Registration No.__
As filed with the Securities and Exchange Commission on April 10, 1996
==============================================================================
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.
It is proposed that this filing will become effective on May 10, 1996 pursuant
to Rule 488 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.
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THE WOODWARD FUNDS
FORM N-14
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(a)
Item No. Heading
- -------- -------
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 Tables; Risk
Factors; Comparison of Investment Policies
and Risk Factors
4. Information About the Transaction........... Summary; Risk Factors; Information Relating
to the Proposed Reorganization; Comparison
of Investment Policies and Risk Factors
5. Information About the Registrant............ Summary; Risk Factors; Comparison of
Investment Policies and Risk Factors;
Additional Information About Woodward;
Additional Information About Prairie
5A. Management's Discussion of
Fund Performance............................ Inapplicable
6. Information About the Company
Being Acquired.............................. Summary; Risk Factors; Comparison of
Investment Policies and Risk Factors;
Additional Information About Woodward;
Additional Information About Prairie
7. Voting Information.......................... Summary; Information Relating to Voting
Matters
8. Interest of Certain Persons
and Experts................................. Additional Information About Woodward;
Additional Information About Prairie
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 May __, 1996*
13. Additional Information
About the Company Being
Acquired.................................... Statement of Additional Information of Prairie
dated March 18, 1996*
14. Financial Statements........................ Inapplicable
<CAPTION>
Part C
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 INSTITUTIONAL FUNDS
Three First National Plaza
Chicago, Illinois 60670
May __, 1996
Dear Prairie Institutional Funds Shareholder:
The Board of Trustees of the Prairie Institutional Funds has called a
Special Meeting of Shareholders on June 25, 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 Institutional 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 each
of the three investment portfolios of the Prairie Institutional Funds will
transfer substantially all its assets and liabilities to a corresponding new
institutional cash management portfolio of the Woodward registered investment
company. The transaction is expected to occur on or after July __, 1996. The
combined investment company will be renamed _______ sometime after the
completion of the transaction.
What do these changes mean to you?
o 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 The investment policies and objectives of the new institutional cash
management portfolios under the Woodward registered investment company
will be substantially similar to your Prairie Institutional Fund's
current objectives and policies following the Reorganization, except
as stated in the enclosures.
<PAGE>
o Shareholders will benefit from improved shareholder servicing and the
elimination of redundant administration costs to the funds.
As a result, the Prairie Institutional Funds Board of Trustees has
voted in favor of the proposed Reorganization Agreement and strongly
encourages 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. If you are a
stockholder of more than one Fund, you will receive a proxy card for each of
your Funds. 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. Thank
you for your cooperation.
Sincerely,
/s/ Mark A. Dillon
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
Three First National Plaza
Chicago, IL 60670
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on June 25, 1996
To Prairie Shareholders:
NOTICE IS HEREBY GIVEN THAT a Special Meeting of the Shareholders
("Shareholders") of each Portfolio of Prairie Institutional Funds ("Prairie")
will be held at the offices of BISYS Fund Services, Inc., 3435 Stelzer Road,
Columbus, Ohio 43219, on June 25, 1996 at ______ a.m./p.m. (Eastern time) for
the following purposes:
ITEM 1. With respect to each investment portfolio (a
"Prairie Portfolio") of Prairie:
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 Cash
Management Fund, Treasury Prime Cash Management Fund and U.S.
Government Securities Cash Management Fund to corresponding
investment portfolios (the "Woodward Funds") of The Woodward
Funds in exchange for Institutional Shares or Service Shares,
as applicable, of the Woodward Funds; (b) the distribution of
such Woodward Fund shares to the shareholders of the Prairie
Portfolios according to their respective interests; (c) the
terminations under state law and the Investment Company Act of
1940, as amended, of Prairie.
ITEM 2. With respect to each Prairie Portfolio:
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 Proxy Statement/Prospectus. Appendix A to the Combined Proxy
Statement/Prospectus is a copy of the Reorganization Agreement.
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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 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
May __, 1996
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<PAGE>
COMBINED PROXY STATEMENT/PROSPECTUS
Dated May __, 1996
PRAIRIE INSTITUTIONAL 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 Proxy Statement/Prospectus is furnished in connection
with the solicitation of proxies by the Board of Trustees of Prairie
Institutional Funds ("Prairie") in connection with a Special Meeting (the
"Meeting") of Shareholders ("Shareholders") to be held on June 25, 1996 at
______a.m./p.m. (Eastern time) at the offices of BISYS Fund Services, Inc.,
3435 Stelzer Road, Columbus, Ohio 43219, at which Shareholders will be asked
to consider and approve a proposed Agreement and Plan of Reorganization dated
____________, 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 A.
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; 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 each of the three
investment portfolios of Prairie listed below will transfer substantially all
its assets and liabilities to the newly organized Woodward investment
portfolio identified below opposite its name:
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Prairie Portfolios Woodward Funds
- ------------------ --------------
Cash Management Fund Cash Management Fund
Treasury Prime Cash Treasury Prime Cash
Management Fund Management Fund
U.S. Government Securities U.S. Government Securities
Cash Management Fund Cash Management Fund
In exchange for the transfers of these assets and liabilities,
Woodward will issue shares in the three Woodward investment portfolios listed
above (collectively, the "Woodward Funds") to the corresponding Prairie
investment portfolios listed above (collectively, the "Prairie Portfolios").
The transaction is expected to occur on July __, 1996, or as soon thereafter
as is practicable.
The Prairie Portfolios have two classes of shares outstanding. After
the Reorganization, Woodward will offer two comparable classes of shares.
Holders of each class of shares of a Prairie Portfolio will receive the class
of shares of the corresponding Woodward Fund as set forth in the table on page
___ under "Information Relating to the Proposed Reorganization -- Description
of the Reorganization Agreement."
The Prairie Portfolios will make liquidating distributions of the
Woodward Funds' shares to the Shareholders of the Prairie Portfolios, so that
a holder of a class of shares in a Prairie Portfolio will receive a class of
Shares (as described herein) of the corresponding Woodward Fund with the same
aggregate net asset value as the Shareholder had in the Prairie Portfolio
immediately before the transaction. Following the Reorganization, Shareholders
of the Prairie Portfolios will be Shareholders of their corresponding Woodward
Funds, and Prairie will be terminated under state law and the Investment
Company Act of 1940, as amended.
The Woodward Funds have recently been organized for the purpose of
continuing the investment operations of the Prairie Portfolios and have no
substantial assets or prior history of investment operations.
This Combined Proxy Statement/Prospectus sets forth the information
that a Shareholder of Prairie 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 Funds, which
describes the operations of those Funds, accompanies this Combined Proxy
Statement/Prospectus. Additional information is set forth in the Statements of
Additional Information relating to those Funds and this Combined Proxy
Statement/Prospectus, which are dated May __, 1996 and May __, 1996,
respectively, and in the Prospectus and Statement of Additional Information,
each dated March 18, 1996 relating to Prairie. Each of these documents is on
file with the Securities and Exchange Commission (the "SEC"),
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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. The information contained in the Prospectus and
Statement of Additional Information, dated March 18, 1996 relating to Prairie
is incorporated herein by reference.
This Combined Proxy Statement/Prospectus constitutes the Proxy
Statement of Prairie for the meeting of its Shareholders, and Woodward's
Prospectus for the shares of its Woodward Funds that have been registered with
the SEC and are to be issued in connection with the Reorganization.
This Combined Proxy Statement/Prospectus is expected to first be sent
to Shareholders on or about May __, 1996.
THE SECURITIES OF THE WOODWARD FUNDS 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 PROXY
STATEMENT/PROSPECTUS. 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 PROXY
STATEMENT/PROSPECTUS 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 FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, FIRST CHICAGO NBD CORPORATION OR ANY OF ITS AFFILIATES. SHARES
OF THE WOODWARD FUNDS 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. AN
INVESTMENT IN THE WOODWARD FUNDS INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF PRINCIPAL AMOUNT INVESTED. THERE IS NO ASSURANCE THAT THE WOODWARD
CASH MANAGEMENT FUND, TREASURY PRIME CASH MANAGEMENT FUND OR U.S. GOVERNMENT
SECURITIES CASH MANAGEMENT FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE.
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<PAGE>
TABLE OF CONTENTS
Page
----
Summary.................................................................
Proposed Reorganization.........................................
Reasons for Reorganization......................................
Federal Income Tax Consequences.................................
Overview of the Prairie Portfolios and
Woodward Funds................................................
Purchase and Redemption Information, Dividends
and Pricing...................................................
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......................
Investment Limitations..........................................
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 A - Agreement and Plan of Reorganization....................... A-1
<PAGE>
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 Proxy Statement/Prospectus, the Prospectuses and Statements of
Additional Information of Prairie and Woodward, and the Reorganization
Agreement attached to this Combined Proxy Statement/Prospectus as Appendix A.
Prairie's Annual Report to Shareholders may be obtained free of charge by
calling 1-800-224-4800 or writing Three First National Plaza, Chicago,
Illinois 60670.
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 Investment
Company Act of 1940 (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.
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 each of the Prairie Portfolios be reorganized as described in
this Combined Proxy Statement/Prospectus. In light of this recommendation,
after consideration of the reasons therefor and the proposed operations of the
combined funds 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 have 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 Portfolios, the
Woodward Funds or their respective shareholders. See
"Information Relating to the Proposed Reorganization -- Federal
Income Tax Consequences."
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<PAGE>
Overview of the Prairie Portfolios and Woodward Funds. The investment
objectives and policies of the Prairie Portfolios are similar to those of
the corresponding Woodward Funds.
Prairie Cash Management Fund and Woodward Cash Management
Fund.
The investment objective of both Funds is to provide investors with as
high a level of current income as is consistent with the preservation of
capital and the maintenance of liquidity. Each pursues its investment
objective by investing in a diversified portfolio of high quality money market
instruments.
Prairie Treasury Prime Cash Management Fund and Woodward
Treasury Prime Cash Management Fund.
The investment objective of both Funds is to provide as high a level
of current income as is consistent with the preservation of capital and the
maintenance of liquidity. The Funds invest only in securities issued and
guaranteed as to principal and interest by the U.S. Government.
Prairie U.S. Government Securities Cash Management Fund and
Woodward U.S. Government Securities Cash Management Fund.
The investment objective of both Funds is to provide investors with as
high a level of current income as is consistent with the preservation of
capital and the maintenance of liquidity. Each pursues its investment
objective by investing 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.
See "Comparison of Investment Policies and Risk Factors" below and the
Prairie and Woodward Prospectuses, which are incorporated by reference herein,
for a description of the similarities and differences between the investment
objectives and policies of the Prairie Portfolios and the corresponding
Woodward Funds.
Certain Arrangements with Service Providers - The Prairie Portfolios.
FCIMCO serves as investment adviser for the Prairie Portfolios and is entitled
to receive advisory fees from them, computed daily and paid monthly, at the
following annual rates, expressed as a percentage of a Portfolio's average
daily net assets:
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<CAPTION>
Actual Advisory Fee
Received for Fiscal
Period Ended December 31,
Prairie Portfolios Advisory Fee 1995 (after waivers)
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Cash Management Fund 0.20% 0.11%
Treasury Prime Cash
Management Fund 0.20% 0.09%
U.S. Government Securities
Cash Management Fund 0.20% 0.12%
</TABLE>
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Pursuant to the Prairie investment advisory agreement, FCIMCO provides
the day-to-day management of each Prairie Portfolio's investments, subject to
the overall authority of the Board and in conformity with Massachusetts law
and the stated policies of the Portfolio. FCIMCO is responsible for making
investment decisions for each Prairie Portfolio, placing purchase and sale
orders and providing research, statistical analysis and continuous supervision
of each Portfolio's investments.
FCIMCO also serves as each Prairie Portfolio'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 each Prairie
Portfolio. For the fiscal period ended December 31, 1995, FCIMCO received
administration fees (after fee waivers) at the effective annual rates of
0.15%, 0.11% and 0.15% of the average daily net assets of the Cash Management,
Treasury Prime Cash Management and U.S. Government Securities Cash Management
Funds, respectively. 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 Portfolios.
FCIMCO, and not the Prairie Portfolios, bears the fees for Concord's services
as sub-administrator.
Primary Funds Service Corp. ("PFSC") serves as Prairie's
transfer agent.
The Bank of New York currently provides custodial services to each
Prairie Portfolio. It is anticipated that on or about ____________, 1996, NBD
will begin providing custodial services to each Prairie Portfolio.
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 Service Plan pursuant to Rule 12b-1 under the
1940 Act (the "Prairie Service Plan"). Under the Prairie Service Plan, the
Service Shares of each of the Prairie Portfolios pay CFG for advertising,
marketing and distributing the Service Shares and for the provision of certain
services to
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the holders of Service Shares at an annual rate of 0.25% of the average
daily net asset value of such Portfolio's outstanding Service Shares. The fee
payable for such services is intended to be a "service fee" as defined in
Article III, Section 26 of the NASD Rules of Fair Practice. The services
provided may include personal services related to shareholder accounts, such
as answering shareholder inquiries regarding the applicable Portfolio and
providing reports and other information, and services related to the
maintenance of shareholder accounts. CFG may make payments to certain
financial institutions, securities dealers and other industry professionals
(collectively, "Service Agents") in respect of these services. FCIMCO and its
affiliates may act as Service Agents and receive fees under the Prairie
Service Plan. The fees payable to CFG for advertising, marketing and
distributing Service Shares and for payments to Service Agents 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 Service Plan of $77,634, $38,530 and $60,969,
respectively, for the Cash Management, Treasury Prime Cash Management and U.S.
Government Securities Cash Management Funds, which represented 0.25% of the
average net assets of each Portfolio's Service Shares during that period.
Certain Arrangements with Service Providers - Woodward Funds. Both
FCIMCO and NBD serve as investment adviser to the Woodward Funds and are
entitled to receive advisory fees from the Woodward Funds computed daily and
paid monthly, at the following annual rates, expressed as a percentage of each
Fund's average daily net assets:
<TABLE>
<CAPTION>
Actual Advisory Fee
Received For Year Ended
December 31, 1995
Woodward Funds Advisory Fee (after waivers)
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<S> <C> <C>
Cash Management Fund 0.20% N/A*
Treasury Prime Cash 0.20% N/A*
Management Fund
U.S. Government Securities 0.20% N/A*
Cash Management Fund
<FN>
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* These are new portfolios which have not commenced investment operations
as of the date hereof.
</TABLE>
Pursuant to the Woodward investment advisory agreement, NBD and FCIMCO
have jointly agreed to provide day-to-day management of each 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 each
Fund. FCIMCO and NBD are responsible for making investment decisions for each
Woodward Fund, placing purchase and sale orders and providing research,
statistical analysis and continuous supervision of each
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<PAGE>
Fund's investments. NBD and FCIMCO have advised Woodward's Board that
investment management for the Funds will be provided by NBD's investment
management staff.
NBD, FCIMCO and BISYS Fund Services, Inc. ("BISYS") serve as
co-administrators pursuant to a joint administration agreement. BISYS is a
wholly-owned subsidiary of The BISYS Group, Inc. and is affiliated with
Concord, the current sub-administrator of Prairie. For their services as
co-administrators, NBD and FCIMCO 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 each Woodward Fund. NBD and FCIMCO, and not the Woodward
Funds, bears the fees for BISYS's services as a co-administrator.
First Data Investor Services Group, Inc. serves as
Woodward's transfer agent.
NBD also serves as Woodward's custodian. As custodian for Woodward,
NBD (i) maintains separate accounts in the name of each Fund, (ii) collects
and makes disbursements of money on behalf of each Fund, and (iii) collects
and receives all income and other payments and distributions on account of the
portfolio securities of each Fund. For its services as custodian, NBD is
entitled to receive fees from each Fund at the following rates: $11.00 for
each clearing and settlement transaction and $12.00 for each accounting and
safekeeping service with respect to investments, in addition to activity
charges for Master Control and Master Settlement accounts.
BISYS is the principal underwriter and distributor for Woodward.
Woodward has adopted a Distribution and Services Plan pursuant to Rule
12b-1 under the 1940 Act. Under the Distribution and Services Plan, each
Woodward Fund pays BISYS for the advertising, marketing and distribution of
its Service Shares and/or for the provision of shareholder and administrative
services for the beneficial owners of such Service Shares, a fee at an annual
rate of up to 0.25% of the average daily net asset value of such Fund's
outstanding Service Shares. The support services provided may include personal
services related to shareholders accounts, such as answering shareholder
inquiries regarding the applicable Fund and providing reports and other
information, and services related to the maintenance of shareholder accounts.
Under the Distribution and Services Plan, BISYS may make payments to Service
Agents in respect of these services. FCIMCO, NBD and their affiliates may act
as Service Agents and receive fees under the Distribution and Services Plan.
BISYS determines the amounts to be paid to Service Agents. The distribution
services provided under the Distribution and Services Plan are activities
primarily intended to result in the sale of such Fund's Service Shares.
Comparative Fee Tables. The tables below show (i) information
regarding the fees and expenses paid by each class of shares of each Prairie
Portfolio as of their most recent fiscal periods, restated to reflect the
expenses each Prairie Portfolio is expected to incur during the current fiscal
year, and (ii) estimated fees and expenses on a pro forma basis giving effect
to the proposed Reorganization. Although not contractually
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obligated to do so, FCIMCO, NBD and BISYS have informed Woodward and Prairie
that they expect to waive fees and reimburse expenses for the twelve months
following the Reorganization as necessary to maintain the total operating
expenses applicable to each class of shares of each Fund at the pro forma
levels stated in the tables below. The tables indicate that the total
operating expenses attributable to each class of the Prairie Portfolios are
expected to remain the same as a result of the Reorganization.
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<TABLE>
<CAPTION>
Comparative Fee Table For Each Portfolio
Prairie Woodward
Cash Management Cash Management Pro Forma
Fund Fund* Combined
---------------------- ---------------------- ----------------------
Service Institutional Service Institutional Service Institutional
Shares Shares Shares Shares Shares Shares
------- ------------- ------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Advisory Fees (after fee
waivers)(1) .13%(2) .13%(2) N/A N/A .11% .11%
12b-1 Fees (distribution and
servicing) .25% None N/A N/A .25% None
Other Expenses(3)
(after fee waivers and/or
expense reimbursements) .22%(4) .22%(4) N/A N/A .24% .24%
Total Operating Expenses
(after fee waivers and/or
expense reimbursements) .60%(5) .35%(5) N/A N/A .60%(6) .35%(6)
<FN>
- --------------------------
* The Woodward Cash Management Fund has not yet commenced operations.
The Woodward Cash Management Fund will continue the operations of the
Prairie Cash Management Fund upon consummation of the Reorganization
relating to that Fund.
(1) The maximum advisory fees for the Service Shares and Institutional
Shares of the Prairie Cash Management Fund and the Service Shares and
Institutional Shares of the Woodward Cash Management Fund are 0.20%.
(2) This number has been restated. Actual advisory fees received for
the fiscal period ended December 31, 1995 were 0.11%.
(3) Includes administration fees of 0.15%.
(4) Other Expenses, before fee waivers and/or expense reimbursements,
would have been 0.24% and 0.23%, respectively, for the Service Shares
and Institutional Shares of the Prairie Cash Management Fund.
(5) Absent voluntary waivers and expense reimbursements, which can be
terminated upon 90 days notice, total operating expenses for the
Service Shares and Institutional Shares of the Prairie Cash Management
Fund would have been 0.69% and 0.43%, respectively.
(6) Absent voluntary and expense reimbursements, which can be terminated
at any time, total operating expenses for the Service Shares and
Institutional Shares of the Pro Forma Combined Fund would be 0.69% and
0.43%, 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 Cash Management Fund
Service Shares $6 $19 $34 $77
Institutional Shares $4 $12 $20 $45
Woodward Cash Management Fund
Service Shares N/A N/A N/A N/A
Institutional Shares N/A N/A N/A N/A
Pro Forma Combined
Service Shares $6 $19 $34 $77
Institutional Shares $4 $12 $20 $45
</TABLE>
-7-<PAGE>
<TABLE>
<CAPTION>
Prairie Woodward
Treasury Prime Treasury Prime
Cash Management Cash Management Pro Forma
Fund Fund* Combined
---------------------- ---------------------- ----------------------
Service Institutional Service Institutional Service Institutional
Shares Shares Shares Shares Shares Shares
------- ------------- ------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Advisory Fees (after fee waivers)(1) .12%(2) .12%(2) N/A N/A .12% .12%
12b-1 Fees (distribution and
servicing) .25% None N/A N/A .25% .25%
Other Expenses(3)
(after fee waivers and/or
expense reimbursements) .23%(4) .23%(4) N/A N/A .23%(5) .23%(5)
Total Operating Expenses
(after fee waivers and/or
expense reimbursements) .60%(6) .35%(6) N/A N/A .60%(7) .35%(7)
<FN>
- --------------------------
* The Woodward Treasury Prime Cash Management Fund has not yet commenced
operations. The Woodward Treasury Prime Cash Management Fund will
continue the operations of the Prairie Treasury Prime Cash Management
Fund upon consummation of the Reorganization relating to that Fund.
(1) The maximum advisory fees for the Service Shares and Institutional
Shares of the Prairie Treasury Prime Cash Management Fund and Service
Shares and Institutional Shares of the Woodward Treasury Prime Cash
Management Fund are 0.20%.
(2) This number has been restated. Actual advisory fees received for the
fiscal period ended December 31, 1995 were 0.09%.
(3) Includes administration fees of 0.15%.
(4) Other Expenses, before fee waivers and/or reimbursements, would have
been 0.29% and 1.03%, respectively, for the Service Shares and
Institutional Shares of the Prairie Treasury Prime Cash Management
Fund.
(5) Other Expenses, before fee waivers and/or expense reimbursements,
would be 1.08% and 1.08%, respectively, for the Service Shares and
Institutional Shares of the Pro Forma Combined Fund.
(6) Absent voluntary waivers, which can be terminated upon 90 days notice,
the total operating expenses for Service Shares and Institutional
Shares of the Prairie Treasury Prime Cash Management Fund would have
been 0.74% and 1.23%, respectively.
(7) Absent voluntary waivers, which can be terminated at any time, the
total operating expenses for the Service Shares and Institutional
Shares of the Pro Forma Combined Fund would be 1.53% and 1.28%,
respectively.
</TABLE>
-8-
<PAGE>
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 Treasury Prime Cash
Management Fund
Service Shares $6 $19 $34 $77
Institutional Shares $4 $12 $20 $45
Woodward Treasury Prime Cash
Management Fund
Service Shares N/A N/A N/A N/A
Institutional Shares N/A N/A N/A N/A
Pro Forma Combined
Service Shares $6 $19 $34 $77
Institutional Shares $4 $12 $20 $45
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
Prairie Woodward
U.S. Government Securities U.S. Government Securities
Cash Management Cash Management Pro Forma
Fund Fund* Combined
-------------------------- -------------------------- ----------------------
Service Institutional Service Institutional Service Institutional
Shares Shares Shares Shares Shares Shares
------- ------------- ------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
net assets)
Advisory Fees (after fee
waivers)(1) .14%(2) .14%(2) N/A N/A .14% .14%
12b-1 Fees (distribution and
servicing) .25% None N/A N/A .25% None
Other Expenses(3)
(after fee waivers and/or
expense reimbursements) .21%(4) .21%(4) N/A N/A .21% .21%
Total Operating Expenses
(after fee waivers and/or
expense reimbursements) .60%(5) .35%(5) N/A N/A .60%(6) .35%(6)
<FN>
- --------------------------
* The Woodward U.S. Government Securities Cash Management Fund has not
yet commenced operations. The Woodward U.S. Government Securities Cash
Management Fund will continue the operations of the Prairie U.S.
Government Securities Cash Management Fund upon consummation of the
Reorganization relating to that Fund.
(1) The maximum advisory fees for the Service Shares and Institutional
Shares of the Prairie U.S. Government Securities Cash Management Fund
and Service Shares and Institutional Shares of the Woodward U.S.
Government Securities Cash Management Fund are 0.20%.
(2) This number has been restated. Actual advisory fees for the fiscal
period ended December 31, 1995 were 0.12%.
(3) Includes administration fees of 0.15%.
(4) Other Expenses, before fee waivers and/or reimbursements, would have
been 0.24% and 0.22%, respectively, for the Service Shares and
Institutional Shares of the Prairie U.S. Government Securities Cash
Management Fund.
(5) Absent voluntary waivers, which can be terminated upon 90 days notice,
the total operating expenses for Service Shares and Institutional
Shares of the Prairie U.S. Government Securities Cash Management Fund
would have been 0.69% and 0.42%, respectively.
(6) Absent voluntary waivers, which can be terminated at any time, the
total operating expenses for Service Shares and Institutional Shares
of the Pro Forma Combined Fund would be 0.67% and 0.42%, 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 U.S. Government Securities
Cash Management Fund
Service Shares $6 $19 $34 $77
Institutional Shares $4 $12 $20 $45
Woodward U.S. Government Securities
Cash Management Fund
Service Shares N/A N/A N/A N/A
Institutional Shares N/A N/A N/A N/A
Pro Forma Combined
Service Shares $6 $19 $34 $77
Institutional Shares $4 $12 $20 $45
</TABLE>
-10-
<PAGE>
Expense Ratios -- Prairie Portfolios. The following table sets forth
(i) the ratios of operating expenses to average net assets of the Prairie
Portfolios for the fiscal period ended December 31, 1995 (a) after fee waivers
and expense reimbursements, and (b) absent fee waivers and expense
reimbursements:
<TABLE>
<CAPTION>
Fiscal 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 Portfolios
- ------------------
<S> <C> <C>
Cash Management Fund
Service Shares 0.60% 0.69%
Institutional Shares 0.35% 0.43%
Treasury Prime Cash Management Fund
Service Shares 0.60% 0.74%
Institutional Shares 0.35% 1.23%
U.S. Government Securities Cash
Management Fund
Service Shares 0.60% 0.69%
Institutional Shares 0.35% 0.42%
</TABLE>
Expense Ratios -- Woodward Funds. The Woodward Cash Management,
Treasury Prime Cash Management and U.S. Government Securities Cash Management
Funds will commence investment operations upon consummation of the
Reorganization.
Purchase and Redemption Information, Dividends and Pricing. The purchase,
redemption, dividends and pricing policies of the Prairie Portfolios and the
Woodward Funds are identical.
Voting Information. This Combined Proxy Statement/Prospectus 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, 3435 Stelzer Road, Columbus, Ohio 43219, on June 25,
1996 at _____ a.m./p.m. Eastern time (such meeting and any adjournments
thereof hereinafter referred to as the "Meeting"). 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 and all shares will vote separately by Portfolio. 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.
-11-
<PAGE>
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 Portfolios and the Woodward Funds
and is qualified in its entirety by the more extensive discussion of risk
factors in "Comparison of Investment Policies and Risk Factors."
Because of the similarities of the investment objectives and policies
of the Prairie Portfolios and the corresponding Woodward Funds, management
believes that an investment in a Woodward Fund involves risks that are
substantially similar to those of the corresponding Prairie Portfolio. These
investment risks include those typically associated with investing in a
portfolio of high quality, short-term money market instruments.
Although each Prairie Portfolio and Woodward Fund seek to maintain a
stable net asset value of $1.00 per share, there is no assurance they will be
able to do so. Generally, the market value of debt securities will vary
inversely to changes in prevailing interest rates. The Prairie Cash Management
Fund and Woodward Cash Management Fund may seek to achieve their investment
objectives through investments in securities of foreign issuers that involve
risks not typically associated with U.S. issuers. Each Fund may invest up to
10% of its net assets in securities that are illiquid. Certain Portfolios may
engage in securities lending transactions. There is no assurance that any
portfolio will achieve its investment objective.
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
Prairie has entered into an agreement whereby its investment
portfolios are to be acquired by portfolios of Woodward. Significant
provisions of this Reorganization Agreement are summarized below; however,
this summary is qualified in its entirety by reference to the Reorganization
Agreement, a copy of which is attached as Appendix A to this Combined Proxy
Statement/Prospectus.
Description of the Reorganization Agreement. There are three separate
Prairie investment portfolios. Their assets will be acquired and liabilities
assumed by three new Woodward Funds
-12-
<PAGE>
which have been organized to continue the operations of these Prairie
Portfolios.
The Reorganization Agreement provides that substantially all of the
assets and liabilities of the Prairie Portfolios will be transferred to the
Woodward Funds identified in the table below. The holders of each class of
shares of a Prairie Portfolio will receive the class of shares of the
corresponding Woodward Fund identified in the table. In the table, (a)
opposite the name of each Prairie Portfolio is the name of the Woodward Fund
which will issue shares to such Prairie Portfolio, and (b) opposite the name
of each class of shares of the Prairie Portfolio is the name of the class of
shares of the Woodward Fund to be distributed to the holders of such Prairie
class. The number of each class of shares to be issued by the Woodward Funds
will have an aggregate net asset value equal to the aggregate net asset value
of the corresponding class or classes of shares of the particular Prairie
Portfolio 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 each
transaction.
Prairie Portfolios and Classes Woodward Funds and Classes
- ------------------------------ --------------------------
Cash Management Fund Cash Management Fund
Service Shares Service Shares
Institutional Shares Institutional Shares
Treasury Prime Cash Management Fund Treasury Prime Cash Management Fund
Service Shares Service Shares
Institutional Shares Institutional Shares
U.S. Government Securities Cash U.S. Government Securities Cash
Management Fund Management Fund
Service Shares Service Shares
Institutional Shares Institutional Shares
Following the transfers of assets and liabilities from the Prairie
Portfolios to the Woodward Funds, and the issuances of shares by the Woodward
Funds to the Prairie Portfolios, each of the Prairie Portfolios will
distribute the class of shares of the Woodward Funds pro rata to the holders
of classes of shares of the Prairie Portfolios as described above in
liquidation of the Prairie Portfolios. Each holder of a class of shares of a
Prairie Portfolio will receive an amount of the corresponding class of shares
of the corresponding Woodward Fund of equal value. 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.
-13-
<PAGE>
The Reorganization is subject to a number of conditions, including
approval of the Reorganization Agreement and the transactions contemplated
thereby described in this Combined Proxy Statement/Prospectus by the
Shareholders of Prairie; the receipt of certain legal opinions described in
the Reorganization Agreement; the receipt of certain certificates from the
parties concerning the continuing accuracy of the 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 Reorganization is expected to occur on July __,
1996 or as soon thereafter as is practicable.
The expenses of Woodward and of Prairie incurred in connection with
the Reorganization will be borne by First Chicago NBD Corporation, 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 Shareholders of Prairie (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.
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 mutual fund families into a single,
larger consolidated group, offering shareholders a full spectrum of funds.
Accordingly, FCIMCO and NBD recommended that each of the Prairie Portfolios be
reorganized as described in this Combined Proxy Statement/Prospectus. The
Board of Trustees of Prairie considered the recommendation of FCIMCO and NBD
with respect to the proposed consolidation of Prairie and Woodward; the
investment capabilities of the co-advisers; the compatibility of the
investment objectives and policies of the Prairie Portfolios
-14-
<PAGE>
and their corresponding Woodward Funds; 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 Funds; the projected operating expense ratios
of the Woodward Funds following the Reorganization; the fact that the
Reorganization would constitute a tax-free reorganization; the fact that total
operating expense ratios of each Woodward Fund after the Reorganization were
expected to be the same or lower than the expense ratios of the corresponding
Prairie Portfolio 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 considered 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 Board of Trustees of Prairie has not determined what action it
will take in the event the shareholders of any Prairie Portfolio 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
Portfolios in their 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 Board of Trustees unanimously determined that the proposed
Reorganization was in the best interests of Woodward and its shareholders, and
that the interests of existing shareholders of Woodward's other funds would
not be diluted as a result of the transaction.
Capitalization. Because the Prairie Portfolios will be combined in the
Reorganization with newly organized Woodward Funds having only nominal assets
and liabilities, information on the capitalization of the Prairie Portfolios
and Woodward Funds is not included.
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
-15-
<PAGE>
all of the assets and liabilities of each of the Prairie Portfolios to their
corresponding Woodward Funds in exchange for shares of the corresponding
Woodward Funds and liquidating distributions to Shareholders of the Prairie
Portfolios of the shares of the Woodward Fund so received, as described in the
Reorganization Agreement, will constitute reorganizations within the meaning
of Section 368(a)(1)(C), Section 368(a)(1)(D) or Section 368(a)(1)(F) of the
Internal Revenue Code of 1986, as amended, and with respect to the
Reorganization, each Prairie Portfolio and Woodward Fund will be considered "a
party to a reorganization" within the meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by any Prairie Portfolio as a result
of such transactions; (iii) no gain or loss will be recognized by any Woodward
Fund as a result of such transactions; (iv) no gain or loss will be
recognized by the Shareholders of any Prairie Portfolio on the distribution to
them by Prairie of shares of any class of the corresponding Woodward Fund in
exchange for their shares of any class of the Prairie Portfolio; (v) the
aggregate basis of the Woodward Fund shares received by a shareholder of a
Prairie Portfolio will be the same as the aggregate basis of the Shareholder's
Prairie Portfolio shares immediately prior to the Reorganization; (vi) the
basis of each Woodward Fund in the assets of the corresponding Prairie
Portfolio received pursuant to the Reorganization will be the same as the
basis of the assets in the hands of the Prairie Portfolio 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 Portfolio shares exchanged therefor, provided that the
shareholder held such Prairie Portfolio shares as a capital asset; and (viii)
each 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
corresponding Prairie Portfolio.
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 objectives and policies of each Prairie Portfolio are
substantially the same as those of the corresponding Woodward Fund. There are,
however, certain differences. The following discussion summarizes the
differences in the investment policies, risk factors and limitations between
the Prairie Portfolios and the corresponding Woodward Funds, and is qualified
in its entirety by the Prospectuses and Statements of Additional Information
of the Prairie Portfolios and the Woodward Funds which are incorporated herein
by reference.
The Woodward Cash Management and U.S. Government Securities Cash
Management Funds may invest in securities issued by other investment companies
which principally invest in securities of the type in which such Funds invest.
Under the 1940 Act, a Fund's investments in such securities, subject to
certain exceptions, is currently limited to: (i) 3% of the total voting stock
of any one investment company; (ii) 5% of a Fund's total assets with respect
to any one investment company; and (iii) 10% of a Fund's total assets in the
aggregate. Investments in the securities of other investment companies may
involve duplication of advisory fees and certain other expenses. The Prairie
Cash Management and U.S. Government Securities Cash Management Funds, as a
matter of fundamental policy, are not permitted to invest in the securities of
other investment companies, except as they may be acquired as part of a merger,
consolidation or acquisition of assets.
The Woodward Treasury Prime Cash Management and U.S. Government
Securities Cash Management Funds may invest in stripped U.S. Treasury
Securities and the Woodward U.S. Government Securities Cash Management Fund may
invest in stripped U.S. Government Securities, where the principal and
interest components are traded independently under the Separate Trading and
Registered Interest and Principal Securities Program ("STRIPS"). Under STRIPS,
the principal and interest components are individually numbered and separately
issued by the U.S. Treasury at the request of depository financial
institutions, which then trade the component parts independently. These
obligations are usually issued at a discount to their face value, and because
of the manner in which principal and interest are returned, may exhibit
greater volatility than more conventional debt securities. The Prairie
Treasury Prime Cash Management and U.S. Government Securities Cash Management
Funds are not expressly permitted to invest in STRIPS.
-16-
<PAGE>
Investment Limitations. Neither the Prairie Portfolios nor the Woodward Funds
may change their fundamental investment policies and 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 Portfolio or Woodward Fund.
As a matter of fundamental policy, each Prairie Portfolio may invest
up to 25% of the value of its total assets in the securities of issuers in a
single industry, provided that: (a) there is no limitation on the purchase of
obligations issued and guaranteed by the U.S. Government, its agencies and
instrumentalities; and (b) the Prairie Cash Management 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. Each Woodward Fund has substantially the same fundamental
investment limitation, but also adds the following clarifications that:
(a) there is no limitation with respect to (1) instruments issued or
guaranteed by any state, territory or possession of the United States,
the District of Columbia or any of their authorities, agencies,
instrumentalities or political subdivisions, (2) instruments
issued by domestic branches of U.S. banks and (3) repurchase agreements
secured by instruments described in clauses (1) and (2); (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; (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; (d) personal credit and
business credit businesses will be considered separate industries; and (e) the
Woodward Cash Management Fund will invest at least 25% of its total assets in
obligations of issuers in the banking industry or instruments secured by such
obligations except during temporary defensive periods.
The Prairie Treasury Prime Cash Management Fund, as a matter of
fundamental policy, may 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; each of the Prairie Cash Management
and U.S. Government Securities Cash Management Funds may borrow money
from banks, but only for temporary or emergency (not leveraging) purposes,
in an amount up to 15% of the value of a Fund's total assets
(including the amount borrowed) valued at the lesser of cost or market,
less liabilities (not including the amount borrowed) at the time the borrowing
is made. While borrowings exceed 5% of the value of a Fund's total assets,
that Fund will not make any additional investments. Each of the Woodward Funds
is permitted to borrow money to the extent permitted under the 1940 Act.
As a matter of fundamental policy, each Prairie Portfolio
may mortgage, pledge, hypothecate or otherwise encumber its assets
only to secure permitted borrowings (this policy is not fundamental
with respect to the Prairie Treasury Prime Cash Management Fund). The
Woodward Funds may mortgage, pledge or hypothecate their assets to the
extent permitted by the 1940 Act.
The Prairie Portfolios have adopted a fundamental policy
such that they may not purchase or sell real estate, except that
the Prairie Treasury Cash Management Fund may purchase securities of
issuers which deal in real estate and may purchase securities which are
secured by interests in real estate. The Woodward Funds may not purchase or
sell real estate or commodities, except to the extent permitted by the 1940
Act.
As a matter of fundamental policy, the Prairie Portfolios,
with the exception of the Prairie Treasury Cash Management Fund,
may not acquire any other investment company or investment company
security except in connection with a merger, consolidation, reorganization
or acquisition of assets. The Prairie Treasury Cash Management Fund and
the Woodward Funds have adopted non-fundamental policies that allow them to
invest in other investment companies to the extent permitted by the 1940 Act.
As a matter of fundamental policy, the Prairie Cash Management
and U.S. Government Securities Cash Management Funds, and the
Woodward Funds may not make loans to others (other than through investment
in debt obligations or other instruments referred to in each Fund's
Prospectus), except that each Fund may lend its portfolio securities in an
amount not to exceed 33 1/3% of the value of its total assets. The Prairie
Treasury Prime Cash Management Fund may not make loans except through the
purchase of debt obligations and the entry into repurchase agreements.
The Prairie Cash Management Fund, and the Woodward Funds have
adopted fundamental policies which do not permit them to purchase
securities (except U.S. Government Securities and related repurchase
agreements) if more than 5% of such a Fund's assets are invested in the
obligations of any one issuer, except that up to 25% of the value of the Fund's
total assets may be invested without regard to this 5% limitation. The Prairie
Treasury Prime Cash Management and U.S. Government Securities Cash Management
Funds are not expressly subject to this limitation.
<PAGE>
See "Investment Objectives and Management Policies -- Investment
Restrictions" in Woodward's Statement of Additional Information, which is
incorporated by reference herein for additional investment limitations of the
Woodward Funds.
-17-
<PAGE>
Other Information. Prairie and Woodward are registered as open-end management
investment companies under the 1940 Act. Currently, Prairie consists of three
investment portfolios and Woodward offers seventeen investment portfolios.
Woodward and Prairie are both 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 Portfolios have a par value of
$.001. Shares of the Woodward Funds have a par value of $.10. In addition,
shares of the Prairie Portfolios and Woodward Funds 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 their prospectuses, Prairie Portfolio shares and Woodward Fund shares are
fully paid and non-assessable by such entities except as required under
Massachusetts law. 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 of Woodward and Prairie upon written request
at the addresses shown on the cover page of this Combined Proxy
Statement/Prospectus.
INFORMATION RELATING TO VOTING MATTERS
General Information. This Combined Proxy Statement/Prospectus 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 solicit proxies by telephone, telegraph, facsimile or
personal
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<PAGE>
interview. 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 _________ shares of Prairie Cash Management Fund,
______ shares of Prairie Treasury Prime Cash Management Fund and ________
shares of Prairie U.S. Government Securities Cash Management Fund. Each share
or fraction thereof is entitled to one vote or fraction thereof, and all
shares will vote separately by Fund.
Prairie and Woodward have been advised by FCIMCO that the shares of
each Prairie Portfolio 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 each respective Prairie Portfolio were actually voted.
If the accompanying proxy is executed and returned in time for the
Meeting, the shares covered thereby will be voted in 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
Cash Management Fund, Treasury Prime Cash Management Fund and U.S. Government
Securities Cash Management Fund in accordance with the provisions of Prairie's
Declaration of Trust, and the requirements of the 1940 Act. The term "majority
of the outstanding shares" of a Prairie Portfolio as used herein means more
than 50% of the outstanding shares of such Prairie Portfolio.
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
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<PAGE>
abstentions and broker non-votes will be considered to be a vote against the
Reorganization proposal.
The approval of the Reorganization by shareholders of Woodward is not
being solicited because their approval or consent is not legally required.
At April 11, 1996, the name, address and percentage of ownership of
each person who owned [beneficially/of record] 5% or more of any class of
shares of the Prairie Portfolios is listed below. Prior to the Reorganization,
the Woodward Funds will have only nominal assets. Accordingly, the persons who
own [beneficially/of record] 5% or more of any class of shares of the Prairie
Portfolios will not materially change upon consummation of the Reorganization.
<TABLE>
<CAPTION>
Percentage Percentage
of Prairie of Class of
Percentage Portfolio Woodward
of Class Shares Fund
Prairie Class of Owned on Owned on Owned on
Portfolio Name and Address Shares Owned Record Date Record Date Consummation
- ---------- ---------------- ------------ ----------- ----------- ------------
At April 11, 1996, the trustees and officers of Prairie, as a group,
owned none of the outstanding shares of the Prairie Portfolios. At April 11,
1996, no shares of the corresponding Woodward Funds were outstanding.
At April 11, 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:
Name and Address Fund Percentage of Ownership
- ---------------- ---- -----------------------
<S> <C> <C>
</TABLE>
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<PAGE>
Appraisal Rights. Shareholders are not entitled to any rights of share
appraisal under Prairie's Declaration of Trust, or under the laws of the
Commonwealth of Massachusetts, in connection with the Reorganization.
Shareholders have, however, the right to redeem from Prairie their Prairie
Portfolio 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 one or more Prairie Portfolios prior to any such adjournment if
sufficient votes have been received for approval with respect to any such
Prairie Portfolio. A quorum is constituted with respect to a Prairie Portfolio
by the presence in person or by proxy of the holders of more than 30% of the
outstanding shares of the Portfolios 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.
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<PAGE>
ADDITIONAL INFORMATION ABOUT WOODWARD
Information about the Woodward Funds is included in the Prospectus
accompanying this Combined Proxy Statement/Prospectus, which is incorporated
by reference herein. Additional information about these Funds is included in
their Statement of Additional Information dated May __, 1996 which has been
filed with the SEC. Copies of the Statement 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 can 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 March 18, 1996 and Statement of Additional Information, dated
March 18, 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 Proxy Statement/Prospectus. 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 financial
effect upon the ability of the co-advisers to provide investment advisory
services or any material adverse effect upon either the Prairie Portfolios or
the Woodward Funds.
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<PAGE>
FINANCIAL STATEMENTS
The financial highlights and financial statements for the Prairie
Portfolios for the fiscal 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 March 18, 1996, each of which is
incorporated by reference into this Combined Proxy Statement/Prospectus. The
Woodward Cash Management Fund, Treasury Prime Cash Management Fund and U.S.
Government Securities Cash Management Fund did not conduct investment
operations during this period.
The audited financial statements of the Prairie Portfolios for the
fiscal period ended December 31, 1995, contained in Prairie's Annual Report
and incorporated by reference in this Combined Proxy/Prospectus, 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.
OTHER BUSINESS
Prairie's Board knows 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 Proxy Statement/Prospectus 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.
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<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
THE WOODWARD FUNDS
AND PRAIRIE INSTITUTIONAL FUNDS
DATED __________________, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
I. Transfer of Assets of Prairie Portfolios. ........................ 2
II. Liquidating Distributions and Termination of Prairie.............. 7
III. Valuation Times................................................... 8
IV. Certain Representations, Warranties and Agreements of
Prairie........................................................... 8
V. Certain Representations, Warranties and Agreements of
Woodward.......................................................... 15
VI. Shareholder Action on Behalf of the Acquired Funds................ 19
VII. N-14 Registration Statement and Proxy Solicitation
Materials......................................................... 21
IX. Woodward Conditions............................................... 22
X. Prairie Conditions................................................ 29
XI. Tax Documents..................................................... 34
XII. Finder's Fees..................................................... 34
XIII. Announcements..................................................... 34
XIV. Further Assurances................................................ 35
XV. Termination of Representations and Warranties..................... 35
XVI. Termination of Agreement.......................................... 35
XVII. Amendment and Waiver.............................................. 36
XVIII. Governing Law..................................................... 37
XIX. Successors and Assigns............................................ 37
XX. Beneficiaries..................................................... 38
XXI. Prairie Liability................................................. 38
XXII. Woodward Liability................................................ 39
XXIII. Notices........................................................... 40
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<PAGE>
XXIV. Expenses.......................................................... 41
XXV. Entire Agreement.................................................. 41
XXVI. Counterparts...................................................... 41
-ii-
<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 Institutional Funds, a Massachusetts
business trust ("Prairie").
WHEREAS, the parties desire that substantially all of the
assets and liabilities of Prairie's portfolios be transferred to, and be
acquired and assumed by, certain Woodward portfolios in exchange for Service
and Institutional Shares of the Woodward portfolios which shall thereafter be
distributed by Prairie to the holders of Service and Institutional Shares of
its portfolios, all as described in this Agreement (the "Reorganization");
WHEREAS, the parties intend that the Woodward Cash Management,
Treasury Prime Cash Management and U.S. Government Securities Cash Management
Funds will each have nominal assets and liabilities before the Reorganization
and will continue the investment operations of the Prairie Cash Management,
Treasury Prime Cash Management and U.S. Government Securities Cash Management
Funds, respectively, after the Reorganization;
WHEREAS, the parties intend that the transfers of assets,
assumptions of liabilities, and distributions of Service
<PAGE>
and Institutional Shares in each Prairie portfolio, 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
WHEREAS, the parties intend that in connection with the
Reorganization each of the Prairie portfolios 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 of Prairie Portfolios.
1.01 (a) At the Effective Time of the Reorganization (as
defined in Article VIII) with respect to each of the
Prairie portfolios (each, an "Acquired Fund"), all
property of every description, and all interests,
rights, privileges and powers of each 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
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<PAGE>
transferred and conveyed by such Acquired Fund to
Woodward on behalf of one of its portfolios as set forth
in Section 1.02 (each, an "Acquiring Fund"), and shall
be accepted by Woodward on behalf of such Acquiring
Fund, and Woodward, on behalf of such Acquiring Fund,
shall assume all known liabilities whether accrued,
absolute, contingent or otherwise, of such Acquired Fund
reflected in the calculation of such Acquired Fund's net
asset value (the "Acquired Fund Liabilities"), so that
at and after the Effective Time of the Reorganization
with respect to such Acquired Fund: (i) all assets of
such Acquired Fund shall become and be the assets of its
Acquiring Fund; and (ii) all known liabilities of such
Acquired Fund reflected as such in the calculation of
the Acquired Fund's net asset value shall attach to its
Acquiring Fund as aforesaid and may thenceforth be
enforced against such 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
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<PAGE>
investments, claims and receivables (including dividend
and interest receivables) owned by an Acquired Fund, and
(subject to Section 1.01(b)) any deferred or prepaid
expenses shown as an asset on an Acquired Fund's books,
at the Effective Time of the Reorganization of such
Acquired Fund, and all good will, all other intangible
property and all books and records belonging to an
Acquired Fund. Recourse by any person for the Acquired
Fund Liabilities assumed by an Acquiring Fund shall, at
and after the Effective Time of the Reorganization of
such Acquired Fund, be limited to such Acquiring Fund.
1.02 The assets of each Acquired Fund shall be acquired by the
Acquiring Fund identified below opposite its name, and the holders of each
class of shares of such Acquired Fund shall receive the class of shares of the
Acquiring Fund identified below opposite the name of such class:
Prairie Portfolios and Classes Woodward Portfolios and Classes
- ------------------------------ -------------------------------
Cash Management Fund Cash Management Fund
Service Shares Service Shares
Institutional Shares Institutional Shares
Treasury Prime Cash Management Fund Treasury Prime Cash Management Fund
Service Shares Service Shares
Institutional Shares Institutional Shares
U.S. Government Securities Cash U.S. Government Securities
Management Fund Cash Management Fund
Service Shares Service Shares
Institutional Shares Institutional Shares
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<PAGE>
In connection with the Reorganization, the Board of Trustees of Woodward has
adopted resolutions authorizing the establishment of Service Shares for each
Acquiring Fund. This change will be effective by the Effective Time of the
Reorganization with respect to each Acquiring Fund.
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 each Acquired
Fund a number of full and fractional shares to the third decimal place, of the
Acquiring Fund specified in Section 1.02 and of the class or classes
identified in Section 1.02, all determined and adjusted as provided in this
Agreement. The number of shares of each class of the Acquiring Funds 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, the holders of which shall receive shares of such class of the
Acquiring Fund, as specified in Section 1.02, all determined and adjusted as
provided in this Agreement.
1.04 The net asset value of each class of shares of the Acquiring
Funds and the net asset value of each class of shares of the Acquired Funds
shall be determined as of the applicable
-5-
<PAGE>
Valuation Time with respect to each Acquired Fund specified in Article III.
1.05 The net asset value of each class of shares of each Acquiring
Fund shall be computed in the manner set forth in such 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 portfolios 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 Funds to
the Acquiring Funds, each security shall be priced in accordance with the
policies and procedures of Woodward described in its then current prospectuses
and statements 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 Distributions and Termination of Prairie.
Immediately after the Effective Time of the Reorganization
with respect to each Acquired Fund, such Acquired Fund shall distribute in
complete liquidation pro rata to the record holders
-6-
<PAGE>
of each class of its shares at the applicable Effective Time of the
Reorganization the shares of the class of the Acquiring Fund identified in
Section 1.02 to be received by the record holders of such class of such
Acquired Fund. In addition, each shareholder of record of an 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 an 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 each 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 each
Acquired Fund shall be redeemed and 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 identified in Section 1.02, 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 1940 Act for an
order declaring that it has ceased to be an investment
-7-
<PAGE>
company and any and all documents that may be necessary to terminate its
existence under state law. After the Effective Time of the Reorganization,
Prairie shall not conduct any business except in connection with its
liquidation, dissolution, and deregistration.
III. Valuation Times. Subject to Section 1.05 hereof, the
Valuation Time for the Reorganization with respect to each of the
Acquired Funds 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 each of its Acquired
Funds, 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
validly existing under the laws of, and duly
authorized to transact business in, the
Commonwealth of Massachusetts. Each Acquired Fund
is registered with the Securities and Exchange
-8-
<PAGE>
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
of this Agreement does not and will not, and the
consummation of the transactions contemplated by
this Agreement will not, violate Prairie's
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<PAGE>
Agreement and Declaration of Trust, By-laws or any
agreement or arrangement to which it is a party or by
which it is bound.
(d) Each 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 with respect to such Acquired Fund.
(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
any Acquired Fund with respect to taxable periods
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
-10-
<PAGE>
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 each 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 each
Acquired Fund as of December 31, 1995 and the
results of its operations for the year or period
then ending, in conformity with generally accepted
accounting principles.
(g) At both the Valuation Time and the Effective Time of the
Reorganization with respect to each Acquired Fund, there
shall be no known liabilities of such Acquired Fund,
whether accrued, absolute, contingent or otherwise, not
reflected in the net asset values per share of its
outstanding classes of shares.
(h) There are no legal, administrative or other proceedings
pending or, to Prairie's knowledge threatened, against
Prairie or an Acquired Fund
-11-
<PAGE>
which could result in liability on the part of
Prairie or an Acquired Fund.
(i) Subject to the approvals of shareholders referred
to herein, at both the Valuation Time and the
Effective Time of the Reorganization with respect
to each Acquired Fund, it shall have full right,
power and authority to sell, assign, transfer and
deliver the Acquired Fund Assets of such Acquired
Fund and, upon delivery and payment for the
Acquired Fund Assets as contemplated herein, an
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).
(j) 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, as
amended ("1934 Act"), the 1940 Act, the rules and
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<PAGE>
regulations under those Acts, and state securities
laws.
(k) Insofar as the following relate to Prairie, the
registration statement filed by Woodward on Form
N-14 relating to the shares of the Acquiring Funds
that will be registered with the SEC pursuant to
this Agreement, which, without limitation, shall
include a proxy statement of Prairie and the
prospectus(es) of Woodward with respect to the
transactions contemplated by this Agreement, and
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 each 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
-13-
<PAGE>
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.
(l) All of the issued and outstanding shares of each
class of each Acquired Fund have been duly and
validly issued, are fully paid and non-assessable,
and were offered for sale and sold in conformity
with all applicable federal and state securities
laws, and no shareholder of an Acquired Fund has
any preemptive right of subscription or purchase
in respect of such shares.
(m) Prairie shall not sell or otherwise dispose of any
shares of an Acquiring Fund to be received in the
transactions contemplated herein, except in distribution
to its shareholders as contemplated herein.
-14-
<PAGE>
V. Certain Representations, Warranties and Agreements of
Woodward. Woodward, on behalf of itself and each 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. Each 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.
(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
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<PAGE>
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) Each Acquiring Fund has elected or will elect to qualify
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.
(e) At both the Valuation Time and the Effective Time of the
Reorganization with respect to each Acquiring Fund,
there shall be no known liabilities of such Acquiring
Fund, whether accrued, absolute, contingent or
otherwise, not reflected in the net asset values per
share of its
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<PAGE>
outstanding classes to be issued pursuant to this
Agreement.
(f) There are no legal, administrative or other proceedings
pending or, to its knowledge, threatened against
Woodward or an Acquiring Fund which could result in
liability on the part of Woodward or an Acquiring Fund.
(g) 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.
(h) 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 at each 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
-17-
<PAGE>
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 Woodward for
use in the N-14 Registration Statement.
(i) The shares of each class of each Acquiring Fund to
be issued and delivered to an Acquired Fund for
the account of record holders of shares of an
Acquired Fund, pursuant to the terms hereof, shall
have been duly authorized as of the Effective Time
of the Reorganization applying to such Acquiring
Fund 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.
-18-
<PAGE>
VI. Shareholder Action on Behalf of the Acquired Funds.
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 applicable to the Acquired Funds 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 Funds for the purpose of
considering and voting upon:
(a) Approval of this Agreement and the transactions
contemplated hereby, including, without
limitation:
(i) The transfer of the Acquired Fund Assets
belonging to each Acquired Fund to an
Acquiring Fund, and the assumption by such
Acquiring Fund of the Acquired Fund
Liabilities of such Acquired Fund, in
exchange for shares of a class or classes
of shares of such Acquiring Fund, as set
forth in Section 1.02.
(ii) The liquidation of each Acquired Fund
through the distribution to its record
holders of shares of the class or classes
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<PAGE>
of shares of such 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 Funds shall constitute the waiver of the application of any
fundamental policy of such Acquired Funds that might be deemed to prevent them
from taking the actions 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
-20-
<PAGE>
state securities laws, to be included in the N-14 Registration
Statement.
VIII. Effective Times of the Reorganization. Delivery of the Acquired Fund
Assets of each Acquired Fund and the shares of the classes of its Acquiring
Fund to be issued pursuant to Article I and the liquidation of each Acquired
Fund pursuant to Article II shall occur at the opening of business on the next
business day following the Valuation Time applicable to such Acquired Fund, 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 respective
date and time at which such actions are taken with respect to an Acquired Fund
are referred to herein as the "Effective Time of the Reorganization." To the
extent any Acquired Fund Assets are, for any reason, not transferred at the
applicable Effective Time of the Reorganization, Prairie shall cause such
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
with respect to each Acquiring Fund shall be subject to the
following conditions precedent:
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<PAGE>
(a) This Agreement and the transactions contemplated by this
Agreement shall have been approved by the shareholders
of such 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 such Acquired Fund in and
to the Acquired Fund Assets of such Acquired Fund.
The Acquired Fund Assets shall be accompanied by
all necessary state stock transfer stamps or cash
for the appropriate purchase price therefor.
(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 each
Valuation Time and each Effective Time of the
Reorganization. As of the Valuation Time and the
Effective Time of the Reorganization applicable to
each Acquired Fund, there shall have been no
material adverse change in the financial position
of such Acquired Fund since December 31, 1995
-22-
<PAGE>
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 applicable to
each Acquired Fund, substantially to the effect
that: (i) Prairie is a Massachusetts business
trust duly organized and validly existing under
the laws of the Commonwealth of Massachusetts;
(ii) the shares of such Acquired Fund outstanding
at such time are duly authorized, validly issued,
fully paid and non-assessable by such Acquired
Fund, and to such counsel's knowledge, no
shareholder of such Acquired Fund has any option,
warrant or pre-emptive right to subscription or
purchase in respect thereof; (iii) this Agreement
and the Transfer Documents have been duly
-23-
<PAGE>
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 an 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 or
By-laws of Prairie or any material agreement known to
such counsel to which Prairie 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
-24-
<PAGE>
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
applicable to each Acquired Fund, substantially to
the effect that for federal income tax purposes
(i) the transfers of all of the Acquired Fund
Assets hereunder, and the assumption by its
Acquiring Fund of Acquired Fund Liabilities, in
exchange for shares of each class of such
Acquiring Fund, and the distribution of said
shares to the shareholders of such Acquired Fund,
as provided in this Agreement, will each
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 each reorganiza-
tion, the Acquired Fund and the Acquiring Fund
-25-
<PAGE>
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 an 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 such Acquired Fund on
the distribution to them by such Acquired Fund of shares
of any class of an 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 an 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 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 such
Acquired Fund Assets
-26-
<PAGE>
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 an Acquired
Fund as a capital asset; and (viii) in accordance with
Section 1223(2) of the Code, the holding period of an
Acquiring Fund with respect to the Acquired Fund Assets
will include the period for which such Acquired Fund
Assets were held by an 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.
(g) The N-14 Registration Statement shall have become
effective under the 1933 Act and no stop order
suspending such effectiveness shall have been
-27-
<PAGE>
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 each Valuation Time
and each 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 such
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
request with access to and copies of all documents
belonging to Prairie.
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<PAGE>
(j) Woodward 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.
X. Prairie Conditions. The obligations of Prairie hereunder with respect
to each 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 such 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
each Valuation Time and each Effective Time of the
Reorganization. As of the Valuation Time and the
Effective Time of the Reorganization applicable to
each Acquired Fund, there shall have been no
material adverse change in the financial condition
of its Acquiring Fund since December 31, 1995
-29-
<PAGE>
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.
(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 applicable to
each Acquired Fund, 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 each
Acquiring Fund to be delivered at such time to an
Acquired Fund as provided for by this Agreement
are duly authorized and upon delivery will be
validly issued, fully paid and non-assessable by
such Acquiring Fund and to such counsel's
-30-
<PAGE>
knowledge, no shareholder of an 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, 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 an 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
-31-
<PAGE>
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 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 applicable to each Acquired
Fund, 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
-32-
<PAGE>
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.
(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 each Valuation Time
and each 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.
-33-
<PAGE>
XI. Tax Documents. Prairie shall deliver to Woodward at each Effective
Time of the Reorganization confirmations or other adequate evidence as to the
adjusted tax basis of the Acquired Fund Assets then delivered to an 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.
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
-34-
<PAGE>
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.
XVI. Termination of Agreement.
16.01 This Agreement may be terminated as to one or more investment
portfolios by a party 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.
-35-
<PAGE>
16.02 If a party terminates this Agreement as to any investment
portfolio 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, 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 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
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<PAGE>
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 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 Institutional Funds," refers 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
-37-
<PAGE>
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 Acquired Fund, or
in connection with the transactions contemplated herein with respect to an
Acquired Fund, shall be discharged only out of the assets of that 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,
-38-
<PAGE>
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 an Acquiring Fund,
or in connection with the transactions contemplated herein with respect to an
Acquiring Fund, shall be discharged only out of the assets of that 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
-39-
<PAGE>
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
611 Woodward Avenue
Detroit, Michigan 48226
Telecopier Number:
With a copy to:
W. Bruce McConnel, III, Esq.
Drinker Biddle & Reath
1345 Chestnut Street
Philadelphia, PA 19107
Telecopier Number: (215) 988-2757
If to Prairie:
Prairie Institutional Funds
c/o Mark A. Dillon, President
Three First National Plaza
Chicago, Illinois 60670
Telecopier Number: (312) 732-1576
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
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<PAGE>
affiliates, provided, however, that Woodward shall bear any filing fees under
the 1933 Act and state securities laws in connection with its Service and
Institutional Shares to be distributed to shareholders of the Acquired Funds.
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.
-41-
<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 INSTITUTIONAL FUNDS
ATTEST:
____________________________ By: __________________________
-42-
<PAGE>
PART B
<PAGE>
PRAIRIE INSTITUTIONAL 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 Meeting of Shareholders of
Prairie Institutional Funds)
This Statement of Additional Information is not a prospectus but
should be read in conjunction with the Combined Proxy Statement/Prospectus
dated May __, 1996 for the Special Meeting of Shareholders of Prairie
Institutional Funds ("Prairie") to be held on June 25, 1996. Copies of the
Combined Proxy Statement/Prospectus 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
Proxy Statement/Prospectus.
Further information about the Service and Institutional Shares of the
Woodward Funds is contained in and incorporated by reference to Woodward's
Statements of Additional Information dated May __, 1996, copies of which are
included herewith.
Further information about the Service Shares and Institutional Shares
of the Prairie Portfolios is contained in and incorporated by reference to
Prairie's Statement of Additional Information dated March 18, 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.
B-1
<PAGE>
TABLE OF CONTENTS
Page
----
General Information................................................. B-3
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 Prairie Cash Management
Fund, Treasury Prime Cash Management Fund and U.S. Government Securities Cash
Management Fund to corresponding Woodward Funds in exchange for full and
fractional shares representing interests in such corresponding Woodward Funds.
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
Portfolios that are outstanding immediately before the effective time of the
Reorganization.
Following the exchange, the Prairie Portfolios will make a liquidating
distribution of corresponding Woodward Funds shares to their shareholders.
Each shareholder owning shares of a particular Prairie Portfolio at the
effective time of the Reorganization will receive shares of the corresponding
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 Portfolio 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 June 25, 1996 at the offices of BISYS Fund Services,
Inc., 3435 Stelzer Road, Columbus, Ohio 43219. For further information about
the transaction, see the Combined Proxy Statement/Prospectus.
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 Funds, but do not prohibit such a bank holding
company or its affiliates or banks generally 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
customers. FCIMCO, NBD and financial intermediaries which agree to provide
shareholder
B-3
<PAGE>
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 Funds, Woodward might be required 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>
PART C
<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 (6)(l). Indemnification of
Registrant's Custodian is provided for in Article XII of the Amended and
Restated Custodian Agreement incorporated herein by reference as Exhibit
(8)(b). 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 (9)(b). 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,
C-2
<PAGE>
judgments, amounts paid in settlement, fines, penalties and
other liabilities.
(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
C-3
<PAGE>
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 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
C-4
<PAGE>
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.
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) Agreement and Plan of Reorganization filed
herewith as Appendix A to the Combined Proxy
Statement/Prospectus.
(5) (a) None.
(6) (a) Form of Co-Advisory Agreement between Registrant,
NBD Bank and First Chicago Investment Management Company
is incorporated herein by reference to exhibit 5(a) of
Post-Effective Amendment No. 28 to Registrant's
Registration Statement on Form N-1A filed with the
Commission on April 5, 1996.
C-5
<PAGE>
(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.
(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) None.
(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
C-6
<PAGE>
Statement on Form N-1A filed with the Commission on
September 8, 1992.
(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) Form of Addendum No. 8 to the Amended and Restated
Custodian Agreement between Registrant and NBD
C-7
<PAGE>
relating to the Woodward Cash Management Fund,
Treasury Prime Cash Management Fund and U.S.
Government Securities Cash Management Fund is
incorporated herein by reference to exhibit 8(i)
of Post-Effective Amendment No. 28 of the
Registrant's Registration Statement on Form N-1A
filed with the Commission on April 5, 1996.
(j) Form of Addendum No. 9 to the Amended and Restated
Custodian Agreement between the 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.
(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.
(11) Opinion of Drinker Biddle & Reath that shares are
validity 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 to Registrant's Registration Statement
on Form N-1A filed with the Commission on April 5,
1996.
(b) 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.
(c) 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.
(d) 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
- ---------------
<F1>1 Filed pursuant to Rule 24f-2 as part of Registrant's Rule 24f-2
Notice.
C-8
<PAGE>
(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.
(e) 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.
(f) 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.
(g) 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.
(h) 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.
(i) 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
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<PAGE>
Securities Cash Management and Treasury Prime Cash
Management Funds is incorporated herein by reference
to exhibit 9(i) of Post-Effective Amendment No. 28
to the Registrant's Registration Statement on
Form N-1A filed with the Commission on April 5, 1996.
(j) 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.
(k) Bank Agreement between FoM and BHC Securities,
Inc. dated June 15, 1992 is incorporated herein by
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.
(l) 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.
(m) 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.
(n) Form of Shareholder Administrative 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.
(14) (a) Consent of Ernst & Young LLP.
(b) Consent of Drinker Biddle & Reath.
(15) Not applicable.
(16) Not applicable.
(17) (a) Declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 of the Registrant.
(b) Forms of Proxy.
(c) Prospectus dated May __, 1996 for Institutional Shares
and Service Shares of The Woodward Funds Cash
Management Fund, Treasury Prime Cash Management
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<PAGE>
Fund, and U.S. Government Securities Cash
Management Fund.
(d) Statement of Additional Information dated May __,
1996 for Institutional Shares and Service Shares of
The Woodward Funds Cash Management Fund, Treasury
Prime Cash Management Fund, and U.S. Government
Securities Cash Management Fund.
(e) Prospectus dated March 18, 1996 for Institutional
and Service Shares of the Prairie Institutional
Funds Cash Management Fund, Treasury Prime Cash
Management Fund and U.S. Government Securities
Cash Management Fund.
(f) Statement of Additional Information dated March
18, 1996 for Institutional and Service Shares of
the Prairie Institutional Funds Cash Management
Fund, Treasury Prime Cash Management Fund and U.S.
Government Securities Cash Management Fund.
(g) Annual Report to Shareholders for The Prairie
Institutional Funds, U.S. Government Securities
Cash Management Fund, Treasury Prime Cash
Management Fund and Cash Management 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.
C-11
<PAGE>
SIGNATURES
Pursuant to the requirements of 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 9th 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.
C-12
<PAGE>
Signatures Title Date
---------- ----- ----
/s/ Earl I. Heenan, Jr.
- ------------------------
Earl I. Heenan, Jr. Trustee April 9, 1996
/s/ Eugene C. Yehle
- ------------------------
Eugene C. Yehle Trustee April 9, 1996
/s/ Will M. Caldwell
- ------------------------
Will M. Caldwell Trustee April 9, 1996
/s/ Julius L. Pallone
- ------------------------
Julius L. Pallone Trustee April 9, 1996
/s/ Nicholas J. DeGrazia
- ------------------------
Nicholas J. De Grazia Trustee April 9, 1996
/s/ Donald G. Sutherland
- ------------------------
Donald G. Sutherland Trustee April 9, 1996
/s/ Donald L. Tuttle
- ------------------------
Donald L. Tuttle Trustee April 9, 1996
/s/ John P. Gould
- ------------------------
John P. Gould Trustee April 9, 1996
/s/ Marilyn McCoy
- ------------------------
Marilyn McCoy Trustee April 9, 1996
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<PAGE>
N-14
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
(12) Opinion of Drinker Biddle & Reath
as to tax matters and consequences
(including consent of such firm).
(14)(a) Consent of Ernst & Young LLP.
(14)(b) Consent of Drinker Biddle & Reath.
(17)(a) Declaration of the Registrant pursuant
to Rule 24f-2 under the Investment
Company Act of 1940.
(17)(b) Forms of Proxy.
(17)(c) Prospectus for Institutional
Shares and Service Shares of
Registrant's Cash Management,
Treasury Prime Cash Management
and U.S. Government Securities
Cash Management Funds dated May
__, 1996.
(17)(d) Statement of Additional Information
for the Registrant's Institutional
Shares and Service Shares of the Cash
Management, Treasury Prime Cash
Management and U.S. Government
Securities Cash Management Funds
dated May __, 1996.
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<PAGE>
Exhibit No. Description Page No.
- ----------- ----------- --------
(17)(e) Prospectus for Institutional
Shares and Service Shares of
Prairie Institutional Funds
Cash Management, Treasury Prime
Cash Management and U.S.
Government Securities Cash
Management Funds dated March
18, 1996.
(17)(f) Statement of Additional
Information for Institutional
Shares and Service Shares of
Prairie Institutional Funds
Cash Management, Treasury Prime
Cash Management and U.S.
Government Securities Cash
Management Funds dated March
18, 1996.
(17)(g) Annual Report to Shareholders
for the Prairie Institutional
Funds Cash Management, Treasury
Prime Cash Management and U.S.
Government Securities Cash
Management Funds for the fiscal
period ended December 31, 1995.
C-15
EXHIBIT 12
April 9, 1996
The Woodward Funds
900 Tower Drive
Troy, Michigan 87007-7058
Prairie Institutional Funds
Three First National Plaza
Chicago, Illinois 60670
Re: Agreement and Plan of Reorganization by and
between The Woodward Funds and Prairie
Institutional Funds
-------------------------------------------
Dear Sirs and Mesdames:
We have been asked to give our opinion, in accordance with the
above Agreement and Plan of Reorganization (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 newly-formed
Cash Management Fund, Treasury Prime Cash Management Fund, and U.S. Government
Securities Cash Management Fund (individually, an "Acquiring Fund" and
collectively, the "Acquiring Funds"). Prairie Institutional Funds ("Prairie")
is a Massachusetts business trust consisting of multiple investment
portfolios, including the Cash Management Fund, Treasury Prime Cash Management
Fund, and U.S. Government Securities Cash Management Fund (individually, an
"Acquired Fund" and collectively, the "Acquired Funds"). 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 each Acquired Fund will transfer all of
its assets and liabilities to the corresponding Acquiring Fund in exchange for
shares of the Acquiring Fund. Prairie will then distribute the shares of each
Acquiring Fund to the shareholders of the corresponding Acquired Fund in
cancellation of all outstanding shares of the Acquired
<PAGE>
Fund, and the existence of Prairie will be terminated. All of the above steps
constitute the "Reorganization." After the Reorganization, each Acquiring Fund
will continue the investment operations of the corresponding 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, each of the Acquired Funds 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 its most
recently ended fiscal year and each of the Acquired Funds and each of the
Acquiring Funds will so qualify for its current fiscal year.
Second, each Acquired Fund will tender for acquisition by the
corresponding Acquiring Fund assets consisting of at least 90% of the fair
market value of the net assets of the Acquired Fund 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 such 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 such 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, each Acquired Fund will distribute to its shareholders
in complete liquidation of the Acquired Fund the corresponding 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, each Acquired Fund will
continue its historic business within the meaning of Treasury Regulations
section 1.368-1(d) and will not dispose of
2
<PAGE>
more than fifty percent (50%) of the fair market value of its assets for the
purpose of satisfying investment objectives of the corresponding Acquiring
Fund, if any, that differ from the existing investment objectives of the
Acquired Fund.
Fifth, following the Reorganization, each Acquiring Fund will
continue the historic business of the corresponding Acquired Fund or will use
a significant portion of the Acquired Fund's historic business assets in a
business.
Sixth, at the time of the Reorganization, the adjusted income
tax basis and the fair market value of the assets to be transferred by each
Acquired Fund to the corresponding Acquiring Fund will each equal or exceed
the sum of the liabilities to be assumed by such Acquiring Fund or to which
such transferred assets are subject.
Seventh, at the time of the Reorganization, there will be no
plan or intention by the shareholders of any 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 corresponding 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 time of the Reorganization, no Acquiring Fund
will have any plan or intention to reacquire any of its shares issued in the
Reorganization, except in the ordinary course of business.
Ninth, at the time of the Reorganization, no Acquiring Fund
will have any plan or intention to sell or otherwise to dispose of any of the
assets of the corresponding Acquired Fund
3
<PAGE>
acquired in the Reorganization, except for dispositions made in the ordinary
course of business.
Tenth, there is and will be no intercorporate indebtedness
between any Acquiring Fund and its corresponding Acquired Fund that was
issued, acquired or will be settled at a discount.
Eleventh, no Acquiring Fund owns or will own, directly or
indirectly, nor has it owned during the past five years, directly or
indirectly, any stock of the corresponding Acquired Fund.
Twelfth, no Acquired Fund is or will 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 each Acquired Fund that will be
assumed by the corresponding 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 each 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 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:
4
<PAGE>
(i) the transfer by each Acquired Fund of all of its assets and
liabilities to the corresponding Acquiring Fund in exchange for shares of the
corresponding 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)(D) or
368(a)(1)(F) of the Code and each of the Acquiring Funds and the Acquired
Funds 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 any 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 any 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 any Acquired Fund on the
distribution to them by the Acquired Fund of shares of the corresponding
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
an 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 each Acquiring Fund in the Reorganization will be
the same as the basis of such assets in the hands of the corresponding
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 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 each Acquiring Fund with respect to the assets acquired in
the Reorganization will include the period for
5
<PAGE>
which such assets were held by the corresponding Acquired Fund; and
(ix) in accordance with section 381(a) of the Code, each
Acquiring Fund will succeed to the tax attributes of the corresponding
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,
/s/ Drinker Biddle & Reath
DRINKER BIDDLE & REATH
SDDH:EMM:FRB
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 Institutional Funds dated February 22, 1996 in this Registration
Statement (Form N-14) of The Woodward Funds.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
April 4, 1996
EXHIBIT 14(b)
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
April 9, 1996
EXHIBIT 17(a)
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
First of Michigan Corporation
100 Renaissance Center
26th Floor
Detroit, Michigan 48243
George G. Martin, Esq.
Miller, Canfield, Paddock and Stone
2500 Comerica Building
Detroit, Michigan 48226
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
<PAGE>
<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>
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 5, 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. 28
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 28
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)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[X] 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 with
respect to such shares for the fiscal year ended December 31, 1995 was filed
on February 27, 1996.
This Post-Effective Amendment is being filed to add the Woodward Cash
Management Fund, U.S. Government Securities Cash Management Fund and Treasury
Prime Cash Management Fund, to the Trust's Registration Statement. The
Prospectuses and Statements of Additional Information for the Woodward Money
Market, Government, Treasury Money Market, Tax-Exempt Money Market, Michigan
Tax-Exempt Money Market, Growth/Value, Opportunity, Intrinsic Value, Capital
Growth, International Equity, Equity Index, Intermediate Bond, Bond, Short
Bond, Municipal Bond, Michigan Municipal Bond and Balanced Funds are not being
filed in this Post- Effective Amendment.
EXHIBIT 17(b)
[PRELIMINARY COPY]
PROXY
PRAIRIE INSTITUTIONAL FUNDS
CASH MANAGEMENT FUND
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of PRAIRIE
INSTITUTIONAL 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 June 25, 1996 at ___ a.m./p.m. (Eastern time).
The undersigned hereby appoints _____________ and ____________, 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 Cash
Management 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 Cash Management Fund (the
"Reorganizing Portfolio") to
Woodward's Cash Management Fund
(the "Woodward Fund") in exchange
for Institutional Shares and Service
Shares, as applicable, of the
Woodward Fund, the distribution of
the Woodward Fund's shares so
received to shareholders of the
Reorganizing Portfolio 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-
<PAGE>
[PRELIMINARY COPY]
PROXY
PRAIRIE INSTITUTIONAL FUNDS
TREASURY PRIME CASH MANAGEMENT FUND
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of Prairie
Institutional 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 June 25, 1996 at ___________ a.m./p.m. (Eastern time).
The undersigned hereby appoints ____________ and ____________ 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
Treasury Prime Cash Management 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 Treasury Prime Cash
Management Fund (the "Reorganizing
Portfolio") to Woodward's Treasury
Prime Cash Management Fund (the
"Woodward Fund") in exchange for
Institutional Shares and Service
Shares, as applicable, of the
Woodward Fund, the distribution
of the Woodward Fund's shares
so received to shareholders of the
Reorganizing Portfolio 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-
<PAGE>
[PRELIMINARY COPY]
PROXY
PRAIRIE INSTITUTIONAL FUNDS
U.S. GOVERNMENT SECURITIES CASH MANAGEMENT FUND
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of PRAIRIE
INSTITUTIONAL FUNDS (the "Company") for use at a Meeting of Shareholders to be
held at the offices of BISYS Fund Services, Inc., 3435 Stelzr Road, Columbus,
Ohio at on June 25, 1996 ___ a.m./p.m. (Eastern time).
The undersigned hereby appoints _______________ and _________________,
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 U.S. Government Securities Cash Management 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 U.S. Government
Securities Cash Management Fund
(the "Reorganizing Portfolio") to
Woodward's U.S. Government
Securities Cash Management Fund
(the "Woodward Fund") in exchange
for Institutional Shares and
Service Shares, as applicable,
of the Woodward Fund, the
distribution of the Woodward
Fund's shares so received to
shareholders of the Reorganizing
Portfolio 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(c)
THE WOODWARD FUNDS
Cash Management Fund
Treasury Prime Cash Management Fund
U.S. Government Securities Cash Management Fund
P R 0 S P E C T U S
___________, 1996
SHARES OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED OR OTHERWISE SUPPORTED BY, FIRST CHICAGO NBD
CORPORATION 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
POSSIBLE LOSS OF PRINCIPAL. THERE CAN BE NO ASSURANCE THAT EACH FUND WILL BE
ABLE TO MAINTAIN A CONSTANT NET ASSET VALUE OF $1.00 PER SHARE.
- ------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------
First Chicago Investment Management Company and NBD Bank
Co-Investment Advisers and Co-Administrators
BISYS Fund Services
Distributor and Co-Administrator
Prospectus begins on page 1
<PAGE>
THE WOODWARD FUNDS
PROSPECTUS -- _________, 1996
The Woodward Funds (the "Trust") is an open-end, management investment
company, known as a series fund. By this Prospectus, the Trust is offering
Class I shares ("Institutional Shares") and Class S Shares ("Service Shares")
of three separate diversified, money market series (each, a "Fund"): Cash
Management Fund, Treasury Prime Cash Management Fund and U.S. Government
Securities Cash Management Fund (collectively, the "Funds"). Each Fund's goal
is to provide investors with as high a level of current income as is
consistent with the preservation of capital and the maintenance of liquidity.
Each Fund is designed for institutional investors, including banks,
acting for themselves or in a fiduciary, advisory, agency, custodial or
similar capacity, public agencies and municipalities. Fund shares may not be
purchased directly by individuals, although institutions may purchase shares
for accounts maintained by individuals.
Each Fund's shares are sold without a sales charge. Investors can
invest or reinvest in or redeem shares at any time without charge or penalty
imposed by the Fund.
Institutional Shares and Service Shares are identical, except as to
the services offered to and expenses borne by each Class. Service Shares bear
certain costs pursuant to a Distribution and Services Plan adopted by the
Board of Trustees.
First Chicago Investment Management Company ("FCIMCO") and NBD Bank
("NBD") serve as each Fund's co-investment adviser (collectively, the
"Co-Investment Advisers") and FCIMCO, NBD and BISYS Fund Services ("BISYS")
serve as co-administrators (collectively, the "Co-Administrators").
BISYS serves as each Fund's distributor.
--------------------
This Prospectus sets forth concisely information about the Trust and
Funds that an investor should know before investing. It should be read and
retained for future reference.
The Statement of Additional Information, dated ________, 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 Trust at
3435 Stelzer Road, Columbus, Ohio 43219-3035, or call 1-800-370-9446.
-1-
<PAGE>
TABLE OF CONTENTS
ANNUAL FUND OPERATING EXPENSES.......................................... 3
YIELD INFORMATION....................................................... 4
DESCRIPTION OF THE FUNDS................................................ 4
Risk Factors..................................................... 6
MANAGEMENT OF THE TRUST................................................. 7
HOW TO BUY FUND SHARES.................................................. 9
HOW TO REDEEM FUND SHARES............................................... 10
DISTRIBUTION AND SERVICES PLAN.......................................... 11
DIVIDENDS, DISTRIBUTIONS AND TAXES...................................... 12
GENERAL INFORMATION..................................................... 13
APPENDIX................................................................ A-1
-2-
<PAGE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
The following table is provided to assist investors in understanding
the various estimated costs and expenses that an investor will indirectly incur
as a beneficial owner of shares in the Funds.
<TABLE>
<CAPTION>
U.S. Government
Cash Management Treasury Prime Cash Securities Cash
Fund(1) Management Fund(1) Management Fund(1)
---------------------- ----------------------- ----------------------
Institutional Service Institutional Service Institutional Service
Shares Shares Shares Shares Shares Shares
------------- ------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Management Fees (after fee waivers)...... .13% .13% .12% .12% .14% .14%
12b-1 Fees (distribution and servicing).. None .25% None .25% None .25%
Other Fund Operating Expenses (after
fee waivers and reimbursements)........ .22% .22% .23% .23% .21% .21%
Total Fund Operating Expenses
(after fee waivers and expense
reimbursements)........................ .35% .60% .35% .60% .35% .60%
<FN>
(1) As of the date of this Prospectus, the Fund had not commenced
investment operations and therefore the expenses for the Funds
are estimates only.
</TABLE>
Example:
An investor would pay the following estimated expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time
period:
<TABLE>
<CAPTION>
Institutional Service Institutional Service Institutional Service
Shares Shares Shares Shares Shares Shares
------------- ------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
1 Year*............................... $ 4 $ 6 $ 4 $ 6 $ 4 $ 6
3 Years*.............................. $11 $19 $11 $19 $11 $19
<FN>
* You would pay the same expenses set forth above on the same investment,
assuming no redemptions at the end of the period.
</TABLE>
- ------------------------------------------------------------------------------
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 the example assumes a 5% annual return, each
Fund's actual performance will vary and may result in an actual return greater
or less than 5%.
- ------------------------------------------------------------------------------
<PAGE>
The purpose of the foregoing table is to assist investors in understanding the
various estimated costs and expenses borne by the Funds, and therefore
indirectly by investors, the payment of which will reduce investors' return on
an annual basis. The Co-Investment Advisers have undertaken, as to each Fund,
until such time as they give investors at least 90 days' notice to the
contrary, that if, in any fiscal year, aggregate expenses exclusive of taxes,
brokerage, interest on borrowings and (with the prior consent of the
necessary state securities commissions) extraordinary expenses, but
including the investment advisory and administration fees, exceed .35%
and .60% of the value of the average net assets of the Institutional Shares
and the Service Shares, respectively, for the fiscal year, the Trust may
deduct from the payment to be made to the Co-Investment Advisers under
the Investment Advisory or Administration Agreements, or the Co-Investment
Advisers will bear, such excess expense. The expenses noted above,
without fee waivers or expense reimbursement arrangements, would have
been: Management Fees, .20% for each Fund, Other Fund Operating Expenses,
.23% for the Institutional Shares and .24% for the Service Shares of the
Cash Management Fund, 1.03% for the Institutional Shares and .29%
for the Service Shares of the Treasury Prime Cash Management Fund,
and .22% for the Institutional Shares and .24% for the Service
Shares of the U.S. Government Securities Cash Management Fund;
and Total Fund Operating Expenses, .43% for the Institutional Shares
and .69% for the Service Shares of the U.S. Government Securities Cash
Management Fund, and Total Fund Operating Expenses, .43% for the
Institutional Shares and .69% for the Service Shares of the Cash
Management Fund, 1.23% for the Institutional Shares and .74% for
the Service Shares of the Treasury Prime Cash Management Fund, and
.42% for the Institutional Shares and .69% for the Service Shares
of the U.S. Government Securities Cash Management Fund. See
"Management of the Trust," "How to Buy Fund Shares" and "Distribution
and Services Plan."
3
<PAGE>
YIELD INFORMATION
From time to time, each Fund will 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 a 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. Each Fund's yield and
effective yield may reflect absorbed expenses pursuant to any undertaking that
may be in effect. See "Management of the Trust." Both yield figures also take
into account any applicable distribution and service fees. As a result, at
any given time, the performance of the Service Class should be expected to be
lower than that of the Institutional Class. See "Distribution and Services
Plan."
Yield information is useful in reviewing a Fund's performance, but
because yields will fluctuate, under certain conditions such information may
not provide a basis for comparison with domestic bank deposits, other
investments which pay a fixed yield for a stated period of time, or other
investment companies which may use a different method of computing yield.
Comparative performance information may be used from time to time in
advertising or marketing Fund shares, including data from Lipper Analytical
Services, Inc., Bank Rate Monitor(TM), N. Palm Beach, Fla. 33408,
IBC/Donoghue's Money Fund Report(R) and other industry publications.
DESCRIPTION OF THE FUNDS
General
The Trust is a "series fund," which is a mutual fund divided into
separate portfolios. 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 Fund.
<PAGE>
By this Prospectus, two classes of shares of each Fund are being
offered -- Institutional Shares and Service Shares (each such class being
referred to as a "Class"). The Classes are identical, except that Service
Shares are subject to an annual distribution and service fee at the
rate of up to .25% of the value of the average daily net assets of the
Service Class. The fee is payable to the Distributor for advertising,
marketing and distributing Service Shares and for ongoing personal services
to the holders of Service Shares relating to shareholder accounts and services
related to the maintenance of such shareholder accounts pursuant to a
Distribution and Services Plan adopted in accordance with Rule 12b-1 under
the 1940 Act. The Distributor may make payments to certain financial
institutions, securities dealers and other industry professionals
(collectively, "Service Agents") in respect of these services. See
"Distribution and Services Plan." The distribution and service fee paid by
the Service Class will cause such Class to have a higher expense ratio and to
pay lower dividends than the Institutional Class.
WHEN USED IN THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL
INFORMATION, THE TERMS "INVESTOR" AND "SHAREHOLDER" REFER TO THE INSTITUTION
PURCHASING FUND SHARES AND DO NOT REFER TO ANY INDIVIDUAL OR ENTITY FOR WHOSE
ACCOUNT THE INSTITUTION MAY PURCHASE FUND SHARES.
Investment Objective
Each Fund's goal is to provide investors with as high a level of
current income as is consistent with the preservation of capital and the
maintenance of liquidity. 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 shares. There can be no assurance that the
Fund's investment objective will be achieved. Securities in which the Funds
invest may not earn as high a level of current income as long-term or lower
quality securities which generally have less liquidity, greater market risk
and more fluctuation of market value.
4
<PAGE>
Management Policies
Each Fund seeks to maintain a net asset value of $1.00 per share for
purchases and redemptions. To do so, the Trust uses the amortized cost method
of valuing each Fund's securities pursuant to Rule 2a-7 under the 1940 Act,
certain requirements of which are summarized below.
In accordance with Rule 2a-7, each Fund is required to maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 397 days or less and invest only
in U.S. dollar denominated securities determined in accordance with procedures
established by the Board of Trustees to present minimal credit risks and, in
the case of the Cash Management 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 of Trustees. The nationally recognized statistical
rating organizations currently rating instruments of the type the Cash
Management Fund may purchase are Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Ratings Group, Division of McGraw Hill ("S&P"), Duff &
Phelps Credit Rating Co., Fitch Investors Service, L.P. ("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 Fund will be
able to maintain a stable net asset value of $1.00 per share.
o Cash Management Fund invests 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 eligible short-term obligations, including those with floating or
variable rates of interest. See "Appendix -- Portfolio Securities." In
addition, the Fund is permitted to lend portfolio securities to the extent
described under "Appendix -- Investment Practices." During normal market
conditions, at least 25% of the Fund's total assets will be invested in bank
obligations.
o Treasury Prime Cash Management Fund invests only in securities
issued and guaranteed by the U.S. Government. These securities include U.S.
Treasury securities, which differ in their interest rates, maturities
and times of issuance. See "Appendix -- Portfolio Securities." The
Fund does not invest in repurchase agreements, securities issued by
agencies or instrumentalities of the Federal government or any other
type of money market instrument or security.
o U.S. Government Securities Cash Management Fund invests only in
short-term securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, may enter into repurchase agreements and
may invest in the securities of other mutual funds that invest in the
particular instruments in which the Fund itself may invest, subject
to the requirements of applicable securities laws. See "Appendix --
Portfolio Securities." The Fund also may lend securities from its
portfolio as described under "Appendix -- Investment Practices."
5
<PAGE>
Certain Fundamental Policies
Each fund may not: (i) borrow money, issue senior
securities, or mortgage, pledge or hypothecate its assets except
to the extent permitted under the 1940 Act; (ii) act as an
underwriter of securities of other issuers, except to the
extent the Fund may be deemed an underwriter under the
Securities Act of 1933, as amended, by virtue of disposing of
portfolio securities; (iii) purchase or sell (a) real estate
or (b) commodities, except, in the case of clauses (a) and
(b), to the extent permitted under the 1940 Act; (iv) make
loans to others (other than through investment in debt
obligations or other instruments referred to in the Fund's
Prospectus), except that the Fund may lend its portfolio
securities in the amount not to exceed 33 1/3% of the value
of its total assets; (v) purchase any securities which would
cause 25% or more of the value of a Fund'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 (1) instruments 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, (2) instruments issued by domestic
branches of U.S. banks and (3) repurchase agreements secured
by instruments described in clauses (1) and (2), (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 and (d) personal credit and business credit
businesses will be considered separate industries, and
further provided that the Cash Management Fund will invest at
least 25% of its total assets in obligations of issuers in
the banking industry or instruments secured by such obliga-
tions except during temporary defensive periods; and (vi)
purchase securities (except U.S. Government securities and
related repurchase agreements) if more than 5% of its 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
without regard to this 5% limitation. See "Investment Objective
and Management Policies -- Investment Restrictions" in the Statement
of Additional Information.
Additional Non-Fundamental Policy
Each Fund may invest up to 10% of the value of its net assets in
illiquid securities. See "Appendix -- Investment Practices -- Illiquid
Securities" and "Investment Objective and Management Policies -- Investment
Restrictions" in the Statement of Additional Information.
Risk Factors
See also the Appendix beginning on page A-1.
Foreign Securities -- (Cash Management Fund) Since the Cash Management Fund's
portfolio may contain securities issued by foreign branches of domestic and
foreign banks, domestic and foreign branches of foreign banks and thrift
institutions, and commercial paper issued by foreign issuers, the Fund may be
subject to additional investment risks with respect to such securities that
are different in some respects from those incurred by a fund which invests
only in debt obligations of U.S. domestic issuers, although such obligations
may be higher yielding when compared to the securities 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.
6<PAGE>
Other Investment Considerations -- Each Fund will attempt to increase yields
by trading to take advantage of short-term market variations. This policy is
expected to result in high portfolio turnover but should not adversely affect
the Funds since each Fund usually will not pay brokerage commissions on
purchases of short-term debt obligations, including U.S. Government
securities. The value of the securities held by each Fund will vary inversely
to changes in prevailing interest rates. Thus, if interest rates have
increased from the time a security was purchased, such security, if sold,
might be sold at a price less than its cost. Similarly, if interest rates have
declined from the time a security was purchased, such security, if sold, might
be sold at a price greater than its purchase cost. In either instance, if the
security is held to maturity, no gain or loss will be realized.
Each Fund may purchase securities on a "when-issued" basis. These
transactions, which involve a commitment by a Fund to purchase or sell
particular securities with payment and delivery taking place at a future date
(perhaps one or two months later), permit the Fund 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 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. The Funds do not earn
income with respect to these transactions until the subject securities are
delivered to the Funds. The Funds do not intend to engage in when-issued
purchases for speculative purposes but only in furtherance of their
investment objectives.
Investment decisions for each Fund are made independently from those
of other investment companies or investment advisory accounts that may be
advised by the Co-Investment Advisers. However, if such other investment
companies or managed accounts are prepared to invest in, or desire to dispose
of, securities of the type in which a Fund may invest at the same time as such
Fund, available investments or opportunities for sales will be allocated
equitably to each of them. In some cases, this procedure may adversely affect
the size of the position obtained for or disposed of by the Fund or the price
paid or received by the Fund.
MANAGEMENT OF THE TRUST
Co-Investment Advisers and Co-Administrators
First Chicago Investment Management Company, located at Three First
National Plaza, Chicago, Illinois 60670, and NBD Bank, located at 611 Woodward
Avenue, Detroit, Michigan 48226, are each Fund's Co-Investment Advisers.
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. NBD is a wholly-owned subsidiary of First Chicago
NBD Corporation. 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.
FCIMCO and NBD serve as Co-Investment Advisers for the Trust pursuant
to an Investment Advisory Agreement dated as of April 12, 1996. Under the
Investment Advisory Agreement, FCIMCO and NBD provide the day-to-day
management of each Fund's investments, subject to the overall authority
of the Trust's Board of Trustees and in conformity with Massachusetts law
and the stated policies of the Trust. FCIMCO and NBD are responsible for
making investment decisions for the Trust, 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. Under the
Investment Advisory Agreement, FCIMCO and NBD are entitled jointly to a
monthly advisory fee at the annual rate of .20% of each Fund's average
daily net assets.
FCIMCO, NBD and BISYS serve as the Trust's Co-Administrators pursuant
to an Administration Agreement with the Trust. Under the Administration
Agreement, FCIMCO, NBD and BISYS generally assist in all aspects of the
Trust's operations, other than providing investment advice, subject to the
overall authority of the Trust's Board in accordance with Massachusetts law.
Under the terms of the Administration Agreement, FCIMCO, NBD and BISYS are
entitled jointly to a monthly administration fee at the annual rate of
.15% of each Fund's average daily net assets.
Distributor
BISYS Fund Services (the "Distributor"), located at 3435 Stelzer
Road, Columbus, Ohio 43219-3035 serves as the Trust's principal underwriter
and distributor of the Funds' shares.
7<PAGE>
Transfer and Dividend Disbursing Agent and Custodian
NBD is the Trust's Transfer and Dividend Disbursing Agent
(the "Transfer Agent"). NBD, 611 Woodward Avenue, Detroit, Michigan 48226,
is the Trust's custodian ("Custodian"). NBD is a wholly-owned subsidiary of
First Chicago NBD Corporation, a registered bank holding company.
Expenses
All expenses incurred in the operation of the Trust are borne by the
Trust, except to the extent specifically assumed by the Co-Investment Advisers
and Co-Administrators. The expenses borne by the Trust include: organizational
costs, taxes, interest, brokerage fees and commissions, if any, fees of
Trustees who are not officers, directors, employees or holders of 5% or more
of the outstanding voting securities of any investment adviser or
administrator of the Funds, 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 Trust'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, Service Shares are subject to an annual
service and distribution fee pursuant to a plan adopted by the Board of
Trustees. See "Distribution and Services Plan." 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 on the
basis determined by the Board of Trustees, including, but not limited to,
proportionately in relation to the net assets of each Fund.
The Co-Investment Advisers have undertaken, as to each Fund, until
such time as it gives investors at least 90 days' notice to the contrary, that
if, in any fiscal year the aggregate expenses of the 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 investment advisory and administration fees exceed .35% and .60% of the
value of the average net assets of the Institutional Class and the Service
Class, respectively, for the fiscal year, the Trust may deduct from the
payment to be made to the Co-Investment Advisers under the Investment Advisory
Agreement, or the Co-Investment Advisers will bear, such excess expense. The
Co-Administrators may also waive fees under the Administration Agreement.
8
<PAGE>
HOW TO BUY FUND SHARES
Each Fund is designed for institutional investors, including banks
(such as FNBC and NBD), acting for themselves or in a fiduciary, advisory,
agency, custodial or similar capacity, public agencies and municipalities.
Fund shares may not be purchased directly by individuals, although
institutions may purchase shares for accounts maintained by individuals.
Generally, each investor will be required to open a single master account with
the Fund for all purposes. In certain cases, the Trust may request investors
to maintain separate master accounts for shares held by the investor (1) for
its own account, for the account of other institutions and for accounts for
which the institution acts as a fiduciary, and (ii) for accounts for which the
investor acts in some other capacity. An institution may arrange with the
Transfer Agent for sub-accounting services and will be charged directly for
the cost of such services. Certain accounts may be eligible for an automatic
investment privilege, commonly called a "sweep," under which amounts in excess
of a certain minimum held in those accounts will be invested automatically in
shares at pre-determined intervals. Each investor desiring to use this
privilege should consult its bank for details.
The minimum initial investment is $1,000,000 or any lesser amount if,
in the Distributor's opinion, the investor has adequate intent and
availability of funds to reach a future level of investment of $1,000,000.
There is no minimum for subsequent purchases. The initial investment must be
accompanied by the Account Application. The Trust reserves the right to offer
Fund shares without regard to the minimum purchase requirements to qualified
or non-qualified employee benefit plans. The Trust does not impose any sales
charges in connection with purchases of Fund shares, although Service Agents
and other institutions may charge their clients fees in connection with
purchases for the accounts of their clients. These fees would be in addition
to any amounts which might be received under the Distribution and Services
Plan. Service Agents may receive different levels of compensation for
selling different classes of shares. The Fund does not issue share
certificates. The Trust reserves the right to reject any purchase order.
Fund shares may be purchased by wire, by telephone or through
compatible computer facilities. All payments should be made in U.S. dollars
and, to avoid fees and delays, should be drawn only on U.S. banks. Investors
may telephone orders for purchases of Fund shares by calling 1-800-370-9446.
For instructions concerning purchases and to determine whether their computer
facilities are compatible with the Trust's, investors should call
1-800-370-9446.
9
<PAGE>
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form and Federal Funds (monies
of member banks in 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, its 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.
Net asset value per share is determined as of 12:00 noon, Central time
for the Treasury Prime Cash Management Fund, and 2:00 p.m., Central time, for
the Cash Management Fund and U.S. Government Securities Cash Management Fund,
on each Fund business day (which, as used herein, shall include each day that
the New York Stock Exchange is open for business, except Martin Luther King,
Jr. Day, Columbus Day and Veterans Day). Net asset value per share of each
Class is computed by dividing the value of the Fund's net assets represented
by such Class (i.e., the value of its assets less liabilities) by the total
number of shares of such Class outstanding. See "Determination of Net Asset
Value" in the Statement of Additional Information.
Investors whose payments are received in or converted into Federal
Funds by 12:00 noon, Central time, for the Treasury Prime Cash Management Fund
or 2:00 p.m., Central time, for the Cash Management Fund and U.S. Government
Securities Cash Management Fund, by the Transfer Agent will receive the
dividend declared that day. Investors whose payments are received in or
converted into Federal Funds by the Transfer Agent after 12:00 noon, Central
time, for the Treasury Prime Cash Management Fund or 2:00 p.m., Central time,
for the Cash Management Fund and U.S. Government Securities Cash Management
Fund, will begin to accrue dividends on the following 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 Trust could subject an investor to a $50 penalty imposed
by the Internal Revenue Service (the "IRS").
HOW TO REDEEM FUND SHARES
An investor may redeem all or any portion of the shares in the
investor's account on any Fund business day at the net asset value next
determined after a redemption request in proper form is received
by the Transfer Agent. Therefore, redemptions will be effected on
the same day the redemption order is received only if such order is received
prior to 12:00 noon, Central time, for the Treasury Prime Cash Management Fund
or 2:00 p.m., Central time, for the Cash Management Fund and U.S. Government
Securities Cash Management Fund, on any Fund business day. Shares that are
redeemed earn dividends up to and including the day prior to the day the
redemption is effected. The proceeds of a redemption will be paid in Federal
Funds ordinarily on the Fund business day the redemption is effected, but in
any event within seven days. Payment for redemption requests received before
12:00 noon, Central time, for the Treasury Prime Cash Management Fund or 2:00
p.m., Central time, for the Cash Management Fund and U.S. Government
Securities Cash Management Fund, ordinarily is made in Federal Funds wired to
the redeeming shareholder on the same Fund business day. Payment for redeemed
shares for which a redemption order is received after such time on a Fund
business day is made in Federal Funds wired to the redeeming shareholder on
the next Fund business day following redemption. To allow the Co-Investment
Advisers to manage the Funds' portfolios more effectively, investors are urged
to make redemption requests as early in the day as possible. In making
redemption requests, the names of the registered shareholders and their
account numbers must be supplied. Although each Fund generally retains the
right to pay the redemption price of its shares in kind with securities
(instead of cash), the Trust has filed an election under Rule 18f-1 under the
1940 Act committing to pay in cash all redemptions by a shareholder of record
up to the amounts specified in such rule (in most cases approximately
$250,000).
10<PAGE>
A wire redemption may be requested by telephone or wire to
NBD, 611 Woodward Avenue, Detroit, Michigan 48226. For telephone redemptions,
please call 1-800-370-9446.
An investor may redeem shares by telephone if the investor has checked
the appropriate box on the Account Application. By selecting a telephone
redemption privilege, an investor authorizes the Transfer Agent to act on
telephone instructions from any person representing himself or herself to be
an authorized representative of the investor and reasonably believed by the
Transfer Agent to be genuine. The Trust will require the Transfer Agent to
employ reasonable procedures, such as requiring a form of identification, to
confirm that instructions are genuine and, if it does not follow such
procedures, the Trust or the Transfer Agent may be liable for any losses due
to unauthorized or fraudulent instructions. Neither the Trust nor the Transfer
Agent will be liable for following telephone instructions reasonably believed
to be genuine.
The Trust makes available to institutions the ability to
redeem shares through compatible computer facilities. Investors
desiring to redeem shares in this manner should call 1-800-370-9446 to
determine whether their computer facilities are compatible and to receive
instructions for redeeming shares in this manner.
The right of any investor to receive payments with respect to any
redemption may be suspended or the payment of the redemption proceeds
postponed during any period in which the New York Stock Exchange is closed
(other than weekends or holidays) or trading on such Exchange is restricted
or, to the extent otherwise permitted by the 1940 Act, if an emergency exists.
DISTRIBUTION AND SERVICES PLAN
(Service Shares Only)
Service Shares are subject to a Distribution and Services
Plan adopted by the Board of Trustees pursuant to Rule 12b-1 under
the 1940 Act. Under the Distribution and Services Plan, each Fund pays
the Distributor for advertising, marketing and distributing such
shares and/or the provision of shareholder and administrative services
for the beneficial owners of such shares a fee at the annual rate of
up to .25% of the average daily net asset value of the Service Class.
The support services provided may include personal services relating to
shareholder accounts, providing reports and other information, and
services related to the maintenance of such shareholder accounts. Under
the Distribution and Services Plan, BISYS may make payments to Service
Agents in respect of these services. FCIMCO, FNBC, NBD and their affiliates
may act as Service Agents and receive fees under the Distribution and Services
Plan. BISYS determines the amounts to be paid to Service Agents. The
distribution services provided are activities primarily intended to result
in the sale of Service Shares.
11
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund ordinarily declares dividends from net investment income on
each Fund business day. Fund shares begin earning income dividends on the day
the purchase order is effective. Dividends usually are paid on the last
calendar day of each month, and are automatically reinvested in additional
shares of the Fund from which they were paid at net asset value or, at the
investor's option, paid in cash. Each Fund's earnings for Saturdays, Sundays
and holidays are declared as dividends on the preceding business day. If an
investor redeems all shares in its account at any time during the month, all
proceeds and dividends to which the investor is entitled will be paid.
Distributions from net realized securities gains, if any, generally are
declared and paid once a year, but a Fund may make distributions on a
more frequent basis to comply with the distribution requirements of the
Internal Revenue Code of 1986, as amended (the "Code"), in all events
in a manner consistent with the provisions of the 1940 Act. No Fund
will make distributions from net realized securities gains unless
capital loss carryovers, if any, have been utilized or have expired.
Investors may choose whether to receive distributions in cash or to reinvest
in additional shares of the Fund from which they were paid at net asset
value. All expenses are accrued daily and deducted before declaration of
dividends to investors. Dividends paid by each Class will be calculated at the
same time and in the same manner and will be of the same amount, except that
the expenses attributable solely to the Institutional Class or the Service
Class will be borne exclusively by such Class. Service Shares will receive
lower per share dividends than Institutional Shares because of the higher
expenses borne by the Service Class. See "Annual Fund Operating Expenses."
Dividends paid by the Funds derived from net investment income,
together with distributions from any net realized short-term securities gains
and all or a portion of any gain realized from the sale or other disposition
of certain market discount bonds, 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 as long-term capital gains for Federal income tax purposes if the
beneficial holder of Fund shares is a citizen or resident of the United
States, regardless of how long investors have held shares and whether such
distributions are received in cash or reinvested in additional shares.
Dividends and distributions attributable to interest from direct
obligations of the United States and paid by the Treasury Prime Cash
Management Fund generally are not subject to state personal income tax. The
Trust intends to provide shareholders of the Treasury Prime Cash Management
Fund with a statement which sets forth the percentage of dividends and
distributions paid by the Fund that is attributable to interest income from
direct obligations of the United States.
Dividends paid by a Fund derived from net investment income, together
with distributions from net realized short-term securities gains and all or a
portion of any gain realized from the sale or other disposition of certain
market discount bonds, paid by such Fund to a foreign investor who is the
beneficial owner of such Fund's shares generally are subject to U.S.
nonresident withholding taxes at the rate of 30%, unless the foreign investor
claims the benefit of a lower rate specified in a tax treaty. Distributions
from net realized long-term securities gains paid by the Fund to such foreign
investor generally will not be subject to U.S. nonresident withholding tax.
However, such distributions may be subject to backup withholding, as described
below, unless the foreign investor certifies his non-U.S. resident status.
12
<PAGE>
Federal regulations generally require the Trust to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends and
distributions from net realized securities gains 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 Trust to institute
backup withholding if the IRS determines a shareholder's TIN is incorrect or
if a shareholder has failed to properly report taxable dividend and interest
income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the record
owner of the account and may be used to offset the record owner's tax
liability on his/her Federal income tax return.
Notice as to the tax status of dividends and distributions will he
mailed to investors annually. Each investor also will receive periodic
summaries of its account which will include information as to dividends and
distributions from securities gains, if any, paid during the year. No dividend
will qualify for the dividends received deduction allowable to certain U.S.
corporations.
Each Fund intends to qualify as a "regulated investment company" under
the Code. Qualification as a regulated investment company generally 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. Each
Fund is subject to a non-deductible 4% excise tax, measured with respect to
certain undistributed amounts of taxable income and capital gains, if any.
Each investor and beneficial shareholder should consult its tax
adviser regarding questions as to Federal, state or local taxes.
GENERAL INFORMATION
The Trust was organized as a business trust on April 21, 1987 under a
Declaration of Trust. As of the date hereof, the Trust is a series fund
having twenty 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 Funds
described herein, the Trust offers the following investment portfolios:
the Woodward Intermediate Bond Fund, Bond Fund, Short Bond Fund,
Municipal Bond Fund, Michigan Municipal Bond Fund, Growth/Value Fund,
Opportunity Fund, Intrinsic Value Fund, Capital Growth Fund, Balanced
Fund, International Equity Fund, Equity Index Fund, Money Market Fund,
Government Fund, Treasury Money Market Fund, Tax-Exempt Money Market Fund and
Michigan Tax-Exempt Money Market Fund.
13
<PAGE>
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 the date of this Prospectus, the Distributor owned all the
outstanding shares of the Cash Management Fund, Treasury Prime Cash Management
Fund and U.S. Government Securities Cash Management Fund. It is contemplated
that the public offering of the shares of each Fund will reduce the
Distributor's holdings to less than 5% of the total shares outstanding of
the Fund.
Because NBD serves the Trust as both Custodian and as a Co-Investment
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.
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 Trust at the address
shown on the front cover or by calling the telephone number shown on the front
cover.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
TRUST'S 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 BY THE TRUST. 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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<PAGE>
APPENDIX
Portfolio Securities
To the extent set forth in this Prospectus and except as noted below,
each Fund may invest in the following securities:
U.S. Treasury Securities -- Each Fund may invest in U.S Treasury
securities which include Treasury Bills, Treasury Notes and Treasury Bonds
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.
U.S. Government Securities -- In addition to U.S. Treasury securities,
each Fund, except the Treasury Prime Cash Management Fund, may invest in
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities, for example, Government National Mortgage
Association pass-through certificates, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal Home Loan
Banks, by the right of the issuer to borrow from the Treasury; others, such as
those issued by the Federal National Mortgage Association, by discretionary
authority of the U.S. Government to purchase certain obligations of the agency
or instrumentality; and others, such as those issued by the Student Loan
Marketing Association, only by the credit of the agency or instrumentality.
These securities bear fixed, floating or variable rates of interest. Interest
may fluctuate based on generally recognized reference rates or the
relationship of rates. While the U.S. Government provides financial support to
such U.S. Government-sponsored agencies or instrumentalities, no assurance can
be given that it will always do so, since it is not so obligated by law. Each
Fund will invest in such securities only when the Trust is satisfied that the
credit risk with respect to the issuer is minimal.
Stripped U.S. Treasury Securities and U.S. Government Securities--The
Treasury Prime Cash Management and U.S. Government Securities Cash Management
Funds may invest in stripped U.S. Treasury Securities and the U.S. Government
Securities Cash Management Fund may invest in stripped U.S. Government
Securities, where the principal and instrument components are traded
independently under the Separate Trading of Registered Interest and Principal
Securities program ("STRIPS"). Under STRIPS, the principal and interest
components are individually numbered and separately issued by the U.S. Treasury
at the request of depository financial institutions, which then trade the
component parts independently. These obligations are usually issued at a
discount to their "face value," and because of the manner in which principal
and interest are returned, may exhibit greater volatility than more
conventional debt securities.
Repurchase Agreements -- Each Fund, except the Treasury Prime Cash
Management Fund, may enter into repurchase agreements, which 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
the 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
A-1
<PAGE>
overnight repurchase agreements with FNBC or an affiliate of FNBC subject to
the terms and conditions of such order.]
Bank Obligations -- The Cash Management Fund will invest in bank
obligations, including 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 and thrift institutions.
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. 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.
Commercial Paper and other Short-Term Obligations -- The
Cash Management Fund may invest in commercial paper, which consists of
short-term, unsecured promissory notes issued to finance short-term credit
needs. The commercial paper purchased by the Fund will consist only of direct
obligations issued by domestic and foreign entities. The other short-term
obligations in which the Fund may invest consist of high quality, U.S. dollar
denominated short-term bonds and notes (including variable amount master
demand notes) issued by domestic and foreign corporations bearing fixed,
floating or variable interest rates.
Floating and Variable Rate Obligations -- The Cash Management
Fund may purchase floating and variable rate demand notes and bonds,
which are obligations ordinarily having stated maturities in excess of 13
months, but which permit the holder to demand payment of principal at any
time, or at specified intervals not exceeding 13 months, in each case upon not
more than 30 days' notice. Variable rate demand notes include master demand
notes which are obligations that permit the Fund to invest fluctuating
amounts, which may change daily without penalty, pursuant to direct
arrangements between the Fund, as lender, and the borrower. The interest rates
on these notes fluctuate from time to time. The issuer of such obligations
normally has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal amount of the obligations plus accrued
interest upon a specified number of days' notice to the holders of such
obligations. The interest rate on a floating
A-2
<PAGE>
rate demand obligation is based on a known lending rate, such as a bank's
prime rate, and is adjusted automatically each time such rate is adjusted. The
interest rate on a variable rate demand obligation is adjusted automatically
at specified intervals. Frequently, such obligations are secured by letters of
credit or other credit support arrangements provided by banks. Because these
obligations are direct lending arrangements between the lender and borrower,
it is not contemplated that such instruments generally will be traded, and
there generally is no established secondary market for these obligations,
although they are redeemable at face value. Accordingly, where these
obligations are not secured by letters of credit or other credit support
arrangements, the Fund's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand. Such obligations frequently
are not rated by credit rating agencies and, if not so rated, the Fund may
invest in them only if the Co-Investment Advisers determine that at the time
of investment the obligations are of comparable quality to the other
obligations in which the Fund may invest. The Co-Investment Advisers, on
behalf of the Fund, will consider on an ongoing basis the creditworthiness of
the issuers of the floating and variable rate demand obligations held by the
Fund. The Fund will not invest more than 10% of the value of its net assets in
floating or variable rate demand obligations as to which it cannot exercise
the demand feature on not more than seven days' notice if there is no
secondary market available for these obligations, and in other securities that
are illiquid.
Investment Company Securities -- Each of the Cash Management and U.S.
Government Securities Cash Management Funds may invest in securities
issued by other investment companies which principally invest in
securities of the type in which the Fund invests. Under the 1940 Act, a
Fund's investments in such securities, subject to certain exceptions,
currently are 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.
Investments in the securities of other investment companies may involve
duplication of advisory fees and certain other expenses.
Investment Practices
Lending Portfolio Securities -- From time to time, each of the Cash
Management Fund and U.S. Government Securities Cash Management Fund may lend
securities from its portfolio to brokers, dealers and other financial
institutions needing to borrow securities to complete certain transactions.
Such loans may not exceed 33-1/3% of the value of the relevant Fund's total
assets. In connection with such loans, each of these Funds will receive
collateral consisting of cash or U.S. Government securities or, with respect
to the Cash Management Fund only, irrevocable letters of credit issued by
financial institutions.
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<PAGE>
Such collateral will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. Each of these Funds
can increase its income through the investment of such collateral. Each of
these Funds continues to be entitled to payments in amounts equal to the
interest 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.
Illiquid Securities -- Each Fund may invest up to 10% of the value of
its assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with its 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, participation interests that are not subject to the demand feature
described above, floating and variable rate demand obligations as to which the
Fund cannot exercise the related demand feature described above on not more
than seven days' notice or as to which there is no secondary market and
repurchase agreements providing for settlement in more than seven days after
notice. 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.
Borrowing Money -- As a fundamental policy, the Treasury Prime Cash
Management Fund is permitted to borrow money to the extent permitted under the
1940 Act. However, the Fund currently intends to borrow money from banks 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 the Fund's total
assets, the Fund will not make any additional investments.
A-4
EXHIBIT 17(d)
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THE WOODWARD FUNDS
Cash Management Fund
Treasury Prime Cash Management Fund
U.S. Government Securities Cash Management Fund
INSTITUTIONAL And SERVICE SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
_________, 1996
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This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Cash Management Fund, Treasury Prime Cash Management Fund and U.S. Government
Securities Cash Management Fund (each, a "Fund") of The Woodward Funds (the
"Trust"), dated _________, 1996, as it may be revised from time to time. To
obtain a copy of the Funds' Prospectus, please write to the Trust at 3435
Stelzer Road, Columbus, Ohio 43219-3035, or call toll free 1-800-370-9446.
First Chicago Investment Management Company ("FCIMCO") and NBD Bank
("NBD") serve as each Fund's co-investment advisers (collectively, the
"Co-Investment Advisers") and, FCIMCO, NBD and BISYS Fund Services serve as
co-administrators.
BISYS Fund Services is the distributor (the "Distributor") and BISYS,
FCIMCO and NBD serve as co-administrators of the Funds' shares.
TABLE OF CONTENTS
Page
----
Investment Objective and Management Policies.......................... B-2
Management of the Trust............................................... B-6
Management Arrangements............................................... B-9
Distribution and Services Plan........................................ B-10
Purchase of Fund Shares............................................... B-11
Redemption of Fund Shares............................................. B-11
Determination of Net Asset Value...................................... B-12
Portfolio Transactions................................................ B-13
Dividends, Distributions and Taxes.................................... B-13
Yield Information..................................................... B-14
Information About the Trust........................................... B-14
Counsel and Independent Auditors...................................... B-15
Appendix.............................................................. B-16
Financial Statements.................................................. B-
Report of Independent Auditors........................................ B-
B-1
<PAGE>
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTIONS IN THE FUNDS' PROSPECTUS ENTITLED "DESCRIPTION
OF THE FUNDS" AND "APPENDIX."
Portfolio Securities and Investment Practices
Bank Obligations. (Cash Management 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 the Fund are insured by the FDIC
(although such insurance may not be of material benefit to the Fund, depending
on the principal amount of the Cds of each bank held by the Fund) and are
subject to Federal examination and to a substantial body of Federal law and
regulation.
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 recordkeeping requirements. In
addition, less information may be publicly available about a foreign branch of
a domestic bank or about a foreign bank than about a domestic bank.
Obligations of United States branches of foreign banks may be general
obligations of the parent 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.
The Fund may purchase Cds issued by banks, savings and loan
associations and similar thrift institutions with less than
B-2
<PAGE>
$1 billion in assets, which are members of the FDIC, provided the Fund
purchases any such Cd in a principal amount of not more than $100,000, which
amount would be fully insured by the Bank Insurance Fund or the Savings
Association Insurance Fund administered by the FDIC. Interest payments on such
a Cd are not insured by the FDIC. The Fund will not own more than one such Cd
per such issuer.
Foreign Securities. (Cash Management Fund) 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.
Furthermore, some of these securities are subject to brokerage 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. Custodial expenses for a portfolio of
non-U.S. securities generally are higher than for a portfolio of U.S.
securities. Income earned or received by the Cash Management Fund from sources
within foreign countries may be reduced by withholding and other taxes.
Repurchase Agreements. (Cash Management Fund and U.S. Government
Securities Cash Management Fund) The Trust's custodian or subcustodian 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
that enters into them. Each Fund will enter into repurchase agreements
only with registered or unregistered securities dealers or banks with
total assets in excess of one billion dollars, with respect to securities
of the type in which such 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 Co-Investment Advisers will
monitor on an ongoing basis the value of the collateral to assure that it
always equals or exceeds the repurchase price. Each of these Funds will
consider on an ongoing basis the creditworthiness of the institutions with
which it enters into repurchase agreements.
Illiquid Securities. If a substantial market of qualified
institutional buyers develops pursuant to Rule 144A under the Securities Act
of 1933, as amended, for certain restricted securities held by a Fund, the
Trust intends to treat such securities as liquid securities in accordance with
procedures approved by the Trust's Board of Trustees. Because it is not
possible to predict with assurance how the market for restricted
securities pursuant to Rule 144A will develop, the Trust's Board of Trustees
has directed the Co-Investment Advisers 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
its investment portfolio during such period.
B-3<PAGE>
Lending Portfolio Securities. (Cash Management Fund and U.S.
Government Securities Cash Management Fund) To a limited extent, each of these
Funds may lend its portfolio securities to brokers, dealers and other
financial institutions, provided it receives cash collateral which at all
times is maintained in an amount equal to at least 100% of the current market
value of the securities loaned. By lending its portfolio securities, the Fund
can increase its income through the investment of the cash collateral. For
purposes of this policy, the Trust considers collateral consisting of U.S.
Government securities or, in the case of the Cash Management Fund only,
irrevocable letters of credit issued by banks whose securities meet the
standards for investment by the Fund to be the equivalent of cash. Such loans
may not exceed 33-1/3% of the Fund's total assets. 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 ("SEC") currently requires that
the following conditions must be met whenever portfolio securities are loaned:
(1) the Fund must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the Fund must be able
to terminate the loan at any time; (4) the Fund must receive reasonable
interest on the loan, as well as any interest or other distributions payable
on the loaned securities, and any increase in market value; and (5) the Fund
may pay only reasonable custodian fees in connection with the loan. These
conditions may be subject to future modification.
Investment Restrictions
Each Fund has adopted the following investment restrictions as
fundamental investment limitations which cannot be changed, as to a particular
Fund, without approval by the holders of a majority (as defined in the
Investment Company Act of 1940, as amended (the "1940 Act")), of that Fund's
outstanding voting shares. Each Fund may not:
1. Borrow money; issue senior securities, or mortgage, pledge or
hypothecate it assets except to the extent permitted under the 1940 Act.
2. Act as an underwriter of securities of other issuers, except to the
extent the Fund may be deemed an underwriter under the Securities Act of 1933,
as amended, by virtue of disposing of portfolio securities.
3. Purchase or sell (a) real estate or (b) commodities, except,in the
case of clauses (a) and (b), to the extent permitted under the 1940 Act.
4. Make loans to others (other than through investment in debt
obligations or other instruments referred to in the Fund's Prospectus), except
that the Fund may lend its portfolio securities in an amount not to exceed 33
1/3% of the value of its total assets.
5. Purchase any securities which would cause 25% or more of the value
of a Fund'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 (i) instruments 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, (ii) instruments issued by domestic branches of U.S. banks and
(iii) repurchase agreements secured by instruments described in clauses (i)
and (ii), (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 and
(d) personal credit and business credit businesses will be considered separate
industries, and further provided that the Cash Management Fund will invest at
least 25% of its total assets in obligations of issuers in the banking
industry or instruments secured by such obligations except during temporary
defensive periods.
B-4<PAGE>
In construing number 5 in accordance with SEC policy, to the extent
permitted, U.S. branches of foreign banks will be considered to be U.S. bank
where they are subject to the same regulation as U.S. banks.
6. Purchase securities (except U.S. Government securities and related
repurchase agreements) if more than 5% of its 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 without regard to this 5% limitation.
Each Fund has adopted the following investment restrictions as
non-fundamental limitations which may be changed, as to a particular Fund, by
the Board of Trustees without approval the approval of by the holders of a
majority, as defined in 1940 Act of that Fund's outstanding voting shares.
Each Fund may not:
1. Purchase securities on margin, except as described in the Fund's
Prospectus or this Statement of Additional Information.
2. Invest in the securities of a company for the purpose of exercising
management or control, but the Fund will vote the securities it owns in its
portfolio as a shareholder in accordance with its views.
3. Purchase, sell or write puts, calls or combinations thereof, except
as described in the Fund's Prospectus or this Statement of Additional
Information.
4. 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 10% of the value of the Fund's net assets would be so
invested.
5. Invest in securities of other investment companies, except to the
extent permitted under the 1940 Act.
6. Invest more than 5% of its assets in the obligations of any one
issuer, except if permitted under Rule 2a-7 under the 1940 Act.
The Cash Management and U.S. Government Securities Cash Management
Funds also may not sell securities short.
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.
The Trust may make commitments more restrictive than the restrictions
listed above so as to permit the sale of a Fund's shares in certain states.
Should the Trust determine that a commitment is no longer in the best
interests of a Fund and its shareholders, the Trust reserves the right to
revoke the commitment by terminating the sale of a Fund's shares in the state
involved.
B-5
<PAGE>
MANAGEMENT OF THE TRUST
Trustees and officers of the Trust, together with information as to
their principal business occupations during at least the last five years, are
shown below.
Trustees and Officers of the Trust
*Earl I. Heenan, Jr., Chairman and President
Vice Chairman (since 1988) 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 76 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.
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* Trustees who are "interested persons" of the Trust, as defined
in the 1940 Act.
B-6
<PAGE>
Nicholas J. De Grazia, Trustee
President, Chief Operating Officer and Director, Lionel Trains, Inc.
(since 1990); Vice President-Finance and Treasurer, University of Detroit
(1981-1990); President (1981-1990) and Director (since 1986), Polymer
Technologies, Inc.; President, Florence Development Company (1987-1990);
Chairman (since 1994) and Director (since 1992), 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
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 Prairie Funds,
Prairie Institutional Funds, Prairie Intermediate Bond Fund and Prairie
Municipal Bond Fund, Inc. He is 55 years old, and his address is 1101 East
58th Street, Chicago, Illinois 60637.
Marilyn McCoy, Trustee
Vice President of Administration and Planning of Northwestern
University. From 1981 to 1985, she was the Director of Planning and Policy
Development for the University of Colorado. She also serves on the Board of
Directors of Evanston Hospital, the Chicago Metropolitan YMCA, the Chicago
Network and United Charities. Mrs. McCoy is a member of the Chicago Economics
Club. Mrs. McCoy is also a Board member of Prairie Funds, Prairie
Institutional Funds, Prairie Intermediate Bond Fund and Prairie Municipal
Bond Fund, Inc. She is 47 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.
- --------
* Trustees who are "interested persons" of the Trust, as defined
in the 1940 Act.
B-7
<PAGE>
Donald L. Tuttle, Trustee
Senior Vice President, Association for Investment Management and
Research (since January 1992); 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 62
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.
For so long as the plan described in the section captioned
"Distribution and Services Plan" remains in effect, the Trustees of
the Trust who are not "interested persons" of the Trust, as defined in the
1940 Act, will be selected and nominated by the Trustees who are not
"interested persons" of the Trust.
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. The fees are allocated aamong the investment
portfolios the Trust and The Woodward Variable Annuity Fund based on their
relative net assets. All Trustees are reimbursed for out-of-pocket expenses
incurred in connection with attendance at meetings. Drinker Biddle & Reath,
of which Mr. McConnel is a partner, receives legal fees as counsel to the
Trust.
B-8<PAGE>
The following table summarizes the compensation for each of the Trustees
for the Trust's fiscal year ending December 31, 1995:
<TABLE>
<CAPTION>
(3)
Total
Compensation
(2) From Trust and
(1) Aggregate Fund Complex**
Name of Board Compensation Paid to Board
Member/Position from Trust* 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.,
Chairman and President 24,437.50 24,437.50(2)+
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
and Treasurer 21,250 21,250(2)+
<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, The Woodward Variable Annuity
Fund, Praire Funds, Praire Institutional Funds, Praire Intermediate Bond
Fund and Praire 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.
</TABLE>
Board members and officers of the Trust, as a group, owned less than
1% of any Fund's shares outstanding on March 28, 1996.
MANAGEMENT ARRANGEMENTS
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUNDS' PROSPECTUS ENTITLED "MANAGEMENT OF
THE TRUST."
Investment Advisory Agreement. FCIMCO and NBD provide investment
advisory services pursuant to the Investment Advisory Agreement (the
"Agreement") dated as of April 12, 1996, with the Trust. As to each Fund,
the Agreement is subject to annual approval by (i) the Trust's Board of
Trustees 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 Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust, FCIMCO or NBD,
by vote cast in person at a meeting called for the purpose of voting on such
approval. As to each Fund, the Agreement is terminable without penalty, on 60
days' notice, by the Trust's Board of Trustees or by vote of the holders of a
majority of such Fund's shares, or, on not less than 90 days' notice, by
FCIMCO or NBD. The Agreement will terminate automatically, as to the relevant
Fund, in the event of its assignment (as defined in the 1940 Act).
FCIMCO and NBD are responsible for investment decisions for each Fund
in accordance with the stated policies of such Fund, subject to the general
supervision of the Trust's Board of Trustees.
B-9
<PAGE>
Under the terms of the Investment Advisory Agreement with the Trust,
FCIMCO and NBD are entitled jointly to a monthly advisory fee at the annual
rate of .20% of each Fund's average daily net assets.
Administration Agreement. Pursuant to an Administration Agreement
dated as of April 12, 1996 with the Trust, FCIMCO, NBD and BISYS assist
in all aspects of the Trust's operations, other than providing investment
advice, subject to the overall authority of the Trust's Board in accordance
with Massachusetts law. Under the terms of the Administration Agreement,
FCIMCO, NBD and BISYS are entitled jointly to a monthly administration fee
at the annual rate of .15% of each Fund's average daily net assets.
The Trust has agreed that neither FCIMCO, NBD nor BISYS will 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 the agreement with FCIMCO, NBD
or BISYS relates, except for a loss resulting from wilful misfeasance, bad
faith or gross negligence on the part of FCIMCO, NBD or BISYS in the
performance of their obligations or from reckless disregard by any of them of
their obligations and duties under the Administration Agreement.
In addition, the Administration Agreement provides that if, in any
fiscal year, the aggregate expenses of a Fund, exceed the expense limitation
of any state having jurisdiction over the Fund, FCIMCO, NBD and BISYS under
the Agreement, or FCIMCO, NBD and BISYS will bear, such excess expense to the
extent required by state law.
The aggregate of the fees payable to FCIMCO, NBD and BISYS is not
subject to reduction as the value of the Fund's net assets increases.
Distribution and Services Plan
(Service Shares Only)
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUNDS' PROSPECTUS ENTITLED "DISTRIBUTION
AND SERVICES PLAN."
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 Trust's Board of Trustees has
adopted such a plan (the "Plan") with respect to each Fund's Service
Shares, pursuant to which each Fund pays BISYS a fee of up to .25% of the
average daily net asset value attributable to such Service Shares for
advertising, marketing and distributing such Service Shares and for the
provision of certain services to the holders of such Service Shares. Under
the Plan, BISYS may make payments to certain financial institutions, securities
dealers and other financial industry professionals (collectively, "Service
Agents") in respect of these services. The Board of Trustees believes that
there is a reasonable likelihood that the Plan will benefit each Fund and
the holders of Service Shares.
The Board of Trustees reviews, at least quarterly, a written report of
the amounts expended under the Plan 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 Plan must be approved by a majority
of the Board of Trustees (including a majority of the Disinterested Trustees).
B-10<PAGE>
PURCHASE OF FUND SHARES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUNDS' PROSPECTUS ENTITLED "HOW TO BUY
FUND SHARES."
The Distributor. The Distributor serves on a best efforts basis as the
Trust's distributor pursuant to an agreement which is renewable annually.
Using Federal Funds. NBD, the Trust's transfer and dividend
disbursing agent (the "Transfer Agent"), or the Trust 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. In
some states, banks or other institutions effecting transactions in Fund shares
may be required to register as dealers pursuant to state law.
REDEMPTION OF FUND SHARES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUNDS' PROSPECTUS ENTITLED "HOW TO REDEEM
FUND SHARES."
Redemption Commitment. The Trust has committed itself to pay in cash
all redemption requests by any shareholder of record of a 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 of Trustees 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.
B-11
<PAGE>
DETERMINATION OF NET ASSET VALUE
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUNDS' PROSPECTUS ENTITLED "HOW TO BUY
FUND SHARES."
Amortized Cost Pricing. The valuation of each Fund's portfolio
securities is based upon their amortized cost which does not take into account
unrealized capital gains or losses. This involves valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price the Fund would receive if it
sold the instrument.
The Board of Trustees has established procedures, as a particular
responsibility within the overall duty of care owed to each Fund's investors,
reasonably designed to stabilize the Fund's price per share as computed for
purposes of purchases and redemptions at $1.00. Such procedures include review
of each Fund's portfolio holdings by the Board of Trustees, at such intervals
as it deems appropriate, to determine whether the Fund's net asset value
calculated by using available market quotations or market equivalents deviates
from $1.00 per share based on amortized cost. In such review of the portfolio
of a 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 the Funds will be valued at fair value
as determined in good faith by the Board of Trustees.
The extent of any deviation between a Fund's net asset value based
upon available market quotations or market equivalents and $1.00 per share
based on amortized cost will be examined by the Board of Trustees. If such
deviation exceeds 1/2 of 1%, the Board of Trustees will consider what actions,
if any, will be initiated. In the event the Board of Trustees determines that
a deviation exists which may result in material dilution or other unfair
results to investors or existing shareholders, it has agreed to take such
corrective action as it 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.
B-12
<PAGE>
PORTFOLIO TRANSACTIONS
Portfolio securities of each Fund ordinarily are purchased directly
from the issuer or from an underwriter or a market maker for the securities.
Ordinarily, no brokerage commissions are paid by the Fund for such purchases.
Purchases from underwriters of portfolio securities may include a concession
paid by the issuer to the underwriter and the purchase price paid to, and
sales price received from, market makers for the securities may reflect the
spread between the bid and asked price. No brokerage commissions have been
paid by any Fund to date.
Transactions are allocated to various dealers by the Trust's
investment personnel in their best judgment. The primary consideration is
prompt and effective execution of orders at the most favorable price. Subject
to that primary consideration, dealers may be selected for research,
statistical or other services to enable FCIMCO or NBD to supplement its own
research and analysis with the views and information of other securities firms
and may be selected based upon their sales of Fund shares.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by FCIMCO or NBD in advising other funds
or accounts it advises and, conversely, research services furnished to FCIMCO
or NBD by brokers in connection with other funds or accounts FCIMCO or NBD
advises may be used by FCIMCO or NBD in advising the Fund. Although it is not
possible to place a dollar value on these services, it is the opinion of
FCIMCO and NBD that the receipt and study of such services should not reduce
FCIMCO's or NBD's overall research expenses.
DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN FUNDS' PROSPECTUS ENTITLED "DIVIDENDS,
DISTRIBUTIONS AND TAXES."
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain or loss. However, all or a portion of the gain
realized from the disposition of certain market discount bonds will be treated
as ordinary income under Section 1276 of the Internal Revenue Code of 1986, as
amended.
B-13
<PAGE>
YIELD INFORMATION
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectus entitled "Yield
Information."
Yield is computed in accordance with a standardized method which
involves determining the net change in the value of a hypothetical
pre-existing Fund account having a balance of one share at the beginning of a
seven calendar day period for which yield is to be quoted, dividing the net
change by the value of the account at the beginning of the period to obtain
the base period return, and annualizing the results (i.e., multiplying the
base period return by 365/7). The net change in the value of the account
reflects the value of additional shares purchased with dividends declared on
the original share and any such additional shares and fees that may be charged
to the shareholder's account, in proportion to the length of the base period
and the Fund's average account size, but does not include realized gains and
losses or unrealized appreciation and depreciation. Effective yield is
computed by adding 1 to the base period return (calculated as described
above), raising that sum to a power equal to 365 divided by 7, and subtracting
1 from the result.
Yields will fluctuate and are not necessarily representative of future
results. Each investor should remember that yield is a function of the type
and quality of the instruments in the portfolio, portfolio maturity and
operating expenses. An investor's principal in the Fund is not guaranteed. See
"Determination of Net Asset Value" for a discussion of the manner in which
the Fund's price per share is determined.
The Cash Management Fund, Treasury Prime Cash Management Fund and U.S.
Government Securities Cash Management Fund are rated AAAm or AAAmG, as the
case may be, by Standard & Poor's Ratings Group, Division of McGraw Hill and
Aaa by Moody's Investors Service, Inc.
From time to time, advertising materials for the Funds may refer to
FNBC's, NBD's or any of their affiliate's full line of investment products for
the corporate cash market, including sweep services, on-line money market
mutual fund purchases, customized portfolio management, and OASIS, a same-day
sweep product that sweeps funds to an overnight Eurodollar time deposit.
INFORMATION ABOUT THE TRUST
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUNDS' PROSPECTUS ENTITLED "GENERAL
INFORMATION."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Fund shares have no preemptive, subscription or conversion rights and are
freely transferable.
The Trust will send annual and semi-annual financial statements to all
its shareholders.
B-14
<PAGE>
COUNSEL AND INDEPENDENT AUDITORS
Drinker Biddle & Reath, 1345 Chestnut Street, Philadelphia, PA
19107-3496, serves as the Trust's counsel.
Arthur Andersen LLP, One Detroit Center, 500 Woodward Avenue, Detroit,
Michigan 48226-3424, independent auditors, is auditor of the Trust.
B-15
<PAGE>
APPENDIX
Description of the highest commercial paper, municipal bond and note
and other short- and long-term rating categories assigned by Standard & Poor's
Rating Group ("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch
Investors Service, Inc. ("Fitch"), Duff & Phelps Credit Rating Co. ("Duff"),
IBCA Limited and IBCA Inc. ("IBCA") and Thomson BankWatch, Inc. ("BankWatch"):
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."
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 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.
B-16<PAGE>
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.
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.
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.
"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."
B-17<PAGE>
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.
Corporate and Municipal Long-Term Debt Ratings
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"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.
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.
B-18
<PAGE>
"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 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.
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 occur 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.
B-19<PAGE>
"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 prudent investment.
Considerable variability in risk is present during economic cycles.
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.
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.
B-20
<PAGE>
"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.
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 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.
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.
B-21<PAGE>
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.
"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.
B-22
- ------------------------------------------------------------------------
EXHIBIT 17(e)
PRAIRIE INSTITUTIONAL FUNDS
CASH MANAGEMENT FUND
TREASURY PRIME CASH MANAGEMENT FUND
U.S. GOVERNMENT SECURITIES CASH MANAGEMENT FUND
PROSPECTUS
March 18, 1996
PLEASE READ CAREFULLY: Mutual fund shares are not bank deposits, are not
insured by the Federal Deposit Insurance Corporation, and are not obligations of
or guaranteed by The First National Bank of Chicago, any of its affiliates or
any other bank. Mutual fund shares involve investment risks, including the
possible loss of the principal amount invested. First Chicago Investment
Management Company acts as investment adviser and administrator of the funds in
the Prairie Family of Funds for which it is compensated as set forth in the
relevant prospectus.
First Chicago Investment Management Company
INVESTMENT ADVISER AND ADMINISTRATOR
Concord Financial Group, Inc.
DISTRIBUTOR
PROSPECTUS BEGINS ON PAGE ONE
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
PROSPECTUS -- March 18, 1996
Prairie Institutional Funds (the "Trust") is an open-end, management
investment company, known as a series fund. By this Prospectus, the Trust is
offering Institutional Shares and Service Shares of three separate diversified,
money market series (each, a "Fund"): Cash Management Fund, Treasury Prime Cash
Management Fund and U.S. Government Securities Cash Management Fund. Each Fund's
goal is to provide investors with as high a level of current income as is
consistent with the preservation of capital and the maintenance of liquidity.
Each Fund is designed for institutional investors, including banks, acting
for themselves or in a fiduciary, advisory, agency, custodial or similar
capacity, public agencies and municipalities. Fund shares may not be purchased
directly by individuals, although institutions may purchase shares for accounts
maintained by individuals. Such institutions have agreed to transmit copies of
this Prospectus to each individual or entity for whose account the institution
purchases Fund shares, to the extent required by law.
Each Fund's shares are sold without a sales charge. Investors can invest or
reinvest in or redeem shares at any time without charge or penalty imposed by
the Fund.
Institutional Shares and Service Shares are identical, except as to the
services offered to and expenses borne by each Class. Service Shares bear
certain costs pursuant to a Service Plan adopted in accordance with Rule 12b-1
under the Investment Company Act of 1940.
First Chicago Investment Management Company ("FCIMCO" or the "Investment
Adviser") serves as each Fund's investment adviser and administrator.
Concord Financial Group, Inc. (the "Distributor") serves as each Fund's
distributor.
AN INVESTMENT IN A FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT EACH FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
MONEY MARKET MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
------------------------------
This Prospectus sets forth concisely information about the Trust and Funds
that an investor should know before investing. It should be read and retained
for future reference.
The Statement of Additional Information, dated March 18, 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 Trust at 3435 Stelzer Road,
Columbus, Ohio 43219-3035, or call 1-800-370-9446.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Annual Fund Operating Expenses......................... 3
Condensed Financial Information........................ 5
Yield Information...................................... 8
Description of the Funds............................... 8
Risk Factors...................................... 10
Management of the Trust................................ 11
How to Buy Fund Shares................................. 13
How to Redeem Fund Shares.............................. 14
Service Plan........................................... 15
Dividends, Distributions and Taxes..................... 16
General Information.................................... 17
Appendix............................................... A-1
<PAGE>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<CAPTION>
CASH MANAGEMENT
FUND
-------------------------
INSTITUTIONAL SERVICE
SHARES SHARES
------------- -------
<S> <C> <C>
Management Fees (after fee waivers)............................... .13% .13%
12b-1 Fees (distribution and servicing)........................... NONE .25%
Other Expenses (after expense reimbursements)..................... .22% .22%
Total Fund Operating Expenses (after fee waivers and expense
reimbursements) 35% .60%
</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 each time
period:
<TABLE>
<CAPTION>
INSTITUTIONAL SERVICE
SHARES SHARES
------------- -------
<S> <C> <C>
1 YEAR........................................................... $ 4 $ 6
3 YEARS.......................................................... $11 $19
5 YEARS.......................................................... $20 $33
10 YEARS.......................................................... $44 $75
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT
TREASURY PRIME CASH SECURITIES CASH
MANAGEMENT FUND MANAGEMENT FUND
------------------------- -------------------------
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
SHARES SHARES SHARES SHARES
------------- ------- ------------- -------
<S> <C> <C> <C> <C>
Management Fees (after fee waivers)........... .12% .12% .14% .14%
12b-1 Fees (distribution and servicing)....... NONE .25% NONE .25%
Other Expenses (after fee waivers and expense
reimbursements)............................. .23% .23% .21% .21%
Total Fund Operating Expenses (after fee
waivers and expense reimbursements)......... .35% .60% .35% .60%
</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 each time
period:
<TABLE>
<CAPTION>
INSTITUTIONAL SERVICE INSTITUTIONAL SERVICE
SHARES SHARES SHARES SHARES
------------- ------- ------------- -------
<S> <C> <C> <C> <C>
1 YEAR....................................... $ 4 $ 6 $ 4 $ 6
3 YEARS...................................... $11 $19 $11 $19
5 YEARS...................................... $20 $33 $20 $33
10 YEARS...................................... $44 $75 $44 $75
</TABLE>
- --------------------------------------------------------------------------------
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 THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, EACH FUND'S
ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN GREATER OR LESS
THAN 5%.
- --------------------------------------------------------------------------------
<PAGE>
The purpose of the foregoing table is to assist investors in understanding
the various costs and expenses borne by a Fund, and therefore indirectly by
investors, the payment of which will reduce investors' return on an annual
basis. FCIMCO has undertaken, as to each Fund, until such time as it gives
investors at least 90 days' notice to the contrary, that if, in any fiscal year,
certain expenses, including the investment advisory and administration fees,
exceed .35% and .60% of the value of the average net assets of the Institutional
Shares and the Service Shares, respectively, for the fiscal year, the Trust may
deduct from the payment to be made to FCIMCO under the Investment Advisory or
Administration Agreements, or FCIMCO will bear, such excess expense. The
expenses noted above, without fee waivers or expense reimbursement arrangements,
would have been: Management Fees, .20% for each Fund, Other Expenses, .23% for
the Institutional Shares and .24% for the Service Shares of the Cash Management
Fund, 1.03% for the Insitutional Shares and .29% for the Service Shares of the
Treasury Prime Cash Management Fund, and .22% for the Institutional Shares and
.24% for the Service Shares of the U.S. Government Securities Cash Management
Fund, and Total Fund Operating Expenses, .43% for the Institutional Shares and
.69% for the Service Shares of the Cash Management Fund, 1.23% for the
Institutional Shares and .74% for the Service Shares of the Treasury Prime Cash
Management Fund, and .42% for the Institutional Shares and .69% for the Service
Shares of the U.S. Government Securities Cash Management Fund. In addition, the
Management Fees noted above have been restated to reflect estimated management
fees for the current fiscal year; for the fiscal year ended December 31, 1995,
management fees, after fee waivers, were .11%, .09% and .12% for the Cash
Management Fund, Treasury Prime Cash Management Fund and U.S. Government
Securities Cash Management Fund, respectively. Institutions effecting
transactions in Fund shares may charge their clients direct fees in connection
with such transactions; such fees are not reflected in the foregoing table. See
"Management of the Trust," "How to Buy Fund Shares" and "Service Plan."
CONDENSED FINANCIAL INFORMATION
The information in the following tables has been audited by Ernst & Young
LLP, each Fund's independent auditors, whose reports 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
Institutional Shares and Service Shares of the Cash Management Fund, U.S.
Government Securities Cash Management Fund and Treasury Prime Cash Management
Fund for the periods indicated. This information has been derived from
information provided in the Fund's financial statements.
CASH MANAGEMENT FUND(1)
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES SERVICE SHARES
------------------------------------------------------- ----------------------------
SIX-MONTH SIX-MONTH
YEAR ENDED JUNE 30, PERIOD ENDED YEAR ENDED PERIOD ENDED
--------------------------------------- DECEMBER 31, JUNE 30, DECEMBER 31,
1993(2) 1994 1995 1995(3) 1995(4) 1995(3)
-------- -------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning
of period................. $ 1.0000 $ .9999 $ .9993 $ .9994 $ 1.0000 $ .9994
-------- -------- ------------ ------------ ------ ------------
Investment Operations:
Investment income -- net.... .0297 .0333 .0507 .0277 .0245 .0264
Net realized gain (loss) on
investments............... (.0001) (.0006) (.0059) .0002 (.0006) .0002
-------- -------- ------------ ------------ ------ ------------
Total from Investment
Operations............ .0296 .0327 .0448 .0279 .0239 .0266
-------- -------- ------------ ------------ ------ ------------
Distributions:
Dividends from investment
income -- net............. (.0297) (.0333) (.0507) (.0277) (.0245) (.0264)
-------- -------- ------------ ------------ ------ ------------
Increase due to voluntary
capital contribution from
an affiliate of Investment
Adviser................... -- -- .0060 -- -- --
-------- -------- ------------ ------------ ------ ------------
Net asset value, end of
period.................... $ .9999 $ .9993 $ .9994 $ .9996 $ .9994 $ .9996
========== ========== ================ =============== ============= ===============
TOTAL INVESTMENT RETURN......... 3.25%(5) 3.38% 5.19%(6) 2.80%(7) 2.47%(7) 2.68%(7)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets................ .05%(5) .31% .35% .35%(5) .60%(5) .60%(5)
Ratio of net investment
income to average net
assets.................... 3.19%(5) 3.33% 5.11% 5.51%(5) 5.46%(5) 5.25%(5)
Decrease reflected in above
expense ratios due to
undertakings.............. .51%(5) .12% .09% .08%(5) .11%(5) .09%(5)
Net Assets, end of period
(000's omitted)........... $175,713 $243,820 $319,214 $389,127 $ 11,372 $121,750
</TABLE>
- ---------------
(1) On January 17, 1995, all of the assets and liabilities of First Prairie Cash
Management were transferred to the Cash Management Fund in exchange for
Institutional Shares of the Cash Management Fund. The financial data
provided above prior to such date is for First Prairie Cash Management.
(2) From July 30, 1992 (commencement of operations) to June 30, 1993.
(3) Effective July 1, 1995, the Fund changed its fiscal year-end from June 30 to
December 31. The figures presented are from July 1, 1995 through December
31, 1995.
(4) From January 17, 1995 (initial offering date of Service Shares) through June
30, 1995.
(5) Annualized.
(6) Had the Fund not had a capital contribution from an affiliate of the
Investment Adviser during the period, the total investment return would have
been 4.51%.
(7) Not annualized.
<PAGE>
U.S. GOVERNMENT SECURITIES CASH MANAGEMENT FUND(1)
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES SERVICE SHARES
------------------------------------------------- ------------------------------
SEVEN-MONTH SEVEN-MONTH
YEAR ENDED MAY 31, PERIOD ENDED PERIOD ENDED
---------------------------------- DECEMBER 31, YEAR ENDED DECEMBER 31,
1993(2) 1994 1995 1995(3) MAY 31, 1995(4) 1995(3)
-------- -------- -------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of
period...................... $ 1.0000 $ 1.0000 $ .9999 $ .9989 $1.0000 $ .9989
-------- -------- -------- ------------ ------- ------------
Investment Operations:
Investment income -- net...... .0319 .0302 .0492 .0320 .0199 .0305
--------
Net realized gain (loss) on
investments................. -- (.0001) (.0010) .0001 (.0011) .0001
-------- -------- -------- ------------ ------- ------------
Total from Investment
Operations............. .0319 .0301 .0482 .0321 .0188 .0306
-------- -------- -------- ------------ ------- ------------
Distributions:
Dividends from investment
income -- net............... (.0319) (.0302) (.0492) (.0320) (.0199) (.0305)
-------- -------- -------- ------------ ------- ------------
Net asset value, end of
period...................... $ 1.0000 $ .9999 $ .9989 $ .9990 $ .9989 $ .9990
======== ======== ======== =========== ============= ===========
TOTAL INVESTMENT RETURN........... 3.25%(5) 3.06% 5.03% 3.24%(6) 2.01%(6) 3.09%(6)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets.................. .02%(5) .30% .34% .35%(5) .57%(5) .60%(5)
Ratio of net investment income
to average net assets....... 3.10%(5) 3.02% 4.94% 5.46%(5) 5.48%(5) 5.17%(5)
Decrease reflected in above
expense ratios due to
undertakings................ .47%(5) .11% .07% .07%(5) .09%(5) .09%(5)
Net Assets, end of period
(000's omitted)............. $264,527 $413,634 $475,248 $489,395 $16,702 $56,000
</TABLE>
- ---------------
(1) On January 17, 1995, all of the assets and liabilities of First Prairie U.S.
Treasury Securities Cash Management were transferred to the U.S. Government
Securities Cash Management Fund in exchange for Institutional Shares of the
U.S. Government Securities Cash Management Fund. The financial data provided
above prior to such date is for First Prairie U.S. Treasury Securities Cash
Management.
(2) From June 2, 1992 (commencement of operations) to May 31, 1993.
(3) Effective June 1, 1995, the Fund changed its fiscal year-end from May 31 to
December 31. The figures presented are from June 1, 1995 through December
31, 1995.
(4) From January 17, 1995 (initial offering date of Service Shares) through May
31, 1995.
(5) Annualized.
(6) Not annualized.
<PAGE>
TREASURY PRIME CASH MANAGEMENT FUND
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995(1)
-----------------------------------------
INSTITUTIONAL SHARES SERVICE SHARES
-------------------- --------------
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period..................... $ 1.0000 $ 1.0000
-------- --------------
Investment Operations:
Investment income -- net................................. .0399 .0380
-------- --------------
Distributions:
Dividends from investment income-net..................... (.0399) (.0380)
-------- --------------
Net asset value, end of period........................... $ 1.0000 $ 1.0000
================ ============
TOTAL INVESTMENT RETURN....................................... 4.0%(2) 3.86%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.................. .35%(3) .60%(3)
Ratio of net investment income to average net assets..... 5.16%(3) 4.72%(3)
Decrease reflected in above expense ratios due to
undertakings........................................... .88%(3) .14%(3)
Net Assets, end of period (000's omitted)................ $ 14,008 $130,559
</TABLE>
- ---------------
(1) From March 22, 1995 (commencement of operations) through December 31, 1995.
(2) Not annualized.
(3) Annualized.
<PAGE>
<PAGE>
YIELD INFORMATION
From time to time, each Fund will 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 a 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. Each Fund's yield and effective yield may reflect
absorbed expenses pursuant to any undertaking that may be in effect. See
"Management of the Trust." Both yield figures also take into account any
applicable distribution and service fees. As a result, at any given time, the
performance of the Service Class should be expected to be lower than that of the
Institutional Class. See "Service Plan."
Yield information is useful in reviewing a Fund's performance, but because
yields will fluctuate, under certain conditions such information may not provide
a basis for comparison with domestic bank deposits, other investments which pay
a fixed yield for a stated period of time, or other investment companies which
may use a different method of computing yield.
Comparative performance information may be used from time to time in
advertising or marketing Fund shares, including data from Lipper Analytical
Services, Inc., Bank Rate Monitor(TM), N. Palm Beach, Fla. 33408, IBC/Donoghue's
Money Fund Report(R) and other industry publications.
DESCRIPTION OF THE FUNDS
GENERAL
The Trust is a "series fund," which is a mutual fund divided into separate
portfolios. 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 Fund.
By this Prospectus, two classes of shares of each Fund are being
offered -- Institutional Shares and Service Shares (each such class being
referred to as a "Class"). The Classes are identical, except that Service Shares
are subject to an annual distribution and service fee at the rate of .25% of the
value of the average daily net assets of the Service Class. The fee is payable
to the Distributor for advertising, marketing and distributing Service Shares
and for ongoing personal services to the holders of Service Shares relating to
shareholder accounts and services related to the maintenance of such shareholder
accounts pursuant to a Service Plan adopted in accordance with Rule 12b-1 under
the 1940 Act. The Distributor may make payments to certain financial
institutions, securities dealers and other industry professionals (collectively,
"Service Agents") in respect of these services. See "Service Plan." The
distribution and service fee paid by the Service Class will cause such Class to
have a higher expense ratio and to pay lower dividends than the Institutional
Class.
WHEN USED IN THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION,
THE TERMS "INVESTOR" AND "SHAREHOLDER" REFER TO THE INSTITUTION PURCHASING FUND
SHARES AND DO NOT REFER TO ANY INDIVIDUAL OR ENTITY FOR
<PAGE>
WHOSE ACCOUNT THE INSTITUTION MAY PURCHASE FUND SHARES. Such institutions have
agreed to transmit copies of this Prospectus and all relevant Fund materials,
including proxy materials, to each individual or entity for whose account the
institution purchases Fund shares, to the extent required by law.
INVESTMENT OBJECTIVE
Each Fund's goal is to provide investors with as high a level of current
income as is consistent with the preservation of capital and the maintenance of
liquidity. 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 shares. There can be no assurance that the Fund's investment
objective will be achieved. Securities in which the Funds invest may not earn as
high a level of current income as long-term or lower quality securities which
generally have less liquidity, greater market risk and more fluctuation in
market value.
MANAGEMENT POLICIES
Each Fund seeks to maintain a net asset value of $1.00 per share for
purchases and redemptions. To do so, the Trust uses the amortized cost method of
valuing each Fund's securities pursuant to Rule 2a-7 under the 1940 Act, certain
requirements of which are summarized below.
In accordance with Rule 2a-7, each 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 of Trustees to present minimal credit risks and, in the
case of the Cash Management 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 of
Trustees. The Cash Management Fund will purchase only instruments so rated in
the highest rating category or, if unrated, of comparable quality as determined
in accordance with procedures established by the Board of Trustees. The
nationally recognized statistical rating organizations currently rating
instruments of the type the Cash Management Fund may purchase are Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Group ("S&P"),
Duff & Phelps Credit Rating Co., Fitch Investors Service, L.P. ("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 Fund will be able to maintain a
stable net asset value of $1.00 per share.
- CASH MANAGEMENT FUND invests 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 "Appendix -- Portfolio Securities." In addition, the Fund
is permitted to lend portfolio securities to the extent described under
"Appendix -- Investment Practices." During normal market conditions, at least
25% of the Fund's total assets will be invested in bank obligations.
- TREASURY PRIME CASH MANAGEMENT FUND invests only in securities issued and
guaranteed as to principal and interest by the U.S. Government. These securities
include U.S. Treasury securities, which differ in their interest rates,
maturities and times of issuance. See "Appendix -- Portfolio Securities." The
Fund does not invest in repurchase agreements, securities issued by agencies or
instrumentalities of the Federal government or any other type of money market
instrument or security.
- U.S. GOVERNMENT SECURITIES CASH MANAGEMENT FUND invests 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. See "Appendix -- Portfolio Securities." The Fund also may lend
securities from its portfolio as described under "Appendix -- Investment
Practices."
CERTAIN FUNDAMENTAL POLICIES
Each Fund may (i) 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; and (ii) pledge, hypothecate, mortgage or
otherwise encumber its assets, but only to secure permitted borrowings (this
policy, however, is not fundamental in the case of the Treasury Prime Cash
Management Fund). In addition, (i) the Treasury Prime Cash Management Fund may
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; (ii)
each of the Cash Management Fund and U.S. Government Securities Cash Management
Fund may borrow money from banks, but only for temporary or emergency (not
leveraging) purposes, in an amount up to 15% of the value of the Fund's total
assets (including the amount borrowed) valued at the lesser of cost or market,
less liabilities (not including the amount borrowed) at the time the borrowing
is made. While borrowings exceed 5% of the value of the Fund's total assets, the
Fund will not make any additional investments; (iii) the Cash Management Fund
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 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 (iv) the Cash Management 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, except as noted, 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 Objective and Management Policies -- Investment Restrictions" in the
Statement of Additional Information.
CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICY
Each Fund may invest up to 10% of the value of its net assets in illiquid
securities. See "Appendix -- Investment Practices -- Illiquid Securities" and
"Investment Objective and Management Policies -- Investment Restrictions" in the
Statement of Additional Information.
RISK FACTORS
See also the Appendix beginning on page A-1.
FOREIGN SECURITIES -- (CASH MANAGEMENT FUND) Since the Cash Management
Fund's portfolio may contain securities issued by foreign branches of domestic
and foreign banks, domestic and foreign branches of foreign banks and thrift
institutions, and commercial paper issued by foreign issuers, the Fund may be
subject to additional investment risks with respect to such securities that are
different in some respects from those incurred by a fund which invests only in
debt obligations of U.S. domestic issuers, although such obligations may be
higher yielding when compared to the securities 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.
OTHER INVESTMENT CONSIDERATIONS -- Each Fund will attempt to increase yields by
trading to take advantage of short-term market variations. This policy is
expected to result in high portfolio turnover but should not adversely affect
the Funds since each Fund usually will not pay brokerage commissions on
purchases of short-term debt obligations, including U.S. Government securities.
The value of the securities held by each Fund will vary inversely to changes in
prevailing interest rates. Thus, if interest rates have increased from the time
a security was purchased, such security, if sold, might be sold at a price less
than its cost. Similarly, if interest rates have declined from the time a
security was purchased, such security, if sold, might be sold at a price greater
than its purchase cost. In either instance, if the security is held to maturity,
no gain or loss will be realized.
Each Fund may purchase securities on a when-issued 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. The 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, although any
gain realized on such sale would be taxable. The Fund will not accrue income in
respect of a when-issued security prior to its stated delivery date.
Securities purchased on a when-issued basis and certain other securities
held in the Fund's portfolio are subject to changes in value (both generally
changing in the same way, i.e., appreciating when interest rates decline and
depreciating when interest rates rise) based upon the public's perception of the
creditworthiness of the issuer and changes, real or anticipated, in the level of
interest rates. Securities purchased on a when-issued basis may expose the Fund
to risk because they may experience such fluctuations prior to their actual
delivery. Purchasing securities on a when-issued basis can involve the
additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself. A
segregated account of the Fund consisting of cash, cash equivalents or U.S.
Government securities or other high quality liquid debt securities at least
equal at all times to the amount of the when-issued commitments will be
established and maintained at the Trust's custodian bank. Purchasing securities
on a when-issued basis when the Fund is fully or almost fully invested may
result in greater potential fluctuation in the value of the Fund's net assets
and its net asset value per share.
Investment decisions for each Fund are made independently from those of
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
of the type in which a Fund may invest at the same time as such Fund, available
investments or opportunities for sales will be allocated equitably to each of
them. In some cases, this procedure may adversely affect the size of the
position obtained for or disposed of by the Fund or the price paid or received
by the Fund.
MANAGEMENT OF THE TRUST
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 the Trust pursuant to an Investment Advisory
Agreement dated as of November 30, 1995. Prior to January 1, 1995, FNBC served
as each Fund's investment adviser and administrator. Under the Investment
Advisory Agreement, FCIMCO provides the day-to-day management of each Fund's
investments, subject to the overall authority of the Trust's Board of Trustees
and in conformity with Massachusetts law and the stated policies of the Trust.
FCIMCO is responsible for making investment decisions for the Trust, 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 Trust that in making its investment decisions FCIMCO does not obtain or use
material inside information in its or any of its affiliate's possession.
Under the terms of the Investment Advisory Agreement with the Trust, the
Trust has agreed to pay FCIMCO a monthly advisory fee at the annual rate of .20
of 1% of the value of each Fund's average daily net assets. For the fiscal year
ended December 31, 1995, the Trust, on behalf of each Fund, paid FCIMCO an
investment advisory fee at the effective annual rates of .11%, .09% and .12% of
the respective average daily net assets of the Cash Management Fund, Treasury
Prime Cash Management Fund and U.S. Government Securities Cash Management Fund.
FCIMCO serves as the Trust's administrator pursuant to an Administration
Agreement with the Trust. Under the Administration Agreement, FCIMCO generally
assists in all aspects of the Trust's operations, other than providing
investment advice, subject to the overall authority of the Trust's Board in
accordance with Massachusetts law. Under the terms of the Administration
Agreement, the Trust has agreed to pay FCIMCO a monthly administration fee at
the annual rate of .15 of 1% of the value of each Fund's average daily net
assets. For the fiscal year ended December 31, 1995, the Trust, on behalf
of each Fund, paid FCIMCO an administrative fee at the effective annual rates of
.15%, .11% and .15% of the respective average daily net assets of the Cash
Management Fund, Treasury Prime Cash Management Fund and U.S. Government
Securities Cash Management Fund. 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 Trust pursuant to a Master
Sub-Administration Agreement between FCIMCO and the Sub-Administrator. The Sub-
Administrator currently provides administrative services or sub-administrative
services to other investment companies with over $60 billion in assets.
FCIMCO, from its own funds, will pay the Sub-Administrator for the Sub-
Administrator's services.
DISTRIBUTOR
Concord Financial Group, Inc. (the "Distributor"), located at 3435 Stelzer
Road, Columbus, Ohio 43219-3035, serves as the Trust's principal underwriter and
distributor of the Funds' 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.
<PAGE>
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
Primary Funds Service Corp., 100 Financial Park, Franklin, Massachusetts
02038, is the Trust's Transfer and Dividend Disbursing Agent (the "Transfer
Agent"). The Bank of New York, 90 Washington Street, New York, New York 10286,
is the Trust's Custodian.
EXPENSES
All expenses incurred in the operation of the Trust are borne by the Trust,
except to the extent specifically assumed by FCIMCO. The expenses borne by the
Trust include: organizational costs, taxes, interest, brokerage fees and
commissions, if any, fees of Trustees who are not officers, directors, employees
or holders of 5% or more of the outstanding voting securities of FCIMCO,
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 Trust'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, Service Shares are subject to an annual distribution and service fee
pursuant to a plan adopted in accordance with Rule 12b-1 under the 1940 Act. See
"Service Plan." 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 on the basis determined by the Board of
Trustees, including, but not limited to, proportionately in relation to the net
assets of each Fund.
FCIMCO has undertaken, as to each Fund, until such time as it gives
investors at least 90 days' notice to the contrary, that if, in any fiscal year
the aggregate expenses of the 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 investment advisory and
administration fees, exceed .35% and .60% of the value of the average net assets
of the Institutional Class and the Service Class, respectively, for the fiscal
year, the Trust may deduct from the payment to be made to FCIMCO under the
Investment Advisory or Administration Agreements, or FCIMCO will bear, such
excess expense.
HOW TO BUY FUND SHARES
Each Fund is designed for institutional investors, including banks (such as
FNBC), acting for themselves or in a fiduciary, advisory, agency, custodial or
similar capacity, public agencies and municipalities. Fund shares may not be
purchased directly by individuals, although institutions may purchase shares for
accounts maintained by individuals. Generally, each investor will be required to
open a single master account with the Fund for all purposes. In certain cases,
the Trust may request investors to maintain separate master accounts for shares
held by the investor (i) for its own account, for the account of other
institutions and for accounts for which the institution acts as a fiduciary, and
(ii) for accounts for which the investor acts in some other capacity. An
institution may arrange with the Transfer Agent for sub-accounting services and
will be charged directly for the cost of such services. Certain accounts may be
eligible for an automatic investment privilege, commonly called a "sweep," under
which amounts in excess of a certain minimum held in those accounts will be
invested automatically in shares at pre-determined intervals. Each investor
desiring to use this privilege should consult its bank for details.
The minimum initial investment is $1,000,000 or any lesser amount if, in
the Distributor's opinion, the investor has adequate intent and availability of
funds to reach a future level of investment of $1,000,000. There is no minimum
for subsequent purchases. The initial investment must be accompanied by the
Account Application. The Trust reserves the right to offer Fund shares without
regard to the minimum purchase requirements to qualified or non-qualified
employee benefit plans. The Trust does not impose any sales charges in
connection with purchases of Fund shares, although Service Agents and other
institutions may charge their clients fees in connection with purchases for the
accounts of their clients. These fees would be in addition to any amounts which
might be received under the Service Plan. Service Agents may receive different
levels of compensation for selling different classes of shares. The Fund does
not issue share certificates. The Trust reserves the right to reject any
purchase order.
Fund shares may be purchased by wire, by telephone or through compatible
computer facilities. All payments should be made in U.S. dollars and, to avoid
fees and delays, should be drawn only on U.S. banks. Investors may telephone
orders for purchases of Fund shares by calling 1-800-370-9446. For instructions
concerning purchases and to determine whether their computer facilities are
compatible with the Trust's, investors should call 1-800-370-9446.
Fund shares are sold on a continuous basis at the net asset value per share
next determined after an order in proper form and Federal Funds (monies of
member banks in 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, its 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.
Net asset value per share is determined as of 12:00 noon, Central time, for
the Treasury Prime Cash Management Fund and 2:00 p.m., Central time, for the
Cash Management Fund and U.S. Government Securities Cash Management Fund, on
each Fund business day (which, as used herein, shall include each day that the
New York Stock Exchange is open for business, except Martin Luther King, Jr.
Day, Columbus Day and Veterans Day). Net asset value per share of each Class is
computed by dividing the value of the Fund's net assets represented by such
Class (i.e., the value of its assets less liabilities) by the total number of
shares of such Class outstanding. See "Determination of Net Asset Value" in the
Statement of Additional Information.
Investors whose payments are received in or converted into Federal Funds by
12:00 noon, Central time, for the Treasury Prime Cash Management Fund or 2:00
p.m., Central time, for the Cash Management Fund and U.S. Government Securities
Cash Management Fund, by the Transfer Agent will receive the dividend declared
that day. Investors whose payments are received in or converted into Federal
Funds by the Transfer Agent after 12:00 noon, Central time, for the Treasury
Prime Cash Management Fund or 2:00 p.m., Central time, for the Cash Management
Fund and U.S. Government Securities Cash Management Fund, will begin to accrue
dividends on the following 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 Trust could subject an investor to a $50 penalty imposed by the Internal
Revenue Service (the "IRS").
HOW TO REDEEM FUND SHARES
An investor may redeem all or any portion of the shares in the investor's
account on any Fund business day at the net asset value next determined after a
redemption request in proper form is received by the Transfer Agent. Therefore,
redemptions will be effected on the same day the redemption order is received
only if such order is received prior to 12:00 noon, Central time, for the
Treasury Prime Cash Management Fund or 2:00 p.m., Central time, for the Cash
Management Fund and U.S. Government Securities Cash Management Fund, on any Fund
business day. Shares that are redeemed earn dividends up to and including the
day prior to the day the redemption is effected. The proceeds of a redemption
will be paid in Federal Funds ordinarily on the Fund business day the redemption
is effected, but in any event within seven days. Payment for redemption requests
received before 12:00 noon, Central time, for the Treasury Prime Cash Management
Fund or 2:00 p.m., Central time, for the Cash Management Fund and U.S.
Government Securities Cash Management Fund, ordinarily is made in Federal Funds
wired to the redeeming shareholder on the same Fund business day. Payment for
redeemed shares for which a redemption order is received after such time on a
Fund business day is made in Federal Funds wired to the redeeming shareholder on
the next Fund business day following redemption. To allow the Investment Adviser
to manage the Funds' portfolios more effectively, investors are urged to make
redemption requests as early in the day as possible. In making redemption
requests, the names of the registered shareholders and their account numbers
must be supplied. Although each Fund generally retains the right to pay the
redemption price of its shares in kind with securities (instead of cash), the
Trust has filed an election under Rule 18f-1 under the 1940 Act committing to
pay in cash all redemptions by a shareholder of record up to the amounts
specified in such rule (in most cases approximately $250,000).
A wire redemption may be requested by telephone or wire to Primary Funds
Service Corp., P.O. Box 9743, Boston, Massachusetts 02109. For telephone
redemptions, please call 1-800-370-9446.
An investor may redeem shares by telephone if the investor has checked the
appropriate box on the Account Application. By selecting a telephone redemption
privilege, an investor authorizes the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be an authorized
representative of the investor and reasonably believed by the Transfer Agent to
be genuine. The Trust will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of identification, to confirm that
instructions are genuine and, if it does not follow such procedures, the Trust
or the Transfer Agent may be liable for any losses due to unauthorized or
fraudulent instructions. Neither the Trust nor the Transfer Agent will be liable
for following telephone instructions reasonably believed to be genuine.
The Trust makes available to institutions the ability to redeem shares
through compatible computer facilities. Investors desiring to redeem shares in
this manner should call 1-800-370-9446 to determine whether their computer
facilities are compatible and to receive instructions for redeeming shares in
this manner.
The right of any investor to receive payments with respect to any
redemption may be suspended or the payment of the redemption proceeds postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
SERVICE PLAN
(Service Shares Only)
Service Shares are subject to a Service Plan adopted pursuant to Rule 12b-1
under the 1940 Act. Under the Service Plan, each Fund pays the Distributor for
advertising, marketing and distributing the Fund's Service Shares and for the
provision of certain services to the holders of Service Shares a fee at the
annual rate of .25 of 1% of the value of the average daily net assets of the
Service Class. 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 such shareholder accounts. The fee payable for such services is
intended to be a "service fee" as defined in Article III, Section 26 of the NASD
Rules of Fair Practice. Under the Service Plan, the Distributor may make
payments to Service Agents in respect of these services. FCIMCO, FNBC and their
affiliates may act as Service Agents and receive fees under the Service 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 Fund pursuant to the Service Plan and any other compensation payable
by their clients in connection with the investment of their assets in Fund
shares. From time to time, the Distributor may defer or waive receipt of fees
under the Service Plan while retaining the ability to be paid by the Fund under
the Service Plan thereafter. The fees payable to the Distributor under the
Service Plan for advertising, marketing and distributing Service Shares and for
payments to Service Agents are payable without regard to actual expenses
incurred.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund ordinarily declares dividends from net investment income on each
Fund business day. Fund shares begin earning income dividends on the day the
purchase order is effective. Dividends usually are paid on the last calendar day
of each month, and are automatically reinvested in additional shares of the Fund
from which they were paid at net asset value or, at the investor's option, paid
in cash. Each Fund's earnings for Saturdays, Sundays and holidays are declared
as dividends on the preceding business day. If an investor redeems all shares in
its account at any time during the month, all dividends to which the investor is
entitled will be paid along with the proceeds of the redemption. Distributions
from net realized securities gains, if any, generally are declared and paid once
a year, but a Fund may make distributions on a more frequent basis to comply
with the distribution requirements of the Code, in all events in a manner
consistent with the provisions of the 1940 Act. No Fund will make distributions
from net realized securities gains unless capital loss carryovers, if any, have
been utilized or have expired. Investors may choose whether to receive
distributions in cash or to reinvest in additional shares of the Fund from which
they were paid at net asset value. All expenses are accrued daily and deducted
before declaration of dividends to investors. Dividends paid by each Class will
be calculated at the same time and in the same manner and will be of the same
amount, except that the expenses attributable solely to the Institutional Class
or the Service Class will be borne exclusively by such Class. Service Shares
will receive lower per share dividends than Institutional Shares because of the
higher expenses borne by the Service Class. See "Annual Fund Operating
Expenses."
Dividends paid by the Funds derived from net investment income, together
with distributions from any net realized short-term securities gains and all or
a portion of any gain realized from the sale or other disposition of certain
market discount bonds, 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 as long-term
capital gains for Federal income tax purposes if the beneficial holder of Fund
shares is a citizen or resident of the United States, regardless of how long
investors have held shares and whether such distributions are received in cash
or reinvested in additional shares.
Dividends and distributions attributable to interest from direct
obligations of the United States and paid by the Treasury Prime Cash Management
Fund currently are not subject to state personal income tax. The Trust intends
to provide shareholders of the Treasury Prime Cash Management Fund with a
statement which sets forth the percentage of dividends and distributions paid by
the Fund that is attributable to interest income from direct obligations of the
United States.
Dividends paid by a Fund derived from net investment income, together with
distributions from net realized short-term securities gains and all or a portion
of any gain realized from the sale or other disposition of certain market
discount bonds, paid by such Fund to a foreign investor who is the beneficial
owner of such Fund's shares generally are subject to U.S. nonresident
withholding taxes at the rate of 30%, unless the foreign investor claims the
benefit of a lower rate specified in a tax treaty. Distributions from net
realized long-term securities gains paid by the Fund to such foreign investor
generally will not be subject to U.S. nonresident withholding tax. However, such
distributions may be subject to backup withholding, as described below, unless
the foreign investor certifies his non-U.S. residency status.
Federal regulations generally require the Trust to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends and distributions
from net realized securities gains 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 Trust to institute backup withholding if the
IRS determines a shareholder's TIN is incorrect or if a shareholder has failed
to properly report taxable dividend and interest income on a Federal income tax
return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the record
owner of the account, and may be claimed as a credit on the record owner's
Federal income tax return.
Notice as to the tax status of dividends and distributions will be mailed
to investors annually. Each investor also will receive periodic summaries of its
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year. For the Municipal Cash
Management Fund, these statements will set forth the dollar amount of income
exempt from Federal tax and the dollar amount, if any, subject to Federal tax.
These dollar amounts will vary depending on the size and length of time of the
investor's investment in the Municipal Cash Management Fund. If the Municipal
Cash Management Fund pays dividends derived from taxable income, it intends to
designate as taxable the same percentage of the day's dividend as the actual
taxable income earned on that day bears to total income earned on that day.
Thus, the percentage of the dividend designated as taxable, if any, may vary
from day to day. No dividend will qualify for the dividends received deduction
allowable to certain U.S. corporations.
Management of the Trust 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 it shareholders. Qualification as a regulated
investment company 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. Each Fund is subject to a non-deductible 4% excise tax, measured
with respect to certain undistributed amounts of taxable income and capital
gains, if any.
Each investor and beneficial shareholder should consult its tax adviser
regarding questions as to Federal, state or local taxes.
GENERAL INFORMATION
The Trust was organized as an unincorporated business trust under the laws
of the Commonwealth of Massachusetts pursuant to an Agreement and Declaration of
Trust (the "Trust Agreement") dated October 20, 1994, and commenced operations
on January 17, 1995. The Trust is authorized to issue an unlimited number of
shares of beneficial interest, par value $.001 per share. Each Fund's shares are
classified into two 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. Holders of Service Shares
only, however, will be entitled to vote on matters
submitted to shareholders pertaining to the Service Plan. Investors have agreed
to vote Fund shares for which they are the record owners according to voting
instructions received from the beneficial holder of such shares.
To date, the Board of Trustees has authorized the creation of four separate
portfolios of shares. 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.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an investment
company, such as the Trust, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each Fund affected by such matter. Rule 18f-2 further provides that a Fund shall
be deemed to be affected by a matter unless it is clear that the interests of
such Fund in the matter are identical or that the matter does not affect any
interest of such Fund. The Rule exempts the selection of independent accountants
and the election of Trustees from the separate voting requirements of the Rule.
Under Massachusetts law, shareholders could, under certain circumstances,
be held liable for the obligations of the Trust. However, the Trust Agreement
disclaims shareholder liability for acts or obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Trust or a Trustee. The Trust
Agreement provides for indemnification from the Trust's property for all losses
and expenses of any shareholder held personally liable for the obligations of
the Trust. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations, a possibility which management believes
is remote. Upon payment of any liability incurred by the Trust, the shareholder
paying such liability will be entitled to reimbursement from the general assets
of the Trust. The Trustees intend to conduct the operations of the Trust in such
a way so as to avoid, as far as possible, ultimate liability of the shareholders
for liabilities of the Trust. As described under "Management of the Trust" in
the Statement of Additional Information, the Trust ordinarily will not hold
shareholder meetings; however, shareholders under certain circumstances may have
the right to call a meeting of shareholders for the purpose of voting to remove
Trustees.
The Transfer Agent maintains a record of each investor's ownership and
sends confirmations and statements of account.
Investor inquiries may be made by writing to the Trust at the address shown
on the front cover or by calling the telephone number shown on the front cover.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE TRUST'S
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 BY THE TRUST. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
<PAGE>
APPENDIX
PORTFOLIO SECURITIES
To the extent set forth in this Prospectus and except as noted below, each
Fund may invest in the following securities:
U.S. TREASURY SECURITIES -- Each Fund may invest in U.S. Treasury
securities which include Treasury Bills, Treasury Notes and Treasury Bonds 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.
U.S. GOVERNMENT SECURITIES -- In addition to U.S. Treasury securities, each
Fund, except the Treasury Prime Cash Management Fund, may invest in securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities, for example, Government National Mortgage
Association pass-through certificates, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal Home Loan
Banks, by the right of the issuer to borrow from the Treasury; others, such as
those issued by the Federal National Mortgage Association, by discretionary
authority of the U.S. Government to purchase certain obligations of the agency
or instrumentality; and others, such as those issued by the Student Loan
Marketing Association, only by the credit of the agency or instrumentality.
These securities bear fixed, floating or variable rates of interest. Interest
may fluctuate based on generally recognized reference rates or the relationship
of rates. While the U.S. Government provides financial support to such U.S.
Government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so, since it is not so obligated by law. Each Fund will
invest in such securities only when the Trust is satisfied that the credit risk
with respect to the issuer is minimal.
REPURCHASE AGREEMENTS -- Each Fund, except the Treasury Prime Cash
Management Fund, may enter into repurchase agreements, which 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 the 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.
BANK OBLIGATIONS -- The Cash Management Fund will invest in bank
obligations, including 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 and thrift institutions. 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 the
Fund will not benefit from insurance from the Bank Insurance Fund or the Savings
Association Insurance Fund administered by the Federal Deposit Insurance
Corporation. Bankers' acceptances are credit instruments evidencing the
obligation of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face amount
of the instrument upon maturity. The other short-term obligations may include
uninsured, direct obligations, bearing fixed, floating or variable interest
rates.
<PAGE>
COMMERCIAL PAPER AND OTHER SHORT-TERM CORPORATE OBLIGATIONS -- The Cash
Management Fund may invest in commercial paper, which consists of short-term,
unsecured promissory notes issued to finance short-term credit needs. The
commercial paper purchased by the Fund will consist only of direct obligations
issued by domestic and foreign entities. The other corporate obligations in
which the Fund may invest consist of high quality, U.S. dollar denominated
short-term bonds and notes (including variable amount master demand notes)
issued by domestic and foreign corporations.
FLOATING AND VARIABLE RATE OBLIGATIONS -- The Cash Management Fund also may
purchase floating and variable rate demand notes and bonds, which are
obligations ordinarily having stated maturities in excess of 13 months, but
which permit the holder to demand payment of principal at any time, or at
specified intervals not exceeding 13 months, in each case upon not more than 30
days' notice. Variable rate demand notes include master demand notes which are
obligations that permit the Fund to invest fluctuating amounts, which may change
daily without penalty, pursuant to direct arrangements between the Fund, as
lender, and the borrower. The interest rates on these notes fluctuate from time
to time. The issuer of such obligations normally has a corresponding right,
after a given period, to prepay in its discretion the outstanding principal
amount of the obligations plus accrued interest upon a specified number of days'
notice to the holders of such obligations. The interest rate on a floating rate
demand obligation is based on a known lending rate, such as a bank's prime rate,
and is adjusted automatically each time such rate is adjusted. The interest rate
on a variable rate demand obligation is adjusted automatically at specified
intervals. Frequently, such obligations are secured by letters of credit or
other credit support arrangements provided by banks. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there generally
is no established secondary market for these obligations, although they are
redeemable at face value. Accordingly, where these obligations are not secured
by letters of credit or other credit support arrangements, the Fund's right to
redeem is dependent on the ability of the borrower to pay principal and interest
on demand. Such obligations frequently are not rated by credit rating agencies
and, if not so rated, the Fund may invest in them only if the Investment Adviser
determines that at the time of investment the obligations are of comparable
quality to the other obligations in which the Fund may invest. The Investment
Adviser, on behalf of the Fund, will consider on an ongoing basis the credit
worthiness of the issuers of the floating and variable rate demand obligations
held by the Fund. The Fund will not invest more than 10% of the value of its net
assets in floating or variable rate demand obligations as to which it cannot
exercise the demand feature on not more than seven days' notice if there is no
secondary market available for these obligations, and in other securities that
are illiquid.
INVESTMENT PRACTICES
LENDING PORTFOLIO SECURITIES -- From time to time, each of the Cash
Management Fund and U.S. Government Securities Cash Management Fund may lend
securities from its portfolio to brokers, dealers and other financial
institutions needing to borrow securities to complete certain transactions. Such
loans may not exceed 33 1/3% of the value of the relevant Fund's total assets.
In connection with such loans, each of these Funds will receive collateral
consisting of cash or U.S. Government securities or, with respect to the Cash
Management Fund only, irrevocable letters of credit issued by financial
institutions. Such collateral will be maintained at all times in an amount equal
to at least 100% of the current market value of the loaned securities. Each of
these Funds can increase its income through the investment of such collateral.
Each of these Funds continues to be entitled to payments in amounts equal to the
interest 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.
ILLIQUID SECURITIES -- Each Fund may invest up to 10% of the value of its
net assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with its 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, participation interests that are not subject to the demand feature
described above, floating and variable rate demand obligations as to which the
Fund cannot exercise the related demand feature described above on not more than
seven days' notice and as to which there is no secondary market and repurchase
agreements providing for settlement in more than seven days after notice. 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.
BORROWING MONEY -- As a fundamental policy, the Treasury Prime Cash
Management Fund is permitted to borrow money to the extent permitted under the
1940 Act. However, the Fund currently intends to borrow money from banks 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 the Fund's total
assets, the Fund will not make any additional investments.
EXHIBIT 17(f)
PRAIRIE INSTITUTIONAL FUNDS
Cash Management Funds
INSTITUTIONAL And SERVICE SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
MARCH 18, 1996
- ------------------------------------------------------------------------
This Statement of Additional Information, which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectus of Cash Management Fund, Treasury Prime Cash Management Fund and U.S.
Government Securities Cash Management Fund (each, a "Fund") of Prairie
Institutional Funds (the "Trust"), dated March 18, 1996, as it may be revised
from time to time. To obtain a copy of the Funds' Prospectus, please write to
the Trust at 3435 Stelzer Road, Columbus, Ohio 43219-3035, 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") is the
distributor of the Funds' shares.
TABLE OF CONTENTS
PAGE
Investment Objective and Management Policies............................ B-2
Management of the Trust................................................. B-9
Management Arrangements................................................. B-11
Purchase of Fund Shares................................................. B-16
Service Plan............................................................ B-16
Redemption of Fund Shares............................................... B-18
Determination of Net Asset Value........................................ B-18
Portfolio Transactions.................................................. B-19
Dividends, Distributions and Taxes...................................... B-20
Yield Information....................................................... B-20
Information About the Trust............................................. B-22
Counsel and Independent Auditors........................................ B-24
Appendix................................................................ B-26
Financial Statements.................................................... B-29
Report of Independent Auditors.......................................... B-50
<PAGE>
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTIONS IN THE FUNDS' PROSPECTUS ENTITLED "DESCRIPTION OF
THE FUNDS" AND "APPENDIX."
PORTFOLIO SECURITIES AND INVESTMENT PRACTICES
BANK OBLIGATIONS. (Cash Management 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 the Fund are insured by the FDIC (although such
insurance may not be of material benefit to the Fund, depending on the principal
amount of the CDs of each bank held by the Fund) and are subject to Federal
examination and to a substantial body of Federal law and regulation. As a result
of Federal or state laws and regulations, domestic branches of domestic banks
whose CDs may be purchased by the Fund 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 recordkeeping requirements. In addition, less information may be
publicly available about a foreign branch of a domestic bank or about a foreign
bank than about a domestic bank.
Obligations of United States branches of foreign banks may be general
obligations of the parent 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.
The Fund may purchase CDs issued by banks, savings and loan
associations and similar thrift institutions with less than $1 billion in
assets, which are members of the FDIC, provided the Fund purchases any such CD
in a principal amount of not more than $100,000, which amount would be fully
insured by the Bank Insurance Fund or the Savings Association Insurance Fund
administered by the FDIC. Interest payments on such a CD are not insured by the
FDIC. The Fund will not own more than one such CD per such issuer.
FOREIGN SECURITIES. (Cash Management Fund) 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.
Furthermore, some of these securities are subject to brokerage 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. Custodial expenses for a portfolio of non-
U.S. securities generally are higher than for a portfolio of U.S. securities.
Income earned or received by the Cash Management Fund from sources within
foreign countries may be reduced by withholding and other taxes.
REPURCHASE AGREEMENTS. (Cash Management Fund and U.S.
Government Securities Cash Management Fund) The Trust's custodian or
subcustodian 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 that enters into them. In an attempt to reduce the risk
of incurring a loss on a repurchase agreement, each of these Funds will enter
into repurchase agreements only with registered or unregistered securities
dealers or banks with total assets in excess of one billion dollars, with
respect to securities of the type in which such 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. Each of these Funds will
consider on an ongoing basis the creditworthiness of the institutions with which
it enters into repurchase agreements.
ILLIQUID SECURITIES. If a substantial market of qualified
institutional buyers develops pursuant to Rule 144A under the Securities Act of
1933, as amended, for certain restricted securities held by a Fund, the Trust
intends to treat such securities as liquid securities in accordance with
procedures approved by the Trust's Board of Trustees. Because it is not possible
to predict with assurance how the market for restricted securities pursuant to
Rule 144A will develop, the Trust's Board of Trustees 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 its investment portfolio
during such period.
LENDING PORTFOLIO SECURITIES. (Cash Management Fund and U.S.
Government Securities Cash Management Fund) To a limited extent, each of these
Funds may lend its portfolio securities to brokers, dealers and other financial
institutions, provided it receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current market value of
the securities loaned. By lending its portfolio securities, the Fund can
increase its income through the investment of the cash collateral. For purposes
of this policy, the Trust considers collateral consisting of U.S. Government
securities or, in the case of the Cash Management Fund only, irrevocable letters
of credit issued by banks whose securities meet the standards for
investment by the Fund to be the equivalent of cash. Such loans may not exceed
33-1/3% of the Fund's total assets. 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 interest or other distributions payable on the
loaned securities, and any increase in market value; and (5) the Fund may pay
only reasonable custodian fees in connection with the loan. These conditions may
be subject to future modification.
INVESTMENT RESTRICTIONS
CASH MANAGEMENT AND U.S. GOVERNMENT SECURITIES CASH MANAGEMENT
FUNDS ONLY. Each of the Cash Management Fund and U.S. Government Securities Cash
Management Fund has adopted investment restrictions numbered 1 through 9 below
as fundamental policies. In addition, the Cash Management Fund has adopted
investment restrictions numbered 12 and 13 and the U.S. Government Securities
Cash Management Fund has adopted investment restriction number 14 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 Investment
Company Act of 1940, as amended (the "1940 Act")) of such Fund's outstanding
voting shares. Investment restrictions numbered 10 and 11 below are not
fundamental policies and may be changed by vote of a majority of the Trust's
Trustees at any time. Neither of these Funds may:
1. Borrow money, except from banks for temporary or emergency
(not leveraging) purposes in an amount up to 15% of the value of the Fund's
total assets (including the amount borrowed) based on the lesser of cost or
market, less liabilities (not including the amount borrowed) at the time the
borrowing is made. While borrowings exceed 5% of the value of the Fund's total
assets, the Fund will not make any additional investments.
2. Pledge, hypothecate, mortgage or otherwise encumber
its assets, except to secure borrowings for temporary or emergency
purposes.
3. Sell securities short or purchase securities on
margin.
4. Write or purchase put or call options or
combinations thereof.
5. Act as an underwriter of securities of other issuers,
except to the extent the Fund may be deemed an underwriter under the Securities
Act of 1933, as amended, by virtue of disposing of portfolio securities.
6. Purchase or sell real estate, real estate
investment trust securities, commodities or commodity contracts,
or oil and gas interests.
7. Make loans to others, except through the purchase of debt
obligations referred to in the Fund's Prospectus, except that 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 Trust's
Trustees.
8. Invest in companies for the purpose of exercising
control.
9. Invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation
or acquisition of assets.
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 10% of the value of the Fund's net assets would
be so invested.
11. Invest in oil, gas and other mineral leases, or
real estate limited partnerships.
The following investment restrictions numbered 12 and 13
apply only to the Cash Management Fund. The Cash Management Fund
may not:
12. Invest more than 5% of its assets in the obligations of
any one issuer, except that up to 25% of the value of the Cash Management Fund's
total assets may be invested (subject to Rule 2a-7 under the 1940 Act) without
regard to any such limitations.
13. 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 Cash Management Fund may invest less than 25% of its
total assets in bank obligations.
The following investment restriction number 14 applies
only to the U.S. Government Securities Cash Management Fund. The
U.S. Government Securities Cash Management Fund may not:
14. 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 investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
TREASURY PRIME CASH MANAGEMENT FUND ONLY. The Treasury Prime
Cash Management Fund has adopted investment restrictions numbered 1 through 8
below as fundamental policies. These restrictions cannot be changed, as to the
Fund, without approval by the holders of a majority (as defined in the 1940 Act)
of the 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 Trust's Trustees at any time.
The 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, 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 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, the 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.
5. Act as an underwriter of securities of other issuers,
except to the extent the Fund may be deemed an underwriter under the Securities
Act of 1933, as amended, by virtue of disposing of portfolio securities.
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, 10 and 11 may be deemed to give rise to
senior securities.
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, andoptions on futures contracts or indexes.
8. 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 investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
9. Invest in the securities of a company for the purpose of
exercising management or control, but the Fund will vote the securities it owns
in its portfolio as a shareholder in accordance with its views.
10. 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.
11. Purchase, sell or write puts, calls or combinations
thereof, except as described in the Prospectus and this Statement
of Additional Information.
12. 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 10% of the value of the Fund's net assets would
be so invested.
13. Invest in securities of other investment companies,
except to the extent permitted under the 1940 Act.
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.
The Trust may make commitments more restrictive than the
restrictions listed above so as to permit the sale of a Fund's shares in certain
states. Should the Trust determine that a commitment is no longer in the best
interests of a Fund and its shareholders, the Trust reserves the right to revoke
the commitment by terminating the sale of such Fund's shares in the state
involved.
MANAGEMENT OF THE TRUST
Trustees and officers of the Trust, together with information
as to their principal business occupations during at least the last five years,
are shown below.
TRUSTEES OF THE TRUST
JOHN P. GOULD, TRUSTEE. 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
the three other funds in the Prairie Family of Funds.
He is 55 years old and his address is 1101 East 58th
Street, Chicago, Illinois 60637.
MARILYN McCOY, TRUSTEE. Vice President of Administration and
Planning of Northwestern University. From 1981 to 1985,
she was the Director of Planning and Policy Development
for the University of Colorado. She also serves on the
Board of Directors of Evanston Hospital, the Chicago
Metropolitan YMCA, the Chicago Network and United
Charities. Mrs. McCoy is a member of the Chicago
Economics Club. Mrs. McCoy is also a Board member of
The Woodward Funds and the three other funds in the
Prairie Family of Funds. She is 46 years old and her
address is 1100 North Lake Shore Drive, Chicago,
Illinois 60611.
RAYMOND D. ODDI, TRUSTEE. Private consultant. A Director of
Caremark International, Inc. and Medisense, Inc.,
companies in the health care industry, and Baxter Credit
Union. From 1978 to 1986, Senior Vice President of
Baxter International, Inc., a company engaged in the
production of medical care products. He also is a
member of the Illinois Society of Certified Public
Accountants. Mr. Oddi is also a Board member of the
three other funds in the Prairie Family of Funds. He is
66 years old and his address is 1181 Loch Lane, Lake
Forest, Illinois 60045.
For so long as the plan described in the section captioned
"Service Plan" remains in effect, the Trustees of the Trust who are not
"interested persons" of the Trust, as defined in the 1940 Act, will be selected
and nominated by the Trustees who are not "interested persons" of the Trust.
OFFICERS OF THE TRUST
MARK A. DILLON, PRESIDENT. An employee of BISYS Fund Services,
which is an affiliate of Concord Holding Corporation, the
Trust's 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.
The Trust pays its Trustees 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 Trustee by the Trust 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)
Pension or Total
Retirement (4) Compensation
(2) Benefits Estimated From Fund and
(1) Aggregate Accrued as Part Annual Fund Complex
Name of Board Compensation of Fund's Benefits Upon Paid to Board
Member from Fund Expenses Retirement Member
- ---------------------- ----------------------- ----------------------- --------------------- ------------------
<S> <C> <C> <C> <C>
John P. Gould $5,295 None None $30,000
Marilyn McCoy $5,295 None None $30,000
Raymond D. Oddi $5,295 None None $30,000
</TABLE>
Board members and officers of the Trust, as a group, owned
less than 1% of any Fund's shares outstanding on February 27, 1996.
MANAGEMENT ARRANGEMENTS
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUNDS' PROSPECTUS ENTITLED "MANAGEMENT OF
THE TRUST."
INVESTMENT ADVISORY AGREEMENT. FCIMCO provides investment
advisory services pursuant to the Investment Advisory Agreement (the
"Agreement") dated as of November 30, 1995 with the Trust. As to each Fund, the
Agreement is subject to annual approval by (i) the Trust's Board of Trustees 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 Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust or FCIMCO, by vote cast in person at a
meeting called for the purpose of voting on such approval. Shareholders approved
the Agreement on November 28, 1995. The Trust's 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 Trust's Board of Trustees 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).
<PAGE>
FCIMCO is responsible for investment decisions for each Fund
in accordance with the stated policies of such Fund, subject to the approval of
the Trust's Board of Trustees. All purchases and sales are reported for the
Trustees' 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 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 Deborah L. Edwards, Marco Hanig, David R. Kling and
Stephen P. Manus, Managing Directors.
As compensation for FCIMCO's investment advisory services to
the Trust, the Trust has agreed to pay FCIMCO a monthly advisory fee at the
annual rate of .20 of 1% of the value of each Fund's average daily net assets.
Treasury Prime Cash Management Fund only. For the period from
March 22, 1995 (commencement of operations of Treasury Prime Cash Management
Fund) through December 31, 1995, the advisory fee payable by the Treasury Prime
Cash Management Fund amounted to $50,405, which amount was reduced by $27,592
pursuant to an undertaking by FCIMCO, resulting in a net advisory fee paid by
the Treasury Prime Cash Management Fund of $22,813.
Cash Management Fund and U.S. Government Securities Cash
Management Fund only. Prior to January 17, 1995, The First National Bank of
Chicago ("FNBC") provided management services to First Prairie Cash Management
and First Prairie U.S. Treasury Securities Cash Management (the predecessor
funds to the Cash Management Fund and U.S. Government Securities Cash Management
Fund, respectively) pursuant to separate management agreements with each such
fund and engaged The Dreyfus Corporation ("Dreyfus") to provide administrative
services to the funds. As compensation for FNBC's services, First Prairie Cash
Management and First Prairie U.S. Treasury Securities Cash Management each
agreed to pay FNBC a monthly management fee at the annual rate of .35 of 1% of
the value of the fund's average daily net assets. The fees payable to Dreyfus
for its services were paid by FNBC.
For the period July 30, 1992 (commencement of operations of
First Prairie Cash Management) through June 30, 1993 (the Fund's prior fiscal
year end), no management fee was paid by First Prairie Cash Management pursuant
to an undertaking by FNBC. For the fiscal year ended June 30, 1994, the
management fee payable by First Prairie Cash Management amounted to $892,114,
which amount was reduced by $304,836 pursuant to an undertaking by FNBC,
resulting in a net management fee paid by First Prairie Cash Management of
$587,278. For the fiscal year ended June 30, 1995, the aggregate
management/advisory fee payable by the Cash Management Fund and its predecessor
amounted to $793,104, which amount was reduced by $267,419 pursuant to
undertakings by FNBC and FCIMCO, resulting in an aggregate net
management/advisory fee paid by the Cash Management Fund and its predecessor of
$525,685. For the Cash Management Fund's new fiscal year ended December 31,
1995, the aggregate management/advisory fee payable by the Fund and its
predecessor amounted to $716,956, which amount was reduced by $331,599
pursuant to undertakings by FNBC and FCIMCO, resulting in an aggregate net
management/advisory fee paid by the Cash Management Fund and its predecessor of
$385,357.
First Prairie U.S. Treasury Securities Cash Management) through May 31,
1993 (the Fund's prior fiscal year end), no management fee was paid by First
Prairie U.S. Treasury Securities Cash Management pursuant to an undertaking by
FNBC. For the fiscal year ended May 31, 1994, the management fee payable by
First Prairie U.S. Treasury Cash Management amounted to $1,478,021, which amount
was reduced by $477,943 pursuant to an undertaking by FNBC, resulting in a net
management fee paid by First Prairie U.S. Treasury Cash Management of
$1,000,078. For the fiscal year ended May 31, 1995, the aggregate
management/advisory fee payable by the U.S. Government Securities Cash
Management Fund and its predecessor amounted to $1,388,345, which amount was
reduced by $312,740 pursuant to undertakings by FNBC and FCIMCO, resulting in an
aggregate net management/advisory fee paid by the U.S. Government Securities
Cash Management Fund and its predecessor of $1,075,605. For the U.S. Government
Securities Cash Management Fund's new fiscal year ended December 31, 1995, the
aggregate management/advisory fee payable by the Fund and its predecessor
amounted to $968,761, which amount was reduced by $381,198 pursuant to
undertakings by FNBC and FCIMCO, resulting in an aggregate net
management/advisory fee paid by the U.S. Government Securities Cash Management
Fund and its predecessor of $587,563.
<PAGE>
ADMINISTRATION AND SUB-ADMINISTRATION AGREEMENTS. Pursuant to
an Administration Agreement dated as of November 30, 1995 with the Trust, FCIMCO
assists in all aspects of the Trust's operations, other than providing
investment advice, subject to the overall authority of the Trust's Board in
accordance with Massachusetts law. As compensation for FCIMCO's administrative
services to the Trust, the Trust has agreed to pay FCIMCO a monthly
administrative fee at the annual rate of .15 of 1% of the value of each Fund's
average daily net assets. FCIMCO has engaged the Sub-Administrator to assist it
in providing certain administrative services to the Trust. Pursuant to its
agreement with FCIMCO (the "Sub-Administration Agreement"), the
Sub-Administrator assists FCIMCO in furnishing the Trust clerical help, data
processing, bookkeeping, internal auditing and legal services and certain other
services required by the Trust, 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 the Trust's operation,
other than providing investment advice. The fees payable to the
Sub-Administrator for its services are paid by FCIMCO.
The Trust has agreed that neither FCIMCO nor the Sub-
Administrator will 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 each
agreement with FCIMCO or the Sub-Administration Agreement relates, 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 the Agreement or Administration
Agreement or on the part of the Sub-Administrator in the performance of its
obligations or from reckless disregard by it of its obligations and duties under
the Sub-Administration Agreement. The Sub-Administration Agreement contains a
similar provision whereby FCIMCO has agreed to limit the Sub-Administrator's
liability.
For the period January 17, 1995 (effective date of
Administration Agreement) through December 31, 1995, the Cash Management Fund
and the U.S. Government Cash Management Fund each paid FCIMCO an administrative
fee of $522,730 and $707,131, respectively. For the period March 22, 1995
(commencement of operations of Treasury Prime Cash Management Fund) through
December 31, 1995, the administrative fee payable by the Treasury Prime Cash
Management Fund amounted to $37,804, which amount was reduced by $9,695 pursuant
to an undertaking by FCIMCO, resulting is a net administrative fee paid by the
Treasury Prime Cash Management Fund of $28,109.
EXPENSES AND EXPENSE INFORMATION. All expenses incurred in the
operation of the Trust are borne by the Trust, except to the extent specifically
assumed by FCIMCO. The expenses borne by the Trust include: organizational
costs, taxes, interest, brokerage fees and commissions, if any, fees of Trustees
who are not officers, directors, employees or holders of 5% or more of the
outstanding voting securities of FCIMCO, 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 Trust'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, the Service Class of each Fund is subject
to an annual distribution and service fee. See "Service Plan." 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 on the basis determined by the Board of Trustees, including, but
not limited to, proportionately in relation to the net assets of each Fund.
FCIMCO has undertaken, as to each Fund, until such time as it
gives investors at least 90 days' notice to the contrary, that if, in any fiscal
year the aggregate expenses of the 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 investment
advisory and administration fees, exceed .35% and .60% of the value of the
average net assets of the Institutional Class and the Service Class,
respectively, for the fiscal year, the Trust may deduct from the payment to be
made to FCIMCO under the Agreement or Administration Agreement, or FCIMCO will
bear, such excess expense.
In addition, 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 investment
advisory fee, exceed the expense limitation of any state having jurisdiction
over the Fund, the Trust 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 the Fund's net assets increases.
PURCHASE OF FUND SHARES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUNDS' PROSPECTUS ENTITLED "HOW TO BUY FUND
SHARES."
THE DISTRIBUTOR. The Distributor serves on a best
efforts basis as the Trust's distributor pursuant to an
agreement which is renewable annually.
USING FEDERAL FUNDS. Primary Fund Services Corp., the Trust's
transfer and dividend disbursing agent (the "Transfer Agent"), or the Trust 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. In some states, banks or other institutions effecting
transactions in Fund shares may be required to register as dealers pursuant to
state law.
SERVICE PLAN
(Service Shares Only)
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUNDS' PROSPECTUS ENTITLED "SERVICE PLAN."
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 Trust's Board of Trustees has adopted such a plan
(the "Service Plan") with respect to each Fund's Service Shares, pursuant to
which each Fund pays the Distributor for advertising, marketing and distributing
such Fund's Service Shares and for the provision of certain services to the
holders of Service Shares. Under the Service Plan, the Distributor may make
payments to certain financial institutions, securities dealers and other
financial industry professionals (collectively, "Service Agents") in respect to
these services. The Trust's Board of Trustees believes that there is a
reasonable likelihood that the Service Plan will benefit each Fund and the
holders of Service Shares.
A quarterly report of the amounts expended under the Service
Plan, and the purposes for which such expenditures were incurred, must be made
to the Trustees for their review. In addition, the Service Plan provides that it
may not be amended to increase materially the costs which holders of Service
Shares may bear pursuant to the Service Plan without the approval of the holders
of Service Shares and that other material amendments of the Service Plan must be
approved by the Board of Trustees and by the Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust and have no direct or
indirect financial interest in the operation of the Service Plan or in any
agreements entered into in connection with the Service Plan, by vote cast in
person at a meeting called for the purpose of considering such amendments. The
Service Plan is subject to annual approval by such vote of the Trustees cast in
person at a meeting called for the purpose of voting on the Service Plan. The
Service Plan was so approved by the Trustees at a meeting held on October 28,
1994. As to each Fund, the Service Plan may be terminated at any time by vote of
a majority of the Trustees who are not "interested persons" and have no direct
or indirect financial interest in the operation of the Service Plan or in any
agreements entered into in connection with the Service Plan or by vote of the
holders of a majority of such Fund's Service Shares.
For the period January 17, 1995 (effective date of Service
Plan) through December 31, 1995, the Cash Management Fund paid fees under the
Service Plan in the amount of $77,634, of which $77,607 was paid to FCIMCO and
its affiliates and $27 was retained by the Distributor. For the period January
17, 1995 through December 31, 1995, the U.S. Government Securities Cash
Management Fund paid fees under the Service Plan in the amount of $60,969, of
which $60,942 was paid to FCIMCO and its affiliates and $27 was retained by the
Distributor. For the period March 22, 1995 (commencement of operations of
Treasury Prime Cash Management Fund) through December 31, 1995, the Treasury
Prime Cash Management Fund paid fees under the Service Plan in the amount of
$38,530, of which $38,505 was paid to FCIMCO and its affiliates and $25 was
retained by the Distributor.
REDEMPTION OF FUND SHARES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUNDS' PROSPECTUS ENTITLED "HOW TO REDEEM
FUND SHARES."
REDEMPTION COMMITMENT. The Trust has committed itself to pay
in cash all redemption requests by any shareholder of record of a 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 of Trustees 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 FUNDS' PROSPECTUS ENTITLED "HOW TO BUY FUND
SHARES."
AMORTIZED COST PRICING. The valuation of each Fund's portfolio
securities is based upon their amortized cost which does not take into account
unrealized capital gains or losses. This involves valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the instrument.
The Board of Trustees has established procedures, as a
particular responsibility within the overall duty of care owed to each Fund's
investors, reasonably designed to stabilize the Fund's price per share as
computed for purposes of purchases and redemptions at $1.00. Such procedures
include review of each Fund's portfolio holdings by the Board of Trustees, at
such intervals as it deems appropriate, to determine whether the Fund's net
asset value calculated by using available market quotations or market
equivalents deviates from $1.00 per share based on amortized cost. In such
review of the portfolio of the 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 the Funds will be
valued at fair value as determined in good faith by the Board of Trustees.
The extent of any deviation between a Fund's net asset value
based upon available market quotations or market equivalents and $1.00 per share
based on amortized cost will be examined by the Board of Trustees. If such
deviation exceeds 1/2 of 1%, the Board of Trustees will consider what actions,
if any, will be initiated. In the event the Board of Trustees determines that a
deviation exists which may result in material dilution or other unfair results
to investors or existing shareholders, it has agreed to take such corrective
action as it 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
Portfolio securities of each Fund ordinarily are purchased directly from
the issuer or from an underwriter or a market maker for the securities.
Ordinarily, no brokerage commissions are paid by the Fund for such purchases.
Purchases from underwriters of portfolio securities may include a concession
paid by the issuer to the underwriter and the purchase price paid to, and sales
price received from, market makers for the securities may reflect the spread
between the bid and asked price. No brokerage commissions have been paid by any
Fund to date.
Transactions are allocated to various dealers by the Trust's
investment personnel in their best judgment. The primary consideration is prompt
and effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable FCIMCO to supplement its own research and analysis with
the views and information of other securities firms and may be selected based
upon their sales of Fund shares.
Research services furnished by brokers through which the Fund
effects securities transactions may be used by FCIMCO in advising other funds or
accounts it advises and, conversely, research services furnished to FCIMCO by
brokers in connection with other funds or accounts FCIMCO advises may be used by
FCIMCO in advising the Fund. Although it is not possible to place a dollar value
on these services, it is the opinion of FCIMCO that the receipt and study of
such services should not reduce FCIMCO's overall research expenses.
DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN FUNDS' PROSPECTUS ENTITLED "DIVIDENDS,
DISTRIBUTIONS AND TAXES."
Ordinarily, gains and losses realized from portfolio
transactions will be treated as capital gain or loss. However, all or a portion
of the gain realized from the disposition of certain market discount bonds will
be treated as ordinary income under Section 1276 of the Internal Revenue Code of
1986, as amended.
YIELD INFORMATION
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUNDS' PROSPECTUS ENTITLED "YIELD
INFORMATION."
Yield is computed in accordance with a standardized method which involves
determining the net change in the value of a hypothetical pre-existing Fund
account having a balance of one share at the beginning of a seven calendar day
period for which yield is to be quoted, dividing the net change by the value of
the account at the beginning of the period to obtain the base period return, and
annualizing the results (i.e., multiplying the base period return by 365/7). The
net change in the value of the account reflects the value of additional shares
purchased with dividends declared on the original share and any such additional
shares and fees that may be charged to the shareholder's account, in proportion
to the length of the base period and the Fund's average account size, but does
not include realized gains and losses or unrealized appreciation and
depreciation. Effective yield is computed by adding 1 to the base period return
(calculated as described above), raising that sum to a power equal to 365
divided by 7, and subtracting 1 from the result.
For the seven-day period ended December 31, 1995, the yield
and effective yield of each Fund were as follows:
<TABLE>
<CAPTION>
Effective
NAME OF FUND AND CLASS YIELD YIELD
<S> <C> <C>
Cash Management Fund
Institutional Shares 5.43%/5.35%* 5.57%/5.49%*
Service Shares 5.18%/5.09%* 5.31%/5.22%*
Treasury Prime Cash
Management Fund 4.87%/4.81%* 4.98%/4.93%*
Institutional Shares 4.62%/4.56%* 4.72%/4.66%*
Service Shares
U.S. Government Securities
Cash Management Fund
Institutional Shares 5.31%/5.22%* 5.44%/5.36%*
Service Shares 5.06%/4.93%* 5.18%/5.05%*
- ------------------------
* Absent fee waivers.
</TABLE>
Yields will fluctuate and are not necessarily representative
of future results. Each investor should remember that yield is a function of the
type and quality of the instruments in the portfolio, portfolio maturity and
operating expenses. An investor's principal in the Fund is not guaranteed. See
"Determination of Net Asset Value" for a discussion of the manner in which the
Fund's price per share is determined.
The Cash Management Fund, Treasury Prime Cash Management Fund
and U.S. Government Securities Cash Management Fund are rated AAAm or AAAmG, as
the case may be, by S&P and Aaa by Moody's.
From time to time, advertising materials for the Funds may
refer to FNBC's or any of its affiliate's full line of investment products for
the corporate cash market, including sweep services, on-line money market mutual
fund purchases, customized portfolio management, and OASIS, a same-day sweep
product that sweeps funds to an overnight Eurodollar time deposit.
INFORMATION ABOUT THE TRUST
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUNDS' PROSPECTUS ENTITLED "GENERAL
INFORMATION."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Fund shares have no preemptive, subscription or conversion rights and are freely
transferable.
On January 17, 1995, all of the assets and liabilities of
First Prairie Cash Management and First Prairie U.S. Treasury Securities Cash
Management were transferred to the Cash Management Fund and U.S. Government
Securities Cash Management Fund, respectively, in exchange for Institutional
Shares pursuant to a proposal approved by shareholders of each such First
Prairie fund on December 30, 1994.
The Trust will send annual and semi-annual financial
statements to all its shareholders.
As of February 29, 1996, the following shareholders owned of
record 5% or more of the indicated Fund's outstanding shares:
Percent of Cash
Management Fund
Institutional
NAME AND ADDRESS SHARES OUTSTANDING
Eagle and Co. 57.6%
c/o American National Bank
Money Market Processing Unit
1 North LaSalle Street, 7th Floor
Chicago, IL 60690
First National Bank of Chicago 29.9%
Corporate Asset Services
Attn: Mutual Funds Manager
One First National Plaza, Ste. 0115
Chicago, IL 60670-0001
First National Bank of Chicago 9.2%
Cash Management Dept.
Attn: Randy Noren
525 West Monroe, Ste. 0256, 6th Floor
Chicago, IL 60670-0001
Percent of Cash
Management Fund
Service Shares
NAME AND ADDRESS OUTSTANDING
First National Bank of Chicago 88.6%
Cash Management Dept.
Attn: Randy Noren
525 West Monroe, Ste 0256, 6th Floor
Chicago, IL 60670-0001
Morand and Co. 11.3%
c/o American National Bank
Mutual Fund Processing Unit
1 North LaSalle Street, 3rd Floor
Chicago, IL 60690
Percent of Treasury
Prime Cash
Management Fund
Institutional
NAME AND ADDRESS SHARES OUTSTANDING
First National Bank of Chicago 51.2%
Cash Management Dept.
Attn: Randy Noren
525 West Monroe, Ste 0256, 6th Floor
Chicago, IL 60670-0001
First National Bank of Chicago 48.5%
Corporation Asset Services
Attn: Mutual Funds Manager
One First National Plaza, Ste. 0115
Chicago, IL 60670-0001
Percent of Treasury
Prime Cash
Management Fund
Service
NAME AND ADDRESS SHARES OUTSTANDING
First National Bank of Chicago 98.0%
Cash Management Dept.
Attn: Randy Noren
525 West Monroe, Ste 0256, 6th Floor
Chicago, IL 60670-0001
Percent of U.S.
Government
Securities Cash
Management Fund
Institutional
NAME AND ADDRESS SHARES OUTSTANDING
First National Bank of Chicago 67.7%
Corporate Trust Administration
Attn: Cash Sweep Coordinator
One First National Plaza, Ste 0126
Chicago, IL 60670-0001
First National Bank of Chicago 19.6%
Corporate Asset Services
Attn: Mutual Funds Manager
One First National Plaza, Ste 0115
Chicago, IL 60670-0001
Eagle and Co. 8.7%
c/o American National Bank
Money Market Processing Unit
1 North LaSalle St., 7th Floor
Chicago, IL 60690
Percent of U.S.
Government
Securities Cash
Management Fund
Service Shares
NAME AND ADDRESS OUTSTANDING
First National Bank of Chicago 91.6%
Cash Management Dept.
Attn: Randy Noren
525 West Monroe, Ste 0256, 6th Floor
Chicago, IL 60670-0001
Morand and Co. 8.3%
c/o American National Bank
Mutual Fund Processing Unit
1 North LaSalle Street, 3rd Floor
Chicago, IL 60690
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.
COUNSEL AND INDEPENDENT AUDITORS
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New
York 10004-2696, as counsel for the Trust, has rendered its opinion as to
certain legal matters regarding the due authorization and valid issuance of the
shares of beneficial interest being sold pursuant to the Funds' Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York
10019, independent auditors, have been selected as auditors of the Trust.
<PAGE>
APPENDIX
Description of the highest commercial paper, bond and
other short- and long-term rating categories 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
Limited and IBCA Inc. ("IBCA") and Thomson BankWatch, Inc.
("BankWatch"):
Commercial Paper and Short-Term Ratings
The designation A-1 by S&P indicates that the degree of safety
regarding timely payment is either overwhelming or very strong. Those issues
determined to possess overwhelming safety characteristics are denoted with a
plus sign (+) designation.
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 of 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.
The rating Fitch-1 (Highest Grade) is the highest commercial
paper rating assigned by Fitch. Paper rated Fitch-1 is regarded as having the
strongest degree of assurance for timely payment.
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.
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.
The rating TBW-1 is the highest short-term obligation rating
assigned by BankWatch. Obligations rated TBW-1 are regarded as having the
strongest capacity for timely repayment.
Bond and Long-Term Ratings
Bonds rated AAA are considered by S&P to be the highest grade
obligations and possess an extremely strong capacity to pay principal and
interest.
Bonds 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."
Bonds rated AAA by Fitch are judged by Fitch to be strictly
high grade, broadly marketable, suitable for investment by trustees and
fiduciary institutions and liable to but slight market fluctuation other than
through changes in the money rate. The prime feature of an AAA bond is a showing
of earnings several times or many times interest requirements, with such
stability of applicable earnings that safety is beyond reasonable question
whatever changes occur in conditions.
Bonds rated AAA are judged by Duff to be of the highest credit
quality with negligible risk factors; only slightly more than U.S. Treasury
debt.
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.
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.
In addition to its 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 INSTITUTIONAL FUNDS
U.S. GOVERNMENT SECURITIES CASH MANAGEMENT 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 AGENCY NOTES--79.6%
Federal Farm Credit Bank Discount
Note................................. 5.59%* 1/19/96 $15,000 $ 14,958,075
Federal Farm Credit Bank Discount
Note................................. 5.48%* 1/22/96 30,000 29,904,100
Federal Farm Credit Bank Discount
Note................................. 5.63%* 1/25/96 20,000 19,924,933
Federal Farm Credit Bank Discount
Note................................. 5.50%* 2/15/96 27,000 26,814,375
Federal Farm Credit Bank Discount
Note................................. 5.47%* 3/11/96 25,000 24,734,097
Federal Home Loan Bank Discount Note.. 5.62%* 1/5/96 20,000 19,987,511
Federal Home Loan Bank Discount Note.. 5.61%* 1/12/96 30,000 29,948,575
Federal Home Loan Bank Discount Note.. 5.60%* 1/19/96 15,000 14,958,000
Federal Home Loan Bank Discount Note.. 5.50%* 2/21/96 30,000 29,766,250
Federal Home Loan Bank Discount Note.. 5.32%* 3/1/96 20,000 19,822,667
Federal Home Loan Mortgage Corp.
Discount Note........................ 5.60%* 1/3/96 35,000 34,989,111
Federal Home Loan Mortgage Corp.
Discount Note........................ 5.61%* 1/4/96 9,000 8,995,793
Federal Home Loan Mortgage Corp.
Discount Note........................ 5.56%* 2/2/96 24,000 23,881,387
Federal Home Loan Mortgage Corp.
Discount Note........................ 5.40%* 2/22/96 25,000 24,805,000
Federal National Mortgage Association
Discount Note........................ 5.52%* 1/29/96 26,000 25,888,373
Federal National Mortgage Association
Discount Note........................ 5.55%* 1/10/96 30,000 29,958,375
Federal National Mortgage Association
Discount Note........................ 5.53%* 1/24/96 25,000 24,911,674
Federal National Mortgage Association
Discount Note........................ 5.50%* 2/9/96 30,000 29,821,250
------------
TOTAL U.S. GOVERNMENT AGENCY NOTES
(AMORTIZED COST $434,069,546)......... 434,069,546
------------
REPURCHASE AGREEMENTS--21.5%
Repurchase agreement with the Sanwa Bank,
dated 12/29/95, with a maturity value
of $100,060,556
(See Footnote A)....................... 5.45% 1/2/96 100,000 100,000,000
Repurchase agreement with the National
Westminster Bank, dated 12/29/95, with a
maturity value of $17,210,798
(See Footnote B)..................... 5.65% 1/2/96 17,200 17,200,000
------------
TOTAL REPURCHASE AGREEMENTS
(AMORTIZED COST $117,200,000)......... 117,200,000
------------
TOTAL INVESTMENTS
(AMORTIZED COST $551,269,546)(A)--
101.1%................................ 551,269,546
Liabilities in excess of other assets--
(1.1)%................................ (5,875,100)
------------
NET ASSETS--100.0%..................... $545,394,446
============
</TABLE>
- --------
Percentages indicated are based on net assets of $545,394,446.
(a)Cost for federal income tax and financial reporting purposes are the same.
*Yield at purchase.
Footnote A: Collateralized by $100,000,000 U.S. Treasury Bills, due 8/22/96
and $4,428,000 U.S. Treasury Bills, due 8/22/96; with an aggregate value of
$101,011,116.
Footnote B: Collateralized by $17,000,000 U.S. Treasury Note,
6.63%, due 3/31/97; with a value of $17,488,962.
See Notes to Financial Statements.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
TREASURY PRIME CASH MANAGEMENT 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--100.7%
U.S. TREASURY BILLS--100.7%
U.S. Treasury Bill................... 5.24% 1/4/96 $14,235 $ 14,228,795
U.S. Treasury Bill................... 5.35% 1/11/96 22,290 22,260,306
U.S. Treasury Bill................... 5.32% 1/18/96 26,680 26,619,493
U.S. Treasury Bill................... 5.35% 1/25/96 11,466 11,425,504
U.S. Treasury Bill................... 5.27% 2/1/96 2,400 2,389,119
U.S. Treasury Bill................... 5.36% 2/8/96 15,940 15,856,931
U.S. Treasury Bill................... 5.33% 2/15/96 13,890 13,798,838
U.S. Treasury Bill................... 5.32% 2/22/96 11,000 10,919,284
U.S. Treasury Bill................... 5.37% 2/29/96 5,000 4,955,996
U.S. Treasury Bill................... 5.32% 3/7/96 15,000 14,853,700
U.S. Treasury Bill................... 5.20% 3/14/96 1,380 1,365,463
U.S. Treasury Bill................... 4.90% 3/21/96 6,000 5,934,667
U.S. Treasury Bill................... 4.94% 4/4/96 920 908,133
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(AMORTIZED COST $145,516,229)........ 145,516,229
------------
TOTAL INVESTMENTS
(AMORTIZED COST $145,516,229)(A)--
100.7%............................... 145,516,229
Liabilities in excess of other
assets--(0.7)%....................... (948,650)
------------
NET ASSETS--100.0%.................... $144,567,579
============
</TABLE>
- --------
Percentages indicated are based on net assets of $144,567,579.
(a)Cost for federal income tax and financial reporting purposes
are the same.
*Yield at purchase.
See Notes to Financial Statements.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
CASH MANAGEMENT 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>
SHORT-TERM INVESTMENTS--100.2%
COMMERCIAL PAPER--46.6%
BANKING--3.5%
Bayerische Vereinsbank...... A-1+/P-1 5.73% 1/8/96 $18,000 $ 17,979,945
------------
BROKERAGE--7.0%
Morgan Stanley Group,
Inc. ...................... A-1+/P-1 6.00% 1/3/96 18,000 17,994,000
Goldman Sachs & Co.......... A-1+/P-1 5.55% 4/2/96 18,000 17,744,700
------------
35,738,700
------------
CONSUMER GOODS AND SERVICES--
3.9%
Hershey Foods............... A-1+/P-1 5.65% 1/12/96 20,000 19,965,472
------------
FINANCE--21.3%
Barclays Funding............ A-1+/P-1 5.67% 1/19/96 20,000 19,943,300
Ciesco L.P.................. A-1+/P-1 5.70% 1/19/96 $20,000 19,943,000
Corporate Asset Funding Co.,
Inc........................ A-1+/P-1 5.65% 2/9/96 18,000 17,889,825
Dresdener U.S. Finance,
Inc........................ A-1+/P-1 5.69% 1/3/96 15,000 14,995,258
Nestle Capital.............. A-1+/P-1 5.73% 1/12/96 18,000 17,968,485
USAA Capital................ A-1+/P-1 5.64% 2/7/96 18,000 17,895,660
------------
108,635,528
------------
OIL--3.9%
Exxon Imperial.............. A-1+/P-1 5.62% 1/16/96 20,000 19,953,167
------------
TOBACCO--3.5%
Philip Morris Capital
Corp....................... A-1/P-1 5.72% 1/19/96 18,000 17,948,520
------------
TELECOMMUNICATIONS--3.5%
AT&T Corp................... A-1+/P-1 5.40% 3/19/96 18,000 17,783,940
------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST
$238,005,272)............... 238,005,272
------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
CASH MANAGEMENT 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>
BANKERS ACCEPTANCES--5.1%
Dai-Ichi Kangyo............. A-1/P-1 5.81% 2/23/96 $10,000 $ 9,914,464
Fuji Bank................... A-1/P-1 5.77% 1/3/96 8,000 7,997,436
Fuji Bank................... A-1/P-1 5.77% 1/12/96 3,000 2,994,711
Industrial Bank of Japan.... A-1/P-1 5.81% 2/28/96 5,000 4,953,197
------------
TOTAL BANKERS ACCEPTANCES
(AMORTIZED COST
$25,859,808)................ 25,859,808
------------
CERTIFICATES OF DEPOSIT--
35.0%
U.S. BRANCHES OF FOREIGN
BANKS--35.0%
ABN-AMRO.................... A-1+/P-1 5.78% 2/1/96 18,000 18,000,752
Bank of Montreal............ A-1+/P-1 5.78% 1/17/96 20,000 20,000,240
Banque Nationale de Paris... A-1/P-1 5.75% 2/5/96 18,000 18,000,646
Bayerische Hypotheken-Und
Wechsel Bank............... A-1/P-1 5.68% 3/22/96 19,000 19,000,078
Canadian Imperial Bank of
Commerce................... A-1+/P-1 5.60% 3/12/96 18,000 18,000,000
Commerzbank AG, New York ... A-1+/P-1 5.77% 1/17/96 15,000 15,000,132
Mitsubishi Bank............. A-1+/P-1 5.86% 3/6/96 18,000 18,002,183
National Westminster........ A-1+/P-1 5.78% 1/16/96 15,000 15,000,112
Rabobank.................... A-1+/P-1 5.75% 1/22/96 20,000 20,000,116
Societe Generale, New York.. A-1+/P-1 5.77% 2/5/96 18,000 18,000,330
------------
TOTAL CERTIFICATES OF DEPOSIT
(AMORTIZED COST
$179,004,589)............... 179,004,589
------------
TOTAL INVESTMENTS IN
SECURITIES
(AMORTIZED COST
$442,869,669)............... 442,869,669
------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
CASH MANAGEMENT FUND
- ----------------------------------------------------------------
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
MATURITY AMOUNT COST
DESCRIPTION RATE DATE (000) (NOTE 2(A))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS--13.5%
Repurchase agreement with National
Westminster, dated 12/29/95, with a
maturity value of $8,805,524 (See
Footnote A)........................... 5.65% 1/2/96 $ 8,800 $ 8,800,000
Repurchase agreement with Sanwa Bank,
dated 12/29/95, with a maturity value
of $60,036,333 (See Footnote B)....... 5.45% 1/2/96 60,000 60,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(AMORTIZED COST $68,800,000)........... 68,800,000
------------
TOTAL INVESTMENTS
(AMORTIZED COST $511,669,669)(A)--
100.2% ................................ 511,669,669
Liabilities in excess of other assets--
(0.2%)................................. (792,813)
------------
NET ASSETS--100.0%...................... $510,876,856
============
</TABLE>
- --------
Percentages indicated are based on net assets of $510,876,856.
(a) Cost for federal income tax and financial reporting purposes are the
same.
Footnote A: Collateralized by $8,700,000 U.S. Treasury Note, 6.63%, due
3/31/97; with a value of $9,022,031.
Footnote B: Collateralized by $45,000,000 U.S. Treasury Bills, due 8/22/96
and $16,528,000 U.S. Treasury Note, 6.50%; due 8/15/97; with an aggregate value
of $61,839,987.
See Notes to Financial Statements.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
- ----------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT TREASURY PRIME CASH
SECURITIES CASH CASH MANAGEMENT MANAGEMENT
MANAGEMENT FUND FUND FUND
--------------- --------------- ------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at
amortized cost (amortized cost
$434,069,546, $145,516,229 and
$442,869,669 respectively)..... $434,069,546 $145,516,229 $442,869,669
Repurchase agreements (amortized
cost $117,200,000, $0 and
$68,800,000, respectively)..... 117,200,000 -- 68,800,000
Cash............................ -- -- 109,258
Interest receivable............. 25,567 -- 1,185,264
Deferred organization expenses.. 129,663 87,971 140,036
Prepaid expenses and other
assets......................... 28,398 10,875 23,044
------------ ------------ ------------
Total Assets................. 551,453,174 145,615,075 513,127,271
------------ ------------ ------------
LIABILITIES:
Advisory fees payable........... 186,860 15,774 91,725
Administration fees payable..... 78,347 5,228 69,812
Service Plan fees payable
(Service Shares)............... 37,975 37,202 53,567
Bank overdraft.................. 3,618,499 537,469 --
Dividends payable............... 2,046,983 417,391 1,968,881
Accrued expenses................ 90,064 34,432 66,430
------------ ------------ ------------
Total Liabilities............ 6,058,728 1,047,496 2,250,415
------------ ------------ ------------
NET ASSETS....................... $545,394,446 $144,567,579 $510,876,856
============ ============ ============
Net Asset Value, Offering Price
and Redemption Price per Share:
Institutional Shares:
Net Assets..................... $489,394,679 $ 14,008,335 $389,126,965
Shares of beneficial interest
issued and outstanding, $0.001
par value, unlimited number of
shares authorized............. 489,865,389 14,008,529 389,280,704
------------ ------------ ------------
Net Asset Value per Share...... $ 1.00 $ 1.00 $ 1.00
============ ============ ============
Service Shares:
Net Assets..................... $ 55,999,767 $130,559,244 $121,749,891
Shares of beneficial interest
issued and outstanding, $0.001
par value, unlimited number of
shares authorized............. 56,053,643 130,561,050 121,798,020
------------ ------------ ------------
Net Asset Value per Share...... $ 1.00 $ 1.00 $ 1.00
============ ============ ============
COMPOSITION OF NET ASSETS:
Shares of beneficial interest,
at par........................ $ 545,919 $ 144,570 $ 511,079
Additional paid-in capital..... 545,373,112 144,425,009 510,567,644
Accumulated net realized losses
from investment transactions.. (524,585) (2,000) (201,867)
------------ ------------ ------------
NET ASSETS, DECEMBER 31, 1995.... $545,394,446 $144,567,579 $510,876,856
============ ============ ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
- ----------------------------------------------------------------
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT U.S. GOVERNMENT TREASURY PRIME CASH CASH
SECURITIES CASH SECURITIES CASH CASH MANAGEMENT MANAGEMENT MANAGEMENT
MANAGEMENT FUND MANAGEMENT FUND FUND FUND FUND
--------------- ------------------ --------------- -------------- ------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
FROM JUNE 1, FROM MARCH 22, FROM JULY 1,
1995 THROUGH FOR THE YEAR ENDED 1995 THROUGH 1995 THROUGH FOR THE YEAR ENDED
DECEMBER 31, MAY 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1995(A) 1995 1995(B) 1995(A) 1995
--------------- ------------------ --------------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest Income......... $17,275,666 $25,222,014 $1,364,594 $12,568,427 $15,728,576
----------- ----------- ---------- ----------- -----------
Expenses:
Advisory fees.......... 645,155 1,388,345 50,405 428,914 793,104
Administration fees.... 445,948 280,584 37,804 321,686 212,319
Service Plan fees
(Service Shares)...... 56,289 4,987 38,892 73,857 4,441
Custodian fees and
expenses.............. 81,041 52,283 42,386 68,908 68,943
Registration fees...... 3,430 83,301 3,693 19,428 54,803
Legal and audit fees... 22,812 82,193 18,638 33,180 62,493
Amortization of
organization
expenses.............. 14,413 11,079 12,559 13,095 12,954
Transfer agent fees and
expenses.............. 12,300 12,882 10,560 17,855
Reports to
shareholders.......... 12,838 9,301 19,437 11,592 13,114
Trustees' fees......... 6,670 4,990 625 6,912 4,608
Other expenses......... 21,361 48,122 2,042 13,845 44,768
----------- ----------- ---------- ----------- -----------
1,322,257 1,965,185 239,363 1,001,977 1,289,402
Less: Expense
reimbursements........ (224,593) (312,740) (107,023) (177,520) (267,419)
----------- ----------- ---------- ----------- -----------
1,097,664 1,652,445 132,340 824,457 1,021,983
----------- ----------- ---------- ----------- -----------
NET INVESTMENT
INCOME.............. 16,178,002 23,569,569 1,232,254 11,743,970 14,706,593
----------- ----------- ---------- ----------- -----------
REALIZED GAINS (LOSSES)
ON INVESTMENT
TRANSACTIONS:
Net realized gains
(losses) on investment
transactions.......... 4,517 (482,586) (2,000) (4,009) (1,706,625)
----------- ----------- ---------- ----------- -----------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS............. $16,182,519 $23,086,983 $1,230,254 $11,739,961 $12,999,968
=========== =========== ========== =========== ===========
</TABLE>
- --------
(a)Effective June 1, 1995 and July 1, 1995, the Funds changed their fiscal year
ends from May 31 and June 30, respectively, to December 31.
(b)Commencement of operations.
See Notes to Financial Statements.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
U.S. GOVERNMENT SECURITIES CASH MANAGEMENT FUND
- ----------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1995(1) MAY 31, 1995 MAY 31, 1994
-------------------- ------------------ ------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS:
Net investment income.. $ 16,178,002 $ 23,569,569 $ 12,751,537
Net realized gains
(losses) from
investment
transactions.......... 4,517 (482,586) (42,640)
--------------- --------------- --------------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS..... 16,182,519 23,086,983 12,708,897
--------------- --------------- --------------
DIVIDENDS TO
SHAREHOLDERS FROM NET
INVESTMENT INCOME:
Institutional Shares.. (15,014,802) (23,456,426) (12,751,537)
Service Shares........ (1,163,200) (113,143) --
--------------- --------------- --------------
TOTAL DIVIDENDS TO
SHAREHOLDERS........ (16,178,002) (23,569,569) (12,751,537)
--------------- --------------- --------------
FUND SHARE TRANSACTIONS
(AT $1.00 PER SHARE):
Net proceeds from
shares sold........... 2,081,961,762 3,284,015,157 4,379,511,392
Dividends reinvested... 785,116 1,824,905 563,903
Cost of shares re-
deemed................ (2,029,306,950) (3,207,041,446) (4,230,925,537)
--------------- --------------- --------------
NET INCREASE IN NET
ASSETS FROM FUND
SHARE TRANSACTIONS
(NOTE 3)............ 53,439,928 78,798,616 149,149,758
--------------- --------------- --------------
TOTAL INCREASE IN
NET ASSETS......... 53,444,445 78,316,030 149,107,118
NET ASSETS:
Beginning of period.... 491,950,001 413,633,971 264,526,853
--------------- --------------- --------------
End of period.......... $ 545,394,446 $ 491,950,001 $ 413,633,971
=============== =============== ==============
</TABLE>
- --------
(1) For the period June 1, 1995 through December 31, 1995.
Effective June 1, 1995, the Fund changed its fiscal year end from May 31 to
December 31.
See Notes to Financial Statements.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
TREASURY PRIME CASH MANAGEMENT FUND
- ----------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
DECEMBER 31, 1995(A)
--------------------
<S> <C>
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income.................................... $ 1,232,254
Net realized losses from investment transactions......... (2,000)
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... 1,230,254
-------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Institutional Shares.................................... (497,768)
Service Shares.......................................... (734,486)
-------------
Total Dividends to Shareholders........................ (1,232,254)
-------------
FUND SHARE TRANSACTIONS (AT $1.00 PER SHARE):
Net proceeds from shares sold............................ 393,556,208
Dividends reinvested..................................... 434,305
Cost of shares redeemed.................................. (249,420,934)
-------------
NET INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS
(NOTE 3).............................................. 144,569,579
-------------
TOTAL INCREASE IN NET ASSETS.......................... 144,567,579
NET ASSETS:
Beginning of period...................................... --
-------------
End of period............................................ $ 144,567,579
=============
</TABLE>
- --------
(a) For the period March 22, 1995 (commencement of operations) through December
31, 1995.
See Notes to Financial Statements.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
CASH MANAGEMENT FUND
- ----------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1995(1) JUNE 30, 1995 JUNE 30, 1994
-------------------- ------------------ ------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS:
Net investment income.. $ 11,743,970 $ 14,706,593 $ 8,493,966
Net realized losses
from investment
transactions.......... (4,009) (1,706,625) (136,023)
--------------- --------------- --------------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS..... 11,739,961 12,999,968 8,357,943
--------------- --------------- --------------
DIVIDENDS TO
SHAREHOLDERS FROM NET
INVESTMENT INCOME:
Institutional Shares.. (10,179,235) (14,606,645) (8,493,966)
Service Shares........ (1,564,735) (99,948) --
--------------- --------------- --------------
TOTAL DIVIDENDS TO
SHAREHOLDERS........ (11,743,970) (14,706,593) (8,493,966)
--------------- --------------- --------------
FUND SHARE TRANSACTIONS
(AT $1.00 PER SHARE):
Net proceeds from
shares sold........... 1,257,882,248 1,539,582,005 2,167,517,783
Dividends reinvested... 985,906 1,362,169 654,107
Cost of shares
redeemed.............. (1,078,572,576) (1,454,140,686) (2,099,928,742)
--------------- --------------- --------------
NET INCREASE IN NET
ASSETS FROM FUND
SHARE TRANSACTIONS
(NOTE 3)............ 180,295,578 86,803,488 68,243,148
--------------- --------------- --------------
Increase due to capital
contribution from
affiliate of Investment
Adviser
(Note 4(d))............ -- 1,668,500 --
--------------- --------------- --------------
TOTAL INCREASE IN
NET ASSETS......... 180,291,569 86,765,363 68,107,125
NET ASSETS:
Beginning of period.... 330,585,287 243,819,924 175,712,799
--------------- --------------- --------------
End of period.......... $ 510,876,856 $ 330,585,287 $ 243,819,924
=============== =============== ==============
</TABLE>
- --------
(1)For the period from July 1, 1995 through December 31, 1995. Effective July 1,
1995, the Fund changed its fiscal year end from June 30 to December 31.
See Notes to Financial Statements.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
- ----------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- ----------------------------------------------------------------
NOTE 1--GENERAL
Prairie Institutional Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended, (the "Act") as an open-end management
investment company. At December 31, 1995, the Trust was comprised of four
separate investment portfolios as follows: Cash Management Fund, Municipal Cash
Management Fund, Treasury Prime Cash Management Fund and U.S. Government
Securities Cash Management Fund. The accompanying financial statements relate
only to the Cash Management Fund, Treasury Prime Cash Management Fund and U.S.
Government Securities Cash Management Fund (collectively, the "Funds"). As of
December 31, 1995, the Municipal Cash Management Fund had not yet commenced
operations.
The Funds each offer two classes of shares, Institutional Shares and Service
Shares. Institutional Shares and Service Shares are substantially the same
except that Service Shares are subject to fees payable under a Service Plan
adopted pursuant to Rule 12b-1 under the Act (the "Service Plan") at an annual
rate of 0.25% of the average daily net asset value of the outstanding Service
Shares.
At a shareholder meeting of the First Prairie U.S. Treasury Securities Cash
Management Fund (the "Treasury Predecessor Fund") held on December 21, 1994, the
shareholders approved an Agreement and Plan of Exchange pursuant to which the
Treasury Predecessor Fund transferred all of its assets and liabilities to the
U.S. Government Securities Cash Management Fund. In exchange for the assets and
liabilities, the U.S. Government Securities Cash Management Fund issued
Institutional Shares to the shareholders of the Treasury Predecessor Fund equal
in value to shares held by such shareholders immediately prior to the exchange.
This exchange took place on January 17, 1995, at which time the shareholders of
the Treasury Predecessor Fund received a pro rata distribution of 431,159,110
Institutional Shares of the U.S. Government Securities Cash Management Fund
having a net asset value of $430,731,675.
At a shareholder meeting of First Prairie Cash Management Fund (the
"Predecessor Fund") held on December 21, 1994, the shareholders approved an
Agreement and Plan of Exchange pursuant to which the Predecessor Fund
transferred all of its assets and liabilities to the Cash Management Fund. In
exchange for the assets and liabilities, the Cash Management Fund issued
Institutional Shares to the shareholders of the Predecessor Fund equal in value
to shares held by such shareholders immediately prior to the exchange. This
exchange took place on January 17, 1995 at which time the shareholders of the
Predecessor Fund received a pro rata distribution of 263,124,343 Institutional
Shares of the Cash Management Fund having a net asset value of $262,954,610.
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 Concord Holding
Corporation ("Concord"), a wholly-owned subsidiary of The BISYS Group, Inc.
("BISYS"), to serve as the Funds' sub-administrator. Concord Financial Group,
Inc., a wholly-owned subsidiary of BISYS, serves as the principal underwriter
and distributor of each Fund's shares.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Trust in the preparation of its 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: Investments of the Funds are valued at either
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 Funds generally may not (a) purchase any
instrument with a remaining maturity greater than thirteen months unless such
instrument is subject to a demand feature, or (b) maintain a dollar-weighted
average maturity which exceeds 90 days.
(b) 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. Interest income,
adjusted for amortization of premiums and when appropriate, discounts on
investments, is earned from settlement date and recognized on the accrual basis.
The U.S. Government Securities Cash Management Fund and Cash Management 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 purchase agreement, must have
an aggregate market value greater than or equal to the repurchase price 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
purchase obligation, the Fund maintains the right to sell the underlying
securities at market value and may claim any resulting loss against the seller.
(c) Dividends to shareholders: Each Fund's dividends from net investment
income are declared daily and paid monthly. Distributions from net realized
capital gains, if any, are normally declared annually 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"). To the
extent that net realized capital gains can be offset by capital loss carryovers,
it is the policy of each Fund not to distribute such gains.
(d) Federal income taxes: It is the policy of each Fund to continue 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 taxable income sufficient to relieve it
from all, or substantially all, Federal income taxes. At December 31, 1995, the
U.S. Government Securities Cash Management Fund had unused capital loss
carryovers of approximately $525,000, 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, $7,000 of the carryover expires
in 2001, $460,000 expires in 2002 and $58,000 expires in 2003. At December 31,
1995, the Treasury Prime Cash Management Fund had unused capital loss carryovers
of approximately $2,000, 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, $2,000 of the carryover expires in 2003. At
December 31, 1995, the Cash Management Fund had unused capital loss carryovers
of approximately $201,000 available for Federal income tax purposes to be
applied against future net capital gains, if any, realized subsequent to
December 31, 1995. The carryover does not include net realized securities losses
from November 1, 1995 through December 31, 1995 which are treated, for Federal
income tax purposes, as arising in fiscal 1996. If not applied, $19,000 of the
carryover expires in 2001, $151,000 expires in 2002 and $31,000 expires in 2003.
(e) 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.
NOTE 3--FUND SHARE TRANSACTIONS
Transactions in shares of the Funds are summarized below (at $1.00 per
share):
<TABLE>
<CAPTION>
TREASURY PRIME
U.S. GOVERNMENT SECURITIES CASH MANAGEMENT
CASH MANAGEMENT FUND FUND
---------------------------------------------- ---------------
FOR THE PERIOD FOR THE PERIOD
JUNE 1, 1995 FOR THE YEAR MARCH 22, 1995
THROUGH ENDED MAY 31, THROUGH
DECEMBER 31, ------------------------------ DECEMBER 31,
1995(1) 1995 1994 1995(2)
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Institutional Shares:
Shares issued.......... 1,915,896,446 3,256,766,429 4,379,511,392 206,294,412
Dividends reinvested... 784,723 1,824,654 563,903 433,330
Shares redeemed........ (1,902,575,044) (3,196,512,306) (4,230,925,537) (192,719,213)
-------------- -------------- -------------- ------------
Net increase........... 14,106,125 62,078,777 149,149,758 14,008,529
============== ============== ============== ============
Service Shares:
Shares issued.......... 166,065,316 27,248,728 -- 187,261,796
Dividends reinvested... 393 251 -- 975
Shares redeemed........ (126,731,906) (10,529,140) -- (56,701,721)
-------------- -------------- -------------- ------------
Net increase........... 39,333,803 16,719,839 -- 130,561,050
============== ============== ============== ============
Net increase in Fund.... 53,439,928 78,798,616 149,149,758 144,569,579
============== ============== ============== ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CASH MANAGEMENT
FUND
--------------------------------------------
FOR THE
PERIOD
JULY 1, 1995 FOR THE YEAR
THROUGH ENDED MAY 31,
DECEMBER ------------------------------
31, 1995(1) 1995 1994
------------ -------------- --------------
<S> <C> <C> <C>
Institutional Shares:
Shares issued.................... 930,307,164 1,491,127,430 2,167,517,783
Dividends reinvested............. 985,563 1,361,860 654,107
Shares redeemed.................. (861,416,587) (1,417,064,383) (2,099,928,742)
------------ -------------- --------------
Net increase..................... 69,876,140 75,424,907 68,243,148
============ ============== ==============
Service Shares:
Shares issued.................... 327,575,084 48,454,575 --
Dividends reinvested............. 343 309 --
Shares redeemed.................. (217,155,989) (37,076,303) --
------------ -------------- --------------
Net increase..................... 110,419,438 11,378,581 --
============ ============== ==============
Net increase in Fund.............. 180,295,578 86,803,488 68,243,148
============ ============== ==============
</TABLE>
(1) Effective June 1, 1995 and July 1, 1995, the Funds changed their fiscal year
ends from May 31 and June 30, respectively, to December 31.
(2) Commencement of operations.
NOTE 4--MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFIILIATES
(a) The Trust has an Investment Advisory Agreement with FCIMCO pursuant to
which FCIMCO has agreed to provide the day-to-day management of each of the
Fund's investments for an advisory fee at an annual rate of 0.20% of each Fund's
average daily net assets.
The Trust has an Administration Agreement with FCIMCO pursuant to which FCIMCO
has agreed to assist in all aspects of each Fund's operations for an
administration fee at an annual rate of 0.15% of each Fund's average daily net
assets. In addition, FCIMCO has engaged Concord to assist in providing certain
administrative services to each Fund pursuant to a Master Sub-Administration
Agreement between FCIMCO and Concord. FCIMCO has agreed to pay Concord a fee
from its own administration fee on a monthly basis.
For the period June 1, 1995 through December 31, 1995 for the U.S.
Government Securities Cash Management Fund, the period March 22, 1995
(commencement of operations) through December 31, 1995 for the Treasury Prime
Cash Management Fund and the period July 1, 1995 through December 31, 1995 for
the Cash Management Fund, FCIMCO agreed to limit each Fund's expenses to an
annual amount not to exceed 0.35% of average daily net assets for Institutional
Shares and 0.60% of average daily net assets for Service Shares. As a result,
The U.S. Government Securities Cash Management Fund, Treasury Prime Cash
Management Fund and Cash Management Fund were reimbursed expenses of $224,593,
$107,023 and $177,520, respectively.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
- ----------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
- ----------------------------------------------------------------
(b) The Trust has adopted a Service Plan pursuant to Rule 12b-1 under the
Act. Under the terms of the Service Plan, each Fund pays the Distributor an
annual fee of 0.25% of the average daily net assets of the outstanding Service
Shares for advertising, marketing and distributing each Fund's Service Shares
and for the provision of certain services to the holders of Service Shares. The
Distributor may make payments to others, including FCIMCO, FNBC and their
affiliates, for the provision of these services. For the period June 1, 1995
through December 31, 1995, the U.S. Government Securities Cash Management Fund
paid fees under the Service Plan in the amount of $56,289. For the period March
22, 1995 (commencement of operations) through December 31, 1995, the Treasury
Prime Cash Management Fund paid fees under the Service Plan in the amount of
$38,892. For the period July 1, 1995 (initial offering of Service Shares)
through December 31, 1995, the Cash Management Fund paid fees under the Service
Plan in the amount of $73,857. Of these amounts, the following was paid to the
Distributor and FCIMCO and its affiliates:
<TABLE>
<CAPTION>
AMOUNT PAID TO
AMOUNT PAID TO FCIMCO
THE DISTRIBUTOR AND ITS AFFILIATES
--------------- ------------------
<S> <C> <C>
U.S. Government Securities Cash Management
Fund...................................... $19 $56,270
Treasury Prime Cash Management Fund........ 25 38,867
Cash Management Fund....................... 16 73,841
</TABLE>
(c) The Fund's pay each Trustee a pro-rata share of the aggregate fixed annual
fee of $25,000 and an attendance fee of $1,000 per meeting for all of the Funds
in the Prairie Family of Funds.
(d) During the year ended June 30, 1995, an affiliate of FCIMCO purchased
securities from the Cash Management Fund at an amount in excess of the
securities' fair market value. The Cash Management Fund recorded a realized loss
on these sales in the amount of $1,668,500 and the Cash Management Fund recorded
an offsetting capital contribution from the affiliate. As a result of varying
treatment for book and tax purposes, the capital contribution was reclassified
from additional paid-in-capital to accumulated net realized losses in the
Statement of Assets and Liabilities.
NOTE 5--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 NBD Bancorp, Inc., which in turn is a wholly
owned subsidiary of FCNBD).
On February 20, 1996, the Board of Trustees of The Woodward Funds and the
Board of Trustees of Prairie Funds and Prairie Institutional Funds 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.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
U.S. GOVERNMENT SECURITIES CASH MANAGEMENT FUND
- ----------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE YEAR FOR THE PERIOD
ENDED ENDED MAY 31, ENDED
DECEMBER 31, ------------------ MAY 31,
1995(1) 1995 1994 1993(2)
-------------- -------- -------- --------------
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES:
NET ASSET VALUE, BEGINNING
OF PERIOD.................. $ 0.9989 $ 0.9999 $ 1.0000 $ 1.0000
-------- -------- -------- --------
Income from investment operations:
Net investment income..... 0.0320 0.0492 0.0302 0.0319
Net realized gains
(losses) from
investments.............. 0.0001 (0.0010) (0.0001) --
-------- -------- -------- --------
Total income from
investment operations... 0.0321 0.0482 0.0301 0.0319
-------- -------- -------- --------
Less dividends:
From net investment
income................... (0.0320) (0.0492) (0.0302) (0.0319)
-------- -------- -------- --------
Net change in net asset val-
ue......................... 0.0001 (0.0010) (0.0001) --
-------- -------- -------- --------
NET ASSET VALUE, END OF PE-
RIOD....................... $ 0.9990 $ 0.9989 $ 0.9999 $ 1.0000
======== ======== ======== ========
TOTAL RETURN................. 3.24%++ 5.03% 3.06% 3.25%+
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets................. 0.35%+ 0.34% 0.30% 0.02%+
Ratio of net investment
income to average net
assets..................... 5.46%+ 4.94% 3.02% 3.10%+
Ratio of expenses to average
net assets*................ 0.42%+ 0.41% 0.41% 0.49%+
Ratio of net investment
income to average net
assets*.................... 5.39%+ 4.87% 2.91% 2.63%+
Net assets, end of period
(000's omitted)............ $489,395 $475,248 $413,634 $264,527
</TABLE>
- --------
(1) For the period June 1, 1995 through December 31, 1995. Effective June
1, 1995, the Fund changed its fiscal year end from May 31 to December 31.
(2) For the period June 2, 1992 (commencement of operations) through May
31, 1993.
* 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.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
U.S. GOVERNMENT SECURITIES CASH MANAGEMENT FUND
- ----------------------------------------------------------------
FINANCIAL HIGHLIGHTS--(CONTINUED)
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
ENDED ENDED
DECEMBER 31, MAY 31,
1995(1) 1995(2)
-------------- --------------
<S> <C> <C>
SERVICE SHARES:
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 0.9989 $ 1.0000
-------- --------
Income from investment operations:
Net investment income......................... 0.0305 0.0199
Net realized gains (losses) from investments.. 0.0001 (0.0011)
-------- --------
Total income from investment operations...... 0.0306 0.0188
-------- --------
Less dividends:
From net investment income.................... (0.0305) (0.0199)
-------- --------
Net change in net asset value................... 0.0001 (0.0011)
-------- --------
NET ASSET VALUE, END OF PERIOD.................. $ 0.9990 $ 0.9989
======== ========
TOTAL RETURN..................................... 3.09%++ 2.01%++
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets......... 0.60%+ 0.57%+
Ratio of net investment income to average net
assets......................................... 5.17%+ 5.48%+
Ratio of expenses to average net assets*........ 0.69%+ 0.66%+
Ratio of net investment income to average net
assets*........................................ 5.08%+ 5.39%+
Net assets, end of period (000's omitted)....... $ 56,000 $ 16,702
</TABLE>
- --------
(1) For the period June 1, 1995 through December 31, 1995. Effective June
1, 1995, the Fund changed its fiscal year end from May 31 to December 31.
(2) For the period January 17, 1995 (initial offering date of Service
Shares) through May 31, 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.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
TREASURY PRIME CASH MANAGEMENT FUND
- ----------------------------------------------------------------
FINANCIAL HIGHLIGHTS--(CONTINUED)
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED
DECEMBER 31,
1995(1)
--------------
<S> <C>
INSTITUTIONAL SHARES:
NET ASSET VALUE, BEGINNING OF PERIOD............................ $ 1.0000
--------
Income from investment operations:
Net investment income......................................... 0.0399
--------
Less dividends:
From net investment income.................................... (0.0399)
--------
Net change in net asset value................................... --
--------
NET ASSET VALUE, END OF PERIOD.................................. $ 1.0000
========
TOTAL RETURN..................................................... 4.06%++
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets......................... 0.35%+
Ratio of net investment income to average net assets............ 5.16%+
Ratio of expenses to average net assets*........................ 1.23%+
Ratio of net investment income to average net assets*........... 4.28%+
Net assets, end of period (000's omitted)....................... $ 14,008
</TABLE>
- --------
(1) For the period March 22, 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.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
TREASURY PRIME CASH MANAGEMENT FUND
- ----------------------------------------------------------------
FINANCIAL HIGHLIGHTS--(CONTINUED)
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED
DECEMBER 31,
1995(1)
--------------
<S> <C>
SERVICE SHARES:
NET ASSET VALUE, BEGINNING OF PERIOD............................ $ 1.0000
--------
Income from investment operations:
Net investment income......................................... 0.0380
--------
Less dividends:
From net investment income.................................... (0.0380)
--------
Net change in net asset value................................... --
--------
NET ASSET VALUE, END OF PERIOD.................................. $ 1.0000
========
TOTAL RETURN..................................................... 3.86%++
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets......................... 0.60%+
Ratio of net investment income to average net assets............ 4.72%+
Ratio of expenses to average net assets*........................ 0.74%+
Ratio of net investment income to average net assets*........... 4.58%+
Net assets, end of period (000's omitted)....................... $130,559
</TABLE>
- --------
(1) For the period March 22, 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.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
CASH MANAGEMENT FUND
- ----------------------------------------------------------------
FINANCIAL HIGHLIGHTS--(CONTINUED)
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
FOR THE PERIOD YEAR ENDED FOR THE PERIOD
ENDED JUNE 30, ENDED
DECEMBER 31, ------------------- JUNE 30,
1995(1) 1995 1994 1993(2)
-------------- -------- -------- --------------
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES:
NET ASSET VALUE, BEGINNING
OF PERIOD................. $ 0.9994 $ 0.9993 $ 0.9999 $ 1.0000
-------- -------- -------- --------
Income from investment
operations:
Net investment income.... 0.0277 0.0507 0.0333 0.0297
Net realized gains
(losses) from
investments............. 0.0002 (0.0059) (0.0006) (0.0001)
-------- -------- -------- --------
Total income from
investment operations.. 0.0279 0.0448 0.0327 0.0296
-------- -------- -------- --------
Less dividends:
From net investment
income.................. (0.0277) (0.0507) (0.0333) (0.0297)
-------- -------- -------- --------
Increase due to capital
contribution from
affiliate of Investment
Adviser (Note 3(d))....... -- 0.0060 -- --
-------- -------- -------- --------
Net change in net asset
value..................... 0.0002 0.0001 (0.0006) (0.0001)
-------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD.................... $ 0.9996 $ 0.9994 $ 0.9993 $ 0.9999
======== ======== ======== ========
TOTAL RETURN................ 2.80%++ 5.19%* 3.38% 3.25%+
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets........ 0.35%+ 0.35% 0.31% 0.05%+
Ratio of net investment
income to average net
assets.................... 5.51%+ 5.11% 3.33% 3.19%+
Ratio of expenses to
average net assets**...... 0.43%+ 0.44% 0.43% 0.56%+
Ratio of net investment
income to average net
assets**.................. 5.43%+ 5.02% 3.21% 2.68%+
Net assets, end of period
(000's omitted)........... $389,127 $319,214 $243,820 $175,713
</TABLE>
- --------
(1) For the period July 1, 1995 through December 31, 1995. Effective July
1, 1995, the Fund changed its fiscal year end from June 30 to December 31.
(2) For the period July 30, 1992 (commencement of operations) through June
30, 1993.
* Had the Portfolio not had a capital contribution by an affiliate of the
Investment Adviser during the period, the total return would have been 4.51%
(See Note 4(d) to Financial Statements).
** 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.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
CASH MANAGEMENT FUND
- ----------------------------------------------------------------
FINANCIAL HIGHLIGHTS--(CONTINUED)
- ----------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
ENDED ENDED
DECEMBER 31, JUNE 30,
1995(1) 1995(2)
-------------- --------------
<S> <C> <C>
SERVICE SHARES:
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 0.9994 $ 1.0000
-------- --------
Income from investment operations:
Net investment income......................... 0.0264 0.0245
Net realized gains (losses) from investments.. 0.0002 (0.0006)
-------- --------
Total income from investment operations...... 0.0266 0.0239
-------- --------
Less dividends:
From net investment income.................... (0.0264) (0.0245)
-------- --------
Net change in net asset value................... 0.0002 (0.0006)
-------- --------
NET ASSET VALUE, END OF PERIOD.................. $ 0.9996 $ 0.9994
======== ========
TOTAL RETURN..................................... 2.68%++ 2.47%++
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets......... 0.60%+ 0.60%+
Ratio of net investment income to average net
assets......................................... 5.25%+ 5.46%+
Ratio of expenses to average net assets*........ 0.69%+ 0.71%+
Ratio of net investment income to average net
assets*........................................ 5.16%+ 5.35%+
Net assets, end of period (000's omitted)....... $121,750 $ 11,372
</TABLE>
- --------
(1) For the period July 1, 1995 through December 31, 1995. Effective June
1, 1995, the Fund changed its ficsal year end from June 30 to December 31.
(2) For the period January 17, 1995 (initial offering date of Service
Shares) through June 30, 1995.
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee waivers and/or reimbursements had not
occurred, the ratios would have been as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
- ----------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
- ----------------------------------------------------------------
PRAIRIE INSTITUTIONAL FUNDS THE BOARD OF TRUSTEES AND
SHAREHOLDERS
We have audited the accompanying statements of asset and liabilities,
including the portfolios of investments, of Prairie Institutional Funds
(comprising, respectively, the U.S. Government Securities Cash Managment,
Treasury Prime Cash Management and Cash Management Funds) (the "Fund") 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 Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of 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 Institutional Funds 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.
LOGO
New York, New York
February 22, 1996
<PAGE>
EXHIBIT (17)(g)
PRAIRIE INSTITUTIONAL FUNDS
U.S. Government Securities
Cash Management Fund
Treasury Prime
Cash Management Fund
Cash Management Fund
ANNUAL REPORT
December 31, 1995
PLEASE READ CAREFULLY: THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK,
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.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
(312) 732-6400
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders........................ 1
Portfolio of Investments...................... 2
Statements of Assets and Liabilities.......... 7
Statements of Operations...................... 8
Statements of Changes in Net Assets........... 9
Notes to Financial Statements................. 12
Financial Highlights.......................... 17
Report of Ernst & Young LLP, Independent
Auditors..................................... 23
</TABLE>
INVESTMENT ADVISER
First Chicago Investment Management Company (FCIMCO)
Three First National Plaza, Chicago, IL 60670
----------------
DISTRIBUTOR
Concord Financial Group, Inc.
3435 Stelzer Road
Columbus, OH 43219
<PAGE>
Dear Shareholder,
The seven-day annualized SEC yields as of December 31, 1995 for the following
Prairie Institutional Funds were:
<TABLE>
<CAPTION>
INSTITUTIONAL SERVICE
SHARES SHARES
------------- -------
<S> <C> <C>
Cash Management Fund............................... 5.43% 5.18%
U.S. Government Securities Cash Management Fund.... 5.31% 5.06%
Treasury Prime Cash Management Fund................ 4.87% 4.62%
</TABLE>
YEAR IN REVIEW
The U.S. investment market's performance in 1995 was nothing short of
extraordinary. We have seen some of the best market returns in years for both
equity and fixed income instruments. But on the short-term yield front, 1995
was a mixed year. Through the first six months of 1995, yields continued to
rise and most expected the average taxable yield to close in on 6.0%. However,
the slowdown in economic growth, coupled with low inflation prompted the
Federal Reserve to change its course and lower the Fed Funds rate, first in
July and again in December. As of December 31, 1995, the Fed Funds rate stood
at 5.50%.
INTEREST RATE OUTLOOK
The Federal Reserve is expected to continue to ease interest rates at a
gradual pace in 1996. This should occur primarily in the first part of the
year. The slant of monetary policy reflects a growing consensus at the Fed
that economic growth can be stronger (and the unemployment rate lower) without
igniting inflation. Our forecast is for the Fed Funds rate to fall to 4 3/4%
by the end of 1996. Relatively moderate economic growth and benign inflation,
along with the Fed easing credit, are also expected to keep long-term bond
rates low.
TRIPLE "A" RATING
As of December 31, 1995, the Prairie Cash Management Fund, Prairie U.S.
Government Securities Cash Management Fund and Prairie Treasury Prime Cash
Management Fund were each assigned a "AAA" rating by Standard & Poor's Ratings
Group and a "Aaa" rating by Moody's Investors Service, Inc. These ratings
reflect the Funds' capacity to maintain principal value and limit exposure to
loss.
We thank you for the confidence that you have expressed in us by investing in
the Prairie Institutional Funds. We will continue to earn your trust by
pursuing an investment strategy which seeks to provide competitive yields
consistent with protecting the value of your principal.
Sincerely,
LOGO
Deborah L. Edwards
Managing Director
First Chicago Investment Management Company
- --------
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
Funds will be able to maintain a stable NAV of $1.00 per share.
Portions of the advisory fee, the administration fee and other expenses
payable by the Funds are being reimbursed. If fees had not been reimbursed,
the yields shown above would have been 5.35% and 5.09%, respectively, for the
Prairie Cash Management Fund, 5.22% and 4.93% for the Prairie U.S. Government
Securities Cash Management Fund and 4.81% and 4.56% for the Prairie Treasury
Prime Cash Management Fund. The fee reimbursement is voluntary and may be
terminated or modified at any time which would reduce fund performance.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK,
ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC"), THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
1
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
U.S. GOVERNMENT SECURITIES CASH MANAGEMENT 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 AGENCY NOTES--79.6%
Federal Farm Credit Bank Discount
Note................................. 5.59%* 1/19/96 $15,000 $ 14,958,075
Federal Farm Credit Bank Discount
Note................................. 5.48%* 1/22/96 30,000 29,904,100
Federal Farm Credit Bank Discount
Note................................. 5.63%* 1/25/96 20,000 19,924,933
Federal Farm Credit Bank Discount
Note................................. 5.50%* 2/15/96 27,000 26,814,375
Federal Farm Credit Bank Discount
Note................................. 5.47%* 3/11/96 25,000 24,734,097
Federal Home Loan Bank Discount Note.. 5.62%* 1/5/96 20,000 19,987,511
Federal Home Loan Bank Discount Note.. 5.61%* 1/12/96 30,000 29,948,575
Federal Home Loan Bank Discount Note.. 5.60%* 1/19/96 15,000 14,958,000
Federal Home Loan Bank Discount Note.. 5.50%* 2/21/96 30,000 29,766,250
Federal Home Loan Bank Discount Note.. 5.32%* 3/1/96 20,000 19,822,667
Federal Home Loan Mortgage Corp.
Discount Note........................ 5.60%* 1/3/96 35,000 34,989,111
Federal Home Loan Mortgage Corp.
Discount Note........................ 5.61%* 1/4/96 9,000 8,995,793
Federal Home Loan Mortgage Corp.
Discount Note........................ 5.56%* 2/2/96 24,000 23,881,387
Federal Home Loan Mortgage Corp.
Discount Note........................ 5.40%* 2/22/96 25,000 24,805,000
Federal National Mortgage Association
Discount Note........................ 5.52%* 1/29/96 26,000 25,888,373
Federal National Mortgage Association
Discount Note........................ 5.55%* 1/10/96 30,000 29,958,375
Federal National Mortgage Association
Discount Note........................ 5.53%* 1/24/96 25,000 24,911,674
Federal National Mortgage Association
Discount Note........................ 5.50%* 2/9/96 30,000 29,821,250
------------
TOTAL U.S. GOVERNMENT AGENCY NOTES
(AMORTIZED COST $434,069,546)......... 434,069,546
------------
REPURCHASE AGREEMENTS--21.5%
Repurchase agreement with the Sanwa
Bank, dated 12/29/95, with a maturity
value of $100,060,556 (See Footnote
A)................................... 5.45% 1/2/96 100,000 100,000,000
Repurchase agreement with the National
Westminster Bank, dated 12/29/95,
with a maturity value of $17,210,798
(See Footnote B)..................... 5.65% 1/2/96 17,200 17,200,000
------------
TOTAL REPURCHASE AGREEMENTS
(AMORTIZED COST $117,200,000)......... 117,200,000
------------
TOTAL INVESTMENTS
(AMORTIZED COST $551,269,546)(A)--
101.1%................................ 551,269,546
Liabilities in excess of other assets--
(1.1)%................................ (5,875,100)
------------
NET ASSETS--100.0%..................... $545,394,446
============
</TABLE>
- --------
Percentages indicated are based on net assets of $545,394,446.
(a)Cost for federal income tax and financial reporting purposes are the same.
*Yield at purchase.
Footnote A: Collateralized by $100,000,000 U.S. Treasury Bills, due 8/22/96
and $4,428,000 U.S. Treasury Bills, due 8/22/96; with an aggregate
value of $101,011,116.
Footnote B: Collateralized by $17,000,000 U.S. Treasury Note, 6.63%, due
3/31/97; with a value of $17,488,962.
See Notes to Financial Statements.
2
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
TREASURY PRIME CASH MANAGEMENT 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--100.7%
U.S. TREASURY BILLS--100.7%
U.S. Treasury Bill................... 5.24% 1/4/96 $14,235 $ 14,228,795
U.S. Treasury Bill................... 5.35% 1/11/96 22,290 22,260,306
U.S. Treasury Bill................... 5.32% 1/18/96 26,680 26,619,493
U.S. Treasury Bill................... 5.35% 1/25/96 11,466 11,425,504
U.S. Treasury Bill................... 5.27% 2/1/96 2,400 2,389,119
U.S. Treasury Bill................... 5.36% 2/8/96 15,940 15,856,931
U.S. Treasury Bill................... 5.33% 2/15/96 13,890 13,798,838
U.S. Treasury Bill................... 5.32% 2/22/96 11,000 10,919,284
U.S. Treasury Bill................... 5.37% 2/29/96 5,000 4,955,996
U.S. Treasury Bill................... 5.32% 3/7/96 15,000 14,853,700
U.S. Treasury Bill................... 5.20% 3/14/96 1,380 1,365,463
U.S. Treasury Bill................... 4.90% 3/21/96 6,000 5,934,667
U.S. Treasury Bill................... 4.94% 4/4/96 920 908,133
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(AMORTIZED COST $145,516,229)........ 145,516,229
------------
TOTAL INVESTMENTS
(AMORTIZED COST $145,516,229)(A)--
100.7%............................... 145,516,229
Liabilities in excess of other
assets--(0.7)%....................... (948,650)
------------
NET ASSETS--100.0%.................... $144,567,579
============
</TABLE>
- --------
Percentages indicated are based on net assets of $144,567,579.
(a)Cost for federal income tax and financial reporting purposes are the same.
*Yield at purchase.
See Notes to Financial Statements.
3
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
CASH MANAGEMENT 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>
SHORT-TERM INVESTMENTS--100.2%
COMMERCIAL PAPER--46.6%
BANKING--3.5%
Bayerische Vereinsbank...... A-1+/P-1 5.73% 1/8/96 $18,000 $ 17,979,945
------------
BROKERAGE--7.0%
Morgan Stanley Group,
Inc. ...................... A-1+/P-1 6.00% 1/3/96 18,000 17,994,000
Goldman Sachs & Co.......... A-1+/P-1 5.55% 4/2/96 18,000 17,744,700
------------
35,738,700
------------
CONSUMER GOODS AND SERVICES--
3.9%
Hershey Foods............... A-1+/P-1 5.65% 1/12/96 20,000 19,965,472
------------
FINANCE--21.3%
Barclays Funding............ A-1+/P-1 5.67% 1/19/96 20,000 19,943,300
Ciesco L.P.................. A-1+/P-1 5.70% 1/19/96 20,000 19,943,000
Corporate Asset Funding Co.,
Inc........................ A-1+/P-1 5.65% 2/9/96 18,000 17,889,825
Dresdener U.S. Finance,
Inc........................ A-1+/P-1 5.69% 1/3/96 15,000 14,995,258
Nestle Capital.............. A-1+/P-1 5.73% 1/12/96 18,000 17,968,485
USAA Capital................ A-1+/P-1 5.64% 2/7/96 18,000 17,895,660
------------
108,635,528
------------
OIL--3.9%
Exxon Imperial.............. A-1+/P-1 5.62% 1/16/96 20,000 19,953,167
------------
TOBACCO--3.5%
Philip Morris Capital
Corp....................... A-1/P-1 5.72% 1/19/96 18,000 17,948,520
------------
TELECOMMUNICATIONS--3.5%
AT&T Corp................... A-1+/P-1 5.40% 3/19/96 18,000 17,783,940
------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST
$238,005,272)............... 238,005,272
------------
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
CASH MANAGEMENT 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>
BANKERS ACCEPTANCES--5.1%
Dai-Ichi Kangyo............. A-1/P-1 5.81% 2/23/96 $10,000 $ 9,914,464
Fuji Bank................... A-1/P-1 5.77% 1/3/96 8,000 7,997,436
Fuji Bank................... A-1/P-1 5.77% 1/12/96 3,000 2,994,711
Industrial Bank of Japan.... A-1/P-1 5.81% 2/28/96 5,000 4,953,197
------------
TOTAL BANKERS ACCEPTANCES
(AMORTIZED COST
$25,859,808)................ 25,859,808
------------
CERTIFICATES OF DEPOSIT--
35.0%
U.S. BRANCHES OF FOREIGN
BANKS--35.0%
ABN-AMRO.................... A-1+/P-1 5.78% 2/1/96 18,000 18,000,752
Bank of Montreal............ A-1+/P-1 5.78% 1/17/96 20,000 20,000,240
Banque Nationale de Paris... A-1/P-1 5.75% 2/5/96 18,000 18,000,646
Bayerische Hypotheken-Und
Wechsel Bank............... A-1/P-1 5.68% 3/22/96 19,000 19,000,078
Canadian Imperial Bank of
Commerce................... A-1+/P-1 5.60% 3/12/96 18,000 18,000,000
Commerzbank AG, New York ... A-1+/P-1 5.77% 1/17/96 15,000 15,000,132
Mitsubishi Bank............. A-1+/P-1 5.86% 3/6/96 18,000 18,002,183
National Westminster........ A-1+/P-1 5.78% 1/16/96 15,000 15,000,112
Rabobank.................... A-1+/P-1 5.75% 1/22/96 20,000 20,000,116
Societe Generale, New York.. A-1+/P-1 5.77% 2/5/96 18,000 18,000,330
------------
TOTAL CERTIFICATES OF DEPOSIT
(AMORTIZED COST
$179,004,589)............... 179,004,589
------------
TOTAL INVESTMENTS IN
SECURITIES
(AMORTIZED COST
$442,869,669)............... 442,869,669
------------
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS--(CONTINUED)
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMORTIZED
MATURITY AMOUNT COST
DESCRIPTION RATE DATE (000) (NOTE 2(A))
----------- ---- -------- --------- -----------
<S> <C> <C> <C> <C>
REPURCHASE AGREEMENTS--13.5%
Repurchase agreement with National
Westminster, dated 12/29/95, with a
maturity value of $8,805,524 (See
Footnote A)........................... 5.65% 1/2/96 $ 8,800 $ 8,800,000
Repurchase agreement with Sanwa Bank,
dated 12/29/95, with a maturity value
of $60,036,333 (See Footnote B)....... 5.45% 1/2/96 60,000 60,000,000
------------
TOTAL REPURCHASE AGREEMENTS
(AMORTIZED COST $68,800,000)........... 68,800,000
------------
TOTAL INVESTMENTS
(AMORTIZED COST $511,669,669)(A)--
100.2% ................................ 511,669,669
Liabilities in excess of other assets--
(0.2%)................................. (792,813)
------------
NET ASSETS--100.0%...................... $510,876,856
============
</TABLE>
- --------
Percentages indicated are based on net assets of $510,876,856.
(a) Cost for federal income tax and financial reporting purposes are the same.
Footnote A: Collateralized by $8,700,000 U.S. Treasury Note, 6.63%, due
3/31/97; with a value of $9,022,031.
Footnote B: Collateralized by $45,000,000 U.S. Treasury Bills, due 8/22/96 and
$16,528,000 U.S. Treasury Note, 6.50%; due 8/15/97; with an
aggregate value of $61,839,987.
See Notes to Financial Statements.
6
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT TREASURY PRIME CASH
SECURITIES CASH CASH MANAGEMENT MANAGEMENT
MANAGEMENT FUND FUND FUND
--------------- --------------- ------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at
amortized cost (amortized cost
$434,069,546, $145,516,229 and
$442,869,669 respectively)..... $434,069,546 $145,516,229 $442,869,669
Repurchase agreements (amortized
cost $117,200,000, $0 and
$68,800,000, respectively)..... 117,200,000 -- 68,800,000
Cash............................ -- -- 109,258
Interest receivable............. 25,567 -- 1,185,264
Deferred organization expenses.. 129,663 87,971 140,036
Prepaid expenses and other
assets......................... 28,398 10,875 23,044
------------ ------------ ------------
Total Assets................. 551,453,174 145,615,075 513,127,271
------------ ------------ ------------
LIABILITIES:
Advisory fees payable........... 186,860 15,774 91,725
Administration fees payable..... 78,347 5,228 69,812
Service Plan fees payable
(Service Shares)............... 37,975 37,202 53,567
Bank overdraft.................. 3,618,499 537,469 --
Dividends payable............... 2,046,983 417,391 1,968,881
Accrued expenses................ 90,064 34,432 66,430
------------ ------------ ------------
Total Liabilities............ 6,058,728 1,047,496 2,250,415
------------ ------------ ------------
NET ASSETS....................... $545,394,446 $144,567,579 $510,876,856
============ ============ ============
Net Asset Value, Offering Price
and Redemption Price per Share:
Institutional Shares:
Net Assets..................... $489,394,679 $ 14,008,335 $389,126,965
Shares of beneficial interest
issued and outstanding, $0.001
par value, unlimited number of
shares authorized............. 489,865,389 14,008,529 389,280,704
------------ ------------ ------------
Net Asset Value per Share...... $ 1.00 $ 1.00 $ 1.00
============ ============ ============
Service Shares:
Net Assets..................... $ 55,999,767 $130,559,244 $121,749,891
Shares of beneficial interest
issued and outstanding, $0.001
par value, unlimited number of
shares authorized............. 56,053,643 130,561,050 121,798,020
------------ ------------ ------------
Net Asset Value per Share...... $ 1.00 $ 1.00 $ 1.00
============ ============ ============
COMPOSITION OF NET ASSETS:
Shares of beneficial interest,
at par........................ $ 545,919 $ 144,570 $ 511,079
Additional paid-in capital..... 545,373,112 144,425,009 510,567,644
Accumulated net realized losses
from investment transactions.. (524,585) (2,000) (201,867)
------------ ------------ ------------
NET ASSETS, DECEMBER 31, 1995.... $545,394,446 $144,567,579 $510,876,856
============ ============ ============
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT U.S. GOVERNMENT TREASURY PRIME CASH CASH
SECURITIES CASH SECURITIES CASH CASH MANAGEMENT MANAGEMENT MANAGEMENT
MANAGEMENT FUND MANAGEMENT FUND FUND FUND FUND
--------------- ------------------ --------------- -------------- ------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
FROM JUNE 1, FROM MARCH 22, FROM JULY 1,
1995 THROUGH FOR THE YEAR ENDED 1995 THROUGH 1995 THROUGH FOR THE YEAR ENDED
DECEMBER 31, MAY 31, DECEMBER 31, DECEMBER 31, JUNE 30,
1995(A) 1995 1995(B) 1995(A) 1995
--------------- ------------------ --------------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest Income......... $17,275,666 $25,222,014 $1,364,594 $12,568,427 $15,728,576
----------- ----------- ---------- ----------- -----------
Expenses:
Advisory fees.......... 645,155 1,388,345 50,405 428,914 793,104
Administration fees.... 445,948 280,584 37,804 321,686 212,319
Service Plan fees
(Service Shares)...... 56,289 4,987 38,892 73,857 4,441
Custodian fees and
expenses.............. 81,041 52,283 42,386 68,908 68,943
Registration fees...... 3,430 83,301 3,693 19,428 54,803
Legal and audit fees... 22,812 82,193 18,638 33,180 62,493
Amortization of
organization
expenses.............. 14,413 11,079 12,559 13,095 12,954
Transfer agent fees and
expenses.............. 12,300 12,882 10,560 17,855
Reports to
shareholders.......... 12,838 9,301 19,437 11,592 13,114
Trustees' fees......... 6,670 4,990 625 6,912 4,608
Other expenses......... 21,361 48,122 2,042 13,845 44,768
----------- ----------- ---------- ----------- -----------
1,322,257 1,965,185 239,363 1,001,977 1,289,402
Less: Expense
reimbursements........ (224,593) (312,740) (107,023) (177,520) (267,419)
----------- ----------- ---------- ----------- -----------
1,097,664 1,652,445 132,340 824,457 1,021,983
----------- ----------- ---------- ----------- -----------
NET INVESTMENT
INCOME.............. 16,178,002 23,569,569 1,232,254 11,743,970 14,706,593
----------- ----------- ---------- ----------- -----------
REALIZED GAINS (LOSSES)
ON INVESTMENT
TRANSACTIONS:
Net realized gains
(losses) on investment
transactions.......... 4,517 (482,586) (2,000) (4,009) (1,706,625)
----------- ----------- ---------- ----------- -----------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS............. $16,182,519 $23,086,983 $1,230,254 $11,739,961 $12,999,968
=========== =========== ========== =========== ===========
</TABLE>
- --------
(a)Effective June 1, 1995 and July 1, 1995, the Funds changed their fiscal year
ends from May 31 and June 30, respectively, to December 31.
(b)Commencement of operations.
See Notes to Financial Statements.
8
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
U.S. GOVERNMENT SECURITIES CASH MANAGEMENT FUND
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1995(1) MAY 31, 1995 MAY 31, 1994
-------------------- ------------------ ------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS:
Net investment income.. $ 16,178,002 $ 23,569,569 $ 12,751,537
Net realized gains
(losses) from
investment
transactions.......... 4,517 (482,586) (42,640)
--------------- --------------- --------------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS..... 16,182,519 23,086,983 12,708,897
--------------- --------------- --------------
DIVIDENDS TO
SHAREHOLDERS FROM NET
INVESTMENT INCOME:
Institutional Shares.. (15,014,802) (23,456,426) (12,751,537)
Service Shares........ (1,163,200) (113,143) --
--------------- --------------- --------------
TOTAL DIVIDENDS TO
SHAREHOLDERS........ (16,178,002) (23,569,569) (12,751,537)
--------------- --------------- --------------
FUND SHARE TRANSACTIONS
(AT $1.00 PER SHARE):
Net proceeds from
shares sold........... 2,081,961,762 3,284,015,157 4,379,511,392
Dividends reinvested... 785,116 1,824,905 563,903
Cost of shares re-
deemed................ (2,029,306,950) (3,207,041,446) (4,230,925,537)
--------------- --------------- --------------
NET INCREASE IN NET
ASSETS FROM FUND
SHARE TRANSACTIONS
(NOTE 3)............ 53,439,928 78,798,616 149,149,758
--------------- --------------- --------------
TOTAL INCREASE IN
NET ASSETS......... 53,444,445 78,316,030 149,107,118
NET ASSETS:
Beginning of period.... 491,950,001 413,633,971 264,526,853
--------------- --------------- --------------
End of period.......... $ 545,394,446 $ 491,950,001 $ 413,633,971
=============== =============== ==============
</TABLE>
- --------
(1) For the period June 1, 1995 through December 31, 1995. Effective June 1,
1995, the Fund changed its fiscal year end from May 31 to December 31.
See Notes to Financial Statements.
9
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
TREASURY PRIME CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
DECEMBER 31, 1995(A)
--------------------
<S> <C>
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income.................................... $ 1,232,254
Net realized losses from investment transactions......... (2,000)
-------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... 1,230,254
-------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Institutional Shares.................................... (497,768)
Service Shares.......................................... (734,486)
-------------
Total Dividends to Shareholders........................ (1,232,254)
-------------
FUND SHARE TRANSACTIONS (AT $1.00 PER SHARE):
Net proceeds from shares sold............................ 393,556,208
Dividends reinvested..................................... 434,305
Cost of shares redeemed.................................. (249,420,934)
-------------
NET INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS
(NOTE 3).............................................. 144,569,579
-------------
TOTAL INCREASE IN NET ASSETS.......................... 144,567,579
NET ASSETS:
Beginning of period...................................... --
-------------
End of period............................................ $ 144,567,579
=============
</TABLE>
- --------
(a) For the period March 22, 1995 (commencement of operations) through December
31, 1995.
See Notes to Financial Statements.
10
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1995(1) JUNE 30, 1995 JUNE 30, 1994
-------------------- ------------------ ------------------
<S> <C> <C> <C>
INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS:
Net investment income.. $ 11,743,970 $ 14,706,593 $ 8,493,966
Net realized losses
from investment
transactions.......... (4,009) (1,706,625) (136,023)
--------------- --------------- --------------
NET INCREASE IN NET
ASSETS RESULTING
FROM OPERATIONS..... 11,739,961 12,999,968 8,357,943
--------------- --------------- --------------
DIVIDENDS TO
SHAREHOLDERS FROM NET
INVESTMENT INCOME:
Institutional Shares.. (10,179,235) (14,606,645) (8,493,966)
Service Shares........ (1,564,735) (99,948) --
--------------- --------------- --------------
TOTAL DIVIDENDS TO
SHAREHOLDERS........ (11,743,970) (14,706,593) (8,493,966)
--------------- --------------- --------------
FUND SHARE TRANSACTIONS
(AT $1.00 PER SHARE):
Net proceeds from
shares sold........... 1,257,882,248 1,539,582,005 2,167,517,783
Dividends reinvested... 985,906 1,362,169 654,107
Cost of shares
redeemed.............. (1,078,572,576) (1,454,140,686) (2,099,928,742)
--------------- --------------- --------------
NET INCREASE IN NET
ASSETS FROM FUND
SHARE TRANSACTIONS
(NOTE 3)............ 180,295,578 86,803,488 68,243,148
--------------- --------------- --------------
Increase due to capital
contribution from
affiliate of Investment
Adviser
(Note 4(d))............ -- 1,668,500 --
--------------- --------------- --------------
TOTAL INCREASE IN
NET ASSETS......... 180,291,569 86,765,363 68,107,125
NET ASSETS:
Beginning of period.... 330,585,287 243,819,924 175,712,799
--------------- --------------- --------------
End of period.......... $ 510,876,856 $ 330,585,287 $ 243,819,924
=============== =============== ==============
</TABLE>
- --------
(1)For the period from July 1, 1995 through December 31, 1995. Effective July
1, 1995, the Fund changed its fiscal year end from June 30 to December 31.
See Notes to Financial Statements.
11
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1--GENERAL
Prairie Institutional Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended, (the "Act") as an open-end management
investment company. At December 31, 1995, the Trust was comprised of four
separate investment portfolios as follows: Cash Management Fund, Municipal
Cash Management Fund, Treasury Prime Cash Management Fund and U.S. Government
Securities Cash Management Fund. The accompanying financial statements relate
only to the Cash Management Fund, Treasury Prime Cash Management Fund and U.S.
Government Securities Cash Management Fund (collectively, the "Funds"). As of
December 31, 1995, the Municipal Cash Management Fund had not yet commenced
operations.
The Funds each offer two classes of shares, Institutional Shares and Service
Shares. Institutional Shares and Service Shares are substantially the same
except that Service Shares are subject to fees payable under a Service Plan
adopted pursuant to Rule 12b-1 under the Act (the "Service Plan") at an annual
rate of 0.25% of the average daily net asset value of the outstanding Service
Shares.
At a shareholder meeting of the First Prairie U.S. Treasury Securities Cash
Management Fund (the "Treasury Predecessor Fund") held on December 21, 1994,
the shareholders approved an Agreement and Plan of Exchange pursuant to which
the Treasury Predecessor Fund transferred all of its assets and liabilities to
the U.S. Government Securities Cash Management Fund. In exchange for the
assets and liabilities, the U.S. Government Securities Cash Management Fund
issued Institutional Shares to the shareholders of the Treasury Predecessor
Fund equal in value to shares held by such shareholders immediately prior to
the exchange. This exchange took place on January 17, 1995, at which time the
shareholders of the Treasury Predecessor Fund received a pro rata distribution
of 431,159,110 Institutional Shares of the U.S. Government Securities Cash
Management Fund having a net asset value of $430,731,675.
At a shareholder meeting of First Prairie Cash Management Fund (the
"Predecessor Fund") held on December 21, 1994, the shareholders approved an
Agreement and Plan of Exchange pursuant to which the Predecessor Fund
transferred all of its assets and liabilities to the Cash Management Fund. In
exchange for the assets and liabilities, the Cash Management Fund issued
Institutional Shares to the shareholders of the Predecessor Fund equal in
value to shares held by such shareholders immediately prior to the exchange.
This exchange took place on January 17, 1995 at which time the shareholders of
the Predecessor Fund received a pro rata distribution of 263,124,343
Institutional Shares of the Cash Management Fund having a net asset value of
$262,954,610.
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 Concord
Holding Corporation ("Concord"), a wholly-owned subsidiary of The BISYS Group,
Inc. ("BISYS"), to serve as the Funds' sub-administrator. Concord Financial
Group, Inc., a wholly-owned subsidiary of BISYS, serves as the principal
underwriter and distributor of each Fund's shares.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Trust in the preparation of its 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
12
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
- -------------------------------------------------------------------------------
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: Investments of the Funds are valued at either
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 Funds generally may not (a) purchase any
instrument with a remaining maturity greater than thirteen months unless such
instrument is subject to a demand feature, or (b) maintain a dollar-weighted
average maturity which exceeds 90 days.
(b) 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. Interest income,
adjusted for amortization of premiums and when appropriate, discounts on
investments, is earned from settlement date and recognized on the accrual
basis.
The U.S. Government Securities Cash Management Fund and Cash Management 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 purchase
agreement, must have an aggregate market value greater than or equal to the
repurchase price 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 purchase obligation, the Fund
maintains the right to sell the underlying securities at market value and may
claim any resulting loss against the seller.
(c) Dividends to shareholders: Each Fund's dividends from net investment
income are declared daily and paid monthly. Distributions from net realized
capital gains, if any, are normally declared annually 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"). To the
extent that net realized capital gains can be offset by capital loss
carryovers, it is the policy of each Fund not to distribute such gains.
(d) Federal income taxes: It is the policy of each Fund to continue 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 taxable income sufficient to relieve
it from all, or substantially all, Federal income taxes. At December 31, 1995,
the U.S. Government Securities Cash Management Fund had unused capital loss
carryovers of approximately $525,000, 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, $7,000 of the carryover
expires in 2001, $460,000 expires in 2002 and $58,000 expires in 2003. At
December 31, 1995, the Treasury Prime Cash Management Fund had unused capital
loss carryovers of approximately $2,000, 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, $2,000 of the
carryover expires in 2003. At December 31, 1995, the Cash Management Fund had
unused capital loss carryovers of approximately
13
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
- -------------------------------------------------------------------------------
$201,000 available for Federal income tax purposes to be applied against
future net capital gains, if any, realized subsequent to December 31, 1995.
The carryover does not include net realized securities losses from November 1,
1995 through December 31, 1995 which are treated, for Federal income tax
purposes, as arising in fiscal 1996. If not applied, $19,000 of the carryover
expires in 2001, $151,000 expires in 2002 and $31,000 expires in 2003.
(e) 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.
NOTE 3--FUND SHARE TRANSACTIONS
Transactions in shares of the Funds are summarized below (at $1.00 per
share):
<TABLE>
<CAPTION>
TREASURY PRIME
U.S. GOVERNMENT SECURITIES CASH MANAGEMENT
CASH MANAGEMENT FUND FUND
---------------------------------------------- ---------------
FOR THE PERIOD FOR THE PERIOD
JUNE 1, 1995 FOR THE YEAR MARCH 22, 1995
THROUGH ENDED MAY 31, THROUGH
DECEMBER 31, ------------------------------ DECEMBER 31,
1995(1) 1995 1994 1995(2)
-------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Institutional Shares:
Shares issued.......... 1,915,896,446 3,256,766,429 4,379,511,392 206,294,412
Dividends reinvested... 784,723 1,824,654 563,903 433,330
Shares redeemed........ (1,902,575,044) (3,196,512,306) (4,230,925,537) (192,719,213)
-------------- -------------- -------------- ------------
Net increase........... 14,106,125 62,078,777 149,149,758 14,008,529
============== ============== ============== ============
Service Shares:
Shares issued.......... 166,065,316 27,248,728 -- 187,261,796
Dividends reinvested... 393 251 -- 975
Shares redeemed........ (126,731,906) (10,529,140) -- (56,701,721)
-------------- -------------- -------------- ------------
Net increase........... 39,333,803 16,719,839 -- 130,561,050
============== ============== ============== ============
Net increase in Fund.... 53,439,928 78,798,616 149,149,758 144,569,579
============== ============== ============== ============
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
CASH MANAGEMENT
FUND
--------------------------------------------
FOR THE
PERIOD
JULY 1, 1995 FOR THE YEAR
THROUGH ENDED MAY 31,
DECEMBER ------------------------------
31, 1995(1) 1995 1994
------------ -------------- --------------
<S> <C> <C> <C>
Institutional Shares:
Shares issued.................... 930,307,164 1,491,127,430 2,167,517,783
Dividends reinvested............. 985,563 1,361,860 654,107
Shares redeemed.................. (861,416,587) (1,417,064,383) (2,099,928,742)
------------ -------------- --------------
Net increase..................... 69,876,140 75,424,907 68,243,148
============ ============== ==============
Service Shares:
Shares issued.................... 327,575,084 48,454,575 --
Dividends reinvested............. 343 309 --
Shares redeemed.................. (217,155,989) (37,076,303) --
------------ -------------- --------------
Net increase..................... 110,419,438 11,378,581 --
============ ============== ==============
Net increase in Fund.............. 180,295,578 86,803,488 68,243,148
============ ============== ==============
</TABLE>
(1) Effective June 1, 1995 and July 1, 1995, the Funds changed their fiscal
year ends from May 31 and June 30, respectively, to December 31.
(2) Commencement of operations.
NOTE 4--MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFIILIATES
(a) The Trust has an Investment Advisory Agreement with FCIMCO pursuant to
which FCIMCO has agreed to provide the day-to-day management of each of the
Fund's investments for an advisory fee at an annual rate of 0.20% of each
Fund's average daily net assets.
The Trust has an Administration Agreement with FCIMCO pursuant to which
FCIMCO has agreed to assist in all aspects of each Fund's operations for an
administration fee at an annual rate of 0.15% of each Fund's average daily net
assets. In addition, FCIMCO has engaged Concord to assist in providing certain
administrative services to each Fund pursuant to a Master Sub-Administration
Agreement between FCIMCO and Concord. FCIMCO has agreed to pay Concord a fee
from its own administration fee on a monthly basis.
For the period June 1, 1995 through December 31, 1995 for the U.S.
Government Securities Cash Management Fund, the period March 22, 1995
(commencement of operations) through December 31, 1995 for the Treasury Prime
Cash Management Fund and the period July 1, 1995 through December 31, 1995 for
the Cash Management Fund, FCIMCO agreed to limit each Fund's expenses to an
annual amount not to exceed 0.35% of average daily net assets for
Institutional Shares and 0.60% of average daily net assets for Service Shares.
As a result, The U.S. Government Securities Cash Management Fund, Treasury
Prime Cash Management Fund and Cash Management Fund were reimbursed expenses
of $224,593, $107,023 and $177,520, respectively.
15
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
- -------------------------------------------------------------------------------
(b) The Trust has adopted a Service Plan pursuant to Rule 12b-1 under the
Act. Under the terms of the Service Plan, each Fund pays the Distributor an
annual fee of 0.25% of the average daily net assets of the outstanding Service
Shares for advertising, marketing and distributing each Fund's Service Shares
and for the provision of certain services to the holders of Service Shares.
The Distributor may make payments to others, including FCIMCO, FNBC and their
affiliates, for the provision of these services. For the period June 1, 1995
through December 31, 1995, the U.S. Government Securities Cash Management Fund
paid fees under the Service Plan in the amount of $56,289. For the period
March 22, 1995 (commencement of operations) through December 31, 1995, the
Treasury Prime Cash Management Fund paid fees under the Service Plan in the
amount of $38,892. For the period July 1, 1995 (initial offering of Service
Shares) through December 31, 1995, the Cash Management Fund paid fees under
the Service Plan in the amount of $73,857. Of these amounts, the following was
paid to the Distributor and FCIMCO and its affiliates:
<TABLE>
<CAPTION>
AMOUNT PAID TO
AMOUNT PAID TO FCIMCO
THE DISTRIBUTOR AND ITS AFFILIATES
--------------- ------------------
<S> <C> <C>
U.S. Government Securities Cash Management
Fund...................................... $19 $56,270
Treasury Prime Cash Management Fund........ 25 38,867
Cash Management Fund....................... 16 73,841
</TABLE>
(c) The Fund's pay each Trustee a pro-rata share of the aggregate fixed
annual fee of $25,000 and an attendance fee of $1,000 per meeting for all of
the Funds in the Prairie Family of Funds.
(d) During the year ended June 30, 1995, an affiliate of FCIMCO purchased
securities from the Cash Management Fund at an amount in excess of the
securities' fair market value. The Cash Management Fund recorded a realized
loss on these sales in the amount of $1,668,500 and the Cash Management Fund
recorded an offsetting capital contribution from the affiliate. As a result of
varying treatment for book and tax purposes, the capital contribution was
reclassified from additional paid-in-capital to accumulated net realized
losses in the Statement of Assets and Liabilities.
NOTE 5--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 NBD Bancorp, Inc., which in turn is a
wholly owned subsidiary of FCNBD).
On February 20, 1996, the Board of Trustees of The Woodward Funds and the
Board of Trustees of Prairie Funds and Prairie Institutional Funds 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.
16
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
U.S. GOVERNMENT SECURITIES CASH MANAGEMENT FUND
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE YEAR FOR THE PERIOD
ENDED ENDED MAY 31, ENDED
DECEMBER 31, ------------------ MAY 31,
1995(1) 1995 1994 1993(2)
-------------- -------- -------- --------------
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES:
NET ASSET VALUE, BEGINNING
OF PERIOD.................. $ 0.9989 $ 0.9999 $ 1.0000 $ 1.0000
-------- -------- -------- --------
Income from investment oper-
ations:
Net investment income..... 0.0320 0.0492 0.0302 0.0319
Net realized gains
(losses) from
investments.............. 0.0001 (0.0010) (0.0001) --
-------- -------- -------- --------
Total income from
investment operations... 0.0321 0.0482 0.0301 0.0319
-------- -------- -------- --------
Less dividends:
From net investment
income................... (0.0320) (0.0492) (0.0302) (0.0319)
-------- -------- -------- --------
Net change in net asset val-
ue......................... 0.0001 (0.0010) (0.0001) --
-------- -------- -------- --------
NET ASSET VALUE, END OF PE-
RIOD....................... $ 0.9990 $ 0.9989 $ 0.9999 $ 1.0000
======== ======== ======== ========
TOTAL RETURN................. 3.24%++ 5.03% 3.06% 3.25%+
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets................. 0.35%+ 0.34% 0.30% 0.02%+
Ratio of net investment
income to average net
assets..................... 5.46%+ 4.94% 3.02% 3.10%+
Ratio of expenses to average
net assets*................ 0.42%+ 0.41% 0.41% 0.49%+
Ratio of net investment
income to average net
assets*.................... 5.39%+ 4.87% 2.91% 2.63%+
Net assets, end of period
(000's omitted)............ $489,395 $475,248 $413,634 $264,527
</TABLE>
- --------
(1) For the period June 1, 1995 through December 31, 1995. Effective June 1,
1995, the Fund changed its fiscal year end from May 31 to December 31.
(2) For the period June 2, 1992 (commencement of operations) through May 31,
1993.
* 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.
17
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
U.S. GOVERNMENT SECURITIES CASH MANAGEMENT FUND
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS--(CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
ENDED ENDED
DECEMBER 31, MAY 31,
1995(1) 1995(2)
-------------- --------------
<S> <C> <C>
SERVICE SHARES:
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 0.9989 $ 1.0000
-------- --------
Income from investment operations:
Net investment income......................... 0.0305 0.0199
Net realized gains (losses) from investments.. 0.0001 (0.0011)
-------- --------
Total income from investment operations...... 0.0306 0.0188
-------- --------
Less dividends:
From net investment income.................... (0.0305) (0.0199)
-------- --------
Net change in net asset value................... 0.0001 (0.0011)
-------- --------
NET ASSET VALUE, END OF PERIOD.................. $ 0.9990 $ 0.9989
======== ========
TOTAL RETURN..................................... 3.09%++ 2.01%++
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets......... 0.60%+ 0.57%+
Ratio of net investment income to average net
assets......................................... 5.17%+ 5.48%+
Ratio of expenses to average net assets*........ 0.69%+ 0.66%+
Ratio of net investment income to average net
assets*........................................ 5.08%+ 5.39%+
Net assets, end of period (000's omitted)....... $ 56,000 $ 16,702
</TABLE>
- --------
(1) For the period June 1, 1995 through December 31, 1995. Effective June 1,
1995, the Fund changed its fiscal year end from May 31 to December 31.
(2) For the period January 17, 1995 (initial offering date of Service Shares)
through May 31, 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.
18
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
TREASURY PRIME CASH MANAGEMENT FUND
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS--(CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED
DECEMBER 31,
1995(1)
--------------
<S> <C>
INSTITUTIONAL SHARES:
NET ASSET VALUE, BEGINNING OF PERIOD............................ $ 1.0000
--------
Income from investment operations:
Net investment income......................................... 0.0399
--------
Less dividends:
From net investment income.................................... (0.0399)
--------
Net change in net asset value................................... --
--------
NET ASSET VALUE, END OF PERIOD.................................. $ 1.0000
========
TOTAL RETURN..................................................... 4.06%++
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets......................... 0.35%+
Ratio of net investment income to average net assets............ 5.16%+
Ratio of expenses to average net assets*........................ 1.23%+
Ratio of net investment income to average net assets*........... 4.28%+
Net assets, end of period (000's omitted)....................... $ 14,008
</TABLE>
- --------
(1) For the period March 22, 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.
19
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
TREASURY PRIME CASH MANAGEMENT FUND
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS--(CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED
DECEMBER 31,
1995(1)
--------------
<S> <C>
SERVICE SHARES:
NET ASSET VALUE, BEGINNING OF PERIOD............................ $ 1.0000
--------
Income from investment operations:
Net investment income......................................... 0.0380
--------
Less dividends:
From net investment income.................................... (0.0380)
--------
Net change in net asset value................................... --
--------
NET ASSET VALUE, END OF PERIOD.................................. $ 1.0000
========
TOTAL RETURN..................................................... 3.86%++
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets......................... 0.60%+
Ratio of net investment income to average net assets............ 4.72%+
Ratio of expenses to average net assets*........................ 0.74%+
Ratio of net investment income to average net assets*........... 4.58%+
Net assets, end of period (000's omitted)....................... $130,559
</TABLE>
- --------
(1) For the period March 22, 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.
20
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
CASH MANAGEMENT FUND
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS--(CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE
FOR THE PERIOD YEAR ENDED FOR THE PERIOD
ENDED JUNE 30, ENDED
DECEMBER 31, ------------------- JUNE 30,
1995(1) 1995 1994 1993(2)
-------------- -------- -------- --------------
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES:
NET ASSET VALUE, BEGINNING
OF PERIOD................. $ 0.9994 $ 0.9993 $ 0.9999 $ 1.0000
-------- -------- -------- --------
Income from investment
operations:
Net investment income.... 0.0277 0.0507 0.0333 0.0297
Net realized gains
(losses) from
investments............. 0.0002 (0.0059) (0.0006) (0.0001)
-------- -------- -------- --------
Total income from
investment operations.. 0.0279 0.0448 0.0327 0.0296
-------- -------- -------- --------
Less dividends:
From net investment
income.................. (0.0277) (0.0507) (0.0333) (0.0297)
-------- -------- -------- --------
Increase due to capital
contribution from
affiliate of Investment
Adviser (Note 3(d))....... -- 0.0060 -- --
-------- -------- -------- --------
Net change in net asset
value..................... 0.0002 0.0001 (0.0006) (0.0001)
-------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD.................... $ 0.9996 $ 0.9994 $ 0.9993 $ 0.9999
======== ======== ======== ========
TOTAL RETURN................ 2.80%++ 5.19%* 3.38% 3.25%+
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets........ 0.35%+ 0.35% 0.31% 0.05%+
Ratio of net investment
income to average net
assets.................... 5.51%+ 5.11% 3.33% 3.19%+
Ratio of expenses to
average net assets**...... 0.43%+ 0.44% 0.43% 0.56%+
Ratio of net investment
income to average net
assets**.................. 5.43%+ 5.02% 3.21% 2.68%+
Net assets, end of period
(000's omitted)........... $389,127 $319,214 $243,820 $175,713
</TABLE>
- --------
(1) For the period July 1, 1995 through December 31, 1995. Effective July 1,
1995, the Fund changed its fiscal year end from June 30 to December 31.
(2) For the period July 30, 1992 (commencement of operations) through June 30,
1993.
* Had the Portfolio not had a capital contribution by an affiliate of the
Investment Adviser during the period, the total return would have been
4.51% (See Note 4(d) to Financial Statements).
** 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.
21
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
CASH MANAGEMENT FUND
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS--(CONTINUED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
ENDED ENDED
DECEMBER 31, JUNE 30,
1995(1) 1995(2)
-------------- --------------
<S> <C> <C>
SERVICE SHARES:
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 0.9994 $ 1.0000
-------- --------
Income from investment operations:
Net investment income......................... 0.0264 0.0245
Net realized gains (losses) from investments.. 0.0002 (0.0006)
-------- --------
Total income from investment operations...... 0.0266 0.0239
-------- --------
Less dividends:
From net investment income.................... (0.0264) (0.0245)
-------- --------
Net change in net asset value................... 0.0002 (0.0006)
-------- --------
NET ASSET VALUE, END OF PERIOD.................. $ 0.9996 $ 0.9994
======== ========
TOTAL RETURN..................................... 2.68%++ 2.47%++
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets......... 0.60%+ 0.60%+
Ratio of net investment income to average net
assets......................................... 5.25%+ 5.46%+
Ratio of expenses to average net assets*........ 0.69%+ 0.71%+
Ratio of net investment income to average net
assets*........................................ 5.16%+ 5.35%+
Net assets, end of period (000's omitted)....... $121,750 $ 11,372
</TABLE>
- --------
(1) For the period July 1, 1995 through December 31, 1995. Effective June 1,
1995, the Fund changed its ficsal year end from June 30 to December 31.
(2) For the period January 17, 1995 (initial offering date of Service Shares)
through June 30, 1995.
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee waivers and/or reimbursements had not occurred, the
ratios would have been as indicated.
+ Annualized.
++ Not annualized.
See Notes to Financial Statements.
22
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
- -------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
- -------------------------------------------------------------------------------
PRAIRIE INSTITUTIONAL FUNDS THE BOARD OF TRUSTEES AND SHAREHOLDERS
We have audited the accompanying statements of asset and liabilities,
including the portfolios of investments, of Prairie Institutional Funds
(comprising, respectively, the U.S. Government Securities Cash Managment,
Treasury Prime Cash Management and Cash Management Funds) (the "Fund") 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 Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of 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 Institutional Funds 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.
LOGO
New York, New York February 22, 1996
23
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
- -------------------------------------------------------------------------------
RESULTS OF SPECIAL SHAREHOLDER
MEETING (UNAUDITED):
- -------------------------------------------------------------------------------
On November 28, 1995, a special meeting of the shareholders of Prairie
Institutional Funds 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>
U.S. Government Securities Cash Management Fund 268,544,652 0 196,765
Treasury Prime Cash Management Fund 7,658,819 0 0
Cash Management Fund 272,674,617 313,088 23,536,693
</TABLE>
24
