S. Treasury Note...................... 5.38% 5/31/98 375 376,288
U.S. Treasury Note...................... 5.13% 6/30/98 400 399,125
U.S. Treasury Note...................... 4.75% 10/31/98 19,000 18,750,625
U.S. Treasury Note...................... 5.00% 1/31/99 550 546,046
U.S. Treasury Note...................... 6.88% 8/31/99 1,785 1,875,921
U.S. Treasury Note...................... 7.13% 9/30/99 165 174,900
U.S. Treasury Note...................... 7.88% 11/15/99 990 1,076,625
</TABLE>
See Notes to Financial Statements.
65
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
U.S. TREASURY NOTES (CONTINUED)
U.S. Treasury Note...................... 7.75% 11/30/99 $ 2,440 $ 2,644,350
U.S. Treasury Note...................... 7.75% 1/31/00 12,100 13,151,187
U.S. Treasury Note...................... 8.50% 2/15/00 830 925,708
U.S. Treasury Note...................... 6.88% 3/31/00 800 846,250
U.S. Treasury Note...................... 6.13% 7/31/00 5,000 5,150,000
U.S. Treasury Note...................... 8.75% 8/15/00 1,870 2,125,369
U.S. Treasury Note...................... 7.50% 11/15/01 18,050 19,900,125
U.S. Treasury Note...................... 7.50% 5/15/02 150 166,500
U.S. Treasury Note...................... 7.25% 5/15/04 1,500 1,669,217
U.S. Treasury Note...................... 7.25% 8/15/04 2,365 2,631,063
U.S. Treasury Note...................... 7.88% 11/15/04 9,700 11,236,829
U.S. Treasury Note...................... 7.63% 2/15/25 3,000 3,666,558
------------
93,018,760
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $90,128,484)..................... 94,276,572
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $168,543,796).................... 175,761,194
------------
SHORT-TERM INVESTMENT--10.5%
REPURCHASE AGREEMENT--10.5%
Repurchase Agreement with National
Westminster Bank dated 12/29/95, with
a maturity value of $20,870,094 (See
Footnote A)........................... 5.65% 1/2/96 20,857 20,857,000
------------
TOTAL SHORT-TERM INVESTMENT (COST
$20,857,000)........................... 20,857,000
------------
TOTAL INVESTMENTS--99.1%
(COST $189,400,796)(A)................. 196,618,194
Other assets in excess of liabilities--
0.9%................................... 1,665,477
------------
NET ASSETS--100.0%....................... $198,283,671
============
</TABLE>
- - -----------
Percentages indicated are based on net assets of $198,283,671.
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................................... $7,224,889
Unrealized depreciation......................................... (7,491)
----------
Net unrealized appreciation..................................... $7,217,398
==========
</TABLE>
(b) Illiquid security.
Footnote A: Collateralized by $22,100,000 U.S. Treasury Bill due 9/19/96, with
a value of $21,293,129.
See Notes to Financial Statements.
66
<PAGE>
PRAIRIE FUNDS
BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS--50.2%
ASSET-BACKED SECURITIES--7.7%
Advanta Mortgage Loan Trust,
Series 1994-3, Class A2............... 7.60% 7/25/10 $ 1,625 $ 1,679,030
First U.S.A. Credit Card Master Trust,
Series 1992-1, Class A................ 5.20% 6/15/98 833 832,116
Green Tree Financial Corporation,
Manufactured Housing Senior
Subordinate Passthrough,
Series 1995-4, Class A6............... 7.30% 7/15/25 3,000 3,169,227
Security Pacific Acceptance Corp.
Manufactured Housing Contract
Senior Subordinate, Series 1995-1,
Class A3.............................. 7.25% 4/10/20 2,000 2,119,118
Standard Credit Card Master Trust I,
Participation Certificates,
Series 1994-2, Class A................ 7.25% 4/7/06 1,800 1,945,636
------------
9,745,127
------------
BANKING--15.8%
ABN-AMRO Bank N.V., Chicago Subordinate
Note.................................. 7.25% 5/31/05 2,000 2,141,566
Chase Manhattan Corp.,
Subordinate Note...................... 9.75% 11/1/01 2,000 2,359,862
Chemical Master Credit Card Trust I,
Series 1995-3, Asset-Backed CTF, Class
A..................................... 6.23% 4/15/05 1,000 1,022,699
Chevy Chase Auto Receivables Trust,
Series 1995-2 Class A................. 5.80% 6/15/02 2,000 2,010,458
First Union Corp., Subordinate Note..... 6.88% 9/15/05 2,000 2,086,634
Interamerican Development Bank,
Debentures............................ 8.50% 3/15/11 1,800 2,152,114
Interamerican Development Bank,
Debentures............................ 7.00% 6/15/25 2,200 2,347,633
International Bank for Reconstruction
and Development Debentures............ 9.64% 4/30/99 1,500 1,685,392
Midland Bank PLC, Subordinate Note...... 8.63% 12/15/04 1,500 1,727,549
Solomon, Inc., Senior Notes............. 6.70% 12/1/98 2,500 2,516,825
------------
20,050,732
------------
</TABLE>
See Notes to Financial Statements.
67
<PAGE>
PRAIRIE FUNDS
BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
BEVERAGE, FOOD AND TOBACCO--0.7%
Grand Metro Investment Corp.,
Guaranteed Note....................... 7.13% 9/15/04 $ 800 $ 854,929
------------
CABLE TV SYSTEMS--3.0%
Cablevision Industries Corp., Senior
Debentures............................ 9.25% 4/1/08 3,500 3,797,500
------------
CHEMICALS--1.4%
Monsanto Co., Debenture................. 8.20% 4/15/25 1,500 1,725,809
------------
ENTERTAINMENT--2.2%
News America Holdings, Senior Note...... 8.50% 2/15/05 2,500 2,821,893
------------
FINANCE--2.0%
American Express Co., Debentures........ 8.63% 5/15/22 800 911,707
Sears Credit Master Trust II,
Series 1995-3, Class A................ 7.00% 10/15/04 1,600 1,679,742
------------
2,591,449
------------
FOREST AND PAPER PRODUCTS--0.7%
Weyerhaeuser Co., Debentures............ 8.38% 2/15/07 800 943,652
------------
HEALTH CARE & HOSPITAL MANAGEMENT--3.8%
Coastal Corp. .......................... 7.75% 10/15/35 2,000 2,136,354
Columbia/HCA Healthcare Corp. .......... 7.58% 9/15/25 2,500 2,723,243
------------
4,859,597
------------
HOTELS AND GAMING--1.7%
Marriott International, Inc., Senior
Note, Series B........................ 7.88% 4/15/05 2,000 2,175,162
------------
RETAIL STORES--5.8%
Dayton Hudson Credit Card Master Trust
Series 95-1, Class A.................. 6.10% 2/25/02 1,500 1,525,948
Dayton Hudson Corp., Debenture.......... 7.88% 6/15/23 1,800 1,867,500
Federated Department Stores, Senior
Notes................................. 8.13% 10/15/02 4,000 4,040,000
------------
7,433,448
------------
TELECOMMUNICATIONS--4.6%
ITT Corp................................ 7.75% 11/15/25 2,000 2,052,980
TCI Communications, Inc. ............... 8.75% 8/1/15 3,500 3,862,891
------------
5,915,871
------------
</TABLE>
See Notes to Financial Statements.
68
<PAGE>
PRAIRIE FUNDS
BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
UTILITIES--0.8%
West Texas Utilities First Mortgage,
Series U............................. 6.38% 10/1/05 $ 1,000 $ 1,017,028
------------
TOTAL CORPORATE OBLIGATIONS
(COST $60,247,885).................... 63,932,197
------------
U.S. GOVERNMENT OBLIGATIONS--40.1%
U.S. TREASURY BONDS--8.0%
U.S. Treasury Bond..................... 10.75% 5/15/03 1,000 1,314,686
U.S. Treasury Bond..................... 11.13% 8/15/03 3,500 4,702,026
U.S. Treasury Bond..................... 12.00% 8/15/13 1,760 2,717,000
U.S. Treasury Bond..................... 9.88% 11/15/15 1,000 1,448,125
------------
10,181,837
------------
U.S. TREASURY NOTES--32.1%
U.S. Treasury Note..................... 5.88% 5/31/96 3,850 3,860,822
U.S. Treasury Note..................... 4.75% 2/15/97 3,500 3,483,588
U.S. Treasury Note..................... 7.88% 1/15/98 700 735,875
U.S. Treasury Note..................... 5.00% 1/31/99 6,450 6,403,631
U.S. Treasury Note..................... 7.75% 11/30/99 1,500 1,625,625
U.S. Treasury Note..................... 6.75% 4/30/00 6,200 6,527,428
U.S. Treasury Note..................... 7.75% 2/15/01 2,000 2,210,000
U.S. Treasury Note..................... 7.50% 11/15/01 6,000 6,615,000
U.S. Treasury Note..................... 7.25% 5/15/04 8,500 9,458,894
------------
40,920,863
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $48,518,853).................... 51,102,700
------------
U.S. GOVERNMENT AGENCY
OBLIGATION--0.1%
Government National Mortgage
Association, Pool #201299 (cost
$77,388).............................. 8.50% 2/15/17 77 81,023
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $108,844,126)................... $115,115,920
------------
</TABLE>
See Notes to Financial Statements.
69
<PAGE>
PRAIRIE FUNDS
BOND FUND
- - -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENT--8.8%
REPURCHASE AGREEMENT--8.8%
Repurchase agreement with National
Westminster Bank dated 12/29/95, with a
maturity value of $11,174,010 (see
Footnote A)............................ 5.65% 1/2/96 $11,167 $ 11,167,000
------------
TOTAL SHORT-TERM INVESTMENT
(COST $11,167,000)...................... 11,167,000
------------
TOTAL INVESTMENTS
(COST $120,011,126)(A)--99.2%........... 126,282,920
Other assets in excess of liabilities--
0.8%.................................... 1,025,749
------------
NET ASSETS--100.0%........................ $127,308,669
============
</TABLE>
- - -----------
Percentages are based on net assets of $127,308,669.
(a) Represents cost for federal income tax and financial reporting purposes
and differs from value by net unrealized appreciation of securities as
follows:
<TABLE>
<S> <C>
Unrealized appreciation......................................... $6,271,794
Unrealized depreciation......................................... --
----------
Net unrealized appreciation..................................... $6,271,794
==========
</TABLE>
Footnote A: Collateralized by $11,300,000 U.S. Treasury Note, 5.63%, due
10/31/97; with a value of $11,480,710.
See Notes to Financial Statements.
70
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000)* (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS--5.3%
BRITISH POUNDS STERLING--1.3%
Barclays Bank........................... 10.25% 12/10/97 120 $ 197,956
-----------
FRENCH FRANCS--1.9%
Unilever NV............................. 9.88% 9/4/97 1,300 284,768
-----------
JAPANESE YEN--2.1%
Export-Import Bank of Japan............. 4.38% 10/1/03 30,000 319,530
-----------
TOTAL CORPORATE OBLIGATIONS
(COST $456,789)........................ 802,254
-----------
FOREIGN GOVERNMENT
OBLIGATIONS--50.0%
BELGIUM FRANCS--3.6%
Belgium Government, Series 19........... 6.50% 3/31/05 16,000 536,496
-----------
BRITISH POUNDS STERLING--3.0%
United Kingdom Exchequer................ 12.25% 3/26/99 250 451,346
-----------
CANADIAN DOLLARS--3.7%
Canadian Government..................... 9.75% 10/1/97 200 156,206
Canadian Government..................... 10.75% 3/15/98 500 402,832
-----------
559,038
-----------
DANISH KRONE--2.6%
Kingdom of Denmark...................... 9.00% 11/15/98 2,000 393,120
-----------
FINLAND--2.3%
Republic of Finland..................... 6.00% 1/29/02 30,000 346,800
-----------
FRENCH FRANCS--5.4%
France O.A.T............................ 8.50% 6/25/97 2,800 599,348
France O.A.T............................ 5.50% 4/25/04 1,100 210,265
-----------
809,613
-----------
GERMAN DEUTSCHEMARKS--9.2%
Austria Republic........................ 6.00% 4/1/98 600 435,555
Bundesrepublic.......................... 9.00% 10/20/00 600 488,375
Deutsche Bundespost..................... 7.50% 8/2/04 600 453,497
-----------
1,377,427
-----------
</TABLE>
See Notes to Financial Statements.
71
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000)* (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
ITALIAN LIRA--6.1%
Italy Government.............. 8.50% 1/1/99 15,000,000 $ 910,500
-----------
JAPANESE YEN--5.6%
Japan Development Bank........ 6.50% 9/20/01 35,000 414,155
Japan Government Bank, Series
175......................... 4.50% 12/20/04 40,000 430,240
-----------
844,395
-----------
NETHERLAND GUILDERS--5.0%
Netherland Government......... 5.75% 1/15/04 1,200 744,109
-----------
SPANISH PESETAS--3.5%
Spanish Government............ 8.00% 5/30/04 70,000 523,040
-----------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS
(COST $7,387,364)............ 7,495,884
-----------
SUPRANATIONAL OBLIGATIONS--13.4%
GERMAN DEUTSCHEMARKS--3.1%
European Investment Bank...... 7.50% 11/4/02 600 457,982
-----------
JAPANESE YEN--10.3%
Asian Development Bank........ 5.00% 2/5/03 40,000 441,080
Council of Europe............. 6.88% 3/5/01 30,000 356,250
IBRD.......................... 5.25% 3/20/02 30,000 337,890
Interamerican Development
Bank........................ 7.25% 5/15/00 35,000 415,625
-----------
1,550,845
-----------
TOTAL SUPRANATIONAL OBLIGATIONS
(COST $2,035,096)............ 2,008,827
-----------
SHORT-TERM INVESTMENT--32.1%
U.S. TREASURY BILL--32.1%
U.S. Treasury Bill............ 5.18%** 1/4/96 4,815(b) 4,812,922
-----------
TOTAL SHORT-TERM INVESTMENT
(COST $4,812,922)............ 4,812,922
-----------
TOTAL INVESTMENTS
(COST $14,692,171)(A)--
100.8%....................... 15,119,887
Liabilities in excess of
assets--(0.8%)............... (124,599)
-----------
TOTAL NET ASSETS--100.0%....... $14,995,288
===========
</TABLE>
See Notes to Financial Statements.
72
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
- - -----------
Percentages indicated are based on net assets of $14,995,288.
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................... $427,716
Unrealized depreciation........................................... --
--------
Net unrealized appreciation....................................... $427,716
========
</TABLE>
(b) Denominated in U.S. dollars.
<TABLE>
<CAPTION>
FORWARD FOREIGN CURRENCY CONTRACT
Principal Market
Amount in Value
Local in U.S. Unrealized
Currency Proceeds Dollars Appreciation
--------- -------- ------- ------------
<S> <C> <C> <C> <C>
Japanese Yen, expiring 2/10/96 300,000,000 $3,036,130 $2,928,038 $108,092
========
</TABLE>
* Numbers are presented in local currency unless otherwise indicated.
** Yield at purchase.
See Notes to Financial Statements.
73
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS--98.9%
ALASKA--0.7%
Alaska Student Loan Corp.,
Student Loan Revenue,
State Assisted, Series A
(A.M.T.)................. A/A 5.50% 7/1/04 $ 1,000 $ 1,007,940
North Slope Boro Refunding,
Series G (FSA Insured)... Aaa/AAA 8.35% 6/30/98 1,500 1,650,360
------------
2,658,300
------------
ARIZONA--1.3%
Maricopa County University
School District No. 41,
Series C, Collateralized
by U.S. Government
Securities (Pre-refunded
at 100 on 7/1/04)(FGIC
Insured)................. Aaa/AAA 6.10% 7/1/14 2,000 2,219,600
Pima County Refunding,
Series A................. Aa/A+ 5.00% 7/1/02 3,000 3,103,440
------------
5,323,040
------------
CALIFORNIA--12.5%
California Health
Facilities Financing
Authority Revenue
Refunding, Catholic
Health Facilities
Insured, Series B (AMBAC
Insured)................. Aaa/AAA 4.50% 7/1/02 2,500 2,506,275
California Health
Facilities Financing, St.
Joseph's Health Systems,
Collateralized by U.S.
Government Securities
(Pre-refunded at 102 on
7/1/99).................. NR/AA- 6.90% 7/1/14 6,750 7,490,137
</TABLE>
See Notes to Financial Statements.
74
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
Central Valley Financing
Authority,
Califcogeneration Project
Revenue, Carson Ice
Generation Project....... NR/BBB- 5.50% 7/1/01 $ 975 $ 993,515
Central Valley Financing
Authority,
Califcogeneration Project
Revenue, Carson Ice
Generation Project....... NR/BBB- 5.40% 7/1/00 2,550 2,598,909
Fresno Health Facilities
Revenue, Holy Cross
Health Systems Corp.
(MBIA Insured)........... A1/AA- 5.10% 12/1/03 1,570 1,626,834
Fresno Health Facilities
Revenue, Holy Cross
Health Systems Corp.
(MBIA Insured)........... A1/AA- 5.10% 12/1/03 635 657,987
Fresno Health Facilities
Revenue, Holy Cross
Health Systems Corp.
(MBIA Insured)........... A1/AA- 5.00% 12/1/02 1,500 1,548,900
Los Angeles Wastewater
Systems Revenue, Series A
(MBIA Insured)........... Aaa/AAA 8.50% 6/1/00 1,360 1,592,519
MSR Public Power Agency
California, San Juan
Project
Revenue Refunding, Series F
(AMBAC Insured).......... Aaa/AAA 5.55% 7/1/02 1,615 1,721,429
Northern California Power
Agency, Public Power
Refunding, Geothermal
Project #3, Series A..... Aaa/AAA 5.85% 7/1/10 4,625 4,983,946
Northern California Power
Agency, Public Power
Refunding, Series B-1,
Collateralized by U.S.
Government Securities
(Pre-refunded at 100 on
7/1/98).................. NR/AAA 8.00% 7/1/24 3,000 3,291,660
</TABLE>
See Notes to Financial Statements.
75
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
Sacramento Cogeneration
Authority Revenue,
Procter & Gamble Project. NR/BBB- 5.90% 7/1/02 $ 1,000 $ 1,027,670
Sacramento Cogeneration
Authority Revenue,
Procter & Gamble Project. NR/BBB- 5.80% 7/1/01 1,300 1,333,800
Sacramento Cogeneration
Authority Revenue,
Procter & Gamble Project. NR/BBB- 5.60% 7/1/99 3,300 3,373,557
South Coast Air Quality
Management District
Building Corp.,
California Revenue
Institutional Sale,
Series B, (Pre-refunded
at 102 on 8/1/99)........ Aaa/AAA 7.13% 8/1/14 3,650 4,092,270
University of California
Revenue Refunding,
Multiple Purpose Projects
(MBIA Insured)........... Aaa/AAA 6.20% 9/1/01 6,675 7,312,129
University of California
Revenue Refunding,
Multiple Purpose
Projects, Series B (MBIA
Insured)................. Aaa/AAA 4.90% 9/1/08 3,140 3,064,514
------------
49,216,051
------------
COLORADO--8.3%
Adams County Single Family
Mortgage Revenue, Series
A, Collateralized by U.S.
Government Securities.... Aaa/AAA 8.88% 8/1/03 1,230 1,579,037
Denver City and County
Airport, Series A
(A.M.T.)................. Baa/BB 7.40% 11/15/04 200 224,006
Denver City and County
Airport, Series A........ Aaa/AAA 8.50% 11/15/07 2,000 2,344,740
Denver City and County
Airport, Series A........ B/BB 8.00% 11/15/17 4,215 4,505,624
Denver City and County
Airport, Series A........ NR/NR 8.00% 11/15/25 1,360 1,542,158
</TABLE>
See Notes to Financial Statements.
76
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
COLORADO (CONTINUED)
Denver City and County
Airport, Series B
(A.M.T.)................. NR/NR 7.25% 11/15/05 $ 2,000 $ 2,195,120
Denver City and County
Airport, Series C........ B/BB 6.55% 11/15/03 1,145 1,219,425
Denver City and County
Airport, Series D........ B/BB 7.30% 11/15/00 2,900 3,171,556
Denver City & County Water
Refunding................ Aa/AA 7.00% 10/1/99 8,665 9,548,137
Denver Metropolitan Major
League Baseball Stadium,
Colorado Revenue
Refunding, Sales Tax,
Baseball Stadium Project
(FGIC Insured)........... Aaa/AAA 4.60% 10/1/05 2,000 1,982,040
Poudre Valley Hospital
District Revenue,
Collateralized by U.S.
Government Securities,
(Pre-refunded at 101 on
12/1/01) (AMBAC Insured). Aaa/AAA 6.63% 12/1/01 3,750 4,243,163
------------
32,555,006
------------
DISTRICT OF COLUMBIA--4.9%
District of Columbia,
Series A, Collateralized
by U.S. Government
Securities (Pre-refunded
at 102 on 6/1/00)........ Aaa/AAA 7.25% 6/1/05 1,125 1,283,299
District of Columbia
Hospital Revenue,
Washington Hospital
Center Corp. Issue,
Series A, Collateralized
by U.S. Government
Securities (Pre-refunded
at 102 on 1/1/01)........ NR/BBB 8.75% 1/1/15 2,750 3,330,608
</TABLE>
See Notes to Financial Statements.
77
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
DISTRICT OF COLUMBIA (CONTINUED)
District of Columbia Refunding,
Series A-1 (MBIA Insured).... Aaa/AAA 4.75% 6/1/03 $ 2,960 $ 2,950,735
District of Columbia Refunding,
Series A-1 (MBIA Insured).... Aaa/AAA 4.65% 6/1/02 1,500 1,494,180
District of Columbia Refunding,
Series B-1 (AMBAC Insured)... Aaa/AAA 5.10% 6/1/03 3,000 3,055,530
District of Columbia Refunding,
Series B-1 (AMBAC Insured)... Aaa/AAA 5.40% 6/1/06 4,850 4,966,303
District of Columbia Refunding,
Series B-3 (MBIA Insured).... Aaa/AAA 5.20% 6/1/04 2,000 2,040,920
------------
19,121,575
------------
FLORIDA--3.6%
Florida State Board of
Education Capital Outlay
Refunding, Series A,
Collateralized by U.S.
Government Securities (Pre-
refunded at 102 on 6/1/00)... Aaa/AAA 7.25% 6/1/23 4,620 5,282,185
Orlando Utilities Commission
Water & Electric Revenue,
Series A..................... Aa/AA 5.25% 10/1/23 7,500 7,343,775
Orlando Utilities Commission
Water & Electric Revenue,
Series D..................... Aa/AA- 5.00% 10/1/23 1,500 1,431,705
------------
14,057,665
------------
GEORGIA--6.0%
Georgia State,
General Obligation........... Aaa/AA+ 7.25% 9/1/04 9,440 11,310,253
</TABLE>
See Notes to Financial Statements.
78
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
GEORGIA (CONTINUED)
Georgia State,
General Obligation....... Aaa/AA+ 7.25% 9/1/05 $ 10,130 $ 12,235,014
------------
23,545,267
------------
HAWAII--2.5%
Hawaii State Department of
Budget & Finance Special
Purpose Mortgage Revenue,
Kapiolani Healthcare
System................... A/A 5.60% 7/1/02 2,065 2,130,770
Hawaii State Refunding,
Series C................. Aa/AA 4.25% 7/1/99 7,500 7,549,800
------------
9,680,570
------------
ILLINOIS--12.2%
Chicago Metropolitan Water
Reclamation District..... Aa/AA 5.00% 12/1/02 4,500 4,671,720
Chicago Public Community
Building Revenue, Series
A (MBIA Insured)......... Aaa/AAA 4.90% 12/1/01 3,000 3,087,600
Illinois Health Facilities
Authority Revenue
Refunding, Illinois
Masonic Medical Center... A/A- 5.20% 10/1/03 750 753,743
Illinois Health Facilities
Authority Revenue
Refunding, Illinois
Masonic Medical Center... A/A- 5.10% 10/1/02 1,180 1,185,263
Illinois Health Facilities
Authority Revenue
Refunding, Illinois
Masonic Medical Center... A/A- 5.00% 10/1/01 1,120 1,124,357
Illinois Health Facilities
Authority Revenue
Refunding, Illinois
Masonic Medical Center... A/A- 4.90% 10/1/00 825 827,714
</TABLE>
See Notes to Financial Statements.
79
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
Illinois Health
Facilities Authority
Revenue Refunding &
Improvement, Swedish
Covenant,
Series A.............. Baa1/A- 6.10% 8/1/08 $ 1,000 $ 1,033,280
Illinois State Sales Tax
Revenue, Series S..... A1/AAA 4.85% 6/15/06 11,300 11,276,722
Illinios State Toll
Highway Authority,
Toll Highway Priority
Revenue, Series A..... A1/A 3.50% 1/1/05 4,000 3,630,240
Illinois Health
Facilities Authority
Revenue Refunding,
Illinois Memorial
Hospital.............. VMIG1/NR 5.60% 1/1/16 1,930 1,930,000
Metropolitan Pier &
Exposition Authority,
Illinois Dedicated
State Tax Revenue..... A/A+ 6.40% 6/1/03 10,495 11,636,226
Metropolitan Pier &
Exposition Authority,
Illinois Dedicated
State Tax Revenue..... A/A+ 6.50% 6/1/05 2,960 3,336,482
Regional Transportation
Authority, Series A
(AMBAC Insured)....... Aaa/AAA 8.00% 6/1/03 2,785 3,357,067
------------
47,850,414
------------
IOWA--0.8%
Iowa Student Loan
Liquidity Corp.
Student Loan Revenue,
Series A.............. Aa1/NR 6.00% 3/1/98 3,000 3,104,850
------------
INDIANA--3.1%
Indiana Bond Bank,
Special Program,
Series A-2............ A/NR 4.75% 11/1/02 375 374,760
Indiana Bond Bank,
Special Program,
Series A-2............ A/NR 4.65% 11/1/01 375 374,599
Indiana Bond Bank
Revenue Guarantee,
State Revolving Fund
Program, Series A..... NR/A 5.80% 2/1/02 500 527,185
</TABLE>
See Notes to Financial Statements.
80
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
INDIANA (CONTINUED)
Indiana Bond Bank Revenue
Guarantee, State Revolving
Fund Program, Series A.... NR/A 5.60% 2/1/05 $ 700 $ 727,230
Indiana Health Facility,
Funding Authority Revenue,
Capital Access Designated
Pool...................... VMIG1/NR 5.60% 12/1/10 1,000 1,000,000
Indiana State Office
Community Building Capital
Complex Revenue Refunding,
State Office Building II
Facilities, Series D...... A1/A+ 6.50% 7/1/99 3,000 3,187,590
Indianapolis Economic
Development Water
Facilities Revenue
Refunding, Indianapolis
Water Co. Project......... A1/A+ 5.20% 5/1/01 5,810 5,948,162
------------
12,139,526
------------
MASSACHUSETTS--3.9%
Massachusetts Bay
Transportation Authority,
General Transportation
Systems, Series A,
Collateralized by U.S.
Government Securities
(Pre-refunded at 102 on
3/1/01)................... Aaa/A+ 7.00% 3/1/22 3,500 4,000,500
Massachusetts Municipal
Wholesale Electric Company
Supply System Revenue,
Series B.................. Aaa/AAA 4.50% 7/1/04 4,215 4,163,703
Massachusetts State General
Obligation, Series B...... A/A+ 9.25% 7/1/00 2,000 2,400,240
Massachusetts State
Refunding, Series A....... A1/A+ 6.25% 7/1/02 4,500 4,949,190
------------
15,513,633
------------
</TABLE>
See Notes to Financial Statements.
81
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
NEVADA--3.4 %
Clark County General
Obligation................ A1/A+ 7.00% 9/1/00 $ 6,705 $ 7,482,914
Las Vegas Refunding......... A1/A 6.40% 10/1/03 2,250 2,488,680
Nevada State Municipal Bond
Bank Project No. R-5,
Series A.................. Aa/AA 6.00% 5/1/02 1,000 1,083,500
Nevada State Municipal Bond
Bank Project No. R-5,
Series A.................. Aa/AA 4.50% 11/1/02 1,020 1,026,212
Nevada State Refunding,
Series C.................. Aa/AA 5.90% 4/1/01 1,000 1,074,230
------------
13,155,536
------------
NEW YORK--8.9%
New York City, General
Obligation, Series F...... Aaa/AAA 3.00% 11/15/00 3,000 2,857,260
New York City Municipal
Water Financing Authority
Water & Sewer Systems
Revenue, Series C,
Collateralized by U.S.
Government Securities
(Pre-refunded at 101.5 on
6/15/01) (FGIC Insured)... Aaa/AAA 7.00% 6/15/16 3,805 4,369,548
New York State Local
Assistance Corp., Series
A, Collateralized by U.S.
Government Securities
(Pre-refunded at 102 on
4/1/01)................... Aaa/AAA 7.25% 4/1/18 2,000 2,319,020
New York State Local
Assistance Corp., Series
B, Collateralized by U.S.
Government Securities
(Pre-refunded at 102 on
4/1/01)................... Aaa/AAA 7.50% 4/1/20 4,255 4,983,456
</TABLE>
See Notes to Financial Statements.
82
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
New York State Local
Assistance Corp., Series
C, Collateralized by U.S.
Government Securities
(Pre-refunded at 102 on
4/1/01)................... Aaa/AAA 7.00% 4/1/21 $ 825 $ 946,960
New York State Throughway
Authority, Highway &
Bridge Traffic Fund,
Series A.................. A/A- 6.00% 4/1/99 17,025 17,736,645
Triborough Bridge & Tunnel
Authority, New York
Revenue, Series R,
Collateralized by U.S.
Government Securities
(Pre-refunded at 100 on
1/1/00)................... Aaa/AAA 6.00% 1/1/20 1,500 1,604,865
------------
34,817,754
------------
NORTH CAROLINA--0.8%
North Carolina Municipal
Power Agency No. 1,
Catawba Electric Revenue,
(MBIA Insured)............ Aaa/AAA 7.25% 1/1/07 2,500 2,989,300
------------
PENNSYLVANIA--10.7%
Geisinger Authority Health
Systems, Series A......... NR/NR 5.50% 7/1/03 2,895 3,063,489
Pennsylvania
Intergovernmental
Cooperative Authority,
Special Tax Revenue, City
of Philadelphia Funding
Program Collateralized by
U.S. Government Securities
(Pre-refunded at 100 on
6/15/02).................. Aaa/AAA 6.80% 6/15/22 9,375 10,662,094
Pennsylvania
Intergovernmental
Cooperative Authority,
Special Tax Revenue, City
of Philadelphia Funding
Program (FGIC Insured).... Aaa/AAA 6.00% 6/15/00 7,000 7,497,280
</TABLE>
See Notes to Financial Statements.
83
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
Philadelphia Gas Works
Revenue, Fourteenth
Series.................... Aaa/AAA 7.00% 7/1/02 $12,090 $ 13,759,992
Philadelphia Gas Works
Revenue, Fifteenth Series
(FSA Insured)............. Aaa/AAA 4.90% 8/1/02 1,350 1,378,903
Pittsburgh Water & Sewer
Authority, Water & Sewer
System Revenue, Series A,
(Pre-refunded at 102 on
9/1/01)................... Aaa/AAA 6.50% 9/1/14 5,000 5,642,850
------------
42,004,608
------------
SOUTH CAROLINA--1.3%
South Carolina State Public
SVC Authority Revenue,
Series A.................. A1/A+ 5.00% 7/1/01 5,000 5,137,900
------------
TENNESSEE--1.3%
Chattanooga-Hamilton County,
Hospital Authority
Hospital Revenue, Enlanger
Medical Center............ Aaa/AAA 5.63% 10/1/09 5,000 5,274,550
------------
TEXAS--1.2%
Dallas Independent School
District, Collateralized
by U.S. Government
Securities................ Aa/AAA 8.70% 8/1/00 1,000 1,188,280
Humble Independent School
District Refunding
(PSFG Insured)............ Aaa/AAA 6.00% 2/15/04 2,035 2,203,132
Texas State Public Financing
Authority, Series A....... Aa/AA 8.00% 10/1/99 1,000 1,134,560
------------
4,525,972
------------
VIRGINIA--1.7%
Fairfax County Refunding,
Series A.................. Aaa/AAA 5.80% 6/1/02 5,250 5,373,060
Virginia Beach Public
Improvement, Series A..... Aa/AA 6.85% 5/1/99 1,100 1,187,384
------------
6,560,444
------------
</TABLE>
See Notes to Financial Statements.
84
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
WASHINGTON--2.3%
King County General
Obligation, Series A. Aa1/AA+ 9.00% 12/1/99 $ 1,200 $ 1,407,888
Snohomish County Public
Utilities District
No. 001, Electric
Revenue Generation
System,
Series B (A.M.T.).... A1/A+ 5.15% 1/1/03 1,280 1,299,533
Washington State Health
Care Facility
Authority Revenue,
Fred Hutchinson
Cancer............... VMIG1/NR 6.00% 1/1/18 450 450,000
Washington State Health
Care Facility
Authority Revenue,
Fred Hutchinson
Cancer............... VMIG1/NR 6.00% 1/1/18 1,335 1,335,000
Washington State Public
Power Supply Systems,
Nuclear Project No. 1
Revenue, Series A,
Collateralized by
U.S. Government
Securities (Pre-
refunded at 102 on
7/1/99) (MBIA
Insured)............. Aaa/AAA 7.50% 7/1/15 1,420 1,603,279
Washington State Public
Power Supply Systems,
Nuclear Project No. 2
Revenue, Series B
(MBIA Insured)....... Aaa/AAA 5.10% 7/1/04 2,800 2,844,408
------------
8,940,108
------------
WEST VIRGINIA--1.7%
Pleasants County
Pollution Control
Revenue Refunding,
Monongahela Power
Co., Series B........ A1/NR 6.88% 4/1/98 6,105 6,502,558
------------
</TABLE>
See Notes to Financial Statements.
85
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
WISCONSIN--5.8%
Wisconsin Health
Facility Authority
Revenue, Franciscan
Health Care.......... VMIG1/A-1+ 5.50% 1/1/16 $ 235 $ 235,000
Wisconsin State General
Obligation, Series B. Aa/AA 7.00% 5/1/01 3,950 4,454,652
Wisconsin State General
Obligation, Series B. Aa/AA 7.00% 5/1/02 4,155 4,750,328
Wisconsin State General
Obligation, Series B. Aa/AA 7.00% 5/1/03 4,625 5,345,205
Wisconsin State General
Obligation, Series 2. Aa/AA 5.13% 11/1/08 3,000 3,039,270
Wisconsin State
Refunding, Series 3.. Aa/AA 4.25% 11/1/99 4,895 4,924,908
------------
22,749,363
------------
TOTAL INVESTMENTS
(COST
$370,618,759)(A)--
98.9%................. 387,423,990
Other assets in excess
of liabilities--1.1%.. 4,446,727
------------
NET ASSETS--100.0%...... $391,870,717
============
</TABLE>
- - -----------
Percentages indicated are based on net assets of $391,870,717.
(a) Represents cost for federal income tax and financial reporting purposes and
differs from the value by net unrealized appreciation of securities as
follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................ $16,805,231
Unrealized depreciation........................................ --
-----------
Net unrealized appreciation.................................... $16,805,231
===========
</TABLE>
AMBAC--American Municipal Bond Assurance Corporation.
A.M.T.--Subject to Alternative Minimum Tax.
FGIC--Financial Guaranty Insurance Company.
FSA--Financial Security Assurance.
MBIA--Municipal Bond Insurance Association.
NR--No rating available.
PSFG--Permanent School Fund Guaranty.
See Notes to Financial Statements.
86
<PAGE>
PRAIRIE FUNDS
MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS--98.9%
ALASKA--0.3%
Alaska Student Loan
Corp., Student Loan
Revenue State
Assisted, Series A
(AMBAC Insured),
(A.M.T.).............. Aaa/AAA 6.13% 7/1/05 $ 800 $ 832,792
------------
ARIZONA--1.1%
Maricopa County School
District No. 028,
Kyrene Elementary,
Series B
(FGIC Insured)........ Aaa/AAA 6.00% 7/1/14 2,500 2,631,675
------------
CALIFORNIA--15.9%
Central Valley Financing
Authority,
Califogeneration
Project Revenue,
Carson Ice Generation
Project............... Bbb-/BBB- 6.00% 7/1/09 5,600 5,699,344
Cupertino Certificates
of Participation, Open
Space Acquisition
Project,
Collateralized by U.S.
Government Securities
(Pre-refunded at 102
on 4/1/01)............ NR/NR 7.13% 4/1/16 2,675 3,064,186
Fresno Health Facilities
Revenue, Holy Cross
Health System Corp.
(MBIA Insured)........ A1/AA 5.25% 12/1/05 1,850 1,922,446
Los Angeles Wastewater
Systems Revenue,
Series D,
Collateralized by U.S.
Government Securities
(Pre-refunded at 102
on 12/1/00) (MBIA
Insured).............. Aaa/AAA 6.70% 12/1/21 10,000 11,316,500
Northern California
Power Agency, Public
Power Revenue
Refunding, Geothermal
Project No. 3, Series
A..................... Aaa/AAA 5.60% 7/1/06 3,500 3,728,620
</TABLE>
See Notes to Financial Statements.
87
<PAGE>
PRAIRIE FUNDS
MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
Northern California
Power Agency, Public
Power Revenue
Refunding, Geothermal
Project No. 3, Series
A.................... Aaa/AAA 5.65% 7/1/07 $ 4,800 $ 5,115,936
Northern California
Power Agency, Public
Power Revenue
Refunding, Geothermal
Project No. 3, Series
A.................... NR/NR 5.80% 7/1/09 4,000 4,309,440
Sacramento Cogeneration
Authority Revenue,
Procter & Gamble
Project.............. NR/BBB- 7.00% 7/1/05 1,500 1,666,005
Sacramento Cogeneration
Authority Revenue,
Procter & Gamble
Project.............. NR/BBB- 6.20% 7/1/06 2,500 2,567,950
------------
39,390,427
------------
COLORADO--12.2%
Denver City and County
Airport Revenue,
Series A (A.M.T.).... Baa/BB 8.50% 11/15/23 2,500 2,865,025
Denver City and County
Airport Revenue,
Series A (A.M.T.).... Baa/BB 8.00% 11/15/25 2,295 2,576,229
Denver City and County
Airport Revenue,
Series B (A.M.T.).... Baa/BB 7.25% 11/15/05 3,000 3,292,680
Denver City and County
Airport Revenue,
Series C (A.M.T.).... Baa/BB 6.50% 11/15/06 2,000 2,100,160
Denver City and County
Airport Revenue,
Series C (A.M.T.).... Baa/BB 6.13% 11/15/25 9,355 9,373,242
Denver City and County
Airport Revenue,
Series D (A.M.T.).... Baa/BB 7.75% 11/15/13 6,925 8,332,160
</TABLE>
See Notes to Financial Statements.
88
<PAGE>
PRAIRIE FUNDS
MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
COLORADO (CONTINUED)
Denver Metropolitan
Major League Baseball
Stadium District
Revenue Refunding,
Sales Tax, Baseball
Stadium Project
(FGIC Insured)........ Aaa/AAA 4.50% 10/1/04 $ 1,600 $ 1,593,600
------------
30,133,096
------------
FLORIDA--3.7%
Broward County
Educational Facilities
Authority Revenue,
Nova Southeastern
University Project
(Connie Lee Insured).. NR/AAA 5.70% 4/1/05 1,440 1,523,678
Florida State Board,
Education Capacity
Outlay, General
Obligation, Series D.. Aa/AA 5.13% 6/1/18 5,800 5,663,758
Orlando Florida
Utilities Commision
Water & Electric
Revenue, Series D..... Aa/AA- 5.00% 10/1/23 2,000 1,908,940
------------
9,096,376
------------
GEORGIA--12.7%
Fulton County School
District, General
Obligation............ Aa/AA 6.38% 5/1/10 5,000 5,716,650
Georgia State General
Obligation............ Aaa/AA+ 7.10% 9/1/09 8,500 10,358,185
Georgia State General
Obligation............ Aaa/AA+ 6.75% 9/1/11 10,000 11,956,500
Georgia State General
Obligation, Series F.. Aaa/AA+ 6.50% 12/1/05 3,060 3,530,750
------------
31,562,085
------------
ILLINOIS--11.0%
Chicago Airport Revenue
Refunding, 2nd Lien,
O'Hare International
Airport, Series C
(MBIA Insured)........ Aaa/AAA 5.75% 1/1/09 2,490 2,665,769
</TABLE>
See Notes to Financial Statements.
89
<PAGE>
PRAIRIE FUNDS
MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
Cook County Community
College, District No.
508 Lease, Series C
(MBIA Insured)........ Aaa/NR 7.70% 12/1/04 $ 5,000 $ 6,090,800
Cook County, General
Obligation, Series B.. Aaa/AAA 5.50% 11/15/22 2,535 2,511,982
Illinois Health
Facilities Authority
Revenue Refunding, Bro
Menn Healthcare (SPA--
Bankers Trust
Co.)(FGIC Insured).... Aaa/AAA 6.00% 8/15/05 1,000 1,087,560
Illinois Health
Facilities Authority
Revenue Refunding &
Improvement, Swedish
Covenant,
Series A.............. Baa1/A- 6.10% 8/1/08 2,600 2,686,528
Illinois Health
Facilities Authority
Revenue Refunding &
Improvement, Swedish
Covenant,
Series A.............. Baa1/A- 6.30% 8/1/13 2,375 2,446,298
Illinois State Sales Tax
Revenue Refunding,
Series Q.............. A1/AAA 5.75% 6/15/06 5,000 5,376,300
Winnebago & Boone
Counties School
District No. 205 (CGIC
Insured).............. Aaa/AAA 7.35% 2/1/04 3,600 4,280,976
------------
27,146,213
------------
INDIANA--3.5%
Indiana State Office
Building Commission,
Correctional
Facilities Revenue,
Series A.............. Aaa/AAA 5.50% 7/1/20 5,000 5,002,100
Indiana Transmission
Financing Authority
Highway Revenue,
Series A.............. A1/A+ 6.80% 12/1/16 1,200 1,411,512
</TABLE>
See Notes to Financial Statements.
90
<PAGE>
PRAIRIE FUNDS
MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ----- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
INDIANA (CONTINUED)
Indiana University
Revenue, Series K..... Aa/AA- 6.50% 8/1/05 $ 1,935 $ 2,197,289
------------
8,610,901
------------
MASSACHUSETTS--12.4%
Massachusetts Municipal
Electric Co., Power
Supply Systems
Revenue, Series B..... A/BBB+ 6.63% 7/1/03 4,535 5,060,516
Massachusetts State
Refunding, Series A... A1/A+ 6.25% 7/1/02 12,000 13,197,840
Massachusetts State
Refunding, Series B... A1/A+ 5.30% 11/1/05 2,300 2,395,611
Massachusetts State
Refunding, Series B... A1/A+ 5.40% 11/1/06 1,730 1,813,075
New England Educational
Loan Marketing Corp.,
Massachusetts Student
Loan Revenue
Refunding,
Series G.............. A1/A- 5.20% 8/1/02 8,000 8,160,480
------------
30,627,522
------------
MISSOURI--1.6%
Sikeston Electric
Revenue Refunding
(MBIA Insured)........ Aaa/AAA 6.00% 6/1/05 3,710 4,069,165
------------
NEVADA--1.9%
Clark County Industrial
Development Revenue
Refunding, Nevada
Power Co. Project,
Series C (AMBAC
Insured).............. Aaa/AAA 7.20% 10/1/22 4,115 4,711,387
------------
NEW YORK--0.8%
New York City General
Obligation, Sub Series
A-9................... A1/A+ 5.10% 8/1/18 2,000 2,000,000
------------
OHIO--2.0%
Columbus School
District, 144A*....... NR/NR 9.39% 5/1/97 688 702,076
</TABLE>
See Notes to Financial Statements.
91
<PAGE>
PRAIRIE FUNDS
MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ----- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
OHIO (CONTINUED)
Ohio State Highway,
Series T............. Aa/AAA 4.80% 5/15/02 $ 1,600 $ 1,644,592
Ohio State Public
Facilities
Commission, Higher
Education Capital
Facilities, Series II
A
(AMBAC Insured)...... Aaa/AAA 4.30% 12/1/08 2,890 2,676,920
------------
5,023,588
------------
OKLAHOMA--1.5%
Oklahoma State
Industrial Authority
Revenue Refunding,
Health Facilities,
Sisters of Mercy,
Series A............. Aa/AA 5.20% 6/1/05 3,600 3,719,016
------------
PENNSYLVANIA--0.5%
Philadelphia Gas Works
Revenue, Fifteenth
Series, (FSA
Insured)............. Aaa/AAA 5.13% 8/1/05 1,220 1,248,255
------------
RHODE ISLAND--2.1%
Rhode Island Depositors
Economic Protection
Corp., Series A (FSA
and MBIA Insured).... Aaa/AAA 6.30% 8/1/05 4,640 5,182,880
------------
TENNESSEE--5.0%
Knox County Health,
Educational & Housing
Facilities Board,
Hospital Facilities
Revenue Refunding,
Fort Sanders Alliance
(MBIA Insured)....... Aaa/AAA 7.25% 1/1/08 8,900 10,731,709
Knox County Health,
Educational & Housing
Facilities Board,
Hospital Facilities
Revenue Refunding,
Fort Sanders Alliance
(MBIA Insured)....... Aaa/AAA 7.25% 1/1/09 1,360 1,649,299
------------
12,381,008
------------
</TABLE>
See Notes to Financial Statements.
92
<PAGE>
PRAIRIE FUNDS
MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ----- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
TEXAS--5.9%
Texas City Industrial
Development Corp.,
Marine Terminal
Revenue Refunding,
Arco Pipe Line Co.
Project.............. A1/A 7.38% 10/1/20 $ 4,650 $ 5,791,436
Texas State College
Student Loan
(A.M.T.)............. Aa/AA 6.50% 8/1/07 4,000 4,362,360
Texas State Public
Finance Authority,
Series A............. Aa/AA 8.00% 10/1/99 3,930 4,458,821
------------
14,612,617
------------
WASHINGTON--2.8%
Chelan County Public
Utilities District
No. 001, Revenue,
Series E............. A1/A+ 5.70% 7/1/08 2,150 2,199,257
Washington State Public
Power Supply System
Nuclear Project No. 2
Revenue, Series C.... NR/AAA 7.63% 7/1/10 4,000 4,673,720
------------
6,872,977
------------
WISCONSIN--1.7%
Wisconsin State General
Obligation, Series B. Aa/AA 5.50% 5/1/09 4,160 4,290,083
------------
WYOMING--0.3%
Wyoming Community
Development
Authority, Single
Family, Series D
(FHA/VA Mortgage
Insured)............. Aa/AA 7.60% 6/1/17 800 856,440
------------
TOTAL INVESTMENTS
(COST
$231,324,230)(A)--
98.9%................. 244,998,503
Other assets in excess
of liabilities--1.1%.. 2,824,647
------------
NET ASSETS--100.0%...... $247,823,150
============
</TABLE>
See Notes to Financial Statements.
93
<PAGE>
PRAIRIE FUNDS
MUNICIPAL BOND FUND
- - -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - -------------------------------------------------------------------------------
- - -----------
Percentages indicated are based on net assets of $247,823,150.
* Securities exempt from registration under Rule 144A of the Securities Act
of 1993. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(a) Represents cost for federal income tax and financial reporting purposes
and differs from the value by net unrealized appreciation of the
securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................................... $13,674,273
Unrealized depreciation......................................... --
-----------
Net unrealized appreciation..................................... $13,674,273
===========
</TABLE>
AMBAC--American Municipal Bond Assurance Corporation.
A.M.T.--Subject to Alternative Minimum Tax.
CGIC--Capital Guaranty Insurance Corporation.
FGIC--Financial Guaranty Insurance Company.
FHA/VA--Federal Housing Association/Veterans Administration.
FSA--Financial Security Assurance.
MBIA--Municipal Bond Insurance Association.
NR--No rating available.
SPA--Standby Purchase Agreement.
See Notes to Financial Statements.
94
<PAGE>
PRAIRIE FUNDS
U.S. GOVERNMENT MONEY MARKET FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amortized
Maturity Amount Cost
Description Rate Date (000) (Note 2(a))
----------- ------ -------- --------- -----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--82.5%
U.S. TREASURY BILLS--82.5%
U.S. Treasury Bill..................... 5.35%* 1/11/96 $10,000 $ 9,985,194
U.S. Treasury Bill..................... 5.32%* 1/18/96 5,000 4,987,451
U.S. Treasury Bill..................... 5.34%* 1/25/96 10,000 9,964,400
U.S. Treasury Bill..................... 5.32%* 2/15/96 7,500 7,450,125
U.S. Treasury Bill..................... 5.30%* 3/7/96 7,500 7,427,194
U.S. Treasury Bill..................... 4.82%* 3/14/96 7,500 7,426,696
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $47,241,060).................... 47,241,060
-----------
TOTAL INVESTMENTS IN SECURITIES
(COST $47,241,060).................... 47,241,060
-----------
REPURCHASE AGREEMENTS--17.8%
Repurchase agreement with National
Westminster, dated 12/29/95, with a
maturity value of $10,206,403 (see
Footnote A).......................... 5.65% 1/2/96 10,200 10,200,000
-----------
TOTAL INVESTMENTS
(COST $57,441,060)(A)--100.3%......... 57,441,060
Liabilities in excess of other assets--
(0.3%)................................ (177,000)
-----------
NET ASSETS--100.0%...................... $57,264,060
===========
</TABLE>
- - -----------
Percentages indicated are based on net assets of $57,264,060.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Yield at purchase.
Footnote A: Collateralized by $10,100,000 U.S. Treasury Note, due 03/31/97;
with a value of $10,474,323.
See Notes to Financial Statements.
95
<PAGE>
PRAIRIE FUNDS
MONEY MARKET FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal Amortized
S&P Maturity Amount Cost
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
BANKERS ACCEPTANCES--4.9%
Bank of Tokyo............... P-1/A-1 5.81% 1/8/96 $ 5,000 $ 4,994,351
Dai-Ichi Kangyo............. P-1/A-1 5.81% 2/15/96 5,000 4,963,688
------------
TOTAL BANKERS ACCEPTANCES
(COST $9,958,039).......... 9,958,039
------------
CERTIFICATES OF DEPOSIT--39.7%
U.S. BRANCHES OF FOREIGN
BANKS--39.7%
ABN Amro.................... P-1/A-1+ 5.78% 2/1/96 7,000 7,000,494
Bank of Montreal............ P-1/A-1+ 5.78% 1/17/96 5,000 5,000,060
Banque Nationale de Paris... P-1/A-1 5.75% 2/5/96 7,000 7,000,251
Canadian Imperial Bank of
Commerce.................. P-1/A-1+ 5.60% 3/12/96 7,000 7,000,000
Commerz Bank AG............. P-1/A-1+ 5.77% 1/17/96 5,000 5,000,044
Fuji Bank, Ltd. ............ P-1/A-1 6.09% 1/18/96 7,000 7,000,099
Industrial Bank of Japan.... P-1/A-1 5.82% 1/17/96 5,000 4,999,747
Mitsubishi Bank, Ltd. ...... P-1/A-1+ 5.86% 3/6/96 7,000 7,000,849
National Westminster Bank... P-1/A-1+ 5.78% 1/16/96 5,000 5,000,054
Rabobank.................... P-1/A-1+ 5.75% 1/22/96 5,000 5,000,029
Sanwa Bank, Ltd. ........... P-1/A-1+ 6.03% 1/17/96 7,000 6,999,953
Societe Generale............ P-1/A-1 5.77% 2/2/96 7,000 7,000,392
Sumitomo Bank............... P-1/A-1 6.06% 1/18/96 7,000 7,000,066
------------
TOTAL CERTIFICATES OF DEPOSIT
(COST $81,002,038)......... 81,002,038
------------
COMMERCIAL PAPER--43.7%
DOMESTIC--34.4%
AT&T........................ P-1/A-1+ 5.54% 3/19/96 7,000 6,915,977
Barclays Funding............ P-1/A-1+ 5.67% 1/19/96 7,500 7,478,737
Ciesco L.P. ................ P-1/A-1+ 5.70% 1/19/96 7,500 7,478,625
Corporate Asset
Funding Co., Inc. ........ P-1/A-1+ 5.65% 2/9/96 7,000 6,957,154
Exxon Imperial.............. P-1/A-1+ 5.62% 1/16/96 6,000 5,985,950
Ford Motor Credit........... P-1/A-1 5.63% 2/13/96 7,500 7,449,565
Goldman Sachs............... P-1/A-1+ 5.55% 4/2/96 7,000 6,900,717
Morgan Stanley & Co. ....... P-1/A-1+ 6.00% 1/3/96 7,000 6,997,667
Nestle Capital.............. P-1/A-1+ 5.73% 1/12/96 7,000 6,987,744
Philip Morris............... P-1/A-1 5.72% 1/19/96 7,000 6,979,980
------------
70,132,116
------------
</TABLE>
See Notes to Financial Statements.
96
<PAGE>
PRAIRIE FUNDS
MONEY MARKET FUND
- - -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal Amortized
S&P Maturity Amount Cost
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
FOREIGN--9.3%
Bayerische Vereinsbank..... P-1/A-1+ 5.73% 1/8/96 $ 7,000 $ 6,992,201
Dresdner Finance........... P-1/A-1+ 5.69% 1/3/96 5,000 4,998,419
Deutsche Bank.............. P-1/A-1+ 5.74% 1/12/96 7,000 6,987,723
------------
18,978,343
------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST
$89,110,459).............. 89,110,459
------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS--0.0%
Small Business
Administration,
Pool #500870V*............ NR/NR 7.63% 4/25/96 6 5,887
------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(AMORTIZED COST $5,887)... 5,887
------------
TOTAL INVESTMENTS IN
SECURITIES (AMORTIZED COST
$180,076,423)............. 180,076,423
------------
REPURCHASE AGREEMENTS--12.3%
Repurchase agreement with
Daiwa Securities, dated
12/29/95, with a maturity
value of $15,009,166 (see
Footnote A).............. NR/NR 5.50% 1/2/96 15,000 15,000,000
Repurchase agreement with
National Westminster
Bank, dated 12/29/95,
with a maturity value of
$10,106,431 (see
Footnote B).............. NR/NR 5.65% 1/2/96 10,100 10,100,000
------------
TOTAL REPURCHASE AGREEMENTS
(AMORTIZED COST
$25,100,000).............. 25,100,000
------------
TOTAL INVESTMENTS
(AMORTIZED COST
$205,176,423)(A)--100.6%.. 205,176,423
Liabilities in excess of
other assets--(0.6%)...... (1,117,205)
------------
NET ASSETS--100.0%.......... $204,059,218
============
</TABLE>
- - -----------
Percentages indicated are based on net assets of $204,059,218.
(a) Cost for federal income tax and financial reporting purposes are the same.
NR--No rating available.
* Variable rate security. Interest rate stated is as of December 31, 1995.
Maturity date reflects the later of the next rate change or the next put
date.
Footnote A: Collateralized by $14,800,000 U.S. Treasury Note, 5.88%, due
07/31/97; with a value of $15,313,017.
Footnote B: Collateralized by $10,000,000 U.S. Treasury Note, 6.63%, due
03/31/97; with a value of $10,287,625.
See Notes to Financial Statements.
97
<PAGE>
PRAIRIE FUNDS
MUNICIPAL MONEY MARKET FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal Amortized
S&P Maturity Amount Cost
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
ALASKA--3.3%
City of Valdez, Marine
Terminal Revenue, CP,
Refunding, ARCO
Transportation
Project, Series A..... VMIG1/A-1 3.50% 2/5/96 $ 3,500 $ 3,500,000
City of Valdez, Marine
Terminal Revenue, CP,
Refunding, ARCO
Transportation
Project, Series A,
1994 A................ VMIG1/A-1 3.55% 1/5/96 4,000 4,000,000
------------
7,500,000
------------
ALABAMA--2.6%
Phenix City Alabama
(A.M.T.)(LC
ABN Amro)............. P-1/NR 3.55% 2/7/96 6,000 6,000,000
------------
CALIFORNIA--4.2%
Southeast Resource
Recovery Facility,
Authority of
California Lease
Revision, VRDN, Series
A, (LC Industrial Bank
of Japan Ltd)......... VMIG1/A-1 5.15%* 12/1/18 9,500 9,500,000
------------
COLORADO--4.4%
Burke County
(LC Credit Swisse).... VMIG1/A-1+ 3.40% 3/7/96 5,000 5,000,000
Colorado Student
Obligation Bond
Authority, VRDN,
Student Loan Revenue,
Series 1990A (A.M.T.)
(LC Student Loan
Marketing
Association).......... VMIG1/NR 5.20%* 9/1/24 5,000 5,000,000
------------
10,000,000
------------
FLORIDA--8.4%
Florida Municipal Power
(LC First Union)...... P-1/A-1 3.50% 2/8/96 7,500 7,500,000
West Orange Hospital
(LC Rabobank)......... VMIG1/NR 3.75% 1/3/96 5,600 5,600,000
West Orange Hospital
(LC Rabobank)......... VMIG1/NR 3.80% 1/11/96 6,000 6,000,000
------------
19,100,000
------------
</TABLE>
See Notes to Financial Statements.
98
<PAGE>
PRAIRIE FUNDS
MUNICIPAL MONEY MARKET FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal Amortized
S&P Maturity Amount Cost
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
GEORGIA--3.2%
Georgia Municipal Gas
(LC Wachovia Bank).... A1+/NR 3.80% 2/5/96 $ 5,000 $ 5,000,000
Thomaston--Upson County,
Industrial Development
Authority, Yamaha
Music Manufacturing,
(A.M.T.) (LC Bank of
Tokyo Ltd.)........... NR/A-1 5.80%* 8/1/18 2,300 2,300,000
------------
7,300,000
------------
IOWA--2.6%
Iowa School Corps.,
Warrant Certificates,
Iowa School Cash
Anticipation Program,
Series A
(CGIC Insured)........ VMIG1/SP-1+ 4.75% 6/28/96 6,000 6,025,412
------------
ILLINOIS--2.7%
Southwestern Illinois
Development Authority,
Environmental Impact
Revenue, Shell Oil Co.
Wood River Project,
(A.M.T.).............. VMIG1/AAA 6.15% 10/1/25 6,175 6,175,000
------------
INDIANA--1.6%
Seymour Economic
Development Authority
Revenue, Kobelco Metal
Powder Project
(A.M.T.) (LC
Industrial Bank of
Japan, Limited)....... NR/A-1 5.80% 12/1/97 3,700 3,700,000
------------
KENTUCKY--4.8%
Bowling Green,
Industrial Building
Revenue, VRDN, Bando
Manufacturing America
Project (A.M.T.) (LC
Industrial Bank of
Japan, New York)...... NR/A-1 5.80%* 12/1/07 2,655 2,655,000
</TABLE>
See Notes to Financial Statements.
99
<PAGE>
PRAIRIE FUNDS
MUNICIPAL MONEY MARKET FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal Amortized
S&P Maturity Amount Cost
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
KENTUCKY (CONTINUED)
Bowling Green,
Industrial Building
Revenue, VRDN, Twin
Faste Inc. Project
(A.M.T.) (LC
Industrial Bank of
Japan)................ NR/A-1 5.80%* 3/1/08 $ 2,400 $ 2,400,000
Henderson County, Solid
Waste Disposal
Revenue, VRDN, Hudson
Foods Inc. Project
(A.M.T.)
(LC Rabobank
Netherland)........... VMIG1/NR 5.10%* 3/1/15 2,000 2,000,000
Kentucky Higher
Education Student Loan
Corp., Insured Student
Loan, Series E,
(A.M.T.) (LC Sumitomo
Bank, Chicago)........ VMIG1/A-1 5.60% 12/1/11 4,000 4,000,000
------------
11,055,000
------------
LOUISIANA--5.3%
New Orleans Exhibition
Hall Authority, Series
B, (A.M.T.) (LC Sanwa
Bank Ltd.)............ VMIG1/A-1 5.50% 7/1/18 5,000 5,000,000
State of Louisiana
(LC Credit Locale).... VMIG1/A-1+ 3.80% 1/3/96 7,000 7,000,000
------------
12,000,000
------------
MISSOURI--3.4%
Missouri Higher
Education Loan
Authority, VRDN,
Series A (A.M.T.) (LC
National Westminster
Place)................ VMIG1/NR 5.25%* 6/1/17 3,000 3,000,000
Burlington G&E VRDN..... P-1/A-1+ 3.65%* 3/11/96 4,800 4,800,000
------------
7,800,000
------------
</TABLE>
See Notes to Financial Statements.
100
<PAGE>
PRAIRIE FUNDS
MUNICIPAL MONEY MARKET FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal Amortized
S&P Maturity Amount Cost
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
NEW HAMPSHIRE--4.4%
New Hampshire Business
Finance Authority,
Pollution Control
Revenue Refunding,
Public Service Co. of
New Hampshire Project,
VRDN, Series 1992D,
(A.M.T.) (LC Barclays
Bank PLC)............. VMIG1/A-1+ 5.15%* 5/1/21 $ 10,000 $ 10,000,000
------------
NEVADA--4.8%
Clark County Industrial
Development Revenue,
Nevada Power Co.
Project, Series A,
(A.M.T.) (LC Bank
Barcia Place)......... NR/A-1+ 5.35% 10/1/30 8,000 8,000,000
Washoe County Nevada (LC
Union Bank of
Switzerland).......... P-1/A-1+ 4.00% 1/22/96 3,000 3,000,000
------------
11,000,000
------------
NEW YORK--11.4%
New York City General
Obligation, Series F-6
(LC Noeinchukin)...... VMIG1/A-1+ 5.50% 2/15/18 4,200 4,200,000
New York City Housing
Development Corp.
Mortgage Revenue,
Multifamily 400 West
59th-A-2 (A.M.T.)
(LC Bayerische
Hypotheken)........... NR/A-1 5.00% 9/1/30 9,000 9,000,000
New York State Energy
Research & Development
Authority, Pollution
Control Revenue, New
York Electric & Gas--D
(LC Union Bank of
Switzerland).......... VMIG1/A-1+ 5.30% 10/1/29 6,000 6,000,000
</TABLE>
See Notes to Financial Statements.
101
<PAGE>
PRAIRIE FUNDS
MUNICIPAL MONEY MARKET FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal Amortized
S&P Maturity Amount Cost
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
New York State Energy
Research & Development
Authority, Pollution
Control Revenue,
Niagara Power Corp.
Project--B, (A.M.T.)
(LC Morgan Guaranty
New York)............. NR/A-1+ 5.60% 7/1/27 $ 2,000 $ 2,000,000
St. Lawrence County
Industrial Development
Agency, Environmental
Impact Revenue
Reynolds Metals Co.
Project, (A.M.T.) (LC
Royal Bank of Canada). VMIG1/A-1+ 5.00% 5/1/25 4,900 4,900,000
------------
26,100,000
------------
OREGON--1.8%
State of Oregon General
Obligation, VRDN,
Veterans' Welfare
Bond, Series 1973F,
(LC Mitsubishi Bank
Ltd.)................. VMIG1/A-1 5.15%* 12/1/17 4,000 4,000,000
------------
PENNSYLVANIA--6.4%
Allegheny County
Pennsylvania (LC
Norinchukin).......... P-1/A-1+ 3.70% 2/2/96 3,700 3,700,000
Carbon County
Pennsylvania (A.M.T.)
(LC NatWest).......... P-1/A-1+ 3.45% 3/6/96 7,000 7,000,000
Montgomery County (LC
Deutsche Bank)........ P-1/A-1+ 3.80% 2/7/96 3,800 3,800,000
------------
14,500,000
------------
RHODE ISLAND--1.3%
Providence Off Street
Public Parking
Facility Revenue,
VRDN, Wash Street
Garage Corp. Project,
(A.M.T.) (LC Morgan
Guaranty Trust)....... NR/A-1+ 5.10%* 12/1/22 3,000 3,000,000
------------
</TABLE>
See Notes to Financial Statements.
102
<PAGE>
PRAIRIE FUNDS
MUNICIPAL MONEY MARKET FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal Amortized
S&P Maturity Amount Cost
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
SOUTH CAROLINA--3.0%
South Carolina Jobs,
Economic Development
Authority, VRDN,
Hospital Facilities
Revenue, Baptist
Healthcare System (LC
Credit Local de
France)............... VMIG1/A-1+ 5.05%* 8/1/17 $ 7,000 $ 7,000,000
------------
TENNESSEE--2.8%
Memphis Shelby County
(A.M.T.) (LC Canadian
Imperial Bank of
Commerce)............. P-1/A-1+ 3.70% 2/22/96 6,405 6,405,000
------------
TEXAS--9.9%
Brazos Higher Education
Authority, Student
Loan Revenue, VRDN,
Series B-1 (A.M.T.)
(LC
Student Loan Marketing
Assoc.) .............. VMIG1/NR 5.20%* 6/1/23 6,000 6,000,000
Brazos River Texas
(A.M.T.) (LC Canadian
Imperial Bank of
Commerce)............. VMIG1/A-1+ 3.95% 1/18/96 3,000 3,000,000
Gulf Coast Industrial
Development Authority,
Texas Solid Waste
Disposal Revenue,
Citgo Petroleum Corp.
Project (A.M.T.)
(LC NationsBank of
Texas)................ VMIG1/NR 6.15% 5/1/25 2,700 2,700,000
Milam County Industrial
Development Corp.,
Pollution Control
Revenue Refunding,
Aluminum Co. of
America Project (LC
Credit Suisse)........ VMIG1/NR 4.60% 3/1/01 5,000 5,000,000
</TABLE>
See Notes to Financial Statements.
103
<PAGE>
PRAIRIE FUNDS
MUNICIPAL MONEY MARKET FUND
- - -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal Amortized
S&P Maturity Amount Cost
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
TEXAS (CONTINUED)
Panhandle Plains Higher
Education Authority
Revenue, VRDN,
Student Loan Revenue,
Series A, (A.M.T.)
(LC Student Loan
Marketing
Association)......... VMIG1/NR 5.20%* 6/1/21 $ 6,000 $ 6,000,000
------------
22,700,000
------------
UTAH--2.4%
Emery County (LC Credit
Suisse).............. P-1/A-1+ 3.90% 1/10/96 5,500 5,500,000
------------
WEST VIRGINIA--2.6%
West Virginia Public
Energy (A.M.T.) (LC
Swiss Bank).......... P-1/A-1+ 3.70% 2/22/96 6,000 6,000,000
------------
WYOMING--2.4%
Sweetwater City,
Wyoming (A.M.T.) (LC
West Deutsche
LandesBank).......... VMIG1/A-1+ 3.70% 2/1/96 5,400 5,400,000
------------
TOTAL INVESTMENTS--99.7%
(COST
$227,760,412)(A)...... 227,760,412
Other assets in excess
of liabilities--0.3%.. 750,866
------------
NET ASSETS--100.0%...... $228,511,278
============
</TABLE>
- - -----------
Percentages indicated are based on net assets of $228,511,278.
(a) Cost for federal income tax and financial reporting purposes are the same.
A.M.T.--Subject to Alternative Minimum Tax.
CGIC--Capital Guaranty Insurance Corporation.
CP--Commercial Paper.
LC--Letter of Credit.
NR--No rating available.
VRDN--Variable Rate Demand Note.
* Variable rate security. Interest rate stated is as of December 31, 1995.
Maturity date reflects the later of the next rate change or the next put
date.
See Notes to Financial Statements.
104
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
105
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managed
Assets Income Managed Equity
Fund Assets Fund Income Fund
------------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value
(cost $46,747,002, $8,788,919,
$246,097,346, $250,136,384,
$78,317,453, $96,241,231 and
$168,543,796, respectively).......... $55,015,009 $9,512,982 $287,695,105
Repurchase Agreements (cost $0, $0, $0,
$0, $0, $0 and $20,857,000,
respectively)........................ -- -- --
Cash................................... 23,959 27,271 --
Cash denominated in foreign currencies. -- -- --
Receivable for investment securities
sold................................. -- -- --
Receivable for Fund shares sold........ 42,814 16,051 59,398
Receivable from Adviser................ -- -- --
Dividends receivable................... 130,722 10,670 1,011,718
Interest receivable.................... 341,392 31,618 98,743
Foreign tax reclaim receivable......... -- -- --
Deferred organization expenses......... 76,450 61,278 60,637
Prepaid expenses and other assets...... 20,666 5,397 7,051
----------- ---------- ------------
Total Assets.......................... 55,651,012 9,665,267 288,932,652
----------- ---------- ------------
LIABILITIES:
Advisory fees payable.................. 32,187 1,596 80,927
Administration fees payable............ 9,160 534 33,314
Shareholder Services fees payable
(Class A Shares)..................... 30,702 4,618 1,548
Shareholder Services fees payable
(Class B Shares)..................... 1,269 486 302
12b-1 fees payable (Class B Shares).... 4,502 1,419 892
Bank overdrafts........................ -- -- 438,819
Dividends payable...................... 19,103 2,812 847,092
Payable for Fund shares redeemed....... 59,709 -- --
Payable for investment securities
purchased............................ -- 23,593 --
Payable for variation margin........... -- -- --
Other accrued expenses................. 29,053 31,208 136,231
----------- ---------- ------------
Total Liabilities..................... 185,685 66,266 1,539,125
----------- ---------- ------------
NET ASSETS.............................. $55,465,327 $9,599,001 $287,393,527
=========== ========== ============
</TABLE>
See Notes to Financial Statements.
106
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Special International
Growth Opportunities Equity Intermediate
Fund Fund Fund Bond Fund
------ ------------- ------------- ------------
<S> <C> <C> <C>
$295,869,250 $93,777,555 $102,116,486 $175,761,194
-- -- -- 20,857,000
-- 7,474 89,437 1,010
-- -- 948,475 --
5,224,933 -- -- --
103,710 13,900 447,060 56,077
-- -- -- 192,506
634,710 33,175 129,246 --
5,165 2,865 960,435 2,452,092
-- -- 55,468 --
59,746 60,194 60,697 38,759
7,172 3,042 3,482 13,068
- - ------------ ----------- ------------ ------------
301,904,686 93,898,205 104,810,786 199,371,706
- - ------------ ----------- ------------ ------------
139,215 39,946 31,952 53,803
42,597 11,526 10,626 25,102
2,545 359 1,592 3,312
148 10 90 136
437 28 256 451
262,146 -- -- --
844,773 180,457 203,585 929,545
326,751 -- 634 --
1,593,065 -- -- --
-- -- 72,514 --
151,663 52,936 100,160 75,686
- - ------------ ----------- ------------ ------------
3,363,340 285,262 421,409 1,088,035
- - ------------ ----------- ------------ ------------
$298,541,346 $93,612,943 $104,389,377 $198,283,671
============ =========== ============ ============
</TABLE>
See Notes to Financial Statements.
107
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managed
Assets Income Managed Equity
Fund Assets Fund Income Fund
------------- ----------- -----------
<S> <C> <C> <C>
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE:
CLASS A SHARES:
Net Assets........................... $51,996,986 $8,355,636 $ 2,872,994
Shares of beneficial interest issued
and outstanding, $0.001 par value,
unlimited number of shares
authorized......................... 3,576,517 726,432 235,161
----------- ---------- ------------
Net Asset Value per Share............ 14.54 11.50 12.22
Maximum Sales Charge................. 0.68* 0.54* 0.58*
----------- ---------- ------------
Maximum Offering Price............... $ 15.22 $ 12.04 $ 12.80
=========== ========== ============
CLASS B SHARES:
Net Assets........................... $ 2,174,744 $ 832,603 $ 593,200
Shares of beneficial interest issued
and outstanding, $0.001 par value,
unlimited number of shares
authorized......................... 149,364 72,716 48,550
----------- ---------- ------------
Net Asset Value per Share............ $ 14.56 $ 11.45 $ 12.22
=========== ========== ============
CLASS I SHARES:
Net Assets........................... $ 1,293,597 $ 410,762 $283,927,333
Shares of beneficial interest issued
and outstanding, $0.001 par value,
unlimited number of shares
authorized......................... 88,785 35,843 23,259,373
----------- ---------- ------------
Net Asset Value per Share............ $ 14.57 $ 11.46 $ 12.21
=========== ========== ============
COMPOSITION OF NET ASSETS:
Shares of beneficial interest, at
par................................ $ 3,815 $ 835 $ 23,544
Additional paid-in-capital........... 47,372,999 8,874,025 240,515,461
Accumulated net realized gains
(losses) from investment
transactions....................... (179,714) 5 5,265,350
Undistributed net investment income
(loss)............................. 220 73 (8,587)
Net unrealized appreciation on
investments........................ 8,268,007 724,063 41,597,759
Net unrealized appreciation of assets
and liabilities denominated in
foreign currencies and financial
futures............................ -- -- --
----------- ---------- ------------
NET ASSETS, DECEMBER 31, 1995.......... $55,465,327 $9,599,001 $287,393,527
=========== ========== ============
</TABLE>
- - -----------
* Sales charge is 4.50% of Maximum Offering Price.
** Sales charge is 3.00% of Maximum Offering Price.
See Notes to Financial Statements.
108
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Special International
Opportunities Equity Intermediate
Growth Fund Fund Fund Bond Fund
----------- ------------- ------------- ------------
<S> <C> <C> <C>
$ 4,329,204 $ 671,776 $ 2,749,124 $ 6,094,679
361,669 55,070 246,447 744,997
------------ ----------- ------------ ------------
11.97 12.20 11.16 8.18
0.56* 0.57* 0.53* 0.25**
------------ ----------- ------------ ------------
$ 12.53 $ 12.77 $ 11.69 $ 8.43
============ =========== ============ ============
$ 268,039 $ 15,387 $ 192,707 $ 259,384
22,438 1,269 17,292 31,701
------------ ----------- ------------ ------------
$ 11.95 $ 12.12 $ 11.14 $ 8.18
============ =========== ============ ============
$293,944,103 $92,925,780 $101,447,546 $191,929,608
24,559,453 7,623,036 9,079,890 23,455,341
------------ ----------- ------------ ------------
$ 11.97 $ 12.19 $ 11.17 $ 8.18
============ =========== ============ ============
$ 24,944 $ 7,679 $ 9,344 $ 24,232
247,530,554 78,254,290 95,968,721 188,432,293
5,249,304 (113,066) 1,502,766 2,609,748
3,678 3,938 134,091 --
45,732,866 15,460,102 5,875,255 7,217,398
-- -- 899,200 --
------------ ----------- ------------ ------------
$298,541,346 $93,612,943 $104,389,377 $198,283,671
============ =========== ============ ============
</TABLE>
See Notes to Financial Statements.
109
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Intermediate
International Municipal
Bond Fund Bond Fund Bond Fund
--------- ------------- ------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value
(cost $108,844,126, $14,692,171,
$370,618,759, $231,324,230,
$47,241,060, $180,076,423 and
$227,760,412, respectively)......... $115,115,920 $15,119,887 $387,423,990
Repurchase agreements (amortized cost
$11,167,000, $0, $0, $0,
$10,200,000, $25,100,000 and $0,
respectively)....................... 11,167,000 -- --
Cash.................................. -- 20,834 --
Receivable for investment securities
sold................................ -- -- --
Receivable for Fund shares sold....... 58,546 5,713 2,889
Receivable from Adviser............... -- -- 142,179
Interest receivable................... 1,667,756 380,503 6,122,544
Unrealized appreciation on forward
foreign currency contracts.......... -- 108,092 --
Deferred organization expenses........ 57,260 56,533 45,319
Prepaid expenses and other assets..... 5,854 6,525 29,721
------------ ----------- ------------
Total Assets......................... 128,072,336 15,698,087 393,766,642
------------ ----------- ------------
LIABILITIES:
Advisory fees payable................. 46,708 4,784 65,306
Administration fees payable........... 17,390 1,942 50,362
Shareholder Services fees payable
(Class A Shares).................... 1,007 283 59,716
Shareholder Services fees payable
(Class B Shares).................... 33 4 160
12b-1 fees payable (Class B Shares)... 94 8 568
Bank overdrafts....................... 175 -- 92
Dividends payable..................... 631,870 665,559 1,447,504
Payable for Fund shares redeemed...... 2,797 -- 170,000
Other accrued expenses................ 63,593 30,219 102,217
------------ ----------- ------------
Total Liabilities.................... 763,667 702,799 1,895,925
------------ ----------- ------------
NET ASSETS............................. $127,308,669 $14,995,288 $391,870,717
============ =========== ============
</TABLE>
See Notes to Financial Statements.
110
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Government Municipal
Municipal Money Market Money Market Money Market
Bond Fund Fund Fund Fund
--------- --------------- ------------ ------------
<S> <C> <C> <C>
$244,998,503 $47,241,060 $180,076,423 $227,760,412
-- 10,200,000 25,100,000 --
-- -- -- 234,790
-- -- 1,938 --
39,250 -- --
108,845 -- -- --
4,307,370 3,973 496,734 1,016,229
-- -- -- --
4,453 57,957 61,354 83,300
21,770 60,156 110,035 122,258
- - ------------ ----------- ------------ ------------
249,480,191 57,563,146 205,846,484 229,216,989
- - ------------ ----------- ------------ ------------
51,660 13,690 41,802 30,811
31,720 19,610 31,447 45,718
22,133 117,924 227,761 283,674
123 -- 36 --
462 -- -- --
198,527 111,239 1,334,167 --
991,881 20,092 58,489 304,350
306,469 -- -- --
54,066 16,531 93,564 41,158
- - ------------ ----------- ------------ ------------
1,657,041 299,086 1,787,266 705,711
- - ------------ ----------- ------------ ------------
$247,823,150 $57,264,060 $204,059,218 $228,511,278
============ =========== ============ ============
</TABLE>
See Notes to Financial Statements.
111
<PAGE>
PRAIRIE FUNDS
- - -------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
December 31, 1995
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Intermediate
Bond International Municipal
Fund Bond Fund Bond Fund
---- ------------- ------------
<S> <C> <C> <C>
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE:
CLASS A SHARES:
Net Assets........................ $ 1,846,532 $ 486,840 $ 17,776,872
Shares of beneficial interest
issued and outstanding, $0.001
par value, unlimited number of
shares authorized(1)............ 170,875 45,289 1,451,741
------------ ----------- ------------
Net Asset Value per Share......... 10.81 10.75 12.25
Maximum Sales Charge.............. 0.51* 0.51* 0.38**
------------ ----------- ------------
Maximum Offering Price............ $ 11.32 $ 11.26 $ 12.63
============ =========== ============
CLASS B SHARES:
Net Assets........................ $ 61,260 $ 4,478 $ 340,913
Shares of beneficial interest
issued and outstanding, $0.001
par value, unlimited number of
shares authorized(1)............ 5,669 414 27,834
------------ ----------- ------------
Net Asset Value per Share......... $ 10.81 $ 10.81 $ 12.25
============ =========== ============
CLASS I SHARES:
Net Assets $125,400,877 $14,503,970 $373,752,932
Shares of beneficial interest
issued and outstanding, $0.001
par value, unlimited number of
shares authorized(1)............ 11,598,064 1,342,032 30,509,460
------------ ----------- ------------
Net Asset Value per Share......... $ 10.81 $ 10.81 $ 12.25
============ =========== ============
COMPOSITION OF NET ASSETS:
Shares of beneficial interest, at
par............................. $ 11,774 $ 1,387 $ 31,989
Additional paid-in-capital........ 118,554,093 14,473,243 375,105,416
Accumulated net realized gains
(losses) on investment
transactions.................... 2,471,008 (37,381) (71,919)
Accumulated net investment loss... -- (13,857) --
Net unrealized appreciation on
investments..................... 6,271,794 427,716 16,805,231
Net unrealized appreciation of
assets and liabilities
denominated in foreign
currencies...................... -- 144,180 --
------------ ----------- ------------
NET ASSETS, DECEMBER 31, 1995....... $127,308,669 $14,995,288 $391,870,717
============ =========== ============
</TABLE>
- - -----------
*Sales charge is 4.50% of Maximum Offering Price.
**Sales charge is 3.00% of Maximum Offering Price.
(1) The Municipal Bond Fund has authorized 2.5 billion shares for Class A and
Class B and has authorized 5.0 billion shares for Class I.
See Notes to Financial Statements.
112
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Government Municipal
Municipal Money Market Money Market Money Market
Bond Fund Fund Fund Fund
--------- --------------- ------------ ------------
<S> <C> <C> <C>
$ 7,425,897 $57,264,060 $203,994,341 $228,511,278
587,619 57,280,045 203,962,497 228,564,929
- - ------------ ----------- ------------ ------------
12.64 1.00 1.00 1.00
0.60* -- -- --
- - ------------ ----------- ------------ ------------
$ 13.24 $ 1.00 $ 1.00 $ 1.00
============ =========== ============ ============
$ 237,697 $ 64,877
18,797 64,867
- - ------------ ------------
$ 12.65 $ 1.00
============ ============
$240,159,556
19,011,083
- - ------------
$ 12.63
============
$ 19,618 $ 57,280 $ 204,027 $ 228,565
233,921,388 57,222,765 203,823,336 228,322,787
207,871 (15,985) 31,855 (40,074)
-- -- -- --
13,674,273 -- -- --
-- -- -- --
- - ------------ ----------- ------------ ------------
$247,823,150 $57,264,060 $204,059,218 $228,511,278
============ =========== ============ ============
</TABLE>
See Notes to Financial Statements.
113
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managed
Assets Income Managed Equity
Fund(6) Assets Fund(1) Income Fund(2)
------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividend income (net of foreign
withholding taxes of $134,218,
for International Equity Fund).. $ 1,219,984 $ 52,630 $ 8,875,334
Interest income................... 1,726,718 91,756 1,593,621
----------- -------- -----------
2,946,702 144,386 10,468,955
----------- -------- -----------
EXPENSES:
Advisory fees..................... 331,535 25,209 1,106,473
Administration fees............... 70,850 5,818 331,942
Shareholder Services fees (Class A
Shares and Class B Shares)...... 120,334 9,051 2,981
12b-1 fees (Class B Shares)....... 5,831 3,325 1,283
Custodian fees and expenses....... 56,320 37,950 81,104
Registration fees................. 13,918 -- 74,275
Legal and audit fees.............. 31,696 22,325 45,392
Amortization of organization
expenses........................ 10,067 10,494 17,155
Transfer agent fees and expenses.. 80,641 10,246 17,960
Reports to shareholders........... 14,504 12,129 20,660
Trustees' fees.................... 1,760 2,265 5,848
Miscellaneous expenses............ 13,157 2,182 17,505
----------- -------- -----------
Total Expenses.................... 750,613 140,994 1,722,578
Less: Expense reimbursements...... (179,574) (89,978) (277,704)
----------- -------- -----------
Net Expenses..................... 571,039 51,016 1,444,874
----------- -------- -----------
NET INVESTMENT INCOME............ 2,375,663 93,370 9,024,081
----------- -------- -----------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENT AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gains (losses) on
investment transactions......... (324,052) 5 12,993,377
Net realized losses on foreign
currency transactions........... -- -- --
Net realized gains on futures
transactions.................... -- -- --
Net change in unrealized
appreciation (depreciation) on
investments..................... 9,391,499 724,063 41,597,759
Net unrealized appreciation of
assets and liabilities
denominated in foreign
currencies and financial
futures......................... -- -- --
----------- -------- -----------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS.. 9,067,447 724,068 54,591,136
----------- -------- -----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS. $11,443,110 $817,438 $63,615,217
=========== ======== ===========
</TABLE>
- - -----------
(1) For the period April 3, 1995 (commencement of operations) through December
31, 1995.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period March 3, 1995 (commencement of operations) through December
31, 1995.
(4) For the period February 1, 1995 through December 31, 1995.
(5) For the year ended January 31, 1995.
(6) For the year ended December 31, 1995.
See Notes to Financial Statements.
114
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Special International
Growth Opportunities Equity Intermediate Intermediate
Fund(2) Fund(2) Fund(3) Bond Fund(4) Bond Fund(5)
------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
$ 4,772,025 $ 611,057 $ 973,285
1,172,933 394,772 746,158 $10,539,377 $ 348,758
- - ----------- ----------- ----------- ----------- ---------
5,944,958 1,005,829 1,719,443 10,539,377 348,758
- - ----------- ----------- ----------- ----------- ---------
1,714,125 487,460 506,105 612,312 30,810
395,568 104,456 94,372 229,617 252
4,884 778 3,253 5,767 170
670 56 379 563 8
74,792 62,572 159,181 60,572 3,383
104,974 16,430 28,299 31,550 3,428
57,332 28,516 28,042 37,450 53,810
17,201 17,259 15,262 148 8,592
16,912 16,800 16,161 23,464 8,893
23,464 15,120 12,673 26,193 17,714
4,088 4,032 5,593 1,670 5,602
18,617 8,410 11,638 7,006 7,099
- - ----------- ----------- ----------- ----------- ---------
2,432,627 761,889 880,958 1,036,312 139,761
(314,740) (168,733) (213,519) (185,219) (137,928)
- - ----------- ----------- ----------- ----------- ---------
2,117,887 593,156 667,439 851,093 1,833
- - ----------- ----------- ----------- ----------- ---------
3,827,071 412,673 1,052,004 9,688,284 346,925
- - ----------- ----------- ----------- ----------- ---------
26,140,162 1,749,697 505,347 7,844,775 (63,605)
-- -- (236,752) -- --
-- -- 3,503,125 -- --
45,732,866 15,460,102 5,875,255 7,312,968 (304,664)
-- -- 899,200 -- --
- - ----------- ----------- ----------- ----------- ---------
71,873,028 17,209,799 10,546,175 15,157,743 (368,269)
- - ----------- ----------- ----------- ----------- ---------
$75,700,099 $17,622,472 $11,598,179 $24,846,027 $ (21,344)
=========== =========== =========== =========== =========
</TABLE>
See Notes to Financial Statements.
115
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Intermediate Intermediate
International Municipal Municipal
Bond Fund(1) Bond Fund(2) Bond Fund(3) Bond Fund(4)
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income (net of
foreign withholding
taxes of $13,850 for
International Bond
Fund).................. $ 7,432,982 $ 717,469 $16,586,298 $2,141,819
----------- ---------- ----------- ----------
7,432,982 717,469 16,586,298 2,141,819
----------- ---------- ----------- ----------
EXPENSES:
Advisory fees............ 571,379 79,128 1,294,971 213,509
Administration fees...... 155,831 16,957 488,746 27,546
Shareholder Services fees
(Class A Shares and
Class B Shares)........ 2,161 684 38,461 60,314
12b-1 fees (Class B
Shares)................ 116 30 824 175
Custodian fees and
expenses............... 55,999 34,025 76,502 5,329
Registration fees........ 31,690 5,776 142,121 33,720
Legal and audit fees..... 29,720 24,652 41,560 59,478
Amortization of
organization expenses.. 16,042 16,769 12,943 --
Transfer agent fees and
expenses............... 15,614 16,432 22,560 17,386
Reports to shareholders.. 13,762 12,840 28,882 18,415
Trustees' fees........... 5,642 2,352 1,586 5,076
Miscellaneous expenses... 10,618 6,748 13,408 11,946
----------- ---------- ----------- ----------
Total Expenses........... 908,574 216,393 2,162,564 452,894
Less: Expense
reimbursements......... (178,732) (110,736) (403,299) (296,239)
----------- ---------- ----------- ----------
Net Expenses............ 729,842 105,657 1,759,265 156,655
----------- ---------- ----------- ----------
NET INVESTMENT INCOME... 6,703,140 611,812 14,827,033 1,985,164
----------- ---------- ----------- ----------
REALIZED AND UNREALIZED
GAINS (LOSSES) ON
INVESTMENT AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gains
(losses) on investment
transactions........... 6,908,795 1,020,021 3,839,621 (757,908)
Net realized gains on
foreign currency
transactions........... -- 30,644 -- --
Net change in unrealized
appreciation on
investments............ 6,271,794 427,716 13,694,976 2,898,764
Translation of assets and
liabilities denominated
in foreign currencies.. -- 144,180 -- --
----------- ---------- ----------- ----------
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON
INVESTMENTS AND
FOREIGN CURRENCY
TRANSACTIONS.......... 13,180,589 1,622,561 17,534,597 2,140,856
----------- ---------- ----------- ----------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS............. $19,883,729 $2,234,373 $32,361,630 $4,126,020
=========== ========== =========== ==========
</TABLE>
- - -----------
(1) For the period February 10, 1995 (commencement of operations) through
December 31, 1995.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period March 1, 1995 through December 31, 1995.
(4) For the year ended February 28, 1995.
(5) For the year ended December 31, 1995.
See Notes to Financial Statements.
116
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Government Municipal
Municipal Municipal Money Market Money Market Money Market
Bond Fund(3) Bond Fund(4) Fund(5) Fund(5) Fund(5)
------------ ------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
$ 11,366,541 $ 984,395 $3,925,073 $8,980,167 $7,967,822
--------------- ---------- ---------- ---------- ----------
11,366,541 984,395 3,925,073 8,980,167 7,967,822
--------------- ---------- ---------- ---------- ----------
829,219 84,738 297,377 631,448 860,103
310,957 15,548 94,631 220,431 292,778
15,010 20,089 170,762 380,585 508,602
600 183 -- 154 --
43,173 5,356 47,037 58,917 67,687
95,405 30,271 7,824 26,695 19,626
56,450 25,959 22,236 57,347 54,617
148 -- 8,303 7,228 9,259
22,392 15,883 37,804 185,048 56,756
26,190 13,517 14,357 25,741 14,373
2,650 1,718 2,138 5,185 8,633
11,000 8,105 29,658 32,213 35,509
--------------- ---------- ---------- ---------- ----------
1,413,194 221,367 732,127 1,630,992 1,927,943
(278,552) (167,016) (198,986) (431,210) (489,926)
--------------- ---------- ---------- ---------- ----------
1,134,642 54,351 533,141 1,199,782 1,438,017
--------------- ---------- ---------- ---------- ----------
10,231,899 930,044 3,391,932 7,780,385 6,529,805
--------------- ---------- ---------- ---------- ----------
5,020,578 (260,986) 32,485 179,219 (44)
-- -- -- -- --
11,041,965 2,624,847 -- -- --
-- -- -- -- --
--------------- ---------- ---------- ---------- ----------
16,062,543 2,363,861 32,485 179,219 (44)
--------------- ---------- ---------- ---------- ----------
$ 26,294,442 $3,293,905 $3,424,417 $7,959,604 $6,529,761
=============== ========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
117
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS INCOME FUND
- - --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
--------------------------
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income............................... $ 2,375,663 $ 2,808,997
Net realized gains (losses) on investment
transactions...................................... (324,052) 210,291
Net change in unrealized appreciation (depreciation)
on investments.................................... 9,391,499 (4,108,668)
----------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................. 11,443,110 (1,089,380)
----------- ------------
Net equalization credits............................ -- 2,562
----------- ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income:
Class A Shares..................................... (2,441,590) (2,753,670)
Class B Shares..................................... (31,089) (34,937)
Class I Shares..................................... (36,073) --
----------- ------------
TOTAL DIVIDENDS TO SHAREHOLDERS.................... (2,508,752) (2,788,607)
----------- ------------
Net realized gains on investments:
Class A Shares..................................... (108,059) (19,340)
Class B Shares..................................... (4,560) (323)
Class I Shares..................................... (2,720) --
----------- ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS................ (115,339) (19,663)
----------- ------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold....................... 9,561,625 6,725,337
Dividends reinvested................................ 2,415,006 2,336,101
Cost of shares redeemed............................. (9,697,497) (12,384,919)
----------- ------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS............................... 2,279,134 (3,323,481)
----------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........... 11,098,153 (7,218,569)
NET ASSETS:
Beginning of year................................... 44,367,174 51,585,743
----------- ------------
End of year (includes undistributed net investment
income of $220 in 1995 and $133,309 in 1994)...... $55,465,327 $ 44,367,174
=========== ============
</TABLE>
See Notes to Financial Statements.
118
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
119
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Period Ended December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managed Equity
Assets Income Growth
Fund(1) Fund(2) Fund(2)
------- ------- -------
<S> <C> <C> <C>
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS:
Net investment income.............. $ 93,370 $ 9,024,081 $ 3,827,071
Net realized gains on investment
transactions..................... 5 12,993,377 26,140,162
Net realized gains (losses) on
foreign currency transactions.... -- -- --
Net realized gains on futures
transactions..................... -- -- --
Net change in unrealized
appreciation on investments...... 724,063 41,597,759 45,732,866
Net unrealized appreciation of
assets and liabilities
denominated in foreign currencies
and financial futures............ -- -- --
---------- ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....... 817,438 63,615,217 75,700,099
---------- ------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income:
Class A Shares.................... (77,991) (36,341) (20,056)
Class B Shares.................... (7,493) (4,665) (128)
Class I Shares.................... (7,813) (8,991,662)(5) (3,803,209)
---------- ------------ ------------
TOTAL DIVIDENDS TO SHAREHOLDERS... (93,297) (9,032,668) (3,823,393)
---------- ------------ ------------
Net realized gains on investments:
Class A Shares.................... -- (76,484) (297,846)
Class B Shares.................... -- (15,958) (18,522)
Class I Shares.................... -- (7,635,585) (20,574,490)
---------- ------------ ------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS.................... -- (7,728,027) (20,890,858)
---------- ------------ ------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold...... 9,391,817 258,157,716 300,831,887
Dividends reinvested............... 85,512 6,638,209 15,027,099
Cost of shares redeemed............ (602,469) (24,256,920) (68,303,488)
---------- ------------ ------------
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS......... 8,874,860 240,539,005 247,555,498
---------- ------------ ------------
TOTAL INCREASE IN NET ASSETS..... 9,599,001 287,393,527 298,541,346
NET ASSETS:
Beginning of period................ -- -- --
---------- ------------ ------------
End of period(6)................... $9,599,001 $287,393,527 $298,541,346
========== ============ ============
</TABLE>
- - -----------
(1) For the period April 3, 1995 (commencement of operations) through December
31, 1995.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period March 3, 1995 (commencement of operations) through December
31, 1995.
(4) For the period February 10, 1995 (commencement of operations) through
December 31, 1995.
(5) Includes distributions in excess of net investment income of $8,587.
(6) Includes undistributed net investment income of $73, $0, $3,678, $3,938,
$134,091, $0 and $0, respectively.
See Notes to Financial Statements.
120
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Special International International
Opportunities Equity Bond Bond
Fund(2) Fund(3) Fund(4) Fund(2)
------------- ------------- ------- -------------
<S> <C> <C> <C>
$ 412,673 $ 1,052,004 $ 6,703,140 $ 611,812
1,749,697 505,347 6,908,795 1,020,021
-- (236,752) -- 30,644
-- 3,503,125 -- --
15,460,102 5,875,255 6,271,794 427,716
-- 899,200 -- 144,180
--------------- ------------ ------------ -----------
17,622,472 11,598,179 19,883,729 2,234,373
--------------- ------------ ------------ -----------
(807) (12,465) (50,085) (13,458)
-- (174) (755) (173)
(407,928) (905,274) (6,652,300) (612,038)
--------------- ------------ ------------ -----------
(408,735) (917,913) (6,703,140) (625,669)
--------------- ------------ ------------ -----------
(13,273) (60,752) (63,549) (33,914)
(308) (4,283) (2,117) (311)
(1,849,182) (2,203,921) (4,372,121) (1,053,821)
--------------- ------------ ------------ -----------
(1,862,763) (2,268,956) (4,437,787) (1,088,046)
--------------- ------------ ------------ -----------
89,942,654 100,265,824 129,396,150 15,584,504
1,194,408 1,535,547 2,974,473 380,496
(12,875,093) (5,823,304) (13,804,756) (1,490,370)
--------------- ------------ ------------ -----------
78,261,969 95,978,067 118,565,867 14,474,630
--------------- ------------ ------------ -----------
93,612,943 104,389,377 127,308,669 14,995,288
-- -- -- --
--------------- ------------ ------------ -----------
$ 93,612,943 $104,389,377 $127,308,669 $14,995,288
=============== ============ ============ ===========
</TABLE>
See Notes to Financial Statements.
121
<PAGE>
PRAIRIE INTERMEDIATE BOND FUND
- - --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period Ended For the Year Ended For the Period Ended
December 31, January 31, January 31,
1995(1) 1995 1994(2)
-------------------- ------------------ --------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS:
Net investment income.. $ 9,688,284 $ 346,925 $ 269,055
Net realized gains
(losses) on
investment
transactions......... 7,844,775 (63,605) 13,430
Net change in
unrealized
appreciation
(depreciation) on
investments.......... 7,312,968 (304,664) (60,015)
------------ ----------- ----------
NET INCREASE
(DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS..... 24,846,027 (21,344) 222,470
------------ ----------- ----------
DIVIDENDS TO
SHAREHOLDERS FROM:
Net investment income:
Class A Shares........ (137,077) (4,217) (1,326)
Class B Shares........ (3,518) (99) --
Class I Shares........ (9,547,689) (342,609) (267,729)
------------ ----------- ----------
TOTAL DIVIDENDS TO
SHAREHOLDERS........ (9,688,284) (346,925) (269,055)
------------ ----------- ----------
Net realized gains on
investments:
Class A Shares........ (157,731) (16) (152)
Class B Shares........ (6,773) (1) --
Class I Shares........ (5,006,911) (1,196) (12,072)
------------ ----------- ----------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS........ (5,171,415) (1,213) (12,224)
------------ ----------- ----------
CAPITAL STOCK
TRANSACTIONS:
Net proceeds from
shares sold.......... 200,868,057 7,682,912 5,298,453
Dividends reinvested... 4,026,532 9,789 6,783
Cost of shares
redeemed............. (23,767,145) (5,345,718) (154,029)
------------ ----------- ----------
NET INCREASE IN NET
ASSETS FROM FUND
SHARE TRANSACTIONS.. 181,127,444 2,346,983 5,151,207
------------ ----------- ----------
TOTAL INCREASE IN NET
ASSETS............. 191,113,772 1,977,501 5,092,398
NET ASSETS:
Beginning of period.... 7,169,899 5,192,398 100,000
------------ ----------- ----------
End of period.......... $198,283,671 $ 7,169,899 $5,192,398
============ =========== ==========
</TABLE>
- - -----------
(1) For the period February 1, 1995 through December 31, 1995.
(2) For the period March 5, 1993 (commencement of operations) through January
31, 1994.
See Notes to Financial Statements.
122
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period Ended For the Year Ended For the Year Ended
December 31, February 28, February 28,
1995(1) 1995 1994(2)
-------------------- ------------------ ------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS:
Net investment income.. $ 14,827,033 $ 1,985,164 $ 1,394,851
Net realized gains
(losses) on
investment
transactions......... 3,839,621 (757,908) 1,275,347
Net change in
unrealized
appreciation on
investments.......... 13,694,976 2,898,764 (1,243,092)
------------ ------------ -----------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS..... 32,361,630 4,126,020 1,427,106
------------ ------------ -----------
DIVIDENDS TO
SHAREHOLDERS FROM:
Net investment income:
Class A Shares........ (619,417) (1,214,913) (1,394,847)
Class B Shares........ (3,609) (17) (4)
Class I Shares........ (14,204,008) (770,234) --
------------ ------------ -----------
TOTAL DIVIDENDS TO
SHAREHOLDERS........ (14,827,034) (1,985,164) (1,394,851)
------------ ------------ -----------
Net realized gains on
investments:
Class A Shares........ (143,000) (62,814) (1,471,722)
Class B Shares........ (2,501) (284) --
Class I Shares........ (3,007,029) -- --
------------ ------------ -----------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS........ (3,152,530) (63,098) (1,471,722)
------------ ------------ -----------
CAPITAL STOCK
TRANSACTIONS:
Net proceeds from
shares sold.......... 48,746,625 367,446,983 6,646,160
Dividends reinvested... 2,914,315 851,803 1,972,931
Cost of shares
redeemed............. (57,221,370) (16,165,822) (6,226,132)
------------ ------------ -----------
NET INCREASE
(DECREASE) IN NET
ASSETS FROM FUND
SHARE TRANSACTIONS.. (5,560,430) 352,132,964 2,392,959
------------ ------------ -----------
TOTAL INCREASE IN NET
ASSETS............. 8,821,636 354,210,722 953,492
NET ASSETS:
Beginning of period.... 383,049,081 28,838,359 27,884,867
------------ ------------ -----------
End of period.......... $391,870,717 $383,049,081 $28,838,359
============ ============ ===========
</TABLE>
- - -----------
(1) For the period March 1, 1995 through December 31, 1995.
(2) Includes Class B Shares for the period February 8, 1994 (initial offering
date of Class B Shares) through February 28, 1994.
See Notes to Financial Statements.
123
<PAGE>
PRAIRIE MUNICIPAL BOND FUND, INC.
- - -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period Ended For the Year Ended For the Year Ended
December 31, February 28, February 28,
1995(1) 1995 1994(2)
-------------------- ------------------ ------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS:
Net investment income.. $ 10,231,899 $ 930,044 $ 497,241
Net realized gains
(losses) on
investment
transactions......... 5,020,578 (260,986) 607,250
Net change in
unrealized
appreciation on
investments.......... 11,041,965 2,624,847 (728,931)
------------ ------------ -----------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS..... 26,294,442 3,293,905 375,560
------------ ------------ -----------
DIVIDENDS TO
SHAREHOLDERS FROM:
Net investment income:
Class A Shares........ (268,916) (409,080) (497,237)
Class B Shares........ (2,833) (67) (4)
Class I Shares........ (9,960,150) (520,897) --
------------ ------------ -----------
TOTAL DIVIDENDS TO
SHAREHOLDERS........ (10,231,899) (930,044) (497,241)
------------ ------------ -----------
Net realized gains on
investments:
Class A Shares........ (135,418) -- (717,815)
Class B Shares........ (4,334) -- --
Class I Shares........ (4,405,351) -- --
------------ ------------ -----------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS........ (4,545,103) -- (717,815)
------------ ------------ -----------
In excess of net
realized gains on
investments:
Class A Shares........ -- -- (6,618)
------------ ------------ -----------
CAPITAL STOCK
TRANSACTIONS:
Net proceeds from
shares sold.......... 34,482,785 222,400,536 3,588,206
Dividends reinvested... 3,928,330 323,826 956,597
Cost of shares
redeemed............. (29,087,608) (7,342,155) (5,752,746)
------------ ------------ -----------
NET INCREASE IN NET
ASSETS FROM FUND
SHARE TRANSACTIONS.. 9,323,507 215,382,207 (1,207,943)
------------ ------------ -----------
TOTAL INCREASE IN NET
ASSETS............. 20,840,947 217,746,068 (2,054,057)
NET ASSETS:
Beginning of period.... 226,982,203 9,236,135 11,290,192
------------ ------------ -----------
End of period.......... $247,823,150 $226,982,203 $ 9,236,135
============ ============ ===========
</TABLE>
- - -----------
(1) For the period March 1, 1995 through December 31, 1995.
(2) Includes Class B Shares for the period February 8,1994 (initial offering
date of Class B Shares) through February 28, 1994.
See Notes to Financial Statements.
124
<PAGE>
PRAIRIE FUNDS
U.S. GOVERNMENT MONEY MARKET FUND
- - --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
---------------------------
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income........................... $ 3,391,932 $ 4,694,844
Net realized gains (losses) on investment
transactions.................................. 32,485 (961,178)
------------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... 3,424,417 3,733,666
------------- ------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Class A Shares.................................. (3,391,932) (4,694,844)
------------- ------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold................... 250,085,862 677,021,399
Dividends reinvested............................ 2,488,380 1,310,332
Cost of shares redeemed......................... (311,695,323) (716,564,214)
------------- ------------
NET DECREASE IN NET ASSETS FROM FUND SHARE
TRANSACTIONS................................. (59,121,081) (38,232,483)
------------- ------------
Increase due to capital contribution from
affiliate of investment adviser (Note 3(d)).... -- 933,054
------------- ------------
TOTAL DECREASE IN NET ASSETS................... (59,088,596) (38,260,607)
NET ASSETS:
Beginning of year............................... 116,352,656 154,613,263
------------- ------------
End of year..................................... $ 57,264,060 $116,352,656
============= ============
</TABLE>
See Notes to Financial Statements.
125
<PAGE>
PRAIRIE FUNDS
MONEY MARKET FUND
- - --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
-----------------------------
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS:
Net investment income.......................... $ 7,780,385 $ 5,491,950
Net realized gains (losses) on investment
transactions................................. 179,219 (1,309,831)
------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................. 7,959,604 4,182,119
------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income:
Class A Shares................................ (7,779,495) (5,491,950)
Class B Shares................................ (890) --
------------- --------------
TOTAL DIVIDENDS TO SHAREHOLDERS............... (7,780,385) (5,491,950)
------------- --------------
Net realized gains on investments:
Class A Shares................................ (123,505) (23,361)
Class B Shares................................ (35) --
------------- --------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS........... (123,540) (23,361)
------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS................................ (7,903,925) (5,515,311)
------------- --------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold.................. 803,027,143 1,724,346,455
Dividends reinvested........................... 6,873,012 2,559,069
Cost of shares redeemed........................ (725,296,634) (1,770,081,791)
------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
FUND SHARE TRANSACTIONS..................... 84,603,521 (43,176,267)
------------- --------------
Increase due to capital contribution from
affiliate of investment adviser (Note 3(d))... -- 1,286,000
------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS...... 84,659,200 (43,223,459)
NET ASSETS:
Beginning of year.............................. 119,400,018 162,623,477
------------- --------------
End of year.................................... $ 204,059,218 $ 119,400,018
============= ==============
</TABLE>
See Notes to Financial Statements.
126
<PAGE>
PRAIRIE FUNDS
MUNICIPAL MONEY MARKET FUND
- - --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
---------------------------
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income............................. $ 6,529,805 $ 4,523,891
Net realized losses on investment transactions.... (44) (36,537)
------------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS..................................... 6,529,761 4,487,354
------------- ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income:
Class A Shares................................... (6,529,805) (4,523,891)
------------- ------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold..................... 534,326,783 428,067,086
Dividends reinvested.............................. 3,305,612 2,261,400
Cost of shares redeemed........................... (482,251,105) (434,859,851)
------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS............................. 55,381,290 (4,531,365)
------------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS......... 55,381,246 (4,567,902)
NET ASSETS:
Beginning of year................................. 173,130,032 177,697,934
------------- ------------
End of year....................................... $ 228,511,278 $173,130,032
============= ============
</TABLE>
See Notes to Financial Statements.
127
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTE 1--GENERAL
Prairie Funds (the "Trust") is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "Act"). At
December 31, 1995, the Trust consisted of twelve separate investment
portfolios. The accompanying financial statements include the results of
operations for the following portfolios of the Trust: Managed Assets Income
Fund, Managed Assets Fund, Equity Income Fund, Growth Fund, Special
Opportunities Fund, International Equity Fund, Bond Fund, International Bond
Fund, Intermediate Municipal Bond Fund, U.S. Government Money Market Fund,
Money Market Fund, and Municipal Money Market Fund. Additionally, the
accompanying financial statements include the results of operations for the
Prairie Municipal Bond Fund, Inc. and the Prairie Intermediate Bond Fund, two
open-end management investment companies registered under the Act (together
with the Trust's portfolios, the "Funds").
First Chicago Investment Management Company ("FCIMCO"), a wholly-owned
subsidiary of The First National Bank of Chicago ("FNBC"), serves as each
Fund's investment adviser and administrator. FCIMCO has engaged ANB Investment
Management and Trust Company ("ANB") to serve as sub-investment adviser for the
International Equity Fund. Additionally, FCIMCO has engaged Concord Holding
Corporation ("Concord"), a wholly-owned subsidiary of The BISYS Group, Inc., to
assist it in providing certain administrative services for the Funds. Concord
Financial Group, Inc., a wholly-owned subsidiary of Concord, serves as the
principal underwriter and distributor of each Fund's shares.
The Funds (except for the U.S. Government Money Market Fund and Municipal
Money Market Fund, which offer Class A shares only, and the Money Market Fund
which offers Class A shares and Class B shares) each offer Class A shares,
Class B shares and Class I shares. Class A shares, Class B shares and Class I
shares are substantially the same except that Class A shares are subject to a
sales charge imposed at the time of purchase and are subject to fees charged
pursuant to a Shareholder Services Plan. Class B shares are subject to a
contingent deferred sales charge imposed at the time of redemption and are
subject to fees charged pursuant to a Distribution Plan adopted pursuant to
Rule 12b-1 under the Act and fees charged pursuant to the Shareholder Services
Plan. Class I shares are not subject to any sales charge, shareholder services
fees or distribution fees.
During the period January 27, 1995 through March 3, 1995, various common
trust funds and collective trust funds managed by FNBC transferred cash and
securities to certain Funds in exchange for Class I shares of the corresponding
Fund. The following table sets forth the date on which such transfers occurred,
the transferring entity, the corresponding Fund, the market value of the
securities and cash transferred and the amount of Class I shares issued in
connection with such transfer:
128
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class I
Shares
Date of Transfer Transferring Entity Fund Market Value Issued
---------------- ------------------- ---- ------------ -------
<S> <C> <C> <C> <C>
January 27, 1995........ First Chicago Personal Equity Income $198,087,162 19,808,716
Trust Equity Fund Fund
January 27, 1995........ First Chicago Personal Growth Fund 245,392,975 24,539,297
Trust Endowment Equity
Fund and First Chicago
Personal Trust Growth
Equity Fund
January 27, 1995........ First Chicago Personal Special 51,316,357 5,131,636
Trust Special Equity Opportunities
Fund Fund
January 27, 1995........ First Chicago Personal International 8,955,517 895,552
Trust International Bond Bond Fund
Fund
February 10, 1995....... First Chicago Personal Bond Fund 98,997,057 9,899,706
Trust Taxable Bond Fund
And First Chicago
Personal Trust
Endowment Bond Fund
February 10, 1995....... First Chicago Personal Intermediate 129,394,694 16,848,267
Trust Intermediate Bond Fund
Taxable Bond Fund and
Lake Shore Common
Trust Taxable Fixed
Income Fund
February 10, 1995....... First Chicago Personal Municipal Bond 213,488,376 17,910,099
Trust Tax-Exempt Bond Fund
Fund
February 10, 1995....... First Chicago Personal Intermediate 349,656,211 29,885,146
Trust Intermediate Tax- Municipal Bond
Exempt Bond Fund and Fund
Lake Shore Common
Trust Municipal Bond
Fund
March 3, 1995........... First Chicago Personal International 48,338,875 4,833,888
Trust International Equity Equity Fund
Fund
</TABLE>
At meetings of the shareholders of the First Prairie Diversified Assets Fund,
First Prairie Municipal Bond Fund--Intermediate Series, First Prairie Money
Market Fund--Money Market Series and Government Series, and First Prairie
Municipal Money Market Fund (collectively, the "First Prairie Funds") held on
January 17, 1995, shareholders of each such Fund approved an Agreement and Plan
of Exchange (the "Plan") which called for the transfer of the assets, subject
to the liabilities, of each First Prairie Fund to the Prairie Managed Assets
Income Fund,
129
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
Prairie Intermediate Municipal Bond Fund, Prairie Money Market Fund, Prairie
U.S. Government Money Market Fund, and Prairie Municipal Money Market Fund,
respectively. The Plan also called for the issuance of shares by the respective
Prairie Funds to the shareholders of the corresponding First Prairie Fund, such
shares being equal in value to the net assets so transferred.
The following table sets forth the date on which this transfer took place
along with the net assets transferred and the number of shares issued:
<TABLE>
<CAPTION>
Net Assets
Fund Date of Transfer Transferred Shares Issued
---- ---------------- ----------- -------------
<S> <C> <C> <C>
Managed Assets Income Fund...... March 3, 1995 $ 43,698,653 3,518,593
Intermediate Municipal Bond
Fund........................... January 27, 1995 22,331,512 1,930,122
Money Market Fund............... May 20, 1995 127,355,807 127,197,352
U.S. Government Money Market
Fund........................... May 20, 1995 52,257,087 52,273,072
Municipal Money Market Fund..... May 20, 1995 178,386,094 178,439,745
</TABLE>
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. These principles
require management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses for the period. Actual results
could differ from those estimates.
(A) Portfolio Valuation: Bonds, debentures, notes, mortgage-related
securities, asset-backed securities, municipal obligations and convertible debt
obligations ("Fixed Income Securities") are valued daily using available market
quotations or at fair value as determined by one or more independent pricing
services (the "Service") approved by the Board of Trustees (or the "Board").
Fixed Income Securities for which quoted bid prices are readily available and
are representative of the bid side of the market, in the judgment 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
Fixed Income Securities are carried at fair value as determined by the Service,
based upon methods which include consideration of yields or prices of
securities of comparable quality, coupon rate, maturity and type, indications
as to values from dealers, and general market conditions. Fixed Income
Securities with maturities less than 60 days are carried at amortized cost,
which approximates market value.
Common stocks, preferred stocks and convertible securities, as well as
warrants to purchase such securities ("Equity Securities"), and call options
written by a Fund are valued at the last sale price on the securities exchange
or national securities market on which such securities are primarily traded.
Equity securities not
130
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
listed on an exchange or national securities market, or securities for which
there were no transactions, are valued at the most recent bid prices. Any
securities or other assets for which recent market quotations are not readily
available are valued at fair value as determined in good faith by the Board.
Restricted securities, illiquid securities and securities for which market
quotations are not readily available, if any, are valued at fair value using
methods approved by the Board.
Investments of the U.S. Government Money Market Fund, Money Market Fund and
Municipal Money Market Fund (the "money market funds") are valued at amortized
cost, which approximates market value. Under the amortized cost method,
discount or premium is amortized on a constant basis to the maturity of the
security. In addition, the money market funds may not (a) purchase any
instruments with a remaining maturity greater that thirteen months unless such
instrument is subject to a demand feature, or (b) maintain a dollar-weighted
average maturity which exceeds 90 days.
(B) Foreign currency translations: The books and records of the International
Bond Fund and the International Equity Fund are maintained in U.S. dollars.
Amounts denominated in foreign currencies are translated into U.S. dollars on
the following basis: (i) investment securities, other assets and liabilities
initially expressed in foreign currencies are converted each business day into
U.S. dollars at the midpoint of the New York interbank market spot exchange
rate as quoted on the day of such translation by the Federal Reserve Bank of
New York or at such other quoted market exchange rate as may be determined to
be appropriate by the investment adviser; (ii) purchases and sales of foreign
securities, income and expenses are converted into U.S. dollars based upon
currency exchange rates prevailing on the respective dates of such
transactions. The Funds generally do not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized and unrealized gains and losses on foreign currency
represent: (i) foreign exchange gains and losses from the sale and holding of
foreign currencies, forward contracts and foreign currency denominated debt
obligations; (ii) gains and losses between trade date and settlement date on
investment securities transactions and forward exchange contracts; and (iii)
gains and losses from the difference between amounts of dividends and interest
recorded and the amounts actually received.
(C) Futures contracts: The International Equity Fund may engage in futures
contracts for the purpose of hedging against changes in the value of its
portfolio securities and in the value of securities it intends to purchase.
Upon entering into a futures contract, the Fund is required to deposit with the
broker an amount of cash or cash equivalents equal to a certain percentage of
the contract amount. This is known as the "initial margin". Subsequent payments
("variation margin") are made
131
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
or received by the Fund each day, depending on the daily fluctuation of the
value of the contract. The daily changes in the value of the contract are
recorded as unrealized gains or losses. The Fund recognizes, when the contract
is closed, a realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the time it was closed. Futures
contracts open at December 31, 1995 and their related unrealized market
appreciation (depreciation) are set forth in the notes to the Portfolio of
Investments of the International Equity Fund.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments or indices, which may not
correlate with the change in value of the hedged investments. In addition,
there is the risk that the Fund may not be able to enter into a closing
transaction because of an illiquid secondary market.
(D) Forward foreign currency contracts--The International Bond Fund may enter
into forward foreign currency contracts in order to hedge its exposure to
changes in foreign currency exchange rates on its foreign portfolio holdings.
When executing forward foreign currency contracts, the Fund is obligated to buy
or sell a foreign currency at a specified rate on a certain date in the future.
With respect to sales of forward foreign currency contracts, the Fund would
incur a loss if the value of the contract increases between the date the
forward contract is opened and the date the forward contract is closed. The
Fund realizes a gain if the value of the contract decreases between those
dates. With respect to purchases of forward foreign currency contracts, the
Fund would incur a loss if the value of the contract decreases between the date
the forward contract is opened and the date the forward contract is closed. The
Fund realizes a gain if the value of the contract increases between those
dates. The Fund is also exposed to credit risk associated with counter party
nonperformance on these forward foreign currency contracts which is typically
limited to the unrealized gains on such contracts that are recognized in the
Statement of Assets and Liabilities.
(E) Securities transactions and investment income: Securities transactions
are recorded on a trade date basis. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, adjusted for
amortization of premiums and, when appropriate, discounts on investments, is
earned from settlement date and recognized on the accrual basis. Securities
purchased or sold on a when-issued or delayed-delivery basis may be settled a
month or more after the trade date.
Each Fund may enter into repurchase agreements with financial institutions
deemed to be creditworthy by FCIMCO, subject to the seller's agreement to
repurchase and the Fund's agreement to resell such securities at a mutually
agreed upon price. Securities purchased subject to repurchase agreements are
deposited with the Fund's custodian and, pursuant to the terms of the
repurchase agreement, must have an aggregate market value greater than or equal
to the repurchase price
132
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
plus accrued interest at all times. If the value of the underlying securities
falls below the value of the repurchase price plus accrued interest, the Fund
will require the seller to deposit additional collateral by the next business
day. If the request for additional collateral is not met, or the seller
defaults on its repurchase obligation, the Fund maintains the right to sell the
underlying securities at market value and may claim any resulting loss against
the seller.
(F) Expenses: Expenses directly attributable to a Fund are charged to that
Fund's operations; expenses which are applicable to all Funds are allocated
among them on the basis of relative net assets. Fund expenses directly
attributable to a class of shares are charged to that class; expenses which are
applicable to all classes are allocated among them.
(G) Dividends to shareholders: It is the policy of Managed Assets Income Fund
and Equity Income Fund to declare and pay dividends from net investment income
monthly while the Managed Assets Fund, Growth Fund, Special Opportunities Fund
and International Equity Fund declare and pay dividends quarterly. The Bond
Fund, Intermediate Bond Fund, International Bond Fund, Municipal Bond Fund,
Intermediate Municipal Bond Fund, U.S. Government Money Market Fund, Money
Market Fund and Municipal Money Market Fund declare dividends daily from net
investment income, payable monthly. Distributions from net realized capital
gains, if any, are normally declared and paid annually, but each Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code (the "Code"). However, to the extent
that net realized capital gains of a Fund can be reduced by capital loss
carryovers, if any, such gains will not be distributed.
The amounts of dividends from net investment income and of distributions from
net realized gains are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting principles. To
the extent these differences are permanent in nature, such amounts are
reclassified within the composition of net assets based on their federal tax-
basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as distributions in excess of net investment income or
net realized capital gains. To the extent they exceed net investment income and
net realized gains for tax purposes, they are reported as distributions of
capital.
(H) Federal income taxes: It is the policy of each Fund to qualify as a
regulated investment company by complying with the provisions available to
certain investment companies, as defined in applicable sections of the Code,
and to make distributions of income and net realized capital gains sufficient
to relieve it from all, or substantially all, Federal income and excise taxes.
Capital losses incurred after October 31 ("Post-October losses") within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Municipal Money Market Fund and the Special Opportunities
Fund
133
<PAGE>
PRAIRIE FUNDS
- - -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - -------------------------------------------------------------------------------
incurred and may elect to defer net capital losses of approximately $50 and
$113,000, respectively.
At December 31, 1995, the Managed Asset Income Fund had unused capital loss
carryovers of approximately $317,000, which are available for Federal income
tax purposes to be applied against future net capital gains, if any, realized
subsequent to December 31, 1995. If not applied, the carryover expires in
2003.
At December 31, 1995, the U.S. Government Money Market Fund had unused
capital loss carryovers of approximately $16,000, which are available for
Federal income tax purposes to be applied against future net capital gains, if
any, realized subsequent to December 31, 1995. If not applied, the carryover
expires in 2002.
At December 31, 1995, the Municipal Money Market Fund had unused capital
loss carryovers of approximately $40,000, which are available for Federal
income tax purposes to be applied against future net capital gains, if any,
realized subsequent to December 31, 1995. If not applied, $1,000 of the
carryover expires in 1999, $2,000 expires in 2001, $1,000 expires in 2002 and
$36,000 expires in 2003.
At December 31, 1995, with the exception of the Growth Fund, the cost of the
Funds' investments for Federal income tax purposes was substantially the same
as the cost for financial reporting purposes (see Portfolios of Investments).
(I) Other: Organization expenses incurred by the Funds are being amortized
to operations over the period during which it is expected that a benefit will
be realized, not to exceed five years.
(J) Concentration of risk: Investing in securities of foreign issuers and
foreign currency transactions may involve certain considerations and risks not
typically associated with investments in the United States. These risks
include revaluation of currencies, adverse fluctuations in foreign currency
values and possible adverse political, social and economic developments,
including those particular to a specific industry, country or region, which
could cause the securities and their markets to be less liquid and prices more
volatile than those of comparable U.S. securities. These risks are greater
with respect to securities of issuers located in emerging market countries in
which certain Funds are authorized to invest. The ability of the issuers of
debt securities held by the Funds to meet their obligations may be affected by
economic and political developments particular to a specific industry, country
or region.
134
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
NOTE 3--INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER TRANSACTIONS WITH
AFFILIATES
(A) The Trust has an Investment Advisory Agreement with FCIMCO pursuant to
which FCIMCO has agreed to provide day-to-day management of each Fund's
investments at the following annual rates:
<TABLE>
<S> <C>
Managed Assets Income Fund............................................. 0.65%
Managed Assets Fund.................................................... 0.65%
Equity Income Fund..................................................... 0.50%
Growth Fund............................................................ 0.65%
Special Opportunities Fund............................................. 0.70%
International Equity Fund.............................................. 0.80%
Intermediate Bond Fund................................................. 0.40%
Bond Fund.............................................................. 0.55%
International Bond Fund................................................ 0.70%
Intermediate Municipal Bond Fund....................................... 0.40%
Municipal Bond Fund.................................................... 0.40%
U.S. Government Money Market Fund...................................... 0.40%
Money Market Fund...................................................... 0.40%
Municipal Money Market Fund............................................ 0.40%
</TABLE>
The Trust has an Administration Agreement with FCIMCO pursuant to which
FCIMCO has agreed to assist in all aspects of the Funds' operations at an
annual rate of 0.15% of each Fund's average daily net assets. FCIMCO has
engaged Concord to provide certain administrative services to the Funds
pursuant to a Master Sub-Administration Agreement between FCIMCO and Concord.
FCIMCO has agreed to pay Concord a fee for the services stipulated in the
Master Sub-Administration Agreement.
For the period ended December 31, 1995, FCIMCO voluntarily agreed to
reimburse a portion of the operating expenses of the Funds to the extent that
the Funds' expenses exceeded the following amounts, excluding shareholder
servicing fees and 12b-1 fees (as a percentage of each Fund's average net
assets):
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS I
------- ------- -------
<S> <C> <C> <C>
Managed Assets Income Fund.............................. 1.31% 2.06% 0.80%
Managed Assets Fund..................................... 1.33% 2.08% 0.80%
Equity Income Fund...................................... 1.18% 1.93% 0.65%
Growth Fund............................................. 1.33% 2.08% 0.80%
Special Opportunities Fund.............................. 1.38% 2.13% 0.85%
International Equity Fund............................... 1.58% 2.33% 1.05%
Intermediate Bond Fund.................................. 1.15% 1.90% 0.55%
Bond Fund............................................... 1.23% 1.98% 0.70%
International Bond Fund................................. 1.48% 2.23% 0.95%
Intermediate Municipal Bond Fund........................ 0.90% 1.83% 0.55%
</TABLE>
135
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B Class I
------- ------- -------
<S> <C> <C> <C>
Municipal Bond Fund..................................... 1.08% 1.83% 0.55%
U.S. Government Money Market............................ 0.80% NA NA
Money Market Fund....................................... 0.80% 1.55% NA
Municipal Money Market Fund............................. 0.70% NA NA
</TABLE>
As such, FCIMCO reimbursed expenses during the period ending December 31,
1995 in the following amounts:
<TABLE>
<CAPTION>
Expense
Reimbursement
-------------
<S> <C>
Managed Assets Income Fund..................................... $179,574
Managed Assets Fund............................................ 89,978
Equity Income Fund............................................. 277,704
Growth Fund.................................................... 314,740
Special Opportunities Fund..................................... 168,733
International Equity Fund...................................... 213,519
Intermediate Bond Fund......................................... 185,219
Bond Fund...................................................... 178,732
International Bond Fund........................................ 110,736
Intermediate Municipal Bond Fund............................... 403,299
Municipal Bond Fund............................................ 278,552
U.S. Government Money Market Fund.............................. 198,986
Money Market Fund.............................................. 431,210
Municipal Money Market Fund.................................... 489,926
</TABLE>
The Distributor is not entitled to any fees pursuant to the Distribution
Agreement; however, the Distributor may receive payments of sales charges or
contingent deferred sales charges.
(B) The Funds' Class A shares and Class B shares have a Shareholder Services
Plan (the "Plan") pursuant to which the Funds pay the Distributor a fee, at an
annual rate of 0.25% of the average daily net assets of the outstanding Class A
shares and Class B shares. Pursuant to the terms of the Plan, the Distributor
has agreed to provide certain shareholder services to the holders of these
shares. Additionally, under the terms of the Plan, the Distributor may make
payments to other shareholder service agents who may include FCIMCO, FNBC and
their affiliates. For the period ended December 31, 1995, the Funds paid the
following amounts under the Plan:
<TABLE>
<CAPTION>
Amounts paid to
FCIMCO, FNBC Amounts paid to Amounts
and other service retained by
its affiliates organizations Distributor
--------------- --------------- -----------
<S> <C> <C> <C>
Managed Assets Income Fund...... $7,185 $111,163 $809
Managed Assets Fund............. 7,036 1,892 124
Equity Income Fund.............. 417 2,510 54
Growth Fund..................... 1,788 2,959 137
Special Opportunities Fund...... 304 454 19
</TABLE>
136
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amounts paid to
FCIMCO, FNBC Amounts paid to Amounts
and other service retained by
its affiliates organizations Distributor
--------------- --------------- -----------
<S> <C> <C> <C>
International Equity Fund....... $ 1,363 $ 1,791 $ 98
Intermediate Bond Fund.......... 3,487 2,209 72
Bond Fund....................... 1,230 898 33
International Bond Fund......... 415 240 29
Intermediate Municipal Bond
Fund........................... 23,617 13,617 1,227
Municipal Bond Fund............. 7,593 7,151 266
U.S. Government Money Market
Fund........................... 168,470 2,292 --
Money Market Fund............... 378,833 1,372 380
Municipal Money Market Fund..... 508,558 28 17
</TABLE>
(C) The Funds' Class B shares have a Distribution Plan adopted pursuant to
Rule 12b-1 under the Act (the "12b-1 Plan") pursuant to which the Funds have
agreed to pay the Distributor for advertising, marketing and distributing Class
B Shares of the Funds at an annual rate of .75% of the average daily net assets
of the Funds' outstanding Class B shares. Under the terms of the 12b-1 Plan,
the Distributor may make payments to FCIMCO, FNBC and their affiliates in
respect of these services. For the period ended December 31, 1995, the Funds
made the following payments under the 12b-1 Plan, all of which was retained by
the Distributor:
<TABLE>
<S> <C>
Managed Assets Income Fund........................................... $5,831
Managed Assets Fund.................................................. 3,325
Equity Income Fund................................................... 1,283
Growth Fund.......................................................... 670
Special Opportunities Fund........................................... 56
International Equity Fund............................................ 379
Intermediate Bond Fund............................................... 563
Bond Fund............................................................ 116
International Bond Fund.............................................. 30
Intermediate Municipal Bond Fund..................................... 824
Municipal Bond Fund.................................................. 600
Money Market Fund.................................................... 154
</TABLE>
(D) During the fiscal year ended December 31, 1994, an affiliate of FCIMCO
purchased securities from the Money Market Fund and the U.S. Government Money
Market Fund at an amount in excess of the securities' fair market value. These
Funds recorded a realized loss on these sales in the amount of $1,286,000 and
$933,054, respectively, and an offsetting capital contribution from the
affiliate. As a result of varying treatments for book and tax purposes, the
capital contributions were reclassified from additional paid-in-capital to
accumulated net realized losses in the Statement of Assets and Liabilities.
137
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
NOTE 4--SECURITIES TRANSACTIONS
The following summarizes the securities transactions entered into by the
Funds, excluding short-term investments, for the period ended December 31,
1995:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
Managed Assets Income Fund........................ $ 3,357,559 $ 7,795,562
Managed Assets Fund............................... 7,772,725 99,502
Equity Income Fund................................ 317,060,048 94,711,633
Growth Fund....................................... 488,008,493 274,675,271
Special Opportunities Fund........................ 96,866,413 26,212,656
International Equity Fund......................... 72,831,246 3,326,924
Intermediate Bond Fund............................ 410,895,956 256,675,480
Bond Fund......................................... 265,646,537 167,721,527
International Bond Fund........................... 14,226,845 4,749,719
Intermediate Municipal Bond Fund.................. 167,757,833 164,745,501
Municipal Bond Fund............................... 174,644,032 162,078,544
</TABLE>
At December 31, 1995, accumulated net unrealized appreciation (depreciation)
on investments was as follows:
<TABLE>
<CAPTION>
Unrealized Unrealized Net Unrealized
Appreciation Depreciation Appreciation
------------ ------------ --------------
<S> <C> <C> <C>
Managed Assets Income Fund.......... $ 8,452,650 $ (184,643) $ 8,268,007
Managed Assets Fund................. 766,286 (42,223) 724,063
Equity Income Fund.................. 42,227,078 (629,319) 41,597,759
Growth Fund......................... 48,630,652 (2,897,786) 45,732,866
Special Opportunities Fund.......... 16,914,276 (1,454,174) 15,460,102
International Equity Fund........... 7,077,639 (1,202,384) 5,875,255
Intermediate Bond Fund.............. 7,224,889 (7,491) 7,217,398
Bond Fund........................... 6,271,794 -- 6,271,794
International Bond Fund............. 427,716 -- 427,716
Intermediate Municipal Bond Fund.... 16,805,231 -- 16,805,231
Municipal Bond Fund................. 13,674,273 -- 13,674,273
</TABLE>
138
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
NOTE 5--CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Funds are summarized below:
<TABLE>
<CAPTION>
MANAGED ASSETS
INCOME FUND
---------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
--------------------- ---------------------- -------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Class A Shares:
Shares Issued........... $ 6,191,735 463,615 $ 5,577,372 441,901
Dividends reinvested.... 2,369,623 177,490 2,307,933 185,739
Shares redeemed......... (9,494,631) (723,267) (11,257,088) (903,518)
----------- -------- ------------ --------
Net Increase (decrease). $ (933,273) (82,162) $ (3,371,783) (275,878)
=========== ======== ============ ========
Class B Shares:
Shares Issued........... $ 2,007,221 146,972 $ 1,147,965 90,904
Dividends reinvested.... 33,593 2,392 28,168 2,281
Shares redeemed......... -- -- (1,127,831) (93,185)(d)
----------- -------- ------------ --------
Net Increase............ $ 2,040,814 149,364 $ 48,302 --
=========== ======== ============ ========
Class I Shares:
Shares Issued........... $ 1,362,669 103,183 -- --
Dividends reinvested.... 11,790 865 -- --
Shares redeemed......... (202,866) (15,263) -- --
----------- -------- ------------ --------
Net Increase............ $ 1,171,593 88,785 $ -- --
=========== ======== ============ ========
Net Increase (decrease)
in Fund................ $ 2,279,134 320,311 $ (3,323,481) (275,878)
=========== ======== ============ ========
</TABLE>
139
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGED ASSETS EQUITY INCOME
FUND FUND
-----------------------------------------------
FOR THE PERIOD FOR THE PERIOD
APRIL 3, 1995 JANUARY 27, 1995
THROUGH THROUGH
DECEMBER 31, 1995(A) DECEMBER 31, 1995(A)
-----------------------------------------------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares Issued........... $8,265,007 774,054 $ 3,147,813 274,126
Dividends reinvested.... 77,996 6,993 96,740 8,056
Shares redeemed......... (582,928) (54,615) (548,876) (47,021)
----------- -------- ------------ ----------
Net Increase............ $7,760,075 726,432 $ 2,695,677 235,161
=========== ======== ============ ==========
Class B Shares:
Shares Issued........... $ 763,106 73,866 $ 549,799 47,321
Dividends reinvested.... 7,435 679 20,644 1,708
Shares redeemed......... (19,541) (1,829) (5,669) (479)
----------- -------- ------------ ----------
Net Increase............ $ 751,000 72,716 $ 564,774 48,550
=========== ======== ============ ==========
Class I Shares:
Shares Issued........... $ 363,704 35,836 $254,460,104 24,853,530
Dividends reinvested.... 81 7 6,520,825 538,073
Shares redeemed......... -- -- (23,702,375) (2,132,230)
----------- -------- ------------ ----------
Net Increase............ $ 363,785 35,843 $237,278,554 23,259,373
=========== ======== ============ ==========
Net Increase in Fund.... $ 8,874,860 834,991 $240,539,005 23,543,084
=========== ======== ============ ==========
</TABLE>
140
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SPECIAL
GROWTH OPPORTUNITIES
FUND FUND
------------------------ ------------------------
FOR THE PERIOD FOR THE PERIOD
JANUARY 27, 1995 JANUARY 27, 1995
THROUGH THROUGH
DECEMBER 31, 1995(A) DECEMBER 31, 1995(A)
------------------------ ------------------------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares Issued............... $ 4,175,044 365,857 $ 621,648 57,254
Dividends reinvested........ 284,304 24,056 13,920 1,177
Shares redeemed............. (339,951) (28,244) (38,190) (3,361)
------------ ---------- ------------ ----------
Net Increase................ $ 4,119,397 361,669 $ 597,378 55,070
============ ========== ============ ==========
Class B Shares:
Shares Issued............... $ 246,223 21,032 $ 13,756 1,248
Dividends reinvested........ 18,650 1,584 308 26
Shares redeemed............. (2,126) (178) (52) (5)
------------ ---------- ------------ ----------
Net Increase................ $ 262,747 22,438 $ 14,012 1,269
============ ========== ============ ==========
Class I Shares:
Shares Issued............... $296,410,620 29,238,077 $89,307,250 8,700,086
Dividends reinvested........ 14,724,145 1,243,736 1,180,180 99,691
Shares redeemed............. (67,961,411) (5,922,360) (12,836,851) (1,176,741)
------------ ---------- ------------ ----------
Net Increase................ $243,173,354 24,559,453 $77,650,579 7,623,036
============ ========== ============ ==========
Net Increase in Fund........ $247,555,498 24,943,560 $78,261,969 7,679,375
============ ========== ============ ==========
</TABLE>
141
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL
EQUITY INTERMEDIATE BOND
FUND FUND
---------------------- ------------------------
FOR THE PERIOD FOR THE PERIOD
MARCH 3, 1995 FEBRUARY 1, 1995
THROUGH THROUGH
DECEMBER 31, 1995(A) DECEMBER 31, 1995(B)
---------------------- ------------------------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares Issued................. $ 2,704,994 256,160 $ 7,282,071 895,627
Dividends reinvested.......... 72,968 6,664 288,362 35,401
Shares redeemed............... (171,519) (16,377) (1,588,172) (194,954)
----------- --------- ------------ ----------
Net Increase.................. $ 2,606,443 246,447 $ 5,982,261 736,074
=========== ========= ============ ==========
Class B Shares:
Shares Issued................. $ 177,315 16,903 $ 303,451 37,048
Dividends reinvested.......... 4,093 407 7,835 961
Shares redeemed............... (193) (18) (50,817) (6,308)
----------- --------- ------------ ----------
Net Increase.................. $ 181,215 17,292 $ 260,469 31,701
=========== ========= ============ ==========
Class I Shares:
Shares Issued................. $97,383,515 9,484,283 $193,282,535 24,813,641
Dividends reinvested.......... 1,458,486 131,833 3,730,335 459,341
Shares redeemed............... (5,651,592) (536,226) (22,128,156) (2,742,147)
----------- --------- ------------ ----------
Net Increase.................. $93,190,409 9,079,890 $174,884,714 22,530,835
=========== ========= ============ ==========
Net Increase in Fund.......... $95,978,067 9,343,629 $181,127,444 23,298,610
=========== ========= ============ ==========
</TABLE>
142
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE BOND
FUND
---------------------------------------------
FOR THE PERIOD
FOR THE YEAR MARCH 5, 1993
ENDED THROUGH
JANUARY 31, 1995 JANUARY 31, 1994(A)
--------------------- ----------------------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares Issued..................... $ 19,449 2,527 $ 51,267 6,185
Dividends reinvested.............. 4,153 533 1,484 180
Shares redeemed................... (15,285) (1,997) -- --
---------- --------- ----------- --------
Net Increase...................... $ 8,317 1,063 $ 52,751 6,365
========== ========= =========== ========
Class B Shares:
Shares Issued..................... $ 2,000 245 $ -- --
Dividends reinvested.............. 99 13 -- --
Shares redeemed................... (2,099) (258) -- --
---------- --------- ----------- --------
Net Increase...................... $ -- -- $ -- --
========== ========= =========== ========
Class I Shares:
Shares Issued..................... $7,661,463 1,001,211 $5,247,186 628,922
Dividends reinvested.............. 5,537 710 5,299 639
Shares redeemed................... (5,328,334) (698,958) (154,029) (18,488)
---------- --------- ----------- --------
Net Increase...................... $2,338,666 302,963 $5,098,456 611,073
========== ========= =========== ========
Net Increase in Fund.............. $2,346,983 304,026 $5,151,207 617,438
========== ========= =========== ========
</TABLE>
143
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL
BOND
BOND FUND FUND
------------------------ ----------------------
FOR THE FOR THE PERIOD
PERIOD JANUARY 27, 1995
FEBRUARY 10, 1995 THROUGH
THROUGH DECEMBER 31,
DECEMBER 31, 1995(A) 1995(A)
------------------------ ----------------------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares issued........... $ 1,854,556 174,316 $ 480,966 42,767
Dividends reinvested.... 110,618 10,293 47,097 4,274
Shares redeemed......... (148,560) (13,734) (19,999) (1,752)
------------ ---------- ----------- ---------
Net increase............ $ 1,816,614 170,875 $ 508,064 45,289
============ ========== =========== =========
Class B Shares:
Shares issued........... $ 58,404 5,401 $ 3,704 370
Dividends reinvested.... 2,873 268 484 44
Shares redeemed......... -- -- -- --
------------ ---------- ----------- ---------
Net increase............ $ 61,277 5,669 $ 4,188 414
============ ========== =========== =========
Class I Shares:
Shares issued........... $127,483,190 12,620,870 $15,099,834 1,442,838
Dividends reinvested.... 2,860,982 267,174 332,915 29,708
Shares redeemed......... (13,656,196) (1,289,980) (1,470,371) (130,514)
------------ ---------- ----------- ---------
Net increase............ $116,687,976 11,598,064 $13,962,378 1,342,032
============ ========== =========== =========
Net increase in Fund.... $118,565,867 11,774,608 $14,474,630 1,387,735
============ ========== =========== =========
</TABLE>
144
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE MUNICIPAL
BOND FUND
--------------------------------------------------
FOR THE PERIOD
MARCH 1, 1995 FOR THE
THROUGH YEAR ENDED
DECEMBER 31, FEBRUARY 28,
1995(C) 1995
------------------------ ------------------------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares issued........... $ 2,036,319 167,138 $ 920,191 78,527
Dividends reinvested.... 579,220 47,958 829,334 70,747
Shares redeemed......... (2,724,405) (225,316) (12,219,977) (1,053,197)
------------ ---------- ------------ ----------
Net decrease............ $ (108,866) (10,220) $(10,470,452) (903,923)
============ ========== ============ ==========
Class B Shares:
Shares issued........... $ 348,000 28,626 $ 115,550 9,750
Dividends reinvested.... 4,876 399 1,971 169
Shares redeemed......... (20,212) (1,672) (123,958) (10,419)
------------ ---------- ------------ ----------
Net increase (decrease). $ 332,664 27,353 $ (6,437) (500)
============ ========== ============ ==========
Class I Shares:
Shares issued........... $ 46,362,306 3,850,432 $366,411,242 31,318,358
Dividends reinvested.... 2,330,219 191,337 20,498 1,737
Shares redeemed......... (54,476,753) (4,527,302) (3,821,887) (325,102)
------------ ---------- ------------ ----------
Net increase (decrease). $ (5,784,228) (485,533) $362,609,853 30,994,993
============ ========== ============ ==========
Net increase (decrease)
in Fund................ $ (5,560,430) (468,400) $352,132,964 30,090,570
============ ========== ============ ==========
</TABLE>
145
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE
MUNICIPAL MUNICIPAL BOND
BOND FUND FUND
--------------------- ------------------------
FOR THE FOR THE PERIOD
YEAR ENDED MARCH 1, 1995
FEBRUARY 28, THROUGH
1994 DECEMBER 31, 1995(C)
--------------------- ------------------------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares issued.................. $ 6,634,160 523,996 $ 1,295,558 103,426
Dividends reinvested........... 1,972,927 158,309 346,338 27,700
Shares redeemed................ (6,226,132) (496,647) (1,377,127) (110,562)
----------- -------- ------------ ----------
Net increase................... $ 2,380,955 185,658 $ 264,769 20,564
=========== ======== ============ ==========
Class B Shares:
Shares issued.................. $ 12,000 980 $ 228,602 18,257
Dividends reinvested........... 4 1 6,838 543
Shares redeemed................ -- -- (39) (3)
----------- -------- ------------ ----------
Net increase................... $ 12,004 981 $ 235,401 18,797
=========== ======== ============ ==========
Class I Shares:
Shares issued.................. $ -- -- $ 32,958,625 2,685,708
Dividends reinvested........... -- -- 3,575,154 285,358
Shares redeemed................ -- -- (27,710,442) (2,219,888)
----------- -------- ------------ ----------
Net increase................... $ -- -- $ 8,823,337 751,178
=========== ======== ============ ==========
Net increase in Fund........... $ 2,392,959 186,639 $ 9,323,507 790,539
=========== ======== ============ ==========
</TABLE>
146
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BOND
FUND
-----------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
FEBRUARY 28, 1995 DECEMBER 31, 1994
------------------------ -----------------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares issued................. $ 301,216 25,507 $ 3,586,206 275,363
Dividends reinvested.......... 319,837 27,236 956,593 75,829
Shares redeemed............... (2,895,171) (246,815) (5,752,746) (441,865)
------------ ---------- ----------- --------
Net decrease.................. $ (2,274,118) (194,072) $(1,209,947) (90,673)
============ ========== =========== ========
Class B Shares:
Shares issued................. $ -- -- $ 2,000 161
Dividends reinvested.......... 66 6 4 1
Shares redeemed............... (2,071) (168) -- --
------------ ---------- ----------- --------
Net increase (decrease)....... $ (2,005) (162) $ 2,004 162
============ ========== =========== ========
Class I Shares:
Shares issued................. $222,099,320 18,631,505 $ -- --
Dividends reinvested.......... 3,923 325 -- --
Shares redeemed............... (4,444,913) (371,925) -- --
------------ ---------- ----------- --------
Net increase.................. $217,658,330 18,259,905 $ -- --
============ ========== =========== ========
Net increase (decrease) in
Fund......................... $215,382,207 18,065,671 $(1,207,943) (90,511)
============ ========== =========== ========
</TABLE>
147
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
FUND FUND
-------------------------- ----------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1995 1994
------------ ------------ ------------ ------------
SHARES SHARES SHARES SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares issued........... 250,085,862 677,021,399 802,777,063 1,724,346,455
Dividends reinvested.... 2,488,380 1,310,332 6,872,109 2,559,069
Shares redeemed......... (311,695,323) (716,564,214) (725,110,518) (1,770,081,791)
------------ ------------ ------------ --------------
Net increase (decrease). (59,121,081) (38,232,483) 84,538,654 (43,176,267)
============ ============ ============ ==============
Class B Shares:
Shares issued........... -- -- 250,080 --
Dividends reinvested.... -- -- 903 --
Shares redeemed......... -- -- (186,116) --
------------ ------------ ------------ --------------
Net increase............ -- -- 64,867 --
============ ============ ============ ==============
Net increase (decrease)
in Fund................ (59,121,081) (38,232,483) 84,603,521 (43,176,267)
============ ============ ============ ==============
</TABLE>
148
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL
MONEY MARKET
FUND
------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- ------------------
SHARES SHARES
------ ------
<S> <C> <C>
Class A Shares:
Shares issued.............................. 534,326,783 428,067,086
Dividends reinvested....................... 3,305,612 2,261,400
Shares redeemed............................ (482,251,105) (434,859,851)
------------ ------------
Net increase (decrease) in Fund............ 55,381,290 (4,531,365)
============ ============
</TABLE>
- - -----------
(a) Period from commencement of operations.
(b) Effective February 1, 1995, the Fund changed its fiscal year end from
January 31 to December 31.
(c) Effective March 1, 1995, the Fund changed its fiscal year end from February
28 to December 31.
(d) Includes 91,228 shares converted to Class A Shares on December 2, 1994.
NOTE 6--MERGER AND SUBSEQUENT EVENT
On December 1, 1995, FCIMCO's ultimate parent company, First Chicago
Corporation, merged with NBD Bancorp., Inc., with the combined company renamed
First Chicago NBD Corporation (FCNBD). FCNBD has now begun the process of
reorganizing their proprietary mutual funds: Prairie Funds, Prairie
Institutional Funds and the Woodward Funds (whose investment adviser is NBD
Bank, a wholly owned subsidiary of FCNBD).
On February 20, 1996, the Board of Trustees of The Woodward Funds and the
Board of Trustees/Directors of the Prairie Funds, Prairie Municipal Bond Fund,
Inc. and Prairie Intermediate Bond Fund approved Reorganization Agreements,
which are subject to shareholder approval. The expenses incurred in connection
with entering into and carrying out provisions of the Reorganization
Agreements, whether or not the transactions contemplated thereby are
consummated, will be paid by FCNBD. The reorganization is intended to be
effected on a tax-free basis, so that none of the Fund's shareholders will
recognize taxable gains or losses as a result of the reorganization.
A proxy statement/prospectus describing the reorganization and the reasons
therefore will be sent to shareholders.
149
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
NOTE 7--ELIGIBLE DISTRIBUTIONS (UNAUDITED):
The Trust designates the following eligible distributions for the dividends
received deduction for corporations for the year ended December 31, 1995:
<TABLE>
<CAPTION>
MANAGED
ASSETS MANAGED EQUITY
INCOME ASSETS INCOME
FUND FUND FUND
------- ------- ------
<S> <C> <C> <C>
Dividend Income................................... $1,219,984 $52,630 $8,875,334
Dividend Income Per Share--Class A Shares......... 0.28 0.05 0.32
Dividend Income Per Share--Class B Shares......... 0.22 0.05 0.26
Dividend Income Per Share--Class I Shares......... 0.28 0.08 0.36
</TABLE>
<TABLE>
<CAPTION>
GROWTH SPECIAL INTERNATIONAL
FUND OPPORTUNITIES FUND EQUITY FUND
------ ------------------ -------------
<S> <C> <C> <C>
Dividend Income.................... $4,772,025 $611,057 $973,285
Dividend Income Per Share--Class A
Shares............................ 0.10 0.01 0.05
Dividend Income Per Share--Class B
Shares............................ 0.05 0.00 0.03
Dividend Income Per Share--Class I
Shares............................ 0.12 0.04 0.07
</TABLE>
150
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS INCOME FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CLASS A SHARES:
Net Asset Value, Beginning of
Year.......................... $ 12.13 $ 13.11 $ 12.68 $ 12.56 $ 10.79
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERA-
TIONS:
Net investment income (loss)... 0.64 0.73 0.72 0.79 0.83
Net realized and unrealized
gains (losses) on invest-
ments........................ 2.48 (0.98) 0.61 0.26 1.77
------- ------- ------- ------- -------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS....... 3.12 (0.25) 1.33 1.05 2.60
------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBU-
TIONS:
From net investment income..... (0.68) (0.72) (0.72) (0.77) (0.83)
From net realized gains on in-
vestments.................... (0.03) (0.01) (0.18) (0.16) --
------- ------- ------- ------- -------
TOTAL DIVIDENDS AND DISTRIBU-
TIONS....................... (0.71) (0.73) (0.90) (0.93) (0.83)
------- ------- ------- ------- -------
Net change in net asset value... 2.41 (0.98) 0.43 0.12 1.77
------- ------- ------- ------- -------
Net Asset Value, End of Year.... $ 14.54 $ 12.13 $ 13.11 $ 12.68 $ 12.56
======= ======= ======= ======= =======
- - ---------------------------------
TOTAL RETURN (EXCLUDES SALES
CHARGE) 26.40% (1.92)% 10.70% 8.68% 24.87%
- - ---------------------------------
- - ---------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ---------------------------------
Ratio of expenses to average net
assets........................ 1.17% 0.63% 0.39% 0.02% --
Ratio of net investment income
to average net assets......... 4.88% 5.77% 5.54% 6.24% 7.04%
Ratio of expenses to average net
assets*....................... 1.54% 1.67% 1.65% 1.88% 2.16%
Ratio of net investment income
to average net assets*........ 4.51% 4.73% 4.28% 4.38% 4.88%
Portfolio turnover.............. 8.23% 28.69% 16.40% 22.14% 26.02%
Net assets, end of period (000's
omitted)...................... $51,997 $44,367 $51,586 $34,262 $14,038
</TABLE>
- - -----------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
See Notes to Financial Statements.
151
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS INCOME FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Period Ended Period Ended
December 31, December 2,
1995(2) 1994(1)
------------ ------------
<S> <C> <C>
CLASS B SHARES:
Net Asset Value, Beginning of Period............... $12.42 $13.05
------ ------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income............................. 0.45 0.51
Net realized and unrealized gains (losses) on
investments..................................... 2.17 (0.91)
------ ------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS... 2.62 (0.40)
------ ------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income........................ (0.45) (0.54)
From net realized gains on investments............ (0.03) (0.01)
------ ------
TOTAL DIVIDENDS AND DISTRIBUTIONS................ (0.48) (0.55)
------ ------
Net change in net asset value...................... 2.14 (0.95)
------ ------
Conversion to Class A Shares(3).................... NA 12.10
------ ------
Net Asset Value, End of Period..................... $14.56 $ --
====== ======
- - ----------------------------------------------------
TOTAL RETURN (EXCLUDES REDEMPTION CHARGE) 21.42%++ (3.13)%++
- - ----------------------------------------------------
- - ----------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ----------------------------------------------------
Ratio of expenses to average net assets............ 1.92%+ 1.21%+
Ratio of net investment income to average net as-
sets............................................. 3.89%+ 4.10%+
Ratio of expenses to average net assets*........... 2.12%+ 2.17%+
Ratio of net investment income to average net as-
sets*............................................ 3.70%+ 3.14%+
Portfolio turnover................................. 8.23%++ 28.69%++
Net assets, end of period (000's omitted).......... $2,175 $ --
</TABLE>
- - -----------
(1) For the period February 8, 1994 (initial offering date of Class B Shares)
through December 2, 1994. On December 2, 1994, the Fund terminated its
offering of Class B Shares under the then-current sales load schedule and
such shares converted to Class A Shares.
(2) For the period March 3, 1995 (re-offering date of Class B Shares) through
December 31, 1995.
(3) On December 2, 1994, the Fund terminated its offering of Class B shares
under the then-current sales load schedule and such shares converted to
Class A Shares.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
NA Not applicable.
See Notes to Financial Statements.
152
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS INCOME FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Period Ended
December 31,
1995(1)
------------
<S> <C>
CLASS I SHARES:
Net Asset Value, Beginning of Period............................. $12.42
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................................... 0.57
Net realized and unrealized gains on investments................ 2.18
------
TOTAL INCOME FROM INVESTMENT OPERATIONS........................ 2.75
------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income...................................... (0.57)
From net realized gains on investments.......................... (0.03)
------
TOTAL DIVIDENDS AND DISTRIBUTIONS.............................. (0.60)
------
Net change in net asset value.................................... 2.15
------
Net Asset Value, End of Period................................... $14.57
======
- - ------------------------------------------------------------------
TOTAL RETURN 22.55%++
- - ------------------------------------------------------------------
- - ------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ------------------------------------------------------------------
Ratio of expenses to average net assets.......................... 0.77%+
Ratio of net investment income to average net assets............. 5.12%+
Ratio of expenses to average net assets*......................... 1.22%+
Ratio of net investment income to average net assets*............ 4.66%+
Portfolio turnover............................................... 8.23%++
Net assets, end of period (000's omitted)........................ $1,294
</TABLE>
- - -----------
(1) For the period March 3, 1995, (initial offering date of Class I Shares)
through December 31, 1995.
* During the period, certain fees were voluntarily reimbursed. If such
voluntary fee reimbursements had not occurred, the ratios would have been
as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
153
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managed Equity
Assets Income Growth
Fund(1) Fund(2) Fund(2)
------- ------- -------
<S> <C> <C> <C>
CLASS A SHARES:
Net Asset Value, Beginning of Period........ $10.00 $10.00 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................... 0.14 0.36 0.11
Net realized and unrealized gains on in-
vestments................................ 1.50 2.57 2.86
------ ------ ------
TOTAL INCOME FROM INVESTMENT OPERATIONS... 1.64 2.93 2.97
------ ------ ------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income................. (0.14) (0.36) (0.11)
In excess of net investment income......... -- (0.01) --
From net realized gains on investments and
foreign currency transactions............ -- (0.34) (0.89)
------ ------ ------
TOTAL DIVIDENDS AND DISTRIBUTIONS......... (0.14) (0.71) (1.00)
------ ------ ------
Net change in net asset value............... 1.50 2.22 1.97
------ ------ ------
Net Asset Value, End of Period.............. $11.50 $12.22 $11.97
====== ====== ======
- - ----------------------------------------------
TOTAL RETURN (EXCLUDES SALES CHARGE) 16.48%++ 29.78%++ 29.98%++
- - ----------------------------------------------
- - ----------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ----------------------------------------------
Ratio of expenses to average net assets..... 1.26%+ 1.11%+ 1.21%+
Ratio of net investment income to average
net assets................................ 2.45%+ 3.33%+ 0.86%+
Ratio of expenses to average net assets*.... 3.15%+ 1.44%+ 1.39%+
Ratio of net investment income (loss) to av-
erage net assets*......................... 0.56%+ 2.99%+ 0.68%+
Portfolio turnover.......................... 2.25%++ 44.07%++ 106.02%++
Net assets, end of period (000's omitted)... $8,356 $2,873 $4,329
</TABLE>
- - -----------
(1) For the period April 3, 1995 (commencement of operations) through December
31, 1995.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period March 3, 1995 (commencement of operations) through December
31, 1995.
(4) For the period February 10, 1995 (commencement of operations) through
December 31, 1995.
* During the period, certain fees were voluntarily reimbursed. If such
voluntary fee reimbursements had not occurred, the ratios would have been
as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
154
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Special International International
Opportunities Equity Bond Bond
Fund(2) Fund(3) Fund(4) Fund(2)
------------- ------------- ------- -------------
<S> <C> <C> <C>
$10.00 $10.00 $10.00 $10.00
-------- ------ ------ ------
0.02 0.10 0.57 0.98
2.45 1.40 1.20 1.10
-------- ------ ------ ------
2.47 1.50 1.77 2.08
-------- ------ ------ ------
(0.02) (0.09) (0.57) (0.98)
-- -- -- (0.01)
(0.25) (0.25) (0.39) (0.34)
-------- ------ ------ ------
(0.27) (0.34) (0.96) (1.33)
-------- ------ ------ ------
2.20 1.16 0.81 0.75
-------- ------ ------ ------
$12.20 $11.16 $10.81 $10.75
======== ====== ====== ======
24.80%++ 15.16%++ 18.22%++ 21.10%++
1.25%+ 1.50%+ 1.02%+ 1.33%+
0.19%+ 1.19%+ 5.94%+ 4.91%+
2.56%+ 1.96%+ 1.57%+ 3.65%+
(1.12)%+ 0.72%+ 5.39%+ 2.59%+
38.89%++ 5.65%++ 156.11%++ 48.03%++
$ 672 $2,749 $1,847 $ 487
</TABLE>
See Notes to Financial Statements.
155
<PAGE>
PRAIRIE FUNDS
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
For the Period Ended December 31, 1995
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managed Equity
Assets Income Growth
Fund(1) Fund(2) Fund(2)
------- ------- -------
<S> <C> <C> <C>
CLASS B SHARES:
Net Asset Value, Beginning of Period....... $10.00 $10.00 $ 10.00
------ ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............. 0.13 0.29 0.06
Net realized and unrealized gains on in-
vestments............................... 1.45 2.56 2.84
------ ------ -------
TOTAL INCOME FROM INVESTMENT OPERATIONS.. 1.58 2.85 2.90
------ ------ -------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income................ (0.13) (0.29) (0.06)
In excess of net investment income........ -- -- --
From net realized gains on investments and
foreign currency transactions........... -- (0.34) (0.89)
------ ------ -------
TOTAL DIVIDENDS AND DISTRIBUTIONS........ (0.13) (0.63) (0.95)
------ ------ -------
Net change in net asset value.............. 1.45 2.22 1.95
------ ------ -------
Net Asset Value, End of Period............. $11.45 $12.22 $ 11.95
====== ====== =======
- - ---------------------------------------------
TOTAL RETURN (EXCLUDES REDEMPTION CHARGE) 15.83%++ 28.97%++ 29.15%++
- - ---------------------------------------------
- - ---------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ---------------------------------------------
Ratio of expenses to average net assets.... 2.00%+ 1.90%+ 2.04%+
Ratio of net investment income (loss) to
average net assets....................... 1.69%+ 2.65%+ 0.02%+
Ratio of expenses to average net assets*... 6.84%+ 2.65%+ 2.60%+
Ratio of net investment income (loss) to
average net assets*...................... (3.15)%+ 1.90%+ (0.54)%+
Portfolio turnover......................... 2.25%++ 44.07%++ 106.02%++
Net assets, end of period (000's omitted).. $ 833 $ 593 $ 268
</TABLE>
- - -----------
(1) For the period April 3, 1995 (commencement of operations) through December
31, 1995.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period March 3, 1995 (commencement of operations) through December
31, 1995.
(4) For the period February 10, 1995 (commencement of operations) through
December 31, 1995.
* During the period, certain fees were voluntarily reimbursed. if such
voluntary fee reimbursements had not occurred, the ratios would have been
as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
156
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Special International International
Opportunities Equity Bond Bond
Fund(2) Fund(3) Fund(4) Fund(2)
------------- ------------- ------- -------------
<S> <C> <C> <C>
$10.00 $10.00 $10.00 $10.00
-------- ------ ------ ------
(0.03) 0.05 0.50 0.91
2.40 1.39 1.20 1.16
-------- ------ ------ ------
2.37 1.44 1.70 2.07
-------- ------ ------ ------
-- (0.05) (0.50) (0.91)
-- -- -- (0.01)
(0.25) (0.25) (0.39) (0.34)
-------- ------ ------ ------
(0.25) (0.30) (0.89) (1.26)
-------- ------ ------ ------
2.12 1.14 0.81 0.81
-------- ------ ------ ------
$12.12 $11.14 $10.81 $10.81
======== ====== ====== ======
23.76%++ 14.52%++ 17.41%++ 20.90%++
2.00%+ 2.28%+ 1.87%+ 2.03%+
(0.51)%+ 0.40%+ 5.22%+ 4.39%+
9.52%+ 3.83%+ 3.91%+ 8.69%+
(8.04)%+ (1.15)%+ 3.19%+ (2.28)%+
38.89%++ 5.65%++ 156.11%++ 48.03%++
$ 15 $ 193 $ 61 $ 4
</TABLE>
See Notes to Financial Statements.
157
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
For the Year Ended December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managed Equity
Assets Income Growth
Fund(1) Fund(2) Fund(2)
------- -------- --------
<S> <C> <C> <C>
CLASS I SHARES:
Net Asset Value, Beginning of Period........ $10.00 $ 10.00 $ 10.00
------ -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................... 0.22 0.42 0.15
Net realized and unrealized gains on in-
vestments................................ 1.46 2.55 2.86
------ -------- --------
TOTAL INCOME FROM INVESTMENT OPERATIONS... 1.68 2.97 3.01
------ -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income................. (0.22) (0.42) (0.15)
In excess of net investment income......... -- -- --
From net realized gains on investments and
foreign currency transactions............ -- (0.34) (0.89)
------ -------- --------
TOTAL DIVIDENDS AND DISTRIBUTIONS......... (0.22) (0.76) (1.04)
------ -------- --------
Net change in net asset value............... 1.46 2.21 1.97
------ -------- --------
Net Asset Value, End of Period.............. $11.46 $ 12.21 $ 11.97
====== ======== ========
- - ---------------------------------------------
TOTAL RETURN 16.90%++ 30.27%++ 30.38%++
- - ---------------------------------------------
- - ---------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ---------------------------------------------
Ratio of expenses to average net assets..... 0.80%+ 0.65%+ 0.80%+
Ratio of net investment income to average
net assets................................ 3.06%+ 4.08%+ 1.46%+
Ratio of expenses to average net assets*.... 4.12%+ 0.77%+ 0.92%+
Ratio of net investment income (loss) to av-
erage net assets*......................... (0.26)%+ 3.96%+ 1.34%+
Portfolio turnover.......................... 2.25%++ 44.07%++ 106.02%++
Net assets, end of period (000's omitted)... $ 411 $283,927 $293,944
</TABLE>
- - -----------
(1) For the period April 3, 1995 (commencement of operations) through December
31, 1995.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period March 3, 1995 (commencement of operations) through December
31, 1995.
(4) For the period February 10, 1995 (commencement of operations) through
December 31, 1995.
* During the period, certain fees were voluntarily reimbursed. If such
voluntary fee reimbursements had not occurred, the ratios would have been
as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
158
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Special International International
Opportunities Equity Bond Bond
Fund(2) Fund(3) Fund(4) Fund(2)
- - ------------- ------------- ------- -------------
<S> <C> <C> <C>
$ 10.00 $ 10.00 $ 10.00 $ 10.00
-------- -------- -------- -------
0.06 0.14 0.61 1.02
2.44 1.40 1.20 1.16
-------- -------- -------- -------
2.50 1.54 1.81 2.18
-------- -------- -------- -------
(0.06) (0.12) (0.61) (1.02)
-- -- -- (0.01)
(0.25) (0.25) (0.39) (0.34)
-------- -------- -------- -------
(0.31) (0.37) (1.00) (1.37)
-------- -------- -------- -------
2.19 1.17 0.81 0.81
-------- -------- -------- -------
$ 12.19 $ 11.17 $ 10.81 $ 10.81
======== ======== ======== =======
25.08%++ 15.62%++ 18.57%++ 22.13%++
0.85%+ 1.05%+ 0.70%+ 0.95%+
0.59%+ 1.70%+ 6.48%+ 5.71%+
1.09%+ 1.38%+ 0.87%+ 1.93%+
0.36%+ 1.36%+ 6.31%+ 4.73%+
38.89%++ 5.65%++ 156.11%++ 48.03%++
$92,926 $101,448 $125,401 $14,504
</TABLE>
See Notes to Financial Statements.
159
<PAGE>
PRAIRIE INTERMEDIATE BOND FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the For the
Period Ended Year Ended Period Ended
December 31, January 31, January 31,
1995(1) 1995 1994(2)
------------ ----------- ------------
<S> <C> <C> <C>
CLASS A SHARES:
Net Asset Value, Beginning of Period.... $ 7.68 $ 8.25 $ 8.36
------ ------ ------
INCOME (LOSS) FROM INVESTMENT OPERA-
TIONS:
Net investment income.................. 0.44 0.52 0.47
Net realized and unrealized gains
(losses) on investments.............. 0.72 (0.57) (0.09)
------ ------ ------
TOTAL INCOME (LOSS) FROM INVESTMENT
OPERATIONS.......................... 1.16 (0.05) 0.38
------ ------ ------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income............. (0.44) (0.52) (0.47)
From net realized gains on investments. (0.22) -- (0.02)
------ ------ ------
TOTAL DIVIDENDS AND DISTRIBUTIONS..... (0.66) (0.52) (0.49)
------ ------ ------
Net change in net asset value........... 0.50 (0.57) (0.11)
------ ------ ------
Net Asset Value, End of Period.......... $ 8.18 $ 7.68 $ 8.25
====== ====== ======
- - -----------------------------------------
TOTAL RETURN (EXCLUDES SALES CHARGE) 15.55%++ (0.45)% 5.16%+
- - -----------------------------------------
- - -----------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - -----------------------------------------
Ratio of expenses to average net assets. 0.94%+ 0.04% --
Ratio of net investment income to
average net assets.................... 5.72%+ 6.70% 5.96%+
Ratio of expenses to average net as-
sets*................................. 1.15%+ 2.78% 3.67%+
Ratio of net investment income to
average net assets*................... 5.51%+ 3.96% 2.29%+
Portfolio turnover...................... 173.26%++ 71.65% 26.54%++
Net assets, end of period (000's omit-
ted).................................. $6,095 $ 69 $ 65
</TABLE>
- - -----------
(1) For the period February 1, 1995 through December 31, 1995. Effective
February 1, 1995, the Fund changed its fiscal year end from January 31 to
December 31.
(2) For the period March 5, 1993 (commencement of operations) through January
31, 1994.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
160
<PAGE>
PRAIRIE INTERMEDIATE BOND FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Period Ended Period Ended
December 31, December 2,
1995(1) 1994(2)
------------ ------------
<S> <C> <C>
CLASS B SHARES:
Net Asset Value, Beginning of Period............... $ 8.13 $ 8.16
------ ------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income............................. 0.24 0.40
Net realized and unrealized gains (losses) on
investments..................................... 0.27 (0.55)
------ ------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS... 0.51 (0.15)
------ ------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income........................ (0.24) (0.40)
From net realized gains on invesments............. (0.22) --
------ ------
TOTAL DIVIDENDS AND DISTRIBUTIONS................ (0.46) (0.40)
------ ------
Net change in net asset value...................... 0.05 (0.55)
------ ------
Conversion to Class A Shares(3).................... NA 7.61
------ ------
Net Asset Value, End of Period..................... $ 8.18 $ --
====== ======
- - ----------------------------------------------------
TOTAL RETURN (EXCLUDES REDEMPTION CHARGE) 6.41%++ (1.82)%++
- - ----------------------------------------------------
- - ----------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ----------------------------------------------------
Ratio of expenses to average net assets............ 1.60%+ --
Ratio of net investment income to average net as-
sets............................................. 5.00%+ 6.48%+
Ratio of expenses to average net assets*........... 1.78%+ 2.58%+
Ratio of net investment income to average net as-
sets*............................................ 4.83%+ 3.90%+
Portfolio turnover................................. 173.26%++ 71.65%++
Net assets, end of period (000's omitted).......... $ 259 $ --
</TABLE>
- - -----------
(1) For the period May 31, 1995 (re-offering date of Class B Shares) through
December 31, 1995. Effective February 1, 1995, the Fund changed its fiscal
year end from January 31 to December 31.
(2) For the period February 8, 1994 (initial offering date of Class B Shares)
through December 2, 1994. On December 2, 1994, the Fund terminated its
offering of Class B Shares and such shares converted to Class A Shares.
(3) On December 2, 1994, the Fund terminated the offering of Class B Shares
under the then-current sales load schedule and such shares converted to
Class A Shares
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
NA Not applicable.
See Notes to Financial Statements.
161
<PAGE>
PRAIRIE INTERMEDIATE BOND FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the For the
Period Ended Year Ended Period Ended
December 31, January 31, January 31,
1995(1) 1995 1994(2)
------------ ----------- ------------
<S> <C> <C> <C>
CLASS I SHARES:
Net Asset Value, Beginning of Period... $ 7.68 $ 8.25 $ 8.36
-------- ------ ------
INCOME (LOSS) FROM INVESTMENT OPERA-
TIONS:
Net investment income................. 0.47 0.52 0.47
Net realized and unrealized gains
(losses) on investments............. 0.72 (0.57) (0.09)
-------- ------ ------
TOTAL INCOME FROM INVESTMENT
OPERATIONS......................... 1.19 (0.05) 0.38
-------- ------ ------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income............ (0.47) (0.52) (0.47)
From net realized gains on invesments. (0.22) -- (0.02)
-------- ------ ------
TOTAL DIVIDENDS AND DISTRIBUTIONS.... (0.69) (0.52) (0.49)
-------- ------ ------
Net change in net asset value.......... 0.50 (0.57) (0.11)
-------- ------ ------
Net Asset Value, End of Period......... $ 8.18 $ 7.68 $ 8.25
======== ====== ======
- - ----------------------------------------
TOTAL RETURN 15.90%++ (0.48)% 5.16%++
- - ----------------------------------------
- - ----------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ----------------------------------------
Ratio of expenses to average net as-
sets................................. 0.55%+ 0.04% --
Ratio of net investment income to
average net assets................... 6.34%+ 6.70% 6.21%+
Ratio of expenses to average net as-
sets*................................ 0.67%+ 2.78% 2.64%+
Ratio of net investment income to
average net assets*.................. 6.22%+ 3.96% 3.57%+
Portfolio turnover..................... 173.26%++ 71.65% 26.54%++
Net assets, end of period (000's omit-
ted)................................. $191,930 $7,101 $5,128
</TABLE>
- - -----------
(1) For the period February 1, 1995 through December 31, 1995. Effective
February 1, 1995, the Fund changed its fiscal year end from January 31 to
December 31.
(2) For the period March 5, 1993 (commencement of operations) through January
31, 1994.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
162
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the Year Ended
Period Ended ---------------------------------------------------
December 31, February 28, February 28, February 28, February 29,
1995(1) 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES:
Net Asset Value, Begin-
ning of Period....... $ 11.79 $ 12.18 $ 12.79 $ 12.25 $ 11.95
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income. 0.44 0.55 0.61 0.64 0.76
Net realized and
unrealized gains
(losses) on invest-
ments............... 0.56 (0.36) 0.01 0.68 0.37
------- ------- ------- ------- -------
TOTAL INCOME FROM
INVESTMENT
OPERATIONS......... 1.00 0.19 0.62 1.32 1.13
------- ------- ------- ------- -------
LESS DIVIDENDS AND DIS-
TRIBUTIONS:
From net investment
income.............. (0.44) (0.55) (0.61) (0.64) (0.76)
From net realized
gains on invest-
ments............... (0.10) (0.03) (0.62) (0.14) (0.07)
------- ------- ------- ------- -------
TOTAL DIVIDENDS AND
DISTRIBUTIONS...... (0.54) (0.58) (1.23) (0.78) (0.83)
------- ------- ------- ------- -------
Net change in net asset
value................ 0.46 (0.39) (0.61) 0.54 0.30
------- ------- ------- ------- -------
Net Asset Value, End of
Period............... $ 12.25 $ 11.79 $ 12.18 $ 12.79 $ 12.25
======= ======= ======= ======= =======
- - ------------------------
TOTAL RETURN (EXCLUDES
SALES CHARGE) 8.58%++ 1.64% 4.94% 11.26% 9.78%
- - ------------------------
- - ------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ------------------------
Ratio of expenses to
average net assets... 0.83%+ 0.29% 0.06% -- --
Ratio of net investment
income to average net
assets............... 4.30%+ 4.73% 4.78% 5.16% 6.15%
Ratio of expenses to
average net assets*.. 0.97%+ 1.38% 1.27% 1.31% 1.72%
Ratio of net investment
income to average net
assets*.............. 4.16%+ 3.64% 3.57% 3.85% 4.43%
Portfolio turnover..... 44.75%++ 128.02% 167.95% 63.67% 86.91%
Net assets, end of
period
(000's omitted)...... $17,777 $17,243 $28,826 $27,885 $18,310
</TABLE>
- - -----------
(1) For the period March 1, 1995 through December 31, 1995. Effective March 1,
1995, the Fund changed its fiscal year end from February 28 to December
31.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
163
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period Ended
----------------------------------------------------
December 31, February 28, December 2, February 28,
1995(1) 1995(2) 1994(3) 1994(4)
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
CLASS B SHARES:
Net Asset Value, Begin-
ning of Period........ $11.80 $ 11.57 $ 12.18 $ 12.32
------ ------- ------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.37 0.04 0.37 0.03
Net realized and
unrealized gains
(losses) on
investments.......... 0.55 0.23 (0.72) (0.14)
------ ------- ------- --------
TOTAL INCOME (LOSS)
FROM INVESTMENT
OPERATIONS.......... 0.92 0.27 (0.35) (0.11)
------ ------- ------- --------
LESS DIVIDENDS AND DIS-
TRIBUTIONS:
From net investment in-
come................. (0.37) (0.04) (0.37) (0.03)
From net realized gains
on investments....... (0.10) -- (0.03) --
------ ------- ------- --------
TOTAL DIVIDENDS AND
DISTRIBUTIONS....... (0.47) (0.04) (0.40) (0.03)
------ ------- ------- --------
Net change in net asset
value................. 0.45 0.23 (0.75) (0.14)
------ ------- ------- --------
Conversion to Class A
shares(3)............. NA NA 11.43 NA
------ ------- ------- --------
Net Asset Value, End of
Period................ $12.25 $ 11.80 $ -- $ 12.18
====== ======= ======= ========
- - -------------------------
TOTAL RETURN (EXCLUDES
REDEMPTION CHARGE) 7.75%++ 2.30%++ (2.98)++ (0.93)%++
- - -------------------------
- - -------------------------
RATIOS/SUPPLEMENTAL DATA:
- - -------------------------
Ratio of expenses to av-
erage net assets...... 1.71%+ 1.36%+ 0.76%+ 0.75%+
Ratio of net investment
income to average net
assets................ 3.36%+ 3.72%+ 4.03%+ 1.68%+
Ratio of expenses to
average net assets*... 2.01%+ 1.64%+ 2.00%+ 3.00%+
Ratio of net investment
income (loss) to
average net assets*... 3.06%+ 3.44%+ 2.79%+ (0.57)%+
Portfolio turnover...... 44.75%++ 128.02%++ 128.02%++ 167.95%++
Net assets, end of pe-
riod (000's omitted).. $ 341 $ 6 $ -- $ 12
</TABLE>
- - -----------
(1) For the period March 1, 1995 through December 31, 1995. Effective March 1,
1995, the Fund changed its fiscal year end from February 28 to December
31.
(2) For the period January 30, 1995 (re-offering date of Class B Shares)
through February 28, 1995.
(3) For the period March 1, 1994 through December 2, 1994. On December 2,
1994, the Fund terminated its offering of Class B Shares and such shares
converted to Class A Shares.
(4) For the period February 8, 1994 (initial offering date of Class B Shares)
through February 28, 1994.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
NA Not applicable.
See Notes to Financial Statements.
164
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Period Ended Year Ended
December 31, February 28,
1995(1) 1995(2)
------------ ------------
<S> <C> <C>
CLASS I SHARES:
Net Asset Value, Beginning of Period.............. $ 11.80 $ 11.57
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................ 0.47 0.04
Net realized and unrealized gains on investments. 0.55 0.23
-------- --------
TOTAL INCOME FROM INVESTMENT OPERATIONS......... 1.02 0.27
-------- --------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income....................... (0.47) (0.04)
From net realized gains on investments........... (0.10) --
-------- --------
TOTAL DIVIDENDS AND DISTRIBUTIONS............... (0.57) (0.04)
-------- --------
Net change in net asset value..................... 0.45 0.23
-------- --------
Net Asset Value, End of Period.................... $ 12.25 $ 11.80
======== ========
- - ---------------------------------------------------
TOTAL RETURN 8.76%++ 2.37%++
- - ---------------------------------------------------
- - ---------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ---------------------------------------------------
Ratio of expenses to average net assets........... 0.55%+ 0.50%+
Ratio of net investment income to average net as-
sets............................................ 4.78%+ 4.79%+
Ratio of expenses to average net assets*.......... 0.68%+ 0.60%+
Ratio of net investment income to average net as-
sets*........................................... 4.65%+ 4.69%+
Portfolio turnover................................ 44.75%++ 128.02%++
Net assets, end of period (000's omitted)......... $373,753 $365,801
</TABLE>
- - -----------
(1) For the period March 1, 1995 through December 31, 1995. Effective March 1,
1995, the Fund changed its fiscal year end from February 28 to December
31.
(2) For the period February 1, 1995 (initial offering date of Class I Shares)
through February 28, 1995.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
165
<PAGE>
PRAIRIE MUNICIPAL BOND FUND, INC.
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the Year Ended
Period Ended ---------------------------------------------------
December 31, February 28, February 28, February 28, February 29,
1995(1) 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES:
Net Asset Value,
Beginning of Period.. $12.06 $12.13 $13.25 $ 12.49 $12.10
------ ------ ------ ------- ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income. 0.48 0.60 0.63 0.70 0.76
Net realized and
unrealized gains
(losses) on
investments......... 0.82 (0.07) (0.15) 1.01 0.47
------ ------ ------ ------- ------
TOTAL INCOME FROM
INVESTMENT
OPERATIONS......... 1.30 0.53 0.48 1.71 1.23
------ ------ ------ ------- ------
LESS DIVIDENDS AND
DISTRIBUTIONS:
From net investment
income.............. (0.48) (0.60) (0.63) (0.70) (0.76)
From net realized
gains on
investments......... (0.24) -- (0.96) (0.25) (0.08)
In excess of net
realized gains on
investments......... -- -- (0.01) -- --
------ ------ ------ ------- ------
TOTAL DIVIDENDS AND
DISTRIBUTIONS...... (0.72) (0.60) (1.60) (0.95) (0.84)
------ ------ ------ ------- ------
Net change in net asset
value................ 0.58 (0.07) (1.12) 0.76 0.39
------ ------ ------ ------- ------
Net Asset Value, End of
Period............... $12.64 $12.06 $12.13 $ 13.25 $12.49
====== ====== ====== ======= ======
- - ------------------------
TOTAL RETURN (EXCLUDES
SALES CHARGE) 10.95%++ 4.45% 3.70% 14.37% 10.50%
- - ------------------------
- - ------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ------------------------
Ratio of expenses to
average net assets... 0.89%+ 1.98% -- -- --
Ratio of net investment
income to average net
assets............... 4.57%+ 5.09% 4.85% 5.49% 5.99%
Ratio of expenses to
average net assets*.. 1.04%+ 3.89% 1.44% 1.59% 2.75%
Ratio of net investment
income to average net
assets*.............. 4.43%+ 3.18% 3.41% 3.90% 3.24%
Portfolio turnover..... 69.31%++ 60.78% 175.06% 88.53% 66.28%
Net assets, end of
period
(000's omitted)...... $7,426 $6,840 $9,234 $11,290 $6,591
</TABLE>
- - -----------
(1) For the period March 1, 1995 through December 31, 1995. Effective March 1,
1995, the Fund changed its fiscal year end from February 28 to December
31.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
166
<PAGE>
PRAIRIE MUNICIPAL BOND FUND, INC.
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period Ended
----------------------------------------
December 31, December 2, February 28,
1995(1) 1994(2) 1994(3)
------------ ----------- ------------
<S> <C> <C> <C>
CLASS B SHARES:
Net Asset Value, Beginning of Period. $ 12.17 $12.14 $ 12.37
------- ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............... 0.34 0.41 0.03
Net realized and unrealized gains
(losses) on investments........... 0.72 (0.70) (0.23)
------- ------ -------
TOTAL INCOME FROM INVESTMENT
OPERATIONS....................... 1.06 (0.29) (0.20)
------- ------ -------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income.......... (0.34) (0.41) (0.03)
From net realized gains on invest-
ments............................. (0.24)
------- ------ -------
TOTAL DIVIDENDS AND DISTRIBUTIONS.. (0.58) (0.41) (0.03)
------- ------ -------
Net change in net asset value........ 0.48 (0.70) (0.23)
------- ------ -------
Conversion to Class A Shares(4)...... NA 11.44 NA
------- ------ -------
Net Asset Value, End of Period....... $ 12.65 $ NA $ 12.14
======= ====== =======
- - --------------------------------------
TOTAL RETURN (EXCLUDES REDEMPTION
CHARGE) 8.81%++ (4.30)%++ (1.64)%++
- - --------------------------------------
- - --------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - --------------------------------------
Ratio of expenses to average net
assets............................. 1.66%+ 3.18%+ 0.50%+
Ratio of net investment income to
average net assets................. 3.61%+ 4.51%+ 4.10%+
Ratio of expenses to average net
assets*............................ 2.04%+ 5.85%+ 2.91%+
Ratio of net investment income to
average net assets*................ 3.23%+ 1.84%+ 1.69%+
Portfolio turnover................... 69.31%++ 60.78%++ 175.06%++
Net assets, end of period (000's
omitted)........................... $ 238 $ -- $ 2
</TABLE>
- - -----------
(1) For the period April 4, 1995 (re-offering date of Class B Shares) through
December 31, 1995. Effective March 1, 1995, the Fund changed its fiscal
year end from February 28 to December 31.
(2) For the period March 1, 1994 through December 2, 1994. On December 2,
1994, the Fund terminated its offering of Class B Shares and such shares
converted to Class A Shares.
(3) For the period February 8, 1994 (initial offering date of Class B Shares)
through February 28, 1994.
(4) On December 2, 1994, the Fund terminated its offering of Class B Shares
under the then-current sales load schedule and such shares converted to
Class A Shares.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
NA Not applicable.
See Notes to Financial Statements.
167
<PAGE>
PRAIRIE MUNICIPAL BOND FUND, INC.
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period Ended
-------------------------------
December 31, February 28,
1995(1) 1995(2)
------------ ------------
<S> <C> <C>
CLASS I SHARES:
Net Asset Value, Beginning of Period.......... $ 12.06 $ 12.06
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................ 0.52 0.05
Net realized and unrealized gains on invest-
ments...................................... 0.81 --
-------- --------
TOTAL INCOME FROM INVESTMENT OPERATIONS..... 1.33 0.05
-------- --------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income................... (0.52) (0.05)
From net realized gains on investments....... (0.24) --
-------- --------
TOTAL DIVIDENDS AND DISTRIBUTIONS........... (0.76) (0.05)
-------- --------
Net change in net asset value................. 0.57 --
-------- --------
Net Asset Value, End of Period................ $ 12.63 $ 12.06
======== ========
- - -----------------------------------------------
TOTAL RETURN 11.20%++ 0.39%++
- - -----------------------------------------------
- - -----------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - -----------------------------------------------
Ratio of expenses to average net assets....... 0.54%+ 0.65%+
Ratio of net investment income to average net
assets...................................... 4.95%+ 5.45%+
Ratio of expenses to average net assets*...... 0.67%+ 0.79%+
Ratio of net investment income to average net
assets*..................................... 4.81%+ 5.31%+
Portfolio turnover............................ 69.31%++ 60.78%++
Net assets, end of period (000's omitted)..... $240,160 $220,143
</TABLE>
- - -----------
(1) For the period March 1, 1995, through December 31, 1995. Effective March
1, 1995, the Fund changed its fiscal year end from February 28 to December
31.
(2) For the period February 1, 1995 (initial offering date of Class I Shares)
to February 28, 1995.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
168
<PAGE>
PRAIRIE FUNDS
U.S. GOVERNMENT MONEY MARKET FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------
1995 1994 1993 1992 1991
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES:
Net Asset Value, Beginning
of Year................... $0.9996 $ 0.9999 $ 1.0000 $ 1.0000 $ 1.0000
------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPER-
ATIONS:
Net investment income...... 0.0498 0.0379 0.0249 0.0283 0.0498
Net realized and unrealized
gains (losses) on
investments.............. 0.0001 (0.0083) (0.0001) -- --
------- -------- -------- -------- --------
TOTAL INCOME FROM
INVESTMENT OPERATIONS... 0.0499 0.0296 0.0248 0.0283 0.0498
------- -------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBU-
TIONS:
From net investment income. (0.0498) (0.0379) (0.0249) (0.0283) (0.0498)
------- -------- -------- -------- --------
Increase due to voluntary
capital contribution from
an affiliate of the In-
vestment Adviser (Note
3(d))..................... -- 0.0080 -- -- --
------- -------- -------- -------- --------
Net change in net asset val-
ue........................ 0.0001 (0.0003) (0.0001) -- --
------- -------- -------- -------- --------
Net Asset Value, End of
Year...................... $0.9997 $ 0.9996 $ 0.9999 $ 1.0000 $ 1.0000
======= ======== ======== ======== ========
- - -----------------------------
TOTAL RETURN 5.09% 3.86%* 2.52% 2.87% 5.10%
- - -----------------------------
- - -----------------------------
RATIOS/SUPPLEMENTAL DATA:
- - -----------------------------
Ratio of expenses to average
net assets................ 0.78% 0.86% 0.74% 0.91% 0.90%
Ratio of net investment
income to average net
assets.................... 4.97% 3.73% 2.48% 2.87% 4.97%
Ratio of expenses to average
net assets**.............. 1.07% 0.88% 0.88% 0.91% 0.90%
Ratio of net investment
income to average net
assets**.................. 4.67% 3.71% 2.34% 2.87% 4.97%
Net assets, end of period
(000's omitted)........... $57,264 $116,353 $154,613 $548,733 $990,897
</TABLE>
- - -----------
* Had the Portfolio not had a capital contribution by an affiliate of the
Investment Adviser during the period, the total return would have been
2.83%.
** During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
See Notes to Financial Statements.
169
<PAGE>
PRAIRIE FUNDS
MONEY MARKET FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES:
Net Asset Value, Beginning
of Year.................. $ 0.9998 $ 1.0001 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OP-
ERATIONS:
Net investment income..... 0.0514 0.0355 0.0274 0.0313 0.0543
Net realized and
unrealized gains (loss-
es) on investments...... 0.0100 (0.0109) 0.0001 -- --
-------- -------- -------- -------- --------
TOTAL INCOME FROM
INVESTMENT OPERATIONS.. 0.0524 0.0246 0.0275 0.0313 0.0543
-------- -------- -------- -------- --------
LESS DIVIDENDS AND DISTRI-
BUTIONS:
From net investment in-
come.................... (0.0514) (0.0355) (0.0274) (0.0313) (0.0543)
From net realized gains on
investments............. (0.0006) (0.0002) -- -- --
-------- -------- -------- -------- --------
TOTAL DIVIDENDS AND
DISTRIBUTIONS......... (0.0520) (0.0357) (0.0274) (0.0313) (0.0543)
-------- -------- -------- -------- --------
Increase due to voluntary
capital contribution from
an affiliate of the
Investment Adviser (Note
3(d)).................... -- 0.0108 -- -- --
-------- -------- -------- -------- --------
Net change in net asset
value.................... 0.0004 (0.0003) 0.0001 -- --
-------- -------- -------- -------- --------
Net Asset Value, End of
Year..................... $ 1.0002 $ 0.9998 $ 1.0001 $ 1.0000 $ 1.0000
======== ======== ======== ======== ========
- - ----------------------------
TOTAL RETURN 5.33% 3.63%* 2.77% 3.18% 5.57%
- - ----------------------------
- - ----------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ----------------------------
Ratio of expenses to
average net assets....... 0.79% 1.02% 0.94% 0.98% 0.97%
Ratio of net investment
income to average net
assets................... 5.12% 3.51% 2.76% 3.17% 5.42%
Ratio of expenses to
average net assets**..... 1.07% 1.02% 0.99% 0.98% 0.97%
Ratio of net investment
income to average net
assets**................. 4.83% 3.51% 2.71% 3.17% 5.42%
Net assets, end of period
(000's omitted).......... $203,994 $119,400 $162,623 $260,865 $456,791
</TABLE>
- - -----------
* Had the Portfolio not had a capital contribution by an affiliate of the
Investment Adviser during the period, the total return would have been
2.61%.
** During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
See Notes to Financial Statements.
170
<PAGE>
PRAIRIE FUNDS
MONEY MARKET FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS-- (CONTINUED)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
Ended
December 31,
1995(1)
--------------
<S> <C>
CLASS B SHARES:
Net Asset Value, Beginning of Period........................... $1.0000
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income......................................... 0.0162
Net realized and unrealized gains on investments.............. 0.0008
-------
TOTAL INCOME FROM INVESTMENT OPERATIONS...................... 0.0170
-------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income.................................... (0.0162)
From net realized gains on investments........................ (0.0006)
-------
TOTAL DIVIDENDS AND DISTRIBUTIONS........................... (0.0168)
-------
Net change in net asset value.................................. 0.0002
-------
Net Asset Value, End of Period................................. $1.0002
=======
- - -----------------------------------------------------------------
TOTAL RETURN 1.69%++
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - -----------------------------------------------------------------
Ratio of expenses to average net assets........................ 1.51%+
Ratio of net investment income to average net assets........... 4.33%+
Ratio of expenses to average net assets*....................... 2.02%+
Ratio of net investment income to average net assets*.......... 3.82%+
Net assets, end of period (000's omitted)...................... $ 65
</TABLE>
- - -----------
(1) For the period May 20, 1995 (initial offering of Class B Shares) through
December 31, 1995.
* During the period, certain fees were voluntarily reimbursed. If such
voluntary fee reimbursements had not occurred, the ratios would have been
as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
171
<PAGE>
PRAIRIE FUNDS
MUNICIPAL MONEY MARKET FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES:
Net Asset Value, Beginning
of Year................... $ 0.9997 $ 0.9999 $ 0.9999 $ 0.9999 $ 0.9999
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPER-
ATIONS:
Net investment income...... 0.0322 0.0234 0.0174 0.0236 0.0413
Net realized and unrealized
gains (losses) on
investments.............. 0.0001 (0.0002) -- -- --
-------- -------- -------- -------- --------
TOTAL INCOME FROM
INVESTMENT OPERATIONS... 0.0323 0.0232 0.0174 0.0236 0.0413
-------- -------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBU-
TIONS:
From net investment income. (0.0322) (0.0234) (0.0174) (0.0236) (0.0413)
-------- -------- -------- -------- --------
Net change in net asset val-
ue........................ 0.0001 (0.0002) -- -- --
-------- -------- -------- -------- --------
Net Asset Value, End of
Year...................... $ 0.9998 $ 0.9997 $ 0.9999 $ 0.9999 $ 0.9999
======== ======== ======== ======== ========
- - -----------------------------
TOTAL RETURN 3.26% 2.36% 1.75% 2.38% 4.21%
- - -----------------------------
- - -----------------------------
RATIOS/SUPPLEMENTAL DATA:
- - -----------------------------
Ratio of expenses to average
net assets................ 0.70% 0.68% 0.79% 0.95% 0.98%
Ratio of net investment
income to average net
assets.................... 3.21% 2.33% 1.74% 2.38% 4.11%
Ratio of expenses to average
net assets*............... 0.94% 0.93% 0.95% 0.96% 0.98%
Ratio of net investment
income to average net
assets*................... 2.97% 2.08% 1.58% 2.37% 4.11%
Net assets, end of period
(000's omitted)........... $228,511 $173,130 $177,698 $210,000 $233,675
</TABLE>
- - -----------
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
See Notes to Financial Statements.
172
<PAGE>
- - -------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
- - -------------------------------------------------------------------------------
Prairie Funds
Prairie Municipal Bond Fund, Inc.
Prairie Intermediate Bond Fund
The Members of the Boards and Shareholders
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of Prairie Funds (comprising,
respectively, the Managed Assets Income, Managed Assets, Equity Income,
Growth, Special Opportunities, International Equity, Bond, International Bond,
Intermediate Municipal Bond, U.S. Government Money Market, Money Market and
Municipal Money Market Funds), Prairie Municipal Bond Fund, Inc. and Prairie
Intermediate Bond Fund (collectively, the "Funds") as of December 31, 1995 and
the related statements of operations for the periods then ended, and the
statements of changes in net assets and the financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Funds' 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 investments
owned as of December 31, 1995 by correspondence with the custodians and
others. 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 each
of the respective funds constituting the Prairie Funds, Prairie Municipal Bond
Fund, Inc. and Prairie Intermediate Bond Fund at December 31, 1995, the
results of their operations for the periods then ended, and the changes in
their net assets and the financial highlights for each of the indicated
periods, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
February 23, 1996
Exhibit (17)(j)
[ FRONT COVER ]
[ WOODWARD FUNDS LOGO ART AND LOGOTYPE ]
Annual Report
December 31, 1995
Woodward International Equity Fund
Investment Adviser
[ NBD BANK LOGOTYPE ]
24 Hour yield information:
Purchase and Redemption orders:
(800) 688-3350
<PAGE>
To Our Woodward Shareholders:
The fourth quarter of 1995 provided strong results in the equity and
bond markets with total returns of 6 percent for the Standard and Poor's (S&P)
and 4.3 percent for the Lehman Aggregate Bond Index. These results capped an
exceptional year which provided total returns of 37.5 percent for the S&P,
31.7 percent for the Russell 2500 (a proxy for smaller companies) and 18.5
percent for the Lehman Aggregate Bond Index. Foreign markets, as measured by
the EAFE Index, provided good absolute returns of 11.2 percent, but failed to
keep up with the exceptional U.S. market. In fact, S&P 500 results were the
third highest since 1948 and the highest since 1958; the overall bond results
were also the third highest, in this case since the mid 1970s.
The Woodward money market funds had an excellent year with all funds
finishing in the top quartile of their respective IBC/Donoghue's peer groups.
The funds maintained their exceptional credit quality throughout the year and
profited from a strategy of maintaining slightly longer-weighted average
maturities as compared to their peer groups.
The Woodward bond funds again exceeded their respective benchmarks in
the fourth quarter, providing exceptional 1995 results. The Bond Fund
generated a total return of 23.8 percent, while the Intermediate Bond Fund
provided results of 19.5 percent. The two funds ranked at the top of their
respective fund categories for the year. The Short Bond Fund provided a total
return of 10.1 percent, modestly below its benchmark but well above cash
alternatives.
The Woodward equity funds had a solid fourth quarter with a number of
the funds exceeding their peer groups. Generally, the results for the Woodward
equity funds for the year provided very high absolute results; they moderately
lagged peer managers and came up somewhat short of the broader indices. The
Woodward Growth/Value, Capital Growth and International Equity funds had good
fourth quarters. This helped the Growth/Value and Capital Growth Funds close
the gap with their peers for the year, while the International Equity Fund
provided good comparative returns on an annual basis. The Opportunity and
Intrinsic Value Funds lagged their respective benchmarks for the quarter and
the year. We look to 1996 to improve relative equity performance which,
coupled with our strong bond results, should provide our clients continued
success with their investments.
During the year, NBD Bancorp, Inc. merged with First Chicago
Corporation. We were pleased that the investment management effort of the
joint organization has been identified as a primary business of the Bank and
that substantial resources have been allocated to the business. We look
forward to melding the two organization's considerable strengths and providing
our clients with a measurably enhanced research and fund management group.
Thank you for your continued support and we hope you find this report
useful and informative.
Sincerely,
/s/ Earl I. Heenan, Jr.
-----------------------
Earl I. Heenan, Jr.
<PAGE>
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
WOODWARD INTERNATIONAL EQUITY FUND
Objective:
The Woodward International Equity Fund (the "Fund") is an equity mutual
fund which invests primarily in equity securities of foreign companies. The
Fund's objective is to achieve long-term capital appreciation and,
secondarily, to produce current income. The Fund seeks to achieve this
objective by emphasizing active country selection involving global economic
and political assessments together with valuation analysis of selected
countries' securities markets. The Fund may exhibit more volatility than the
U.S. equity market in general.
Performance Highlights:
International equity markets appreciated during 1995 as slower economic
growth and modest inflationary pressures resulted in lower interest rates. The
Morgan Stanley Capital International EAFE Index returned 11.2 percent in U.S.
dollar terms during 1995. European equity markets advanced 21.6 percent in
U.S. dollars on good earnings gains and lower interest rates. The Japanese
stock market lagged with a U.S. dollar return of 0.7 percent. This stock
market declined during the first half of the year on concerns about the anemic
business outlook, trade tensions with the U.S. and increasing nonperforming
loans at Japanese banks. The MSCI Pacific ex-Japan index returned 12.9
percent, led by a return of 22.6 percent in Hong Kong. Latin American equity
markets generally declined in response to a financial crisis in Mexico.
During the calendar year ended December 31, 1995, the Fund returned 11.5
percent (without sales charge). The net asset value increased from $10.005 to
$11.046. Distributions from ordinary income were $0.107 per share and there
was no long-term capital gains distribution.
The Fund's performance compared favorably with the Morgan Stanley
Capital International EAFE Index, a market value weighted index of about 1,100
equity securities issued by foreign companies with a total market value of
approximately US $5.3 trillion. This index is not subject to expenses of a
mutual fund. The Fund outperformed primarily due to its underweighting of
equities in Japan and overweighting of equities in Europe. The Fund also
outperformed the Lipper International Universe average return of 9.4 percent
for 1995.
Over the long term, international equities have historically provided
returns superior to U.S. large capitalization stocks although, at a higher
level of volatility. We continue to recommend that long-term investors have a
portion of their assets invested internationally to capture the benefits of
portfolio diversification and potential capital appreciation.
<PAGE>
<TABLE>
<CAPTION>
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
WOODWARD INTERNATIONAL EQUITY FUND (Continued)
Growth of $10,000 Invested in the
Woodward International Equity Fund and the
Morgan Stanley Capital International EAFE Index
[ GRAPH ]
12/3/94 6/95 12/95
------- ---- -----
<S> <C> <C> <C>
Fund (1) ... $ 9,500 $10,004 $10,595
Fund (2) ... $10,000 $10,531 $11,153
Index (3) .. $10,000 $10,492 $11,372
<FN>
(1) Includes maximum sales charge of 5.0%.
(2) Excludes maximum sales charge of 5.0%.
(3) Excludes expenses.
</TABLE>
<TABLE>
<CAPTION>
Since
Average Annual Total Return One Inception
Through 12/31/95 Year (12/3/94)
--------------------------- ---- ---------
<S> <C> <C>
Woodward International Equity Fund
(with maximum 5.0% sales charge) 5.9% 5.5%
Woodward International Equity Fund
(without sales charge) 11.5% 10.7%
Morgan Stanely Capital International
EAFE Index 11.2% 12.7%
Past performance is not predictive of future performance.
</TABLE>
<PAGE>
THE WOODWARD FUNDS
INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investment in securities:
At cost $100,165,227
============
At value (Note 2) $107,690,899
Cash 364,232
Receivable for securities sold 8,253
Unrealized appreciation on foreign exchange contracts 52
Withholding tax receivable 140,894
Income receivable 178,985
Deferred organization costs, net (Note 2) 49,159
Prepaids and other assets 27,321
------------
TOTAL ASSETS 108,459,795
------------
LIABILITIES:
Payable for securities purchased 770,234
Unrealized depreciation on foreign exchange contracts 267
Accrued investment advisory fee 67,327
Accrued distribution fees 516
Accrued custodial fee 14,528
Dividends payable 306,527
Other payables and accrued expenses 12,095
------------
TOTAL LIABILITIES 1,171,494
------------
NET ASSETS $107,288,301
============
Net assets consist of:
Capital shares (unlimited number of shares
authorized, par value $.10 per share) $ 971,289
Additional paid-in capital 98,938,436
Accumulated undistributed net investment income 803
Accumulated undistributed net realized losses from
investments and foreign currency transactions (154,256)
Net unrealized appreciation on investments and
foreign currency translation 7,532,029
------------
TOTAL NET ASSETS $107,288,301
============
Shares of capital stock outstanding 9,712,891
============
Net asset value and redemption price per share $ 11.05
============
Maximum offering price per share $ 11.63
============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
<S> <C> <C>
INVESTMENT INCOME (Note 2)
Interest $ 538,478
Dividends (net of foreign taxes withheld of $98,515) 1,279,198
----------
TOTAL INVESTMENT INCOME 1,817,676
----------
EXPENSES (Notes 2, 3 and 5):
Investment advisory fee 529,312
Distribution fees 4,063
Professional fees 66,313
Custodial fee 133,650
Amortization of deferred organization costs 10,714
Marketing expenses 46,449
Registration, filing fees and other expenses 77,246
Less: Expense reimbursement (51,707)
----------
NET EXPENSES 816,040
----------
NET INVESTMENT INCOME 1,001,636
----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized loss on:
Investment securities (147,589)
Foreign currency transactions (475) (148,064)
---------
Net change in unrealized appreciation on:
Investment securities 7,523,087
Assets and liabilities denominated in foreign
currencies 6,376 7,529,463
--------- ----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS
AND FOREIGN CURRENCY 7,381,399
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $8,383,035
==========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE WOODWARD FUNDS
INTERNATIONAL EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Period Ended
Dec. 31, 1995 Dec. 31, 1994
------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 1,001,636 $ 32,338
Net realized losses on investments and foreign
currency transactions (148,064) (2,937)
Net change in unrealized appreciation on
investments and foreign currency translation 7,529,463 2,566
------------ -----------
Net increase in net assets from operations 8,383,035 31,967
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1,033,171) --
In excess of realized gains (3,255) --
------------ -----------
Total distributions (1,036,426) --
------------ -----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 74,411,073 36,626,877
Net asset value of shares issued in reinvestment of
distributions to shareholders 720,012 --
------------ -----------
75,131,085 36,626,877
Less: payments for shares redeemed (11,734,863) (113,374)
------------ -----------
Net increase in net assets from capital share
transactions 63,396,222 36,513,503
------------ -----------
NET INCREASE IN NET ASSETS 70,742,831 36,545,470
NET ASSETS:
Beginning of period 36,545,470 --
------------ -----------
End of period $107,288,301 $36,545,470
============ ===========
CAPITAL SHARE TRANSACTIONS:
Shares sold 7,102,657 3,664,087
Shares issued in reinvestment of distributions to
shareholders 65,214 --
------------ -----------
7,167,871 3,664,087
Less: shares redeemed (1,107,679) (11,388)
------------ -----------
NET INCREASE IN SHARES OUTSTANDING 6,060,192 3,652,699
------------ -----------
CAPITAL SHARES:
Beginning of period 3,652,699 --
------------ -----------
End of period 9,712,891 3,652,699
============ ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
THE WOODWARD FUNDS
INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
December 31, 1995
<TABLE>
<CAPTION>
Description Face Amount Market Value
----------- ----------- ------------
<S> <C> <C>
TEMPORARY CASH INVESTMENT -- 4.48%
Salomon Brothers, Revolving Repurchase Agreement,
5.875%, 1/3/95 (secured by various U.S. Treasury
Strips with maturities ranging from 2/15/95
through 5/15/99, all held at Chemical Bank) $4,819,555 $4,819,555
---------- ----------
(Cost $4,819,555)
Shares
------
<S> <C> <C>
COMMON STOCKS -- 95.52%
AUSTRALIA -- 2.42%
BANKS
National Australia Bank 38,710 348,421
Westpac Bank Corp 55,410 245,657
CHEMICALS
Ici Australia 11,453 87,751
CONSTRUCTION
Boral Limited 17,000 42,996
Csr Limited 27,466 89,488
Pioneer International 13,882 35,832
ENERGY & RAW MATERIALS
Broken Hill Pty 28,140 397,716
Santos Limited 33,203 97,066
FOOD & AGRICULTURE
Amcor Limited 9,799 69,247
Goodman Fielder Limited 23,031 23,128
LIQUOR & TOBACCO
Coca-Cola Amatil 14,487 115,631
Fosters Brewing Gp 22,347 36,737
MEDIA
News Corporation (Aust Listing) 37,765 201,702
News Corporation Preferred Limited Voting
Shares 30,504 142,726
MISCELLANEOUS
Pacific Dunlop Limited 44,367 103,960
NON-FERROUS METALS
Cra Limited 10,619 155,938
Mim Holding Limited 23,841 32,986
Western Mining Corp 36,388 233,866
RAILROAD & SHIPPING
Brambles Inds Ltd. 8,027 89,565
RETAIL
Coles Myer Ltd. 18,791 58,568
----------
2,608,981
----------
BELGIUM -- 4.30%
BANKS
Generale De Banque 1,300 460,514
Kredietbank 1,550 423,985
CHEMICALS
Solvay 850 459,240
ENERGY & UTILITIES
Electrabel 4,250 1,010,905
Tractebel Inv Cap 1,300 536,714
INSURANCE
Fortis Ag 3,700 450,099
Fortis Ag(VVPR) 80 9,745
INTERNATIONAL OIL
Petrofina Sa 2,160 661,305
NON-FERROUS METALS
Union Miniere * 1,804 120,761
OTHER ENERGY SOURCES
Gpe Bruxelles Lam 2,300 319,259
PRODUCER GOODS
Bekaert Sa 220 181,282
----------
4,633,809
----------
DENMARK -- 2.11%
BANKS
Den Danske Bank 3,641 251,634
Unidanmark 'A' (Reg'd) 3,535 175,417
BUSINESS MACHINE
Iss International Series 'B' 2,800 63,156
Sophus Berendsen 'B' 1,175 132,516
DRUGS & MEDICINE
Novo-Nordisk As 'B' 2,449 335,855
FOOD & AGRICULTURE
Danisco 3,695 178,689
LIQUOR & TOBACCO
Carlsberg 'A' 275 15,383
Carlsberg 'B' 2,018 112,884
RAILROAD & SHIPPING
D/S 1912 'B' 15 286,910
D/S Svendborg 'B' 9 248,475
TELEPHONE
Tele Danmark 'B' 8,786 480,378
----------
2,281,297
----------
FINLAND -- 3.55%
BANKS
Unitas Ser 'A' * 119,766 303,414
CONSTRUCTION
Metro AB 'A' 2,000 82,450
ELECTRONICS
Nokia (AB) Oy Series 'K' 18,600 736,802
Nokia (AB) Oy Series 'A' 24,500 964,876
FOOD & AGRICULTURE
Cultor Oy Series '2' 500 20,728
Cultor Oy Series '1' 2,500 103,639
INSURANCE
Pohjola Series 'B' 3,800 49,010
Sampo 'A' 2,200 118,056
NON-FERROUS METALS
Outokumpo Oy 'A' 19,500 309,880
PAPER & FOREST PRODUCTS
Kymmene Corp 12,500 331,068
Repola 23,400 441,915
PRODUCER GOODS
Kone Corp 'B' 700 58,521
RETAIL
Kesko 12,000 149,516
Stockmann Oy 'A' 1,600 91,386
TRAVEL & RECREATION
Amer Group 'A' 3,800 59,424
----------
3,820,685
----------
FRANCE -- 4.91%
BANKS
Banque National Paris 3,615 163,291
Cie De Suez 1,251 51,673
Cie Fin Paribas 'A' 2,318 127,267
Society Generale 1,829 226,270
CHEMICALS
Air Liquide ('L') 996 165,173
Rhone Poulenc Sa 'A' 5,686 121,966
CONSTRUCTION
Cie De St Gobain 1,834 203,262
Lafarge Coppee Sa (Br) 1,800 116,126
CONSUMER DURABLES
Printemps (Av) 600 119,868
DRUGS & MEDICINE
L'Oreal 985 264,056
Sanofi 2,339 150,134
ELECTRONICS
Alcatel Alsthom (Cge) 2,544 219,631
Csf (Thomson) 3,520 78,528
Legrand 500 77,295
Schneider Sa (Ex-Sp) 3,630 124,257
ENERGY & UTILITIES
Eaux (Cie Generale) 2,307 230,635
Lyonnaise Des Eaux 1,753 169,013
FOOD & AGRICULTURE
Danone (Ex Bsn) 1,520 251,138
Eridania Beghin Sa 861 147,890
Saint Louis 350 93,040
INSURANCE
Axa 1,981 133,677
INTERNATIONAL OIL
Elf Auqitaine (Soc Nat) 5,566 410,646
Total B 4,716 318,715
LIQUOR & TOBACCO
Lvmh Moet-Hennessy 2,000 417,146
Pernod-Ricard 1,114 63,395
MOTOR VEHICLES
Peugeot Sa 793 104,752
PRODUCER GOODS
Carnaud Metal Box 766 35,086
Michelin (Cgde) Class 'B' (Brwn Bds)(Reg'd) 2,150 85,861
REAL PROPERTY
Sefimeg (Reg'd) 986 65,527
RETAIL
Carrefour 586 356,006
Promodes 433 101,912
TRAVEL & RECREATION
Accor 757 98,139
----------
5,291,375
----------
GERMANY -- 4.93%
AIR TRANSPORT
Lufthansa Ag 1,707 236,739
BANKS
Bayer Vereinsbank (Var) 5,140 154,422
Deutsche Bank (Var) 10,440 496,734
Dresdner Bank (Var) 7,140 191,810
CHEMICALS
Basf (Var) 1,026 231,540
Bayer (Var) 1,100 292,662
Schering 1,350 89,888
CONSTRUCTION
Hochtief 357 152,899
ELECTRONICS
Siemens (Var) 704 387,592
SAP N/V Pref 600 91,303
ENERGY & UTILITIES
Rwe (Var) 516 188,010
Veba (Var) 10,150 435,422
INSURANCE
Munchener Ruckvers Reg Vink * 145 313,042
Allianz (Regd) 250 491,869
MOTOR VEHICLES
Daimler-Benz (Var) 384 194,243
Volkswagen (Var) 506 170,048
PRODUCER GOODS
Linde 156 92,645
Mannesmann (Var) 1,146 365,512
RETAIL
Kaufhof Holding 402 122,739
STEEL
Preussag Br (Var) 1,074 303,153
Thyssen * 716 130,917
Viag (Var) 419 173,014
----------
5,306,203
----------
HONG KONG -- 2.40%
AIR TRANSPORT
Cathay Pacific Airways 37,000 56,467
BANKS
Hang Seng Bank 39,400 352,881
ENERGY & UTILITIES
China Light & Power 34,700 159,769
Hong Kong Electric 20,000 65,572
Hong Kong & China Gas 34,800 56,035
MISCELLANEOUS
Hutchinson Whampoa 56,000 341,131
MISCELLANEOUS FINANCE
Swire Pacific 'A' 23,500 182,361
Wharf (Holding) 30,000 99,910
Wing Lung Bank 16,848 94,351
REAL PROPERTY
Cheung Kong (Holdings) 40,000 243,665
Hopewell Holdings 50,000 28,777
Hysan Development 10,000 26,449
New World Infrastr * 52 100
New World Development Co 31,366 136,710
Sun Hung Kai Properties 45,700 373,842
TELEPHONE
Hong Kong Telecomm 203,600 363,386
----------
2,581,406
----------
IRELAND -- 1.95%
BANKS
Allied Irish Banks 82,680 447,907
Bank of Ireland (Dublin Listing) 26,825 193,904
CONSTRUCTION
Crh 48,929 367,014
FOOD & AGRICULTURE
Greencore 24,349 209,568
Kerry Group 'A' 28,760 218,954
INSURANCE
Irish Life 56,656 215,211
MEDIA
Independent News 18,405 117,406
PAPER & FOREST PRODUCTS
Smurfit(Jefferson) (Dublin Listing) 139,859 329,517
----------
2,099,481
----------
JAPAN -- 30.54%
AIR TRANSPORT
Japan Airlines Co * 46,000 305,472
BANK
Asahi Bank 34,000 428,495
Bank of Tokyo 28,000 491,315
Dai-Ichi Kangyo Bank 40,000 787,190
Fuji Bank 43,000 950,445
Industrial Bank of Japan 23,000 697,904
Joyo Bank 36,000 289,671
Sakura Bank 19,000 241,295
Sumitomo Bank 37,000 785,542
Tokai Bank 25,000 349,001
BUSINESS MACHINE
Canon Inc 21,000 380,702
Fujitsu 10,000 111,486
Ricoh Co. 55,000 602,511
CHEMICALS
Asahi Chemical Industries 63,000 482,493
Dainippon Ink & Chemical 19,000 88,598
Mitsubishi Gas Chemical 19,000 85,651
Sekisui Chemical 15,000 221,034
Shin-Etsu Chemical Co. 13,000 269,700
Showa Denko Kk * 102,000 320,383
Sumitomo Chemical 92,000 459,324
Toray Industries Inc 20,000 131,845
CONSTRUCTION
Chichibu Onoda Cement 6,000 32,050
Fujita Corp 6,000 27,106
Haseko Corp 57,000 230,428
Kajima Corp 11,000 108,772
Nihon Cement Co 30,000 200,675
Obayashi Corp 8,000 63,596
Sato Kogyo Co 12,000 73,872
Sekisui House 43,000 550,258
Shimizu Corp 25,000 254,480
Taisei Corp 47,000 313,936
Toto 15,000 209,400
CONSUMER DURABLES
Matsushita Electric Industries 56,000 912,055
Sanyo Electric Co 34,000 196,119
Sharp Corp 24,000 383,901
DRUGS & MEDICINE
Daiichi Pharmacy Co 33,000 470,278
Sankyo Co 15,000 337,367
Takeda Chemical Industries 24,000 395,534
ELECTRONICS
Hitachi * 78,000 786,415
Kyocera 11,000 817,922
Mitsubishi Electric Corp 48,000 345,743
Omron Corp 17,000 392,238
ENERGY & UTILITIES
Kansai Electric Power 13,900 336,883
Osaka Gas Co 124,000 429,154
Tokyo Electric Power 36,600 979,296
Tokyo Gas Co 15,000 52,932
FOOD & AGRICULTURE
Ajinomoto Co., Inc. 36,000 401,351
Yamazaki Baking Co 14,000 260,587
INTERNATIONAL OIL
Japan Energy Corp 19,000 63,731
Nippon Oil Co 86,000 540,253
MEDIA
Dai Nippon Printing 33,000 559,855
MULTI-INDUSTRY
Itochu Corp 38,000 256,031
Marubeni Corp 68,000 368,506
Mitsubishi 26,000 320,111
Sumitomo Corp 34,000 346,092
MISCELLANEOUS FINANCE
Daiwa Securities 34,000 520,786
Mitsubishi Trust & Banking 11,000 183,419
Nomura Securities 44,000 959,752
Yamaichi Securities Co. 34,000 264,678
MOTOR VEHICLES
Honda Motor Co 27,000 557,528
Nissan Motor Co 53,000 407,449
Toyota Motor Corp 56,000 1,188,929
NON-FERROUS METALS
Mitsubishi Steel * 17,000 88,995
Tostem Corp 5,000 166,260
PAPER & FOREST PRODUCTS
Daishowa Paper Manufacturing * 13,000 100,822
Honshu Paper Co 48,000 294,091
PRODUCER GOODS
Bridgestone Corp 31,000 492,866
Komatsu 33,000 271,930
Kubota Corp 60,000 386,809
Mitsubishi Heavy Industries 79,000 630,305
Nippondenso Co 25,000 467,758
Sumitomo Heavy Industries * 83,000 298,522
Toyo Seikan Kaisha 12,000 359,471
Toyoda Auto Loom 12,000 215,217
RAILROAD & SHIPPING
Hankyu Corp * 65,000 356,029
Mitsui Osk Lines * 63,000 202,159
Nagoya Railroad Co 61,000 307,508
Tokyu Corp 47,000 332,161
REAL PROPERTY
Mitsubishi Estate 49,000 612,787
RETAIL
Ito-Yokado Co 6,000 369,941
Nichii Co 47,000 624,226
Seven-Elevan Japan Npv 7,000 494,030
STEEL
Kawasaki Steel Corp 47,000 164,030
Kobe Steel * 34,000 105,146
Nippon Steel Corp 108,000 370,638
Nkk Corp * 48,000 129,362
Sumitomo Metal Industries * 156,000 473,360
----------
32,893,948
----------
MALAYSIA -- 2.03%
AIR TRANSPORT
Malaysian Airline Systems 8,000 25,995
BANKS
Ammb Holdings Berhad 6,000 68,534
Commerce Asset Holding 5,000 25,208
Dcb Holdings Berhad 17,000 49,549
Malayan Bkg Berhad 32,000 269,723
Public Bank Berhad 14,000 19,631
Public Bank Berhad (Alien Market) 51,000 97,625
CONSTRUCTION
Hume Inds (M) Berhad 16,000 76,884
United Engineers Berhad 8,000 51,046
CONSUMER DURABLES
Tech Res Inds Berhad * 21,000 62,035
ENERGY & UTILITIES
Tenaga Nasional 74,000 291,465
FOOD & AGRICULTURE
Golden Hope Plants 31,000 51,770
Nestle Malay Berhad 2,000 14,652
LIQUOR & TOBACCO
Rothmans Pall Mall 10,000 82,319
MISCELLANEOUS
Malayan Utd Inds 28,000 22,718
MOTOR VEHICLES
Edaran Otomobil 17,000 127,890
MULTI-INDUSTRY
Sime Darby Berhad 52,200 138,780
PRODUCER GOODS
Leader Univ Holdings 41,333 94,423
RAILROAD & SHIPPING
Malaysian Int Ship (Alien Market) 22,000 57,623
REAL PROPERTY
Hong Leong Properties 7,000 7,279
TELEPHONE
Telekom Malaysia 41,000 319,744
TRAVEL & RECREATION
Landmarks Berhad 6,000 7,988
Magnum Corp Berhad 61,500 116,271
Resorts World Berhad 19,000 101,775
----------
2,180,927
----------
MEXICO -- 1.03%
BANKS
Gpo Financiero Banamex-Ac Series 'B' 13,700 22,831
Gpo Financiero Banamex-Ac Series 'L' 685 1,006
CONSTRUCTION
Cemex Sa Ser 'A' 29,937 98,692
FOOD & AGRICULTURE
Grupo Ind Bimbo Series 'A' 12,000 49,061
MEDIA
Fomento Economico Mexico Series 'B' 17,000 39,274
Grupo Televisa Ptg Certs Repr 1 A,L,D Shs 11,500 130,452
MISCELLANEOUS FINANCE
Grupo Financiero Bancomer Series 'B' 55,000 15,490
Grupo Financiero Bancomer Series 'L' 2,037 523
Grupo Carso Series 'A1' * 16,000 85,350
MULTI-INDUSTRY
Alfa Sa Series 'A' (Cpo) 3,500 44,791
NON-FERROUS METALS
Industrias Penoles 10,000 41,273
PAPER & FOREST PRODUCTS
Kimberly Clark Mexico 'A' 11,000 166,326
RETAIL
Cifra Sa De Cv 'B' * 147,000 154,542
TELEPHONE
Telefonos De Mexico Series 'L' (Ltd Voting) 162,000 258,620
----------
1,108,231
----------
NETHERLANDS -- 6.11%
AIR TRANSPORT
KLM 2,341 82,366
BANK
ABN Amro Holding 11,227 511,977
CHEMICALS
Akzo Nobel Nv 2,562 296,638
ELECTRONICS
Philips Electronic 11,082 400,974
FOOD & AGRICULTURE
Ahold (kon) Nv 4,389 179,340
Unilever Nv Cva 5,151 724,616
INSURANCE
ING Groep Nv Cva 8,743 584,689
INTERNATIONAL OIL
Royal Dutch Petroleum (Br) 16,546 2,314,186
LIQUOR & TOBACCO
Heineken Nv 1,734 307,968
MEDIA
Elsevier Nv 23,480 313,460
Wolters Kluwer Cva 2,079 196,877
PAPER & FOREST PRODUCTS
KNP BT (Kon) Nv 2,446 62,867
STEEL
Kon Hoogovens Nv Cva 1,568 52,528
TELEPHONE
Kon Ptt Nederland 15,198 552,744
----------
6,581,230
----------
NORWAY -- 3.41%
CHEMICALS
Dyno Industrier 4,900 114,786
DRUGS & MEDICINE
Hafslund Nycomed Series 'A' 10,010 262,218
Hafslund Nycomed Series 'B' 6,018 152,882
FOOD & AGRICULTURE
Orkla As 'A' 6,150 306,631
Orkla As 'B' 1,200 57,361
INSURANCE
Uni Storebrand As 'A' * 51,053 282,826
INTERNATIONAL OIL
Norsk Hydro As 35,100 1,477,812
Transocean * 14,721 255,142
PAPER & FOREST PRODUCTS
Norske Skogsindust 'A' 4,100 120,706
PRODUCER GOODS
Kvaerner As Series 'A' 5,750 203,867
Kvaerner As Series 'B' 3,900 130,867
RAILROAD & SHIPPING
Bergesen Dy As 'A' 7,100 141,599
Bergesen Dy As 'B' Non-Voting 2,400 47,105
Leif Hoegh & Co 4,600 68,441
Unitor As 4,000 55,081
----------
3,677,324
----------
SINGAPORE -- 3.35%
AIR TRANSPORT
Singapore Airlines (Alien Market) 48,000 447,943
BANK
Dev Bank Singapore (Alien Market) 35,250 438,611
Overseas Chinese Bank (Alien Market) 33,833 423,371
United Overseas Bank (Alien Market) 40,804 392,328
CONSUMER DURABLES
Jardine Matheson (Sing Quote) 2,041 13,981
LIQUOR & TOBACCO
Fraser & Neave 18,000 229,062
Straits Trading Co 36,000 84,498
MEDIA
Singapore Press Holdings (Alien Market) 16,000 282,792
MOTOR VEHICLES
Cycle & Carriage 30,000 299,053
MULTI-INDUSTRY
Straits Steamship 44,000 148,692
PRODUCER GOODS
Jurong Shipyard (Nl) 13,000 100,179
Keppel Corp 45,000 400,858
REAL PROPERTY
City Developments 37,600 273,799
Hong Kong Land Holdings (Sing Quote) 25,975 48,054
RETAIL
Dairy Farms Intl (Sing Quote) 21,831 20,084
----------
3,603,305
----------
SPAIN -- 2.31%
BANKS
Argentaria Corp Banc 3,909 161,108
Banco Bilbao Vizcaya (Reg'd) 5,568 200,568
Banco Central Hispan (Reg'd) 3,721 75,453
Banco Santander (Reg'd) 4,588 230,315
CONSTRUCTION
Fomento Const Y Contra 588 45,076
ENERGY & UTILITIES
Empresa Nac Electricid 6,839 387,285
Gas Natural Sdg Sa 1,341 208,916
Iberdrola Sa 19,807 181,227
Union Electrical Fenosa 12,958 77,973
INSURANCE
Corporation Mapfre (Reg'd) 947 53,003
INTERNATIONAL OIL
Repsol Sa 8,351 273,626
LIQUOR & TOBACCO
Tabacalera Sa Series 'A' (Reg'd) 1,599 60,630
NON-FERROUS METALS
Acerinox Sa (Reg'd) 401 40,557
PRODUCER GOODS
Zardoya-Otis 310 33,858
RAILROAD & SHIPPING
Autopistas Cesa 6,059 68,923
REAL PROPERTY
Vallehermoso Sa 2,815 52,325
TELEPHONE
Telefonica De Espana 24,037 332,867
----------
2,483,710
----------
SWITZERLAND -- 5.46%
BANKS
Cs Holding (Reg'd) 6,034 620,102
Schweiz Bangesellsch (Br) 566 614,870
Schweiz Bangesellsch (Reg'd) 252 57,380
Schweiz Bankverein (Reg'd) 700 143,267
CHEMICALS
Ciba-Geigy (Br) 120 105,332
Ciba-Geigy (Reg'd) 380 335,202
CONSTRUCTION
Holderbank Fn Glarus (Br) 135 103,833
Holderbank Fn Glarus Wts (Pur Br) * 55 50
CONSUMER DURABLES
Smh Ag Neuenburg (Reg'd) 475 62,334
Smh Ag Neuenburg (Br) 25 14,992
DRUGS & MEDICINE
Roche Holdings Genusscheine Npv 113 896,124
Roche Holdings (Br) 44 617,564
Sandoz (Reg'd) 835 766,314
ELECTRONICS
Bbc Brown Boveri (Br) 240 279,494
Sgs Holding (Br) 24 47,764
FOOD & AGRICULTURE
Merkur Hldg Ag (Reg'd) 80 17,590
Nestle Sa (Reg'd) 673 746,315
INSURANCE
Zurich Versicherun (Reg'd) 1,200 359,796
NON-FERROUS METALS
Alusuisse-Lonza Holdings (Reg'd) 108 85,788
PRODUCER GOODS
Sulzer Ag Ptg 13 6,947
----------
5,881,058
----------
UNITED KINGDOM -- 14.71%
AIR TRANSPORT
British Airways 44,575 322,505
BANKS
Abbey National 38,813 383,260
Barclays 34,087 391,104
Hsbc Holdings (UK Reg'd) 42,779 652,231
Hsbc Holdings (UK Reg'd) 24,871 388,464
LLoyds Bank 74,113 381,450
CHEMICALS
Boc Group 13,799 193,033
Imperial Chemical Industries 17,053 202,016
CONSTRUCTION
English China Clay 33,609 165,415
Rmc Group 19,470 299,571
Taylor Woodrow 91,386 166,716
DRUGS & MEDICINE
Glaxo Holdings 63,234 898,321
Smithkline Beecham/ Bec Unts (1bch 'B'
12.5P&1sbc Pfd) 22,566 245,953
Smithkline Beecham 'A' 24,860 274,043
Zeneca Group 17,984 347,908
ELECTRONICS
General Electric Co 59,140 325,964
ENERGY & UTILITIES
British Gas 123,228 485,962
National Power 34,132 238,205
Thames Water 26,744 233,358
FOOD & AGRICULTURE
Associated British Foods 33,128 189,793
Cadbury Schweppes 27,535 227,434
Kingfisher 11,117 93,551
Sainsbury (J) 32,305 197,116
Tesco 47,446 218,784
Unilever 14,698 301,910
INSURANCE
Prudential Corp 68,435 440,947
INTERNATIONAL OIL
British Petroleum 125,393 1,049,353
LIQUOR & TOBACCO
BAT Industries 67,568 595,342
Bass 24,550 274,056
Grand Metropolitan 47,103 339,333
Guinness 59,179 435,517
MEDIA
Reuters Holdings 39,031 357,537
MULTI-INDUSTRY
Hanson 107,145 320,230
Inchcape 11,605 44,865
PRODUCER GOODS
Btr * 78,087 398,873
Rolls Royce 54,712 160,548
Rtz Corp (Reg'd) 27,830 404,435
Smiths Industries 22,799 225,130
REAL PROPERTY
Mepc 15,356 94,175
RETAIL
Argos 17,988 166,452
Boots Co 16,552 150,594
Great Univ Stores 19,328 205,559
Marks & Spencer 53,864 376,332
Sears 50,391 81,367
STEEL
British Steel 37,990 95,995
TELEPHONE
British Telecom 130,594 717,771
Cable & Wireless 52,660 376,096
Vodafone Group 74,958 268,255
TRAVEL & RECREATION
Ladbroke Group 64,565 146,857
Thorn Emi 12,257 288,688
------------
15,838,374
------------
TOTAL COMMON STOCKS 102,871,344
(COST $95,345,672) ------------
TOTAL INVESTMENTS $107,690,899
(COST $100,165,227) ============
<FN>
* Non Income producing security
</TABLE>
<PAGE>
THE WOODWARD FUNDS
INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (Continued)
December 31, 1995
Notes to Portfolio of Investments
At December 31, 1995, industry diversification of the Woodward
International Equity Fund investments was as follows:
<TABLE>
<CAPTION>
% of
Sector Diversification Investments
---------------------- -----------
<S> <C>
Banks/Finance 22.51%
Materials and Services 14.89
Consumer Non-Durables 14.01
Utilities 8.39
International Oil 6.87
Drugs and Medicine 5.96
Capital Goods 5.74
Electronics 5.73
Consumer Durables 4.52
Temporary Cash Investment 4.48
Transportation 3.47
Miscellaneous 2.33
Technology 0.59
Energy 0.51
------
Total Investments 100.00%
======
</TABLE>
<PAGE>
THE WOODWARD FUNDS
INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
(1) Organization and Commencement of Operations
The Woodward Funds (Woodward) was organized as a Massachusetts business
trust on April 21, 1987, and registered under the Investment Company Act of
1940, as amended, as an open-end investment company. As of December 31, 1995,
Woodward consisted of seventeen separate series. The Woodward International
Equity Fund (International Fund) commenced operations on December 3, 1994.
(2) Significant Accounting Policies
The following is a summary of significant accounting policies followed
in the preparation of the financial statements. The policies are in conformity
with generally accepted accounting principles for investment companies.
Following generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date
of the financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Investments
The International Fund values investment securities at market value
which is determined by a pricing service based upon quoted market prices or
dealer quotes at the close of the respective foreign securities exchange.
Securities for which market prices or dealer quotes are not readily available
are valued by the investment advisor, NBD Bank, (NBD) in accordance with
procedures approved by the Board of Trustees.
Investment security purchases and sales are accounted for on the day
after trade date.
Woodward invests in securities subject to repurchase agreements. Such
transactions are entered into only with institutions included on the Federal
Reserve System's list of institutions with whom the Federal Reserve open
market desk will do business. NBD, acting under the supervision of the Board
of Trustees, has established the following additional policies and procedures
relating to Woodward's investments in securities subject to repurchase
agreements: 1) the value of the underlying collateral is required to equal or
exceed 102% of the funds advanced under the repurchase agreement including
accrued interest; 2) collateral is marked to market daily by NBD to assure its
value remains at least equal to 102% of the repurchase agreement amount; and
3) funds are not disbursed by Woodward or its agent unless collateral is
presented or acknowledged by the collateral custodian.
Investment Income
Interest income is recorded daily on the accrual basis. Dividends are
recorded on the ex-dividend date or upon receipt of ex-dividend notification
in the case of certain foreign securities. Investment income is recorded net
of foreign taxes withheld where recovery of such taxes is uncertain.
Forward Foreign Currency Contracts
The International Fund may enter into a forward foreign currency
contract which is an agreement between two parties to buy and sell a currency
at a set price on a future date. The market value of the contract will
fluctuate with changes in currency exchange rates. The contract is
"marked-to-market" daily using the prevailing exchange rate and the change in
market value is recorded as an unrealized gain or loss. When the contract is
closed, a realized gain or loss is recorded equal to the difference between
the value of the contract at the time it was entered into and the value at the
time it was closed.
The International Fund may enter into forward foreign currency contracts
with the objective of minimizing its risk from adverse changes in the
relationship between currencies or to enhance income. The International Fund
may also enter into a forward contract in relation to a security denominated
in a foreign currency when it anticipates receipt in a foreign currency of
dividend payments in order to "lock in" the U.S. dollar price of a security or
the U.S. dollar equivalent of such dividend payments.
These contracts involve market risk in excess of the amounts reflected
in the International Fund's Statement of Assets and Liabilities. The face or
contract amount in U.S. dollars, as reflected in Footnote 6, reflects the
total exposure the fund has in that particular currency contract. Losses may
arise due to changes in the value of the foreign currency or if the
counterparty does not perform under the contract.
Foreign Currency Translations
The accounting records of the International Fund are maintained in U.S.
dollars. Foreign currency-denominated assets and liabilities are
"marked-to-market" daily using the prevailing exchange rate and the change in
value is recorded as an unrealized gain or loss. Upon receipt or payment, a
realized gain or loss is recorded equal to the difference between the original
value and the settlement value of the asset or liability. Purchases and sales
of securities, income, and expenses are translated into U.S. dollars at
prevailing exchange rate on the respective date of the transaction.
Net realized gains and losses on foreign currency transactions represent
gains and losses from sales and maturities of forward foreign currency
contracts, disposition of foreign currencies and currency gains and losses
realized between trade and settlement dates on securities transactions and
between the ex, pay and settlement dates on dividend income. Exchange rate
fluctuations on investments are not segregated in the statement of operations
from changes arising in market price movements. The effects of changes in
foreign currency exchange rates on investments in securities are included
within the net realized gain or loss on securities sold and net unrealized
appreciation or depreciation on investment securities held.
Federal Income Taxes
It is Woodward's policy to comply with the requirements of Subchapter M
of the Internal Revenue Code, as amended, applicable to regulated investment
companies and to distribute net investment income and realized gains to its
shareholders. Therefore, no federal income tax provision is required in the
accompanying financial statements.
Net investment income and net realized gains (losses) may differ for
financial statement and tax purposes primarily due to differing treatments for
foreign currency transactions, wash sales and post October 31 capital losses.
Also, due to the timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the net investment
income or realized gains (losses) were recorded by the Fund. Certain
book-to-tax timing differences for the Fund are reflected as excess
distributions in the Statement of Changes in Net Assets. These distributions
do not constitute a tax return of capital.
Shareholder Dividends
Dividends from net investment income are declared and paid annually. Net
realized capital gains are distributed annually. Distributions from net
investment income and net realized gains are made during each year to avoid
the 4% excise tax imposed on regulated investment companies by the Internal
Revenue Code.
Deferred Organization Costs
Organization costs are being amortized on a straight-line basis over the
five year period beginning with the commencement of operations of the Fund.
Expenses
Expenses are charged daily as a percentage of the Fund's assets.
Woodward monitors the rate at which expenses are charged to ensure that a
proper amount of expense is charged to income each year. This percentage is
subject to revision if there is a change in the estimate of the future net
assets of the International Fund or change in expectations as to the level of
actual expenses.
Concentration of Risk
Investing in securities of foreign issuers and currency transactions may
involve certain considerations and risks not typically associated with
investing in U.S. companies and U.S. government securities. These risks
include revaluation of currencies, adverse fluctuations in foreign currency
values and possible adverse political, social and economic developments,
including those particular to a specific industry, country or region, which
could cause the securities and their markets to be less liquid and price more
volatile than those of comparable U.S. companies and U.S. government
securities.
(3) Transactions with Affiliates
First of Michigan Corporation (FoM) and Essex National Securities, Inc.
(Essex) act as sponsors and co-distributors of Woodward's shares. Pursuant to
their Distribution Agreement with Woodward, FoM is entitled to receive
a fee at the annual rate of .005% of the International Fund's average net
assets and Essex is entitled to receive a fee at the annual rate of .10% of
the aggregate average net assets of Woodward's investment portfolios,
attributable to investments by clients of Essex.
NBD is the investment advisor pursuant to the Advisory Agreement. For
its advisory services to Woodward, NBD is entitled to a fee, computed daily
and payable monthly. Under the Advisory Agreement, NBD also provides Woodward
with certain administrative services, such as maintaining Woodward's general
ledger and assisting in the preparation of various regulatory reports. NBD
receives no additional compensation for such services.
A reorganization of Woodward and The Prairie Funds is being considered
by the Board of Trustees of both funds. In connection with the proposed
reorganization, the Board of Trustees of Woodward and the Board of Trustees of
Prairie must approve certain reorganization agreements. The transaction is
intended to be effected as a tax-free reorganization under the Internal
Revenue Code, so that none of the Fund's shareholders will recognize taxable
gains or losses as a result of the reorganization. A proxy
statement/prospectus describing the reorganization and the reasons therefore
will be sent to shareholders.
NBD, FoM, and Essex have agreed that they may waive their fees in whole
or in part; and, if in part, may specify the particular fund to which such
waiver relates as may be required to satisfy any expense limitation imposed by
state securities laws or other applicable laws. At present, no restrictive
expense limitation is imposed on Woodward. Restrictive limitations could be
imposed as a result of changes in current state laws and regulations in those
states where Woodward has qualified its shares, or by a decision of the
Trustees to qualify the shares in other states having restrictive expense
limitations. For the year ended December 31, 1995, NBD reimbursed the
International Fund for certain expenses in the amount of $51,707.
NBD is also compensated for its services as Woodward's Custodian,
Transfer Agent and Dividend Disbursing Agent, and is reimbursed for certain
out of pocket expenses incurred on behalf of Woodward.
On March 10, 1994, Woodward adopted the Woodward Funds Deferred
Compensation Plan (the "Plan"), an unfunded, nonqualified deferred
compensation plan. The Plan allows an individual trustee to elect to defer
receipt of all or a percentage of fees which otherwise would be payable for
services performed.
See Note 5 for a summary of fee rates and expenses pursuant to these
agreements.
<PAGE>
(4) Investment Securities Transactions
Information with respect to investment securities and security
transactions based on the aggregate cost of investments for federal income tax
purposes, excluding short-term securities, is as follows:
<TABLE>
<S> <C>
Gross Unrealized Gains $ 10,121,293
Gross Unrealized Losses (2,595,621)
------------
$ 7,525,672
============
Federal Income Tax Cost $100,165,227
Purchases $ 65,664,939
Sales, at value $ 1,353,172
</TABLE>
(5) Expenses
Following is a summary of total expense rates charged, advisory fee
rates payable to NBD, and amounts paid to NBD, FoM, and Essex pursuant to the
agreements described in Note 3 for the year ended December 31, 1995. The rates
shown are stated as a percentage of the Fund's average net assets.
<TABLE>
<CAPTION>
Effective Date
- - --------------
<S> <C>
Expense Rates:
January 1 1.15%
November 9 1.17%
NBD Advisory Fee:
January 1 0.75%
Amounts Paid:
Advisory Fee to NBD $529,312
Distribution Fees to FoM & Essex $ 4,063
Other
Fees & Out of Pocket Expenses to NBD $140,786
Expense reimbursements by NBD $(51,707)
</TABLE>
<PAGE>
(6) Forward Foreign Currency Contracts
As of December 31, 1995, the Fund had entered into two forward foreign
currency exchange contracts that obligate the Fund to deliver currencies at
specified future dates.
Outstanding contracts as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
U.S. Dollar U.S. Dollar
Currency To Value As Of Currency To Value as of Unrealized
Settlement Date Be Delivered Dec. 31, 1995 Be Received Dec. 31, 1995 Gain (Loss)
- - --------------- ------------ ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Jan. 2, 1996 770,501 $770,501 3,344,361 $770,234 $(267)
U.S. Dollars Finnish Marks
Jan. 3, 1996 5,349 (8,305) 8,253 (8,253) 52
G.B. Pounds U.S. Dollars
-------- -------- -----
$762,196 $761,981 $(215)
======== ======== =====
</TABLE>
<PAGE>
THE WOODWARD FUNDS
INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
The Financial Highlights present a per share analysis of how the International
Equity Fund's net asset values have changed during the periods presented.
Additional quantitative measures expressed in ratio form analyze important
relationships between certain items presented in the financial statements.
These Financial Highlights have been derived from the financial statements of
the International Equity Fund and other information for the periods presented.
<TABLE>
<CAPTION>
Year Ended Period ended
Dec. 31, 1995 Dec. 31, 1994
------------- -------------
<S> <C> <C>
Net asset value, beginning of period $ 10.01 $ 10.00
Income from investment operations:
Net investment income 0.10 0.01
Net realized and unrealized gains on investments 1.05 --
------------ -----------
Total from investment operations 1.15 0.01
------------ -----------
Less distributions:
From net investment income (0.11) --
In excess of realized gains (0.00) --
------------ -----------
Total distributions (0.11) --
------------ -----------
Net asset value, end of period $ 11.05 $ 10.01
============ ===========
Total Return (b) 11.47% 1.26%(a)
Ratios/Supplemental Data
Net assets, end of period $107,288,301 $36,545,470
Ratio of expenses to average net assets 1.16% 1.15%(a)
Ratio of net investment income to average net assets 1.43% 1.18%(a)
Ratio of expenses to average net assets without
reimbursed expenses 1.24% 1.92%(a)
Ratio of net investment income to average net assets
without reimbursed expenses 1.35% 0.41%(a)
Portfolio turnover rate 2.09% 0.30%
Average commission rate $ 0.05
<FN>
- - ----------------
(a) Annualized for periods less than one year for comparability purposes.
Actual annual values may be less than or greater than those shown.
(b) Total returns as presented do not include any applicable sales load.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees and Shareholders of
The Woodward International Equity Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of The Woodward International Equity
Fund as of December 31, 1995, and the related statement of operations for the
year then ended, the statements of changes in net assets and the financial
highlights for each of the periods from inception (as indicated in Note 1)
through December 31, 1995. 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 audit 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 physical counts and
confirmation of securities owned as of December 31, 1995, by inspection and
correspondence with custodians, banks 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 The Woodward International Equity Fund as of December 31, 1995,
the results of its operations for the year then ended, the changes in its net
assets and the financial highlights for each of the periods from inception (as
indicated in Note 1) through December 31, 1995 in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
February 19, 1996.
<PAGE>
[ BACK COVER ]
Investment Adviser:
NBD Bank
Detroit, Michigan 48226
Sponsors and Co-Distributors:
First of Michigan Corporation
Detroit, Michigan 48243
Essex National Securities, Inc.
Napa, California 94558
Custodian and Transfer Agent:
NBD Bank
Troy, Michigan 48007-7058
Legal Counsel:
Drinker Biddle & Reath
Philadelphia, Pennsylvania 19107-3496 [ WOODWARD FUNDS LOGO ]
- - -------------------------------------------------------------------------------
The Woodward Funds ------------
P.O. Box 7058 BULK RATE
Troy, MI 48007-7058 U.S. POSTAGE
PAID
Detroit, MI
Permit No. 2
------------
Exhibit (17)(k)
<PAGE>
[LOGO OF PRAIRIEFUNDS]
PRAIRIE FUNDS
ASSET ALLOCATION FUNDS
The Managed Assets Income Fund
The Managed Assets Fund
EQUITY FUNDS
The Equity Income Fund
The Growth Fund
The Special Opportunities Fund
The International Equity Fund
BOND FUNDS
The Intermediate Bond Fund
The Bond Fund
The International Bond Fund
MUNICIPAL BOND FUNDS
The Intermediate Municipal Bond Fund
The Municipal Bond Fund
MONEY MARKET FUNDS
The U.S. Government Money Market Fund
The Money Market Fund
The Municipal Money Market Fund
ANNUAL REPORT
DECEMBER 31, 1995
THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS
PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
<PAGE>
Table of Contents
1 Letter to Shareholders
3-23 Fund Highlights
24-104 Portfolios of Investments
106-113 Statements of Assets and Liabilities
114-117 Statements of Operations
118-127 Statements of Changes in Net Assets
128-150 Notes to Financial Statements
152-172 Financial Highlights
173 Report of Independent Auditors
The Prairie Funds PRAIRIE FUNDS
are not insured or (800) 224-4800
protected by the
FDIC or any other INVESTMENT ADVISER
governmental First Chicago Investment Management
agency, are not Company (FCIMCO)
deposits or Three First National Plaza, MS 0334
obligations of The Chicago, IL 60670-0334
First National Bank
of Chicago, are not DISTRIBUTOR
guaranteed by the Concord Financial Group, Inc.
bank, and involve 3435 Stelzer Road
investment risk, Columbus, OH 43219
including the
possible loss of
principal.
<PAGE>
DEAR SHAREHOLDERS:
For investors, 1995 was a year for the record books--the performance of both
the stock and bond markets was nothing short of extraordinary. During the 12
months ended December 31, 1995, the Standard & Poor's 500 Index had a total
return of 37%. Bond investors profited handsomely too, as returns from some
sectors rivaled those of the stock market.
THE BULLS MAY BACK OFF A BIT IN '96
The stock market's relentless march upward in 1995 was driven by two powerful
factors: interest rates and corporate profits. A combination of strong
overseas sales, productivity increases and slow wage growth supported the
uptrend in corporate profits. Reported earnings for the S&P 500 increased some
28% over the 12 months ended December 31, 1995.
Interest rates also declined significantly in 1995. Yields on long-term
government bonds fell from 8% to 6%--and lower long-term interest rates
provided less investment competition to stocks as the months wore on. As a
result, the U.S. stock market scored record highs, and for the year,
outperformed most major equity markets worldwide.
Where do we go from here? It is highly unlikely that 1995's strong
performance will be repeated in 1996. Nevertheless, we see little on the
horizon to dramatically alter the underpinnings of this market. Inflation
remains in check, and there is no indication that corporate profits will
collapse. Fundamentals are strong. Consumer demand, while not robust, has not
disappeared, and U.S. corporations are operating more efficiently after years
of downsizing. Consequently, we are optimistic about the equity market's
prospects in 1996.
A DIFFICULT ENVIRONMENT FOR BONDS
We are not as enthusiastic about the outlook for bonds in 1996. Recent
volatility in energy and gold prices may be an early signal of increasing
inflationary pressure. While there are few indications that inflation is
picking up, we are watching these signs closely.
The political situation also troubles us. If and when Congress and the
President agree on a balanced budget plan, we expect the final agreement to be
watered down so much as to be almost meaningless. At this point, even a short-
term agreement would be helpful. If tax cuts and budget cuts are not
significant over the long term, we believe that the fixed-income markets will
suffer.
1
<PAGE>
Additionally, in 1996, we expect the Federal Reserve to cut short-term rates
and long-term rates will rise. At current rates, however, an investor is not
paid enough in higher yield to buy long-term bonds relative to the risk
assumed. We are positioning our fixed-income portfolios with this in mind.
OUR VALUED SHAREHOLDERS
We thank you for the confidence that you have expressed in us by choosing the
Prairie Funds. We will continue to strive for superior performance for your
investments.
Sincerely,
/s/Marco Hanig
Marco Hanig
Managing Director, Prairie Funds
First Chicago Investment Management Company (FCIMCO)
2
<PAGE>
- - -------------------------------------------------------------------------------
FUND HIGHLIGHTS
- - -------------------------------------------------------------------------------
Prairie Funds can meet the diverse needs of investors who may be seeking to
build capital, preserve their assets, reduce their taxes or generate higher
income.
[LINE GRAPH APPEARS HERE]
3
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
4
<PAGE>
PORTFOLIO MANAGER INTERVIEWS
ASSET ALLOCATION FUNDS
MANAGED ASSETS INCOME FUND, MANAGED ASSETS FUND
An interview with CLAUDE ERB Portfolio Manager
Q. IN A YEAR THAT WAS GOOD FOR BOTH STOCKS AND BONDS, HOW WELL DID THE FUNDS
DO?
We're pleased that both Funds performed well. The Managed Assets Income
Fund returned 26.40% (A Shares)+ for the 12 months ended December 31,
1995, compared to 19.24% and 37.43% for its benchmarks, the Lehman
Brothers Government/Corporate Bond Index and the S&P 500, respectively.
The Managed Assets Fund returned 16.48% (A Shares)+ from April 3, 1995,
through December 31, 1995, versus 13.58% for the Lehman Brothers
Government/Corporate Bond Index and 25.24% for the S&P 500.
Q. WAS THERE ANY ONE PARTICULAR REASON THAT THE FUNDS DID SO WELL?
1995 was a year of tremendous opportunity. Stocks were a great value in
comparison to bonds, and we had a healthy exposure to U.S. equities. In
the fixed-income area, it was a year to go long on maturity, and we were
positioned in the right area of the yield curve. As a result, bonds made a
positive contribution to the portfolios' performance as well.
Q. HOW WERE THE PORTFOLIOS' ASSETS ALLOCATED THROUGHOUT THE YEAR?
Given the differing objectives of the two Funds, the emphasis of each was
different. Both Funds had a greater-than-normal allocation to the equity
markets, where we saw good values. In the Managed Assets Fund, where our
focus is on total return, we invested approximately 60% of the portfolio
in stocks, 30% in bonds and 10% in cash. In the Managed Assets Income
Fund, where the focus is on income, we had a heavier weighting in bonds
and in above-average yielding equities.++
Q. WHAT'S YOUR OUTLOOK FOR THE YEAR AHEAD?
Realistically, it's unlikely that the U.S. stock market will repeat its
performance of the past year. As a result, we're taking a more cautious
approach to the equity markets and shifting our focus to intermediate
securities in the fixed-income markets.
+ With the maximum sales charge of 4.50%, A Shares of the Managed Assets
Income Fund returned 20.71%, and A Shares of the Managed Assets Fund
returned 11.25% over the respective time periods.
++ The composition of the Funds' holdings is subject to change.
5
<PAGE>
Q. WHERE DO YOU SEE OPPORTUNITY IN 1996?
Internationally. As the U.S. market slows, we will be looking increasingly
at opportunities overseas. Although equities aren't particularly cheap
outside the U.S., the dollar has bottomed and should strengthen in the
coming year, which will help foreign companies producing goods for the
U.S. market--making foreign stocks attractive as a long-term investment.
Nearer term, we're also interested in the fixed-income side of the
equation--particularly when it comes to emerging markets.
Q. WHAT KIND OF YEAR DO YOU THINK 1996 WILL BE?
A good one--if you're positioned correctly. 1995 was a year to be in
domestic stocks and long-term fixed-income securities. In 1996, we believe
that international stocks and the intermediate range of the yield curve
will offer investors the greatest opportunity.
Managed Assets Income Fund
[GRAPH APPEARS HERE]
Return on a $10,000 Investment
<TABLE>
<CAPTION>
Lehman Brothers
S&P 500 Government/Corporate
Date A Shares* Index Bond Index
- - ---- --------- ------- ----------
<S> <C> <C> <C>
01/23/86 9,551
01/31/86 9,561 10,000 10,000
12/31/86 10,847 11,795 11,492
12/31/87 10,738 12,412 11,757
12/31/88 12,645 14,499 12,649
12/31/89 15,054 19,064 14,450
12/31/90 15,482 18,459 15,648
12/31/91 19,218 24,099 18,172
12/31/92 20,895 25,947 19,549
12/31/93 22,965 28,539 21,711
12/31/94 22,525 28,912 20,948
12/31/95 28,494 39,734 24,979
</TABLE>
<TABLE>
<CAPTION>
Managed Assets Income Fund Performance
Average Annual Total Return
- - --------------------------------------------------------------------------------
Inception Since
Date 1 Year 5 Year Inception
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/95
A Shares* 1/23/86 20.71% 11.92% 11.61%
B Shares** 3/3/95 NA NA 16.42%
I Shares*** 3/3/95 NA NA 22.55%
</TABLE>
The performance of the Prairie Managed Assets Income Fund is measured against
the S&P 500 Index, an unmanaged index generally representative of the U.S. stock
market, and the Lehman Brothers Government/Corporate Bond Index, an unmanaged
broad-based index representative of the bond market as a whole. The indices do
not reflect the deduction of expenses associated with a mutual fund, such as
investment management and fund accounting fees. However, the Fund's performance
reflects the deduction of fees for these value-added services. Past performance
is not predictive of future results. The investment return and NAV will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
The chart reflects the performance of Class A shares, which have been offered
since 1/23/86. Please refer to the box above for returns on Class B and I
shares.
* Reflects 4.50% Sales Charge
** Reflects 5.00% Contingent Deferred Sales Charge
*** Aggregate Total Return
6
<PAGE>
Managed Assets Fund
[GRAPH APPEARS HERE]
Return on a $10,000 Investment
<TABLE>
<CAPTION>
Lehman
Government/Corporate
Bond S&P 500
Date A Shares* B Shares** I Shares Index Index
- - ---- --------- ---------- -------- -------------------- -------
<S> <C> <C> <C> <C> <C>
03/31/95 10,000 10,000
04/03/95 9,551 9,500 10,000
06/30/96 10,038 9,990 10,520 10,648 10,949
09/30/95 10,507 10,460 11,024 10,852 11,819
12/31/95 11,125 11,083 11,690 11,358 12,524
</TABLE>
<TABLE>
<CAPTION>
Managed Assets Fund Performance
Aggregate Total Return
---------------------------------------------
Inception Since
Date Inception
---------------------------------------------
<S> <C> <C>
12/31/95
A Shares* 4/3/95 11.25%
B Shares** 4/3/95 10.83%
I Shares 4/3/95 16.90%
</TABLE>
The performance of the Prairie Managed Assets Fund is measured against the S&P
500 Index, an unmanaged index generally representative of the U.S. stock market,
and the Lehman Brothers Government/Corporate Bond Index, an unmanaged broad-
based index representative of the bond market as a whole. The indices do not
reflect the deduction of expenses associated with a mutual fund, such as
investment management and fund accounting fees. However, the Fund's performance
reflects the deduction of fees for these value-added services. Past performance
is not predictive of future results. The investment return and NAV will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
* Reflects 4.50% Sales Charge
** Reflects 5.00% Contingent Deferred Sales Charge
7
<PAGE>
EQUITY FUNDS
EQUITY INCOME FUND, GROWTH FUND AND SPECIAL OPPORTUNITIES FUND
An interview with JAMES MOELLER Portfolio Manager
Q. 1995 WAS A GOOD YEAR FOR EQUITY FUNDS. HOW WELL DID THE THREE DOMESTIC
STOCK FUNDS PERFORM?
All three of the Funds benefited from the stock market's rise. From their
inception on January 27, 1995, through December 31, 1995, the Equity
Income Fund returned 29.78% (A Shares),+ compared to 34.21% for its
benchmark, the Russell 1000 Value Index; the Growth Fund returned 29.98%
(A Shares),+ versus 34.34% for the Russell 1000 Growth Index; and the
Special Opportunities Fund posted a gain of 24.80% (A Shares),+ compared
to 26.36% for the Russell 2000 Value Index.
Q. DID INVESTMENTS IN ANY ONE AREA OF THE MARKET--LARGE-CAP, MID-CAP, SMALL-
CAP--CONTRIBUTE MORE TO PERFORMANCE THAN ANY OTHER?
Not really. We saw a very broad strong market during the year. The Dow
Jones Industrial Average, the S&P 500 and the Wilshire 5000 all posted
gains over 35% for the 12 months ended December 31, 1995. So returns were
relatively uniform across the various sectors of the market. Only the
small-cap index, the Russell 2000, lagged, but it was still up about 28%
for the year. In any other year, with this kind of performance, small-cap
stocks would be considered big winners.
Q. GIVEN THIS ENVIRONMENT, HOW DID YOU APPROACH THE MARKET?
We expected the economy to exhibit slower economic growth in 1995 after
the torrid pace it achieved in the latter part of 1994. Accordingly, we
invested our portfolios in defensive securities, or companies whose profit
outlook would be least affected by the slower rate of growth. This
strategy initially proved conservative. The consensus viewed the sharp
decline of bond yields in the first half of the year as a catalyst for the
economy to reaccelerate, thereby favoring cyclical investments. However,
this did not occur, and the economy continued to slow as the year
progressed. It became clear that certain sectors of the economy could not
meet earnings expectations, and our strategy began to positively impact
our Funds' performance.
+ With the maximum sales charge of 4.50%, A Shares of the Equity Income Fund
returned 23.95%, A Shares of the Growth Fund returned 24.14%, and A Shares
of the Special Opportunities Fund returned 19.20% over the same time
period.
Small-capitalization funds typically carry additional risks since smaller
companies generally have a higher risk of failure, and by definition are not
as well established as "blue chip" companies. Historically, smaller
companies' stocks have experienced a greater degree of market volatility
than average.
8
<PAGE>
Q. WHICH SECTORS DID YOU EMPHASIZE?
In the second half of the year, the best-performing groups were the most
defensive--sectors with relatively stable demand regardless of the
economy's ups and downs. The Equity Income Fund emphasized energy, utility
and financial stocks and had only a few holdings in companies with more
cyclical demand. While the Growth Fund held a few positions in the
technology sector, it was overweighted in health care and consumer
staples. The Special Opportunities Fund focused on smaller companies in
the same sectors as the Growth Fund.++
Q. TURNING TO 1996, WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS?
We feel that earnings disappointments will continue. Economic growth is
expected to remain sluggish in the months ahead, and while profits will
still be positive, fewer companies will be able to meet or surpass the
stratospheric records set in 1995. So we expect to see a challenging
market in the months ahead.
Q. GIVEN THIS OUTLOOK, HOW ARE THE FUNDS POSITIONED?
Defensively. As we move into 1996, we remain invested in less economically
sensitive sectors of the marketplace. Other than this, we haven't made any
major changes in the Funds' allocations. Many of the companies we invest
in are global in nature and not solely dependent on the U.S. economy for
profit growth. Consequently, while we are somewhat cautious about the U.S.
stock market, we are optimistic about the Funds' prospects for growth in
the year ahead.
++ The composition of the Funds' holdings is subject to change.
Equity Income Fund
[GRAPH APPEARS HERE]
Return on a $10,000 Investment
<TABLE>
<CAPTION>
Russell 1000
Date A Shares* B Shares** I Shares Value Index
- - ---- --------- ---------- -------- ------------
<S> <C> <C> <C> <C>
12/31/94 10,000
01/27/95 9,551 9,500 10,000
01/31/95 10,308
03/31/95 10,005 9,959 10,476 10,950
06/30/95 10,750 10,721 11,264 11,930
09/30/95 11,583 11,570 12,154 12,973
12/31/95 12,395 12,397 13,027 13,421
</TABLE>
<TABLE>
<CAPTION>
Equity Income Fund Performance
Aggregate Total Return
------------------------------
Since
Inception
(1/27/95)
------------------------------
<S> <C>
12/31/95
A Shares* 23.95%
B Shares** 23.97%
I Shares 30.27%
</TABLE>
The performance of the Prairie Equity Income Fund is measured against the
Russell 1000 Value Index, an unmanaged index generally representative of the
"large-cap" segment of the Russell 3000 Index, an index of the 3000 largest
U.S. companies. The index does not reflect the deduction of expenses associated
with a mutual fund, such as investment management and fund accounting fees.
However, the Fund's performance reflects the deduction of fees for these value-
added services. Past performance is not predictive of future results. The
investment return and NAV will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than the original cost.
* Reflects 4.50% Sales Charge
** Reflects 5.00% Contingent Deferred Sales Charge
9
<PAGE>
Growth Fund
[GRAPH APPEARS HERE]
Return on a $10,000 Investment
<TABLE>
<CAPTION>
Russell 1000
Date A Shares* B Shares** I Shares Growth Index
- - ---- --------- ---------- -------- ------------
<S> <C> <C> <C> <C>
12/31/94 10,000
01/27/95 9,551 9,500 10,000
01/31/95 10,213
03/31/95 10,172 10,130 10,650 10,953
06/30/95 10,807 10,769 11,317 12,030
09/30/95 11,646 11,629 12,211 13,123
12/31/95 12,414 12,415 13,038 13,434
</TABLE>
<TABLE>
<CAPTION>
Growth Fund Performance
Aggregate Total Return
------------------------------
Since
Inception
(1/27/95)
------------------------------
<S> <C>
12/31/95
A Shares* 24.14%
B Shares** 24.15%
I Shares 30.38%
</TABLE>
The performance of the Prairie Growth Fund is measured against the Russell 1000
Growth Index, an unmanaged index generally representative of the "large-cap"
segment of the Russell 3000 Index, an index of the 3000 largest U.S. companies.
The index does not reflect the deduction of expenses associated with a mutual
fund, such as investment management and fund accounting fees. However, the
Fund's performance reflects the deduction of fees for these value-added
services. Past performance is not predictive of future results. The investment
return and NAV will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than the original cost.
* Reflects 4.50% Sales Charge
** Reflects 5.00% Contingent Deferred Sales Charge
10
<PAGE>
Special Opportunities Fund
[GRAPH APPEARS HERE]
Return on a $10,000 Investment
<TABLE>
<CAPTION>
Russell 2000
Date A Shares* B Shares** I Shares Value Index
- - ---- --------- ---------- -------- ------------
<S> <C> <C> <C> <C>
12/31/94 10,000
01/27/95 9,551 9,500 10,000
01/31/95 9,952
03/31/95 10,124 10,090 10,600 10,371
06/30/95 10,167 10,100 10,640 11,280
09/30/95 11,255 11,220 11,798 12,219
12/31/95 11,920 11,876 12,508 12,636
</TABLE>
<TABLE>
<CAPTION>
Special Opportunities Fund Performance
Aggregate Total Return
--------------------------------------
Since
Inception
(1/27/95)
--------------------------------------
<S> <C>
12/31/95
A Shares* 19.20%
B Shares** 18.76%
I Shares 25.08%
</TABLE>
The performance of the Prairie Special Opportunities Fund is measured against
the Russell 2000 Value Index, an unmanaged index generally representative of the
2000 smallest stocks in the Russell 3000 Index, an index of the 3000 largest
U.S. companies and the Lehman Brothers Aggregate Bond Index, an unmanaged broad-
based index representative of the bond market as a whole. The index does not
reflect the deduction of expenses associated with a mutual fund, such as
investment management and fund accounting fees. However, the Fund's performance
reflects the deduction of fees for these value-added services. Past performance
is not predictive of future results. The investment return and NAV will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
* Reflects 4.50% Sales Charge
** Reflects 5.00% Contingent Deferred Sales Charge
11
<PAGE>
EQUITY FUNDS
INTERNATIONAL EQUITY FUND
An interview with PETER JANKOVSKIS Portfolio Manager
Q. HOW WELL HAS THE FUND PERFORMED SINCE ITS INCEPTION ON MARCH 3, 1995?
Very well. It outperformed its benchmark by 5.74 percentage points. The
Fund posted a gain of 15.16% (A Shares),+ while the Morgan Stanley Europe,
Asia and Far East (EAFE) Index produced a total return of 9.42% for the
period.
Q. GENERALLY, IT WAS A TOUGH YEAR FOR MARKETS OUTSIDE THE U.S. WHAT ACCOUNTED
FOR THE FUND'S STRONG PERFORMANCE?
Primarily our investment in Japan. After a dismal four years, the Japanese
economy showed signs of reviving in 1995; with 59% of our assets invested
there, we benefited from the rebound. In addition, 40% of the yen currency
exposure associated with our holdings in Japan was hedged with U.S.
dollars using currency futures. This helped the Fund preserve its gains in
the Japanese equity market as the dollar rose in value relative to the
yen.
Q. WHAT HAPPENED IN MARKETS BEYOND JAPAN?
The rising value of European currencies relative to the dollar and the
associated pressure on the export-oriented economies of Europe made it
difficult for foreign markets to match the torrid pace of the U.S. stock
market. The Fund had significant investments in the UK stock market (21%),
which had a return of 22.2%. Returns in Germany and France were
considerably lower, though aided by the appreciation of the D-mark and
franc.
Q. SPECIFICALLY, WHERE DO YOU SEE OPPORTUNITY?
I like foreign equity markets in general and look for them to outperform
the U.S. in 1996. Dollar strength will be the major driver for foreign
markets in the coming year. A rising dollar means that foreign goods will
be cheaper in the U.S., which should increase sales and, eventually, boost
foreign corporate profits. Looking at individual markets, I still like
Japan, which has continued to show signs that it is coming out of its
recession.
+ With the maximum sales charge of 4.50%, A Shares of the International
Equity Fund returned 9.99% for the same period.
12
<PAGE>
Q. IS THERE ANY REGION YOU AREN'T OPTIMISTIC ABOUT?
I'm not wildly enthusiastic about the prospects for Continental Europe in
the year ahead. Growth is slowing and unemployment is high. Most
importantly, the governments there can't do much to relieve the
situation--they're constrained by the Maastricht Treaty on monetary union
and have very little margin for fiscal stimulus.
Q. GIVEN YOUR OUTLOOK, HOW HAVE YOU ALLOCATED THE FUND'S ASSETS?
As of December 31, 1995, 59% of our holdings were invested in Japan and
21% was invested in the United Kingdom. Approximately one-third of our
currency exposure in both countries was hedged with U.S. dollars. Holdings
in Germany and France accounted for approximately 7% of the portfolio. The
remainder was invested in Australia, Singapore and Hong Kong.++
++ The composition of the Fund's holdings is subject to change. The Fund seeks
to outperform the EAFE Index by actively shifting exposure among countries.
International investing is subject to certain risk factors such as currency
exchange-rate volatility, possible political, social or economic instability,
foreign taxation and possible differences in auditing and other financial
standards.
International Equity Fund
[GRAPH APPEARS HERE]
Return on a $10,000 Investment
<TABLE>
<CAPTION>
Date A Shares* B Shares** I Shares EAFE Index
- - ---- --------- ---------- -------- ----------
<S> <C> <C> <C> <C>
03/06/95 9,551 9,500 10,000
03/31/95 9,847 9,800 10,310 10,000
06/30/95 9,616 9,552 10,090 10,080
09/30/95 10,397 10,351 10,925 10,508
12/31/95 10,999 10,952 11,562 10,942
</TABLE>
<TABLE>
<CAPTION>
International Equity Fund Performance
Aggregate Total Return
-------------------------------------
Since
Inception
(3/3/95)
-------------------------------------
<S> <C>
12/31/95
A Shares* 9.99%
B Shares** 9.52%
I Shares 15.62%
</TABLE>
The performance of the Prairie International Equity Fund is measured against
the EAFE Index, an unmanaged index generally representative of the entire range
of stocks available to investors in each local market. The index does
not reflect the deduction of expenses associated with a mutual fund, such as
investment management and fund accounting fees. However, the Fund's performance
reflects the deduction of fees for these value-added services. Past performance
is not predictive of future results. The investment return and NAV will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
* Reflects 4.50% Sales Charge
** Reflects 5.00% Contingent Deferred Sales Charge
13
<PAGE>
BOND FUNDS
INTERMEDIATE BOND FUND AND BOND FUND
An interview with ANNETTE COLE Portfolio Manager
Q. HOW DID THE INTERMEDIATE BOND AND BOND FUNDS PERFORM IN 1995?
Very well. For the 12 months ended December 31, 1995, the Intermediate
Bond Fund beat its industry benchmark with a total return of 17.19% (A
Shares)+ versus 14.43% for the Lehman Brothers Intermediate
Government/Corporate Bond Index. The Bond Fund, which began operations on
February 10, 1995, produced a total return of 18.22% (A Shares)+ since
inception, beating the Lehman Brothers Corporate Bond Index, which had a
total return of 16.35% over the same time period.
Q. WAS THERE ANY ONE REASON FOR YOUR FUNDS' STRONG PERFORMANCE?
We made the right moves at the right time. Throughout the year, as rates
rose and fell, we adjusted the duration of the portfolios (a measure of
their sensitivity to changes in interest rates), capitalizing on
opportunities to capture appreciation as interest rates fell and moving to
a more defensive position as interest rates rose. The Funds were also
overweighted in two sectors of the market that did particularly well
during the year--banking and asset-backed securities.
Q. HOW ABOUT OTHER MARKET SECTORS? DID YOU MAKE ANY MAJOR CHANGES IN
ALLOCATION DURING THE YEAR?
In an effort to track more closely with industry averages, we increased
our positions in corporate securities in both Funds during the year.
Corporate bonds were relatively expensive at the start of the period and
became more expensive as the year progressed, so we added to our holdings
only when the added yield was high enough to compensate for their added
risk. As a result, these bonds made a solid contribution to the
performance of both Funds.++
Q. WILL 1996 BE AS GOOD A YEAR AS 1995 FOR THE BOND MARKET?
We think it's unlikely. Right now, we're watching commodity and gold
prices very closely for evidence of inflationary pressures. We're not
convinced that the economy is slowing quite as much or as quickly as most
investors think. We're
+ With the maximum sales charge of 3.00%, A Shares of the Intermediate Bond
Fund returned 13.61% for the 12 months ended December 31, 1995. With the
maximum sales charge of 4.50%, A Shares of the Bond Fund returned 12.91%
from February 10, 1995, through December 31, 1995.
++ The composition of the Funds' holdings is subject to change.
14
<PAGE>
also worried about the situation in Washington--endless wrangling over the
budget can only erode confidence in our financial markets. Finally, we're
concerned about the shape of the domestic yield curve--currently, longer-
term securities are not paying investors a premium over short-term
securities. There is little incentive for investors to be in anything
other than shorter-term securities at the moment.
Q. WHERE DO YOU SEE INTEREST RATES GOING?
Clearly, investors believe that the Federal Reserve Board is poised to cut
short-term rates once again and have priced the cut into the market. As a
result, at this point, the risks of extending maturities outweigh the
potential rewards. Our forecast calls for short-term rates to fall and
long-term rates to rise later in the year. Therefore, at the end of 1996,
the rewards for extending maturities are expected to be much greater.
Q.GIVEN YOUR OUTLOOK, HOW ARE YOU POSITIONING THE PORTFOLIOS?
We're approaching the markets very cautiously. By the first quarter of
1996, we expect the Funds to hold 8% to 10% of their assets in short-term
securities. Our target figure will move higher if we see a clear
indication of increased inflationary pressures such as a dramatic increase
in the price of commodities, gold or energy.
Q.WHAT'S THE AVERAGE MATURITY OF THE FUNDS' HOLDINGS?
As of December 31, 1995, the average portfolio maturity was 10.4 years for
the Bond Fund and 6.5 years for the Intermediate Bond Fund. The average
credit quality of portfolio holdings was AAA for the Intermediate Bond
Fund and AA2 for the Bond Fund.
15
<PAGE>
Intermediate Bond Fund
[GRAPH APPEARS HERE]
Return on a $10,000 Investment
<TABLE>
<CAPTION>
Lehman Intermediate
Government/Corporate
Date A Shares* Bond Index
- - ---- --------- ----------
<S> <C> <C>
03/05/93 9,698
03/31/93 9,664 10,000
06/30/93 9,845 10,197
09/30/93 10,045 10,412
12/31/93 10,063 10,428
03/31/94 9,921 10,235
06/30/94 9,880 10,178
09/30/94 9,945 10,255
12/31/94 9,968 10,246
03/31/95 10,420 10,672
06/30/95 10,999 11,172
09/30/95 11,202 11,344
12/31/95 11,682 11,724
</TABLE>
<TABLE>
<CAPTION>
Intermediate Bond Fund Performance
Average Annual Total Return
- - --------------------------------------------------------------------------------
Inception Since
Date 1 Year Inception
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
12/31/95
A Shares* 3/5/93 13.61% 5.65%
B Shares** 5/31/95 NA 1.41%
I Shares 3/5/93 17.53% 6.91%
</TABLE>
The performance of the Prairie Intermediate Bond Fund is measured against the
Lehman Brothers Intermediate Government/Corporate Bond Index, an unmanaged
broad-based index representative of the bond market as a whole. The index does
not reflect the deduction of expenses associated with a mutual fund, such as
investment management and fund accounting fees. However, the Fund's performance
reflects the deduction of fees for these value-added services. Past performance
is not predictive of future results. The investment return and NAV will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
This chart reflects the performance of Class A shares, which have been offered
since 3/5/93. Please refer to the box above for returns on Class B and I shares.
* Reflects 3.00% Sales Charge
** Reflects 5.00% Contingent Deferred Sales Charge
16
<PAGE>
Bond Fund
[GRAPH APPEARS HERE]
Return on a $10,000 Investment
<TABLE>
<CAPTION>
Lehman Corporate
Date A Shares* B Shares** I Shares Bond Index
- - ---- --------- ---------- -------- ----------------
<S> <C> <C> <C> <C>
02/16/95 9,551 9,500 10,000
02/28/95 9,752 9,707 10,211 10,000
03/31/95 9,811 9,761 10,275 10,082
06/30/95 10,480 10,451 10,992 10,832
09/30/95 10,716 10,667 11,241 11,087
12/31/95 11,291 11,241 11,857 11,635
</TABLE>
<TABLE>
<CAPTION>
Bond Fund Performance
Aggregate Total Return
------------------------------
Since
Inception
(2/10/95)
------------------------------
<S> <C>
12/31/95
A Shares* 12.91%
B Shares** 12.41%
I Shares 18.57%
</TABLE>
The performance of the Prairie Bond Fund is measured against the Lehman Brothers
Corporate Bond Index, an unmanaged broad-based index representative of
investment-grade debt corporate bonds. The index does not reflect the deduction
of expenses associated with a mutual fund, such as investment management and
fund accounting fees. However, the Fund's performance reflects the deduction of
fees for these value-added services. Past performance is not predictive of
future results. The investment return and NAV will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than the original
cost.
* Reflects 4.50% Sales Charge
** Reflects 5.00% Contingent Deferred Sales Charge
17
<PAGE>
BOND FUNDS
INTERNATIONAL BOND FUND
An interview with CLAUDE ERB Portfolio Manager
Q. HOW DID THE INTERNATIONAL BOND FUND PERFORM IN 1995?
We did extremely well. For its 11 months of operation since January 27,
1995, the Fund had a total return of 21.10% (A Shares),+ outperforming our
industry benchmark, the Salomon Brothers Non-U.S. Government Bond Index,
which returned 16.98% for the period. We are extremely pleased with
results.
Q. WHAT ACCOUNTED FOR YOUR SUCCESS?
Very simply, smart currency hedging. We took advantage of the gross
overvaluation of the Japanese yen. As the dollar bottomed and the yen
began to take a hit, the Fund was positioned to benefit--and it has. We
expect to see the dollar strengthen in the coming year, so the environment
still presents us with opportunity.
Q. DURING 1995, WHICH MARKETS DID YOU EMPHASIZE AND WHY?
Basically, we had exposure to the major bond markets, such as Japan,
Germany, the United Kingdom and Canada. Our good performance was due to
selective currency and maturity decisions.++
Q.WHAT, SPECIFICALLY, DO YOU SEE AS OPPORTUNITIES IN THE YEAR AHEAD?
Without doubt, the most compelling non-U.S. bond market is Canada. We plan
to take advantage of this view soon.
+ With the maximum sales charge of 4.50%, A Shares of the International Bond
Fund returned 15.66% for the same period.
++ The composition of the Fund's holdings is subject to change.
International investing is subject to certain risk factors such as currency
exchange-rate volatility, possible political, social or economic instability,
foreign taxation and possible differences in auditing and other financial
standards.
18
<PAGE>
International Bond Fund
[GRAPH APPEARS HERE]
Return on a $10,000 Investment
<TABLE>
<CAPTION>
Salomon Non-U.S.
Date A Shares* B Shares** I Shares Government Index
- - ---- --------- ---------- -------- ----------------
<S> <C> <C> <C> <C>
12/31/94 10,000
01/27/95 9,551 9,500 10,000
01/31/95 10,218
03/31/95 10,705 10,647 11,213 11,443
06/30/95 11,110 11,115 11,706 12,003
09/30/95 11,270 11,266 11,886 11,711
12/31/95 11,566 11,549 12,213 11,953
</TABLE>
<TABLE>
<CAPTION>
International Bond Fund Performance
Aggregate Total Return
-----------------------------------
Since
Inception
(1/27/95)
-----------------------------------
<S> <C>
12/31/95
A Shares* 15.66%
B Shares** 15.49%
I Shares 22.13%
</TABLE>
The performance of the Prairie International Bond Fund is measured against the
Salomon Brothers Non-U.S. Government Bond Index, an unmanaged index generally
representative of the world government bond markets. The index does not reflect
the deduction of expenses associated with a mutual fund, such as investment
management and fund accounting fees. However, the Fund's performance reflects
the deduction of fees for these value-added services. Past performance is not
predictive of future results. The investment return and NAV will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than the
original cost.
* Reflects 4.50% Sales Charge
** Reflects 5.00% Contingent Deferred Sales Charge
19
<PAGE>
MUNICIPAL BOND FUNDS
INTERMEDIATE MUNICIPAL BOND FUND AND MUNICIPAL BOND FUND
An interview with JOHN ERICKSON Portfolio Manager
Q. HOW DID THE FUNDS PERFORM DURING THE YEAR ENDED DECEMBER 31, 1995?
Very well. For the one-year period ended December 31, 1995, the Municipal
Bond Fund's total return was 16.89% (A Shares),+ versus a gain of 15.98%
for the A. H. Williams Broad Market Municipal Index, our benchmark.
Similarly, the Intermediate Municipal Bond Fund ran neck and neck with its
index. For the same period, its total return was 12.55% (A Shares)+ versus
12.49% for the A. H. Williams Intermediate Municipal Index.
Q. WAS THERE ANY ONE REASON THAT THE FUNDS DID SO WELL?
Security selection. 1995 was a volatile year in the municipal markets. As
the economy weakened and inflationary fears eased, investors regained
confidence, which put upward pressure on the market. At the same time, the
specter of tax reform hung over our heads for most of the year--which
exerted downward pressure. Investor sentiment seemed to shift in response
to whichever topic the media focused on. In such an uncertain environment,
the quality of the portfolio's holdings was key. At period's end, the
average quality of the securities in the portfolios was Aa.
Q. WHAT IMPACT DID THE BUDGET SITUATION IN WASHINGTON HAVE ON THE MARKET?
It was a wild card. Meaningful progress on the deficit would have a very
positive effect--and that's what investors thought they would get. But so
far, no budget agreement has materialized. Now we're seeing the other side
of the equation--there's a consensus growing that there may not be an
agreement or significant progress anytime soon.
Q. WHAT ABOUT THE POSSIBILITY OF A FLAT TAX?
The possibility of such a change was positive for the taxable bond markets
in 1995, while the yield from municipals was at a historic high versus
Treasury securities throughout much of the year. Whether the possibility
of a true flat tax will ever become a reality seems unlikely at the
moment. Such a revolutionary change would demand a consensus of opinion,
which is in short supply in Washington these days.
+ With the maximum sales charge of 4.50%, A Shares of the Municipal Bond Fund
returned 11.67% for the one-year period. With the maximum sales charge of
3.00%, A Shares of the Intermediate Municipal Bond Fund returned 9.21% for
the same period.
20
<PAGE>
Q. WHAT'S YOUR OUTLOOK FOR THE MUNI MARKETS IN THE MONTHS AHEAD?
We're not wildly optimistic. We expect to see long-term rates increase
while short-term and intermediate-term rates remain constant. Right now,
little yield can be picked up by extending out the yield curve past five
years.
Q. WITH THIS IN MIND, HOW ARE YOU POSITIONING THE PORTFOLIOS?
Defensively. Given the environment, it makes little sense for income-
oriented fixed-income investors to be in long-term securities. As a
result, in recent weeks, we've been unwinding our long-term bond positions
and increasing our holdings of short-term securities.++
Q. WHAT'S THE AVERAGE MATURITY OF THE FUNDS' HOLDINGS NOW?
As of December 31, 1995, the average portfolio maturity was 7.4 years for
the Intermediate Municipal Bond Fund and 13.5 years for the Municipal Bond
Fund. However, we expect to see these numbers fall in the months ahead as
we increase our short-term holdings.
++ The composition of the Funds' holdings is subject to change.
Intermediate Municipal Bond Fund
[GRAPH APPEARS HERE]
Return on a $10,000 Investment
<TABLE>
<CAPTION>
A. H. Williams
Intermediate
Date A Shares* Municipal Index
- - ---- --------- ---------------
<S> <C> <C>
03/01/88 9,704 10,000
02/28/89 10,365
02/28/90 11,298 10,308
02/28/91 12,422 11,292
02/29/92 13,637 12,245
02/28/93 15,172 13,731
02/28/94 15,935 14,309
02/28/95 16,196 14,731
12/31/95 17,586 15,942
</TABLE>
<TABLE>
<CAPTION>
Intermediate Municipal Bond Fund Performance
Average Annual Total Return
- - --------------------------------------------------------------------------------
Inception Since
Date 1 Year 5 Year Inception
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/95
A Shares* 3/1/88 9.21% 7.08% 7.46%
B Shares** 1/30/95 NA NA 6.22%
I Shares*** 1/30/95 NA NA 11.33%
</TABLE>
The performance of the Prairie Intermediate Municipal Bond Fund is measured
against the A.H. Williams Intermediate Municipal Index, an unmanaged index
generally representative of the intermediate investment-grade tax-exempt bond
market. The index does not reflect the deduction of expenses associated with a
mutual fund, such as investment management and fund accounting fees. However,
the Fund's performance reflects the deduction of fees for these value-added
services. Past performance is not predictive of future results. The investment
return and NAV will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than the original cost.
This chart reflects the performance of Class A shares, which have been offered
since 3/1/88. Please refer to the box above for returns on Class B and I shares.
Although the A.H. Williams Index started after the inception of the Fund, the
index is an appropriate measure of performance because the investments tracked
by the index are similar to those in the Fund.
* Reflects 3.00% Sales Charge
** Reflects 5.00% Contingent Deferred Sales Charge
*** Aggregate Total Return
21
<PAGE>
Municipal Bond Fund
[GRAPH APPEARS HERE]
Return on a $10,000 Investment
<TABLE>
<CAPTION>
A. H. Williams Broad
Date A Shares* Market Municipal Index
- - ---- --------- ----------------------
<S> <C> <C>
03/01/88 9,552 10,000
02/28/89 10,204
02/28/90 11,160 10,284
02/28/91 12,290 11,279
02/29/92 13,580 12,418
02/28/93 15,529 14,274
02/28/94 16,103 15,004
02/28/95 16,846 15,387
12/31/95 18,692 16,897
</TABLE>
<TABLE>
<CAPTION>
Municipal Bond Fund Performance
Average Annual Total Return
- - --------------------------------------------------------------------------------
Inception Since
Date 1 Year 5 Year Inception
- - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/31/95
A Shares* 3/1/88 11.67% 8.21% 8.30%
B Shares** 4/4/95 NA NA 3.81%
I Shares*** 2/1/95 NA NA 14.20%
</TABLE>
The performance of the Prairie Municipal Bond Fund is measured against
the A.H. Williams Broad Market Municipal Index, an unmanaged index generally
representative of the broad investment-grade, tax-exempt bond market. The
index does not reflect the deduction of expenses associated with a mutual fund,
such as investment management and fund accounting fees. However, the Fund's
performance reflects the deduction of fees for these value-added services. Past
performance is not predictive of future results. The investment return and NAV
will fluctuate, so that an investor's shares, when redeemed, may be worth more
or less than the original cost.
Although the A.H. Williams Index started after the inception of the Fund, the
index is an appropriate measure of performance because the investments tracked
by the index are similar to those in the fund.
This chart reflects the performance of Class A shares, which have been offered
since 3/1/88. Please refer to the box above for returns on Class B and I
shares.
* Reflects 4.50% Sales Charge
** Reflects 5.00% Contingent Deferred Sales Charge
*** Aggregate Total Return
22
<PAGE>
MONEY MARKET FUNDS
MONEY MARKET FUND U.S. GOVERNMENT MONEY MARKET FUND MUNICIPAL MONEY MARKET
FUND
CURRENT SEVEN-DAY YIELDS
AS OF DECEMBER 31, 1995*
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRAIRIE PRAIRIE
CLASS A CLASS B
SHARES SHARES
- - --------------------------------------------------------------------------------
<S> <C> <C>
Money Market Fund............................................... 5.03% 4.29%
U.S. Government Money Market Fund............................... 4.63% --
Municipal Money Market Fund..................................... 3.85% --
- - --------------------------------------------------------------------------------
</TABLE>
* An investment in the Funds is neither insured nor guaranteed by the U.S.
Government. Yields will fluctuate, and there can be no assurance that the
Fund will be able to maintain a stable NAV of $1.00 per share.
Performance quoted reflects the reimbursement of a portion of the advisory
and/or administration fees. Had these reimbursements not been in effect, the
performance would have been lower and the 7-day yields would have been: Money
Market Fund A, 4.78%; Money Market Fund B, 3.58%; U.S. Government Money
Market Fund, 4.50%; and Municipal Money Market Fund, 3.62%.
23
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS INCOME FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS--25.7%
AUTOMOBILES--LEASING--0.9%
Hertz Corp., Junior Subordinate Note.... 6.63% 7/15/00 $ 500 $ 511,596
-----------
BANKING--2.4%
Citicorp, Subordinate Capital Note...... 9.75% 8/1/99 250 281,881
Citicorp, Subordinate Debenture......... 8.63% 12/1/02 350 399,187
NationsBank Corp., Subordinate
Debenture............................. 8.13% 6/15/02 350 386,750
Westpac Banking Limited, Subordinate
Debenture............................. 9.13% 8/15/01 250 285,192
-----------
1,353,010
-----------
BEVERAGES, FOOD AND TOBACCO--4.8%
Grand Metro Investment Corp., Guaranteed
Debenture, Yankee Bond................ 9.00% 8/15/11 250 309,616
Philip Morris Cos., Inc., Corporate
Note.................................. 8.63% 3/1/99 500 539,361
Philip Morris Cos., Inc., Corporate
Note.................................. 7.13% 10/1/04 250 264,357
RJR Nabisco, Inc. ...................... 8.30% 4/15/99 750 799,769
RJR Nabisco, Inc. ...................... 8.63% 12/1/02 700 727,012
-----------
2,640,115
-----------
CONSUMER GOODS AND SERVICES--1.0%
Time Warner, Inc., Corporate Note....... 7.95% 2/1/00 500 528,668
-----------
ENERGY--3.1%
Burlington Resources, Inc., Corporate
Note.................................. 8.50% 10/1/01 250 279,853
Coastal Corp., Senior Debenture......... 10.25% 10/15/04 500 623,257
Occidental Petroleum Corp., Senior Note. 11.13% 8/1/10 400 558,388
Shell Canada Limited, Corporate Note.... 7.38% 6/1/99 250 263,587
-----------
1,725,085
-----------
FINANCIAL SERVICES--9.2%
Barclay American Corp., Senior
Debenture............................. 9.13% 12/1/97 750 796,317
Chemical Banking Corp., Subordinate
Note.................................. 7.63% 1/15/03 500 542,021
Discover Credit Corp., Medium Term Note. 8.37% 4/28/99 250 268,483
General Motors Acceptance Corp.,
Corporate Note........................ 7.75% 4/15/97 250 254,756
General Motors Acceptance Corp.,
Corporate Note........................ 7.00% 3/1/00 500 520,157
</TABLE>
See Notes to Financial Statements.
24
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS INCOME FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
FINANCIAL SERVICES (CONTINUED)
General Motors Acceptance Corp.,
Medium Term Note...................... 8.65% 5/29/96 $ 400 $ 405,094
International Lease Finance,
Corporate Note........................ 8.35% 10/1/98 500 533,594
KFW International Finance, Inc.
Guaranteed Note....................... 8.85% 6/15/99 250 274,728
Progessive Corp., Ohio, Corporate Note.. 6.60% 1/15/04 500 509,013
Salomon Inc., Senior Note............... 7.50% 2/1/03 500 514,213
Wells Fargo & Co., Subordinate Note..... 8.38% 5/15/02 400 447,822
-----------
5,066,198
-----------
HEATH CARE AND HOSPITAL MANAGEMENT--0.5%
Multicare Cos., Inc.,
Subordinate Debenture*................ 7.00% 3/15/03 250 271,250
-----------
RETAIL--0.5%
May Department Stores Co.,
Medium Term Note...................... 9.45% 2/2/99 250 275,701
-----------
STEEL--0.9%
USX-Marathon Group, Corporate Note...... 6.38% 7/15/98 500 505,561
-----------
TECHNOLOGY INDUSTRIES--1.0%
Digital Equipment Corp., Debenture...... 8.63% 11/1/12 500 547,116
-----------
UTILITIES--1.4%
Commonwealth Edison Co., First Mortgage,
Series 81, Corporate Note............. 8.63% 2/1/22 250 275,250
Pacific Bell, Corporate Note............ 7.00% 7/15/04 500 525,940
-----------
801,190
-----------
TOTAL CORPORATE OBLIGATIONS
(COST $13,587,940)..................... 14,225,490
-----------
U.S. GOVERNMENT OBLIGATIONS--3.7%
U.S. Treasury Notes..................... 8.50% 5/15/97 100 104,344
U.S. Treasury Notes..................... 8.13% 2/15/98 500 528,750
U.S. Treasury Notes..................... 6.25% 5/31/00 850 879,218
U.S. Treasury Notes..................... 8.00% 5/15/01 500 560,000
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $1,960,714)...................... 2,072,312
-----------
</TABLE>
See Notes to Financial Statements.
25
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS INCOME FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS--1.7%
Federal National
Mortgage Association.. 7.60% 1/10/97 $ 400 $ 409,250
Federal National
Mortgage Association.. 8.35% 11/10/99 500 547,694
----------
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS
(COST $900,628)........ 956,944
----------
<CAPTION>
Shares
------
<S> <C> <C> <C> <C>
PREFERRED CONVERTIBLE
STOCKS--7.0%
AUTOMOBILES--3.1%
Ford Motor Co., Series
A, $4.20.............. 9,000 852,750
General Motors Corp.,
Series C, $3.25....... 12,000 879,000
----------
1,731,750
----------
BANKING AND FINANCE--3.9%
Citicorp, Series 13,
$5.38................. 6,000 1,098,750
First USA, Inc., 6.25%.. 15,000 592,500
National City Corp.,
8.00%................. 6,000 472,500
----------
2,163,750
----------
TOTAL PREFERRED
CONVERTIBLE STOCKS
(COST $2,643,539)...... 3,895,500
----------
COMMON STOCKS--41.9%
AUTOMOBILES--1.7%
Ford Motor Co. ......... 4,000 116,000
General Motors Corp..... 14,886 787,097
----------
903,097
----------
BANKING AND FINANCE--5.1%
Bank of Boston Corp. ... 21,000 971,250
First Union Corp. ...... 11,000 611,875
NationsBank Corp. ...... 13,912 968,623
Citicorp................ 4,280 287,830
----------
2,839,578
----------
BEVERAGE, FOOD AND
TOBACCO--3.3%
Philip Morris Cos.,
Inc. ................. 20,000 1,810,000
----------
</TABLE>
See Notes to Financial Statements.
26
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS INCOME FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
ELECTRICAL AND ELECTRONIC EQUIPMENT--0.6%
Hubbell, Inc., Class B.......................... 5,000 $ 328,750
-----------
HEALTH INDUSTRIES--3.6%
National Health Investors, Inc. ................ 61,000 2,020,625
-----------
INSURANCE--3.1%
AON Corp. ...................................... 28,500 1,421,438
Exel, Ltd. ..................................... 5,200 317,200
-----------
1,738,638
-----------
OIL & GAS--3.9%
Atlantic Richfield Co. ......................... 5,000 553,750
British Petroleum PLC ADR....................... 9,000 919,125
Texaco, Inc. ................................... 9,000 706,500
-----------
2,179,375
-----------
PHARMACEUTICALS--5.8%
Bristol Myers Squibb Co. ....................... 8,000 687,000
Johnson & Johnson............................... 8,000 685,000
Pfizer, Inc. ................................... 20,000 1,260,000
Warner Lambert Co. ............................. 6,000 582,750
-----------
3,214,750
-----------
REAL ESTATE INVESTMENT TRUSTS--2.0%
Amli Residential Property Trust................. 55,000 1,100,000
-----------
TELECOMMUNICATIONS--6.0%
Brittish Telecom PLC ADR........................ 10,000 565,000
GTE Corp. ...................................... 26,000 1,144,000
Sprint Corp. ................................... 20,000 797,500
US West, Inc. .................................. 15,000 536,250
US West Media Group............................. 15,000 285,000
-----------
3,327,750
-----------
UTILITIES--6.8%
Detroit Edison Co. ............................. 20,000 690,000
Entergy Corp. .................................. 20,000 585,000
Peco Energy Co. ................................ 25,000 753,125
</TABLE>
See Notes to Financial Statements.
27
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS INCOME FUND
- - -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
UTILITIES (CONTINUED)
Texas Utilities Co. ................... 30,000 $ 1,233,750
United Illuminating Co. ............... 14,000 523,250
-----------
3,785,125
-----------
TOTAL COMMON STOCKS
(COST $17,046,251).................... 23,247,688
-----------
<CAPTION>
Principal
Maturity Amount
Rate Date (000)
---- -------- ---------
<S> <C> <C> <C> <C>
SHORT TERM INVESTMENT--19.2%
U.S. TREASURY BILL--19.2%
U.S. Treasury Bill (cost $10,607,930).. 5.31%** 2/29/96 $10,700 10,617,075
-----------
TOTAL INVESTMENTS--99.2%
(COST $46,747,002)(A)................. 55,015,009
Other assets in excess of liabilities--
0.8%.................................. 450,318
-----------
NET ASSETS--100.0%...................... $55,465,327
===========
</TABLE>
- - -----------
Percentages indicated are based on net assets of $55,465,327.
* Security 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.
** Yield at purchase.
(a) Represents cost for federal income tax and financial reporting purposes
and differs from value by net unrealized appreciation of securities as
follows:
<TABLE>
<S> <C>
Unrealized appreciation......................................... $8,452,650
Unrealized depreciation......................................... (184,643)
----------
Net unrealized appreciation..................................... $8,268,007
==========
</TABLE>
ADR--American Depository Receipts.
See Notes to Financial Statements.
28
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
COMMON STOCKS--61.4%
ALUMINUM--1.1%
Aluminum Co. of America...................... 1,900 $ 100,462
----------
AUTOMOBILES--0.9%
Ford Motor Co................................ 3,000 87,000
----------
AUTOMOTIVE PARTS & EQUIPMENT--0.9%
Echlin, Inc.................................. 2,400 87,600
----------
BANKING--3.7%
BankAmerica Corp............................. 1,900 123,025
NationsBank Corp............................. 1,700 118,363
State Street Bank(b)......................... 2,600 117,000
----------
358,388
----------
BEVERAGE, FOOD & TOBACCO--4.5%
Anheuser-Busch Cos., Inc..................... 1,200 80,250
Coca-Cola Co................................. 1,600 118,800
PepsiCo, Inc................................. 2,000 111,750
Philip Morris Cos., Inc...................... 1,300 117,650
----------
428,450
----------
BROKERAGE SERVICES--0.7%
Dean Witter, Discover & Co................... 1,400 65,800
----------
BUSINESS & DATA PROCESSING EQUIPMENT--1.6%
International Business Machines.............. 1,700 155,975
----------
CHEMICALS--3.6%
E. I. du Pont de Nemours & Co................ 1,100 76,863
Monsanto Co.................................. 700 85,750
Morton Int'l................................. 2,900 104,037
Praxair, Inc................................. 2,300 77,337
----------
343,987
----------
COMPUTERS-MICRO--0.9%
Compaq Computer Corp.(b)..................... 1,700 81,600
----------
COMPUTERS-SOFTWARE & PERIPHERALS--2.1%
Computer Association Int'l., Inc. ........... 1,550 88,156
Microsoft Corp.(b)........................... 1,300 114,075
----------
202,231
----------
</TABLE>
See Notes to Financial Statements.
29
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
CONGLOMERATES--3.4%
Allied Signal, Inc........................... 1,700 $ 80,750
General Electric Co.......................... 2,500 180,000
ITT Corp..................................... 900 47,700
ITT Industries, Inc.(b)...................... 900 21,600
----------
330,050
----------
CONSUMER GOODS--1.0%
Service Corp. International.................. 2,100 92,400
----------
ELECTRONIC EQUIPMENT--2.7%
Emerson Electric Co.......................... 2,000 163,500
Motorola, Inc................................ 1,700 96,900
----------
260,400
----------
FINANCE COMPANIES--1.1%
Federal Home Loan Mortgage Corp.............. 1,300 108,550
----------
FOOD PROCESSING--0.9%
CPC Int. .................................... 1,300 89,212
----------
FOOD PRODUCTS--0.8%
Hershey Foods................................ 1,200 78,000
----------
HOUSEHOLD & PERSONAL CARE PRODUCTS--1.2%
Procter & Gamble Co. ........................ 1,400 116,200
----------
INSURANCE--1.9%
American International Group, Inc. .......... 1,500 138,750
ITT Hartford Group(b)........................ 900 43,538
----------
182,288
----------
LEISURE & ENTERTAINMENT--1.1%
Walt Disney Co............................... 1,800 106,200
----------
NEWSPAPERS AND PUBLISHING--0.7%
News Corp., Ltd. ADR......................... 3,300 70,538
----------
OIL-DOMESTIC--3.9%
Chevron Corp................................. 2,300 120,750
Mobil Corp................................... 1,200 134,400
Unocal Corp.................................. 4,100 119,413
----------
374,563
----------
</TABLE>
See Notes to Financial Statements.
30
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
OIL-FIELD SERVICES AND EQUIPMENT--0.9%
Schlumberger, Ltd. ........................... 1,200 $ 83,100
----------
OIL & GAS--2.0%
British Petroleum Co. ADR..................... 900 91,913
Royal Dutch Petroleum Co...................... 700 98,788
----------
190,701
----------
PHARMACEUTICALS--5.5%
Bristol Myers Squibb Co....................... 1,200 103,050
Johnson & Johnson............................. 1,500 128,437
Merck & Co., Inc.............................. 1,800 118,350
Pfizer, Inc................................... 1,600 100,800
Smithkline Beecham ADR........................ 1,300 72,150
----------
522,787
----------
POLLUTION CONTROL--0.9%
WMX Technologies.............................. 3,000 89,625
----------
RAILROADS--1.1%
CSX Corp...................................... 2,400 109,500
----------
RESTAURANTS--0.8%
McDonald's Corp............................... 1,600 72,200
----------
RETAIL--3.1%
Home Depot, Inc............................... 2,400 114,900
May Department Stores Co...................... 1,500 63,375
Wal Mart Stores, Inc.......................... 5,400 120,825
----------
299,100
----------
TELECOMMUNICATIONS--6.9%
AT&T Corp..................................... 2,100 135,974
General Instrument Corp.(b)................... 1,300 30,388
GTE Corp...................................... 3,800 167,200
MCI Communications Corp....................... 2,800 73,150
NYNEX Corp.................................... 2,100 113,400
Pacific Telesis Group......................... 1,800 60,525
Telcom Corp. New Zealand ADR.................. 1,200 83,250
----------
663,887
----------
</TABLE>
See Notes to Financial Statements.
31
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
UTILITIES--1.5%
FPL Group, Inc.......................... 3,200 $ 148,400
----------
TOTAL COMMON STOCKS
(COST $5,270,362)...................... 5,899,194
----------
<CAPTION>
Principal
Maturity Amount
Rate Date (000)
----- -------- ---------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--26.0%
U.S. TREASURY NOTES
U.S. Treasury Note...................... 6.25% 5/31/00 $ 800 827,500
U.S. Treasury Note...................... 7.50% 11/15/01 700 771,750
U.S. Treasury Note...................... 6.38% 8/15/02 850 893,296
----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $2,398,249)...................... 2,492,546
----------
SHORT TERM INVESTMENT--11.7%
U.S. TREASURY BILL
U.S. Treasury Bill (cost $1,120,308).... 5.31%* 2/29/96 1,130 1,121,243
----------
TOTAL INVESTMENTS
(COST $8,788,919)(A)--99.1% ........... 9,512,982
Other assets in excess of liabilities--
0.9%................................... 86,019
----------
NET ASSETS--100.0%....................... $9,599,001
==========
</TABLE>
- - -----------
Percentages indicated are based on net assets of $9,599,001.
*Yield at purchase.
(a)Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................... $766,286
Unrealized depreciation........................................... (42,223)
--------
Net unrealized appreciation....................................... $724,063
========
</TABLE>
(b)Represents non-income producing security.
ADR--American Depository Receipts.
See Notes to Financial Statements.
32
<PAGE>
PRAIRIE FUNDS
EQUITY INCOME FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
COMMON STOCKS--87.4%
AUTOMOBILES--1.4%
Ford Motor Co.............................. 140,000 $ 4,060,000
------------
AUTOMOTIVE PARTS & EQUIPMENT--1.7%
Echlin, Inc................................ 135,000 4,927,500
------------
BANKS--5.7%
Bankers Trust.............................. 115,000 7,647,500
First Union Corp. ......................... 90,000 5,006,250
NationsBank Corp........................... 55,000 3,829,375
------------
16,483,125
------------
BEVERAGES, FOOD & TOBACCO--2.8%
ConAgra, Inc............................... 81,418 3,358,492
Philip Morris Cos., Inc.................... 50,841 4,601,111
------------
7,959,603
------------
CHEMICALS--6.3%
ARCO Chemical.............................. 106,000 5,154,250
Dow Chemical............................... 93,000 6,544,875
E. I. du Pont de Nemours & Co.............. 90,000 6,288,750
------------
17,987,875
------------
COMPUTER SOFTWARE AND PERIPHERALS--1.3%
International Business Machines............ 40,000 3,670,000
------------
CONSTRUCTION--0.5%
Vulcan Materials........................... 23,000 1,325,375
------------
CONSUMER PRODUCTS--3.8%
Clorox Co. ................................ 100,000 7,162,500
Southern Co. .............................. 150,000 3,693,750
------------
10,856,250
------------
DEFENSE--1.7%
Lockheed Martin............................ 60,000 4,740,000
------------
ELECTRICAL EQUIPMENT--2.2%
Emerson Electric Co. ...................... 48,000 3,924,000
Hubbell, Inc., Class B..................... 20,000 1,315,000
Thomas & Betts Corp. ...................... 15,000 1,106,250
------------
6,345,250
------------
</TABLE>
See Notes to Financial Statements.
33
<PAGE>
PRAIRIE FUNDS
EQUITY INCOME FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
FOREST AND PAPER PRODUCTS--1.4%
Weyerhaeuser Co............................. 95,000 $ 4,108,750
------------
INSURANCE--5.8%
AON Corp. .................................. 137,000 6,832,875
FPL Group, Inc. ............................ 75,000 3,478,125
Lincoln National Corp. ..................... 120,000 6,450,000
------------
16,761,000
------------
METALS--1.0%
Phelps Dodge Corp. ......................... 45,000 2,801,250
------------
NATURAL GAS--3.0%
National Fuel Gas Co. ...................... 25,000 840,625
Sonat, Inc.................................. 40,000 1,425,000
Tenneco, Inc. .............................. 130,000 6,451,250
------------
8,716,875
------------
OIL & GAS--19.0%
AMOCO Corp.................................. 140,000 10,062,500
Atlantic Richfield Corp..................... 55,000 6,091,250
British Petroleum Co. PLC, ADR.............. 70,000 7,148,750
Exxon Corp.................................. 15,000 1,201,875
Mobil Corp.................................. 105,000 11,760,000
Occidental Petroleum Corp. ................. 195,000 4,168,125
Texaco, Inc................................. 125,000 9,812,500
Unocal Corp................................. 153,000 4,456,125
------------
54,701,125
------------
PHARMACEUTICALS--2.9%
Warner Lambert Co. ......................... 86,000 8,352,750
------------
REAL ESTATE INVESTMENT TRUSTS--3.8%
Amli Residential Properties Trust........... 140,000 2,800,000
Equity Residential Properties Trust ........ 80,000 2,450,000
National Health Investors, Inc. ............ 174,000 5,763,750
------------
11,013,750
------------
RETAIL STORES--2.3%
May Department Stores Co. .................. 156,938 6,630,631
------------
</TABLE>
See Notes to Financial Statements.
34
<PAGE>
PRAIRIE FUNDS
EQUITY INCOME FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
TELECOMMUNICATIONS--8.7%
British Telecom PLC ADR.................. 70,000 $ 3,955,000
GTE Corp. ............................... 210,000 9,240,000
Sprint Corp.............................. 156,938 6,257,903
U.S. West, Inc........................... 156,938 5,610,533
------------
25,063,436
------------
UTILITIES--12.1%
Cinergy Corp............................. 130,000 3,981,250
Detroit Edison Co. ...................... 196,173 6,767,969
Houston Industries....................... 260,000 6,305,000
Pacific Gas & Electric Co................ 54,928 1,558,582
Peco Energy Co. ......................... 129,769 3,909,291
Texas Utilities Co. ..................... 156,938 6,454,075
United Illuminating Co................... 156,938 5,865,558
------------
34,841,725
------------
TOTAL COMMON STOCKS
(COST $213,380,725)..................... 251,346,270
------------
CONVERTIBLE PREFERRED STOCKS--2.9%
AUTOMOBILES--2.2%
Ford Motor Company, Series A, $4.20...... 66,699 6,319,730
------------
STEEL--0.7%
WHX Corp., Series B, $3.00............... 45,694 1,941,995
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(COST $7,461,465)....................... 8,261,725
------------
<CAPTION>
Principal
Maturity Amount
Rate Date (000)
---- -------- ---------
<S> <C> <C> <C> <C>
CONVERTIBLE BOND--2.7%
BANKS--2.7%
Bank of New York, Inc.
Subordinate Convertible Debenture
(cost $4,984,156)...................... 7.50% 8/15/01 $ 3,139 7,816,110
------------
</TABLE>
See Notes to Financial Statements.
35
<PAGE>
PRAIRIE FUNDS
EQUITY INCOME FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENT--7.1%
TIME DEPOSIT--7.1%
Berlin/Frankfurt Bank
(cost $20,271,000).................... 5.81% 1/2/96 $20,271 $ 20,271,000
------------
TOTAL INVESTMENTS
(COST $246,097,346)(A)--100.1%......... 287,695,105
Liabilities in excess of other
assets--(0.1%)......................... (301,578)
------------
NET ASSETS--100.0%....................... $287,393,527
============
</TABLE>
- - -----------
Percentages indicated are based on net assets of $287,393,527.
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................ $42,227,078
Unrealized depreciation........................................ (629,319)
-----------
Net unrealized appreciation.................................... $41,597,759
===========
</TABLE>
ADR--American Depository Receipt.
See Notes to Financial Statements.
36
<PAGE>
PRAIRIE FUNDS
GROWTH FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
COMMON STOCKS--95.5%
ADVERTISING AND MARKETING SERVICES--1.3%
Interpublic Group of Companies, Inc. ........ 55,000 $ 2,385,625
Omnicon Group................................ 40,000 1,490,000
------------
3,875,625
------------
AUTOMOTIVE PARTS & EQUIPMENT--1.0%
Echlin, Inc. ................................ 80,000 2,920,000
------------
BANKING--1.5%
State Street Bank(b)......................... 100,000 4,500,000
------------
BEVERAGES, FOOD AND TOBACCO--16.0%
Coca Cola Co. ............................... 55,000 4,083,750
ConAgra, Inc. ............................... 110,000 4,537,500
General Mills, Inc. ......................... 140,000 8,085,000
Hershey Foods Corp. ......................... 60,000 3,900,000
Hudson Foods, Inc. Class A................... 90,000 1,552,500
PepsiCo, Inc. ............................... 130,000 7,263,750
Philip Morris Cos., Inc. .................... 140,000 12,670,000
Sara Lee Corp. .............................. 170,000 5,418,750
Schweitzer-Mauduit Int'l.(b)................. 8,000 185,000
------------
47,696,250
------------
CHEMICALS--5.9%
Eastman Chemical Co. ........................ 85,000 5,323,125
Morton Int'l ................................ 150,000 5,381,250
Praxair, Inc. ............................... 145,000 4,875,625
Wellman, Inc. ............................... 90,000 2,047,500
------------
17,627,500
------------
COMPUTERS--MICRO--0.7%
Compaq Computer Corp.(b)..................... 40,000 1,920,000
------------
COMPUTER SOFTWARE AND PERIPHERALS--5.2%
Automatic Data Processing, Inc. ............. 80,000 5,940,000
Computer Associates Int'l., Inc. ............ 100,000 5,687,500
Intel Corp. ................................. 70,000 3,972,500
------------
15,600,000
------------
</TABLE>
See Notes to Financial Statements.
37
<PAGE>
PRAIRIE FUNDS
GROWTH FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
CONSUMER GOODS AND SERVICES--10.4%
American Home Products Corp. ................ 70,000 $ 6,790,000
Clorox Co. .................................. 75,000 5,371,875
Hillenbrand Industries, Inc. ................ 100,000 3,387,500
Kimberly-Clark Corp. ........................ 80,000 6,620,000
Service Corp. Int'l. ........................ 115,000 5,060,000
Stewart Enterprises, Inc. ................... 105,000 3,885,000
------------
31,114,375
------------
CONSUMER NON-DURABLES--0.6%
Alberto-Culver Co., Class A.................. 55,000 1,677,500
------------
ELECTRONICS--9.5%
AMP, Inc. ................................... 120,000 4,605,000
Emerson Electric............................. 80,000 6,540,000
General Electric Co. ........................ 180,000 12,960,000
Motorola, Inc. .............................. 75,000 4,275,000
------------
28,380,000
------------
ENTERTAINMENT AND LEISURE--1.5%
Time Warner, Inc. ........................... 120,000 4,545,000
------------
HEALTH INDUSTRIES--3.9%
Horizon HealthCare Corp.(b).................. 145,000 3,661,250
Procter & Gamble Co. ........................ 95,000 7,885,000
------------
11,546,250
------------
INSURANCE--5.4%
American International Group, Inc. .......... 75,000 6,937,500
Chubb Corp. ................................. 65,000 6,288,750
General RE Corp. ............................ 20,000 3,100,000
------------
16,326,250
------------
MANUFACTURING--1.1%
Corning, Inc. ............................... 100,000 3,200,000
------------
MEDICAL CARE & PRODUCTS--0.7%
Sofamor Danek Group(b)....................... 80,000 2,270,000
------------
OIL & GAS--3.4%
British Petroleum Co. ADR.................... 70,000 7,148,750
Unocal Corp. ................................ 100,000 2,912,500
------------
10,061,250
------------
</TABLE>
See Notes to Financial Statements.
38
<PAGE>
PRAIRIE FUNDS
GROWTH FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
PHARMACEUTICALS--12.0%
Elan Corp. PLC ADR(b)......................... 90,000 $ 4,376,250
Forest Labs, Inc.(b).......................... 50,000 2,262,500
Ivax Corp. ................................... 100,000 2,850,000
Johnson & Johnson............................. 95,000 8,134,375
Mylan Labs.................................... 105,000 2,467,500
Pfizer, Inc. ................................. 160,000 10,080,000
Pharmacia & Upjohn(b)......................... 75,000 2,906,250
Smithkline Beecham ADR........................ 50,000 2,775,000
------------
35,851,875
------------
POLLUTION CONTROL--4.1%
Browning-Ferris............................... 185,000 5,457,500
WMX Technologies, Inc. ....................... 230,000 6,871,250
------------
12,328,750
------------
RETAIL--4.2%
Eckerd Corp.(b)............................... 110,000 4,908,750
May Department Stores Co. .................... 110,000 4,647,500
Walgreen Co.(b)............................... 100,000 2,987,500
------------
12,543,750
------------
TELECOMMUNICATIONS--6.5%
AT&T Corp. ................................... 140,000 9,065,000
Century Telephone Enterprises, Inc. .......... 50,000 1,587,500
DSC Communications Corp.(b)................... 40,000 1,475,000
MCI Communications Corp. ..................... 275,000 7,184,375
------------
19,311,875
------------
UTILITIES--0.6%
AES Corp.(b).................................. 80,000 1,910,000
------------
TOTAL COMMON STOCKS
(COST $239,473,384).......................... 285,206,250
------------
</TABLE>
See Notes to Financial Statements.
39
<PAGE>
PRAIRIE FUNDS
GROWTH FUND
- - -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENT--3.6%
TIME DEPOSIT--3.6%
Berlin/Frankfort Bank
(cost $10,663,000).................... 5.81% 1/2/96 $10,663 $ 10,663,000
------------
TOTAL INVESTMENTS
(COST $250,136,384)(A)--99.1%.......... 295,869,250
Other assets in excess of liabilities--
0.9%................................... 2,672,096
------------
NET ASSETS--100.0%....................... $298,541,346
============
</TABLE>
- - -----------
Percentages indicated are based on net assets of $298,541,346.
(a) Represents cost for financial reporting purposes. Cost for federal income
tax purposes was $250,657,238 and differs from value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................ $48,528,373
Unrealized depreciation........................................ (3,316,361)
-----------
Net unrealized appreciation.................................... $45,212,012
===========
</TABLE>
(b) Represents non-income producing security.
ADR--American Depository Receipts.
See Notes to Financial Statements.
40
<PAGE>
PRAIRIE FUNDS
SPECIAL OPPORTUNITIES FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
COMMON STOCKS--93.9%
ADVERTISING AND MARKETING SERVICES--1.3%
Interpublic Group of Companies, Inc. ......... 12,000 $ 520,500
Omnicon Group................................. 20,000 745,000
-----------
1,265,500
-----------
APPAREL--1.1%
Tommy Hilfiger Corp.(b)....................... 24,100 1,021,238
-----------
AUTOMOTIVE PARTS AND EQUIPMENT--3.0%
Borg Warner................................... 30,000 960,000
Simpson Industries............................ 70,000 630,000
Superior Industries Int'l, Inc. .............. 45,000 1,186,875
-----------
2,776,875
-----------
BANKS--13.0%
First of America.............................. 50,000 2,218,750
Firstar Corp.................................. 60,000 2,377,500
Northern Trust Corp. ......................... 50,000 2,800,000
Old Kent Financial............................ 60,000 2,467,500
Southern National............................. 60,000 1,575,000
Southtrust Corp. ............................. 30,000 768,750
-----------
12,207,500
-----------
BEVERAGES, FOOD AND TOBACCO--3.0%
Dean Foods Co. ............................... 35,000 962,500
Hudson Foods, Inc., Class A................... 110,000 1,897,500
-----------
2,860,000
-----------
BUSINESS EQUIPMENT AND SERVICES--1.1%
Proxima Corp.(b).............................. 45,000 995,625
-----------
CHEMICALS--2.0%
Airgas, Inc.(b)............................... 55,000 1,828,750
-----------
CONSUMER GOODS AND SERVICES--2.1%
Service Corp Int'l. .......................... 45,000 1,980,000
-----------
CONSUMER NON-DURABLES--1.8%
Alberto-Culver Co., Class A................... 55,000 1,677,500
-----------
</TABLE>
See Notes to Financial Statements.
41
<PAGE>
PRAIRIE FUNDS
SPECIAL OPPORTUNITIES FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
ELECTRONICS--1.9%
Memec Electric Materials, Inc.(b)............. 14,000 $ 456,750
Methode Electronics, Inc., Class A............ 37,500 534,375
Molex, Inc. .................................. 25,000 793,750
-----------
1,784,875
-----------
ENTERTAINMENT AND LEISURE--1.1%
Royal Caribbean Cruise Ltd. .................. 48,000 1,056,000
-----------
HEALTH CARE PRODUCTS AND SERVICES--14.4%
American Medical Response, Inc.(b)............ 55,000 1,787,500
Amerisource Health Corp., Class A(b).......... 60,000 1,980,000
Genesis Health Ventures, Inc.(b).............. 50,000 1,825,000
Healthcare & Retirement Corp.(b).............. 55,000 1,925,000
Horizon HealthCare Corp.(b)................... 95,000 2,398,750
Multicare Cos., Inc.(b)....................... 50,000 1,200,000
OEA, Inc...................................... 42,000 1,254,750
Summit Care Corp.(b).......................... 50,000 1,143,750
-----------
13,514,750
-----------
INSURANCE--13.6%
Ace Limited................................... 40,000 1,590,000
AMBAC, Inc.................................... 60,000 2,812,500
American Re Corp.............................. 50,000 2,043,750
Integon, Corp................................. 100,000 2,062,500
National Re Corp.............................. 60,000 2,280,000
Sphere Drake Holdings Ltd..................... 68,024 952,336
Western National Corp......................... 60,000 967,500
-----------
12,708,586
-----------
INVESTMENT MANAGEMENT--0.5%
Phoenix Duff & Phelps Corp.................... 62,471 429,488
-----------
MANUFACTURING--1.0%
Holophane(b).................................. 45,000 978,750
-----------
MEDICAL CARE AND PRODUCTS--4.8%
Rural/Metro(b)................................ 80,000 1,810,000
Sofamor Danek Group(b)........................ 95,000 2,695,625
-----------
4,505,625
-----------
</TABLE>
See Notes to Financial Statements.
42
<PAGE>
PRAIRIE FUNDS
SPECIAL OPPORTUNITIES FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
NATURAL GAS--0.4%
Swift Energy Co.(b)............................ 35,000 $ 420,000
-----------
OIL & GAS--3.5%
Noble Affiliates............................... 50,000 1,493,750
Smith Intl., Inc.(b)........................... 75,000 1,762,500
-----------
3,256,250
-----------
PHARMACEUTICALS--7.6%
A.L. Pharmaceuticals, Inc...................... 85,000 2,220,625
Elan Corp. PLC ADR(b).......................... 50,000 2,431,250
Ivax Corp. .................................... 85,000 2,422,500
-----------
7,074,375
-----------
POLLUTION CONTROL--0.7%
Waste Management PLC ADR(b).................... 65,000 698,750
-----------
RAILROAD EQUIPMENT--0.3%
Johnstown America Industries, Inc.(b).......... 60,000 300,000
-----------
REAL ESTATE DEVELOPMENT--1.8%
Stewart Enterprises, Inc., Class A ............ 45,000 1,665,000
-----------
RESTAURANTS--1.9%
IHOP Corp.(b).................................. 60,000 1,560,000
Starbucks Corp................................. 10,000 210,000
-----------
1,770,000
-----------
RETAIL AND WHOLESALE DISTRIBUTION--1.0%
Corporate Express, Inc.(b)..................... 30,000 903,750
-----------
RETAIL STORES--4.1%
Eckerd Corp.(b)................................ 55,000 2,454,375
Officemax, Inc................................. 60,193 1,346,818
-----------
3,801,193
-----------
TELECOMMUNICATIONS--2.8%
Centennial Cellular Corp., Class A(b).......... 30,000 513,750
Century Telephone Enterprises, Inc. ........... 65,000 2,063,750
-----------
2,577,500
-----------
</TABLE>
See Notes to Financial Statements.
43
<PAGE>
PRAIRIE FUNDS
SPECIAL OPPORTUNITIES FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
UTILITIES--4.1%
AES Corp.(b)............................ 80,000 $ 1,910,000
Public Service Co. of New Mexico(b)..... 35,000 616,875
South Industries G&E Co.(b)............. 36,800 1,278,800
-----------
3,805,675
-----------
TOTAL COMMON STOCKS
(COST $72,403,453)..................... 87,863,555
-----------
<CAPTION>
Principal
Maturity Amount
Rate Date (000)
---- -------- ---------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENT--6.3%
TIME DEPOSIT
Berlin/Frankfort Bank
(cost $5,914,000)..................... 5.81% 1/2/96 $5,914 5,914,000
-----------
TOTAL INVESTMENTS
(COST $78,317,453)(A)--100.2%.......... 93,777,555
Liabilities in excess of other assets--
(0.2%)................................. (164,612)
-----------
NET ASSETS--100.0%....................... $93,612,943
===========
</TABLE>
- - -----------
Percentages indicated are based on net assets of $93,612,943.
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................ $16,914,276
Unrealized depreciation........................................ (1,454,174)
-----------
Net unrealized appreciation.................................... $15,460,102
===========
</TABLE>
(b) Represents non-income producing security.
ADR--American Depository Receipts.
See Notes to Financial Statements.
44
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
COMMON STOCKS--71.2%
AUSTRALIA--3.2%
Aberfoyle................................... 2,400 $ 5,266
Adelaide Brighton Limited................... 3,800 3,392
Amcor Limited............................... 15,300 108,121
Ampolex..................................... 6,900 15,090
Ashton Mining Limited....................... 7,000 10,154
Australian National Industries Limited...... 18,800 13,983
Boral Limited............................... 27,500 69,550
Brambles Industries Limited................. 5,500 61,369
Broken Hill Proprietary Co. ................ 47,000 664,270
Burns Philip & Co. ......................... 12,200 27,316
Caltex Limited.............................. 4,300 16,985
Coca-Coca Amatil............................ 9,600 76,623
Coles Myer Limited.......................... 26,612 82,944
CRA Limited................................. 16,017 235,192
Crusader(b)................................. 2,400 2,535
CSR Limited................................. 22,700 73,959
Dominion Mining Limited(b).................. 2,160 1,125
Email Limited............................... 6,900 16,424
Emperor Mines Limited(b).................... 1,600 2,559
FAI Insurances(b)........................... 7,600 4,127
Fosters Brewing Group....................... 48,900 80,387
General Property Trust...................... 15,200 26,910
Gold Mines of Kalgoorlie.................... 23,800 22,129
Goodman Fielder Limited..................... 29,900 30,026
Hardie (James) Industries................... 9,600 16,567
ICI Australia............................... 7,400 56,697
Lend Lease Corp. ........................... 6,000 87,032
MIM Holdings Limited........................ 39,700 54,925
National Australia Bank..................... 34,900 314,124
Newcrest Mining Limited..................... 5,800 24,419
News Corporation Limited.................... 49,700 265,443
North Limited............................... 17,100 47,700
OPSM Protector Limited...................... 3,500 5,467
Pacific Dunlop Limited...................... 28,800 67,481
Pioneer International Holdings.............. 22,100 57,045
QCT Resources............................... 15,100 16,960
RGC Limited................................. 5,000 24,920
</TABLE>
See Notes to Financial Statements.
45
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
AUSTRALIA (CONTINUED)
Rothman's Holdings Limited................. 2,500 $ 10,228
Santos Limited............................. 21,000 61,389
Schroders Property Fund.................... 9,100 14,892
Smith Howard Limited....................... 4,200 19,839
Sons of Gwalia Limited..................... 1,800 9,908
Southcorp Holdings......................... 23,400 54,482
Stockland Trust Group...................... 7,400 17,064
TNT Limited(b)............................. 14,400 19,066
Tubemakers of Australia Limited............ 6,900 21,403
Westfield Trust............................ 23,700 42,662
Westpac Banking Corp....................... 45,500 201,720
WMC Limited................................ 27,600 177,385
------------
3,339,254
------------
FRANCE--3.5%
Accor...................................... 100 12,964
Air Liquide................................ 250 41,459
Alcatel Alsthom............................ 1,700 146,766
AXA........................................ 600 40,488
Banque Nationale de Paris.................. 4,500 203,266
BIC........................................ 100 10,183
Bouygues................................... 100 10,087
Carnaudmetalbox(b)......................... 3,300 151,154
Carrefour(b)............................... 150 91,128
Casino Guich-Perr.......................... 250 7,264
Chargeurs.................................. 50 9,969
Cie De St Gobain........................... 2,300 254,909
Cie De Suez................................ 2,400 99,133
Cie Geophysique(b)......................... 50 1,646
Club Mediterranee(b)....................... 50 3,998
Compagnie Bancaire......................... 1,210 135,589
Compagnie UAP.............................. 3,600 94,152
Comptoirs Modern........................... 50 16,256
CSF (Thomson).............................. 450 10,039
Docks de France............................ 50 7,607
Dollfus-Meig & Cie PV...................... 50 2,044
Eaux-Cie Generale.......................... 2,700 269,924
</TABLE>
See Notes to Financial Statements.
46
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
FRANCE (CONTINUED)
ELF-Aquitane............................... 3,300 $ 243,466
Eridania Beghin-Say........................ 100 17,177
Essilor International...................... 50 9,570
Europe 1(b)................................ 25 5,061
Groupe Danone.............................. 250 41,306
GTM Entrepose.............................. 50 3,512
Imetal..................................... 50 5,981
Lafarge-Coppee............................. 330 21,290
Lagardere Groupe........................... 350 6,441
Legrand.................................... 500 77,295
L'oreal.................................... 250 67,019
LVMH Moet Hennessy......................... 1,600 333,716
Lyonnais Des Eaux-Dumez.................... 100 9,641
Michelin, Class B.......................... 2,300 91,852
Moulinex(b)................................ 100 1,374
Nord Est................................... 50 1,159
Peugeot SA................................. 1,300 171,725
Pinault-Printemps.......................... 100 19,978
Promodes................................... 50 11,768
Rhone Poulenc, Series A.................... 1,250 26,813
Sanofi..................................... 3,300 211,818
Schneider SA............................... 500 17,115
Sefimeg.................................... 50 3,323
Seita...................................... 200 7,259
Simco...................................... 50 4,754
Societe Generale........................... 2,500 309,281
Sodexho(b)................................. 50 14,723
St. Louis.................................. 50 13,291
Total, Class B............................. 4,800 324,392
Union Immobiliere de France................ 50 4,334
------------
3,696,459
------------
GERMANY--3.1%
AMB AAchener & Muench...................... 50 36,331
BASF AG.................................... 600 135,404
Bayer AG................................... 600 159,634
Bayerische Vereinsbank..................... 3,000 90,129
</TABLE>
See Notes to Financial Statements.
47
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
GERMANY (CONTINUED)
Beiersdorf AG, Series ABC................... 50 $ 34,410
Bilfinger & Berger.......................... 50 19,039
Brau Und Brunnen............................ 50 7,616
Bremer Vulkan AG............................ 150 4,192
CKAG Colonial............................... 50 41,921
Commerzbank AG.............................. 500 118,950
Continental AG.............................. 1,000 14,148
Daimler Benz AG............................. 350 177,045
Degussa AG.................................. 100 33,746
Deutsche Bank AG............................ 8,000 380,639
Deutsche Lufthansa AG....................... 400 55,475
Didier-Werke AG(b).......................... 50 4,045
FAG Kugelfischer Georg(b)................... 50 6,428
Heidelberger Zement......................... 55 34,508
Hochtief AG................................. 100 42,829
Kaufhof Holding AG.......................... 300 91,597
Linde AG.................................... 100 59,388
Linotype Hell AG(b)......................... 50 5,153
MAN AG...................................... 100 27,737
Mannesmann AG............................... 450 143,526
Muenchener Ruckvers......................... 100 215,891
Preussag AG................................. 800 225,812
P.W.A. Papier Waldhof(b).................... 50 7,406
RWE AG...................................... 300 109,308
SAP AG...................................... 500 77,553
Schering AG................................. 1,000 66,584
Siemens AG(b)............................... 650 357,862
Thyssen AG(b)............................... 350 63,995
Veba AG..................................... 7,000 300,291
Volkswagon AG............................... 200 67,212
------------
3,215,804
------------
HONG KONG--1.6%
Bank of East Asia........................... 6,000 21,534
Cathay Pacific Airway....................... 23,000 35,100
Cheung Kong Holdings........................ 18,000 109,649
China Light and Power Co., Limited.......... 25,000 115,105
</TABLE>
See Notes to Financial Statements.
48
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
HONG KONG (CONTINUED)
Chinese Estates Holdings................... 12,000 $ 7,837
Dickson Concepts Intl. Limited............. 5,000 4,656
Giordano International Holdings............ 4,000 3,414
Hang Lung Development Co................... 10,000 15,908
Hang Seng Bank Limited..................... 21,800 195,247
Hong Kong Aircraft......................... 1,200 3,104
Hong Kong Telecom.......................... 106,400 189,903
Hopewell Holdings.......................... 35,000 20,143
Hutchison Whampoa.......................... 46,000 280,214
Hysan Development Limited.................. 8,000 21,158
Johnson Electric Holdings.................. 3,000 5,354
Kumagai Gumi............................... 3,000 2,173
Lai Sun Garment International.............. 2,000 1,940
Miramar Hotel & Investment................. 4,000 8,432
New World Development Co................... 13,000 56,661
Oriental Press Group....................... 12,000 3,647
Peregrine Investment Holdings.............. 4,000 5,173
Playmates Toys Holdings.................... 4,000 796
Regal Hotel Holdings....................... 22,000 5,177
Shangri-La Asia............................ 8,000 9,778
Shun Tak Holdings Limited.................. 12,000 8,458
South China Morning Post................... 12,000 7,333
Sun Hung Kai Properties.................... 25,000 204,508
Swire Pacific Limited...................... 20,000 155,200
Television Broadcasts Limited.............. 3,000 10,689
Wharf Holdings Limited..................... 39,000 129,882
Wing Lung Bank............................. 1,200 6,720
Winsor Industrial Corp. Limited............ 2,000 1,693
------------
1,646,586
------------
JAPAN--41.2%
Advantest Corp. ........................... 1,000 51,380
Ajinomoto Co., Inc. ....................... 10,000 111,485
Alps Electric Co.(b)....................... 3,000 34,608
Amada Co. ................................. 28,000 276,871
Aoki Corp.(b).............................. 2,000 8,394
Aoyama Trading............................. 1,000 31,991
</TABLE>
See Notes to Financial Statements.
49
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
JAPAN (CONTINUED)
Asahi Bank Limited(c)....................... 41,000 $ 516,710
Asahi Breweries............................. 8,000 94,617
Asahi Chemical Industries................... 27,000 206,781
Asahi Glass Co. ............................ 33,000 367,903
Ashikaga Bank............................... 10,000 62,431
Bank of Tokyo............................... 36,000 631,687
Bank of Yokohama............................ 20,000 163,836
Banyu Pharmaceutical........................ 2,000 24,624
Bridgestone Corp. .......................... 16,000 254,382
Brother Industries Limited.................. 4,000 21,754
Canon, Inc. ................................ 24,000 435,086
Casio Computer Co. ......................... 1,000 9,791
Chiba Bank.................................. 13,000 117,205
Chichibu Onada Cement....................... 7,000 37,391
Chugai Pharmaceutical Co. .................. 2,000 19,176
Citizen Watch Co. Limited................... 19,000 145,513
Cosmo Oil Co. .............................. 3,000 16,403
Credit Saison............................... 2,000 47,697
Dai Nippon Co. Limited.(b).................. 26,000 441,098
Dai Nippon Ink & Chemical................... 8,000 37,304
Dai Nippon Screen........................... 2,000 17,566
Daicel Chemical Industries.................. 13,000 73,978
Daido Steel Co. Limited..................... 2,000 10,082
Daiei Inc. ................................. 9,000 109,062
Dai-Ichi Kangyo Bank(c)..................... 64,000 1,259,501
Dai-Ichi Pharmaceuticals Co. Limited........ 3,000 42,752
Daikin Industries........................... 27,000 264,368
Daikyo(b)................................... 3,000 22,394
Daimaru(b).................................. 2,000 15,511
Daishowa Paper(b)........................... 1,000 7,756
Daito Trust................................. 1,000 11,827
Daiwa Bank.................................. 20,000 161,896
Daiwa House Industries...................... 14,000 230,727
Daiwa Kosho Lease Co. Limited............... 3,000 29,956
Daiwa Securities............................ 24,000 367,613
Denid Kagaku Kogyo.......................... 3,000 10,906
Ebara Corp. ................................ 2,000 29,277
</TABLE>
See Notes to Financial Statements.
50
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
JAPAN (CONTINUED)
Eisai Co. ................................. 3,000 $ 52,641
Ezaki Glico Co. ........................... 2,000 19,350
Fanuc Co. ................................. 7,000 303,339
Fuji Bank(c)............................... 56,000 1,237,785
Fuji Photo Film Limited(c)................. 11,000 317,783
Fujita Corp. .............................. 3,000 13,553
Fujita Kanko............................... 2,000 44,207
Fujitsu Limited............................ 43,000 479,390
Furukawa Electric.......................... 3,000 14,687
Gakken Co.(b).............................. 2,000 13,184
Gunma Bank................................. 9,000 96,847
Gunze Limited(b)........................... 4,000 24,236
Hankyu Corp.(b)............................ 12,000 65,728
Hanyu Department Stores.................... 1,000 14,833
Haseko Corp.(b)............................ 2,000 8,085
Hazama Corp.(b)............................ 2,000 8,531
Higo Bank.................................. 3,000 24,139
Hitachi Limited(c)......................... 81,000 816,658
Hokkaido Bank.............................. 5,000 16,965
Hokuriku Bank.............................. 11,000 68,995
Honda Motor Co. ........................... 19,000 392,335
Honshu Paper Co. .......................... 2,000 12,254
House Foods Corp.(b)....................... 2,000 36,063
Hoya Corp. ................................ 1,000 34,415
Inax Corp. ................................ 26,000 247,013
Industrial Bank of Japan(c)................ 47,000 1,426,149
Isetan Co. ................................ 2,000 32,961
Ishihara Sangyo Kaisha(b).................. 2,000 6,495
Ito Yokado Co.(c).......................... 13,000 801,537
Itochu Corp. .............................. 26,000 175,178
Itoham Foods............................... 3,000 22,685
Iwantani International Corp.(b)............ 3,000 15,996
Jaccs...................................... 2,000 20,746
Japan Air Lines Co.(b)..................... 33,000 219,143
Japan Energy Corp. ........................ 5,000 16,771
Jeol....................................... 1,000 8,512
JGC Corp.(b)............................... 1,000 10,567
</TABLE>
See Notes to Financial Statements.
51
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
JAPAN (CONTINUED)
Joyo Bank.................................. 14,000 $ 112,650
Jusco Co.(b)............................... 4,000 104,312
Kajima Corp. .............................. 12,000 118,660
Kaken Pharmaceutical....................... 1,000 9,016
Kandenko Limited........................... 1,000 12,506
Kanebo Corp.(b)............................ 9,000 22,335
Kaneka Corp. .............................. 3,000 18,933
Kansai Electric Power(c)................... 20,100 487,146
Kansai Paint Co. Limited................... 2,000 9,307
Kao Corp. ................................. 9,000 111,680
Katokichi.................................. 1,000 20,843
Kawasaki Kisen Kaisha(b)................... 11,000 34,977
Kawasaki Steel Corp........................ 39,000 136,110
Keihin Electric............................ 6,000 36,005
Keio Teito Electric Railway................ 16,000 93,221
Kikkoman Corp.............................. 3,150 23,208
Kinden Corp................................ 2,000 34,124
Kinki Nippon Railway....................... 31,000 234,410
Kirin Brewery Co........................... 19,000 224,717
Kobe Steel(b).............................. 30,000 92,775
Komatsu Limited(c)......................... 9,000 74,162
Konica Corp................................ 1,000 7,251
Kubota Corp................................ 13,000 83,808
Kumagai Gumi Co............................ 5,000 20,116
Kurabo Industries.......................... 5,000 19,147
Kuraray Co. Limited........................ 8,000 87,638
Kureha Chemical Industries Co.(b).......... 2,000 9,404
Kyocera Corp............................... 3,000 223,070
Kyowa Hakko Kogyo.......................... 5,000 47,212
Lion Corp.................................. 2,000 11,808
Maeda Road Construction.................... 6,000 111,098
Makita Corp................................ 2,000 31,992
Marubeni Corp.............................. 28,000 151,738
Marudai Food Co............................ 2,000 14,348
Maruha Co.(b).............................. 4,000 13,533
Marui Co.(b)............................... 5,000 104,215
Matsushita Electric Industries............. 40,000 651,464
</TABLE>
See Notes to Financial Statements.
52
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
JAPAN (CONTINUED)
Meija Milk Products......................... 4,000 $ 23,964
Meiji Seika Kaisha.......................... 5,000 30,150
Misawa Homes................................ 1,000 8,803
Mitsubishi Bank............................. 12,000 282,690
Mitsubishi Chemical Corp.................... 29,000 141,131
Mitsubishi Corp............................. 29,000 357,045
Mitsubishi Electric Corp.................... 32,000 230,493
Mitsubishi Estate........................... 24,000 300,139
Mitsubishi Gas(b)........................... 3,000 13,524
Mitsubishi Heavy Industries Limited......... 68,000 542,538
Mitsubishi Materials........................ 21,000 108,917
Mitsubishi Oil Co........................... 2,000 17,780
Mitsubishi Paper............................ 34,000 204,687
Mitsubishi Steel Manufacturing(b)........... 1,000 5,235
Mitsubishi Trust and Banking Limited........ 24,000 400,186
Mitsui Engine & Shipbuilding(b)............. 1,000 2,782
Mitsui Fire & Marine Insurance.............. 13,000 92,756
Mitsui Fudosan Co. ......................... 15,000 184,679
Mitsui Mining and Smelting(b)............... 9,000 36,122
Mitsui O.S.K. Lines(b)...................... 20,000 64,176
Mitsui Toatsu Chemical...................... 6,000 24,139
Mitsui Trust and Banking Co................. 22,000 241,003
Mitsui & Co. Limited........................ 29,000 254,710
Mitsukoshi Limited(b)....................... 6,000 56,422
Mochida Pharmaceuticals..................... 1,000 13,863
Murata Manufacturing Co..................... 4,000 147,356
Nagase & Co.(b)............................. 1,000 8,609
Nagoya Railroad Co.......................... 11,000 55,452
Nankai Electric Railway..................... 6,000 40,717
NEC Corp. .................................. 30,000 366,450
New Oji Paper............................... 8,000 72,437
NGK Insulators.............................. 44,000 439,349
Nichido Fire and Marine Insurance........... 8,000 64,371
Nichii Co. Limited.......................... 22,000 292,191
Nichirei Corp............................... 5,000 32,476
Nihon Cement Co............................. 4,000 26,756
Nintendo Co................................. 2,600 197,864
</TABLE>
See Notes to Financial Statements.
53
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
JAPAN (CONTINUED)
Nippon Beet Sugar(b)........................ 2,000 $ 8,880
Nippon Communications Systems Corp.(b)...... 1,000 10,567
Nippon Denso................................ 19,000 355,496
Nippon Express Co........................... 16,000 154,179
Nippon Fire and Marine Insurance............ 11,000 74,647
Nippon Light Metal.......................... 10,000 57,391
Nippon Meat Packers......................... 16,000 232,666
Nippon Oil Co. ............................. 11,000 69,102
Nippon Paper Industries..................... 10,000 69,509
Nippon Seiko Kab Kai........................ 2,000 14,542
Nippon Shinpan Co. ......................... 5,000 37,808
Nippon Shokubai Kagaku Kogyo................ 2,000 19,583
Nippon Steel Corp. ......................... 138,000 473,588
Nippon Suisan(b)............................ 4,000 16,558
Nippon Yusen Kab Kai........................ 22,000 127,752
Nishimatsu(b)............................... 2,000 23,460
Nissan Motor Co. ........................... 46,000 353,634
Nisshinbo Industries, Inc. ................. 4,000 38,778
Nissin Food Products Co., Limited(b)........ 2,000 46,921
NKK Corp.(b)................................ 40,000 107,800
NOF Corp. .................................. 2,000 10,877
Nomura Securities........................... 36,000 785,250
NTN Corp. .................................. 1,000 6,689
Obayashi Corp. ............................. 8,000 63,595
Odakyu Electric Railway..................... 10,000 68,345
Okamoto Industries.......................... 3,000 19,486
Okumura(b).................................. 1,000 9,113
Olympus Optical Co., Limited................ 1,000 9,694
Omron Corp. ................................ 3,000 69,218
Onward Kashiyama(b)......................... 3,000 48,860
Orient Corp. ............................... 5,000 28,405
Orix Corp. ................................. 3,000 123,604
Osaka Gas Co. .............................. 117,000 404,925
Penta-Ocean(b).............................. 2,000 15,511
Pioneer Electronic.......................... 8,000 146,580
Q.P. Corp.(b)............................... 2,000 17,431
Renown, Inc. ............................... 5,000 17,402
</TABLE>
See Notes to Financial Statements.
54
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
JAPAN (CONTINUED)
Ricoh Co. .................................. 5,000 $ 54,774
Rohn Company Limited........................ 2,000 113,037
Sagami...................................... 4,000 17,334
Sakura Bank................................. 61,000 774,682
Sankyo Co. ................................. 19,000 427,331
Sankyo Aluminum............................. 2,000 10,722
Sanrio Corp.(b)............................. 1,000 11,536
Sanwo Shutter Corp. ........................ 2,000 14,522
Sanyo Electric Corp......................... 32,000 184,582
Sapporo Corporation......................... 6,000 55,840
Secom Co. .................................. 7,000 487,243
Sega Enterprises............................ 1,000 55,258
Seino Transportation........................ 10,000 167,714
Seiyu(b).................................... 2,000 24,818
Sekisui Chemical............................ 8,000 117,884
Sekisui House............................... 54,000 691,016
Settsu Corp.(b)............................. 1,000 3,151
Seven-Eleven Japan NPV...................... 8,000 564,605
Sharp Corp. ................................ 18,000 287,924
Shimizu Corp. .............................. 9,000 91,612
Shin-Etsu Chemical Co. ..................... 4,000 82,984
Shinmaywa Industries........................ 16,000 132,154
Shiongoi & Co. ............................. 3,000 25,273
Shiseido Co. ............................... 4,000 47,696
Shizuoka Bank............................... 14,000 176,438
Shochiku Co.(b)............................. 1,000 10,955
Shokusan(b)................................. 1,000 3,665
Showa Denko KK(b)........................... 10,000 31,410
Skylark Co. ................................ 2,000 36,839
Snow Brand Milk(b).......................... 5,000 31,992
Sony Corp. ................................. 6,200 372,054
Sumitomo Bank............................... 63,000 1,337,540
Sumitomo Chemical........................... 20,000 99,852
Sumitomo Corp. ............................. 20,000 203,582
Sumitomo Electric Industries................ 22,000 264,464
Sumitomo Forestry........................... 2,000 30,634
Sumitomo Marine and Fire Insurance.......... 12,000 98,651
</TABLE>
See Notes to Financial Statements.
55
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
JAPAN (CONTINUED)
Sumitomo Metal Industries(b)................ 36,000 $ 109,235
Sumitomo Metal Mining....................... 10,000 89,964
Sumitomo Osaka Cement....................... 5,000 23,267
Taisei Corp. ............................... 11,000 73,473
Taisho Pharmaceutical Co. .................. 4,000 79,107
Taiyo Yuden................................. 2,000 21,522
Takara(b)................................... 2,000 22,879
Takara Shuzo(b)............................. 4,000 38,274
Takashimaya Co.(b).......................... 2,000 31,992
Takeda Chemical Industries.................. 32,000 527,376
Tanabe...................................... 2,000 14,406
TDK Corp. .................................. 8,000 408,718
Teijin Limited.............................. 11,000 56,305
TOA Corp.(b)................................ 1,000 7,368
Tobu Railway Co. ........................... 12,000 75,151
Tohoku Electric Power....................... 8,080 195,045
Tokai Bank.................................. 36,000 502,560
Tokio Marine and Fire Insurance............. 29,000 379,538
Tokyo Broadcasting.......................... 3,000 49,442
Tokyo Dome Corp. ........................... 3,000 51,477
Tokyo Electric Power........................ 27,200 727,782
Tokyo Electronics........................... 3,000 116,333
Tokyo Gas Co. .............................. 43,000 151,734
Tokyo Steel Manufacturing Co. Limited....... 20,000 368,388
Tokyo Style Co.(b).......................... 2,000 34,318
Tokyo Tatemono(b)........................... 4,000 19,001
Tokyoto Keiba Co. .......................... 5,000 20,843
Tokyu Corp. ................................ 16,000 113,075
Tonen Corp. ................................ 20,000 292,772
Toppan Printing Co. ........................ 14,000 184,582
Toray Industries Inc. ...................... 90,000 593,298
Toshiba Corp.(c)............................ 88,000 690,166
Tosoh Corp.(b).............................. 5,000 24,091
Tostem Corp. ............................... 3,000 99,756
Toto Limited................................ 4,000 55,840
Toyo Engineering............................ 1,000 6,301
Toyo Kanetsu KK............................. 3,000 15,385
</TABLE>
See Notes to Financial Statements.
56
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
JAPAN (CONTINUED)
Toyo Seikan Kaisha.......................... 2,000 $ 59,912
Toyobo Co.(b)............................... 13,000 46,756
Toyoda Automatic Loom Works Limited......... 2,000 35,869
Toyota Motor Corp.(c)....................... 77,000 1,634,772
UBE Industries(b)........................... 2,000 7,562
Unitika Limited(b).......................... 3,000 9,132
Yamaguchi Bank.............................. 3,000 51,187
Yamaichi Securities Co. .................... 22,000 171,261
Yamanouchi Pharmaceutical................... 4,000 86,087
Yamato Transport............................ 4,000 47,696
Yamazaki Baking Co. ........................ 3,000 55,840
Yasuda Trust and Bank....................... 20,000 118,466
Yokogawa Bridge Works Corp. ................ 7,000 105,863
Yokogawa Electric........................... 4,000 37,847
77 Bank..................................... 6,000 55,084
------------
43,005,659
------------
SINGAPORE--5.1%
Amcol Holdings.............................. 20,000 55,144
Chaun Hup Holdings.......................... 13,000 11,764
City Developments........................... 52,000 378,654
Cycle and Carriage.......................... 16,000 159,494
DBS Land Limited............................ 61,000 206,137
Development Bank Singapore.................. 45,000 559,926
First Capital Corp. ........................ 16,000 44,341
Fraser and Neave Limited.................... 16,000 203,610
Hai Sun Hup Group........................... 29,000 19,476
Haw Par Brothers International.............. 12,000 25,620
Hotel Properties Limited.................... 27,000 41,801
Inchcape Berhad............................. 11,000 35,306
Jurong Shipyard............................. 7,000 53,942
Keppel Corp. ............................... 34,000 302,869
Low Keng Huat Limited....................... 4,000 2,234
Lum Chang Holdings Limited.................. 22,000 18,352
Metro Holdings.............................. 7,000 27,218
Natsteel Limited............................ 22,000 45,104
Neptune Orient Lines........................ 46,000 51,704
Overseas Chinese Banking Corp. ............. 61,000 763,324
</TABLE>
See Notes to Financial Statements.
57
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
SINGAPORE (CONTINUED)
Overseas Union Enterprises................. 8,000 $ 40,439
Parkway Holdings Limited................... 19,000 51,581
Prima Limited.............................. 3,000 11,453
Robinson and Company....................... 4,000 16,684
Shangri-La Hotel........................... 10,000 38,883
Sia Limited Foreign........................ 86,000 802,561
Singapore Press Holdings................... 22,800 402,979
Straits Steamship.......................... 40,000 135,172
Straits Trading Co. ....................... 20,000 46,942
United Industrial Corp. ................... 90,000 88,443
United Overseas Bank....................... 60,600 582,663
United Overseas Land....................... 33,000 62,756
------------
5,286,576
------------
UNITED KINGDOM--13.5%
Abbey National PLC(b)...................... 21,900 216,252
Anglian Water PLC.......................... 3,000 28,180
Argos PLC.................................. 2,900 26,835
Argyll Group............................... 11,000 58,067
Arjo Wiggins............................... 11,100 28,435
Associated British FDS..................... 2,400 13,750
Barclays PLC(b)............................ 26,900 308,643
Bass(b).................................... 27,900 311,450
Bat Industries............................. 35,500 312,791
BBA Group.................................. 3,200 14,383
Bet Pub Limited............................ 48,400 95,435
BICC PLC................................... 2,800 11,998
Blue Circle Industries..................... 9,900 52,644
BOC Group.................................. 6,500 90,928
Boots Co. PLC.............................. 9,300 84,613
BPB Industries............................. 6,800 31,884
British Aerospace.......................... 2,200 27,223
British Airways............................ 13,000 94,056
British Gas................................ 116,800 460,612
British Land Co.(b)........................ 5,000 29,577
British Petroleum.......................... 61,800 517,173
British Steel.............................. 27,500 69,487
</TABLE>
See Notes to Financial Statements.
58
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
British Telecom............................ 131,700 $ 723,850
BTR PLC.................................... 61,600 314,653
Cable & Wireless........................... 18,900 134,982
Cadbury Schweppes PLC...................... 16,400 135,461
Carlton Communities PLC(b)................. 2,300 34,496
Chubb Security(b).......................... 2,800 13,846
Coats Viyella.............................. 15,600 42,385
Commercial Union........................... 11,100 108,228
Courtaulds PLC............................. 5,500 34,755
De La Rue PLC(b)........................... 2,200 22,236
Delta PLC.................................. 1,200 7,434
Electrocomponent PLC....................... 5,800 32,418
English China Clays........................ 4,200 20,671
Forte PLC.................................. 15,800 81,075
General Accident........................... 3,400 34,365
General Electric........................... 46,000 253,538
GKN PLC.................................... 4,700 56,845
Glaxo Holdings PLC......................... 46,900 666,271
Grand Metropolitan......................... 39,300 283,117
Great Universe Stores PLC.................. 9,800 104,226
Guardian Royal Exchange PLC................ 6,600 28,282
Guinness................................... 43,200 317,922
Hammerson PLC.............................. 3,900 21,344
Hanson..................................... 75,200 224,750
Harrison & Crossfield PLC.................. 9,600 23,847
Hepworth Ceramic........................... 3,300 16,344
HSBC Holdings.............................. 43,800 684,117
IMI PLC.................................... 4,400 22,441
Imperial Chemical Industries............... 9,900 117,278
Kingfisher PLC............................. 6,500 54,698
Ladbroke Group PLC(b)...................... 19,400 44,125
Land Securities PLC........................ 6,900 66,099
Lasmo PLC.................................. 74,200 201,601
Legal and General.......................... 9,700 100,903
Lloyds TSB Group........................... 180,086 926,867
London Electricity PLC..................... 3,300 29,409
Lonrho PLC(b).............................. 9,000 24,593
</TABLE>
See Notes to Financial Statements.
59
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
Lucas Industries PLC....................... 28,300 $ 79,529
Marks & Spencer PLC........................ 46,700 326,279
Metal Box-Caradon(b)....................... 8,200 24,889
MEPC....................................... 5,500 33,730
National Grid Group(b)..................... 2,910 9,013
National Power............................. 13,000 90,726
Next PLC................................... 3,700 26,195
Northwest Water Group(b)................... 3,800 36,343
P & O Stream Nav(b)........................ 10,100 74,642
Pearson PLC................................ 6,500 62,973
Pilkington Ord PLC......................... 10,800 33,871
Prudential Corp. .......................... 31,700 204,249
Rank Organisation PLC...................... 11,300 81,757
Reckitt and Coleman........................ 22,600 250,182
Redland PLC................................ 7,100 42,881
Reed International......................... 9,400 143,317
Reuters Holdings PLC(b).................... 27,800 254,656
Rexam PLC.................................. 6,800 37,374
RMC Group.................................. 2,700 41,543
Rolls Royce................................ 39,300 115,322
Royal Bank of Scotland PLC................. 13,300 121,006
Royal Insurance PLC........................ 24,200 143,528
RTZ Corp................................... 17,800 258,675
Rugby...................................... 8,700 14,858
Sainsbury (J) PLC.......................... 17,600 107,390
Schroders PLC.............................. 3,200 67,966
Scottish & New Castle PLC(b)............... 1,000 9,517
Scottish Power PLC(b)...................... 13,600 78,127
Sears...................................... 88,800 143,385
Sedgwick Group............................. 24,700 46,401
Seeboard PLC(b)............................ 200 1,633
Slough Estate PLC.......................... 5,300 18,021
Smith Industries........................... 4,100 40,485
Smithkline Beecham, Class A................ 12,900 142,202
Smithkline Beecham......................... 50,400 549,320
Southern Electric PLC(b)................... 200 2,807
Southern Water PLC......................... 1,700 18,159
</TABLE>
See Notes to Financial Statements.
60
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
UNITED KINGDOM (CONTINUED)
T & N PLC.................................. 4,200 $ 10,564
Tarmac PLC................................. 12,600 20,148
Tate & Lyle PLC............................ 1,000 7,328
Taylor Woodrow PLC......................... 5,200 9,486
Tesco...................................... 77,700 358,290
Thames Water PLC........................... 22,800 198,944
Thorn EMI PLC(b)........................... 7,100 167,226
TI Group PLC(b)............................ 5,500 39,195
Trafalgar House PLC(b)..................... 12,600 5,428
Unigate Limited............................ 600 3,829
Unilever PLC............................... 13,500 277,301
United Biscuits PLC........................ 1,400 5,564
Vodafone Group............................. 26,200 93,762
Williams Holdings.......................... 7,900 40,231
Willis Corroon PLC......................... 3,200 7,005
Wimpey George PLC.......................... 4,900 10,955
Wolseley................................... 7,500 52,517
Zeneca Group............................... 8,900 172,172
------------
14,106,784
------------
TOTAL COMMON STOCKS
(COST $68,762,442)........................ 74,297,122
------------
PREFERRED STOCKS--0.6%
AUSTRALIA--0.1%
News Corp., Limited Voting Preferred Voting
Shares................................... 24,100 112,761
------------
FRANCE--0.0%
Casino Guich-Perr, Preferred Shares........ 50 1,135
------------
GERMANY--0.5%
Allianz AG, Preferred Shares Nonvoting..... 200 393,495
Kloeckner AG, Preferred Shares Nonvoting... 500 3,022
Lufthansa AG, Preferred Shares Nonvoting... 50 6,550
Man AG, Preferred Shares Nonvoting......... 50 10,753
RWE AG, Preferred Shares Nonvoting......... 150 41,921
</TABLE>
See Notes to Financial Statements.
61
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Description Shares (Note 2(a))
----------- ------ -----------
<S> <C> <C>
GERMANY (CONTINUED)
SAP AG, Preferred Nonvoting........... 500 $ 76,085
Volkswagon AG, Preferred Shares
Nonvoting........................... 50 12,150
------------
543,976
------------
TOTAL PREFERRED STOCKS
(COST $580,168)...................... 657,872
------------
<CAPTION>
Principal
Maturity Amount
Rate Date (000)
---- -------- ---------
<S> <C> <C> <C> <C>
FOREIGN CORPORATE OBLIGATION--12.6%
GERMANY--12.6%
Bundeslaender Versicher
(cost $12,896,203).................. 8.63% 2/20/96 18,700** 13,143,650
------------
SHORT-TERM INVESTMENTS--13.4%
U.S. TREASURY BILLS--13.4%
U.S. Treasury Bill.................... 5.61%* 2/8/96 1,000 994,320
U.S. Treasury Bill.................... 5.48%* 2/15/96 2,000 1,986,675
U.S. Treasury Bill.................... 5.54%* 3/7/96 2,500 2,478,150
U.S. Treasury Bill.................... 5.07%* 3/28/96 1,600 1,581,232
U.S. Treasury Bill(c)................. 5.35%* 5/2/96 3,500 3,441,883
U.S. Treasury Bill.................... 5.65%* 7/25/96 1,500 1,457,802
U.S. Treasury Bill.................... 5.61%* 8/22/96 1,150 1,113,305
U.S. Treasury Bill(c)................. 5.61%* 9/19/96 1,000 964,475
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $14,002,418)................... 14,017,842
------------
TOTAL INVESTMENTS
(COST $96,241,231)(A)--97.8%......... 102,116,486
Other assets in excess of liabilities--
2.2%................................. 2,272,891
------------
NET ASSETS--100.0%..................... $104,389,377
============
</TABLE>
- - -----------
Percentages indicated are based on net assets of $104,389,377.
* Yield at purchase.
** Denominated in local currency.
See Notes to Financial Statements.
62
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL EQUITY FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................ $ 7,077,639
Unrealized depreciation........................................ (1,202,384)
-----------
Net unrealized appreciation.................................... $ 5,875,255
===========
</TABLE>
(b) Represents non-income producing security.
(c) Securities partially or fully pledged as collateral to cover open futures
positions.
<TABLE>
<CAPTION>
Contract Contract Unrealized
Price Value (Depreciation)
-------- -------- --------------
<S> <C> <C> <C>
FOREIGN CURRENCY INVESTMENTS
CURRENCY PURCHASED:
German Deutsche Mark......................... $0.698600 $328,907 $ (3,032)
Japanese Yen(d).............................. $0.960000 504,385 (69,326)
U.K. Pound Sterling.......................... $1.552600 115,183 (1,442)
-------- --------
TOTAL FOREIGN CURRENCY INVESTMENTS
(COST $1,022,275)........................... $948,475 $(73,800)
======== ========
</TABLE>
(d) Pledged to cover margin requirements for open futures positions.
<TABLE>
<S> <C> <C> <C> <C>
FINANCIAL FUTURES
<CAPTION>
UNREALIZED
MARKET VALUE APPRECIATION
NUMBER OF COVERED (DEPRECIATION)
CONTRACTS BY CONTRACTS EXPIRATION AT 12/31/95
--------- ------------ ---------- --------------
<S> <C> <C> <C> <C>
Financial Futures Purchased
Long:
British Pound--FTSE(1)...... 57 $ 8,134,087 March 1996 $ 54,862
German Deutsche Marks--
DAX(1).................... 3 447,415 March 1996 12,404
Japanese Yen--TOPIX(1)...... 120 18,426,486 March 1996 851,509
Financial Futures Sold Short:
German Deutsche Marks(2).... 130 $11,340,875 March 1996 (71,500)
Japanese Yen(2) 69 8,491,312 March 1996 101,775
--------
$949,050
========
</TABLE>
(1) Exchange traded local currency denominated futures contracts.
(2) U.S. Dollar denominated futures contracts.
See Notes to Financial Statements.
63
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS--33.6%
ASSET-BACKED SECURITIES--7.0%
Advanta Mortgage Loan Trust,
Series 1994-3, Class A2............... 7.60% 7/25/10 $ 3,915 $ 4,045,170
First Federal Savings & Loan
Association, Chicago, Mortgage Backed
Certificates, Series A, Passthrough
Notes(b).............................. 8.75% 6/1/06 7 7,113
Green Tree Home Improvement Loan Trust,
Series 1994-B1, Class A1.............. 7.15% 7/15/14 1,045 1,071,326
MBNA Master Credit Card Trust,
Series 1994-C, Class A................ 6.25% 3/15/04 1,655 1,661,206
Midlantic Auto Grantor Trust,
Series 1992-1, Class A................ 4.30% 9/15/97 125 124,509
Olympic Automobiles Receivables Trust,
Series 1995-D......................... 6.15% 7/15/01 2,300 2,333,781
People's Bank Credit Card Master Trust,
Series 1993-1, Class A................ 4.80% 12/15/99 2,480 2,476,352
Security Pacific Acceptance Corp.,
Series 1995-1......................... 7.25% 4/10/20 2,000 2,119,118
------------
13,838,575
------------
BANKING--11.3%
AAB, Global Bond, Bank Guaranteed....... 7.25% 5/31/05 2,800 2,998,192
Chase Manhattan Corp., Subordinate Note. 9.75% 11/1/01 2,500 2,949,827
Chevy Chase Auto Receivables Trust
Class A............................... 5.80% 6/15/02 3,000 3,015,687
First Union Corp., Subordinate Note..... 6.88% 9/15/05 3,000 3,129,951
Mellon Financial Co., Senior Notes...... 7.63% 11/15/99 2,310 2,449,360
Midland Bank PLC, Subordinate Notes..... 8.63% 12/15/04 2,230 2,568,289
Norwest Corp., Medium Term Note......... 7.75% 3/1/02 1,500 1,639,203
Saloman, Inc. Senior Notes.............. 6.70% 12/1/98 3,700 3,724,901
------------
22,475,410
------------
ENTERTAINMENT--3.2%
News America Holdings................... 8.50% 2/15/05 2,500 2,821,893
Time Warner Entertainment............... 9.63% 5/1/02 3,000 3,476,898
------------
6,298,791
------------
FINANCE--2.2%
Associates Corp., North America,
Corporate Notes....................... 6.63% 6/15/05 1,700 1,757,470
Chemical Master Credit Card Trust,
Series 1995-3, Class A................ 6.23% 4/15/02 2,500 2,556,748
------------
4,314,218
------------
</TABLE>
See Notes to Financial Statements.
64
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
HEALTH CARE & HOSPITAL MANAGEMENT--2.2%
Columbia HCA/Health, Medium Term Note... 6.87% 9/15/03 $ 4,250 $ 4,421,896
------------
HOTELS AND GAMING--1.4%
Marriot International, Inc., Senior
Note.................................. 7.88% 4/15/05 2,500 2,718,953
------------
INDUSTRIAL--3.9%
ITT Corp., Debentures................... 7.38% 11/15/15 5,000 5,132,450
TCI Communications, Senior Notes........ 8.00% 8/1/05 2,500 2,672,875
------------
7,805,325
------------
RETAIL STORES--1.3%
Dayton Hudson Credit Card Master Trust,
Series 1995-1, Class A................ 6.10% 2/25/02 2,500 2,543,247
------------
SUPRANATIONALS--0.6%
European Investment Bank................ 8.88% 3/1/01 1,000 1,143,335
------------
UTILITIES--0.5%
West Texas Utilities.................... 6.38% 10/1/05 1,000 1,017,028
------------
TOTAL CORPORATE OBLIGATIONS
(COST $64,213,422)..................... 66,576,778
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--7.5%
Federal Farm Credit Bank,
Medium Term Note...................... 7.00% 4/18/97 6,000 6,032,004
Federal Home Loan Mortgage Corporation,
Debenture............................. 7.35% 3/22/05 8,000 8,807,624
Federal Home Loan Mortgage Corporation,
Pool #555124 ......................... 9.50% 12/1/18 1 1,010
Government National Mortgage
Association, Pool #304382............. 8.50% 3/15/23 64 67,206
------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(COST $14,201,890)..................... 14,907,844
------------
U.S. GOVERNMENT OBLIGATIONS--47.5%
U.S. TREASURY BOND--0.6%
U.S. Treasury Bond...................... 8.13% 8/15/19 1,000 1,257,812
------------
U.S. TREASURY NOTES--46.9%
U.S. Treasury Note...................... 5.88% 5/31/96 2,650 2,657,449
U.S. Treasury Note...................... 7.88% 1/15/98 2,900 3,048,625
U.S. Treasury Note...................... 5.38% 5/31/98 375 376,288
U.S. Treasury Note...................... 5.13% 6/30/98 400 399,125
U.S. Treasury Note...................... 4.75% 10/31/98 19,000 18,750,625
U.S. Treasury Note...................... 5.00% 1/31/99 550 546,046
U.S. Treasury Note...................... 6.88% 8/31/99 1,785 1,875,921
U.S. Treasury Note...................... 7.13% 9/30/99 165 174,900
U.S. Treasury Note...................... 7.88% 11/15/99 990 1,076,625
</TABLE>
See Notes to Financial Statements.
65
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
U.S. TREASURY NOTES (CONTINUED)
U.S. Treasury Note...................... 7.75% 11/30/99 $ 2,440 $ 2,644,350
U.S. Treasury Note...................... 7.75% 1/31/00 12,100 13,151,187
U.S. Treasury Note...................... 8.50% 2/15/00 830 925,708
U.S. Treasury Note...................... 6.88% 3/31/00 800 846,250
U.S. Treasury Note...................... 6.13% 7/31/00 5,000 5,150,000
U.S. Treasury Note...................... 8.75% 8/15/00 1,870 2,125,369
U.S. Treasury Note...................... 7.50% 11/15/01 18,050 19,900,125
U.S. Treasury Note...................... 7.50% 5/15/02 150 166,500
U.S. Treasury Note...................... 7.25% 5/15/04 1,500 1,669,217
U.S. Treasury Note...................... 7.25% 8/15/04 2,365 2,631,063
U.S. Treasury Note...................... 7.88% 11/15/04 9,700 11,236,829
U.S. Treasury Note...................... 7.63% 2/15/25 3,000 3,666,558
------------
93,018,760
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $90,128,484)..................... 94,276,572
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $168,543,796).................... 175,761,194
------------
SHORT-TERM INVESTMENT--10.5%
REPURCHASE AGREEMENT--10.5%
Repurchase Agreement with National
Westminster Bank dated 12/29/95, with
a maturity value of $20,870,094 (See
Footnote A)........................... 5.65% 1/2/96 20,857 20,857,000
------------
TOTAL SHORT-TERM INVESTMENT (COST
$20,857,000)........................... 20,857,000
------------
TOTAL INVESTMENTS--99.1%
(COST $189,400,796)(A)................. 196,618,194
Other assets in excess of liabilities--
0.9%................................... 1,665,477
------------
NET ASSETS--100.0%....................... $198,283,671
============
</TABLE>
- - -----------
Percentages indicated are based on net assets of $198,283,671.
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................................... $7,224,889
Unrealized depreciation......................................... (7,491)
----------
Net unrealized appreciation..................................... $7,217,398
==========
</TABLE>
(b) Illiquid security.
Footnote A: Collateralized by $22,100,000 U.S. Treasury Bill due 9/19/96, with
a value of $21,293,129.
See Notes to Financial Statements.
66
<PAGE>
PRAIRIE FUNDS
BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS--50.2%
ASSET-BACKED SECURITIES--7.7%
Advanta Mortgage Loan Trust,
Series 1994-3, Class A2............... 7.60% 7/25/10 $ 1,625 $ 1,679,030
First U.S.A. Credit Card Master Trust,
Series 1992-1, Class A................ 5.20% 6/15/98 833 832,116
Green Tree Financial Corporation,
Manufactured Housing Senior
Subordinate Passthrough,
Series 1995-4, Class A6............... 7.30% 7/15/25 3,000 3,169,227
Security Pacific Acceptance Corp.
Manufactured Housing Contract
Senior Subordinate, Series 1995-1,
Class A3.............................. 7.25% 4/10/20 2,000 2,119,118
Standard Credit Card Master Trust I,
Participation Certificates,
Series 1994-2, Class A................ 7.25% 4/7/06 1,800 1,945,636
------------
9,745,127
------------
BANKING--15.8%
ABN-AMRO Bank N.V., Chicago Subordinate
Note.................................. 7.25% 5/31/05 2,000 2,141,566
Chase Manhattan Corp.,
Subordinate Note...................... 9.75% 11/1/01 2,000 2,359,862
Chemical Master Credit Card Trust I,
Series 1995-3, Asset-Backed CTF, Class
A..................................... 6.23% 4/15/05 1,000 1,022,699
Chevy Chase Auto Receivables Trust,
Series 1995-2 Class A................. 5.80% 6/15/02 2,000 2,010,458
First Union Corp., Subordinate Note..... 6.88% 9/15/05 2,000 2,086,634
Interamerican Development Bank,
Debentures............................ 8.50% 3/15/11 1,800 2,152,114
Interamerican Development Bank,
Debentures............................ 7.00% 6/15/25 2,200 2,347,633
International Bank for Reconstruction
and Development Debentures............ 9.64% 4/30/99 1,500 1,685,392
Midland Bank PLC, Subordinate Note...... 8.63% 12/15/04 1,500 1,727,549
Solomon, Inc., Senior Notes............. 6.70% 12/1/98 2,500 2,516,825
------------
20,050,732
------------
</TABLE>
See Notes to Financial Statements.
67
<PAGE>
PRAIRIE FUNDS
BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
BEVERAGE, FOOD AND TOBACCO--0.7%
Grand Metro Investment Corp.,
Guaranteed Note....................... 7.13% 9/15/04 $ 800 $ 854,929
------------
CABLE TV SYSTEMS--3.0%
Cablevision Industries Corp., Senior
Debentures............................ 9.25% 4/1/08 3,500 3,797,500
------------
CHEMICALS--1.4%
Monsanto Co., Debenture................. 8.20% 4/15/25 1,500 1,725,809
------------
ENTERTAINMENT--2.2%
News America Holdings, Senior Note...... 8.50% 2/15/05 2,500 2,821,893
------------
FINANCE--2.0%
American Express Co., Debentures........ 8.63% 5/15/22 800 911,707
Sears Credit Master Trust II,
Series 1995-3, Class A................ 7.00% 10/15/04 1,600 1,679,742
------------
2,591,449
------------
FOREST AND PAPER PRODUCTS--0.7%
Weyerhaeuser Co., Debentures............ 8.38% 2/15/07 800 943,652
------------
HEALTH CARE & HOSPITAL MANAGEMENT--3.8%
Coastal Corp. .......................... 7.75% 10/15/35 2,000 2,136,354
Columbia/HCA Healthcare Corp. .......... 7.58% 9/15/25 2,500 2,723,243
------------
4,859,597
------------
HOTELS AND GAMING--1.7%
Marriott International, Inc., Senior
Note, Series B........................ 7.88% 4/15/05 2,000 2,175,162
------------
RETAIL STORES--5.8%
Dayton Hudson Credit Card Master Trust
Series 95-1, Class A.................. 6.10% 2/25/02 1,500 1,525,948
Dayton Hudson Corp., Debenture.......... 7.88% 6/15/23 1,800 1,867,500
Federated Department Stores, Senior
Notes................................. 8.13% 10/15/02 4,000 4,040,000
------------
7,433,448
------------
TELECOMMUNICATIONS--4.6%
ITT Corp................................ 7.75% 11/15/25 2,000 2,052,980
TCI Communications, Inc. ............... 8.75% 8/1/15 3,500 3,862,891
------------
5,915,871
------------
</TABLE>
See Notes to Financial Statements.
68
<PAGE>
PRAIRIE FUNDS
BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
UTILITIES--0.8%
West Texas Utilities First Mortgage,
Series U............................. 6.38% 10/1/05 $ 1,000 $ 1,017,028
------------
TOTAL CORPORATE OBLIGATIONS
(COST $60,247,885).................... 63,932,197
------------
U.S. GOVERNMENT OBLIGATIONS--40.1%
U.S. TREASURY BONDS--8.0%
U.S. Treasury Bond..................... 10.75% 5/15/03 1,000 1,314,686
U.S. Treasury Bond..................... 11.13% 8/15/03 3,500 4,702,026
U.S. Treasury Bond..................... 12.00% 8/15/13 1,760 2,717,000
U.S. Treasury Bond..................... 9.88% 11/15/15 1,000 1,448,125
------------
10,181,837
------------
U.S. TREASURY NOTES--32.1%
U.S. Treasury Note..................... 5.88% 5/31/96 3,850 3,860,822
U.S. Treasury Note..................... 4.75% 2/15/97 3,500 3,483,588
U.S. Treasury Note..................... 7.88% 1/15/98 700 735,875
U.S. Treasury Note..................... 5.00% 1/31/99 6,450 6,403,631
U.S. Treasury Note..................... 7.75% 11/30/99 1,500 1,625,625
U.S. Treasury Note..................... 6.75% 4/30/00 6,200 6,527,428
U.S. Treasury Note..................... 7.75% 2/15/01 2,000 2,210,000
U.S. Treasury Note..................... 7.50% 11/15/01 6,000 6,615,000
U.S. Treasury Note..................... 7.25% 5/15/04 8,500 9,458,894
------------
40,920,863
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $48,518,853).................... 51,102,700
------------
U.S. GOVERNMENT AGENCY
OBLIGATION--0.1%
Government National Mortgage
Association, Pool #201299 (cost
$77,388).............................. 8.50% 2/15/17 77 81,023
------------
TOTAL INVESTMENTS IN SECURITIES
(COST $108,844,126)................... $115,115,920
------------
</TABLE>
See Notes to Financial Statements.
69
<PAGE>
PRAIRIE FUNDS
BOND FUND
- - -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000) (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
SHORT-TERM INVESTMENT--8.8%
REPURCHASE AGREEMENT--8.8%
Repurchase agreement with National
Westminster Bank dated 12/29/95, with a
maturity value of $11,174,010 (see
Footnote A)............................ 5.65% 1/2/96 $11,167 $ 11,167,000
------------
TOTAL SHORT-TERM INVESTMENT
(COST $11,167,000)...................... 11,167,000
------------
TOTAL INVESTMENTS
(COST $120,011,126)(A)--99.2%........... 126,282,920
Other assets in excess of liabilities--
0.8%.................................... 1,025,749
------------
NET ASSETS--100.0%........................ $127,308,669
============
</TABLE>
- - -----------
Percentages are based on net assets of $127,308,669.
(a) Represents cost for federal income tax and financial reporting purposes
and differs from value by net unrealized appreciation of securities as
follows:
<TABLE>
<S> <C>
Unrealized appreciation......................................... $6,271,794
Unrealized depreciation......................................... --
----------
Net unrealized appreciation..................................... $6,271,794
==========
</TABLE>
Footnote A: Collateralized by $11,300,000 U.S. Treasury Note, 5.63%, due
10/31/97; with a value of $11,480,710.
See Notes to Financial Statements.
70
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000)* (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
CORPORATE OBLIGATIONS--5.3%
BRITISH POUNDS STERLING--1.3%
Barclays Bank........................... 10.25% 12/10/97 120 $ 197,956
-----------
FRENCH FRANCS--1.9%
Unilever NV............................. 9.88% 9/4/97 1,300 284,768
-----------
JAPANESE YEN--2.1%
Export-Import Bank of Japan............. 4.38% 10/1/03 30,000 319,530
-----------
TOTAL CORPORATE OBLIGATIONS
(COST $456,789)........................ 802,254
-----------
FOREIGN GOVERNMENT
OBLIGATIONS--50.0%
BELGIUM FRANCS--3.6%
Belgium Government, Series 19........... 6.50% 3/31/05 16,000 536,496
-----------
BRITISH POUNDS STERLING--3.0%
United Kingdom Exchequer................ 12.25% 3/26/99 250 451,346
-----------
CANADIAN DOLLARS--3.7%
Canadian Government..................... 9.75% 10/1/97 200 156,206
Canadian Government..................... 10.75% 3/15/98 500 402,832
-----------
559,038
-----------
DANISH KRONE--2.6%
Kingdom of Denmark...................... 9.00% 11/15/98 2,000 393,120
-----------
FINLAND--2.3%
Republic of Finland..................... 6.00% 1/29/02 30,000 346,800
-----------
FRENCH FRANCS--5.4%
France O.A.T............................ 8.50% 6/25/97 2,800 599,348
France O.A.T............................ 5.50% 4/25/04 1,100 210,265
-----------
809,613
-----------
GERMAN DEUTSCHEMARKS--9.2%
Austria Republic........................ 6.00% 4/1/98 600 435,555
Bundesrepublic.......................... 9.00% 10/20/00 600 488,375
Deutsche Bundespost..................... 7.50% 8/2/04 600 453,497
-----------
1,377,427
-----------
</TABLE>
See Notes to Financial Statements.
71
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Maturity Amount Value
Description Rate Date (000)* (Note 2(a))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
ITALIAN LIRA--6.1%
Italy Government.............. 8.50% 1/1/99 15,000,000 $ 910,500
-----------
JAPANESE YEN--5.6%
Japan Development Bank........ 6.50% 9/20/01 35,000 414,155
Japan Government Bank, Series
175......................... 4.50% 12/20/04 40,000 430,240
-----------
844,395
-----------
NETHERLAND GUILDERS--5.0%
Netherland Government......... 5.75% 1/15/04 1,200 744,109
-----------
SPANISH PESETAS--3.5%
Spanish Government............ 8.00% 5/30/04 70,000 523,040
-----------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS
(COST $7,387,364)............ 7,495,884
-----------
SUPRANATIONAL OBLIGATIONS--13.4%
GERMAN DEUTSCHEMARKS--3.1%
European Investment Bank...... 7.50% 11/4/02 600 457,982
-----------
JAPANESE YEN--10.3%
Asian Development Bank........ 5.00% 2/5/03 40,000 441,080
Council of Europe............. 6.88% 3/5/01 30,000 356,250
IBRD.......................... 5.25% 3/20/02 30,000 337,890
Interamerican Development
Bank........................ 7.25% 5/15/00 35,000 415,625
-----------
1,550,845
-----------
TOTAL SUPRANATIONAL OBLIGATIONS
(COST $2,035,096)............ 2,008,827
-----------
SHORT-TERM INVESTMENT--32.1%
U.S. TREASURY BILL--32.1%
U.S. Treasury Bill............ 5.18%** 1/4/96 4,815(b) 4,812,922
-----------
TOTAL SHORT-TERM INVESTMENT
(COST $4,812,922)............ 4,812,922
-----------
TOTAL INVESTMENTS
(COST $14,692,171)(A)--
100.8%....................... 15,119,887
Liabilities in excess of
assets--(0.8%)............... (124,599)
-----------
TOTAL NET ASSETS--100.0%....... $14,995,288
===========
</TABLE>
See Notes to Financial Statements.
72
<PAGE>
PRAIRIE FUNDS
INTERNATIONAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
- - -----------
Percentages indicated are based on net assets of $14,995,288.
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................... $427,716
Unrealized depreciation........................................... --
--------
Net unrealized appreciation....................................... $427,716
========
</TABLE>
(b) Denominated in U.S. dollars.
<TABLE>
<CAPTION>
FORWARD FOREIGN CURRENCY CONTRACT
Principal Market
Amount in Value
Local in U.S. Unrealized
Currency Proceeds Dollars Appreciation
--------- -------- ------- ------------
<S> <C> <C> <C> <C>
Japanese Yen, expiring 2/10/96 300,000,000 $3,036,130 $2,928,038 $108,092
========
</TABLE>
* Numbers are presented in local currency unless otherwise indicated.
** Yield at purchase.
See Notes to Financial Statements.
73
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS--98.9%
ALASKA--0.7%
Alaska Student Loan Corp.,
Student Loan Revenue,
State Assisted, Series A
(A.M.T.)................. A/A 5.50% 7/1/04 $ 1,000 $ 1,007,940
North Slope Boro Refunding,
Series G (FSA Insured)... Aaa/AAA 8.35% 6/30/98 1,500 1,650,360
------------
2,658,300
------------
ARIZONA--1.3%
Maricopa County University
School District No. 41,
Series C, Collateralized
by U.S. Government
Securities (Pre-refunded
at 100 on 7/1/04)(FGIC
Insured)................. Aaa/AAA 6.10% 7/1/14 2,000 2,219,600
Pima County Refunding,
Series A................. Aa/A+ 5.00% 7/1/02 3,000 3,103,440
------------
5,323,040
------------
CALIFORNIA--12.5%
California Health
Facilities Financing
Authority Revenue
Refunding, Catholic
Health Facilities
Insured, Series B (AMBAC
Insured)................. Aaa/AAA 4.50% 7/1/02 2,500 2,506,275
California Health
Facilities Financing, St.
Joseph's Health Systems,
Collateralized by U.S.
Government Securities
(Pre-refunded at 102 on
7/1/99).................. NR/AA- 6.90% 7/1/14 6,750 7,490,137
</TABLE>
See Notes to Financial Statements.
74
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
Central Valley Financing
Authority,
Califcogeneration Project
Revenue, Carson Ice
Generation Project....... NR/BBB- 5.50% 7/1/01 $ 975 $ 993,515
Central Valley Financing
Authority,
Califcogeneration Project
Revenue, Carson Ice
Generation Project....... NR/BBB- 5.40% 7/1/00 2,550 2,598,909
Fresno Health Facilities
Revenue, Holy Cross
Health Systems Corp.
(MBIA Insured)........... A1/AA- 5.10% 12/1/03 1,570 1,626,834
Fresno Health Facilities
Revenue, Holy Cross
Health Systems Corp.
(MBIA Insured)........... A1/AA- 5.10% 12/1/03 635 657,987
Fresno Health Facilities
Revenue, Holy Cross
Health Systems Corp.
(MBIA Insured)........... A1/AA- 5.00% 12/1/02 1,500 1,548,900
Los Angeles Wastewater
Systems Revenue, Series A
(MBIA Insured)........... Aaa/AAA 8.50% 6/1/00 1,360 1,592,519
MSR Public Power Agency
California, San Juan
Project
Revenue Refunding, Series F
(AMBAC Insured).......... Aaa/AAA 5.55% 7/1/02 1,615 1,721,429
Northern California Power
Agency, Public Power
Refunding, Geothermal
Project #3, Series A..... Aaa/AAA 5.85% 7/1/10 4,625 4,983,946
Northern California Power
Agency, Public Power
Refunding, Series B-1,
Collateralized by U.S.
Government Securities
(Pre-refunded at 100 on
7/1/98).................. NR/AAA 8.00% 7/1/24 3,000 3,291,660
</TABLE>
See Notes to Financial Statements.
75
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
Sacramento Cogeneration
Authority Revenue,
Procter & Gamble Project. NR/BBB- 5.90% 7/1/02 $ 1,000 $ 1,027,670
Sacramento Cogeneration
Authority Revenue,
Procter & Gamble Project. NR/BBB- 5.80% 7/1/01 1,300 1,333,800
Sacramento Cogeneration
Authority Revenue,
Procter & Gamble Project. NR/BBB- 5.60% 7/1/99 3,300 3,373,557
South Coast Air Quality
Management District
Building Corp.,
California Revenue
Institutional Sale,
Series B, (Pre-refunded
at 102 on 8/1/99)........ Aaa/AAA 7.13% 8/1/14 3,650 4,092,270
University of California
Revenue Refunding,
Multiple Purpose Projects
(MBIA Insured)........... Aaa/AAA 6.20% 9/1/01 6,675 7,312,129
University of California
Revenue Refunding,
Multiple Purpose
Projects, Series B (MBIA
Insured)................. Aaa/AAA 4.90% 9/1/08 3,140 3,064,514
------------
49,216,051
------------
COLORADO--8.3%
Adams County Single Family
Mortgage Revenue, Series
A, Collateralized by U.S.
Government Securities.... Aaa/AAA 8.88% 8/1/03 1,230 1,579,037
Denver City and County
Airport, Series A
(A.M.T.)................. Baa/BB 7.40% 11/15/04 200 224,006
Denver City and County
Airport, Series A........ Aaa/AAA 8.50% 11/15/07 2,000 2,344,740
Denver City and County
Airport, Series A........ B/BB 8.00% 11/15/17 4,215 4,505,624
Denver City and County
Airport, Series A........ NR/NR 8.00% 11/15/25 1,360 1,542,158
</TABLE>
See Notes to Financial Statements.
76
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
COLORADO (CONTINUED)
Denver City and County
Airport, Series B
(A.M.T.)................. NR/NR 7.25% 11/15/05 $ 2,000 $ 2,195,120
Denver City and County
Airport, Series C........ B/BB 6.55% 11/15/03 1,145 1,219,425
Denver City and County
Airport, Series D........ B/BB 7.30% 11/15/00 2,900 3,171,556
Denver City & County Water
Refunding................ Aa/AA 7.00% 10/1/99 8,665 9,548,137
Denver Metropolitan Major
League Baseball Stadium,
Colorado Revenue
Refunding, Sales Tax,
Baseball Stadium Project
(FGIC Insured)........... Aaa/AAA 4.60% 10/1/05 2,000 1,982,040
Poudre Valley Hospital
District Revenue,
Collateralized by U.S.
Government Securities,
(Pre-refunded at 101 on
12/1/01) (AMBAC Insured). Aaa/AAA 6.63% 12/1/01 3,750 4,243,163
------------
32,555,006
------------
DISTRICT OF COLUMBIA--4.9%
District of Columbia,
Series A, Collateralized
by U.S. Government
Securities (Pre-refunded
at 102 on 6/1/00)........ Aaa/AAA 7.25% 6/1/05 1,125 1,283,299
District of Columbia
Hospital Revenue,
Washington Hospital
Center Corp. Issue,
Series A, Collateralized
by U.S. Government
Securities (Pre-refunded
at 102 on 1/1/01)........ NR/BBB 8.75% 1/1/15 2,750 3,330,608
</TABLE>
See Notes to Financial Statements.
77
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
DISTRICT OF COLUMBIA (CONTINUED)
District of Columbia Refunding,
Series A-1 (MBIA Insured).... Aaa/AAA 4.75% 6/1/03 $ 2,960 $ 2,950,735
District of Columbia Refunding,
Series A-1 (MBIA Insured).... Aaa/AAA 4.65% 6/1/02 1,500 1,494,180
District of Columbia Refunding,
Series B-1 (AMBAC Insured)... Aaa/AAA 5.10% 6/1/03 3,000 3,055,530
District of Columbia Refunding,
Series B-1 (AMBAC Insured)... Aaa/AAA 5.40% 6/1/06 4,850 4,966,303
District of Columbia Refunding,
Series B-3 (MBIA Insured).... Aaa/AAA 5.20% 6/1/04 2,000 2,040,920
------------
19,121,575
------------
FLORIDA--3.6%
Florida State Board of
Education Capital Outlay
Refunding, Series A,
Collateralized by U.S.
Government Securities (Pre-
refunded at 102 on 6/1/00)... Aaa/AAA 7.25% 6/1/23 4,620 5,282,185
Orlando Utilities Commission
Water & Electric Revenue,
Series A..................... Aa/AA 5.25% 10/1/23 7,500 7,343,775
Orlando Utilities Commission
Water & Electric Revenue,
Series D..................... Aa/AA- 5.00% 10/1/23 1,500 1,431,705
------------
14,057,665
------------
GEORGIA--6.0%
Georgia State,
General Obligation........... Aaa/AA+ 7.25% 9/1/04 9,440 11,310,253
</TABLE>
See Notes to Financial Statements.
78
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
GEORGIA (CONTINUED)
Georgia State,
General Obligation....... Aaa/AA+ 7.25% 9/1/05 $ 10,130 $ 12,235,014
------------
23,545,267
------------
HAWAII--2.5%
Hawaii State Department of
Budget & Finance Special
Purpose Mortgage Revenue,
Kapiolani Healthcare
System................... A/A 5.60% 7/1/02 2,065 2,130,770
Hawaii State Refunding,
Series C................. Aa/AA 4.25% 7/1/99 7,500 7,549,800
------------
9,680,570
------------
ILLINOIS--12.2%
Chicago Metropolitan Water
Reclamation District..... Aa/AA 5.00% 12/1/02 4,500 4,671,720
Chicago Public Community
Building Revenue, Series
A (MBIA Insured)......... Aaa/AAA 4.90% 12/1/01 3,000 3,087,600
Illinois Health Facilities
Authority Revenue
Refunding, Illinois
Masonic Medical Center... A/A- 5.20% 10/1/03 750 753,743
Illinois Health Facilities
Authority Revenue
Refunding, Illinois
Masonic Medical Center... A/A- 5.10% 10/1/02 1,180 1,185,263
Illinois Health Facilities
Authority Revenue
Refunding, Illinois
Masonic Medical Center... A/A- 5.00% 10/1/01 1,120 1,124,357
Illinois Health Facilities
Authority Revenue
Refunding, Illinois
Masonic Medical Center... A/A- 4.90% 10/1/00 825 827,714
</TABLE>
See Notes to Financial Statements.
79
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
Illinois Health
Facilities Authority
Revenue Refunding &
Improvement, Swedish
Covenant,
Series A.............. Baa1/A- 6.10% 8/1/08 $ 1,000 $ 1,033,280
Illinois State Sales Tax
Revenue, Series S..... A1/AAA 4.85% 6/15/06 11,300 11,276,722
Illinios State Toll
Highway Authority,
Toll Highway Priority
Revenue, Series A..... A1/A 3.50% 1/1/05 4,000 3,630,240
Illinois Health
Facilities Authority
Revenue Refunding,
Illinois Memorial
Hospital.............. VMIG1/NR 5.60% 1/1/16 1,930 1,930,000
Metropolitan Pier &
Exposition Authority,
Illinois Dedicated
State Tax Revenue..... A/A+ 6.40% 6/1/03 10,495 11,636,226
Metropolitan Pier &
Exposition Authority,
Illinois Dedicated
State Tax Revenue..... A/A+ 6.50% 6/1/05 2,960 3,336,482
Regional Transportation
Authority, Series A
(AMBAC Insured)....... Aaa/AAA 8.00% 6/1/03 2,785 3,357,067
------------
47,850,414
------------
IOWA--0.8%
Iowa Student Loan
Liquidity Corp.
Student Loan Revenue,
Series A.............. Aa1/NR 6.00% 3/1/98 3,000 3,104,850
------------
INDIANA--3.1%
Indiana Bond Bank,
Special Program,
Series A-2............ A/NR 4.75% 11/1/02 375 374,760
Indiana Bond Bank,
Special Program,
Series A-2............ A/NR 4.65% 11/1/01 375 374,599
Indiana Bond Bank
Revenue Guarantee,
State Revolving Fund
Program, Series A..... NR/A 5.80% 2/1/02 500 527,185
</TABLE>
See Notes to Financial Statements.
80
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
INDIANA (CONTINUED)
Indiana Bond Bank Revenue
Guarantee, State Revolving
Fund Program, Series A.... NR/A 5.60% 2/1/05 $ 700 $ 727,230
Indiana Health Facility,
Funding Authority Revenue,
Capital Access Designated
Pool...................... VMIG1/NR 5.60% 12/1/10 1,000 1,000,000
Indiana State Office
Community Building Capital
Complex Revenue Refunding,
State Office Building II
Facilities, Series D...... A1/A+ 6.50% 7/1/99 3,000 3,187,590
Indianapolis Economic
Development Water
Facilities Revenue
Refunding, Indianapolis
Water Co. Project......... A1/A+ 5.20% 5/1/01 5,810 5,948,162
------------
12,139,526
------------
MASSACHUSETTS--3.9%
Massachusetts Bay
Transportation Authority,
General Transportation
Systems, Series A,
Collateralized by U.S.
Government Securities
(Pre-refunded at 102 on
3/1/01)................... Aaa/A+ 7.00% 3/1/22 3,500 4,000,500
Massachusetts Municipal
Wholesale Electric Company
Supply System Revenue,
Series B.................. Aaa/AAA 4.50% 7/1/04 4,215 4,163,703
Massachusetts State General
Obligation, Series B...... A/A+ 9.25% 7/1/00 2,000 2,400,240
Massachusetts State
Refunding, Series A....... A1/A+ 6.25% 7/1/02 4,500 4,949,190
------------
15,513,633
------------
</TABLE>
See Notes to Financial Statements.
81
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
NEVADA--3.4 %
Clark County General
Obligation................ A1/A+ 7.00% 9/1/00 $ 6,705 $ 7,482,914
Las Vegas Refunding......... A1/A 6.40% 10/1/03 2,250 2,488,680
Nevada State Municipal Bond
Bank Project No. R-5,
Series A.................. Aa/AA 6.00% 5/1/02 1,000 1,083,500
Nevada State Municipal Bond
Bank Project No. R-5,
Series A.................. Aa/AA 4.50% 11/1/02 1,020 1,026,212
Nevada State Refunding,
Series C.................. Aa/AA 5.90% 4/1/01 1,000 1,074,230
------------
13,155,536
------------
NEW YORK--8.9%
New York City, General
Obligation, Series F...... Aaa/AAA 3.00% 11/15/00 3,000 2,857,260
New York City Municipal
Water Financing Authority
Water & Sewer Systems
Revenue, Series C,
Collateralized by U.S.
Government Securities
(Pre-refunded at 101.5 on
6/15/01) (FGIC Insured)... Aaa/AAA 7.00% 6/15/16 3,805 4,369,548
New York State Local
Assistance Corp., Series
A, Collateralized by U.S.
Government Securities
(Pre-refunded at 102 on
4/1/01)................... Aaa/AAA 7.25% 4/1/18 2,000 2,319,020
New York State Local
Assistance Corp., Series
B, Collateralized by U.S.
Government Securities
(Pre-refunded at 102 on
4/1/01)................... Aaa/AAA 7.50% 4/1/20 4,255 4,983,456
</TABLE>
See Notes to Financial Statements.
82
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
New York State Local
Assistance Corp., Series
C, Collateralized by U.S.
Government Securities
(Pre-refunded at 102 on
4/1/01)................... Aaa/AAA 7.00% 4/1/21 $ 825 $ 946,960
New York State Throughway
Authority, Highway &
Bridge Traffic Fund,
Series A.................. A/A- 6.00% 4/1/99 17,025 17,736,645
Triborough Bridge & Tunnel
Authority, New York
Revenue, Series R,
Collateralized by U.S.
Government Securities
(Pre-refunded at 100 on
1/1/00)................... Aaa/AAA 6.00% 1/1/20 1,500 1,604,865
------------
34,817,754
------------
NORTH CAROLINA--0.8%
North Carolina Municipal
Power Agency No. 1,
Catawba Electric Revenue,
(MBIA Insured)............ Aaa/AAA 7.25% 1/1/07 2,500 2,989,300
------------
PENNSYLVANIA--10.7%
Geisinger Authority Health
Systems, Series A......... NR/NR 5.50% 7/1/03 2,895 3,063,489
Pennsylvania
Intergovernmental
Cooperative Authority,
Special Tax Revenue, City
of Philadelphia Funding
Program Collateralized by
U.S. Government Securities
(Pre-refunded at 100 on
6/15/02).................. Aaa/AAA 6.80% 6/15/22 9,375 10,662,094
Pennsylvania
Intergovernmental
Cooperative Authority,
Special Tax Revenue, City
of Philadelphia Funding
Program (FGIC Insured).... Aaa/AAA 6.00% 6/15/00 7,000 7,497,280
</TABLE>
See Notes to Financial Statements.
83
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
PENNSYLVANIA (CONTINUED)
Philadelphia Gas Works
Revenue, Fourteenth
Series.................... Aaa/AAA 7.00% 7/1/02 $12,090 $ 13,759,992
Philadelphia Gas Works
Revenue, Fifteenth Series
(FSA Insured)............. Aaa/AAA 4.90% 8/1/02 1,350 1,378,903
Pittsburgh Water & Sewer
Authority, Water & Sewer
System Revenue, Series A,
(Pre-refunded at 102 on
9/1/01)................... Aaa/AAA 6.50% 9/1/14 5,000 5,642,850
------------
42,004,608
------------
SOUTH CAROLINA--1.3%
South Carolina State Public
SVC Authority Revenue,
Series A.................. A1/A+ 5.00% 7/1/01 5,000 5,137,900
------------
TENNESSEE--1.3%
Chattanooga-Hamilton County,
Hospital Authority
Hospital Revenue, Enlanger
Medical Center............ Aaa/AAA 5.63% 10/1/09 5,000 5,274,550
------------
TEXAS--1.2%
Dallas Independent School
District, Collateralized
by U.S. Government
Securities................ Aa/AAA 8.70% 8/1/00 1,000 1,188,280
Humble Independent School
District Refunding
(PSFG Insured)............ Aaa/AAA 6.00% 2/15/04 2,035 2,203,132
Texas State Public Financing
Authority, Series A....... Aa/AA 8.00% 10/1/99 1,000 1,134,560
------------
4,525,972
------------
VIRGINIA--1.7%
Fairfax County Refunding,
Series A.................. Aaa/AAA 5.80% 6/1/02 5,250 5,373,060
Virginia Beach Public
Improvement, Series A..... Aa/AA 6.85% 5/1/99 1,100 1,187,384
------------
6,560,444
------------
</TABLE>
See Notes to Financial Statements.
84
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
WASHINGTON--2.3%
King County General
Obligation, Series A. Aa1/AA+ 9.00% 12/1/99 $ 1,200 $ 1,407,888
Snohomish County Public
Utilities District
No. 001, Electric
Revenue Generation
System,
Series B (A.M.T.).... A1/A+ 5.15% 1/1/03 1,280 1,299,533
Washington State Health
Care Facility
Authority Revenue,
Fred Hutchinson
Cancer............... VMIG1/NR 6.00% 1/1/18 450 450,000
Washington State Health
Care Facility
Authority Revenue,
Fred Hutchinson
Cancer............... VMIG1/NR 6.00% 1/1/18 1,335 1,335,000
Washington State Public
Power Supply Systems,
Nuclear Project No. 1
Revenue, Series A,
Collateralized by
U.S. Government
Securities (Pre-
refunded at 102 on
7/1/99) (MBIA
Insured)............. Aaa/AAA 7.50% 7/1/15 1,420 1,603,279
Washington State Public
Power Supply Systems,
Nuclear Project No. 2
Revenue, Series B
(MBIA Insured)....... Aaa/AAA 5.10% 7/1/04 2,800 2,844,408
------------
8,940,108
------------
WEST VIRGINIA--1.7%
Pleasants County
Pollution Control
Revenue Refunding,
Monongahela Power
Co., Series B........ A1/NR 6.88% 4/1/98 6,105 6,502,558
------------
</TABLE>
See Notes to Financial Statements.
85
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
WISCONSIN--5.8%
Wisconsin Health
Facility Authority
Revenue, Franciscan
Health Care.......... VMIG1/A-1+ 5.50% 1/1/16 $ 235 $ 235,000
Wisconsin State General
Obligation, Series B. Aa/AA 7.00% 5/1/01 3,950 4,454,652
Wisconsin State General
Obligation, Series B. Aa/AA 7.00% 5/1/02 4,155 4,750,328
Wisconsin State General
Obligation, Series B. Aa/AA 7.00% 5/1/03 4,625 5,345,205
Wisconsin State General
Obligation, Series 2. Aa/AA 5.13% 11/1/08 3,000 3,039,270
Wisconsin State
Refunding, Series 3.. Aa/AA 4.25% 11/1/99 4,895 4,924,908
------------
22,749,363
------------
TOTAL INVESTMENTS
(COST
$370,618,759)(A)--
98.9%................. 387,423,990
Other assets in excess
of liabilities--1.1%.. 4,446,727
------------
NET ASSETS--100.0%...... $391,870,717
============
</TABLE>
- - -----------
Percentages indicated are based on net assets of $391,870,717.
(a) Represents cost for federal income tax and financial reporting purposes and
differs from the value by net unrealized appreciation of securities as
follows:
<TABLE>
<S> <C>
Unrealized appreciation........................................ $16,805,231
Unrealized depreciation........................................ --
-----------
Net unrealized appreciation.................................... $16,805,231
===========
</TABLE>
AMBAC--American Municipal Bond Assurance Corporation.
A.M.T.--Subject to Alternative Minimum Tax.
FGIC--Financial Guaranty Insurance Company.
FSA--Financial Security Assurance.
MBIA--Municipal Bond Insurance Association.
NR--No rating available.
PSFG--Permanent School Fund Guaranty.
See Notes to Financial Statements.
86
<PAGE>
PRAIRIE FUNDS
MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
MUNICIPAL BONDS--98.9%
ALASKA--0.3%
Alaska Student Loan
Corp., Student Loan
Revenue State
Assisted, Series A
(AMBAC Insured),
(A.M.T.).............. Aaa/AAA 6.13% 7/1/05 $ 800 $ 832,792
------------
ARIZONA--1.1%
Maricopa County School
District No. 028,
Kyrene Elementary,
Series B
(FGIC Insured)........ Aaa/AAA 6.00% 7/1/14 2,500 2,631,675
------------
CALIFORNIA--15.9%
Central Valley Financing
Authority,
Califogeneration
Project Revenue,
Carson Ice Generation
Project............... Bbb-/BBB- 6.00% 7/1/09 5,600 5,699,344
Cupertino Certificates
of Participation, Open
Space Acquisition
Project,
Collateralized by U.S.
Government Securities
(Pre-refunded at 102
on 4/1/01)............ NR/NR 7.13% 4/1/16 2,675 3,064,186
Fresno Health Facilities
Revenue, Holy Cross
Health System Corp.
(MBIA Insured)........ A1/AA 5.25% 12/1/05 1,850 1,922,446
Los Angeles Wastewater
Systems Revenue,
Series D,
Collateralized by U.S.
Government Securities
(Pre-refunded at 102
on 12/1/00) (MBIA
Insured).............. Aaa/AAA 6.70% 12/1/21 10,000 11,316,500
Northern California
Power Agency, Public
Power Revenue
Refunding, Geothermal
Project No. 3, Series
A..................... Aaa/AAA 5.60% 7/1/06 3,500 3,728,620
</TABLE>
See Notes to Financial Statements.
87
<PAGE>
PRAIRIE FUNDS
MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
CALIFORNIA (CONTINUED)
Northern California
Power Agency, Public
Power Revenue
Refunding, Geothermal
Project No. 3, Series
A.................... Aaa/AAA 5.65% 7/1/07 $ 4,800 $ 5,115,936
Northern California
Power Agency, Public
Power Revenue
Refunding, Geothermal
Project No. 3, Series
A.................... NR/NR 5.80% 7/1/09 4,000 4,309,440
Sacramento Cogeneration
Authority Revenue,
Procter & Gamble
Project.............. NR/BBB- 7.00% 7/1/05 1,500 1,666,005
Sacramento Cogeneration
Authority Revenue,
Procter & Gamble
Project.............. NR/BBB- 6.20% 7/1/06 2,500 2,567,950
------------
39,390,427
------------
COLORADO--12.2%
Denver City and County
Airport Revenue,
Series A (A.M.T.).... Baa/BB 8.50% 11/15/23 2,500 2,865,025
Denver City and County
Airport Revenue,
Series A (A.M.T.).... Baa/BB 8.00% 11/15/25 2,295 2,576,229
Denver City and County
Airport Revenue,
Series B (A.M.T.).... Baa/BB 7.25% 11/15/05 3,000 3,292,680
Denver City and County
Airport Revenue,
Series C (A.M.T.).... Baa/BB 6.50% 11/15/06 2,000 2,100,160
Denver City and County
Airport Revenue,
Series C (A.M.T.).... Baa/BB 6.13% 11/15/25 9,355 9,373,242
Denver City and County
Airport Revenue,
Series D (A.M.T.).... Baa/BB 7.75% 11/15/13 6,925 8,332,160
</TABLE>
See Notes to Financial Statements.
88
<PAGE>
PRAIRIE FUNDS
MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
COLORADO (CONTINUED)
Denver Metropolitan
Major League Baseball
Stadium District
Revenue Refunding,
Sales Tax, Baseball
Stadium Project
(FGIC Insured)........ Aaa/AAA 4.50% 10/1/04 $ 1,600 $ 1,593,600
------------
30,133,096
------------
FLORIDA--3.7%
Broward County
Educational Facilities
Authority Revenue,
Nova Southeastern
University Project
(Connie Lee Insured).. NR/AAA 5.70% 4/1/05 1,440 1,523,678
Florida State Board,
Education Capacity
Outlay, General
Obligation, Series D.. Aa/AA 5.13% 6/1/18 5,800 5,663,758
Orlando Florida
Utilities Commision
Water & Electric
Revenue, Series D..... Aa/AA- 5.00% 10/1/23 2,000 1,908,940
------------
9,096,376
------------
GEORGIA--12.7%
Fulton County School
District, General
Obligation............ Aa/AA 6.38% 5/1/10 5,000 5,716,650
Georgia State General
Obligation............ Aaa/AA+ 7.10% 9/1/09 8,500 10,358,185
Georgia State General
Obligation............ Aaa/AA+ 6.75% 9/1/11 10,000 11,956,500
Georgia State General
Obligation, Series F.. Aaa/AA+ 6.50% 12/1/05 3,060 3,530,750
------------
31,562,085
------------
ILLINOIS--11.0%
Chicago Airport Revenue
Refunding, 2nd Lien,
O'Hare International
Airport, Series C
(MBIA Insured)........ Aaa/AAA 5.75% 1/1/09 2,490 2,665,769
</TABLE>
See Notes to Financial Statements.
89
<PAGE>
PRAIRIE FUNDS
MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
ILLINOIS (CONTINUED)
Cook County Community
College, District No.
508 Lease, Series C
(MBIA Insured)........ Aaa/NR 7.70% 12/1/04 $ 5,000 $ 6,090,800
Cook County, General
Obligation, Series B.. Aaa/AAA 5.50% 11/15/22 2,535 2,511,982
Illinois Health
Facilities Authority
Revenue Refunding, Bro
Menn Healthcare (SPA--
Bankers Trust
Co.)(FGIC Insured).... Aaa/AAA 6.00% 8/15/05 1,000 1,087,560
Illinois Health
Facilities Authority
Revenue Refunding &
Improvement, Swedish
Covenant,
Series A.............. Baa1/A- 6.10% 8/1/08 2,600 2,686,528
Illinois Health
Facilities Authority
Revenue Refunding &
Improvement, Swedish
Covenant,
Series A.............. Baa1/A- 6.30% 8/1/13 2,375 2,446,298
Illinois State Sales Tax
Revenue Refunding,
Series Q.............. A1/AAA 5.75% 6/15/06 5,000 5,376,300
Winnebago & Boone
Counties School
District No. 205 (CGIC
Insured).............. Aaa/AAA 7.35% 2/1/04 3,600 4,280,976
------------
27,146,213
------------
INDIANA--3.5%
Indiana State Office
Building Commission,
Correctional
Facilities Revenue,
Series A.............. Aaa/AAA 5.50% 7/1/20 5,000 5,002,100
Indiana Transmission
Financing Authority
Highway Revenue,
Series A.............. A1/A+ 6.80% 12/1/16 1,200 1,411,512
</TABLE>
See Notes to Financial Statements.
90
<PAGE>
PRAIRIE FUNDS
MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ----- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
INDIANA (CONTINUED)
Indiana University
Revenue, Series K..... Aa/AA- 6.50% 8/1/05 $ 1,935 $ 2,197,289
------------
8,610,901
------------
MASSACHUSETTS--12.4%
Massachusetts Municipal
Electric Co., Power
Supply Systems
Revenue, Series B..... A/BBB+ 6.63% 7/1/03 4,535 5,060,516
Massachusetts State
Refunding, Series A... A1/A+ 6.25% 7/1/02 12,000 13,197,840
Massachusetts State
Refunding, Series B... A1/A+ 5.30% 11/1/05 2,300 2,395,611
Massachusetts State
Refunding, Series B... A1/A+ 5.40% 11/1/06 1,730 1,813,075
New England Educational
Loan Marketing Corp.,
Massachusetts Student
Loan Revenue
Refunding,
Series G.............. A1/A- 5.20% 8/1/02 8,000 8,160,480
------------
30,627,522
------------
MISSOURI--1.6%
Sikeston Electric
Revenue Refunding
(MBIA Insured)........ Aaa/AAA 6.00% 6/1/05 3,710 4,069,165
------------
NEVADA--1.9%
Clark County Industrial
Development Revenue
Refunding, Nevada
Power Co. Project,
Series C (AMBAC
Insured).............. Aaa/AAA 7.20% 10/1/22 4,115 4,711,387
------------
NEW YORK--0.8%
New York City General
Obligation, Sub Series
A-9................... A1/A+ 5.10% 8/1/18 2,000 2,000,000
------------
OHIO--2.0%
Columbus School
District, 144A*....... NR/NR 9.39% 5/1/97 688 702,076
</TABLE>
See Notes to Financial Statements.
91
<PAGE>
PRAIRIE FUNDS
MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ----- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
OHIO (CONTINUED)
Ohio State Highway,
Series T............. Aa/AAA 4.80% 5/15/02 $ 1,600 $ 1,644,592
Ohio State Public
Facilities
Commission, Higher
Education Capital
Facilities, Series II
A
(AMBAC Insured)...... Aaa/AAA 4.30% 12/1/08 2,890 2,676,920
------------
5,023,588
------------
OKLAHOMA--1.5%
Oklahoma State
Industrial Authority
Revenue Refunding,
Health Facilities,
Sisters of Mercy,
Series A............. Aa/AA 5.20% 6/1/05 3,600 3,719,016
------------
PENNSYLVANIA--0.5%
Philadelphia Gas Works
Revenue, Fifteenth
Series, (FSA
Insured)............. Aaa/AAA 5.13% 8/1/05 1,220 1,248,255
------------
RHODE ISLAND--2.1%
Rhode Island Depositors
Economic Protection
Corp., Series A (FSA
and MBIA Insured).... Aaa/AAA 6.30% 8/1/05 4,640 5,182,880
------------
TENNESSEE--5.0%
Knox County Health,
Educational & Housing
Facilities Board,
Hospital Facilities
Revenue Refunding,
Fort Sanders Alliance
(MBIA Insured)....... Aaa/AAA 7.25% 1/1/08 8,900 10,731,709
Knox County Health,
Educational & Housing
Facilities Board,
Hospital Facilities
Revenue Refunding,
Fort Sanders Alliance
(MBIA Insured)....... Aaa/AAA 7.25% 1/1/09 1,360 1,649,299
------------
12,381,008
------------
</TABLE>
See Notes to Financial Statements.
92
<PAGE>
PRAIRIE FUNDS
MUNICIPAL BOND FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal
S&P Maturity Amount Value
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ----- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
TEXAS--5.9%
Texas City Industrial
Development Corp.,
Marine Terminal
Revenue Refunding,
Arco Pipe Line Co.
Project.............. A1/A 7.38% 10/1/20 $ 4,650 $ 5,791,436
Texas State College
Student Loan
(A.M.T.)............. Aa/AA 6.50% 8/1/07 4,000 4,362,360
Texas State Public
Finance Authority,
Series A............. Aa/AA 8.00% 10/1/99 3,930 4,458,821
------------
14,612,617
------------
WASHINGTON--2.8%
Chelan County Public
Utilities District
No. 001, Revenue,
Series E............. A1/A+ 5.70% 7/1/08 2,150 2,199,257
Washington State Public
Power Supply System
Nuclear Project No. 2
Revenue, Series C.... NR/AAA 7.63% 7/1/10 4,000 4,673,720
------------
6,872,977
------------
WISCONSIN--1.7%
Wisconsin State General
Obligation, Series B. Aa/AA 5.50% 5/1/09 4,160 4,290,083
------------
WYOMING--0.3%
Wyoming Community
Development
Authority, Single
Family, Series D
(FHA/VA Mortgage
Insured)............. Aa/AA 7.60% 6/1/17 800 856,440
------------
TOTAL INVESTMENTS
(COST
$231,324,230)(A)--
98.9%................. 244,998,503
Other assets in excess
of liabilities--1.1%.. 2,824,647
------------
NET ASSETS--100.0%...... $247,823,150
============
</TABLE>
See Notes to Financial Statements.
93
<PAGE>
PRAIRIE FUNDS
MUNICIPAL BOND FUND
- - -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - -------------------------------------------------------------------------------
- - -----------
Percentages indicated are based on net assets of $247,823,150.
* Securities exempt from registration under Rule 144A of the Securities Act
of 1993. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(a) Represents cost for federal income tax and financial reporting purposes
and differs from the value by net unrealized appreciation of the
securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation......................................... $13,674,273
Unrealized depreciation......................................... --
-----------
Net unrealized appreciation..................................... $13,674,273
===========
</TABLE>
AMBAC--American Municipal Bond Assurance Corporation.
A.M.T.--Subject to Alternative Minimum Tax.
CGIC--Capital Guaranty Insurance Corporation.
FGIC--Financial Guaranty Insurance Company.
FHA/VA--Federal Housing Association/Veterans Administration.
FSA--Financial Security Assurance.
MBIA--Municipal Bond Insurance Association.
NR--No rating available.
SPA--Standby Purchase Agreement.
See Notes to Financial Statements.
94
<PAGE>
PRAIRIE FUNDS
U.S. GOVERNMENT MONEY MARKET FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Amortized
Maturity Amount Cost
Description Rate Date (000) (Note 2(a))
----------- ------ -------- --------- -----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--82.5%
U.S. TREASURY BILLS--82.5%
U.S. Treasury Bill..................... 5.35%* 1/11/96 $10,000 $ 9,985,194
U.S. Treasury Bill..................... 5.32%* 1/18/96 5,000 4,987,451
U.S. Treasury Bill..................... 5.34%* 1/25/96 10,000 9,964,400
U.S. Treasury Bill..................... 5.32%* 2/15/96 7,500 7,450,125
U.S. Treasury Bill..................... 5.30%* 3/7/96 7,500 7,427,194
U.S. Treasury Bill..................... 4.82%* 3/14/96 7,500 7,426,696
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $47,241,060).................... 47,241,060
-----------
TOTAL INVESTMENTS IN SECURITIES
(COST $47,241,060).................... 47,241,060
-----------
REPURCHASE AGREEMENTS--17.8%
Repurchase agreement with National
Westminster, dated 12/29/95, with a
maturity value of $10,206,403 (see
Footnote A).......................... 5.65% 1/2/96 10,200 10,200,000
-----------
TOTAL INVESTMENTS
(COST $57,441,060)(A)--100.3%......... 57,441,060
Liabilities in excess of other assets--
(0.3%)................................ (177,000)
-----------
NET ASSETS--100.0%...................... $57,264,060
===========
</TABLE>
- - -----------
Percentages indicated are based on net assets of $57,264,060.
(a) Cost for federal income tax and financial reporting purposes are the same.
* Yield at purchase.
Footnote A: Collateralized by $10,100,000 U.S. Treasury Note, due 03/31/97;
with a value of $10,474,323.
See Notes to Financial Statements.
95
<PAGE>
PRAIRIE FUNDS
MONEY MARKET FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal Amortized
S&P Maturity Amount Cost
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
BANKERS ACCEPTANCES--4.9%
Bank of Tokyo............... P-1/A-1 5.81% 1/8/96 $ 5,000 $ 4,994,351
Dai-Ichi Kangyo............. P-1/A-1 5.81% 2/15/96 5,000 4,963,688
------------
TOTAL BANKERS ACCEPTANCES
(COST $9,958,039).......... 9,958,039
------------
CERTIFICATES OF DEPOSIT--39.7%
U.S. BRANCHES OF FOREIGN
BANKS--39.7%
ABN Amro.................... P-1/A-1+ 5.78% 2/1/96 7,000 7,000,494
Bank of Montreal............ P-1/A-1+ 5.78% 1/17/96 5,000 5,000,060
Banque Nationale de Paris... P-1/A-1 5.75% 2/5/96 7,000 7,000,251
Canadian Imperial Bank of
Commerce.................. P-1/A-1+ 5.60% 3/12/96 7,000 7,000,000
Commerz Bank AG............. P-1/A-1+ 5.77% 1/17/96 5,000 5,000,044
Fuji Bank, Ltd. ............ P-1/A-1 6.09% 1/18/96 7,000 7,000,099
Industrial Bank of Japan.... P-1/A-1 5.82% 1/17/96 5,000 4,999,747
Mitsubishi Bank, Ltd. ...... P-1/A-1+ 5.86% 3/6/96 7,000 7,000,849
National Westminster Bank... P-1/A-1+ 5.78% 1/16/96 5,000 5,000,054
Rabobank.................... P-1/A-1+ 5.75% 1/22/96 5,000 5,000,029
Sanwa Bank, Ltd. ........... P-1/A-1+ 6.03% 1/17/96 7,000 6,999,953
Societe Generale............ P-1/A-1 5.77% 2/2/96 7,000 7,000,392
Sumitomo Bank............... P-1/A-1 6.06% 1/18/96 7,000 7,000,066
------------
TOTAL CERTIFICATES OF DEPOSIT
(COST $81,002,038)......... 81,002,038
------------
COMMERCIAL PAPER--43.7%
DOMESTIC--34.4%
AT&T........................ P-1/A-1+ 5.54% 3/19/96 7,000 6,915,977
Barclays Funding............ P-1/A-1+ 5.67% 1/19/96 7,500 7,478,737
Ciesco L.P. ................ P-1/A-1+ 5.70% 1/19/96 7,500 7,478,625
Corporate Asset
Funding Co., Inc. ........ P-1/A-1+ 5.65% 2/9/96 7,000 6,957,154
Exxon Imperial.............. P-1/A-1+ 5.62% 1/16/96 6,000 5,985,950
Ford Motor Credit........... P-1/A-1 5.63% 2/13/96 7,500 7,449,565
Goldman Sachs............... P-1/A-1+ 5.55% 4/2/96 7,000 6,900,717
Morgan Stanley & Co. ....... P-1/A-1+ 6.00% 1/3/96 7,000 6,997,667
Nestle Capital.............. P-1/A-1+ 5.73% 1/12/96 7,000 6,987,744
Philip Morris............... P-1/A-1 5.72% 1/19/96 7,000 6,979,980
------------
70,132,116
------------
</TABLE>
See Notes to Financial Statements.
96
<PAGE>
PRAIRIE FUNDS
MONEY MARKET FUND
- - -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal Amortized
S&P Maturity Amount Cost
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
FOREIGN--9.3%
Bayerische Vereinsbank..... P-1/A-1+ 5.73% 1/8/96 $ 7,000 $ 6,992,201
Dresdner Finance........... P-1/A-1+ 5.69% 1/3/96 5,000 4,998,419
Deutsche Bank.............. P-1/A-1+ 5.74% 1/12/96 7,000 6,987,723
------------
18,978,343
------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST
$89,110,459).............. 89,110,459
------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS--0.0%
Small Business
Administration,
Pool #500870V*............ NR/NR 7.63% 4/25/96 6 5,887
------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(AMORTIZED COST $5,887)... 5,887
------------
TOTAL INVESTMENTS IN
SECURITIES (AMORTIZED COST
$180,076,423)............. 180,076,423
------------
REPURCHASE AGREEMENTS--12.3%
Repurchase agreement with
Daiwa Securities, dated
12/29/95, with a maturity
value of $15,009,166 (see
Footnote A).............. NR/NR 5.50% 1/2/96 15,000 15,000,000
Repurchase agreement with
National Westminster
Bank, dated 12/29/95,
with a maturity value of
$10,106,431 (see
Footnote B).............. NR/NR 5.65% 1/2/96 10,100 10,100,000
------------
TOTAL REPURCHASE AGREEMENTS
(AMORTIZED COST
$25,100,000).............. 25,100,000
------------
TOTAL INVESTMENTS
(AMORTIZED COST
$205,176,423)(A)--100.6%.. 205,176,423
Liabilities in excess of
other assets--(0.6%)...... (1,117,205)
------------
NET ASSETS--100.0%.......... $204,059,218
============
</TABLE>
- - -----------
Percentages indicated are based on net assets of $204,059,218.
(a) Cost for federal income tax and financial reporting purposes are the same.
NR--No rating available.
* Variable rate security. Interest rate stated is as of December 31, 1995.
Maturity date reflects the later of the next rate change or the next put
date.
Footnote A: Collateralized by $14,800,000 U.S. Treasury Note, 5.88%, due
07/31/97; with a value of $15,313,017.
Footnote B: Collateralized by $10,000,000 U.S. Treasury Note, 6.63%, due
03/31/97; with a value of $10,287,625.
See Notes to Financial Statements.
97
<PAGE>
PRAIRIE FUNDS
MUNICIPAL MONEY MARKET FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal Amortized
S&P Maturity Amount Cost
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
ALASKA--3.3%
City of Valdez, Marine
Terminal Revenue, CP,
Refunding, ARCO
Transportation
Project, Series A..... VMIG1/A-1 3.50% 2/5/96 $ 3,500 $ 3,500,000
City of Valdez, Marine
Terminal Revenue, CP,
Refunding, ARCO
Transportation
Project, Series A,
1994 A................ VMIG1/A-1 3.55% 1/5/96 4,000 4,000,000
------------
7,500,000
------------
ALABAMA--2.6%
Phenix City Alabama
(A.M.T.)(LC
ABN Amro)............. P-1/NR 3.55% 2/7/96 6,000 6,000,000
------------
CALIFORNIA--4.2%
Southeast Resource
Recovery Facility,
Authority of
California Lease
Revision, VRDN, Series
A, (LC Industrial Bank
of Japan Ltd)......... VMIG1/A-1 5.15%* 12/1/18 9,500 9,500,000
------------
COLORADO--4.4%
Burke County
(LC Credit Swisse).... VMIG1/A-1+ 3.40% 3/7/96 5,000 5,000,000
Colorado Student
Obligation Bond
Authority, VRDN,
Student Loan Revenue,
Series 1990A (A.M.T.)
(LC Student Loan
Marketing
Association).......... VMIG1/NR 5.20%* 9/1/24 5,000 5,000,000
------------
10,000,000
------------
FLORIDA--8.4%
Florida Municipal Power
(LC First Union)...... P-1/A-1 3.50% 2/8/96 7,500 7,500,000
West Orange Hospital
(LC Rabobank)......... VMIG1/NR 3.75% 1/3/96 5,600 5,600,000
West Orange Hospital
(LC Rabobank)......... VMIG1/NR 3.80% 1/11/96 6,000 6,000,000
------------
19,100,000
------------
</TABLE>
See Notes to Financial Statements.
98
<PAGE>
PRAIRIE FUNDS
MUNICIPAL MONEY MARKET FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal Amortized
S&P Maturity Amount Cost
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
GEORGIA--3.2%
Georgia Municipal Gas
(LC Wachovia Bank).... A1+/NR 3.80% 2/5/96 $ 5,000 $ 5,000,000
Thomaston--Upson County,
Industrial Development
Authority, Yamaha
Music Manufacturing,
(A.M.T.) (LC Bank of
Tokyo Ltd.)........... NR/A-1 5.80%* 8/1/18 2,300 2,300,000
------------
7,300,000
------------
IOWA--2.6%
Iowa School Corps.,
Warrant Certificates,
Iowa School Cash
Anticipation Program,
Series A
(CGIC Insured)........ VMIG1/SP-1+ 4.75% 6/28/96 6,000 6,025,412
------------
ILLINOIS--2.7%
Southwestern Illinois
Development Authority,
Environmental Impact
Revenue, Shell Oil Co.
Wood River Project,
(A.M.T.).............. VMIG1/AAA 6.15% 10/1/25 6,175 6,175,000
------------
INDIANA--1.6%
Seymour Economic
Development Authority
Revenue, Kobelco Metal
Powder Project
(A.M.T.) (LC
Industrial Bank of
Japan, Limited)....... NR/A-1 5.80% 12/1/97 3,700 3,700,000
------------
KENTUCKY--4.8%
Bowling Green,
Industrial Building
Revenue, VRDN, Bando
Manufacturing America
Project (A.M.T.) (LC
Industrial Bank of
Japan, New York)...... NR/A-1 5.80%* 12/1/07 2,655 2,655,000
</TABLE>
See Notes to Financial Statements.
99
<PAGE>
PRAIRIE FUNDS
MUNICIPAL MONEY MARKET FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal Amortized
S&P Maturity Amount Cost
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
KENTUCKY (CONTINUED)
Bowling Green,
Industrial Building
Revenue, VRDN, Twin
Faste Inc. Project
(A.M.T.) (LC
Industrial Bank of
Japan)................ NR/A-1 5.80%* 3/1/08 $ 2,400 $ 2,400,000
Henderson County, Solid
Waste Disposal
Revenue, VRDN, Hudson
Foods Inc. Project
(A.M.T.)
(LC Rabobank
Netherland)........... VMIG1/NR 5.10%* 3/1/15 2,000 2,000,000
Kentucky Higher
Education Student Loan
Corp., Insured Student
Loan, Series E,
(A.M.T.) (LC Sumitomo
Bank, Chicago)........ VMIG1/A-1 5.60% 12/1/11 4,000 4,000,000
------------
11,055,000
------------
LOUISIANA--5.3%
New Orleans Exhibition
Hall Authority, Series
B, (A.M.T.) (LC Sanwa
Bank Ltd.)............ VMIG1/A-1 5.50% 7/1/18 5,000 5,000,000
State of Louisiana
(LC Credit Locale).... VMIG1/A-1+ 3.80% 1/3/96 7,000 7,000,000
------------
12,000,000
------------
MISSOURI--3.4%
Missouri Higher
Education Loan
Authority, VRDN,
Series A (A.M.T.) (LC
National Westminster
Place)................ VMIG1/NR 5.25%* 6/1/17 3,000 3,000,000
Burlington G&E VRDN..... P-1/A-1+ 3.65%* 3/11/96 4,800 4,800,000
------------
7,800,000
------------
</TABLE>
See Notes to Financial Statements.
100
<PAGE>
PRAIRIE FUNDS
MUNICIPAL MONEY MARKET FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal Amortized
S&P Maturity Amount Cost
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
NEW HAMPSHIRE--4.4%
New Hampshire Business
Finance Authority,
Pollution Control
Revenue Refunding,
Public Service Co. of
New Hampshire Project,
VRDN, Series 1992D,
(A.M.T.) (LC Barclays
Bank PLC)............. VMIG1/A-1+ 5.15%* 5/1/21 $ 10,000 $ 10,000,000
------------
NEVADA--4.8%
Clark County Industrial
Development Revenue,
Nevada Power Co.
Project, Series A,
(A.M.T.) (LC Bank
Barcia Place)......... NR/A-1+ 5.35% 10/1/30 8,000 8,000,000
Washoe County Nevada (LC
Union Bank of
Switzerland).......... P-1/A-1+ 4.00% 1/22/96 3,000 3,000,000
------------
11,000,000
------------
NEW YORK--11.4%
New York City General
Obligation, Series F-6
(LC Noeinchukin)...... VMIG1/A-1+ 5.50% 2/15/18 4,200 4,200,000
New York City Housing
Development Corp.
Mortgage Revenue,
Multifamily 400 West
59th-A-2 (A.M.T.)
(LC Bayerische
Hypotheken)........... NR/A-1 5.00% 9/1/30 9,000 9,000,000
New York State Energy
Research & Development
Authority, Pollution
Control Revenue, New
York Electric & Gas--D
(LC Union Bank of
Switzerland).......... VMIG1/A-1+ 5.30% 10/1/29 6,000 6,000,000
</TABLE>
See Notes to Financial Statements.
101
<PAGE>
PRAIRIE FUNDS
MUNICIPAL MONEY MARKET FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal Amortized
S&P Maturity Amount Cost
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
NEW YORK (CONTINUED)
New York State Energy
Research & Development
Authority, Pollution
Control Revenue,
Niagara Power Corp.
Project--B, (A.M.T.)
(LC Morgan Guaranty
New York)............. NR/A-1+ 5.60% 7/1/27 $ 2,000 $ 2,000,000
St. Lawrence County
Industrial Development
Agency, Environmental
Impact Revenue
Reynolds Metals Co.
Project, (A.M.T.) (LC
Royal Bank of Canada). VMIG1/A-1+ 5.00% 5/1/25 4,900 4,900,000
------------
26,100,000
------------
OREGON--1.8%
State of Oregon General
Obligation, VRDN,
Veterans' Welfare
Bond, Series 1973F,
(LC Mitsubishi Bank
Ltd.)................. VMIG1/A-1 5.15%* 12/1/17 4,000 4,000,000
------------
PENNSYLVANIA--6.4%
Allegheny County
Pennsylvania (LC
Norinchukin).......... P-1/A-1+ 3.70% 2/2/96 3,700 3,700,000
Carbon County
Pennsylvania (A.M.T.)
(LC NatWest).......... P-1/A-1+ 3.45% 3/6/96 7,000 7,000,000
Montgomery County (LC
Deutsche Bank)........ P-1/A-1+ 3.80% 2/7/96 3,800 3,800,000
------------
14,500,000
------------
RHODE ISLAND--1.3%
Providence Off Street
Public Parking
Facility Revenue,
VRDN, Wash Street
Garage Corp. Project,
(A.M.T.) (LC Morgan
Guaranty Trust)....... NR/A-1+ 5.10%* 12/1/22 3,000 3,000,000
------------
</TABLE>
See Notes to Financial Statements.
102
<PAGE>
PRAIRIE FUNDS
MUNICIPAL MONEY MARKET FUND
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal Amortized
S&P Maturity Amount Cost
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
SOUTH CAROLINA--3.0%
South Carolina Jobs,
Economic Development
Authority, VRDN,
Hospital Facilities
Revenue, Baptist
Healthcare System (LC
Credit Local de
France)............... VMIG1/A-1+ 5.05%* 8/1/17 $ 7,000 $ 7,000,000
------------
TENNESSEE--2.8%
Memphis Shelby County
(A.M.T.) (LC Canadian
Imperial Bank of
Commerce)............. P-1/A-1+ 3.70% 2/22/96 6,405 6,405,000
------------
TEXAS--9.9%
Brazos Higher Education
Authority, Student
Loan Revenue, VRDN,
Series B-1 (A.M.T.)
(LC
Student Loan Marketing
Assoc.) .............. VMIG1/NR 5.20%* 6/1/23 6,000 6,000,000
Brazos River Texas
(A.M.T.) (LC Canadian
Imperial Bank of
Commerce)............. VMIG1/A-1+ 3.95% 1/18/96 3,000 3,000,000
Gulf Coast Industrial
Development Authority,
Texas Solid Waste
Disposal Revenue,
Citgo Petroleum Corp.
Project (A.M.T.)
(LC NationsBank of
Texas)................ VMIG1/NR 6.15% 5/1/25 2,700 2,700,000
Milam County Industrial
Development Corp.,
Pollution Control
Revenue Refunding,
Aluminum Co. of
America Project (LC
Credit Suisse)........ VMIG1/NR 4.60% 3/1/01 5,000 5,000,000
</TABLE>
See Notes to Financial Statements.
103
<PAGE>
PRAIRIE FUNDS
MUNICIPAL MONEY MARKET FUND
- - -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1995
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratings
Moody's/ Principal Amortized
S&P Maturity Amount Cost
Description (Unaudited) Rate Date (000) (Note 2(a))
----------- ----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
TEXAS (CONTINUED)
Panhandle Plains Higher
Education Authority
Revenue, VRDN,
Student Loan Revenue,
Series A, (A.M.T.)
(LC Student Loan
Marketing
Association)......... VMIG1/NR 5.20%* 6/1/21 $ 6,000 $ 6,000,000
------------
22,700,000
------------
UTAH--2.4%
Emery County (LC Credit
Suisse).............. P-1/A-1+ 3.90% 1/10/96 5,500 5,500,000
------------
WEST VIRGINIA--2.6%
West Virginia Public
Energy (A.M.T.) (LC
Swiss Bank).......... P-1/A-1+ 3.70% 2/22/96 6,000 6,000,000
------------
WYOMING--2.4%
Sweetwater City,
Wyoming (A.M.T.) (LC
West Deutsche
LandesBank).......... VMIG1/A-1+ 3.70% 2/1/96 5,400 5,400,000
------------
TOTAL INVESTMENTS--99.7%
(COST
$227,760,412)(A)...... 227,760,412
Other assets in excess
of liabilities--0.3%.. 750,866
------------
NET ASSETS--100.0%...... $228,511,278
============
</TABLE>
- - -----------
Percentages indicated are based on net assets of $228,511,278.
(a) Cost for federal income tax and financial reporting purposes are the same.
A.M.T.--Subject to Alternative Minimum Tax.
CGIC--Capital Guaranty Insurance Corporation.
CP--Commercial Paper.
LC--Letter of Credit.
NR--No rating available.
VRDN--Variable Rate Demand Note.
* Variable rate security. Interest rate stated is as of December 31, 1995.
Maturity date reflects the later of the next rate change or the next put
date.
See Notes to Financial Statements.
104
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
105
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managed
Assets Income Managed Equity
Fund Assets Fund Income Fund
------------- ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value
(cost $46,747,002, $8,788,919,
$246,097,346, $250,136,384,
$78,317,453, $96,241,231 and
$168,543,796, respectively).......... $55,015,009 $9,512,982 $287,695,105
Repurchase Agreements (cost $0, $0, $0,
$0, $0, $0 and $20,857,000,
respectively)........................ -- -- --
Cash................................... 23,959 27,271 --
Cash denominated in foreign currencies. -- -- --
Receivable for investment securities
sold................................. -- -- --
Receivable for Fund shares sold........ 42,814 16,051 59,398
Receivable from Adviser................ -- -- --
Dividends receivable................... 130,722 10,670 1,011,718
Interest receivable.................... 341,392 31,618 98,743
Foreign tax reclaim receivable......... -- -- --
Deferred organization expenses......... 76,450 61,278 60,637
Prepaid expenses and other assets...... 20,666 5,397 7,051
----------- ---------- ------------
Total Assets.......................... 55,651,012 9,665,267 288,932,652
----------- ---------- ------------
LIABILITIES:
Advisory fees payable.................. 32,187 1,596 80,927
Administration fees payable............ 9,160 534 33,314
Shareholder Services fees payable
(Class A Shares)..................... 30,702 4,618 1,548
Shareholder Services fees payable
(Class B Shares)..................... 1,269 486 302
12b-1 fees payable (Class B Shares).... 4,502 1,419 892
Bank overdrafts........................ -- -- 438,819
Dividends payable...................... 19,103 2,812 847,092
Payable for Fund shares redeemed....... 59,709 -- --
Payable for investment securities
purchased............................ -- 23,593 --
Payable for variation margin........... -- -- --
Other accrued expenses................. 29,053 31,208 136,231
----------- ---------- ------------
Total Liabilities..................... 185,685 66,266 1,539,125
----------- ---------- ------------
NET ASSETS.............................. $55,465,327 $9,599,001 $287,393,527
=========== ========== ============
</TABLE>
See Notes to Financial Statements.
106
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Special International
Growth Opportunities Equity Intermediate
Fund Fund Fund Bond Fund
------ ------------- ------------- ------------
<S> <C> <C> <C>
$295,869,250 $93,777,555 $102,116,486 $175,761,194
-- -- -- 20,857,000
-- 7,474 89,437 1,010
-- -- 948,475 --
5,224,933 -- -- --
103,710 13,900 447,060 56,077
-- -- -- 192,506
634,710 33,175 129,246 --
5,165 2,865 960,435 2,452,092
-- -- 55,468 --
59,746 60,194 60,697 38,759
7,172 3,042 3,482 13,068
- - ------------ ----------- ------------ ------------
301,904,686 93,898,205 104,810,786 199,371,706
- - ------------ ----------- ------------ ------------
139,215 39,946 31,952 53,803
42,597 11,526 10,626 25,102
2,545 359 1,592 3,312
148 10 90 136
437 28 256 451
262,146 -- -- --
844,773 180,457 203,585 929,545
326,751 -- 634 --
1,593,065 -- -- --
-- -- 72,514 --
151,663 52,936 100,160 75,686
- - ------------ ----------- ------------ ------------
3,363,340 285,262 421,409 1,088,035
- - ------------ ----------- ------------ ------------
$298,541,346 $93,612,943 $104,389,377 $198,283,671
============ =========== ============ ============
</TABLE>
See Notes to Financial Statements.
107
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managed
Assets Income Managed Equity
Fund Assets Fund Income Fund
------------- ----------- -----------
<S> <C> <C> <C>
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE:
CLASS A SHARES:
Net Assets........................... $51,996,986 $8,355,636 $ 2,872,994
Shares of beneficial interest issued
and outstanding, $0.001 par value,
unlimited number of shares
authorized......................... 3,576,517 726,432 235,161
----------- ---------- ------------
Net Asset Value per Share............ 14.54 11.50 12.22
Maximum Sales Charge................. 0.68* 0.54* 0.58*
----------- ---------- ------------
Maximum Offering Price............... $ 15.22 $ 12.04 $ 12.80
=========== ========== ============
CLASS B SHARES:
Net Assets........................... $ 2,174,744 $ 832,603 $ 593,200
Shares of beneficial interest issued
and outstanding, $0.001 par value,
unlimited number of shares
authorized......................... 149,364 72,716 48,550
----------- ---------- ------------
Net Asset Value per Share............ $ 14.56 $ 11.45 $ 12.22
=========== ========== ============
CLASS I SHARES:
Net Assets........................... $ 1,293,597 $ 410,762 $283,927,333
Shares of beneficial interest issued
and outstanding, $0.001 par value,
unlimited number of shares
authorized......................... 88,785 35,843 23,259,373
----------- ---------- ------------
Net Asset Value per Share............ $ 14.57 $ 11.46 $ 12.21
=========== ========== ============
COMPOSITION OF NET ASSETS:
Shares of beneficial interest, at
par................................ $ 3,815 $ 835 $ 23,544
Additional paid-in-capital........... 47,372,999 8,874,025 240,515,461
Accumulated net realized gains
(losses) from investment
transactions....................... (179,714) 5 5,265,350
Undistributed net investment income
(loss)............................. 220 73 (8,587)
Net unrealized appreciation on
investments........................ 8,268,007 724,063 41,597,759
Net unrealized appreciation of assets
and liabilities denominated in
foreign currencies and financial
futures............................ -- -- --
----------- ---------- ------------
NET ASSETS, DECEMBER 31, 1995.......... $55,465,327 $9,599,001 $287,393,527
=========== ========== ============
</TABLE>
- - -----------
* Sales charge is 4.50% of Maximum Offering Price.
** Sales charge is 3.00% of Maximum Offering Price.
See Notes to Financial Statements.
108
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Special International
Opportunities Equity Intermediate
Growth Fund Fund Fund Bond Fund
----------- ------------- ------------- ------------
<S> <C> <C> <C>
$ 4,329,204 $ 671,776 $ 2,749,124 $ 6,094,679
361,669 55,070 246,447 744,997
------------ ----------- ------------ ------------
11.97 12.20 11.16 8.18
0.56* 0.57* 0.53* 0.25**
------------ ----------- ------------ ------------
$ 12.53 $ 12.77 $ 11.69 $ 8.43
============ =========== ============ ============
$ 268,039 $ 15,387 $ 192,707 $ 259,384
22,438 1,269 17,292 31,701
------------ ----------- ------------ ------------
$ 11.95 $ 12.12 $ 11.14 $ 8.18
============ =========== ============ ============
$293,944,103 $92,925,780 $101,447,546 $191,929,608
24,559,453 7,623,036 9,079,890 23,455,341
------------ ----------- ------------ ------------
$ 11.97 $ 12.19 $ 11.17 $ 8.18
============ =========== ============ ============
$ 24,944 $ 7,679 $ 9,344 $ 24,232
247,530,554 78,254,290 95,968,721 188,432,293
5,249,304 (113,066) 1,502,766 2,609,748
3,678 3,938 134,091 --
45,732,866 15,460,102 5,875,255 7,217,398
-- -- 899,200 --
------------ ----------- ------------ ------------
$298,541,346 $93,612,943 $104,389,377 $198,283,671
============ =========== ============ ============
</TABLE>
See Notes to Financial Statements.
109
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Intermediate
International Municipal
Bond Fund Bond Fund Bond Fund
--------- ------------- ------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value
(cost $108,844,126, $14,692,171,
$370,618,759, $231,324,230,
$47,241,060, $180,076,423 and
$227,760,412, respectively)......... $115,115,920 $15,119,887 $387,423,990
Repurchase agreements (amortized cost
$11,167,000, $0, $0, $0,
$10,200,000, $25,100,000 and $0,
respectively)....................... 11,167,000 -- --
Cash.................................. -- 20,834 --
Receivable for investment securities
sold................................ -- -- --
Receivable for Fund shares sold....... 58,546 5,713 2,889
Receivable from Adviser............... -- -- 142,179
Interest receivable................... 1,667,756 380,503 6,122,544
Unrealized appreciation on forward
foreign currency contracts.......... -- 108,092 --
Deferred organization expenses........ 57,260 56,533 45,319
Prepaid expenses and other assets..... 5,854 6,525 29,721
------------ ----------- ------------
Total Assets......................... 128,072,336 15,698,087 393,766,642
------------ ----------- ------------
LIABILITIES:
Advisory fees payable................. 46,708 4,784 65,306
Administration fees payable........... 17,390 1,942 50,362
Shareholder Services fees payable
(Class A Shares).................... 1,007 283 59,716
Shareholder Services fees payable
(Class B Shares).................... 33 4 160
12b-1 fees payable (Class B Shares)... 94 8 568
Bank overdrafts....................... 175 -- 92
Dividends payable..................... 631,870 665,559 1,447,504
Payable for Fund shares redeemed...... 2,797 -- 170,000
Other accrued expenses................ 63,593 30,219 102,217
------------ ----------- ------------
Total Liabilities.................... 763,667 702,799 1,895,925
------------ ----------- ------------
NET ASSETS............................. $127,308,669 $14,995,288 $391,870,717
============ =========== ============
</TABLE>
See Notes to Financial Statements.
110
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Government Municipal
Municipal Money Market Money Market Money Market
Bond Fund Fund Fund Fund
--------- --------------- ------------ ------------
<S> <C> <C> <C>
$244,998,503 $47,241,060 $180,076,423 $227,760,412
-- 10,200,000 25,100,000 --
-- -- -- 234,790
-- -- 1,938 --
39,250 -- --
108,845 -- -- --
4,307,370 3,973 496,734 1,016,229
-- -- -- --
4,453 57,957 61,354 83,300
21,770 60,156 110,035 122,258
- - ------------ ----------- ------------ ------------
249,480,191 57,563,146 205,846,484 229,216,989
- - ------------ ----------- ------------ ------------
51,660 13,690 41,802 30,811
31,720 19,610 31,447 45,718
22,133 117,924 227,761 283,674
123 -- 36 --
462 -- -- --
198,527 111,239 1,334,167 --
991,881 20,092 58,489 304,350
306,469 -- -- --
54,066 16,531 93,564 41,158
- - ------------ ----------- ------------ ------------
1,657,041 299,086 1,787,266 705,711
- - ------------ ----------- ------------ ------------
$247,823,150 $57,264,060 $204,059,218 $228,511,278
============ =========== ============ ============
</TABLE>
See Notes to Financial Statements.
111
<PAGE>
PRAIRIE FUNDS
- - -------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES -- (CONTINUED)
December 31, 1995
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Intermediate
Bond International Municipal
Fund Bond Fund Bond Fund
---- ------------- ------------
<S> <C> <C> <C>
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE:
CLASS A SHARES:
Net Assets........................ $ 1,846,532 $ 486,840 $ 17,776,872
Shares of beneficial interest
issued and outstanding, $0.001
par value, unlimited number of
shares authorized(1)............ 170,875 45,289 1,451,741
------------ ----------- ------------
Net Asset Value per Share......... 10.81 10.75 12.25
Maximum Sales Charge.............. 0.51* 0.51* 0.38**
------------ ----------- ------------
Maximum Offering Price............ $ 11.32 $ 11.26 $ 12.63
============ =========== ============
CLASS B SHARES:
Net Assets........................ $ 61,260 $ 4,478 $ 340,913
Shares of beneficial interest
issued and outstanding, $0.001
par value, unlimited number of
shares authorized(1)............ 5,669 414 27,834
------------ ----------- ------------
Net Asset Value per Share......... $ 10.81 $ 10.81 $ 12.25
============ =========== ============
CLASS I SHARES:
Net Assets $125,400,877 $14,503,970 $373,752,932
Shares of beneficial interest
issued and outstanding, $0.001
par value, unlimited number of
shares authorized(1)............ 11,598,064 1,342,032 30,509,460
------------ ----------- ------------
Net Asset Value per Share......... $ 10.81 $ 10.81 $ 12.25
============ =========== ============
COMPOSITION OF NET ASSETS:
Shares of beneficial interest, at
par............................. $ 11,774 $ 1,387 $ 31,989
Additional paid-in-capital........ 118,554,093 14,473,243 375,105,416
Accumulated net realized gains
(losses) on investment
transactions.................... 2,471,008 (37,381) (71,919)
Accumulated net investment loss... -- (13,857) --
Net unrealized appreciation on
investments..................... 6,271,794 427,716 16,805,231
Net unrealized appreciation of
assets and liabilities
denominated in foreign
currencies...................... -- 144,180 --
------------ ----------- ------------
NET ASSETS, DECEMBER 31, 1995....... $127,308,669 $14,995,288 $391,870,717
============ =========== ============
</TABLE>
- - -----------
*Sales charge is 4.50% of Maximum Offering Price.
**Sales charge is 3.00% of Maximum Offering Price.
(1) The Municipal Bond Fund has authorized 2.5 billion shares for Class A and
Class B and has authorized 5.0 billion shares for Class I.
See Notes to Financial Statements.
112
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Government Municipal
Municipal Money Market Money Market Money Market
Bond Fund Fund Fund Fund
--------- --------------- ------------ ------------
<S> <C> <C> <C>
$ 7,425,897 $57,264,060 $203,994,341 $228,511,278
587,619 57,280,045 203,962,497 228,564,929
- - ------------ ----------- ------------ ------------
12.64 1.00 1.00 1.00
0.60* -- -- --
- - ------------ ----------- ------------ ------------
$ 13.24 $ 1.00 $ 1.00 $ 1.00
============ =========== ============ ============
$ 237,697 $ 64,877
18,797 64,867
- - ------------ ------------
$ 12.65 $ 1.00
============ ============
$240,159,556
19,011,083
- - ------------
$ 12.63
============
$ 19,618 $ 57,280 $ 204,027 $ 228,565
233,921,388 57,222,765 203,823,336 228,322,787
207,871 (15,985) 31,855 (40,074)
-- -- -- --
13,674,273 -- -- --
-- -- -- --
- - ------------ ----------- ------------ ------------
$247,823,150 $57,264,060 $204,059,218 $228,511,278
============ =========== ============ ============
</TABLE>
See Notes to Financial Statements.
113
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managed
Assets Income Managed Equity
Fund(6) Assets Fund(1) Income Fund(2)
------------- -------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividend income (net of foreign
withholding taxes of $134,218,
for International Equity Fund).. $ 1,219,984 $ 52,630 $ 8,875,334
Interest income................... 1,726,718 91,756 1,593,621
----------- -------- -----------
2,946,702 144,386 10,468,955
----------- -------- -----------
EXPENSES:
Advisory fees..................... 331,535 25,209 1,106,473
Administration fees............... 70,850 5,818 331,942
Shareholder Services fees (Class A
Shares and Class B Shares)...... 120,334 9,051 2,981
12b-1 fees (Class B Shares)....... 5,831 3,325 1,283
Custodian fees and expenses....... 56,320 37,950 81,104
Registration fees................. 13,918 -- 74,275
Legal and audit fees.............. 31,696 22,325 45,392
Amortization of organization
expenses........................ 10,067 10,494 17,155
Transfer agent fees and expenses.. 80,641 10,246 17,960
Reports to shareholders........... 14,504 12,129 20,660
Trustees' fees.................... 1,760 2,265 5,848
Miscellaneous expenses............ 13,157 2,182 17,505
----------- -------- -----------
Total Expenses.................... 750,613 140,994 1,722,578
Less: Expense reimbursements...... (179,574) (89,978) (277,704)
----------- -------- -----------
Net Expenses..................... 571,039 51,016 1,444,874
----------- -------- -----------
NET INVESTMENT INCOME............ 2,375,663 93,370 9,024,081
----------- -------- -----------
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENT AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gains (losses) on
investment transactions......... (324,052) 5 12,993,377
Net realized losses on foreign
currency transactions........... -- -- --
Net realized gains on futures
transactions.................... -- -- --
Net change in unrealized
appreciation (depreciation) on
investments..................... 9,391,499 724,063 41,597,759
Net unrealized appreciation of
assets and liabilities
denominated in foreign
currencies and financial
futures......................... -- -- --
----------- -------- -----------
NET REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS.. 9,067,447 724,068 54,591,136
----------- -------- -----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS. $11,443,110 $817,438 $63,615,217
=========== ======== ===========
</TABLE>
- - -----------
(1) For the period April 3, 1995 (commencement of operations) through December
31, 1995.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period March 3, 1995 (commencement of operations) through December
31, 1995.
(4) For the period February 1, 1995 through December 31, 1995.
(5) For the year ended January 31, 1995.
(6) For the year ended December 31, 1995.
See Notes to Financial Statements.
114
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Special International
Growth Opportunities Equity Intermediate Intermediate
Fund(2) Fund(2) Fund(3) Bond Fund(4) Bond Fund(5)
------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
$ 4,772,025 $ 611,057 $ 973,285
1,172,933 394,772 746,158 $10,539,377 $ 348,758
- - ----------- ----------- ----------- ----------- ---------
5,944,958 1,005,829 1,719,443 10,539,377 348,758
- - ----------- ----------- ----------- ----------- ---------
1,714,125 487,460 506,105 612,312 30,810
395,568 104,456 94,372 229,617 252
4,884 778 3,253 5,767 170
670 56 379 563 8
74,792 62,572 159,181 60,572 3,383
104,974 16,430 28,299 31,550 3,428
57,332 28,516 28,042 37,450 53,810
17,201 17,259 15,262 148 8,592
16,912 16,800 16,161 23,464 8,893
23,464 15,120 12,673 26,193 17,714
4,088 4,032 5,593 1,670 5,602
18,617 8,410 11,638 7,006 7,099
- - ----------- ----------- ----------- ----------- ---------
2,432,627 761,889 880,958 1,036,312 139,761
(314,740) (168,733) (213,519) (185,219) (137,928)
- - ----------- ----------- ----------- ----------- ---------
2,117,887 593,156 667,439 851,093 1,833
- - ----------- ----------- ----------- ----------- ---------
3,827,071 412,673 1,052,004 9,688,284 346,925
- - ----------- ----------- ----------- ----------- ---------
26,140,162 1,749,697 505,347 7,844,775 (63,605)
-- -- (236,752) -- --
-- -- 3,503,125 -- --
45,732,866 15,460,102 5,875,255 7,312,968 (304,664)
-- -- 899,200 -- --
- - ----------- ----------- ----------- ----------- ---------
71,873,028 17,209,799 10,546,175 15,157,743 (368,269)
- - ----------- ----------- ----------- ----------- ---------
$75,700,099 $17,622,472 $11,598,179 $24,846,027 $ (21,344)
=========== =========== =========== =========== =========
</TABLE>
See Notes to Financial Statements.
115
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Intermediate Intermediate
International Municipal Municipal
Bond Fund(1) Bond Fund(2) Bond Fund(3) Bond Fund(4)
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income (net of
foreign withholding
taxes of $13,850 for
International Bond
Fund).................. $ 7,432,982 $ 717,469 $16,586,298 $2,141,819
----------- ---------- ----------- ----------
7,432,982 717,469 16,586,298 2,141,819
----------- ---------- ----------- ----------
EXPENSES:
Advisory fees............ 571,379 79,128 1,294,971 213,509
Administration fees...... 155,831 16,957 488,746 27,546
Shareholder Services fees
(Class A Shares and
Class B Shares)........ 2,161 684 38,461 60,314
12b-1 fees (Class B
Shares)................ 116 30 824 175
Custodian fees and
expenses............... 55,999 34,025 76,502 5,329
Registration fees........ 31,690 5,776 142,121 33,720
Legal and audit fees..... 29,720 24,652 41,560 59,478
Amortization of
organization expenses.. 16,042 16,769 12,943 --
Transfer agent fees and
expenses............... 15,614 16,432 22,560 17,386
Reports to shareholders.. 13,762 12,840 28,882 18,415
Trustees' fees........... 5,642 2,352 1,586 5,076
Miscellaneous expenses... 10,618 6,748 13,408 11,946
----------- ---------- ----------- ----------
Total Expenses........... 908,574 216,393 2,162,564 452,894
Less: Expense
reimbursements......... (178,732) (110,736) (403,299) (296,239)
----------- ---------- ----------- ----------
Net Expenses............ 729,842 105,657 1,759,265 156,655
----------- ---------- ----------- ----------
NET INVESTMENT INCOME... 6,703,140 611,812 14,827,033 1,985,164
----------- ---------- ----------- ----------
REALIZED AND UNREALIZED
GAINS (LOSSES) ON
INVESTMENT AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gains
(losses) on investment
transactions........... 6,908,795 1,020,021 3,839,621 (757,908)
Net realized gains on
foreign currency
transactions........... -- 30,644 -- --
Net change in unrealized
appreciation on
investments............ 6,271,794 427,716 13,694,976 2,898,764
Translation of assets and
liabilities denominated
in foreign currencies.. -- 144,180 -- --
----------- ---------- ----------- ----------
NET REALIZED AND
UNREALIZED GAINS
(LOSSES) ON
INVESTMENTS AND
FOREIGN CURRENCY
TRANSACTIONS.......... 13,180,589 1,622,561 17,534,597 2,140,856
----------- ---------- ----------- ----------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS............. $19,883,729 $2,234,373 $32,361,630 $4,126,020
=========== ========== =========== ==========
</TABLE>
- - -----------
(1) For the period February 10, 1995 (commencement of operations) through
December 31, 1995.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period March 1, 1995 through December 31, 1995.
(4) For the year ended February 28, 1995.
(5) For the year ended December 31, 1995.
See Notes to Financial Statements.
116
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Government Municipal
Municipal Municipal Money Market Money Market Money Market
Bond Fund(3) Bond Fund(4) Fund(5) Fund(5) Fund(5)
------------ ------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
$ 11,366,541 $ 984,395 $3,925,073 $8,980,167 $7,967,822
--------------- ---------- ---------- ---------- ----------
11,366,541 984,395 3,925,073 8,980,167 7,967,822
--------------- ---------- ---------- ---------- ----------
829,219 84,738 297,377 631,448 860,103
310,957 15,548 94,631 220,431 292,778
15,010 20,089 170,762 380,585 508,602
600 183 -- 154 --
43,173 5,356 47,037 58,917 67,687
95,405 30,271 7,824 26,695 19,626
56,450 25,959 22,236 57,347 54,617
148 -- 8,303 7,228 9,259
22,392 15,883 37,804 185,048 56,756
26,190 13,517 14,357 25,741 14,373
2,650 1,718 2,138 5,185 8,633
11,000 8,105 29,658 32,213 35,509
--------------- ---------- ---------- ---------- ----------
1,413,194 221,367 732,127 1,630,992 1,927,943
(278,552) (167,016) (198,986) (431,210) (489,926)
--------------- ---------- ---------- ---------- ----------
1,134,642 54,351 533,141 1,199,782 1,438,017
--------------- ---------- ---------- ---------- ----------
10,231,899 930,044 3,391,932 7,780,385 6,529,805
--------------- ---------- ---------- ---------- ----------
5,020,578 (260,986) 32,485 179,219 (44)
-- -- -- -- --
11,041,965 2,624,847 -- -- --
-- -- -- -- --
--------------- ---------- ---------- ---------- ----------
16,062,543 2,363,861 32,485 179,219 (44)
--------------- ---------- ---------- ---------- ----------
$ 26,294,442 $3,293,905 $3,424,417 $7,959,604 $6,529,761
=============== ========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements.
117
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS INCOME FUND
- - --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
--------------------------
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income............................... $ 2,375,663 $ 2,808,997
Net realized gains (losses) on investment
transactions...................................... (324,052) 210,291
Net change in unrealized appreciation (depreciation)
on investments.................................... 9,391,499 (4,108,668)
----------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................. 11,443,110 (1,089,380)
----------- ------------
Net equalization credits............................ -- 2,562
----------- ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income:
Class A Shares..................................... (2,441,590) (2,753,670)
Class B Shares..................................... (31,089) (34,937)
Class I Shares..................................... (36,073) --
----------- ------------
TOTAL DIVIDENDS TO SHAREHOLDERS.................... (2,508,752) (2,788,607)
----------- ------------
Net realized gains on investments:
Class A Shares..................................... (108,059) (19,340)
Class B Shares..................................... (4,560) (323)
Class I Shares..................................... (2,720) --
----------- ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS................ (115,339) (19,663)
----------- ------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold....................... 9,561,625 6,725,337
Dividends reinvested................................ 2,415,006 2,336,101
Cost of shares redeemed............................. (9,697,497) (12,384,919)
----------- ------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS............................... 2,279,134 (3,323,481)
----------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........... 11,098,153 (7,218,569)
NET ASSETS:
Beginning of year................................... 44,367,174 51,585,743
----------- ------------
End of year (includes undistributed net investment
income of $220 in 1995 and $133,309 in 1994)...... $55,465,327 $ 44,367,174
=========== ============
</TABLE>
See Notes to Financial Statements.
118
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
119
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Period Ended December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managed Equity
Assets Income Growth
Fund(1) Fund(2) Fund(2)
------- ------- -------
<S> <C> <C> <C>
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS:
Net investment income.............. $ 93,370 $ 9,024,081 $ 3,827,071
Net realized gains on investment
transactions..................... 5 12,993,377 26,140,162
Net realized gains (losses) on
foreign currency transactions.... -- -- --
Net realized gains on futures
transactions..................... -- -- --
Net change in unrealized
appreciation on investments...... 724,063 41,597,759 45,732,866
Net unrealized appreciation of
assets and liabilities
denominated in foreign currencies
and financial futures............ -- -- --
---------- ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS....... 817,438 63,615,217 75,700,099
---------- ------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income:
Class A Shares.................... (77,991) (36,341) (20,056)
Class B Shares.................... (7,493) (4,665) (128)
Class I Shares.................... (7,813) (8,991,662)(5) (3,803,209)
---------- ------------ ------------
TOTAL DIVIDENDS TO SHAREHOLDERS... (93,297) (9,032,668) (3,823,393)
---------- ------------ ------------
Net realized gains on investments:
Class A Shares.................... -- (76,484) (297,846)
Class B Shares.................... -- (15,958) (18,522)
Class I Shares.................... -- (7,635,585) (20,574,490)
---------- ------------ ------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS.................... -- (7,728,027) (20,890,858)
---------- ------------ ------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold...... 9,391,817 258,157,716 300,831,887
Dividends reinvested............... 85,512 6,638,209 15,027,099
Cost of shares redeemed............ (602,469) (24,256,920) (68,303,488)
---------- ------------ ------------
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS......... 8,874,860 240,539,005 247,555,498
---------- ------------ ------------
TOTAL INCREASE IN NET ASSETS..... 9,599,001 287,393,527 298,541,346
NET ASSETS:
Beginning of period................ -- -- --
---------- ------------ ------------
End of period(6)................... $9,599,001 $287,393,527 $298,541,346
========== ============ ============
</TABLE>
- - -----------
(1) For the period April 3, 1995 (commencement of operations) through December
31, 1995.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period March 3, 1995 (commencement of operations) through December
31, 1995.
(4) For the period February 10, 1995 (commencement of operations) through
December 31, 1995.
(5) Includes distributions in excess of net investment income of $8,587.
(6) Includes undistributed net investment income of $73, $0, $3,678, $3,938,
$134,091, $0 and $0, respectively.
See Notes to Financial Statements.
120
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Special International International
Opportunities Equity Bond Bond
Fund(2) Fund(3) Fund(4) Fund(2)
------------- ------------- ------- -------------
<S> <C> <C> <C>
$ 412,673 $ 1,052,004 $ 6,703,140 $ 611,812
1,749,697 505,347 6,908,795 1,020,021
-- (236,752) -- 30,644
-- 3,503,125 -- --
15,460,102 5,875,255 6,271,794 427,716
-- 899,200 -- 144,180
--------------- ------------ ------------ -----------
17,622,472 11,598,179 19,883,729 2,234,373
--------------- ------------ ------------ -----------
(807) (12,465) (50,085) (13,458)
-- (174) (755) (173)
(407,928) (905,274) (6,652,300) (612,038)
--------------- ------------ ------------ -----------
(408,735) (917,913) (6,703,140) (625,669)
--------------- ------------ ------------ -----------
(13,273) (60,752) (63,549) (33,914)
(308) (4,283) (2,117) (311)
(1,849,182) (2,203,921) (4,372,121) (1,053,821)
--------------- ------------ ------------ -----------
(1,862,763) (2,268,956) (4,437,787) (1,088,046)
--------------- ------------ ------------ -----------
89,942,654 100,265,824 129,396,150 15,584,504
1,194,408 1,535,547 2,974,473 380,496
(12,875,093) (5,823,304) (13,804,756) (1,490,370)
--------------- ------------ ------------ -----------
78,261,969 95,978,067 118,565,867 14,474,630
--------------- ------------ ------------ -----------
93,612,943 104,389,377 127,308,669 14,995,288
-- -- -- --
--------------- ------------ ------------ -----------
$ 93,612,943 $104,389,377 $127,308,669 $14,995,288
=============== ============ ============ ===========
</TABLE>
See Notes to Financial Statements.
121
<PAGE>
PRAIRIE INTERMEDIATE BOND FUND
- - --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period Ended For the Year Ended For the Period Ended
December 31, January 31, January 31,
1995(1) 1995 1994(2)
-------------------- ------------------ --------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS:
Net investment income.. $ 9,688,284 $ 346,925 $ 269,055
Net realized gains
(losses) on
investment
transactions......... 7,844,775 (63,605) 13,430
Net change in
unrealized
appreciation
(depreciation) on
investments.......... 7,312,968 (304,664) (60,015)
------------ ----------- ----------
NET INCREASE
(DECREASE) IN NET
ASSETS RESULTING
FROM OPERATIONS..... 24,846,027 (21,344) 222,470
------------ ----------- ----------
DIVIDENDS TO
SHAREHOLDERS FROM:
Net investment income:
Class A Shares........ (137,077) (4,217) (1,326)
Class B Shares........ (3,518) (99) --
Class I Shares........ (9,547,689) (342,609) (267,729)
------------ ----------- ----------
TOTAL DIVIDENDS TO
SHAREHOLDERS........ (9,688,284) (346,925) (269,055)
------------ ----------- ----------
Net realized gains on
investments:
Class A Shares........ (157,731) (16) (152)
Class B Shares........ (6,773) (1) --
Class I Shares........ (5,006,911) (1,196) (12,072)
------------ ----------- ----------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS........ (5,171,415) (1,213) (12,224)
------------ ----------- ----------
CAPITAL STOCK
TRANSACTIONS:
Net proceeds from
shares sold.......... 200,868,057 7,682,912 5,298,453
Dividends reinvested... 4,026,532 9,789 6,783
Cost of shares
redeemed............. (23,767,145) (5,345,718) (154,029)
------------ ----------- ----------
NET INCREASE IN NET
ASSETS FROM FUND
SHARE TRANSACTIONS.. 181,127,444 2,346,983 5,151,207
------------ ----------- ----------
TOTAL INCREASE IN NET
ASSETS............. 191,113,772 1,977,501 5,092,398
NET ASSETS:
Beginning of period.... 7,169,899 5,192,398 100,000
------------ ----------- ----------
End of period.......... $198,283,671 $ 7,169,899 $5,192,398
============ =========== ==========
</TABLE>
- - -----------
(1) For the period February 1, 1995 through December 31, 1995.
(2) For the period March 5, 1993 (commencement of operations) through January
31, 1994.
See Notes to Financial Statements.
122
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period Ended For the Year Ended For the Year Ended
December 31, February 28, February 28,
1995(1) 1995 1994(2)
-------------------- ------------------ ------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS:
Net investment income.. $ 14,827,033 $ 1,985,164 $ 1,394,851
Net realized gains
(losses) on
investment
transactions......... 3,839,621 (757,908) 1,275,347
Net change in
unrealized
appreciation on
investments.......... 13,694,976 2,898,764 (1,243,092)
------------ ------------ -----------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS..... 32,361,630 4,126,020 1,427,106
------------ ------------ -----------
DIVIDENDS TO
SHAREHOLDERS FROM:
Net investment income:
Class A Shares........ (619,417) (1,214,913) (1,394,847)
Class B Shares........ (3,609) (17) (4)
Class I Shares........ (14,204,008) (770,234) --
------------ ------------ -----------
TOTAL DIVIDENDS TO
SHAREHOLDERS........ (14,827,034) (1,985,164) (1,394,851)
------------ ------------ -----------
Net realized gains on
investments:
Class A Shares........ (143,000) (62,814) (1,471,722)
Class B Shares........ (2,501) (284) --
Class I Shares........ (3,007,029) -- --
------------ ------------ -----------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS........ (3,152,530) (63,098) (1,471,722)
------------ ------------ -----------
CAPITAL STOCK
TRANSACTIONS:
Net proceeds from
shares sold.......... 48,746,625 367,446,983 6,646,160
Dividends reinvested... 2,914,315 851,803 1,972,931
Cost of shares
redeemed............. (57,221,370) (16,165,822) (6,226,132)
------------ ------------ -----------
NET INCREASE
(DECREASE) IN NET
ASSETS FROM FUND
SHARE TRANSACTIONS.. (5,560,430) 352,132,964 2,392,959
------------ ------------ -----------
TOTAL INCREASE IN NET
ASSETS............. 8,821,636 354,210,722 953,492
NET ASSETS:
Beginning of period.... 383,049,081 28,838,359 27,884,867
------------ ------------ -----------
End of period.......... $391,870,717 $383,049,081 $28,838,359
============ ============ ===========
</TABLE>
- - -----------
(1) For the period March 1, 1995 through December 31, 1995.
(2) Includes Class B Shares for the period February 8, 1994 (initial offering
date of Class B Shares) through February 28, 1994.
See Notes to Financial Statements.
123
<PAGE>
PRAIRIE MUNICIPAL BOND FUND, INC.
- - -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period Ended For the Year Ended For the Year Ended
December 31, February 28, February 28,
1995(1) 1995 1994(2)
-------------------- ------------------ ------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS:
Net investment income.. $ 10,231,899 $ 930,044 $ 497,241
Net realized gains
(losses) on
investment
transactions......... 5,020,578 (260,986) 607,250
Net change in
unrealized
appreciation on
investments.......... 11,041,965 2,624,847 (728,931)
------------ ------------ -----------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS..... 26,294,442 3,293,905 375,560
------------ ------------ -----------
DIVIDENDS TO
SHAREHOLDERS FROM:
Net investment income:
Class A Shares........ (268,916) (409,080) (497,237)
Class B Shares........ (2,833) (67) (4)
Class I Shares........ (9,960,150) (520,897) --
------------ ------------ -----------
TOTAL DIVIDENDS TO
SHAREHOLDERS........ (10,231,899) (930,044) (497,241)
------------ ------------ -----------
Net realized gains on
investments:
Class A Shares........ (135,418) -- (717,815)
Class B Shares........ (4,334) -- --
Class I Shares........ (4,405,351) -- --
------------ ------------ -----------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS........ (4,545,103) -- (717,815)
------------ ------------ -----------
In excess of net
realized gains on
investments:
Class A Shares........ -- -- (6,618)
------------ ------------ -----------
CAPITAL STOCK
TRANSACTIONS:
Net proceeds from
shares sold.......... 34,482,785 222,400,536 3,588,206
Dividends reinvested... 3,928,330 323,826 956,597
Cost of shares
redeemed............. (29,087,608) (7,342,155) (5,752,746)
------------ ------------ -----------
NET INCREASE IN NET
ASSETS FROM FUND
SHARE TRANSACTIONS.. 9,323,507 215,382,207 (1,207,943)
------------ ------------ -----------
TOTAL INCREASE IN NET
ASSETS............. 20,840,947 217,746,068 (2,054,057)
NET ASSETS:
Beginning of period.... 226,982,203 9,236,135 11,290,192
------------ ------------ -----------
End of period.......... $247,823,150 $226,982,203 $ 9,236,135
============ ============ ===========
</TABLE>
- - -----------
(1) For the period March 1, 1995 through December 31, 1995.
(2) Includes Class B Shares for the period February 8,1994 (initial offering
date of Class B Shares) through February 28, 1994.
See Notes to Financial Statements.
124
<PAGE>
PRAIRIE FUNDS
U.S. GOVERNMENT MONEY MARKET FUND
- - --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
---------------------------
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income........................... $ 3,391,932 $ 4,694,844
Net realized gains (losses) on investment
transactions.................................. 32,485 (961,178)
------------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS................................... 3,424,417 3,733,666
------------- ------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Class A Shares.................................. (3,391,932) (4,694,844)
------------- ------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold................... 250,085,862 677,021,399
Dividends reinvested............................ 2,488,380 1,310,332
Cost of shares redeemed......................... (311,695,323) (716,564,214)
------------- ------------
NET DECREASE IN NET ASSETS FROM FUND SHARE
TRANSACTIONS................................. (59,121,081) (38,232,483)
------------- ------------
Increase due to capital contribution from
affiliate of investment adviser (Note 3(d)).... -- 933,054
------------- ------------
TOTAL DECREASE IN NET ASSETS................... (59,088,596) (38,260,607)
NET ASSETS:
Beginning of year............................... 116,352,656 154,613,263
------------- ------------
End of year..................................... $ 57,264,060 $116,352,656
============= ============
</TABLE>
See Notes to Financial Statements.
125
<PAGE>
PRAIRIE FUNDS
MONEY MARKET FUND
- - --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
-----------------------------
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS:
Net investment income.......................... $ 7,780,385 $ 5,491,950
Net realized gains (losses) on investment
transactions................................. 179,219 (1,309,831)
------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................. 7,959,604 4,182,119
------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income:
Class A Shares................................ (7,779,495) (5,491,950)
Class B Shares................................ (890) --
------------- --------------
TOTAL DIVIDENDS TO SHAREHOLDERS............... (7,780,385) (5,491,950)
------------- --------------
Net realized gains on investments:
Class A Shares................................ (123,505) (23,361)
Class B Shares................................ (35) --
------------- --------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS........... (123,540) (23,361)
------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS................................ (7,903,925) (5,515,311)
------------- --------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold.................. 803,027,143 1,724,346,455
Dividends reinvested........................... 6,873,012 2,559,069
Cost of shares redeemed........................ (725,296,634) (1,770,081,791)
------------- --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
FUND SHARE TRANSACTIONS..................... 84,603,521 (43,176,267)
------------- --------------
Increase due to capital contribution from
affiliate of investment adviser (Note 3(d))... -- 1,286,000
------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS...... 84,659,200 (43,223,459)
NET ASSETS:
Beginning of year.............................. 119,400,018 162,623,477
------------- --------------
End of year.................................... $ 204,059,218 $ 119,400,018
============= ==============
</TABLE>
See Notes to Financial Statements.
126
<PAGE>
PRAIRIE FUNDS
MUNICIPAL MONEY MARKET FUND
- - --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
---------------------------
December 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income............................. $ 6,529,805 $ 4,523,891
Net realized losses on investment transactions.... (44) (36,537)
------------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS..................................... 6,529,761 4,487,354
------------- ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income:
Class A Shares................................... (6,529,805) (4,523,891)
------------- ------------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold..................... 534,326,783 428,067,086
Dividends reinvested.............................. 3,305,612 2,261,400
Cost of shares redeemed........................... (482,251,105) (434,859,851)
------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND
SHARE TRANSACTIONS............................. 55,381,290 (4,531,365)
------------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS......... 55,381,246 (4,567,902)
NET ASSETS:
Beginning of year................................. 173,130,032 177,697,934
------------- ------------
End of year....................................... $ 228,511,278 $173,130,032
============= ============
</TABLE>
See Notes to Financial Statements.
127
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTE 1--GENERAL
Prairie Funds (the "Trust") is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "Act"). At
December 31, 1995, the Trust consisted of twelve separate investment
portfolios. The accompanying financial statements include the results of
operations for the following portfolios of the Trust: Managed Assets Income
Fund, Managed Assets Fund, Equity Income Fund, Growth Fund, Special
Opportunities Fund, International Equity Fund, Bond Fund, International Bond
Fund, Intermediate Municipal Bond Fund, U.S. Government Money Market Fund,
Money Market Fund, and Municipal Money Market Fund. Additionally, the
accompanying financial statements include the results of operations for the
Prairie Municipal Bond Fund, Inc. and the Prairie Intermediate Bond Fund, two
open-end management investment companies registered under the Act (together
with the Trust's portfolios, the "Funds").
First Chicago Investment Management Company ("FCIMCO"), a wholly-owned
subsidiary of The First National Bank of Chicago ("FNBC"), serves as each
Fund's investment adviser and administrator. FCIMCO has engaged ANB Investment
Management and Trust Company ("ANB") to serve as sub-investment adviser for the
International Equity Fund. Additionally, FCIMCO has engaged Concord Holding
Corporation ("Concord"), a wholly-owned subsidiary of The BISYS Group, Inc., to
assist it in providing certain administrative services for the Funds. Concord
Financial Group, Inc., a wholly-owned subsidiary of Concord, serves as the
principal underwriter and distributor of each Fund's shares.
The Funds (except for the U.S. Government Money Market Fund and Municipal
Money Market Fund, which offer Class A shares only, and the Money Market Fund
which offers Class A shares and Class B shares) each offer Class A shares,
Class B shares and Class I shares. Class A shares, Class B shares and Class I
shares are substantially the same except that Class A shares are subject to a
sales charge imposed at the time of purchase and are subject to fees charged
pursuant to a Shareholder Services Plan. Class B shares are subject to a
contingent deferred sales charge imposed at the time of redemption and are
subject to fees charged pursuant to a Distribution Plan adopted pursuant to
Rule 12b-1 under the Act and fees charged pursuant to the Shareholder Services
Plan. Class I shares are not subject to any sales charge, shareholder services
fees or distribution fees.
During the period January 27, 1995 through March 3, 1995, various common
trust funds and collective trust funds managed by FNBC transferred cash and
securities to certain Funds in exchange for Class I shares of the corresponding
Fund. The following table sets forth the date on which such transfers occurred,
the transferring entity, the corresponding Fund, the market value of the
securities and cash transferred and the amount of Class I shares issued in
connection with such transfer:
128
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class I
Shares
Date of Transfer Transferring Entity Fund Market Value Issued
---------------- ------------------- ---- ------------ -------
<S> <C> <C> <C> <C>
January 27, 1995........ First Chicago Personal Equity Income $198,087,162 19,808,716
Trust Equity Fund Fund
January 27, 1995........ First Chicago Personal Growth Fund 245,392,975 24,539,297
Trust Endowment Equity
Fund and First Chicago
Personal Trust Growth
Equity Fund
January 27, 1995........ First Chicago Personal Special 51,316,357 5,131,636
Trust Special Equity Opportunities
Fund Fund
January 27, 1995........ First Chicago Personal International 8,955,517 895,552
Trust International Bond Bond Fund
Fund
February 10, 1995....... First Chicago Personal Bond Fund 98,997,057 9,899,706
Trust Taxable Bond Fund
And First Chicago
Personal Trust
Endowment Bond Fund
February 10, 1995....... First Chicago Personal Intermediate 129,394,694 16,848,267
Trust Intermediate Bond Fund
Taxable Bond Fund and
Lake Shore Common
Trust Taxable Fixed
Income Fund
February 10, 1995....... First Chicago Personal Municipal Bond 213,488,376 17,910,099
Trust Tax-Exempt Bond Fund
Fund
February 10, 1995....... First Chicago Personal Intermediate 349,656,211 29,885,146
Trust Intermediate Tax- Municipal Bond
Exempt Bond Fund and Fund
Lake Shore Common
Trust Municipal Bond
Fund
March 3, 1995........... First Chicago Personal International 48,338,875 4,833,888
Trust International Equity Equity Fund
Fund
</TABLE>
At meetings of the shareholders of the First Prairie Diversified Assets Fund,
First Prairie Municipal Bond Fund--Intermediate Series, First Prairie Money
Market Fund--Money Market Series and Government Series, and First Prairie
Municipal Money Market Fund (collectively, the "First Prairie Funds") held on
January 17, 1995, shareholders of each such Fund approved an Agreement and Plan
of Exchange (the "Plan") which called for the transfer of the assets, subject
to the liabilities, of each First Prairie Fund to the Prairie Managed Assets
Income Fund,
129
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
Prairie Intermediate Municipal Bond Fund, Prairie Money Market Fund, Prairie
U.S. Government Money Market Fund, and Prairie Municipal Money Market Fund,
respectively. The Plan also called for the issuance of shares by the respective
Prairie Funds to the shareholders of the corresponding First Prairie Fund, such
shares being equal in value to the net assets so transferred.
The following table sets forth the date on which this transfer took place
along with the net assets transferred and the number of shares issued:
<TABLE>
<CAPTION>
Net Assets
Fund Date of Transfer Transferred Shares Issued
---- ---------------- ----------- -------------
<S> <C> <C> <C>
Managed Assets Income Fund...... March 3, 1995 $ 43,698,653 3,518,593
Intermediate Municipal Bond
Fund........................... January 27, 1995 22,331,512 1,930,122
Money Market Fund............... May 20, 1995 127,355,807 127,197,352
U.S. Government Money Market
Fund........................... May 20, 1995 52,257,087 52,273,072
Municipal Money Market Fund..... May 20, 1995 178,386,094 178,439,745
</TABLE>
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. These principles
require management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses for the period. Actual results
could differ from those estimates.
(A) Portfolio Valuation: Bonds, debentures, notes, mortgage-related
securities, asset-backed securities, municipal obligations and convertible debt
obligations ("Fixed Income Securities") are valued daily using available market
quotations or at fair value as determined by one or more independent pricing
services (the "Service") approved by the Board of Trustees (or the "Board").
Fixed Income Securities for which quoted bid prices are readily available and
are representative of the bid side of the market, in the judgment 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
Fixed Income Securities are carried at fair value as determined by the Service,
based upon methods which include consideration of yields or prices of
securities of comparable quality, coupon rate, maturity and type, indications
as to values from dealers, and general market conditions. Fixed Income
Securities with maturities less than 60 days are carried at amortized cost,
which approximates market value.
Common stocks, preferred stocks and convertible securities, as well as
warrants to purchase such securities ("Equity Securities"), and call options
written by a Fund are valued at the last sale price on the securities exchange
or national securities market on which such securities are primarily traded.
Equity securities not
130
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
listed on an exchange or national securities market, or securities for which
there were no transactions, are valued at the most recent bid prices. Any
securities or other assets for which recent market quotations are not readily
available are valued at fair value as determined in good faith by the Board.
Restricted securities, illiquid securities and securities for which market
quotations are not readily available, if any, are valued at fair value using
methods approved by the Board.
Investments of the U.S. Government Money Market Fund, Money Market Fund and
Municipal Money Market Fund (the "money market funds") are valued at amortized
cost, which approximates market value. Under the amortized cost method,
discount or premium is amortized on a constant basis to the maturity of the
security. In addition, the money market funds may not (a) purchase any
instruments with a remaining maturity greater that thirteen months unless such
instrument is subject to a demand feature, or (b) maintain a dollar-weighted
average maturity which exceeds 90 days.
(B) Foreign currency translations: The books and records of the International
Bond Fund and the International Equity Fund are maintained in U.S. dollars.
Amounts denominated in foreign currencies are translated into U.S. dollars on
the following basis: (i) investment securities, other assets and liabilities
initially expressed in foreign currencies are converted each business day into
U.S. dollars at the midpoint of the New York interbank market spot exchange
rate as quoted on the day of such translation by the Federal Reserve Bank of
New York or at such other quoted market exchange rate as may be determined to
be appropriate by the investment adviser; (ii) purchases and sales of foreign
securities, income and expenses are converted into U.S. dollars based upon
currency exchange rates prevailing on the respective dates of such
transactions. The Funds generally do not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
Reported net realized and unrealized gains and losses on foreign currency
represent: (i) foreign exchange gains and losses from the sale and holding of
foreign currencies, forward contracts and foreign currency denominated debt
obligations; (ii) gains and losses between trade date and settlement date on
investment securities transactions and forward exchange contracts; and (iii)
gains and losses from the difference between amounts of dividends and interest
recorded and the amounts actually received.
(C) Futures contracts: The International Equity Fund may engage in futures
contracts for the purpose of hedging against changes in the value of its
portfolio securities and in the value of securities it intends to purchase.
Upon entering into a futures contract, the Fund is required to deposit with the
broker an amount of cash or cash equivalents equal to a certain percentage of
the contract amount. This is known as the "initial margin". Subsequent payments
("variation margin") are made
131
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
or received by the Fund each day, depending on the daily fluctuation of the
value of the contract. The daily changes in the value of the contract are
recorded as unrealized gains or losses. The Fund recognizes, when the contract
is closed, a realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the time it was closed. Futures
contracts open at December 31, 1995 and their related unrealized market
appreciation (depreciation) are set forth in the notes to the Portfolio of
Investments of the International Equity Fund.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments or indices, which may not
correlate with the change in value of the hedged investments. In addition,
there is the risk that the Fund may not be able to enter into a closing
transaction because of an illiquid secondary market.
(D) Forward foreign currency contracts--The International Bond Fund may enter
into forward foreign currency contracts in order to hedge its exposure to
changes in foreign currency exchange rates on its foreign portfolio holdings.
When executing forward foreign currency contracts, the Fund is obligated to buy
or sell a foreign currency at a specified rate on a certain date in the future.
With respect to sales of forward foreign currency contracts, the Fund would
incur a loss if the value of the contract increases between the date the
forward contract is opened and the date the forward contract is closed. The
Fund realizes a gain if the value of the contract decreases between those
dates. With respect to purchases of forward foreign currency contracts, the
Fund would incur a loss if the value of the contract decreases between the date
the forward contract is opened and the date the forward contract is closed. The
Fund realizes a gain if the value of the contract increases between those
dates. The Fund is also exposed to credit risk associated with counter party
nonperformance on these forward foreign currency contracts which is typically
limited to the unrealized gains on such contracts that are recognized in the
Statement of Assets and Liabilities.
(E) Securities transactions and investment income: Securities transactions
are recorded on a trade date basis. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income, adjusted for
amortization of premiums and, when appropriate, discounts on investments, is
earned from settlement date and recognized on the accrual basis. Securities
purchased or sold on a when-issued or delayed-delivery basis may be settled a
month or more after the trade date.
Each Fund may enter into repurchase agreements with financial institutions
deemed to be creditworthy by FCIMCO, subject to the seller's agreement to
repurchase and the Fund's agreement to resell such securities at a mutually
agreed upon price. Securities purchased subject to repurchase agreements are
deposited with the Fund's custodian and, pursuant to the terms of the
repurchase agreement, must have an aggregate market value greater than or equal
to the repurchase price
132
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
plus accrued interest at all times. If the value of the underlying securities
falls below the value of the repurchase price plus accrued interest, the Fund
will require the seller to deposit additional collateral by the next business
day. If the request for additional collateral is not met, or the seller
defaults on its repurchase obligation, the Fund maintains the right to sell the
underlying securities at market value and may claim any resulting loss against
the seller.
(F) Expenses: Expenses directly attributable to a Fund are charged to that
Fund's operations; expenses which are applicable to all Funds are allocated
among them on the basis of relative net assets. Fund expenses directly
attributable to a class of shares are charged to that class; expenses which are
applicable to all classes are allocated among them.
(G) Dividends to shareholders: It is the policy of Managed Assets Income Fund
and Equity Income Fund to declare and pay dividends from net investment income
monthly while the Managed Assets Fund, Growth Fund, Special Opportunities Fund
and International Equity Fund declare and pay dividends quarterly. The Bond
Fund, Intermediate Bond Fund, International Bond Fund, Municipal Bond Fund,
Intermediate Municipal Bond Fund, U.S. Government Money Market Fund, Money
Market Fund and Municipal Money Market Fund declare dividends daily from net
investment income, payable monthly. Distributions from net realized capital
gains, if any, are normally declared and paid annually, but each Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code (the "Code"). However, to the extent
that net realized capital gains of a Fund can be reduced by capital loss
carryovers, if any, such gains will not be distributed.
The amounts of dividends from net investment income and of distributions from
net realized gains are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting principles. To
the extent these differences are permanent in nature, such amounts are
reclassified within the composition of net assets based on their federal tax-
basis treatment; temporary differences do not require reclassification.
Dividends and distributions to shareholders which exceed net investment income
and net realized capital gains for financial reporting purposes but not for tax
purposes are reported as distributions in excess of net investment income or
net realized capital gains. To the extent they exceed net investment income and
net realized gains for tax purposes, they are reported as distributions of
capital.
(H) Federal income taxes: It is the policy of each Fund to qualify as a
regulated investment company by complying with the provisions available to
certain investment companies, as defined in applicable sections of the Code,
and to make distributions of income and net realized capital gains sufficient
to relieve it from all, or substantially all, Federal income and excise taxes.
Capital losses incurred after October 31 ("Post-October losses") within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Municipal Money Market Fund and the Special Opportunities
Fund
133
<PAGE>
PRAIRIE FUNDS
- - -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - -------------------------------------------------------------------------------
incurred and may elect to defer net capital losses of approximately $50 and
$113,000, respectively.
At December 31, 1995, the Managed Asset Income Fund had unused capital loss
carryovers of approximately $317,000, which are available for Federal income
tax purposes to be applied against future net capital gains, if any, realized
subsequent to December 31, 1995. If not applied, the carryover expires in
2003.
At December 31, 1995, the U.S. Government Money Market Fund had unused
capital loss carryovers of approximately $16,000, which are available for
Federal income tax purposes to be applied against future net capital gains, if
any, realized subsequent to December 31, 1995. If not applied, the carryover
expires in 2002.
At December 31, 1995, the Municipal Money Market Fund had unused capital
loss carryovers of approximately $40,000, which are available for Federal
income tax purposes to be applied against future net capital gains, if any,
realized subsequent to December 31, 1995. If not applied, $1,000 of the
carryover expires in 1999, $2,000 expires in 2001, $1,000 expires in 2002 and
$36,000 expires in 2003.
At December 31, 1995, with the exception of the Growth Fund, the cost of the
Funds' investments for Federal income tax purposes was substantially the same
as the cost for financial reporting purposes (see Portfolios of Investments).
(I) Other: Organization expenses incurred by the Funds are being amortized
to operations over the period during which it is expected that a benefit will
be realized, not to exceed five years.
(J) Concentration of risk: Investing in securities of foreign issuers and
foreign currency transactions may involve certain considerations and risks not
typically associated with investments in the United States. These risks
include revaluation of currencies, adverse fluctuations in foreign currency
values and possible adverse political, social and economic developments,
including those particular to a specific industry, country or region, which
could cause the securities and their markets to be less liquid and prices more
volatile than those of comparable U.S. securities. These risks are greater
with respect to securities of issuers located in emerging market countries in
which certain Funds are authorized to invest. The ability of the issuers of
debt securities held by the Funds to meet their obligations may be affected by
economic and political developments particular to a specific industry, country
or region.
134
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
NOTE 3--INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER TRANSACTIONS WITH
AFFILIATES
(A) The Trust has an Investment Advisory Agreement with FCIMCO pursuant to
which FCIMCO has agreed to provide day-to-day management of each Fund's
investments at the following annual rates:
<TABLE>
<S> <C>
Managed Assets Income Fund............................................. 0.65%
Managed Assets Fund.................................................... 0.65%
Equity Income Fund..................................................... 0.50%
Growth Fund............................................................ 0.65%
Special Opportunities Fund............................................. 0.70%
International Equity Fund.............................................. 0.80%
Intermediate Bond Fund................................................. 0.40%
Bond Fund.............................................................. 0.55%
International Bond Fund................................................ 0.70%
Intermediate Municipal Bond Fund....................................... 0.40%
Municipal Bond Fund.................................................... 0.40%
U.S. Government Money Market Fund...................................... 0.40%
Money Market Fund...................................................... 0.40%
Municipal Money Market Fund............................................ 0.40%
</TABLE>
The Trust has an Administration Agreement with FCIMCO pursuant to which
FCIMCO has agreed to assist in all aspects of the Funds' operations at an
annual rate of 0.15% of each Fund's average daily net assets. FCIMCO has
engaged Concord to provide certain administrative services to the Funds
pursuant to a Master Sub-Administration Agreement between FCIMCO and Concord.
FCIMCO has agreed to pay Concord a fee for the services stipulated in the
Master Sub-Administration Agreement.
For the period ended December 31, 1995, FCIMCO voluntarily agreed to
reimburse a portion of the operating expenses of the Funds to the extent that
the Funds' expenses exceeded the following amounts, excluding shareholder
servicing fees and 12b-1 fees (as a percentage of each Fund's average net
assets):
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS I
------- ------- -------
<S> <C> <C> <C>
Managed Assets Income Fund.............................. 1.31% 2.06% 0.80%
Managed Assets Fund..................................... 1.33% 2.08% 0.80%
Equity Income Fund...................................... 1.18% 1.93% 0.65%
Growth Fund............................................. 1.33% 2.08% 0.80%
Special Opportunities Fund.............................. 1.38% 2.13% 0.85%
International Equity Fund............................... 1.58% 2.33% 1.05%
Intermediate Bond Fund.................................. 1.15% 1.90% 0.55%
Bond Fund............................................... 1.23% 1.98% 0.70%
International Bond Fund................................. 1.48% 2.23% 0.95%
Intermediate Municipal Bond Fund........................ 0.90% 1.83% 0.55%
</TABLE>
135
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A Class B Class I
------- ------- -------
<S> <C> <C> <C>
Municipal Bond Fund..................................... 1.08% 1.83% 0.55%
U.S. Government Money Market............................ 0.80% NA NA
Money Market Fund....................................... 0.80% 1.55% NA
Municipal Money Market Fund............................. 0.70% NA NA
</TABLE>
As such, FCIMCO reimbursed expenses during the period ending December 31,
1995 in the following amounts:
<TABLE>
<CAPTION>
Expense
Reimbursement
-------------
<S> <C>
Managed Assets Income Fund..................................... $179,574
Managed Assets Fund............................................ 89,978
Equity Income Fund............................................. 277,704
Growth Fund.................................................... 314,740
Special Opportunities Fund..................................... 168,733
International Equity Fund...................................... 213,519
Intermediate Bond Fund......................................... 185,219
Bond Fund...................................................... 178,732
International Bond Fund........................................ 110,736
Intermediate Municipal Bond Fund............................... 403,299
Municipal Bond Fund............................................ 278,552
U.S. Government Money Market Fund.............................. 198,986
Money Market Fund.............................................. 431,210
Municipal Money Market Fund.................................... 489,926
</TABLE>
The Distributor is not entitled to any fees pursuant to the Distribution
Agreement; however, the Distributor may receive payments of sales charges or
contingent deferred sales charges.
(B) The Funds' Class A shares and Class B shares have a Shareholder Services
Plan (the "Plan") pursuant to which the Funds pay the Distributor a fee, at an
annual rate of 0.25% of the average daily net assets of the outstanding Class A
shares and Class B shares. Pursuant to the terms of the Plan, the Distributor
has agreed to provide certain shareholder services to the holders of these
shares. Additionally, under the terms of the Plan, the Distributor may make
payments to other shareholder service agents who may include FCIMCO, FNBC and
their affiliates. For the period ended December 31, 1995, the Funds paid the
following amounts under the Plan:
<TABLE>
<CAPTION>
Amounts paid to
FCIMCO, FNBC Amounts paid to Amounts
and other service retained by
its affiliates organizations Distributor
--------------- --------------- -----------
<S> <C> <C> <C>
Managed Assets Income Fund...... $7,185 $111,163 $809
Managed Assets Fund............. 7,036 1,892 124
Equity Income Fund.............. 417 2,510 54
Growth Fund..................... 1,788 2,959 137
Special Opportunities Fund...... 304 454 19
</TABLE>
136
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amounts paid to
FCIMCO, FNBC Amounts paid to Amounts
and other service retained by
its affiliates organizations Distributor
--------------- --------------- -----------
<S> <C> <C> <C>
International Equity Fund....... $ 1,363 $ 1,791 $ 98
Intermediate Bond Fund.......... 3,487 2,209 72
Bond Fund....................... 1,230 898 33
International Bond Fund......... 415 240 29
Intermediate Municipal Bond
Fund........................... 23,617 13,617 1,227
Municipal Bond Fund............. 7,593 7,151 266
U.S. Government Money Market
Fund........................... 168,470 2,292 --
Money Market Fund............... 378,833 1,372 380
Municipal Money Market Fund..... 508,558 28 17
</TABLE>
(C) The Funds' Class B shares have a Distribution Plan adopted pursuant to
Rule 12b-1 under the Act (the "12b-1 Plan") pursuant to which the Funds have
agreed to pay the Distributor for advertising, marketing and distributing Class
B Shares of the Funds at an annual rate of .75% of the average daily net assets
of the Funds' outstanding Class B shares. Under the terms of the 12b-1 Plan,
the Distributor may make payments to FCIMCO, FNBC and their affiliates in
respect of these services. For the period ended December 31, 1995, the Funds
made the following payments under the 12b-1 Plan, all of which was retained by
the Distributor:
<TABLE>
<S> <C>
Managed Assets Income Fund........................................... $5,831
Managed Assets Fund.................................................. 3,325
Equity Income Fund................................................... 1,283
Growth Fund.......................................................... 670
Special Opportunities Fund........................................... 56
International Equity Fund............................................ 379
Intermediate Bond Fund............................................... 563
Bond Fund............................................................ 116
International Bond Fund.............................................. 30
Intermediate Municipal Bond Fund..................................... 824
Municipal Bond Fund.................................................. 600
Money Market Fund.................................................... 154
</TABLE>
(D) During the fiscal year ended December 31, 1994, an affiliate of FCIMCO
purchased securities from the Money Market Fund and the U.S. Government Money
Market Fund at an amount in excess of the securities' fair market value. These
Funds recorded a realized loss on these sales in the amount of $1,286,000 and
$933,054, respectively, and an offsetting capital contribution from the
affiliate. As a result of varying treatments for book and tax purposes, the
capital contributions were reclassified from additional paid-in-capital to
accumulated net realized losses in the Statement of Assets and Liabilities.
137
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
NOTE 4--SECURITIES TRANSACTIONS
The following summarizes the securities transactions entered into by the
Funds, excluding short-term investments, for the period ended December 31,
1995:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
Managed Assets Income Fund........................ $ 3,357,559 $ 7,795,562
Managed Assets Fund............................... 7,772,725 99,502
Equity Income Fund................................ 317,060,048 94,711,633
Growth Fund....................................... 488,008,493 274,675,271
Special Opportunities Fund........................ 96,866,413 26,212,656
International Equity Fund......................... 72,831,246 3,326,924
Intermediate Bond Fund............................ 410,895,956 256,675,480
Bond Fund......................................... 265,646,537 167,721,527
International Bond Fund........................... 14,226,845 4,749,719
Intermediate Municipal Bond Fund.................. 167,757,833 164,745,501
Municipal Bond Fund............................... 174,644,032 162,078,544
</TABLE>
At December 31, 1995, accumulated net unrealized appreciation (depreciation)
on investments was as follows:
<TABLE>
<CAPTION>
Unrealized Unrealized Net Unrealized
Appreciation Depreciation Appreciation
------------ ------------ --------------
<S> <C> <C> <C>
Managed Assets Income Fund.......... $ 8,452,650 $ (184,643) $ 8,268,007
Managed Assets Fund................. 766,286 (42,223) 724,063
Equity Income Fund.................. 42,227,078 (629,319) 41,597,759
Growth Fund......................... 48,630,652 (2,897,786) 45,732,866
Special Opportunities Fund.......... 16,914,276 (1,454,174) 15,460,102
International Equity Fund........... 7,077,639 (1,202,384) 5,875,255
Intermediate Bond Fund.............. 7,224,889 (7,491) 7,217,398
Bond Fund........................... 6,271,794 -- 6,271,794
International Bond Fund............. 427,716 -- 427,716
Intermediate Municipal Bond Fund.... 16,805,231 -- 16,805,231
Municipal Bond Fund................. 13,674,273 -- 13,674,273
</TABLE>
138
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
NOTE 5--CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Funds are summarized below:
<TABLE>
<CAPTION>
MANAGED ASSETS
INCOME FUND
---------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
--------------------- ---------------------- -------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Class A Shares:
Shares Issued........... $ 6,191,735 463,615 $ 5,577,372 441,901
Dividends reinvested.... 2,369,623 177,490 2,307,933 185,739
Shares redeemed......... (9,494,631) (723,267) (11,257,088) (903,518)
----------- -------- ------------ --------
Net Increase (decrease). $ (933,273) (82,162) $ (3,371,783) (275,878)
=========== ======== ============ ========
Class B Shares:
Shares Issued........... $ 2,007,221 146,972 $ 1,147,965 90,904
Dividends reinvested.... 33,593 2,392 28,168 2,281
Shares redeemed......... -- -- (1,127,831) (93,185)(d)
----------- -------- ------------ --------
Net Increase............ $ 2,040,814 149,364 $ 48,302 --
=========== ======== ============ ========
Class I Shares:
Shares Issued........... $ 1,362,669 103,183 -- --
Dividends reinvested.... 11,790 865 -- --
Shares redeemed......... (202,866) (15,263) -- --
----------- -------- ------------ --------
Net Increase............ $ 1,171,593 88,785 $ -- --
=========== ======== ============ ========
Net Increase (decrease)
in Fund................ $ 2,279,134 320,311 $ (3,323,481) (275,878)
=========== ======== ============ ========
</TABLE>
139
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGED ASSETS EQUITY INCOME
FUND FUND
-----------------------------------------------
FOR THE PERIOD FOR THE PERIOD
APRIL 3, 1995 JANUARY 27, 1995
THROUGH THROUGH
DECEMBER 31, 1995(A) DECEMBER 31, 1995(A)
-----------------------------------------------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares Issued........... $8,265,007 774,054 $ 3,147,813 274,126
Dividends reinvested.... 77,996 6,993 96,740 8,056
Shares redeemed......... (582,928) (54,615) (548,876) (47,021)
----------- -------- ------------ ----------
Net Increase............ $7,760,075 726,432 $ 2,695,677 235,161
=========== ======== ============ ==========
Class B Shares:
Shares Issued........... $ 763,106 73,866 $ 549,799 47,321
Dividends reinvested.... 7,435 679 20,644 1,708
Shares redeemed......... (19,541) (1,829) (5,669) (479)
----------- -------- ------------ ----------
Net Increase............ $ 751,000 72,716 $ 564,774 48,550
=========== ======== ============ ==========
Class I Shares:
Shares Issued........... $ 363,704 35,836 $254,460,104 24,853,530
Dividends reinvested.... 81 7 6,520,825 538,073
Shares redeemed......... -- -- (23,702,375) (2,132,230)
----------- -------- ------------ ----------
Net Increase............ $ 363,785 35,843 $237,278,554 23,259,373
=========== ======== ============ ==========
Net Increase in Fund.... $ 8,874,860 834,991 $240,539,005 23,543,084
=========== ======== ============ ==========
</TABLE>
140
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SPECIAL
GROWTH OPPORTUNITIES
FUND FUND
------------------------ ------------------------
FOR THE PERIOD FOR THE PERIOD
JANUARY 27, 1995 JANUARY 27, 1995
THROUGH THROUGH
DECEMBER 31, 1995(A) DECEMBER 31, 1995(A)
------------------------ ------------------------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares Issued............... $ 4,175,044 365,857 $ 621,648 57,254
Dividends reinvested........ 284,304 24,056 13,920 1,177
Shares redeemed............. (339,951) (28,244) (38,190) (3,361)
------------ ---------- ------------ ----------
Net Increase................ $ 4,119,397 361,669 $ 597,378 55,070
============ ========== ============ ==========
Class B Shares:
Shares Issued............... $ 246,223 21,032 $ 13,756 1,248
Dividends reinvested........ 18,650 1,584 308 26
Shares redeemed............. (2,126) (178) (52) (5)
------------ ---------- ------------ ----------
Net Increase................ $ 262,747 22,438 $ 14,012 1,269
============ ========== ============ ==========
Class I Shares:
Shares Issued............... $296,410,620 29,238,077 $89,307,250 8,700,086
Dividends reinvested........ 14,724,145 1,243,736 1,180,180 99,691
Shares redeemed............. (67,961,411) (5,922,360) (12,836,851) (1,176,741)
------------ ---------- ------------ ----------
Net Increase................ $243,173,354 24,559,453 $77,650,579 7,623,036
============ ========== ============ ==========
Net Increase in Fund........ $247,555,498 24,943,560 $78,261,969 7,679,375
============ ========== ============ ==========
</TABLE>
141
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL
EQUITY INTERMEDIATE BOND
FUND FUND
---------------------- ------------------------
FOR THE PERIOD FOR THE PERIOD
MARCH 3, 1995 FEBRUARY 1, 1995
THROUGH THROUGH
DECEMBER 31, 1995(A) DECEMBER 31, 1995(B)
---------------------- ------------------------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares Issued................. $ 2,704,994 256,160 $ 7,282,071 895,627
Dividends reinvested.......... 72,968 6,664 288,362 35,401
Shares redeemed............... (171,519) (16,377) (1,588,172) (194,954)
----------- --------- ------------ ----------
Net Increase.................. $ 2,606,443 246,447 $ 5,982,261 736,074
=========== ========= ============ ==========
Class B Shares:
Shares Issued................. $ 177,315 16,903 $ 303,451 37,048
Dividends reinvested.......... 4,093 407 7,835 961
Shares redeemed............... (193) (18) (50,817) (6,308)
----------- --------- ------------ ----------
Net Increase.................. $ 181,215 17,292 $ 260,469 31,701
=========== ========= ============ ==========
Class I Shares:
Shares Issued................. $97,383,515 9,484,283 $193,282,535 24,813,641
Dividends reinvested.......... 1,458,486 131,833 3,730,335 459,341
Shares redeemed............... (5,651,592) (536,226) (22,128,156) (2,742,147)
----------- --------- ------------ ----------
Net Increase.................. $93,190,409 9,079,890 $174,884,714 22,530,835
=========== ========= ============ ==========
Net Increase in Fund.......... $95,978,067 9,343,629 $181,127,444 23,298,610
=========== ========= ============ ==========
</TABLE>
142
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE BOND
FUND
---------------------------------------------
FOR THE PERIOD
FOR THE YEAR MARCH 5, 1993
ENDED THROUGH
JANUARY 31, 1995 JANUARY 31, 1994(A)
--------------------- ----------------------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares Issued..................... $ 19,449 2,527 $ 1,481 6,185
Dividends reinvested.............. 4,153 533 -- 180
Shares redeemed................... (15,285) (1,997) 51,267 --
---------- --------- ----------- --------
Net Increase...................... $ 8,317 1,063 $ 52,751 6,365
========== ========= =========== ========
Class B Shares:
Shares Issued..................... $ 2,000 245 $ -- --
Dividends reinvested.............. 99 13 -- --
Shares redeemed................... (2,099) (258) -- --
---------- --------- ----------- --------
Net Increase...................... $ -- -- $ -- --
========== ========= =========== ========
Class I Shares:
Shares Issued..................... $7,661,463 1,001,211 $5,247,186 628,922
Dividends reinvested.............. 5,537 710 5,299 639
Shares redeemed................... (5,328,334) (698,958) (154,029) (18,488)
---------- --------- ----------- --------
Net Increase...................... $2,338,666 302,963 $5,098,456 611,073
========== ========= =========== ========
Net Increase in Fund.............. $2,346,983 304,026 $5,151,207 617,438
========== ========= =========== ========
</TABLE>
143
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL
BOND
BOND FUND FUND
------------------------ ----------------------
FOR THE FOR THE PERIOD
PERIOD JANUARY 27, 1995
FEBRUARY 10, 1995 THROUGH
THROUGH DECEMBER 31,
DECEMBER 31, 1995(A) 1995(A)
------------------------ ----------------------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares issued........... $ 1,854,556 174,316 $ 480,966 42,767
Dividends reinvested.... 110,618 10,293 47,097 4,274
Shares redeemed......... (148,560) (13,734) (19,999) (1,752)
------------ ---------- ----------- ---------
Net increase............ $ 1,816,614 170,875 $ 508,064 45,289
============ ========== =========== =========
Class B Shares:
Shares issued........... $ 58,404 5,401 $ 3,704 370
Dividends reinvested.... 2,873 268 484 44
Shares redeemed......... -- -- -- --
------------ ---------- ----------- ---------
Net increase............ $ 61,277 5,669 $ 4,188 414
============ ========== =========== =========
Class I Shares:
Shares issued........... $127,483,190 12,620,870 $15,099,834 1,442,838
Dividends reinvested.... 2,860,982 267,174 332,915 29,708
Shares redeemed......... (13,656,196) (1,289,980) (1,470,371) (130,514)
------------ ---------- ----------- ---------
Net increase............ $116,687,976 11,598,064 $13,962,378 1,342,032
============ ========== =========== =========
Net increase in Fund.... $118,565,867 11,774,608 $14,474,630 1,387,735
============ ========== =========== =========
</TABLE>
144
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE MUNICIPAL
BOND FUND
--------------------------------------------------
FOR THE PERIOD
MARCH 1, 1995 FOR THE
THROUGH YEAR ENDED
DECEMBER 31, FEBRUARY 28,
1995(C) 1995
------------------------ ------------------------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares issued........... $ 2,036,319 167,138 $ 920,191 78,527
Dividends reinvested.... 579,220 47,958 829,334 70,747
Shares redeemed......... (2,724,405) (225,316) (12,219,977) (1,053,197)
------------ ---------- ------------ ----------
Net decrease............ $ (108,866) (10,220) $(10,470,452) (903,923)
============ ========== ============ ==========
Class B Shares:
Shares issued........... $ 348,000 28,626 $ 115,550 9,750
Dividends reinvested.... 4,876 399 1,971 169
Shares redeemed......... (20,212) (1,672) (123,958) (10,419)
------------ ---------- ------------ ----------
Net increase (decrease). $ 332,664 27,353 $ (6,437) (500)
============ ========== ============ ==========
Class I Shares:
Shares issued........... $ 46,362,306 3,850,432 $366,411,242 31,318,358
Dividends reinvested.... 2,330,219 191,337 20,498 1,737
Shares redeemed......... (54,476,753) (4,527,302) (3,821,887) (325,102)
------------ ---------- ------------ ----------
Net increase (decrease). $ (5,784,228) (485,533) $362,609,853 30,994,993
============ ========== ============ ==========
Net increase (decrease)
in Fund................ $ (5,560,430) (468,400) $352,132,964 30,090,570
============ ========== ============ ==========
</TABLE>
145
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERMEDIATE
MUNICIPAL MUNICIPAL BOND
BOND FUND FUND
--------------------- ------------------------
FOR THE FOR THE PERIOD
YEAR ENDED MARCH 1, 1995
FEBRUARY 28, THROUGH
1994 DECEMBER 31, 1995(C)
--------------------- ------------------------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares issued.................. $ 6,634,160 523,996 $ 1,295,558 103,426
Dividends reinvested........... 1,972,927 158,309 346,338 27,700
Shares redeemed................ (6,226,132) (496,647) (1,377,127) (110,562)
----------- -------- ------------ ----------
Net increase................... $ 2,380,955 185,658 $ 264,769 20,564
=========== ======== ============ ==========
Class B Shares:
Shares issued.................. $ 12,000 980 $ 228,602 18,257
Dividends reinvested........... 4 1 6,838 543
Shares redeemed................ -- -- (39) (3)
----------- -------- ------------ ----------
Net increase................... $ 12,004 981 $ 235,401 18,797
=========== ======== ============ ==========
Class I Shares:
Shares issued.................. $ -- -- $ 32,958,625 2,685,708
Dividends reinvested........... -- -- 3,575,154 285,358
Shares redeemed................ -- -- (27,710,442) (2,219,888)
----------- -------- ------------ ----------
Net increase................... $ -- -- $ 8,823,337 751,178
=========== ======== ============ ==========
Net increase in Fund........... $ 2,392,959 186,639 $ 9,323,507 790,539
=========== ======== ============ ==========
</TABLE>
146
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL BOND
FUND
-----------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
FEBRUARY 28, 1995 DECEMBER 31, 1994
------------------------ -----------------
AMOUNT SHARES AMOUNT SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares issued................. $ 301,216 25,507 $ 3,586,206 275,363
Dividends reinvested.......... 319,837 27,236 956,593 75,829
Shares redeemed............... (2,895,171) (246,815) (5,752,746) (441,865)
------------ ---------- ----------- --------
Net decrease.................. $ (2,274,118) (194,072) $(1,209,947) (90,673)
============ ========== =========== ========
Class B Shares:
Shares issued................. $ -- -- $ 2,000 161
Dividends reinvested.......... 66 6 4 1
Shares redeemed............... (2,071) (168) -- --
------------ ---------- ----------- --------
Net increase (decrease)....... $ (2,005) (162) $ 2,004 162
============ ========== =========== ========
Net decrease in Fund.......... $ -- -- $(1,207,943) (90,511)
============ ========== =========== ========
Class I Shares:
Shares issued................. $222,099,320 18,631,505 $ -- --
Dividends reinvested.......... 3,923 325 -- --
Shares redeemed............... (4,444,913) (371,925) -- --
------------ ---------- ----------- --------
Net increase.................. $217,658,330 18,259,905 $ -- --
============ ========== =========== ========
Net increase (decrease) in
Fund......................... $215,382,207 18,065,671 $ -- --
============ ========== =========== ========
</TABLE>
147
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
FUND FUND
-------------------------- ----------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1995 1994
------------ ------------ ------------ ------------
SHARES SHARES SHARES SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
Class A Shares:
Shares issued........... 250,085,862 677,021,399 802,777,063 1,724,346,455
Dividends reinvested.... 2,488,380 1,310,332 6,872,109 2,559,069
Shares redeemed......... (311,695,323) (716,564,214) (725,110,518) (1,770,081,791)
------------ ------------ ------------ --------------
Net increase (decrease). (59,121,081) (38,232,483) 84,538,654 (43,176,267)
============ ============ ============ ==============
Class B Shares:
Shares issued........... -- -- 250,080 --
Dividends reinvested.... -- -- 903 --
Shares redeemed......... -- -- (186,116) --
------------ ------------ ------------ --------------
Net increase............ -- -- 64,867 --
============ ============ ============ ==============
Net increase (decrease)
in Fund................ (59,121,081) (38,232,483) 84,603,521 (43,176,267)
============ ============ ============ ==============
</TABLE>
148
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL
MONEY MARKET
FUND
------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- ------------------
SHARES SHARES
------ ------
<S> <C> <C>
Class A Shares:
Shares issued.............................. 534,326,783 428,067,086
Dividends reinvested....................... 3,305,612 2,261,400
Shares redeemed............................ (482,251,105) (434,859,851)
------------ ------------
Net increase (decrease) in Fund............ 55,381,290 (4,531,365)
============ ============
</TABLE>
- - -----------
(a) Period from commencement of operations.
(b) Effective February 1, 1995, the Fund changed its fiscal year end from
January 31 to December 31.
(c) Effective March 1, 1995, the Fund changed its fiscal year end from February
28 to December 31.
(d) Includes 91,228 shares converted to Class A Shares on December 2, 1994.
(e) Includes Class B Shares for the period from February 8, 1994 (commencement
of initial offering of B Shares) through December 2, 1994.
(f) Includes 91,228 shares converted to Class A Shares on December 2, 1994.
NOTE 6--MERGER AND SUBSEQUENT EVENT
On December 1, 1995, FCIMCO's ultimate parent company, First Chicago
Corporation, merged with NBD Bancorp., Inc., with the combined company renamed
First Chicago NBD Corporation (FCNBD). FCNBD has now begun the process of
reorganizing their proprietary mutual funds: Prairie Funds, Prairie
Institutional Funds and the Woodward Funds (whose investment adviser is NBD
Bank, a wholly owned subsidiary of FCNBD).
On February 20, 1996, the Board of Trustees of The Woodward Funds and the
Board of Trustees/Directors of the Prairie Funds, Prairie Municipal Bond Fund,
Inc. and Prairie Intermediate Bond Fund approved Reorganization Agreements,
which are subject to shareholder approval. The expenses incurred in connection
with entering into and carrying out provisions of the Reorganization
Agreements, whether or not the transactions contemplated thereby are
consummated, will be paid by FCNBD. The reorganization is intended to be
effected on a tax-free basis, so that none of the Fund's shareholders will
recognize taxable gains or losses as a result of the reorganization.
A proxy statement/prospectus describing the reorganization and the reasons
therefore will be sent to shareholders.
149
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- - --------------------------------------------------------------------------------
NOTE 7--ELIGIBLE DISTRIBUTIONS (UNAUDITED):
The Trust designates the following eligible distributions for the dividends
received deduction for corporations for the year ended December 31, 1995:
<TABLE>
<CAPTION>
MANAGED
ASSETS MANAGED EQUITY
INCOME ASSETS INCOME
FUND FUND FUND
------- ------- ------
<S> <C> <C> <C>
Dividend Income................................... $1,219,984 $52,630 $8,875,334
Dividend Income Per Share--Class A Shares......... 0.28 0.05 0.32
Dividend Income Per Share--Class B Shares......... 0.22 0.05 0.26
Dividend Income Per Share--Class I Shares......... 0.28 0.08 0.36
</TABLE>
<TABLE>
<CAPTION>
GROWTH SPECIAL INTERNATIONAL
FUND OPPORTUNITIES FUND EQUITY FUND
------ ------------------ -------------
<S> <C> <C> <C>
Dividend Income.................... $4,772,025 $611,057 $973,285
Dividend Income Per Share--Class A
Shares............................ 0.10 0.01 0.05
Dividend Income Per Share--Class B
Shares............................ 0.05 0.00 0.03
Dividend Income Per Share--Class I
Shares............................ 0.12 0.04 0.07
</TABLE>
150
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS INCOME FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CLASS A SHARES:
Net Asset Value, Beginning of
Year.......................... $ 12.13 $ 13.11 $ 12.68 $ 12.56 $ 10.79
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERA-
TIONS:
Net investment income (loss)... 0.64 0.73 0.72 0.79 0.83
Net realized and unrealized
gains (losses) on invest-
ments........................ 2.48 (0.98) 0.61 0.26 1.77
------- ------- ------- ------- -------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS....... 3.12 (0.25) 1.33 1.05 2.60
------- ------- ------- ------- -------
LESS DIVIDENDS AND DISTRIBU-
TIONS:
From net investment income..... (0.68) (0.72) (0.72) (0.77) (0.83)
From net realized gains on in-
vestments.................... (0.03) (0.01) (0.18) (0.16) --
------- ------- ------- ------- -------
TOTAL DIVIDENDS AND DISTRIBU-
TIONS....................... (0.71) (0.73) (0.90) (0.93) (0.83)
------- ------- ------- ------- -------
Net change in net asset value... 2.41 (0.98) 0.43 0.12 1.77
------- ------- ------- ------- -------
Net Asset Value, End of Year.... $ 14.54 $ 12.13 $ 13.11 $ 12.68 $ 12.56
======= ======= ======= ======= =======
- - ---------------------------------
TOTAL RETURN (EXCLUDES SALES
CHARGE) 26.40% (1.92)% 10.70% 8.68% 24.87%
- - ---------------------------------
- - ---------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ---------------------------------
Ratio of expenses to average net
assets........................ 1.17% 0.63% 0.39% 0.02% --
Ratio of net investment income
to average net assets......... 4.88% 5.77% 5.54% 6.24% 7.04%
Ratio of expenses to average net
assets*....................... 1.54% 1.67% 1.65% 1.88% 2.16%
Ratio of net investment income
to average net assets*........ 4.51% 4.73% 4.28% 4.38% 4.88%
Portfolio turnover.............. 8.23% 28.69% 16.40% 22.14% 26.02%
Net assets, end of period (000's
omitted)...................... $51,997 $44,367 $51,586 $34,262 $14,038
</TABLE>
- - -----------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred,
the ratios would have been as indicated.
See Notes to Financial Statements.
151
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS INCOME FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Period Ended Period Ended
December 31, December 2,
1995(2) 1994(1)
------------ ------------
<S> <C> <C>
CLASS B SHARES:
Net Asset Value, Beginning of Period............... $12.42 $13.05
------ ------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income............................. 0.45 0.51
Net realized and unrealized gains (losses) on
investments..................................... 2.17 (0.91)
------ ------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS... 2.62 (0.40)
------ ------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income........................ (0.45) (0.54)
From net realized gains on investments............ (0.03) (0.01)
------ ------
TOTAL DIVIDENDS AND DISTRIBUTIONS................ (0.48) (0.55)
------ ------
Net change in net asset value...................... 2.14 (0.95)
------ ------
Conversion to Class A Shares(3).................... NA 12.10
------ ------
Net Asset Value, End of Period..................... $14.56 $ --
====== ======
- - ----------------------------------------------------
TOTAL RETURN (EXCLUDES REDEMPTION CHARGE) 21.42%++ (3.13)%++
- - ----------------------------------------------------
- - ----------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ----------------------------------------------------
Ratio of expenses to average net assets............ 1.92%+ 1.21%+
Ratio of net investment income to average net as-
sets............................................. 3.89%+ 4.10%+
Ratio of expenses to average net assets*........... 2.12%+ 2.17%+
Ratio of net investment income to average net as-
sets*............................................ 3.70%+ 3.14%+
Portfolio turnover................................. 8.23%++ 28.69%++
Net assets, end of period (000's omitted).......... $2,175 $ --
</TABLE>
- - -----------
(1) For the period February 8, 1994 (initial offering date of Class B Shares)
through December 2, 1994. On December 2, 1994, the Fund terminated its
offering of Class B Shares under the then-current sales load schedule and
such shares converted to Class A Shares.
(2) For the period March 3, 1995 (re-offering date of Class B Shares) through
December 31, 1995.
(3) On December 2, 1994, the Fund terminated its offering of Class B shares
under the then-current sales load schedule and such shares converted to
Class A Shares.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
NA Not applicable.
See Notes to Financial Statements.
152
<PAGE>
PRAIRIE FUNDS
MANAGED ASSETS INCOME FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Period Ended
December 31,
1995(1)
------------
<S> <C>
CLASS I SHARES:
Net Asset Value, Beginning of Period............................. $12.42
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................................... 0.57
Net realized and unrealized gains on investments................ 2.18
------
TOTAL INCOME FROM INVESTMENT OPERATIONS........................ 2.75
------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income...................................... (0.57)
From net realized gains on investments.......................... (0.03)
------
TOTAL DIVIDENDS AND DISTRIBUTIONS.............................. (0.60)
------
Net change in net asset value.................................... 2.15
------
Net Asset Value, End of Period................................... $14.57
======
- - ------------------------------------------------------------------
TOTAL RETURN 22.55%++
- - ------------------------------------------------------------------
- - ------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ------------------------------------------------------------------
Ratio of expenses to average net assets.......................... 0.77%+
Ratio of net investment income to average net assets............. 5.12%+
Ratio of expenses to average net assets*......................... 1.22%+
Ratio of net investment income to average net assets*............ 4.66%+
Portfolio turnover............................................... 8.23%++
Net assets, end of period (000's omitted)........................ $1,294
</TABLE>
- - -----------
(1) For the period March 3, 1995, (initial offering date of Class I Shares)
through December 31, 1995.
* During the period, certain fees were voluntarily reimbursed. If such
voluntary fee reimbursements had not occurred, the ratios would have been
as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
153
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managed Equity
Assets Income Growth
Fund(1) Fund(2) Fund(2)
------- ------- -------
<S> <C> <C> <C>
CLASS A SHARES:
Net Asset Value, Beginning of Period........ $10.00 $10.00 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................... 0.14 0.36 0.11
Net realized and unrealized gains on in-
vestments................................ 1.50 2.57 2.86
------ ------ ------
TOTAL INCOME FROM INVESTMENT OPERATIONS... 1.64 2.93 2.97
------ ------ ------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income................. (0.14) (0.36) (0.11)
In excess of net investment income......... -- (0.01) --
From net realized gains on investments and
foreign currency transactions............ -- (0.34) (0.89)
------ ------ ------
TOTAL DIVIDENDS AND DISTRIBUTIONS......... (0.14) (0.71) (1.00)
------ ------ ------
Net change in net asset value............... 1.50 2.22 1.97
------ ------ ------
Net Asset Value, End of Period.............. $11.50 $12.22 $11.97
====== ====== ======
- - ----------------------------------------------
TOTAL RETURN (EXCLUDES SALES CHARGE) 16.48%++ 29.78%++ 29.98%++
- - ----------------------------------------------
- - ----------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ----------------------------------------------
Ratio of expenses to average net assets..... 1.26%+ 1.11%+ 1.21%+
Ratio of net investment income to average
net assets................................ 2.45%+ 3.33%+ 0.86%+
Ratio of expenses to average net assets*.... 3.15%+ 1.44%+ 1.39%+
Ratio of net investment income (loss) to av-
erage net assets*......................... 0.56%+ 2.99%+ 0.68%+
Portfolio turnover.......................... 2.25%++ 44.07%++ 106.02%++
Net assets, end of period (000's omitted)... $8,356 $2,873 $4,329
</TABLE>
- - -----------
(1) For the period April 3, 1995 (commencement of operations) through December
31, 1995.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period March 3, 1995 (commencement of operations) through December
31, 1995.
(4) For the period February 10, 1995 (commencement of operations) through
December 31, 1995.
* During the period, certain fees were voluntarily reimbursed. If such
voluntary fee reimbursements had not occurred, the ratios would have been
as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
154
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Special International International
Opportunities Equity Bond Bond
Fund(2) Fund(3) Fund(4) Fund(2)
------------- ------------- ------- -------------
<S> <C> <C> <C>
$10.00 $10.00 $10.00 $10.00
-------- ------ ------ ------
0.02 0.10 0.57 0.98
2.45 1.40 1.20 1.10
-------- ------ ------ ------
2.47 1.50 1.77 2.08
-------- ------ ------ ------
(0.02) (0.09) (0.57) (0.98)
-- -- -- (0.01)
(0.25) (0.25) (0.39) (0.34)
-------- ------ ------ ------
(0.27) (0.34) (0.96) (1.33)
-------- ------ ------ ------
2.20 1.16 0.81 0.75
-------- ------ ------ ------
$12.20 $11.16 $10.81 $10.75
======== ====== ====== ======
24.80%++ 15.16%++ 18.22%++ 21.10%++
1.25%+ 1.50%+ 1.02%+ 1.33%+
0.19%+ 1.19%+ 5.94%+ 4.91%+
2.56%+ 1.96%+ 1.57%+ 3.65%+
(1.12)%+ 0.72%+ 5.39%+ 2.59%+
38.89%++ 5.65%++ 156.11%++ 48.03%++
$ 672 $2,749 $1,847 $ 487
</TABLE>
See Notes to Financial Statements.
155
<PAGE>
PRAIRIE FUNDS
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
For the Period Ended December 31, 1995
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managed Equity
Assets Income Growth
Fund(1) Fund(2) Fund(2)
------- ------- -------
<S> <C> <C> <C>
CLASS B SHARES:
Net Asset Value, Beginning of Period....... $10.00 $10.00 $ 10.00
------ ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).............. 0.13 0.29 0.06
Net realized and unrealized gains on in-
vestments............................... 1.45 2.56 2.84
------ ------ -------
TOTAL INCOME FROM INVESTMENT OPERATIONS.. 1.58 2.85 2.90
------ ------ -------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income................ (0.13) (0.29) (0.06)
In excess of net investment income........ -- -- --
From net realized gains on investments and
foreign currency transactions........... -- (0.34) (0.89)
------ ------ -------
TOTAL DIVIDENDS AND DISTRIBUTIONS........ (0.13) (0.63) (0.95)
------ ------ -------
Net change in net asset value.............. 1.45 2.22 1.95
------ ------ -------
Net Asset Value, End of Period............. $11.45 $12.22 $ 11.95
====== ====== =======
- - ---------------------------------------------
TOTAL RETURN (EXCLUDES REDEMPTION CHARGE) 15.83%++ 28.97%++ 29.15%++
- - ---------------------------------------------
- - ---------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ---------------------------------------------
Ratio of expenses to average net assets.... 2.00%+ 1.90%+ 2.04%+
Ratio of net investment income (loss) to
average net assets....................... 1.69%+ 2.65%+ 0.02%+
Ratio of expenses to average net assets*... 6.84%+ 2.65%+ 2.60%+
Ratio of net investment income (loss) to
average net assets*...................... (3.15)%+ 1.90%+ (0.54)%+
Portfolio turnover......................... 2.25%++ 44.07%++ 106.02%++
Net assets, end of period (000's omitted).. $ 833 $ 593 $ 268
</TABLE>
- - -----------
(1) For the period April 3, 1995 (commencement of operations) through December
31, 1995.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period March 3, 1995 (commencement of operations) through December
31, 1995.
(4) For the period February 10, 1995 (commencement of operations) through
December 31, 1995.
* During the period, certain fees were voluntarily reimbursed. if such
voluntary fee reimbursements had not occurred, the ratios would have been
as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
156
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Special International International
Opportunities Equity Bond Bond
Fund(2) Fund(3) Fund(4) Fund(2)
------------- ------------- ------- -------------
<S> <C> <C> <C>
$10.00 $10.00 $10.00 $10.00
-------- ------ ------ ------
(0.03) 0.05 0.50 0.91
2.40 1.39 1.20 1.16
-------- ------ ------ ------
2.37 1.44 1.70 2.07
-------- ------ ------ ------
-- (0.05) (0.50) (0.91)
-- -- -- (0.01)
(0.25) (0.25) (0.39) (0.34)
-------- ------ ------ ------
(0.25) (0.30) (0.89) (1.26)
-------- ------ ------ ------
2.12 1.14 0.81 0.81
-------- ------ ------ ------
$12.12 $11.14 $10.81 $10.81
======== ====== ====== ======
23.76%++ 14.52%++ 17.41%++ 20.90%++
2.00%+ 2.28%+ 1.87%+ 2.03%+
(0.51)%+ 0.40%+ 5.22%+ 4.39%+
9.52%+ 3.83%+ 3.91%+ 8.69%+
(8.04)%+ (1.15)%+ 3.19%+ (2.28)%+
38.89%++ 5.65%++ 156.11%++ 48.03%++
$ 15 $ 193 $ 61 $ 4
</TABLE>
See Notes to Financial Statements.
157
<PAGE>
PRAIRIE FUNDS
- - --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
For the Year Ended December 31, 1995
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Managed Equity
Assets Income Growth
Fund(1) Fund(2) Fund(2)
------- -------- --------
<S> <C> <C> <C>
CLASS I SHARES:
Net Asset Value, Beginning of Period........ $10.00 $ 10.00 $ 10.00
------ -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income...................... 0.22 0.42 0.15
Net realized and unrealized gains on in-
vestments................................ 1.46 2.55 2.86
------ -------- --------
TOTAL INCOME FROM INVESTMENT OPERATIONS... 1.68 2.97 3.01
------ -------- --------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income................. (0.22) (0.42) (0.15)
In excess of net investment income......... -- -- --
From net realized gains on investments and
foreign currency transactions............ -- (0.34) (0.89)
------ -------- --------
TOTAL DIVIDENDS AND DISTRIBUTIONS......... (0.22) (0.76) (1.04)
------ -------- --------
Net change in net asset value............... 1.46 2.21 1.97
------ -------- --------
Net Asset Value, End of Period.............. $11.46 $ 12.21 $ 11.97
====== ======== ========
- - ---------------------------------------------
TOTAL RETURN 16.90%++ 30.27%++ 30.38%++
- - ---------------------------------------------
- - ---------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ---------------------------------------------
Ratio of expenses to average net assets..... 0.80%+ 0.65%+ 0.80%+
Ratio of net investment income to average
net assets................................ 3.06%+ 4.08%+ 1.46%+
Ratio of expenses to average net assets*.... 4.12%+ 0.77%+ 0.92%+
Ratio of net investment income (loss) to av-
erage net assets*......................... (0.26)%+ 3.96%+ 1.34%+
Portfolio turnover.......................... 2.25%++ 44.07%++ 106.02%++
Net assets, end of period (000's omitted)... $ 411 $283,927 $293,944
</TABLE>
- - -----------
(1) For the period April 3, 1995 (commencement of operations) through December
31, 1995.
(2) For the period January 27, 1995 (commencement of operations) through
December 31, 1995.
(3) For the period March 3, 1995 (commencement of operations) through December
31, 1995.
(4) For the period February 10, 1995 (commencement of operations) through
December 31, 1995.
* During the period, certain fees were voluntarily reimbursed. If such
voluntary fee reimbursements had not occurred, the ratios would have been
as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
158
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Special International International
Opportunities Equity Bond Bond
Fund(2) Fund(3) Fund(4) Fund(2)
- - ------------- ------------- ------- -------------
<S> <C> <C> <C>
$ 10.00 $ 10.00 $ 10.00 $ 10.00
-------- -------- -------- -------
0.06 0.14 0.61 1.02
2.44 1.40 1.20 1.16
-------- -------- -------- -------
2.50 1.54 1.81 2.18
-------- -------- -------- -------
(0.06) (0.12) (0.61) (1.02)
-- -- -- (0.01)
(0.25) (0.25) (0.39) (0.34)
-------- -------- -------- -------
(0.31) (0.37) (1.00) (1.37)
-------- -------- -------- -------
2.19 1.17 0.81 0.81
-------- -------- -------- -------
$ 12.19 $ 11.17 $ 10.81 $ 10.81
======== ======== ======== =======
25.08%++ 15.62%++ 18.57%++ 22.13%++
0.85%+ 1.05%+ 0.70%+ 0.95%+
0.59%+ 1.70%+ 6.48%+ 5.71%+
1.09%+ 1.38%+ 0.87%+ 1.93%+
0.36%+ 1.36%+ 6.31%+ 4.73%+
38.89%++ 5.65%++ 156.11%++ 48.03%++
$92,926 $101,448 $125,401 $14,504
</TABLE>
See Notes to Financial Statements.
159
<PAGE>
PRAIRIE INTERMEDIATE BOND FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the For the
Period Ended Year Ended Period Ended
December 31, January 31, January 31,
1995(1) 1995 1994(2)
------------ ----------- ------------
<S> <C> <C> <C>
CLASS A SHARES:
Net Asset Value, Beginning of Period.... $ 7.68 $ 8.25 $ 8.36
------ ------ ------
INCOME (LOSS) FROM INVESTMENT OPERA-
TIONS:
Net investment income.................. 0.44 0.52 0.47
Net realized and unrealized gains
(losses) on investments.............. 0.72 (0.57) (0.09)
------ ------ ------
TOTAL INCOME (LOSS) FROM INVESTMENT
OPERATIONS.......................... 1.16 (0.05) 0.38
------ ------ ------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income............. (0.44) (0.52) (0.47)
From net realized gains on investments. (0.22) -- (0.02)
------ ------ ------
TOTAL DIVIDENDS AND DISTRIBUTIONS..... (0.66) (0.52) (0.49)
------ ------ ------
Net change in net asset value........... 0.50 (0.57) (0.11)
------ ------ ------
Net Asset Value, End of Period.......... $ 8.18 $ 7.68 $ 8.25
====== ====== ======
- - -----------------------------------------
TOTAL RETURN (EXCLUDES SALES CHARGE) 15.55%++ (0.45)% 5.16%+
- - -----------------------------------------
- - -----------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - -----------------------------------------
Ratio of expenses to average net assets. 0.94%+ 0.04% --
Ratio of net investment income to
average net assets.................... 5.72%+ 6.70% 5.96%+
Ratio of expenses to average net as-
sets*................................. 1.15%+ 2.78% 3.67%+
Ratio of net investment income to
average net assets*................... 5.51%+ 3.96% 2.29%+
Portfolio turnover...................... 173.26%++ 71.65% 26.54%++
Net assets, end of period (000's omit-
ted).................................. $6,095 $ 69 $ 65
</TABLE>
- - -----------
(1) For the period February 1, 1995 through December 31, 1995. Effective
February 1, 1995, the Fund changed its fiscal year end from January 31 to
December 31.
(2) For the period March 5, 1993 (commencement of operations) through January
31, 1994.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
160
<PAGE>
PRAIRIE INTERMEDIATE BOND FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Period Ended Period Ended
December 31, December 2,
1995(1) 1994(2)
------------ ------------
<S> <C> <C>
CLASS B SHARES:
Net Asset Value, Beginning of Period............... $ 8.13 $ 8.16
------ ------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income............................. 0.24 0.40
Net realized and unrealized gains (losses) on
investments..................................... 0.27 (0.55)
------ ------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS... 0.51 (0.15)
------ ------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income........................ (0.24) (0.40)
From net realized gains on invesments............. (0.22) --
------ ------
TOTAL DIVIDENDS AND DISTRIBUTIONS................ (0.46) (0.40)
------ ------
Net change in net asset value...................... 0.05 (0.55)
------ ------
Conversion to Class A Shares(3).................... NA 7.61
------ ------
Net Asset Value, End of Period..................... $ 8.18 $ --
====== ======
- - ----------------------------------------------------
TOTAL RETURN (EXCLUDES REDEMPTION CHARGE) 6.41%++ (1.82)%++
- - ----------------------------------------------------
- - ----------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ----------------------------------------------------
Ratio of expenses to average net assets............ 1.60%+ --
Ratio of net investment income to average net as-
sets............................................. 5.00%+ 6.48%+
Ratio of expenses to average net assets*........... 1.78%+ 2.58%+
Ratio of net investment income to average net as-
sets*............................................ 4.83%+ 3.90%+
Portfolio turnover................................. 173.26%++ 71.65%++
Net assets, end of period (000's omitted).......... $ 259 $ --
</TABLE>
- - -----------
(1) For the period May 31, 1995 (re-offering date of Class B Shares) through
December 31, 1995. Effective February 1, 1995, the Fund changed its fiscal
year end from January 31 to December 31.
(2) For the period February 8, 1994 (initial offering date of Class B Shares)
through December 2, 1994. On December 2, 1994, the Fund terminated its
offering of Class B Shares and such shares converted to Class A Shares.
(3) On December 2, 1994, the Fund terminated the offering of Class B Shares
under the then-current sales load schedule and such shares converted to
Class A Shares
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
NA Not applicable.
See Notes to Financial Statements.
161
<PAGE>
PRAIRIE INTERMEDIATE BOND FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the For the
Period Ended Year Ended Period Ended
December 31, January 31, January 31,
1995(1) 1995 1994(2)
------------ ----------- ------------
<S> <C> <C> <C>
CLASS I SHARES:
Net Asset Value, Beginning of Period... $ 7.68 $ 8.25 $ 8.36
-------- ------ ------
INCOME (LOSS) FROM INVESTMENT OPERA-
TIONS:
Net investment income................. 0.47 0.52 0.47
Net realized and unrealized gains
(losses) on investments............. 0.72 (0.57) (0.09)
-------- ------ ------
TOTAL INCOME FROM INVESTMENT
OPERATIONS......................... 1.19 (0.05) 0.38
-------- ------ ------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income............ (0.47) (0.52) (0.47)
From net realized gains on invesments. (0.22) -- (0.02)
-------- ------ ------
TOTAL DIVIDENDS AND DISTRIBUTIONS.... (0.69) (0.52) (0.49)
-------- ------ ------
Net change in net asset value.......... 0.50 (0.57) (0.11)
-------- ------ ------
Net Asset Value, End of Period......... $ 8.18 $ 7.68 $ 8.25
======== ====== ======
- - ----------------------------------------
TOTAL RETURN 15.90%++ (0.48)% 5.16%++
- - ----------------------------------------
- - ----------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ----------------------------------------
Ratio of expenses to average net as-
sets................................. 0.55%+ 0.04% --
Ratio of net investment income to
average net assets................... 6.34%+ 6.70% 6.21%+
Ratio of expenses to average net as-
sets*................................ 0.67%+ 2.78% 2.64%+
Ratio of net investment income to
average net assets*.................. 6.22%+ 3.96% 3.57%+
Portfolio turnover..................... 173.26%++ 71.65% 26.54%++
Net assets, end of period (000's omit-
ted)................................. $191,930 $7,101 $5,128
</TABLE>
- - -----------
(1) For the period February 1, 1995 through December 31, 1995. Effective
February 1, 1995, the Fund changed its fiscal year end from January 31 to
December 31.
(2) For the period March 5, 1993 (commencement of operations) through January
31, 1994.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
162
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the Year Ended
Period Ended ---------------------------------------------------
December 31, February 28, February 28, February 28, February 29,
1995(1) 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES:
Net Asset Value, Begin-
ning of Period....... $ 11.79 $ 12.18 $ 12.79 $ 12.25 $ 11.95
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income. 0.44 0.55 0.61 0.64 0.76
Net realized and
unrealized gains
(losses) on invest-
ments............... 0.56 (0.36) 0.01 0.68 0.37
------- ------- ------- ------- -------
TOTAL INCOME FROM
INVESTMENT
OPERATIONS......... 1.00 0.19 0.62 1.32 1.13
------- ------- ------- ------- -------
LESS DIVIDENDS AND DIS-
TRIBUTIONS:
From net investment
income.............. (0.44) (0.55) (0.61) (0.64) (0.76)
From net realized
gains on invest-
ments............... (0.10) (0.03) (0.62) (0.14) (0.07)
------- ------- ------- ------- -------
TOTAL DIVIDENDS AND
DISTRIBUTIONS...... (0.54) (0.58) (1.23) (0.78) (0.83)
------- ------- ------- ------- -------
Net change in net asset
value................ 0.46 (0.39) (0.61) 0.54 0.30
------- ------- ------- ------- -------
Net Asset Value, End of
Period............... $ 12.25 $ 11.79 $ 12.18 $ 12.79 $ 12.25
======= ======= ======= ======= =======
- - ------------------------
TOTAL RETURN (EXCLUDES
SALES CHARGE) 8.58%++ 1.64% 4.94% 11.26% 9.78%
- - ------------------------
- - ------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ------------------------
Ratio of expenses to
average net assets... 0.83%+ 0.29% 0.06% -- --
Ratio of net investment
income to average net
assets............... 4.30%+ 4.73% 4.78% 5.16% 6.15%
Ratio of expenses to
average net assets*.. 0.97%+ 1.38% 1.27% 1.31% 1.72%
Ratio of net investment
income to average net
assets*.............. 4.16%+ 3.64% 3.57% 3.85% 4.43%
Portfolio turnover..... 44.75%++ 128.02% 167.95% 63.67% 86.91%
Net assets, end of
period
(000's omitted)...... $17,777 $17,243 $28,826 $27,885 $18,310
</TABLE>
- - -----------
(1) For the period March 1, 1995 through December 31, 1995. Effective March 1,
1995, the Fund changed its fiscal year end from February 28 to December
31.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
163
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period Ended
----------------------------------------------------
December 31, February 28, December 2, February 28,
1995(1) 1995(2) 1994(3) 1994(4)
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
CLASS B SHARES:
Net Asset Value, Begin-
ning of Period........ $11.80 $ 11.57 $ 12.18 $ 12.32
------ ------- ------- --------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income.. 0.37 0.04 0.37 0.03
Net realized and
unrealized gains
(losses) on
investments.......... 0.55 0.23 (0.72) (0.14)
------ ------- ------- --------
TOTAL INCOME (LOSS)
FROM INVESTMENT
OPERATIONS.......... 0.92 0.27 (0.35) (0.11)
------ ------- ------- --------
LESS DIVIDENDS AND DIS-
TRIBUTIONS:
From net investment in-
come................. (0.37) (0.04) (0.37) (0.03)
From net realized gains
on investments....... (0.10) -- (0.03) --
------ ------- ------- --------
TOTAL DIVIDENDS AND
DISTRIBUTIONS....... (0.47) (0.04) (0.40) (0.03)
------ ------- ------- --------
Net change in net asset
value................. 0.45 0.23 (0.75) (0.14)
------ ------- ------- --------
Conversion to Class A
shares(3)............. NA NA 11.43 NA
------ ------- ------- --------
Net Asset Value, End of
Period................ $12.25 $ 11.80 $ -- $ 12.18
====== ======= ======= ========
- - -------------------------
TOTAL RETURN (EXCLUDES
REDEMPTION CHARGE) 7.75%++ 2.30%++ (2.98)++ (0.93)%++
- - -------------------------
- - -------------------------
RATIOS/SUPPLEMENTAL DATA:
- - -------------------------
Ratio of expenses to av-
erage net assets...... 1.71%+ 1.36%+ 0.76%+ 0.75%+
Ratio of net investment
income to average net
assets................ 3.36%+ 3.72%+ 4.03%+ 1.68%+
Ratio of expenses to
average net assets*... 2.01%+ 1.64%+ 2.00%+ 3.00%+
Ratio of net investment
income (loss) to
average net assets*... 3.06%+ 3.44%+ 2.79%+ (0.57)%+
Portfolio turnover...... 44.75%++ 128.02%++ 128.02%++ 167.95%++
Net assets, end of pe-
riod (000's omitted).. $ 341 $ 6 $ -- $ 12
</TABLE>
- - -----------
(1) For the period March 1, 1995 through December 31, 1995. Effective March 1,
1995, the Fund changed its fiscal year end from February 28 to December
31.
(2) For the period January 30, 1995 (re-offering date of Class B Shares)
through February 28, 1995.
(3) For the period March 1, 1994 through December 2, 1994. On December 2,
1994, the Fund terminated its offering of Class B Shares and such shares
converted to Class A Shares.
(4) For the period February 8, 1994 (initial offering date of Class B Shares)
through February 28, 1994.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
NA Not applicable.
See Notes to Financial Statements.
164
<PAGE>
PRAIRIE FUNDS
INTERMEDIATE MUNICIPAL BOND FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Period Ended Year Ended
December 31, February 28,
1995(1) 1995(2)
------------ ------------
<S> <C> <C>
CLASS I SHARES:
Net Asset Value, Beginning of Period.............. $ 11.80 $ 11.57
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................ 0.47 0.04
Net realized and unrealized gains on investments. 0.55 0.23
-------- --------
TOTAL INCOME FROM INVESTMENT OPERATIONS......... 1.02 0.27
-------- --------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income....................... (0.47) (0.04)
From net realized gains on investments........... (0.10) --
-------- --------
TOTAL DIVIDENDS AND DISTRIBUTIONS............... (0.57) (0.04)
-------- --------
Net change in net asset value..................... 0.45 0.23
-------- --------
Net Asset Value, End of Period.................... $ 12.25 $ 11.80
======== ========
- - ---------------------------------------------------
TOTAL RETURN 8.76%++ 2.37%++
- - ---------------------------------------------------
- - ---------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ---------------------------------------------------
Ratio of expenses to average net assets........... 0.55%+ 0.50%+
Ratio of net investment income to average net as-
sets............................................ 4.78%+ 4.79%+
Ratio of expenses to average net assets*.......... 0.68%+ 0.60%+
Ratio of net investment income to average net as-
sets*........................................... 4.65%+ 4.69%+
Portfolio turnover................................ 44.75%++ 128.02%++
Net assets, end of period (000's omitted)......... $373,753 $365,801
</TABLE>
- - -----------
(1) For the period March 1, 1995 through December 31, 1995. Effective March 1,
1995, the Fund changed its fiscal year end from February 28 to December
31.
(2) For the period February 1, 1995 (initial offering date of Class I Shares)
through February 28, 1995.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
165
<PAGE>
PRAIRIE MUNICIPAL BOND FUND, INC.
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the Year Ended
Period Ended ---------------------------------------------------
December 31, February 28, February 28, February 28, February 29,
1995(1) 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES:
Net Asset Value,
Beginning of Period.. $12.06 $12.13 $13.25 $ 12.49 $12.10
------ ------ ------ ------- ------
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income. 0.48 0.60 0.63 0.70 0.76
Net realized and
unrealized gains
(losses) on
investments......... 0.82 (0.07) (0.15) 1.01 0.47
------ ------ ------ ------- ------
TOTAL INCOME FROM
INVESTMENT
OPERATIONS......... 1.30 0.53 0.48 1.71 1.23
------ ------ ------ ------- ------
LESS DIVIDENDS AND
DISTRIBUTIONS:
From net investment
income.............. (0.48) (0.60) (0.63) (0.70) (0.76)
From net realized
gains on
investments......... (0.24) -- (0.96) (0.25) (0.08)
In excess of net
realized gains on
investments......... -- -- (0.01) -- --
------ ------ ------ ------- ------
TOTAL DIVIDENDS AND
DISTRIBUTIONS...... (0.72) (0.60) (1.60) (0.95) (0.84)
------ ------ ------ ------- ------
Net change in net asset
value................ 0.58 (0.07) (1.12) 0.76 0.39
------ ------ ------ ------- ------
Net Asset Value, End of
Period............... $12.64 $12.06 $12.13 $ 13.25 $12.49
====== ====== ====== ======= ======
- - ------------------------
TOTAL RETURN (EXCLUDES
SALES CHARGE) 10.95%++ 4.45% 3.70% 14.37% 10.50%
- - ------------------------
- - ------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ------------------------
Ratio of expenses to
average net assets... 0.89%+ 1.98% -- -- --
Ratio of net investment
income to average net
assets............... 4.57%+ 5.09% 4.85% 5.49% 5.99%
Ratio of expenses to
average net assets*.. 1.04%+ 3.89% 1.44% 1.59% 2.75%
Ratio of net investment
income to average net
assets*.............. 4.43%+ 3.18% 3.41% 3.90% 3.24%
Portfolio turnover..... 69.31%++ 60.78% 175.06% 88.53% 66.28%
Net assets, end of
period
(000's omitted)...... $7,426 $6,840 $9,234 $11,290 $6,591
</TABLE>
- - -----------
(1) For the period March 1, 1995 through December 31, 1995. Effective March 1,
1995, the Fund changed its fiscal year end from February 28 to December
31.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
166
<PAGE>
PRAIRIE MUNICIPAL BOND FUND, INC.
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period Ended
----------------------------------------
December 31, December 2, February 28,
1995(1) 1994(2) 1994(3)
------------ ----------- ------------
<S> <C> <C> <C>
CLASS B SHARES:
Net Asset Value, Beginning of Period. $ 12.17 $12.14 $ 12.37
------- ------ -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............... 0.34 0.41 0.03
Net realized and unrealized gains
(losses) on investments........... 0.72 (0.70) (0.23)
------- ------ -------
TOTAL INCOME FROM INVESTMENT
OPERATIONS....................... 1.06 (0.29) (0.20)
------- ------ -------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income.......... (0.34) (0.41) (0.03)
From net realized gains on invest-
ments............................. (0.24)
------- ------ -------
TOTAL DIVIDENDS AND DISTRIBUTIONS.. (0.58) (0.41) (0.03)
------- ------ -------
Net change in net asset value........ 0.48 (0.70) (0.23)
------- ------ -------
Conversion to Class A Shares(4)...... NA 11.44 NA
------- ------ -------
Net Asset Value, End of Period....... $ 12.65 $ NA $ 12.14
======= ====== =======
- - --------------------------------------
TOTAL RETURN (EXCLUDES REDEMPTION
CHARGE) 8.81%++ (4.30)%++ (1.64)%++
- - --------------------------------------
- - --------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - --------------------------------------
Ratio of expenses to average net
assets............................. 1.66%+ 3.18%+ 0.50%+
Ratio of net investment income to
average net assets................. 3.61%+ 4.51%+ 4.10%+
Ratio of expenses to average net
assets*............................ 2.04%+ 5.85%+ 2.91%+
Ratio of net investment income to
average net assets*................ 3.23%+ 1.84%+ 1.69%+
Portfolio turnover................... 69.31%++ 60.78%++ 175.06%++
Net assets, end of period (000's
omitted)........................... $ 238 $ -- $ 2
</TABLE>
- - -----------
(1) For the period April 4, 1995 (re-offering date of Class B Shares) through
December 31, 1995. Effective March 1, 1995, the Fund changed its fiscal
year end from February 28 to December 31.
(2) For the period March 1, 1994 through December 2, 1994. On December 2,
1994, the Fund terminated its offering of Class B Shares and such shares
converted to Class A Shares.
(3) For the period February 8, 1994 (initial offering date of Class B Shares)
through February 28, 1994.
(4) On December 2, 1994, the Fund terminated its offering of Class B Shares
under the then-current sales load schedule and such shares converted to
Class A Shares.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
NA Not applicable.
See Notes to Financial Statements.
167
<PAGE>
PRAIRIE MUNICIPAL BOND FUND, INC.
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS -- (CONTINUED)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period Ended
-------------------------------
December 31, February 28,
1995(1) 1995(2)
------------ ------------
<S> <C> <C>
CLASS I SHARES:
Net Asset Value, Beginning of Period.......... $ 12.06 $ 12.06
-------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................ 0.52 0.05
Net realized and unrealized gains on invest-
ments...................................... 0.81 --
-------- --------
TOTAL INCOME FROM INVESTMENT OPERATIONS..... 1.33 0.05
-------- --------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income................... (0.52) (0.05)
From net realized gains on investments....... (0.24) --
-------- --------
TOTAL DIVIDENDS AND DISTRIBUTIONS........... (0.76) (0.05)
-------- --------
Net change in net asset value................. 0.57 --
-------- --------
Net Asset Value, End of Period................ $ 12.63 $ 12.06
======== ========
- - -----------------------------------------------
TOTAL RETURN 11.20%++ 0.39%++
- - -----------------------------------------------
- - -----------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - -----------------------------------------------
Ratio of expenses to average net assets....... 0.54%+ 0.65%+
Ratio of net investment income to average net
assets...................................... 4.95%+ 5.45%+
Ratio of expenses to average net assets*...... 0.67%+ 0.79%+
Ratio of net investment income to average net
assets*..................................... 4.81%+ 5.31%+
Portfolio turnover............................ 69.31%++ 60.78%++
Net assets, end of period (000's omitted)..... $240,160 $220,143
</TABLE>
- - -----------
(1) For the period March 1, 1995, through December 31, 1995. Effective March
1, 1995, the Fund changed its fiscal year end from February 28 to December
31.
(2) For the period February 1, 1995 (initial offering date of Class I Shares)
to February 28, 1995.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
168
<PAGE>
PRAIRIE FUNDS
U.S. GOVERNMENT MONEY MARKET FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------
1995 1994 1993 1992 1991
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES:
Net Asset Value, Beginning
of Year................... $0.9996 $ 0.9999 $ 1.0000 $ 1.0000 $ 1.0000
------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPER-
ATIONS:
Net investment income...... 0.0498 0.0379 0.0249 0.0283 0.0498
Net realized and unrealized
gains (losses) on
investments.............. 0.0001 (0.0083) (0.0001) -- --
------- -------- -------- -------- --------
TOTAL INCOME FROM
INVESTMENT OPERATIONS... 0.0499 0.0296 0.0248 0.0283 0.0498
------- -------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBU-
TIONS:
From net investment income. (0.0498) (0.0379) (0.0249) (0.0283) (0.0498)
------- -------- -------- -------- --------
Increase due to voluntary
capital contribution from
an affiliate of the In-
vestment Adviser (Note
3(d))..................... -- 0.0080 -- -- --
------- -------- -------- -------- --------
Net change in net asset val-
ue........................ 0.0001 (0.0003) (0.0001) -- --
------- -------- -------- -------- --------
Net Asset Value, End of
Year...................... $0.9997 $ 0.9996 $ 0.9999 $ 1.0000 $ 1.0000
======= ======== ======== ======== ========
- - -----------------------------
TOTAL RETURN 5.09% 3.86%* 2.52% 2.87% 5.10%
- - -----------------------------
- - -----------------------------
RATIOS/SUPPLEMENTAL DATA:
- - -----------------------------
Ratio of expenses to average
net assets................ 0.78% 0.86% 0.74% 0.91% 0.90%
Ratio of net investment
income to average net
assets.................... 4.97% 3.73% 2.48% 2.87% 4.97%
Ratio of expenses to average
net assets**.............. 1.07% 0.88% 0.88% 0.91% 0.90%
Ratio of net investment
income to average net
assets**.................. 4.67% 3.71% 2.34% 2.87% 4.97%
Net assets, end of period
(000's omitted)........... $57,264 $116,353 $154,613 $548,733 $990,897
</TABLE>
- - -----------
* Had the Portfolio not had a capital contribution by an affiliate of the
Investment Adviser during the period, the total return would have been
2.83%.
** During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
See Notes to Financial Statements.
169
<PAGE>
PRAIRIE FUNDS
MONEY MARKET FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES:
Net Asset Value, Beginning
of Year.................. $ 0.9998 $ 1.0001 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OP-
ERATIONS:
Net investment income..... 0.0514 0.0355 0.0274 0.0313 0.0543
Net realized and
unrealized gains (loss-
es) on investments...... 0.0100 (0.0109) 0.0001 -- --
-------- -------- -------- -------- --------
TOTAL INCOME FROM
INVESTMENT OPERATIONS.. 0.0524 0.0246 0.0275 0.0313 0.0543
-------- -------- -------- -------- --------
LESS DIVIDENDS AND DISTRI-
BUTIONS:
From net investment in-
come.................... (0.0514) (0.0355) (0.0274) (0.0313) (0.0543)
From net realized gains on
investments............. (0.0006) (0.0002) -- -- --
-------- -------- -------- -------- --------
TOTAL DIVIDENDS AND
DISTRIBUTIONS......... (0.0520) (0.0357) (0.0274) (0.0313) (0.0543)
-------- -------- -------- -------- --------
Increase due to voluntary
capital contribution from
an affiliate of the
Investment Adviser (Note
3(d)).................... -- 0.0108 -- -- --
-------- -------- -------- -------- --------
Net change in net asset
value.................... 0.0004 (0.0003) 0.0001 -- --
-------- -------- -------- -------- --------
Net Asset Value, End of
Year..................... $ 1.0002 $ 0.9998 $ 1.0001 $ 1.0000 $ 1.0000
======== ======== ======== ======== ========
- - ----------------------------
TOTAL RETURN 5.33% 3.63%* 2.77% 3.18% 5.57%
- - ----------------------------
- - ----------------------------
RATIOS/SUPPLEMENTAL DATA:
- - ----------------------------
Ratio of expenses to
average net assets....... 0.79% 1.02% 0.94% 0.98% 0.97%
Ratio of net investment
income to average net
assets................... 5.12% 3.51% 2.76% 3.17% 5.42%
Ratio of expenses to
average net assets**..... 1.07% 1.02% 0.99% 0.98% 0.97%
Ratio of net investment
income to average net
assets**................. 4.83% 3.51% 2.71% 3.17% 5.42%
Net assets, end of period
(000's omitted).......... $203,994 $119,400 $162,623 $260,865 $456,791
</TABLE>
- - -----------
* Had the Portfolio not had a capital contribution by an affiliate of the
Investment Adviser during the period, the total return would have been
2.61%.
** During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
See Notes to Financial Statements.
170
<PAGE>
PRAIRIE FUNDS
MONEY MARKET FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS-- (CONTINUED)
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
Ended
December 31,
1995(1)
--------------
<S> <C>
CLASS B SHARES:
Net Asset Value, Beginning of Period........................... $1.0000
-------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income......................................... 0.0162
Net realized and unrealized gains on investments.............. 0.0008
-------
TOTAL INCOME FROM INVESTMENT OPERATIONS...................... 0.0170
-------
LESS DIVIDENDS AND DISTRIBUTIONS:
From net investment income.................................... (0.0162)
From net realized gains on investments........................ (0.0006)
-------
TOTAL DIVIDENDS AND DISTRIBUTIONS........................... (0.0168)
-------
Net change in net asset value.................................. 0.0002
-------
Net Asset Value, End of Period................................. $1.0002
=======
- - -----------------------------------------------------------------
TOTAL RETURN 1.69%++
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- - -----------------------------------------------------------------
Ratio of expenses to average net assets........................ 1.51%+
Ratio of net investment income to average net assets........... 4.33%+
Ratio of expenses to average net assets*....................... 2.02%+
Ratio of net investment income to average net assets*.......... 3.82%+
Net assets, end of period (000's omitted)...................... $ 65
</TABLE>
- - -----------
(1) For the period May 20, 1995 (initial offering of Class B Shares) through
December 31, 1995.
* During the period, certain fees were voluntarily reimbursed. If such
voluntary fee reimbursements had not occurred, the ratios would have been
as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
171
<PAGE>
PRAIRIE FUNDS
MUNICIPAL MONEY MARKET FUND
- - -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CLASS A SHARES:
Net Asset Value, Beginning
of Year................... $ 0.9997 $ 0.9999 $ 0.9999 $ 0.9999 $ 0.9999
-------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPER-
ATIONS:
Net investment income...... 0.0322 0.0234 0.0174 0.0236 0.0413
Net realized and unrealized
gains (losses) on
investments.............. 0.0001 (0.0002) -- -- --
-------- -------- -------- -------- --------
TOTAL INCOME FROM
INVESTMENT OPERATIONS... 0.0323 0.0232 0.0174 0.0236 0.0413
-------- -------- -------- -------- --------
LESS DIVIDENDS AND DISTRIBU-
TIONS:
From net investment income. (0.0322) (0.0234) (0.0174) (0.0236) (0.0413)
-------- -------- -------- -------- --------
Net change in net asset val-
ue........................ 0.0001 (0.0002) -- -- --
-------- -------- -------- -------- --------
Net Asset Value, End of
Year...................... $ 0.9998 $ 0.9997 $ 0.9999 $ 0.9999 $ 0.9999
======== ======== ======== ======== ========
- - -----------------------------
TOTAL RETURN 3.26% 2.36% 1.75% 2.38% 4.21%
- - -----------------------------
- - -----------------------------
RATIOS/SUPPLEMENTAL DATA:
- - -----------------------------
Ratio of expenses to average
net assets................ 0.70% 0.68% 0.79% 0.95% 0.98%
Ratio of net investment
income to average net
assets.................... 3.21% 2.33% 1.74% 2.38% 4.11%
Ratio of expenses to average
net assets*............... 0.94% 0.93% 0.95% 0.96% 0.98%
Ratio of net investment
income to average net
assets*................... 2.97% 2.08% 1.58% 2.37% 4.11%
Net assets, end of period
(000's omitted)........... $228,511 $173,130 $177,698 $210,000 $233,675
</TABLE>
- - -----------
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had not
occurred, the ratios would have been as indicated.
See Notes to Financial Statements.
172
<PAGE>
- - -------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
- - -------------------------------------------------------------------------------
Prairie Funds
Prairie Municipal Bond Fund, Inc.
Prairie Intermediate Bond Fund
The Members of the Boards and Shareholders
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of Prairie Funds (comprising,
respectively, the Managed Assets Income, Managed Assets, Equity Income,
Growth, Special Opportunities, International Equity, Bond, International Bond,
Intermediate Municipal Bond, U.S. Government Money Market, Money Market and
Municipal Money Market Funds), Prairie Municipal Bond Fund, Inc. and Prairie
Intermediate Bond Fund (collectively, the "Funds") as of December 31, 1995 and
the related statements of operations for the periods then ended, and the
statements of changes in net assets and the financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Funds' 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 investments
owned as of December 31, 1995 by correspondence with the custodians and
others. 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 each
of the respective funds constituting the Prairie Funds, Prairie Municipal Bond
Fund, Inc. and Prairie Intermediate Bond Fund at December 31, 1995, the
results of their operations for the periods then ended, and the changes in
their net assets and the financial highlights for each of the indicated
periods, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
February 23, 1996
173
<PAGE>
PRAIRIE FUNDS
- - -------------------------------------------------------------------------------
RESULTS OF SPECIAL SHAREHOLDER MEETING (UNAUDITED)
- - -------------------------------------------------------------------------------
On November 28, 1995, a special meeting of the shareholders of Prairie
Funds, Prairie Intermediate Bond Fund and Prairie Municipal Bond Fund, Inc.
was held to consider the approval of a new Investment Management agreement
between the Funds and First Chicago Investment Management Company.
The shareholders approved the new Investment Management Agreement with
respect to each Fund as follows:
<TABLE>
<CAPTION>
Portfolio In Favor Opposed Abstain
--------- ----------- ------- ---------
<S> <C> <C> <C>
Managed Assets Income Fund..................... 3,484,255 29,569 48,108
Managed Assets Fund............................ 338,203 0 1,984
Equity Income Fund............................. 20,277,924 289,304 1,689,065
Growth Fund.................................... 23,688,705 159,270 151,624
Special Opportunities Fund..................... 6,783,521 0 646,622
International Equity Fund...................... 7,743,043 0 3,978
Intermediate Bond Fund......................... 21,827,738 96,649 519,659
Bond Fund...................................... 9,402,335 242,037 1,301,595
International Bond Fund........................ 1,063,692 0 47,663
Intermediate Municipal Bond Fund............... 30,202,480 23,546 215,217
Municipal Bond Fund, Inc. ..................... 18,802,091 76,798 633,190
U.S. Government Money Market Fund.............. 26,654,820 473,493 1,021,928
Money Market Fund.............................. 88,655,004 509,609 3,096,509
Municipal Money Market Fund.................... 130,175,915 939,563 4,252,834
</TABLE>
In addition, the shareholders of the International Equity Fund were asked to
consider a new Sub-Investment Advisory Agreement between First Chicago
Investment Management Company and ANB Investment Management and Trust Company.
The shareholders approved the Sub-Investment Advisory Agreement with respect
to the International Equity Fund as follows:
<TABLE>
<CAPTION>
Portfolio In Favor Opposed Abstain
--------- --------- ------- --------
<S> <C> <C> <C>
International Equity Fund......................... 7,747,021 0 0
</TABLE>
174
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
175
<PAGE>
-----------------
PRAIRIE FUNDS FIRST CLASS
c/o First Chicago Investment U.S. Postage
Management Company (FCIMCO) PAID
Three First National Plaza, MS 0334 Lancaster, PA
Chicago, IL 60670-0334 Permit No. 1793
-----------------
