PEGASUS INSTITUTIONAL FUNDS
U.S. Government Securities
Cash Management Fund
Treasury Prime
Cash Management Fund
Cash Management Fund
ANNUAL REPORT
December 31, 1996
Please Read Carefully. This report is not authorized for distribution to
prospective investors unless preceded or accopmpanied 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>
Pegasus Institutional Funds
Table of Contents
Letter to Sharesholders ............................................. 1
Statements of Assets and Liabilities ................................ 2
Statements of Operations ............................................ 3
Statements of Changes in Net Assets ................................. 4
Portfolio of Investments ............................................ 6
Notes to Financial Statements ....................................... 12
Financial Highlights ................................................ 18
Report of Arthur Andersen, LLP ...................................... 24
INVESTMENT ADVISER
First Chicago NBD Investment Management Company (FCNIMCO)
Three First National Plaza, Chicago, IL 60670
----------------------------
DISTRIBUTOR
BYSIS Fund Services
3435 Stelzer Road
Columbus, OH 43219
<PAGE>
Dear Shareholders:
The Federal Reserve acted only once in 1996 by reducing the Federal Funds
rate from 5.50% to 5.25% on January 31st. This, however, did not reflect the
volatility of the money markets. The one year U.S. Treasury Bill yield varied
from a low of 4.78% to a high of 5.96% in 1996, reflecting investors'
uncertainty over the direction of the economy and inflation. The Cash
Management Funds took advantage of the volatility and selectively locked in
higher rates throughout the year. This contributed to the Cash Management
Funds' competitive returns. The Cash Management Funds also continued to
employ a "high quality approach" and only purchased securities of excellent
credit quality.
Asset-backed commercial paper outstandings continued to grow rapidly in 1996.
There are now 160 asset-backed commercial paper programs in existence.
Estimates place the 1996 asset-backed commercial paper outstandings at $150
billion or about 25% of the total dealer-placed commercial paper market. The
Cash Management Fund selectively purchases asset-backed commercial paper due
to its competitive yield and high credit quality.
Longer-term interest rates were also fairly volatile during 1996 with the
30-year U.S. Treasury yield beginning the year at 5.96%, reaching a high of
7.19% in July before falling back to 6.64% at year-end. Investors' thirst for
yield continued throughout the year producing strong demand for "spread"
products such as mortgage-backed securities, corporates and asset-backed
securities. Corporate spreads in particular have reached exceptionally narrow
levels allowing for limited upside potential.
We believe the Pegasus Cash Management Funds provide a solid foundation for
meeting your investment goals and we thank you for your continued confidence
in selecting us as your investment advisor.
Sincerely,
/s/ George F. Abel
- ------------------
George F. Abel
Chief Investment Officer
First Chicago NBD Investment Management Company
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<CAPTION>
U.S. Government Treasury Prime Cash
Securities Cash Cash Management Management
Management Fund Fund Fund
--------------- --------------- ----------
<S> <C> <C> <C>
ASSETS:
Investment in securities:
At cost $574,703,638 $285,210,184 $1,115,646,770
============ ============ ==============
At amortized cost $576,399,969 $286,044,842 $1,118,121,601
Cash 994 743 46,486
Interest receivable 2,900,666 196,413 2,964,271
Deferred organization costs, net 97,998 62,689 106,095
Prepaids and other 14,948 17,145 19,459
------------ ------------ --------------
TOTAL ASSETS 579,414,575 286,321,832 1,121,257,912
------------ ------------ --------------
LIABILITIES:
Accrued investment advisory fees 110,916 45,579 115,815
Accrued administration fees 83,187 34,573 86,862
Shareholder services plan fees payable (Service Shares) 53,255 43,351 46,168
Accrued custodial fees 81,343 16,517 63,245
Dividends payable 2,684,077 1,012,518 2,696,845
Other payables and accrued expenses 193,226 8,890 53,515
------------ ------------ --------------
TOTAL LIABILITIES 3,206,004 1,161,428 3,062,450
------------ ------------ --------------
NET ASSETS $576,208,571 $285,160,404 $1,118,195,462
============ ============ ==============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE:
Institutional Shares:
Net Assets $369,162,712 $ 70,120,255 $ 885,946,299
Capital Shares 369,575,052 70,120,747 886,105,300
------------ ------------ --------------
Net asset value and redemption price per share $ 1.00 $ 1.00 $ 1.00
============ ============ ==============
Service Shares:
Net Assets $207,045,859 $215,040,149 $ 232,249,163
Capital Shares 207,149,406 215,037,409 232,292,062
------------ ------------ --------------
Net asset value and redemption price per share $ 1.00 $ 1.00 $ 1.00
============ ============ ==============
NET ASSETS CONSISTS OF:
Capital Shares (unlimited number of shares
authorized, par value $.001 per share) $ 5,767,245 $ 2,851,582 $ 11,183,974
Additional paid-in capital 570,957,213 282,306,574 1,107,213,388
Accumulated undistributed net realized gains
(losses) (515,887) 2,248 (201,900)
------------ ------------ --------------
TOTAL NET ASSETS $576,208,571 $285,160,404 $1,118,195,462
============ ============ ==============
<FN>
See accompanying notes to financial statements.
</TABLE>
2
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
U.S. Government Treasury Prime Cash
Securities Cash Cash Management Management
Management Fund Fund Fund
--------------- --------------- ----------
<S> <C> <C> <C>
INVESTMENT INCOME: $30,966,487 $11,371,461 $30,411,870
----------- ----------- -----------
EXPENSES:
Investment advisory fee 1,145,131 445,359 1,107,319
Administration fees 858,848 334,019 830,490
Service plan fees (Service Shares) 370,920 466,429 344,060
Custodial fees 216,894 85,309 175,064
Registration and filing fees 16,822 65,912 54,820
Professional fees 69,884 36,982 77,060
Amortization of deferred organization costs 31,665 25,282 33,941
Other expenses 101,216 38,411 80,005
Less: Expense reimbursements (436,588) (248,460) (398,141)
Expenses paid by third parties (1,532) (3,440) (24,273)
----------- ----------- -----------
NET EXPENSES 2,373,260 1,245,803 2,280,345
----------- ----------- -----------
NET INVESTMENT INCOME 28,593,227 10,125,658 28,131,525
----------- ----------- -----------
NET REALIZED GAINS (LOSSES) ON INVESTMENTS 8,700 4,248 (32)
----------- ----------- -----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $28,601,927 $10,129,906 $28,131,493
=========== =========== ===========
<FN>
See accompanying notes to financial statements.
</TABLE>
3
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
U.S. Government Securities
Cash Management Fund
--------------------------------------------------------
Year Ended Period Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995(a) May 31, 1995
------------- -------------------- ------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 28,593,227 $ 16,178,002 $ 23,569,569
Net realized gains (losses) on investments 8,700 4,517 (482,586)
--------------- --------------- ---------------
Net increase in net assets from
operations 28,601,927 16,182,519 23,086,983
--------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT
INCOME:
Institutional Shares (21,389,317) (15,014,802) (23,456,426)
Service Shares (7,203,910) (1,163,200) (113,143)
--------------- --------------- ---------------
Total distributions to shareholders (28,593,227) (16,178,002) (23,569,569)
--------------- --------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 4,081,677,457 2,081,961,762 3,284,015,157
Net asset value of shares issued in reinvestment of
distributions to shareholders 1,174,078 785,116 1,824,905
--------------- --------------- ---------------
4,082,851,535 2,082,746,878 3,285,840,062
Less: payments for shares redeemed (4,052,046,110) (2,029,306,950) (3,207,041,446)
--------------- --------------- ---------------
Net increase in net assets from capital share
transactions 30,805,425 53,439,928 78,798,616
--------------- --------------- ---------------
NET INCREASE IN NET ASSETS 30,814,125 53,444,445 78,316,030
NET ASSETS:
Beginning of period 545,394,446 491,950,001 413,633,971
--------------- --------------- ---------------
End of period $ 576,208,571 $ 545,394,446 $ 491,950,001
=============== =============== ===============
<FN>
(a) For the period from 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 accompanying notes to financial statements.
</TABLE>
4
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
STATEMENTS OF CHANGES IN NET ASSETS -- (Continued)
<TABLE>
<CAPTION>
Treasury Prime
Cash Management Fund Cash Management Fund
-----------------------------------------------------------------------------------------
Year Ended Period Ended Year Ended Period Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995(b) Dec. 31, 1996 Dec. 31, 1995(c) June 30, 1995
------------- ---------------- ------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 10,125,658 $ 1,232,254 $ 28,131,525 $ 11,743,970 $ 14,706,593
Net realized gains (losses)
on investments 4,248 (2,000) (32) (4,009) (1,706,625)
--------------- ------------- --------------- --------------- ---------------
Net increase in net assets
from operations 10,129,906 1,230,254 28,131,493 11,739,961 12,999,968
--------------- ------------- --------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME:
Institutional Shares
to shareholders (1,717,216) (497,768) (21,315,342) (10,179,235) (14,606,645)
Service Shares (8,408,442) (734,486) (6,816,183) (1,564,735) (99,948)
--------------- ------------- --------------- --------------- ---------------
Total distributions
to shareholders (10,125,658) (1,232,254) (28,131,525) (11,743,970) (14,706,593)
--------------- ------------- --------------- --------------- ---------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold 2,257,327,819 393,556,208 3,601,197,069 1,257,882,248 1,539,582,005
Net asset value of shares
issued in reinvestment of
distributions to shareholders 490,552 434,305 2,720,665 985,906 1,362,169
--------------- ------------- --------------- --------------- ---------------
2,257,818,371 393,990,513 3,603,917,734 1,540,944,174
Less: payments for shares
redeemed (2,117,229,794) (249,420,934) (2,996,599,096) (1,078,572,576) (1,454,140,686)
--------------- ------------- --------------- --------------- ---------------
Net increase in net assets from
capital share transactions 140,588,577 144,569,579 607,318,638 180,295,578 86,803,488
--------------- ------------- --------------- --------------- ---------------
Increase due to capital
contribution from affiliate
of Investment Adviser -- -- -- -- 1,668,500
--------------- ------------- --------------- --------------- ---------------
NET INCREASE IN NET ASSETS 140,592,825 144,567,579 607,318,606 180,291,569 86,765,363
NET ASSETS:
Beginning of period 144,567,579 -- 510,876,856 330,585,287 243,819,924
--------------- ------------- --------------- --------------- ---------------
End of period $ 285,160,404 $ 144,567,579 $ 1,118,195,462 $ 510,876,856 $ 330,585,287
=============== ============= =============== =============== ===============
<FN>
(b) For the period March 22, 1995 (commencement of operations) through
December 31, 1995.
(c) 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 accompanying notes to financial statements.
</TABLE>
5
<PAGE>
PEGASUS U.S. GOVERNMENT CASH MANAGEMENT FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Amortized
Face Cost
Description Amount (Note 2)
----------- ------ --------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS -- 62.03%
Barclay de Zoete Wedd Sec., Inc., Revolving
Repurchase Agreement, 5.80%, 1/2/97, (secured by
U.S. Treasury obligations with maturities
ranging from 2/15/97 to 11/15/02 at various
interest rates ranging from 4.75% to 10.75%, all
held at The Bank of New York) ................... $20,000,000 $ 20,000,000
Daiwa Securities America, Inc., Revolving
Repurchase Agreement, 6.90%, 1/2/97 (secured by
U.S. Treasury Bills due 10/16/97, all held at
The Bank of New York) ........................... 27,000,000 27,000,000
First Union Capital Markets Treasury, Revolving
Repurchase Agreement, 7.05%, 1/2/97 (secured by
U.S. Treasury Notes with maturities ranging from
2/15/97 through 5/15/06 at various interest rates
ranging from 4.75% to 8.75%, all held at Bankers
Trust Company) .................................. 27,000,000 27,000,000
Greenwich Capital Markets, Inc., Revolving
Repurchase Agreement, 6.80%, 1/2/97 (secured
by U.S. Treasury Notes with maturities ranging
from 1/15/00 through 4/30/00 at various
interest rates ranging from 6.375% to
8.50%, all held at Chase Bank) .................. 27,000,000 27,000,000
H.S.B.C. Treasury Inc., Revolving Repurchase
Agreement, 6.00%, 1/2/97 (secured by various U.S.
Treasury Notes with maturities ranging from
4/30/01 through 8/15/04 at various interest
rates ranging 5.75% to 8.00%, all held at Chase
Bank) ........................................... 50,000,000 50,000,000
Lehman Brothers, Inc., Revolving Repurchase
Agreement, 6.90%, 1/2/97 (secured by various U.S.
Treasury Notes with maturities ranging from
1/15/00 through 12/31/01 at various interest
rates ranging from 6.125% to 8.50%, all held at
Chase Bank)...................................... 98,566,000 98,566,000
NationsBank Capital Markets, Inc., Revolving
Repurchase Agreement, 6.90%, 1/2/97 (secured by
various U.S. Treasury Notes with maturities
ranging from 9/30/98 through 10/15/06 at various
interest rates ranging from 5.00% to 8.875%, all
held at Chase Bank) ............................. 50,000,000 50,000,000
Prudential Securities Agency, Revolving Repurchase
Agreement, 7.02%, 1/2/97 (secured by various U.S.
Government obligations with maturities ranging
from 1/15/97 through 11/20/06 at various interest
rates ranging from 5.25% to 8.50%, all held at
The Bank of New York) ........................... 58,000,000 58,000,000
-----------
357,566,000
-----------
6
<PAGE>
U.S. TREASURY AND AGENCY OBLIGATIONS -- 37.97%
U.S. Treasury Securities -- 7.74%
U.S. Treasury Bill, 5.24%, 5/1/97 ............... 20,000,000 19,646,333
U.S. Treasury Notes, 5.625%, 10/31/97 ........... 25,000,000 24,965,078
-----------
44,611,411
-----------
Agency Obligations -- 30.23%
Federal Farm Credit Bank, 5.85%, 8/1/97 ......... 2,000,000 2,000,267
Federal Home Loan Bank:
5.26%, 1/31/97 .............................. 3,935,000 3,917,752
5.275%, 2/4/97 .............................. 6,685,000 6,651,696
4.75%, 2/24/97 .............................. 10,000,000 9,985,502
5.308%, 3/14/97 ............................. 1,000,000 998,801
5.905%, 10/15/97 ............................ 15,000,000 15,000,000
5.44%, 12/2/97 .............................. 11,000,000 10,991,593
Federal Home Loan Mortgage Corp., 5.22%, 2/28/97 20,000,000 19,831,800
Federal National Mortgage Assn. Discount Notes:
5.22%, 1/28/97 .............................. 15,000,000 14,941,275
5.23%, 2/10/97 .............................. 20,000,000 19,883,778
5.15%, 2/18/97 .............................. 30,000,000 29,791,200
5.25%, 3/13/97 .............................. 25,000,000 24,741,146
Federal National Mortgage Assn. Medium Term
Notes:
5.64%, 9/3/97 ............................... 5,000,000 4,999,441
5.40%, 12/5/97 .............................. 5,000,000 4,995,092
Student Loan Marketing Assn., 5.97%, 6/30/97 .... 5,500,000 5,493,215
174,222,558
------------
TOTAL INVESTMENTS ................................... $576,399,969
============
</TABLE>
7
<PAGE>
PEGASUS TREASURY PRIME CASH MANAGEMENT FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Amortized
Face Cost
Description Amount (Note 2)
---------- --------- ----------
<S> <C> <C>
U.S. TREASURY SECURITIES -- 100.00%
U.S. Treasury Bills:
4.99%, 1/9/97 ................................. $55,257,000 $ 55,199,718
4.92%, 1/16/97 ................................ 19,993,000 19,952,181
4.92%, 1/23/97 ................................ 21,723,000 21,661,041
4.55%, 2/6/97 ................................. 45,923,000 45,701,721
5.01%, 2/13/97 ................................ 34,610,000 34,409,871
4.83%, 2/20/97 ................................ 35,000,000 34,764,514
5.10%, 2/27/97 ................................ 16,948,000 16,816,609
5.13%, 3/6/97 ................................. 22,734,000 22,534,993
5.01%, 4/3/97 ................................. 3,725,000 3,678,182
5.05%, 4/17/97 ................................ 14,000,000 13,791,828
5.44%, 5/29/97 ................................ 3,000,000 2,932,168
5.3125%, 8/21/97 .............................. 6,816,000 6,574,499
U.S. Treasury Notes:
6.50%, 8/15/97 ................................ 8,000,000 8,027,517
------------
TOTAL INVESTMENTS ................................... $286,044,842
============
</TABLE>
8
<PAGE>
PEGASUS CASH MANAGEMENT FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Amortized
Face Cost
Description Amount (Note 2)
----------- ------- ----------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS -- 49.33%
Aubrey Langston, Revolving Repurchase Agreement,
5.90%, 1/2/97 (secured by U.S. Treasury
obligations with maturities ranging from 1/2/97
through 5/15/05, all held at Chase Bank) ........ $50,000,000 $ 50,000,000
Barclay de Zoete Wedd Sec., Inc., Revolving
Repurchase Agreement, 5.80%, 1/2/97 (secured by
U.S. Treasury obligations with maturities ranging
from 2/15/97 through 11/15/02 at various interest
rates ranging from 4.75% to 10.75%, all held at
The Bank of New York) ........................... 30,000,000 30,000,000
Daiwa Securities America Inc., Revolving Repurchase
Agreement, 6.90%, 1/2/97 (secured by U.S.
Treasury Bills due 10/16/97, all held at The Bank
of New York) .................................... 23,000,000 23,000,000
First Union Capital Markets Treasury, Revolving
Repurchase Agreement 7.05%, 1/2/97 (secured by
U.S. Treasury Notes with maturities ranging from
2/15/97 through 5/15/06 at various interest rates
ranging from 4.75% to 8.75%, all held at
Bankers Trust Comp.) ............................ 23,000,000 23,000,000
Greenwich Capital Markets, Inc., Revolving
Repurchase Agreement, 6.80%, 1/2/97 (secured by
U.S. Treasury Notes with maturities ranging from
1/15/00 through 4/30/00 at various interest
rates ranging from 6.375% to 8.50%, all held at
Chase Bank) ..................................... 23,000,000 23,000,000
Lehman Brothers, Inc., Revolving Repurchase
Agreement, 6.90%, 1/2/97 (secured by various
U.S. Treasury Notes with maturities ranging from
1/15/00 through 12/31/01 at various interest
rates ranging from 6.125% to 8.50%, all held at
Chase Bank) ..................................... 110,529,000 110,529,000
Nomura Securities Int'l Inc., Revolving Repurchase
Agreement 7.00%, 1/2/97 (secured by various U.S.
Government obligations with maturities ranging
from 3/24/97 through 5/11/05 at various interest
rates ranging from 5.65% to 7.65%, all held at
The Bank of New York) ........................... 200,000,000 200,000,000
Prudential Securities Agency, Revolving Repurchase
Agreement 7.02%, 1/2/97 (secured by various U.S.
Government obligations with maturities ranging
from 1/15/97 through 11/20/06 at various interest
rates ranging from 5.25% to 8.50%, all held at
The Bank of New York) ........................... 92,000,000 92,000,000
-----------
551,529,000
-----------
9
<PAGE>
COMMERCIAL PAPER -- 18.79%
Abbey National North America, 5.32%, 3/3/97 ....... 10,000,000 9,909,855
Aesop Funding Corp., 5.50%, 1/10/97 ............... 10,000,000 9,986,250
Asset Securitization Cooperative Corp., 5.60%,
2/6/97 .......................................... 10,000,000 9,944,000
Caisse D Amortissement de la Dette Sociale, 5.50%,
5/23/97 ......................................... 5,000,000 4,891,528
Corporate Receivables Corp., 5.565%, 1/15/97 ...... 7,500,000 7,483,769
CXC Inc., 5.45%, 1/14/97 .......................... 15,000,000 14,970,479
Eureka Securitization Inc., 5.37%, 2/18/97 ........ 15,000,000 14,892,600
Finance One Funding Corp., 5.31%, 5/21/97 ......... 9,660,000 9,460,521
General Electric Capital Corp., 5.50%, 1/17/97 .... 13,000,000 12,968,222
Mont Blanc Capital Corp.:
5.47%, 1/9/97 ................................. 13,900,000 13,883,104
5.50%, 1/16/97 ................................ 10,000,000 9,977,083
Monte Rosa Capital Corp., 5.50%, 1/10/97 .......... 20,000,000 19,972,500
Pooled Accounts Receivable Capital, 5.35%, 1/14/97 10,000,000 9,980,681
Receivables Capital Corp., 5.44%, 2/3/97 .......... 10,000,000 9,950,133
Royal Bank of Canada, 5.32%, 1/17/97 .............. 9,000,000 8,978,720
St. Michael Finance Limited, 5.33%, 1/7/97 ........ 10,000,000 9,991,133
Sweden (Kingdom of), 5.38%, 2/14/97 ............... 13,000,000 12,914,518
Xerox Credit Corp.:
5.55%, 1/13/97 ................................ 10,000,000 9,981,500
5.38%, 2/18/97 ................................ 10,000,000 9,928,268
-----------
210,064,864
-----------
NOTES -- 7.65%
Abbey National Treasury Services PLC, Medium Term
Note, 5.50%, 11/21/97 ........................... 10,000,000 9,991,113
Federal National Mortgage Assn. Medium Term Note,
(V/R), 6/20/97 .................................. 5,000,000 4,998,177
Kalamazoo Funding Company LLC, (V/R), 12/1/26 ..... 4,820,000 4,820,000
Kalamazoo Funding Company LLC, Series B, (V/R),
11/1/26 ......................................... 3,940,000 3,940,000
Oak Crest Homes Inc., (V/R) Demand Note, 11/1/26 .. 8,500,000 8,500,000
New York Life Insurance Company*, Funding Agreement,
(V/R), 10/15/97 ................................. 20,000,000 20,000,000
Shepherd Capital LLC, (V/R) Demand Note, 10/1/46 .. 8,800,000 8,800,000
10
<PAGE>
Student Loan Marketing Assn., Floating
Note, 6/30/97 ................................... 6,500,000 6,502,939
Travelers Insurance Group*, Funding Agreement,
(V/R), 11/6/97 .................................. 18,000,000 18,000,000
------------
85,552,229
------------
CERTIFICATES OF DEPOSIT -- 6.17%
Bank of America, Bank Note, 5.52%, 11/21/97 ....... 10,000,000 9,995,315
Canadian Imperial Bank of Commerce, 5.39%, 1/31/97 10,000,000 10,000,000
Dresdner Bank A G, 5.60%, 7/3/97 .................. 10,000,000 10,000,000
National Australia Bank, Bank Note, 5.80%, 10/3/97 9,975,000 9,974,280
Republic Mase Australia, 5.65%, 10/31/97 .......... 12,000,000 12,006,846
Societe Generale:
5.80%, 8/26/97 .................................. 6,000,000 6,000,000
5.85%, 10/1/97 .................................. 6,000,000 6,000,778
Swiss Bank Corp., 5.96%, 6/3/97 ................... 5,000,000 4,998,289
----------
68,975,508
----------
TIME DEPOSITS -- 18.06%
Banca Commerciale Italiana, 7.25%, 1/2/97 ......... 24,000,000 24,000,000
Bank Brussel Lambert, 7.25%, 1/2/97 ............... 30,000,000 30,000,000
Boatmens National Bank of St. Louis, 6.50%, 1/2/97 40,000,000 40,000,000
Caisse National De Credit Agricole, 7.25%, 1/2/97 . 30,000,000 30,000,000
Hong Kong & Shanghai Banking Corp., 7.00%, 1/2/97 . 30,000,000 30,000,000
Republic National Bank of New York, 7.00%, 1/2/97 . 18,000,000 18,000,000
Suntrust Banks Inc., 7.125%, 1/2/97 ............... 30,000,000 30,000,000
--------------
202,000,000
--------------
TOTAL INVESTMENTS ................................... $1,118,121,601
==============
<FN>
V/R -- Variable Rate
* -- Restricted Security (see Note 5)
</TABLE>
11
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
NOTES TO FINANCIAL STATEMENTS
(1) General
The Pegasus Funds (Pegasus) formerly "The Woodward Funds," was organized
as a Massachusetts business trust on April 21, 1987 and registered under the
Investment Company Act of 1940, as amended, (the Act) as an open-end investment
company. As of December 31, 1996, Pegasus consisted of twenty six separate
series of which there were three cash management funds (the Cash Management
Funds or the Funds), as described below.
Pegasus Cash Management Fund
Pegasus Treasury Prime Cash Management Fund
Pegasus U.S. Government Securities Cash Management Fund
The Cash Management Fund commenced operations on July 30, 1992, the
Treasury Prime Cash Management Fund commenced operations on March 22, 1995,
and the U.S. Government Securities Cash Management Fund commenced operations
on June 2, 1992.
First Chicago Corporation merged with NBD Bancorp, Inc. on December 1,
1995. First Chicago Investment Management Company, an affiliate of First
Chicago Corporation, served as Investment Advisor to Prairie Institutional
Funds, which included the Prairie U.S. Government Securities Cash Management,
Prairie Treasury Prime Cash Management and Prairie Cash Management Funds. On
July 13, 1996, pursuant to an Agreement and Plan of Reorganization which had
received approval from the shareholders of such Funds, the assets of the
Prairie Institutional Funds were transferred to the Pegasus U.S. Government
Securities Cash Management, Pegasus Treasury Prime Cash Management and
Pegasus Cash Management Funds, respectively, in exchange for shares of those
funds. Prior to July 13, 1996, the Pegasus Cash Management Funds held no
assets and had not yet commenced operations. The financial history contained
herein therefore includes such history of the Prairie Cash Management Funds,
which ceased operations as of July 12, 1996.
The Cash Management 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 Distribution and Services 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 Services Shares.
(2) Significant Accounting Policies
The following is a summary of significant accounting policies followed
by the Cash Management Funds in preparation of the financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies. Following generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the financial statements and reported
amounts of income and expenses during the reporting period. Actual results
could differ from those estimates.
Investments
Pursuant to Rule 2a-7 of the Act, the Cash Management Funds utilize
the amortized cost method to determine the carrying value of investment
securities. Under this method, investment securities are valued
12
<PAGE>
for both financial reporting and federal tax purposes at amortized cost
and any discount or premium is amortized from the date of acquisition to
maturity. The use of this method results in a carrying value which
approximates market value. Market value is determined based upon quoted
market prices or dealer quotes.
Investment security purchases and sales are accounted for on the trade
date. Realized gains and losses from security transactions are recorded on the
identified cost basis.
Pegasus invests in securities subject to repurchase agreements.
First Chicago NBD Investment Management Company (FCNIMCO), acting under
the supervision of the Board of Trustees, has established the following
additional policies and procedures relating to Pegasus' investments in
securities subject to repurchase agreements: 1) the value of the underlying
collateral is required to equal or exceed 102% of the funds advanced under the
repurchase agreement including accrued interest; 2) collateral is marked to
market daily by FCNIMCO to assure its value remains at least equal to 102% of
the repurchase agreement amount; and 3) funds are not disbursed by Pegasus or
its agent unless collateral is presented or acknowledged by the collateral
custodian.
Investment Income
Interest income is recorded daily on the accrual basis adjusted for
amortization of premium and accretion of discount. Premiums and discounts are
amortized/accreted as required by the Internal Revenue Code (the Code).
Federal Income Taxes
It is Pegasus' policy to comply with the requirements of Subchapter M
of the Code, as amended, applicable to regulated investment companies
and to distribute net investment income and net realized gains to its
shareholders. Therefore, no federal income tax provision is required in the
accompanying Financial Statements.
As of December 31, 1996, the Cash Management Funds had capital loss
carryforwards with expiration dates as follows:
<TABLE>
<CAPTION>
2001 2002 2003 Total
---- ---- ---- -----
Fund
- ----
<S> <C> <C> <C> <C>
U.S. Government Securities Cash
Management Fund ..................................... $ -- $458,000 $58,000 $516,000
Cash Management Fund ................................ 19,000 151,000 32,000 202,000
</TABLE>
Shareholder Dividends
On each business day, except those holidays the New York Stock Exchange
(Exchange), FCNIMCO or its bank affiliates observe, net investment income is
declared as a dividend, at the close of the Exchange, to shareholders of
record at such close. Such dividends are paid monthly. Distributions from net
realized capital gains, if any, are normally declared and paid annually, but
each Fund may make distributions on a more frequent basis to comply with the
distribution requirements of the Code. To the extent that net realized capital
gains can be offset by capital loss carryforwards, it is the policy of each
Fund not to distribute such gains.
13
<PAGE>
Deferred Organization Costs
Organization costs are being amortized on a straight-line basis over
the five year period beginning with the commencement of operations of each
series.
Expenses
Expenses directly attributable to a Cash Management Fund are charged
to that Cash Management Fund's operations; expenses which are
applicable to all Cash Management 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. Pegasus monitors
the rate at which expenses are charged to ensure that a proper amount of
expense is charged to income each year. This percentage is subject to
revision if there is a change in the estimate of the future net assets of
the funds or a change in expectations as to the level of actual expenses.
Other
Prior to July 5, 1996 each Cash Management Fund maintained a cash
balance with its custodian (The Bank of New York) and received a reduction
of its custodial fees and expenses for the amount of interest that
should have been earned on such uninvested cash balances. For financial
reporting purposes for the period ended July 5, 1996, custodial fees and
expenses paid by third parties were the following amounts:
<TABLE>
<CAPTION>
<S> <C>
U.S. Government Securities Cash
Management Fund ................................... $ 1,532
Treasury Prime Cash Management Fund ................. 3,440
Cash Management Fund ................................ 24,273
</TABLE>
There was no effect on net investment income. The Cash Management Funds
could have invested such cash amounts in an income-producing asset if they had
not agreed to a reduction of fees or expenses under the expense offset
agreements with their custodian.
14
<PAGE>
(3) Capital Share Transactions
Transactions in shares of the Cash Management Funds are summarized below
(at $1.00 per share):
<TABLE>
<CAPTION>
U.S. Government Securities
Cash Management Fund
-----------------------------------------------------------
Period Year
Year Ended June 1, 1995 through Ended
December 31, 1996 December 31, 1995 (a) May 31, 1995
------------------ --------------------- ------------
<S> <C> <C> <C>
Institutional Shares:
Shares issued ..................................... 3,012,405,624 1,915,896,446 3,256,766,429
Dividends reinvested .............................. 1,114,598 784,723 1,824,654
Shares redeemed ................................... (3,133,810,559) (1,902,575,044) (3,196,512,306)
-------------- -------------- --------------
Net increase (decrease) ........................... (120,290,337) 14,106,125 62,078,777
============== ============== ==============
Service Shares:
Shares issued ..................................... 1,069,271,833 166,065,316 27,248,728
Dividends reinvested .............................. 59,480 393 251
Shares redeemed ................................... (918,235,551) (126,731,906) (10,529,140)
-------------- -------------- --------------
Net increase ...................................... 151,095,762 39,333,803 16,719,839
============== ============== ==============
Net increase in Fund ................................ 30,805,425 53,439,928 78,798,616
============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Treasury Prime
Cash Management Fund
----------------------------------------------------
Period
Year Ended March 22, 1995
December 31, 1996 through December 31,1995 (b)
----------------- ----------------------------
<S> <C> <C>
Institutional Shares:
Shares issued ..................................... 834,279,533 206,294,412
Dividends reinvested .............................. 490,259 433,330
Shares redeemed ................................... (778,657,574) (192,719,213)
-------------- -----------
Net increase ...................................... 56,112,218 14,008,529
============== ===========
Service Shares:
Shares issued ..................................... 1,423,048,286 187,261,796
Dividends reinvested .............................. 293 975
Shares redeemed ................................... (1,338,572,220) (56,701,721)
-------------- -----------
Net increase ...................................... 84,476,359 130,561,050
============== ===========
Net increase in Fund ................................ 140,588,577 144,569,579
============== ===========
<FN>
(a) Effective June 1, 1995 and July 1, 1995 these Funds changed their fiscal year ends from May 31 and June 30, respectively, to
December 31.
(b) Commencement of operations
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Cash Management Fund
-----------------------------------------------------------
Period
Year Ended July 1, 1995 through Year Ended
December 31, 1996 December 31 1995 (a) June 30,1995
----------------- -------------------- ------------
<S> <C> <C> <C>
Institutional Shares:
Shares issued ..................... 2,462,204,127 930,307,164 1,491,127,430
Dividends reinvested .............. 2,719,445 985,563 1,361,860
Shares redeemed ................... (1,968,098,976) (861,416,587) (1,417,064,383)
-------------- ------------ --------------
Net increase ...................... 496,824,596 69,876,140 75,424,907
============== =========== ==============
Service Shares:
Shares issued ..................... 1,138,992,942 327,575,084 48,454,575
Dividends reinvested .............. 1,220 343 309
Shares redeemed ................... (1,028,500,120) (217,155,989) (37,076,303)
-------------- ------------ --------------
Net increase ...................... 110,494,042 110,419,438 11,378,581
============== ============ ==============
Net increase in Fund ................ 607,318,638 180,295,578 86,803,488
============== ============ ==============
<FN>
- ----------------
(a) Effective June 1, 1995 and July 1, 1995, these Funds changed their fiscal
year ends from May 31 and June 30, respectively, to December 31.
</TABLE>
(4) Management Fee and Other Transactions With Affiliates
Pegasus has an Investment Advisory Agreement with FCNIMCO pursuant to
which FCNIMCO has agreed to provide the day-to-day management of each of the
Cash Management Fund's investments for an advisory fee at an annual rate of
0.20% of each Cash Management Fund's average daily net assets.
Pegasus has entered into a Co-Administration Agreement with FCNIMCO and
BISYS (collectively, the Co-Administrators) pursuant to which the
Co-Administrators have agreed to assist in all aspects of each
Cash Management Fund's operations for an administration fee at an annual
rate of 0.15% of each Cash Management Fund's average daily net assets.
Prior to July 13, 1996, Concord Holding Corporation was
the distributor for the Cash Management Funds.
For the year ended December 31, 1996, FCNIMCO agreed to limit each
Cash Management 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 $436,588, $248,460
and $398,141, respectively.
Pegasus has adopted a Distribution and Services Plan pursuant to
Rule 12b-1 under the Act. Under the terms of such Plan, each Fund pays
BISYS, 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 Cash Management 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 FCNIMCO, First
Chicago NBD (FCNBD) and their affiliates, for the provision of these
services. For the year ended December 31, 1996, the U.S. Government
Securities Cash
16
<PAGE>
Management Fund, the Treasury Prime Cash Management
Fund and the Cash Management Fund paid fees under the Service Plan
in the amounts of $370,920, $466,429, and $344,060, respectively.
Of these amounts, the following was paid to the Distributor and
FCNIMCO and its affiliates:
<TABLE>
<CAPTION>
Amount paid to
Amount paid to FCNIMCO
the Distributor and its affiliates
--------------- ------------------
<S> <C> <C>
U.S. Government Securities Cash Management Fund ..... $17 $370,903
Treasury Prime Cash Management Fund ................. 16 466,413
Cash Management Fund ................................ 17 344,043
</TABLE>
During the year ended June 30, 1995, an affiliate of FCNIMCO 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 undistributed
net realized losses in the Statement of Assets and Liabilities.
NBD Bank is also compensated for its services as Pegasus' custodian,
and is reimbursed for certain out of pocket expenses incurred on behalf of
Pegasus.
Pegasus maintains an unfunded, nonqualified deferred compensation plan.
This plan allows an individual trustee to elect to defer receipt of all or a
percentage of fees which otherwise would be payable for services performed.
(5) Illiquid Securities
The Pegasus Cash Management Funds may invest not more than 10%
of the value of their net assets in securities that are illiquid.
Illiquid investments may include securities having legal or contractual
restrictions on resale or no readily available market. At December 31,
1996, the Pegasus Cash Management Fund owned the following restricted
securities (constituting 3.4% of net assets) which may not be publicly
sold without registration under the Securities Act of 1933 (the 1933
Act). The Fund does not have the right to demand that such securities
be registered. The value of these securities is determined by
valuations supplied by a pricing service or brokers or, if not
available, in good faith by or at the directions of the Trustees.
Certain of these securities may be offered and sold to "qualified
institutional buyers" under Rule 144A of the 1933 Act.
<TABLE>
<CAPTION>
Value Percentage
Acquisition Par Per 12/31/96 of
Security Date Value Unit Value Net Assets Cost
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New York Life
Insurance Company 10/15/96 $20,000,000 $1.00 $20,000,000 1.8% $20,000,000
Travelers Insurance
Group 11/7/96 18,000,000 1.00 18,000,000 1.6 18,000,000
----------- --- -----------
$38,000,000 3.4% $38,000,000
----------- --- -----------
</TABLE>
17
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
FINANCIAL HIGHLIGHTS
The financial highlights present a per share analysis of net investment
income and distributions from net investment income for the Cash Management
Funds. Additional quantitative measures expressed in ratio form analyze
important relationships between certain items presented in the financial
statements. These financial highlights have been derived from the financial
statements of the Cash Management Funds and other information for the periods
presented.
<TABLE>
<CAPTION>
U.S. Government Securities
Cash Management Fund
---------------------------------------------------------------------------------------
Year ended Period Ended Year Ended May 31, Period Ended
Dec. 31, 1996 Dec. 31, 1995(a) 1995 1994 May 31, 1993(b)
------------- -------------------- ----------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Institutional Shares:
Net asset value, beginning of
period .......................... $ 0.9990 $ 0.9989 $ 0.9999 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income ........... 0.0502 0.0320 0.0492 0.0302 0.0319
Net realized gains (losses) ...... (0.0002) 0.0001 (0.0010) (0.0001) --
-------- -------- -------- -------- --------
Total from investment operations 0.0500 0.0321 0.0482 0.0301 0.0319
-------- -------- -------- -------- --------
Less distributions:
From net investment income ...... (0.0502) (0.0320) (0.0492) (0.0302) (0.0319)
-------- -------- -------- -------- --------
Net asset value, end of period .... $ 0.9988 $ 0.9990 $ 0.9989 $ 0.9999 $ 1.0000
======== ======== ======== ======== ========
Total Return ...................... 5.15% 3.24%++ 5.03% 3.06% 3.25%++
Ratios/Supplemental Data
Ratios to average net assets:
Expenses ........................ 0.35% 0.35%+ 0.34% 0.30% 0.02%+
Net investment income ............ 5.09% 5.46%+ 4.94% 3.02% 3.10%+
Expenses without reimbursement.... 0.43% 0.42%+ 0.41% 0.41% 0.49%+
Net investment income without
reimbursement................... 5.01% 5.39%+ 4.87% 2.91% 2.63%+
Net assets, end of period (000's
omitted) ...................... $369,163 $489,395 $475,248 $413,634 $264,527
<FN>
- ----------------
(a) 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.
(b) For the period January 17, 1993 (initial offering date of Institutional
Shares) through May 31, 1993.
+ Annualized
++ Not Annualized
See accompanying notes to financial statements.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
U.S. Government Securities
Cash Management Fund
-----------------------------------------------------------
Year Ended Period Ended Period Ended
Dec. 31, 1996 Dec. 31, 1995(a) May 31, 1995(b)
------------- -------------------- --------------------
<S> <C> <C> <C>
Service Shares:
Net asset value, beginning of period ................ $ 0.9990 $ 0.9989 $ 1.0000
-------- -------- --------
Income from investment operations:
Net investment income ............................. 0.0478 0.0305 0.0199
Net realized gains (losses)........................ 0.0005 0.0001 (0.0011)
--------- ------- ---------
Total from investment operations .................. 0.0483 0.0306 0.0188
-------- ------- --------
Less distributions:
From net investment income ........................ (0.0478) (0.0305) (0.0199)
-------- ------- --------
Net asset value, end of period ...................... $ 0.9995 $ 0.9990 $ 0.9989
======== ======= ========
Total Return ........................................ 4.89% 3.09%++ 2.01%++
Ratios/Supplemental Data
Ratios to average net assets:
Expenses .......................................... 0.60% 0.60%+ 0.57%+
Net investment income ............................. 4.84% 5.17%+ 5.48%+
Expenses without reimbursement .................... 0.68% 0.69%+ 0.66%+
Net investment income without
reimbursement ................................... 4.76% 5.08%+ 5.39%+
Net assets, end of period (000's omitted) ......... $207,046 $ 56,000 $ 16,702
<FN>
- ----------------
(a) 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.
(b) For the period January 17, 1995 (initial offering date of Service Shares)
through May 31, 1995.
+ Annualized
++ Not Annualized
See accompanying notes to financial statements.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Treasury Prime Cash Management Fund
----------------------------------
Year Ended Period Ended
Dec. 31, 1996 Dec. 31, 1995(a)
------------- ----------------
<S> <C> <C>
Institutional Shares:
Net asset value, beginning of period ................ $ 1.0000 $ 1.0000
-------- --------
Income from investment operations:
Net investment income ............................. 0.0474 0.0399
Net realized gains (losses)........................ (0.0001) --
-------- --------
Total from investment operations .................. 0.0473 0.0399
-------- --------
Less distributions:
From net investment income ........................ (0.0474) (0.0399)
-------- --------
Net asset value, end of period ...................... $ 0.9999 $ 1.0000
======== ========
Total Return ........................................ 4.86% 4.06%++
Ratios/Supplemental Data
Ratios to average net assets:
Expenses .......................................... 0.35% 0.35%+
Net investment income ............................. 4.84% 5.16%+
Expenses without reimbursement .................... 0.46% 1.23%+
Net investment income without
reimbursement ................................... 4.73% 4.28%+
Net assets, end of period (000's omitted) ......... $ 70,120 $ 14,008
<FN>
- ----------------
(a) For the period March 22, 1995 (commencement of operations) through
December 31, 1995.
+ Annualized
++ Not Annualized
See accompanying notes to financial statements.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Treasury Prime Cash Management Fund
-------------------------------------
Year Ended Period Ended
Dec. 31, 1996 Dec. 31, 1995(a)
------------- --------------------
<S> <C> <C>
Service Shares:
Net asset value, beginning of period ................ $ 1.0000 $ 1.0000
-------- --------
Income from investment operations:
Net investment income ............................. 0.0449 0.0380
-------- --------
Total from investment operations .................. 0.0449 0.0380
-------- --------
Less distributions:
From net investment income ........................ (0.0449) (0.0380)
-------- --------
Net asset value, end of period ...................... $ 1.0000 $ 1.0000
======== ========
Total Return ........................................ 4.60% 3.86%++
Ratios/Supplemental Data
Ratios to average net assets:
Expenses .......................................... 0.60% 0.60%+
Net investment income ............................. 4.59% 4.72%+
Expenses without reimbursement .................... 0.71% 0.74%+
Net investment income without
reimbursement ................................... 4.48% 4.58%+
Net assets, end of period (000's omitted) ......... $215,040 $130,559
<FN>
- ----------------
(a) For the period March 22, 1995 (commencement of operations) through
December 31, 1995.
+ Annualized
++ Not Annualized
See accompanying notes to financial statements.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Cash Management Fund
---------------------------------------------------------------------------------------
Year Ended Period Ended Year Ended June 30, Period Ended
Dec. 31, 1996 Dec. 31, 1995(a) 1995 1994 June 30, 1993(b)
------------- -------------------- ----------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Institutional Shares:
Net asset value, beginning of
period .......................... $ 0.9996 $ 0.9994 $ 0.9993 $ 0.9999 $ 1.0000
--------- -------- -------- --------- ---------
Income from investment operations:
Net investment income ........... 0.0508 0.0277 0.0507 0.0333 0.0297
Net realized gains (losses) ...... 0.0002 0.0002 (0.0059) (0.0006) (0.0001)
--------- -------- -------- --------- ---------
Total from investment operations 0.0510 0.0279 0.0448 0.0327 0.0296
--------- -------- -------- --------- ---------
Less distributions:
From net investment income ...... (0.0508) (0.0277) (0.0507) (0.0333) (0.0297)
--------- -------- -------- --------- ---------
Increase due to capital
contribution from affiliate of
Investment Adviser (Note 4) ..... -- -- 0.0060 -- --
--------- -------- -------- --------- ---------
Net asset value, end of period .... $ 0.9998 $ 0.9996 $ 0.9994 $ 0.9993 $ 0.9999
========= ======== ======== ========= =========
Total Return ...................... 5.23% 2.80%++ 5.19%* 3.38% 3.25%+
Ratios/Supplemental Data
Ratios to average net assets:
Expenses ........................ 0.35% 0.35%+ 0.35% 0.31% 0.05%+
Net investment income ........... 5.19% 5.51%+ 5.11% 3.33% 3.19%+
Expenses without reimbursement .. 0.42% 0.43%+ 0.44% 0.43% 0.56%+
Net investment income without
reimbursement ................. 5.12% 5.43%+ 5.02% 3.21% 2.68%+
Net assets, end of period (000's
omitted). ..................... $ 885,946 $389,127 $319,214 $ 243,820 $ 175,713
<FN>
- ----------------
(a) 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.
(b) For the period July 30, 1992 (commencement of operations) through June
30, 1993.
* Had the Fund not had a capital contribution by an affiliate of the
Investment Advisor, the total return would have been 4.51%.
+ Annualized
++ Not Annualized
See accompanying notes to financial statements.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Cash Management Fund
-----------------------------------------------------------
Year Ended Period Ended Period Ended
Dec. 31, 1996 Dec. 31, 1995(a) June 30, 1995(b)
------------- -------------------- --------------------
<S> <C> <C> <C>
Service Shares:
Net asset value, beginning of period ................ $ 0.9996 $ 0.9994 $ 1.0000
Income from investment operations:
Net investment income ............................. 0.0484 0.0264 0.0245
Net realized gains (losses)........................ 0.0002 0.0002 (0.0006)
-------- --------- ---------
Total income from investment operations ........... 0.0486 0.0266 0.0239
-------- --------- ---------
Less distributions:
From net investment income ........................ (0.0484) (0.0264) (0.0245)
-------- --------- ---------
Net asset value, end of period ...................... $ 0.9998 $ 0.9996 $ 0.9994
======== ========= =========
Total Return ........................................ 4.98% 2.68%++ 2.47%++
Ratios/Supplemental Data
Ratios to average net assets:
Expenses .......................................... 0.60% 0.60%+ 0.60%+
Net investment income ............................. 4.94% 5.25%+ 5.46%+
Expenses without reimbursement .................... 0.67% 0.69%+ 0.71%+
Net investment income without
reimbursement ................................... 4.87% 5.16%+ 5.35%+
Net assets, end of period (000's omitted) ......... $232,249 $ 121,750 $ 11,372
<FN>
- ----------------
(a) 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.
(b) For the period January 17, 1995 (initial offering date of Service Shares)
through June 30, 1995.
+ Annualized
++ Not Annualized
See accompanying notes to financial statements.
</TABLE>
23
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees and Shareholders of
the Pegasus Cash Management Funds:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of the Cash Management Funds of the
PEGASUS FUNDS (comprising, as indicated in Note 1, the U.S. Government
Securities, Treasury Prime and Cash Management) as of December 31, 1996, and
the related statements of operations, the statements of changes in net
assets and the financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The statements
of changes in net assets for the year ended December 31, 1995 and the
financial highlights for the period from inception to December 31, 1995 of
the Cash Management Funds of the Pegasus Funds (formerly known as the Prairie
Institutional Funds) were audited by other auditors whose report dated
February 22, 1996, expressed an unqualified opinion on those statements.
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 physical counts and
confirmation of securities owned as of December 31, 1996, by inspection and
correspondence with custodians, banks and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the 1996 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 Cash Management
Funds of the Pegasus Funds as of December 31, 1996, the results of their
operations, the changes in their net assets and the financial highlights for
the year then ended, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
February 21, 1997.
24
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
RESULTS OF SPECIAL SHAREHOLDER MEETING
(UNAUDITED)
On July 8, 1996, a special meeting of the shareholders of the Treasury
Prime Cash Management Fund of Prairie Institutional Funds was held to
consider the approval of an Agreement and Plan of Reorganization by and
between Pegasus Funds and Prairie Institutional Funds.
The shareholders approved the Reorganization Agreement with respect to
the Treasury Prime Cash Management Fund as follows:
<TABLE>
<CAPTION>
Portfolio In Favor Opposed Abstain
--------- -------- ------- -------
<S> <C> <C> <C>
Treasury Prime Cash Management Fund ................. 119,886,862 -- 8,512,903
</TABLE>
On July 12, 1996, a special meeting of the shareholders of the U.S.
Government Securities Cash Management Fund and the Cash Management Fund of
Prairie Institutional Funds was held to consider the approval of an Agreement
and Plan of Reorganization by and between Pegasus Funds and Prairie
Institutional Funds.
The Shareholders approved the Reorganization 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 .......... 263,151,795 1,524,350 94,204,830
Cash Management Fund ................................ 276,162,573 1,572,496 11,763,950
</TABLE>
25
