As filed with the Securities and Exchange Commission on May 16, 1997
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. 41
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 41
PEGASUS 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)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[X] on August 1, 1997 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.
Registrant has previously registered an indefinite number of its shares of
beneficial interest under the Securities Act of 1933 pursuant to Rule 24f-2
under the Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for
the fiscal year ended December 31, 1996 was filed on March 3, 1997.
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<PAGE>
CROSS REFERENCE SHEET
Class S and Class I Shares of the:
Cash Management Fund,
Treasury Cash Management Fund,
Treasury Prime Cash Management Fund and
U.S. Government Securities Cash Management Fund, Respectively.
Form N-1A Part A Item Prospectus Caption
- --------------------- ------------------
1. Cover Page........................................ Cover page
2. Synopsis.......................................... Fund Expenses;
Background
3. Financial Highlights.............................. Financial
Highlights;
Performance
Information
4. General Description of
Registrant........................................ Cover Page;
Description of the
Funds; General
Information;
Supplemental
Information
5. Management of Registrant ......................... Management of the
Funds
5A. Management's Discussion .......................... Inapplicable
6. Capital Stock and Other
Securities........................................ How to Buy Shares;
How to Redeem
Shares; Dividends
and Distributions;
Taxes; Management
of the Funds;
General
Information
7. Purchase of Securities
Being Offered..................................... How to Buy Shares;
Management of the
Funds
8. Redemption or Repurchase.......................... How to Redeem
Shares;
9. Pending Legal Proceedings......................... Inapplicable
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<PAGE>
PEGASUS FUNDS
Cash Management Fund
Treasury 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
August 1, 1997
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 NBD Investment Management Company
Investment Adviser and Co-Administrator
BISYS Fund Services
Distributor and Co-Administrator
Prospectus begins on page one
<PAGE>
PROSPECTUS
August 1, 1997
PEGASUS FUNDS
Pegasus 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 four separate diversified, money
market series (each, a "Fund"): Cash Management Fund, Treasury 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 NBD Investment Management Company ("FCNIMCO") serves as
each Fund's investment adviser (the "Investment Adviser") and FCNIMCO and
BISYS Fund Services Limited Partnership d/b/a 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 August 1, 1997,
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 (the "SEC") and is incorporated herein by reference. For a free
copy, write to the Trust at 900 Tower Drive, Mail Suite 8412, Troy, Michigan
48098, or call 1-800-688-3350.
<PAGE>
TABLE OF CONTENTS
ANNUAL FUND OPERATING EXPENSES............................................ 3
CONDENSED FINANCIAL INFORMATION........................................... 5
YIELD INFORMATION......................................................... 9
DESCRIPTION OF THE FUNDS.................................................. 9
MANAGEMENT OF THE TRUST................................................... 14
HOW TO BUY FUND SHARES.................................................... 18
HOW TO REDEEM FUND SHARES................................................. 20
DISTRIBUTION AND SERVICES PLAN............................................ 21
DIVIDENDS, DISTRIBUTIONS AND TAXES........................................ 21
GENERAL INFORMATION....................................................... 24
SUPPLEMENTAL INFORMATION................................................. A-1
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<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 Cash Treasury Prime Cash Securities Cash
Fund Management Fund Management Fund Management Fund
--------------------- ----------------------- ----------------------- ----------------------
Institutional Service Institutional Service Institutional Service Institutional Service
Shares Shares Shares Shares Shares Shares Shares Shares
------------- ------- ------------- ------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees
(after fee waivers)..... .17% .17% .12% .12% .16% .16% .17% .17%
12b-1 (distribution
and servicing)
Fees..................... None .25% None .25% None .25% None .25%
Other Fund Operating
Expenses (after fee
waivers and
reimbursements).......... .18% .18% .23%* .23%* .19% .19% .18% .18%
Total Fund Operating
Expenses (after fee
waivers and expense
reimbursements).......... .35% .60% .35% .60% .35% .60% .35% .60%
<FN>
* Estimated
</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 Institutional Service
Shares Shares Shares Shares Shares Shares Shares Shares
------------- ------- ------------- ------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year.............. $ 4 $ 6 $ 4 $ 6 $ 4 $ 6 $ 4 $ 6
3 Years............. $11 $19 $11 $19 $11 $19 $11 $19
5 Years............. $20 $33 N/A N/A $20 $33 $20 $33
10 Years............ $44 $75 N/A N/A $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%.
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<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 Investment Adviser 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, 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 Investment Adviser under the Investment Advisory or
Administration Agreements, or the Investment Adviser 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, .21% for the Institutional Shares and
Service Shares of the Cash Management Fund, .31% for the Institutional
Shares and Service Shares of the Treasury Cash Management Fund (based on
estimated amounts for the current fiscal year), .23% for the Institutional
Shares and Service Shares of the Treasury Prime Cash Management Fund, and
.21% for the Institutional Shares and Service Shares of the U.S. Government
Securities Cash Management Fund; and Total Fund Operating Expenses, .41% for
the Institutional Shares and .66% for the Service Shares of the Cash
Management Fund, .51% for the Institutional Shares and .76% for the
Service Shares of the Treasury Cash Management Fund (based on estimated
amounts for the current fiscal year), .43% for the Institutional Shares and
.68% for the Service Shares of the Treasury Prime Cash Management Fund, and
.41% for the Institutional Shares and .66% 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."
-4-
<PAGE>
CONDENSED FINANCIAL INFORMATION
Financial Highlights
The Cash Management Fund commenced operations on July 30, 1992 as the
First Prairie Cash Management Fund and the U.S. Government Securities Cash
Management Fund commenced operations on June 2, 1992 as the First Prairie
U.S. Treasury Securities Cash Management Fund (collectively, the "First
Prairie Funds"). On January 17, 1995, all of the assets and liabilities of
each First Prairie Fund were transferred to the Cash Management Fund and U.S.
Government Securities Cash Management Fund, respectively, of the Prairie
Institutional Funds. On July 13, 1996, all of the assets and liabilities of
the Cash Management Fund, Treasury Prime Cash Management Fund and U.S.
Government Securities Cash Management Fund (the "Predecessor Funds") of
Prairie Institutional Funds were transferred to the Cash Management Fund,
Treasury Prime Cash Management Fund and U.S. Government Securities Cash
Management Fund, respectively. The Treasury Cash Management Fund had not
commenced operations prior to the date of this Prospectus.
The tables below set forth certain information concerning the
investment results of the Funds (excluding the Treasury Cash Management
Fund), the Predecessor Funds and the First Prairie Funds. The information
about the Funds for the period ended December 31, 1996 has been audited by
Arthur Andersen LLP, the Trust's independent accountants, whose report
thereon is incorporated by reference in the Statement of Additional
Information. The information about the Predecessor Funds and the First
Prairie Funds for the periods and years prior to December 31, 1995 has
been derived from the financial statements which have been audited by
Ernst & Young LLP, such Funds' prior independent auditors, whose report
thereon dated February 22, 1996 expressed an unqualified opinion on
such financial statements. The Financial Highlights should be read in
conjunction with the financial statements and notes thereto and the
reports of the independent accountants which are incorporated by reference
in the Statement of Additional Information. Further information about the
performance of the Funds is available in the Funds' Annual Report to
Shareholders. The Statement of Additional Information and the Annual
Report to Shareholders may be obtained from the Trust free of charge by
calling (800) 688-3350.
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<PAGE>
For a Share Outstanding Throughout the Period
<TABLE>
<CAPTION>
Net Asset Net Distributions
Value Net Realized Total from from Net
Beginning Investment Gains Investment Investment
of Period Income (Losses) Operations Income
--------- ---------- -------- ---------- -------------
U.S. Government Securities Cash Management Fund
<S> <C> <C> <C> <C> <C>
Institutional
Shares
1996 $0.9990 0.0502 (0.0002) 0.0500 (0.0502)
1995(a) $0.9989 0.0320 0.0001 0.0321 (0.0320)
1995 $0.9999 0.0492 (0.0010) 0.0482 (0.0492)
1994 $1.0000 0.0302 (0.0001) 0.0301 (0.0302)
1993(b) $1.0000 0.0319 -- 0.0319 (0.0319)
Service Shares
1996 $0.9990 0.0478 0.0005 0.0483 (0.0478)
1995(a) $0.9989 0.0305 0.0001 0.0306 (0.0305)
1995(c) $1.0000 0.0199 (0.0011) 0.0188 (0.0199)
<CAPTION>
Ratio
of Net
Ratio of Investment
Ratio Expenses Income
of Net to Average to Average
Net Assets Ratio of Investment Net Assets Net Assets
Net Asset End of Expenses Income (Excluding Fee (Excluding Fee
Value End Total Period to Average to Average Waivers and Waivers and
of Period Return (000) Net Assets Net Assets Reimbursements) Reimbursements)
- --------- ------ ---------- ---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
$0.9988 5.15% $369,163 0.35% 5.09% 0.43% 5.01%
$0.9990 3.24%++ $489,395 0.35%+ 5.46%+ 0.42%+ 5.39%+
$0.9989 5.03% $475,248 0.34% 4.94% 0.41% 4.87%
$0.9999 3.06% $413,634 0.30% 3.02% 0.41% 2.91%
$1.0000 3.25%+ $264,527 0.02%+ 3.10%+ 0.49%+ 2.63%+
$0.9995 4.89% $207,046 0.60% 4.84% 0.68% 4.76%
$0.9990 3.09%++ $ 56,000 0.60%+ 5.17%+ 0.69%+ 5.08%+
$0.9989 2.01%++ $ 16,702 0.57%+ 5.48%+ 0.66%+ 5.39%+
<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 June 2, 1992 (commencement of operations) through
May 31, 1993.
(c) For the period January 17, 1995 (initial offering date of Service Shares)
through May 31, 1995.
+ Annualized.
++ Not Annualized.
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Net Asset Net Distributions
Value Net Realized Total from from Net
Beginning Investment Gains Investment Investment
of Period Income (Losses) Operations Income
--------- ---------- -------- ---------- -------------
Treasury Prime Cash Management Fund
<S> <C> <C> <C> <C> <C>
Institutional
Shares
1996 $1.0000 0.0474 (0.0001) 0.0473 (0.0474)
1995(a) $1.0000 0.0399 -- 0.0399 (0.0399)
Service Shares
1996 $1.0000 0.0449 -- 0.0449 (0.0449)
1995(a) $1.0000 0.0380 -- 0.0380 (0.0380)
<CAPTION>
Ratio
of Net
Ratio of Investment
Ratio Expenses Income
of Net to Average to Average
Net Assets Ratio of Investment Net Assets Net Assets
Net Asset End of Expenses Income (Excluding Fee (Excluding Fee
Value End Total Period to Average to Average Waivers and Waivers and
of Period Return (000) Net Assets Net Assets Reimbursements) Reimbursements)
- --------- ------ ---------- ---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
$0.9999 4.86% $ 70,120 0.35% 4.84% 0.46% 4.73%
$1.0000 4.06%++ $ 14,008 0.35%+ 5.16%+ 1.23%+ 4.28%+
$1.0000 4.60% $215,040 0.60% 4.59% 0.71% 4.48%
$1.0000 3.86%++ $130,559 0.60%+ 4.72%+ 0.74%+ 4.58%+
<FN>
(a) For the period March 22, 1995 (commencement of operations) through
December 31, 1995.
+ Annualized.
++ Not Annualized.
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
Increase Due
to Capital
Contribution
Net Distribut- from an
Net Asset Realized ions Affiliate
Value Net Gains Total from from Net of the
Beginning Investment (Losses) on Investment Investment Investment
of Period Income Investments Operations Income Adviser
--------- ------ ----------- ---------- ---------- ------------
Cash Management Fund
<S> <C> <C> <C> <C> <C> <C>
Institutional
Shares
1996 $0.9996 0.0508 0.0002 0.0510 (0.0508) --
1995(a) $0.9994 0.0277 0.0002 0.0279 (0.0277) --
1995 $0.9993 0.0507 (0.0059) 0.0448 (0.0507) 0.0060
1994 $0.9999 0.0333 (0.0006) 0.0327 (0.0333) --
1993(c) $1.0000 0.0297 (0.0001) 0.0296 (0.0297) --
Service Shares
1996 $0.9996 0.0484 0.0002 0.0486 (0.0484) --
1995 (a) $0.9994 0.0264 0.0002 0.0266 (0.0264) --
1995 (d) $1.0000 0.0245 (0.0006) 0.0239 (0.0245) --
<CAPTION>
Ratio
of Net
Ratio of Investment
Ratio Expenses Income
of Net to Average to Average
Net Assets Ratio of Investment Net Assets Net Assets
Net Asset End of Expenses Income (Excluding Fee (Excluding Fee
Value End Total Period to Average to Average Waivers and Waivers and
of Period Return (000) Net Assets Net Assets Reimbursements) Reimbursements)
- --------- ------ ---------- ------------ ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
$0.9998 5.23% $885,946 0.35% 5.19% 0.42% 5.12%
$0.9996 2.80%++ $389,127 0.35%+ 5.51%+ 0.43%+ 5.43%+
$0.9994 5.19%(b) $319,214 0.35% 5.11% 0.44% 5.02%
$0.9993 3.38% $243,820 0.31% 3.33% 0.43% 3.21%
$0.9999 3.25%+ $175,713 0.05%+ 3.19%+ 0.56%+ 2.68%+
$0.9998 4.98% $232,249 0.60% 4.94% 0.67% 4.87%
$0.9996 2.68%++ $121,750 0.60%+ 5.25%+ 0.69%+ 5.16%+
$0.9994 2.47%++ $ 11,372 0.60%+ 5.46%+ 0.71%+ 5.35%+
- ------------------------------
(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) If the Fund had not had a capital contribution by an Affiliate
of the Investment Adviser during the period, the total return would
have been 4.51%.
(c) For the period July 30, 1992 (commencement of operations) through
June 30, 1993.
(d) For the period January 17, 1995 (initial offering date of Service
Shares) through June 30, 1995.
+ Annualized.
++ Not Annualized.
</TABLE>
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<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. 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.
By this Prospectus, two classes of shares of each Fund are being
offered -- Institutional Shares and Service Shares (each
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<PAGE>
such class being referred to as a "Class"). Unlike Institutional Shares,
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."
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 investment objective 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.
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
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<PAGE>
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, guaranteed investment contracts, 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 "Supplemental Information -- Portfolio Securities and
Investment Practices." During normal market conditions, at least 25% of the
Fund's total assets will be invested in bank obligations or instruments
secured by such obligations.
o Treasury Cash Management Fund invests in U.S. Treasury bills,
notes, and direct U.S. Treasury obligations having remaining maturities
of 397 days or less; and repurchase agreements relating to direct U.S.
Treasury obligations. See "Supplemental Information -- Portfolio Securities."
o Treasury Prime Cash Management Fund invests in U.S. Treasury bills,
notes, and direct U.S. Treasury obligations having remaining maturities
of 397 days or less. See "Supplemental Information -- Portfolio Securities."
The Fund does not invest in repurchase agreements.
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<PAGE>
o U.S. Government Securities Cash Management Fund invests in
short-term securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; and repurchase agreements relating to
direct U.S. Government securities. See "Supplemental Information --
Portfolio Securities and Investment Practices."
Certain Fundamental Policies
Each Fund may not:
(1) Borrow money, issue senior securities, or mortgage, pledge or
hypothecate its assets except to the extent permitted under the 1940 Act;
(2) Act as an underwriter of securities of other issuers, except to
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 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 the 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
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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; and
(6) Purchase securities of any one issuer (except U.S. Government
securities and related repurchase agreements) if immediately after such
purchase, more than 5% of the value of the Fund's total assets would be
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.
See, also "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 "Supplemental Information -- Investment Practices --
Illiquid Securities" and "Investment Objective and Management Policies --
Investment Restrictions" in the Statement of Additional Information.
Risk Factors
See also "Supplemental Information" 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 banks
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
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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, except the Treasury Cash Management and Treasury Prime
Cash Management Funds, 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 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
Trustees and Officers of the Trust
The Board of Trustees of the Trust is responsible for the management
of the business and affairs of the Trust. The Statement of Additional
Information contains information about the Board of Trustees.
Investment Adviser and Co-Administrators
First Chicago NBD Investment Management Company ("FCNIMCO"),
located at Three First National Plaza, Chicago, Illinois 60670,
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is each Fund's Investment Adviser. FCNIMCO 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
("FCN"), a registered bank holding company. Included among FCNIMCO'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. FCNIMCO also acts as
investment adviser for other registered investment company portfolios.
FCNIMCO serves as Investment Adviser for the Trust pursuant to an
Investment Advisory Agreement dated as of April 12, 1996. Under the
Investment Advisory Agreement, FCNIMCO 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. FCNIMCO 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. Under the Investment Advisory Agreement, FCNIMCO is entitled to a
monthly advisory fee at the annual rate of .20% of each Fund's average daily
net assets. For the period from July 13, 1996 through December 31, 1996, the
Trust paid FCNIMCO an investment advisory fee under the Investment Advisory
Agreement at the effective annual rates of .13%, .12% and .14% 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. The Treasury Cash Management Fund had not commenced operations prior
to the date of this Prospectus.
FCNIMCO also served as each Predecessor Fund's investment adviser.
Prior to January 17, 1995, FNBC served as the investment adviser to the First
Prairie Funds. For the period January 1, 1996 through July 12, 1996, Prairie
Institutional Funds paid FCNIMCO an investment advisory fee under the prior
advisory agreement at the effective annual rates of .13%, .12% and .14% of
the respective average daily net assets of the Predecessor Cash Management
Fund, Predecessor Treasury Prime Cash Management Fund and Predecessor U.S.
Government Securities Cash Management Fund.
FCNIMCO and BISYS jointly serve as the Trust's Co-Administrators
pursuant to an Administration Agreement with the Trust. Under the
Administration Agreement, FCNIMCO 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 the Trust pays FCNIMCO,
as agent for the Co-Administrators, a monthly
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administration fee at the annual rate of .15% of each Fund's average daily
net assets. For the fiscal year ended December 31, 1996, the Trust paid
administration fees at the effective annual rate of .15% of each Fund's
(other than the Treasury Cash Management Fund) average daily net assets.
FCNIMCO also served as each Predecessor Fund's administrator. Prior
to January 17, 1995, FNBC served as administrator to the First Prairie Funds.
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.
Transfer and Dividend Disbursing Agent and Custodian
First Data Investor Services Group, Inc., P.O. Box 5142, Westborough,
Massachusetts 01581-5120, serves as the Trust's Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). NBD Bank, which is a wholly-owned
subsidiary of First Chicago NBD Corporation, serves as the Trust's custodian
(the "Custodian"). NBD Bank is located at 900 Tower Drive, Troy, Michigan
48098.
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Expenses
All expenses incurred in the operation of the Trust are borne by the
Trust, except to the extent specifically assumed by the Investment Adviser
and Co-Administrators. The expenses borne by the Trust include organizational
costs, taxes, interest, brokerage fees and commissions, if any, fees and
expenses of Trustees, SEC 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 by the Board of Trustees. See
"Distribution and Services Plan." Expenses attributable to a particular Fund
or Class are generally charged against the assets of that Fund or Class,
respectively, and 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 Investment Adviser 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 the Investment Adviser under the Investment Advisory or
Administration Agreements, or the Investment Adviser will bear such excess
expense.
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HOW TO BUY FUND SHARES
Each Fund is designed primarily 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 1-800-688-3350.
For instructions concerning purchases and to determine whether their
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computer facilities are compatible with the Trust's, investors should call
1-800-688-3350.
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, Treasury 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, Treasury 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, Treasury 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" 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"), and could subject the investor to backup withholding.
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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, Treasury 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. 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, Treasury 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).
For redemptions by telephone or wire, please call 1-800-688-3350.
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
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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 1-800-688-3350 to determine whether their
computer facilities are compatible and to receive instructions for redeeming
shares in this manner.
The Trust reserves the right to redeem an investor's account at the
Trust's option upon not less than 60 days' written notice if, due to share
redemptions, the accounts net asset value decreases to $1,000,000 or less,
and remains so during the notice period.
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 for 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. FCNIMCO, 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.
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 first
calendar day of each
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month, and are automatically reinvested at net asset value in additional
shares of the Fund from which they were paid 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 at net asset value of the Fund from
which they were paid. 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 generally 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
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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 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 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. 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 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.
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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-eight 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 currently offers the following investment portfolios by means of
separate prospectuses: the Pegasus Intermediate Bond Fund, Bond Fund, Short
Bond Fund, Income Fund, High Yield Bond Fund, International Bond Fund,
Municipal Bond Fund, Intermediate Municipal Bond Fund, Michigan Municipal
Bond Fund, Equity Income Fund, Growth Fund, Mid-Cap Opportunity Fund,
Small-Cap Opportunity Fund, Intrinsic Value Fund, Growth and Value Fund,
Equity Index Fund, International Equity Fund, Managed Assets Conservative
Fund, Managed Assets Balanced Fund, Managed Assets Growth Fund, Money Market
Fund, Treasury Money Market Fund, Municipal Money Market Fund and Michigan
Municipal Money Market Fund.
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.
The Board of Trustees has 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
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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.
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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SUPPLEMENTAL INFORMATION
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 Cash Management Fund and 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 --
Each Fund may invest in stripped U.S. Treasury Securities and the Cash
Management and U.S. Government Securities Cash Management Funds may invest in
stripped U.S. Government Securities, where the principal and interest
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
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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 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 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 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
A-2
<PAGE>
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 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.
Guaranteed Investment Contracts -- The Cash Management Fund and U.S.
Government Securities Cash Management Fund may make limited investments in
guaranteed investment contracts ("GICs") issued by highly rated U.S.
insurance companies. Pursuant to such contracts, a Fund makes cash
contributions to a deposit fund of the insurance company's general account.
The insurance company then credits to the Fund on a monthly basis guaranteed
interest which is based on an index. The GICs provide that this guaranteed
interest will not be less than a certain minimum rate. Generally, a GIC
allows a purchaser to buy an annuity with the monies accumulated under
contract; however, a Fund will not
A-3
<PAGE>
purchase any such annuity. A GIC is a general obligation of the issuing
insurance company and not a separate account. The purchase price paid for a
GIC becomes a part of the general assets of the issuer, and the contract is
paid from the general assets of the issuer. The Cash Management Fund and
U.S. Government Securities Cash Management Fund will only purchase GICs from
issuers which meet quality and credit standards established by the Investment
Adviser. Generally, GICs are not assignable or transferable without the
permission of the issuing insurance companies, and an active secondary market
in GICs does not currently exist. Therefore, GICs are considered by the Cash
Management Fund and U.S. Government Securities Fund to be illiquid
investments and subject to the limitation on illiquid investments set forth
below.
Investment Company Securities -- Each Fund 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 and U.S. Government Securities Cash Management Funds 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.
A-4
<PAGE>
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 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 each of the Funds is
permitted to borrow money to the extent permitted under the 1940 Act.
However, each 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, each Fund will not make any additional
investments.
A-5
<PAGE>
CROSS REFERENCE SHEET
Class S and Class I Shares of the:
Cash Management Fund,
Treasury Cash Management Fund,
Treasury Prime Cash Management Fund and
U.S. Government Securities Cash Management Fund, Respectively.
Statement of Additional
Form N-1A Part B Item Information Caption
- --------------------- -----------------------
10. Cover Page..................................... Cover Page
11. Table of Contents.............................. Table of Contents
12. General Information and History................ Description of Shares
13. Investment Objectives and Policies............. Investment Objectives,
Policies and Risk
Factors
14. Management of Registrant....................... Management
15. Control Persons and Principal.................. Description of Shares
Holders of Securities
16. Investment Advisory and Other Services......... Management
17. Brokerage Allocation and other Practices....... Investment Objectives,
Policies and Risk
Factors
18. Capital Stock and Other Securities............. Additional Purchase
and Redemption
Information;
Description of Shares
19. Purchase, Redemption and Pricing............... Additional Purchase
of Securities Being Offered and Redemption
Additional Purchase and Redemption Information Information
20. Tax Status..................................... Additional Information
Concerning Taxes
21. Underwriters................................... Not Applicable
22. Calculation of Performance Data................ Additional Information
on Performance
23. Financial Statements........................... Independent Public
Accountants; Financial
Statements
-3-
<PAGE>
PEGASUS FUNDS
Cash Management Funds
INSTITUTIONAL And SERVICE SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
August 1, 1997
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 Cash Management Fund, Treasury Prime Cash
Management Fund and U.S. Government Securities Cash Management Fund (each, a
"Fund") of Pegasus Funds, dated August 1, 1997, 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
1-800-688-3350.
First Chicago NBD Investment Management Company ("FCNIMCO") serves as
each Fund's investment adviser (the "Investment Adviser") and FCNIMCO and
BISYS Fund Services serve as co-administrators.
BISYS Fund Services is the distributor (the "Distributor") and BISYS
and FCNIMCO serve as co-administrators of the Funds' shares.
TABLE OF CONTENTS
Page
The Trust........................................................ 2
Investment Objective and Management Policies..................... 2
Management of the Trust.......................................... 7
Management Arrangements.......................................... 12
Distribution and Services Plan................................... 15
Purchase of Fund Shares.......................................... 17
Redemption of Fund Shares........................................ 17
Determination of Net Asset Value................................. 18
Portfolio Transactions........................................... 19
Dividends, Distributions and Taxes............................... 21
Yield Information................................................ 21
Information About the Trust...................................... 23
Counsel.......................................................... 26
Independent Auditors............................................. 26
Appendix A....................................................... A-1
<PAGE>
THE TRUST
The Pegasus Funds (the "Trust"), formerly "The Woodward Funds" was
organized as a Massachusetts business trust on April 21, 1987. As of the date
of this Statement of Additional Information, the Trust consisted of
twenty-eight separate funds, of which there were four cash management funds,
the Funds, which are described in this Statement of Additional Information.
The Cash Management Fund commenced operations on July 30, 1992 as
the First Prairie Cash Management Fund, and the U.S. Government Securities
Cash Management Fund commenced operations on June 2, 1992 as the First
Prairie U.S. Treasury Securities Cash Management Fund. On January 17, 1995,
all of the assets and liabilities of First Prairie Cash Management Fund and
First Prairie U.S. Treasury Securities Cash Management were transferred to
the Cash Management Fund (the "Predecessor Cash Management Fund") and U.S.
Government Securities Cash Management Fund (the "Predecessor U.S. Government
Securities Cash Management Fund") of the Prairie Institutional Funds,
respectively, in exchange for Institutional Shares of those Funds pursuant to
a reorganization agreement approved by shareholders of each such First
Prairie Fund. The Treasury Prime Cash Management Fund (the "Predecessor
Treasury Prime Cash Management Fund") commenced operations on March 22, 1995
as a series of Prairie Institutional Funds.
On July 13, 1996, all of the assets and liabilities of the
Predecessor Cash Management Fund, Predecessor Treasury Prime Cash Management
Fund and Predecessor U.S. Government Securities Cash Management Fund of the
Prairie Institutional Funds were transferred to the Cash Management Fund,
Treasury Prime Cash Management Fund and U.S. Government Securities Cash
Management Fund, respectively, in exchange for Institutional Shares and
Service Shares pursuant to an agreement and plan of reorganization approved
by shareholders of the Predecessor Cash Management, Predecessor Treasury
Prime Cash Management and Predecessor U.S. Government Securities Cash
Management Funds (the "Reorganization"). Prior to July 13, 1996, the Funds
had no operating history. The financial history contained herein includes
information for the First Prairie Funds and the Prairie Institutional Funds.
The Treasury Cash Management Fund had not commenced operations
prior to the date of this Statement of Additional Information.
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 "Supplemental Information."
-2-
<PAGE>
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.
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
-3-
<PAGE>
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, Treasury 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 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.
-4-
<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 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 its 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 to the extent permitted under the 1940 Act.
-5-
<PAGE>
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.
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. banks
where they are subject to the same regulation as U.S. banks.
6. Purchase securities of any one issuer (except U.S. Government
securities and related repurchase agreements) if immediately after such
purchase, more than 5% of the value of the Fund's total assets would be
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.
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 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:
-6-
<PAGE>
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.
7. 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.
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. Each Trustee has an address at the Trust, c/o NBD Bank, 611
Woodward Avenue, Detroit, Michigan 48226.
Trustees and Officers of the Trust
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. (1985-1996); 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, Pegasus Variable Annuity Fund. He is 71 years old.
-7-
<PAGE>
Nicholas J. De Grazia, Trustee
Business Consultant (1997); Consultant, Lionel L.L.C. (1995-1996);
President, Chief Operating Officer and Director, Lionel Trains, Inc.
(1990-1995); 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); Trustee, Pegasus Variable Annuity Fund.
He is 54 years old.
John P. Gould, Trustee, Chairman of the Board
Executive Vice President of Lexecon Inc. (since 1995); Steven G.
Rothmeier Professor (since January, 1996); Distinguished Service Professor of
Economics of the University of Chicago Graduate School of Business (since
1984); Dean of the University of Chicago Graduate School of Business
(1983-1993); Member of Economic Club of Chicago and Commercial Club of
Chicago; Director of Harbor Capital Advisors and Dimensional Fund Advisors;
Trustee, Pegasus Variable Annuity Fund. He is 58 years old.
Marilyn McCoy, Trustee
Vice President of Administration and Planning of Northwestern
University (since 1985); Director of Planning and Policy Development for the
University of Colorado (1981-1985); Member of the Board of Directors of
Evanston Hospital, Mather Foundation and Metropolitan Family Services; Member
of Economic Club of Chicago and Chicago Network; Trustee, Pegasus Variable
Annuity Fund. She is 49 years old.
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 Technological
University (since 1982); Director, Oakland Commerce Bank (since 1984) and
Michigan Opera Theater (since 1981); Trustee, Pegasus Variable Annuity Fund.
He is 67 years old.
-8-
<PAGE>
*Donald G. Sutherland, Trustee and President
Partner of the law firm Ice, Miller, Donadio & Ryan, Indianapolis,
Indiana; Trustee, Pegasus Variable Annuity Fund.
He is 68 years old.
Donald L. Tuttle, Trustee
Vice President (since 1995), Senior Vice President (1992-1995),
Association for Investment Management and Research; 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); Trustee, Pegasus Variable Annuity Fund. He is 62 years old.
Mark A. Dillon, Vice President
An employee of the Distributor. He is 35 years old and his
address is 3435 Stelzer Road, Columbus, Ohio 43219-3035.
Alaina Metz, Vice President
An employee of the Distributor since June 1995. Prior to
joining the Distributor Ms. Metz was a supervisor at Alliance
Capital Management L.P. in New York. She is 30 years old and her
address is 3435 Stelzer Road, Columbus, Ohio 43219-3035.
D'Ray Moore, Treasurer
An employee of the Distributor. She is 38 years old and her address
is 3435 Stelzer Road, Columbus, Ohio 43219-3035.
W. Bruce McConnel, III, Secretary
Partner of the law firm Drinker Biddle & Reath LLP, Philadelphia,
Pennsylvania. He is 54 years old, and his address is 1345 Chestnut Street,
Philadelphia, Pennsylvania 19107.
- ---------------
* Trustee who is an "interested person" of the Trust, as
defined in the 1940 Act.
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.
Each Trustee receives from the Trust and the Pegasus Variable
Annuity Fund a total annual fee of
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<PAGE>
$17,000 and a fee of $2,000 for each Board of Trustees meeting attended. The
Chairman is entitled to additional compensation of $4,250 per year for his
services to the Trusts in that capacity. These fees are allocated among the
investment portfolios of the Trust and the Pegasus Variable Annuity Fund
based on their relative net assets. All Trustees are reimbursed for out of
pocket expenses in connection with attendance at meetings. Drinker Biddle &
Reath LLP, of which Mr. McConnel is a partner, receives legal fees as counsel
to the Trusts.
-10-
<PAGE>
The following table summarizes the compensation for each of the
Trustees for the Trust's fiscal year ended December 31, 1996:
<TABLE>
<CAPTION>
(3)
(2) Total Compensation
Aggregate From Trust and Fund
(1) Compensation Complex** Paid to
Name of Board Member from Trust* Board Member
- --------------------------------- ------------- -------------------
<S> <C> <C>
Will M. Caldwell, Trustee $31,000 $31,000(2)+
Nicholas J. DeGrazia, Trustee $24,750 $24,750(2)+
John P. Gould, Trustee and $25,813 $41,313(4)+
Chairman of the Board
Earl I. Heenan, Jr., $26,625 $26,625(2)+
Trustee++,+++
Marilyn McCoy, Trustee $22,750 $37,250(4)+
Julius L. Pallone, Trustee ++ $24,750 $24,750(2)+
Donald G. Sutherland, $28,750 $28,750(2)+
Trustee and President ++
Donald L. Tuttle, Trustee ++ $29,000 $29,000(2)+
Eugene C. Yehle, Trustee +++ $18,500 $18,500(2)+
<FN>
- ----------------------
* Amount does not include reimbursed expenses for attending Board
meeting.
** The Fund Complex for the fiscal year ended December 31, 1996, consisted
of the Trust, Pegasus Variable Annuity Fund, Prairie Funds, Prairie
Institutional Funds, Prairie Intermediate Bond Fund and Prairie Municipal
Bond Fund, Inc.
+ Total number of investment companies in the Fund Complex from which the
Trustee received compensation for serving as a trustee.
++ Deferred compensation in the amounts of $24,750, $24,750, $24,750, and
$28,750 accrued during the Pegasus Funds' fiscal year ended December 31,
1996 for Messrs. Heenan, DeGrazia, Pallone and Sutherland, respectively.
+++ Messrs. Heenan and Yehle resigned as Trustees of the Trust and the
Pegasus Variable Annuity Fund as of July 13, 1996. In addition, Mr.
Heenan had been the Chairman of the Board and President and Mr. Yehle had
been the Treasurer.
</TABLE>
- --------------------------------
Board members and officers of the Trust, as a group, owned less than
1% of any Fund's shares outstanding on May 12, 1997.
-11-
<PAGE>
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. FCNIMCO provides 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 or FCNIMCO, 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 FCNIMCO. The
Agreement will terminate automatically, as to the relevant Fund, in the event
of its assignment (as defined in the 1940 Act).
FCNIMCO is 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.
Under the terms of the Investment Advisory Agreement with the Trust,
FCNIMCO is entitled to a monthly advisory fee at the annual rate of .20% of
each Fund's average daily net assets. In addition, FCNIMCO is entitled to
4/10ths of the gross income earned by a Fund on each loan of securities
(excluding capital gains and losses, if any). FCNIMCO has informed the
Trust's Board of Trustees that since the inception of the Trust neither it
nor any of its affiliates has engaged in and received compensation for any
transactions involving lending of portfolio securities. Furthermore, neither
FCNIMCO nor any of its affiliates will do so unless permitted by the SEC or
SEC staff.
For the period July 13, 1996 (date of the Reorganization) through
December 31, 1996, the aggregate advisory fees payable to FCNIMCO by the Cash
Management Fund, Treasury Prime Cash Management Fund and U.S. Government
Securities Cash Management Fund were $620,226, $269,337 and $622,156,
respectively, of which amounts $222,088, $145,816 and $297,097, respectively,
were reduced pursuant to undertakings by FCNIMCO, resulting in a net advisory
fee of $398,138, $123,521 and $325,059, respectively. The Treasury Cash
Management Fund had not commenced operations prior to the date of this
Statement of Additional Information.
For the period January 1, 1996 through July 13, 1996 (date of the
Reorganization) the aggregate advisory fees payable to
-12-
<PAGE>
FCNIMCO by the Predecessor Cash Management Fund, Predecessor Treasury Prime
Cash Management Fund and Predecessor U.S. Government Securities Cash
Management Fund were $487,093, $176,021 and $522,975, respectively, of which
amounts $176,053, $102,644 and $297,097, respectively, were reduced pursuant
to undertakings by FCNIMCO, resulting in a net advisory fee of $311,040,
$73,377 and $383,484, respectively.
Prior to January 17, 1995, The First National Bank of Chicago
("FNBC") provided management services to First Prairie Cash Management Fund
and First Prairie U.S. Treasury Securities Cash Management Fund (the
predecessor funds to the Predecessor Cash Management Fund and Predecessor
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 Fund and
First Prairie U.S. Treasury Securities Cash Management Fund each agreed to
pay FNBC a monthly management fee at the annual rate of .35 of l% 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 fiscal year ended June 30, 1994 (the Predecessor Cash
Management Fund's prior fiscal year end), the management fee payable by First
Prairie Cash Management Fund 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 Fund of $587,278. For the fiscal
year ended June 30, 1995, the aggregate management/advisory fee payable by
the Predecessor Cash Management Fund and its predecessor amounted to
$793,104, which amount was reduced by $267,419 pursuant to undertakings by
FNBC and FCNIMCO, resulting in a net management/advisory fee paid by the
Predecessor Cash Management Fund and its predecessor of $525,685. For the
Predecessor Cash Management Fund's fiscal period ended December 31, 1995, the
aggregate management/advisory fee payable by the Predecessor Cash Management
Fund and its predecessor amounted to $716,956, which amount was reduced by
$331,599 pursuant to undertakings by FNBC and FCNIMCO, resulting in a net
management/advisory fee paid by the Predecessor Cash Management Fund and its
predecessor of $385,357.
For the period from March 22, 1995 (commencement of operations of
the Predecessor Treasury Prime Cash Management Fund) through December 31,
1995, the advisory fee payable by the Predecessor Treasury Prime Cash
Management Fund amounted to $50,405, which amount was reduced by $27,592
pursuant to an undertaking by FCNIMCO, resulting in a net advisory fee paid
by the Predecessor Treasury Prime Cash Management Fund of $22,813.
-13-
<PAGE>
For the fiscal year ended May 31, 1994 (the Predecessor U.S.
Government Securities Cash Management Fund's prior fiscal year end), the
management fee payable by First Prairie U.S. Treasury Cash Management Fund
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 Fund of $1,000,078. For the fiscal year ended
May 31, 1995, the aggregate management/advisory fee payable by the
Predecessor 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 FCNIMCO, resulting in a net
management/advisory fee paid by the Predecessor U.S. Government Securities
Cash Management Fund and its predecessor of $1,075,605. For the Predecessor
U.S. Government Securities Cash Management Fund's fiscal period ended
December 31, 1995, the aggregate management/advisory fee payable by the U.S.
Government Securities Cash Management Fund and its predecessor amounted to
$968,761, which amount was reduced by $381,198 pursuant to undertakings by
FNBC and FCNIMCO, resulting in a net management/advisory fee paid by the
Predecessor U.S. Government Securities Cash Management Fund and its
predecessor of $587,563.
Administration Agreement. Pursuant to an Administration Agreement
dated as of April 12, 1996 with the Trust, FCNIMCO 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, FCNIMCO
and BISYS are entitled jointly to a monthly administration fee at the annual
rate of .15% of each Fund's average daily net assets.
For the period July 13, 1996 (date of the Reorganization) through
December 31, 1996, the Cash Management Fund, Treasury Prime Cash Management
Fund and U.S. Government Securities Cash Management Fund paid FCNIMCO, as
agent for the co-administrators, administration fees of $465,170, $202,003
and $466,617, respectively. The Treasury Cash Management Fund had not
commenced operations prior to the date of this Statement of Additional
Information.
For the period from January 1, 1996 through July 13, 1996 (date of
the Reorganization), the Predecessor Cash Management Fund, Predecessor
Treasury Prime Cash Management Fund and Predecessor U.S. Government
Securities Cash Management Fund paid FCNIMCO administration fees of $365,320,
$132,016 and $392,231, respectively.
As stated above, prior to January 17, 1995, Dreyfus provided
administrative services to each Predecessor Fund (and its predecessor) and
that the fees payable to Dreyfus for its services were paid by FNBC. From
January 17, 1995 through July 13, 1996, FCNIMCO provided administrative
services to each Predecessor Fund. For the period January 17, 1995 through
December 31, 1995, the
-14-
<PAGE>
Predecessor Cash Management Fund and the Predecessor U.S. Government
Securities Cash Management Fund paid FCNIMCO administration fees of $522,730
and $707,131, respectively. For the period March 22, 1995 (commencement of
operations of the Predecessor Treasury Prime Cash Management Fund) through
December 31, 1995, the administration fee payable by the Predecessor Treasury
Prime Cash Management Fund amounted to $37,804, which amount was reduced by
$9,695 pursuant to an undertaking by FCNIMCO, resulting in a net
administration fee paid by the Predecessor Treasury Prime Cash Management
Fund of $28,109.
The Trust has agreed that neither FCNIMCO 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 FCNIMCO or
BISYS relates, except for a loss resulting from wilful misfeasance, bad faith
or gross negligence on the part of FCNIMCO 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, FCNIMCO, and BISYS will bear
such excess expense to the extent required by state law.
The aggregate of the fees payable to FCNIMCO 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
-15-
<PAGE>
believes that there is a reasonable likelihood that the Plan will benefit
each Fund and the holders of Service Shares.
For the period July 13, 1996 (date of the Reorganization) through
December 31, 1996, the Funds* paid fees pursuant to the Plan as follows:
<TABLE>
<CAPTION>
Amount Paid
Amount to FCNIMCO
Total Paid to and its
Paid BISYS Affiliates
----- ------- -----------
<S> <C> <C> <C>
Cash Management Fund $225,944 -- $225,944
Treasury Cash Mangement Fund N/A N/A N/A
Treasury Prime Cash Management
Fund $274,411 -- $274,411
U.S. Government Securities Cash
Management Fund $256,526 -- $256,526
<FN>
- ---------------------------
* The Treasury Cash Management Fund had not commenced operations
prior to the date of this Statement of Additional Information.
</TABLE>
For the period January 1, 1996 through July 13, 1996 (date of the
Reorganization), the Prairie Institutional Funds' paid fees pursuant to the
previous 12b-1 Plan as follows:
<TABLE>
<CAPTION>
Amount Paid
Amount to FCNIMCO
Total Paid to and its
Paid BISYS Affiliates
----- ------- -----------
<S> <C> <C> <C>
Predecessor Cash Management Fund $115,641 $17 $115,624
Predecessor Treasury Prime Cash
Management Fund $189,936 $16 $189,920
Predecessor U.S. Government
Securities Cash Management Fund $117,895 $17 $117,878
</TABLE>
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").
-16-
<PAGE>
Any material amendment to the Plan must be approved by a majority of
the Board of Trustees (including a majority of the Disinterested Trustees).
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. First Data Investor Services Group, Inc., 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 normally redeems shares for cash.
However, the Trustees can determine that conditions exist making cash
payments undesirable. If they should so determine, redemption payments could
be made in securities valued at the value used in determining net asset
value. There may be brokerage and other costs incurred by the redeeming
shareholder in selling such securities. The Trust has elected to be covered
by
-17-
<PAGE>
Rule 18f-1 under the 1940 Act, pursuant to which the Trust is obligated to
redeem shares solely in cash up to the lesser of $250,000 or 1% of net asset
value during any 90-day period for any one shareholder.
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 SEC 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 SEC 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.
-18-
<PAGE>
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. In addition to these holidays, the Fund will not
compute net asset value on the following bank holidays: Martin Luther King,
Jr. Day, Columbus Day and Veterans Day.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Trust's Board of Trustees,
FCNIMCO is responsible for making decisions with respect to and placing
orders for all purchases and sales of portfolio securities for each Fund.
Purchases of money market instruments by the Funds are made from
dealers, underwriters and issuers. The Funds currently do not expect to incur
any brokerage commission expense on such transactions because money market
instruments are generally traded on a "net" basis by dealers acting as
principal for their own accounts without a stated commission. The price of
the security, however, usually includes a profit to the dealer. Securities
purchased in underwritten offerings include a fixed amount of compensation to
the underwriter, generally referred to as the underwriter's concession or
discount. When securities are purchased directly from or sold directly to an
issuer, no commissions or discounts are paid. No brokerage commissions have
been paid by any Fund to date.
The Funds may participate, if and when practicable, in bidding for
the purchase of portfolio securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding
group. A Fund will engage in this practice, however, only when FCNIMCO, in
its sole discretion, believes such practice to be otherwise in the Fund's
interests.
The Advisory Agreement for the Funds provides that, in executing
portfolio transactions and selecting brokers or dealers,
-19-
<PAGE>
FCNIMCO will seek to obtain the best overall terms available for each Fund.
In assessing the best overall terms available for any transaction, FCNIMCO
shall consider factors it deems relevant, including the breadth of the market
in the security, the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. In addition, the Agreement authorizes FCNIMCO to cause a Fund to pay a
broker-dealer which furnishes brokerage and research services a higher
commission than that which might be charged by another broker-dealer for
effecting the same transaction, provided that FCNIMCO determines in good
faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in
terms of either the particular transaction or the overall responsibilities of
FCNIMCO to the Funds. Such brokerage and research services might consist of
reports and statistics relating to specific companies or industries, general
summaries of groups of stocks or bonds and their comparative earnings and
yields, or broad overviews of the stock, bond and government securities
markets and the economy.
Supplementary research information so received is in addition to,
and not in lieu of, services required to be performed by FCNIMCO and does not
reduce the advisory fees payable by the Funds. The Trustees will periodically
review any commissions paid by the Funds to consider whether the commissions
paid over representative periods of time appear to be reasonable in relation
to the benefits inuring to the Funds. It is possible that certain of the
supplementary research or other services received will primarily benefit one
or more other investment companies or other accounts for which investment
discretion is exercised by FCNIMCO. Conversely, a Fund may be the primary
beneficiary of the research or services received as a result of portfolio
transactions effected for such other account or investment company.
The Trust will not execute portfolio transactions through, acquire
portfolio securities issued by, make savings deposits in or enter into
repurchase or reverse repurchase agreements with FCNIMCO, the Distributor or
an affiliated person of any of them (as such term is defined in the 1940 Act)
acting as principal, except to the extent permitted under the 1940 Act. In
addition, a Fund will not purchase securities during the existence of any
underwriting or selling group relating thereto of which the Distributor or
FCNIMCO, or an affiliated person of any of them, is a member, except to the
extent permitted under the 1940 Act. Under certain circumstances, the Funds
may be at a disadvantage because of these limitations in comparison with
other investment companies which have similar investment objectives but are
not subject to such limitations.
Investment decisions for each Fund are made independently from those
for the other Funds and for any other investment
-20-
<PAGE>
companies and accounts advised or managed by FCNIMCO. Such other investment
companies and accounts may also invest in the same securities as the Funds.
To the extent permitted by law, FCNIMCO may aggregate the securities to be
sold or purchased for the Funds with those to be sold or purchased for other
investment companies or accounts in executing transactions. When a purchase
or sale of the same security is made at substantially the same time on behalf
of one or more of the Funds and another investment company or account, the
transaction will be averaged as to price and available investments allocated
as to amount, in a manner which FCNIMCO believes to be equitable to each Fund
and such other investment company or account. In some instances, this
investment procedure may adversely affect the price paid or received by a
Fund or the size of the position obtained or sold by the Fund.
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.
As of December 31, 1996, the Funds had capital loss carryforwards
with expiration dates as follows:
<TABLE>
<CAPTION>
2001 2002 2003 Total
---- ---- ---- -----
<S> <C> <C> <C> <C>
Cash Management Fund $ -- $458,000 $58,000 $516,000
U.S. Government Securities Cash Management Fund 19,000 151,000 32,000 202,000
</TABLE>
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
-21-
<PAGE>
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, 1996, the yield and
effective yield (after fee waivers and/or expense reimbursements) of each
Fund were as follows:
<TABLE>
<CAPTION>
Name of Fund
and Class Yield Effective Yield
- ------------ ----- ---------------
<S> <C> <C>
Cash Management Fund
Institutional Shares 5.32% 5.46%
Service Shares 5.07% 5.20%
Treasury Prime Cash
Management Fund
Institutional Shares 4.63% 4.73%
Service Shares 4.38% 4.47%
Treasury Cash Management Fund*
Institutional Shares N/A N/A
Service Shares N/A N/A
U.S. Government Securities
Cash Management Fund
Institutional Shares 5.23% 5.36%
Service Shares 4.98% 5.10%
<FN>
- -----------------------------
* The Treasury Cash Management Fund had not commenced operations
prior to the date of this Statement of Additional Information.
</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 Standard & Poor's Ratings Group, Division of McGraw Hill
and Aaa by Moody's Investors Service, Inc. The Treasury Cash Management Fund
has not yet been rated.
-22-
<PAGE>
From time to time, advertising materials for the Funds may refer to
FCNIMCO'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. In
addition, from time to time, references to the Funds may appear in
advertisements and sales literature for certain products or services offered
by the Trust's Investment Adviser, its affiliates or others, through which it
is possible to invest in one or more of the Funds, such as the Pegasus
Architect wrap account, the Pathmaker variable annuity, and First Choice,
First Choice Pegasus and First Choice Select 401(k) products.
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.
As of April 30, 1997, the following persons may have beneficially
owned 5% or more of the outstanding shares of the following Funds:
<TABLE>
<CAPTION>
Percentage
of
Number of Outstanding
Fund Name and Address Shares Shares
---- ---------------- --------- -----------
<S> <C> <C> <C>
Cash First National Bank of
Management Fund - Chicago 45,147,560.450 11.84%
Class I Cash Management Dept.
Suite 0256
6th Floor
525 W. Monroe Street
Chicago, IL 60661-3629
Eagle & Co.
American National Bank 204,340,426.630 53.61%
Money Market
Processing Unit
1 N. LaSalle Street
Floor 7
Chicago, IL 60670-0001
-23-
<PAGE>
First National Bank of
Chicago 69,885,963.890 18.33%
Corporate Trust
Administration
1 F&B Plaza
Suite 0126
Chicago, IL 60670-0001
Cash Management First National Bank
Fund - Class S of Chicago 60,725,134.800 24.65%
Commercial Products
1 First National Plaza
Suite 0649
Chicago, IL 60670
First National Bank of
Chicago 174,193,020.830 70.72%
Cash Management Dept.
Suite 0256
6th Floor
525 W. Monroe Street
Chicago, IL 60661-3629
Treasury First National Bank of
Prime Cash Chicago 3,746,346.110 22.65%
Management Fund - Cash Management Dept.
Class I Suite 0256
6th Floor
525 W. Monroe Street
Chicago, IL 60661-3629
Eagle & Co.
American National Bank 6,305,701.300 38.12%
Money Market
Processing Unit
1 N. LaSalle Street
Floor 7
Chicago, IL 60602-3902
-24-
<PAGE>
Treasury First National Bank of
Prime Cash Chicago 32,162,887.420 15.34%
Management Fund - Corporate Trust
Class S Administration
1 F&B Plaza
Suite 0126
Chicago, IL 60670-0001
First National Bank of
Chicago 47,169,452.470 22.50%
Commercial Products
1 First National Plaza
Suite 0649
Chicago, IL 60670
First National Bank of
Chicago 130,275,554.610 62.15%
Cash Management Dept.
Suite 0256, 6th Floor
525 W. Monroe Street
Chicago, IL 60661-3629
U.S. First National Bank of
Government Chicago 384,720,427.940 88.20%
Securities Corporate Trust
Cash Administration
Management Fund - 1 F&B Plaza
Class I Suite 0126
Chicago, IL 60670-0001
Eagle & Co.
American National Bank 41,430,407.780 9.50%
Money Market
Processing Unit
1 N. La Salle Street
Floor 7
Chicago, IL 60602-3902
-25-
<PAGE>
U.S.Government First National Bank of
Securities Chicago 168,148,157.250 71.18%
Cash Management Cash Management Dept.
Fund - Class S Suite 0256, 6th Floor
525 W. Monroe Street
Chicago, IL 60661-3629
First National Bank of
Chicago 58,647,286.990 24.83%
Commercial Products
1 First National Plaza
Suite 0649
Chicago, IL 60670
</TABLE>
The Trust will send annual and semi-annual financial statements for
the Funds to their shareholders.
COUNSEL
Drinker Biddle & Reath LLP, 1345 Chestnut Street, Philadelphia, PA
19107-3496, serves as the Trust's counsel.
INDEPENDENT AUDITORS
Arthur Andersen LLP, 500 Woodward Avenue, Detroit, Michigan
48226-3424, are the independent auditors of the Trust. Ernst & Young
LLP served as independent auditors for the First Prairie Funds and the
Prairie Institutional Funds. The audited financial statements and notes
thereto for each Fund for the fiscal year ended December 31, 1996 are
contained in the Funds' Annual Report to Shareholders dated December 31, 1996
and are incorporated by reference into this Statement of Additional
Information. The December 31, 1996 financial statements and notes thereto
have been audited by Arthur Andersen LLP, whose report thereon also appears
in such Annual Report and is also incorporated herein by reference.
Information in the audited financial statements for periods or years prior to
December 31, 1995 has been audited by Ernst & Young LLP. No other parts of
the Annual Report are incorporated by reference herein. Such financial
statements have been incorporated herein in reliance on the reports of Arthur
Andersen LLP and Ernst & Young LLP, independent auditors, given on the
authority of said firms as experts in auditing and accounting.
-26-
<PAGE>
APPENDIX A
Commercial Paper Ratings
A Standard & Poor's commercial paper rating is a current
assessment of the likelihood of timely payment of debt considered short-term
in the relevant market. The following summarizes the rating categories used
by Standard and Poor's for commercial paper:
"A-1" - The highest category indicates that the degree of
safety regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.
"A-2" - Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree of
safety is not as high as for issues designated "A-1."
"A-3" - Issues carrying this designation have adequate
capacity for timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations carrying the
higher designations.
"B" - Issues are regarded as having only a speculative
capacity for timely payment.
"C" - This rating is assigned to short-term debt obligations
with a doubtful capacity for payment.
"D" - Issues are in payment default.
Moody's commercial paper ratings are opinions of the ability
of issuers to repay punctually promissory obligations not having an original
maturity in excess of 9 months. The following summarizes the rating
categories used by Moody's for commercial paper:
"Prime-1" - Issuers or related supporting institutions 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.
A-1
<PAGE>
"Prime-2" - Issuers or related supporting institutions 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.
"Prime-3" - Issuers or related supporting institutions have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes
in the level of debt protection measurements and the requirement for
relatively high financial leverage. Adequate alternate liquidity is
maintained.
"Not Prime" - Issuers do not fall within any of the
Prime rating categories.
The three rating categories of Duff & Phelps for investment
grade commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff &
Phelps employs three designations, "D-1+," "D-1" and "D-1-," within the
highest rating category. The following summarizes the rating categories used
by Duff & Phelps for commercial paper:
"D-1+" - Debt possesses highest certainty of timely
payment. Short-term liquidity, including internal operating
factors and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
"D-2" - Debt possesses good certainty of timely payment.
Liquidity factors and company fundamentals are sound. Although ongoing
funding needs may enlarge total financing requirements, access to capital
markets is good. Risk factors are small.
"D-3" - Debt possesses satisfactory liquidity and other
protection factors qualify issue as investment grade. Risk
A-2
<PAGE>
factors are larger and subject to more variation. Nevertheless,
timely payment is expected.
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to ensure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or
interest payments.
Fitch short-term ratings apply to debt obligations that are
payable on demand or have original maturities of generally up to three years.
The following summarizes the rating categories used by Fitch for short-term
obligations:
"F-1+" - Securities possess exceptionally strong credit
quality. Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment.
"F-1" - Securities possess very strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly
less in degree than issues rated "F-1+."
"F-2" - Securities possess good credit quality. Issues
assigned this rating have a satisfactory degree of assurance for timely
payment, but the margin of safety is not as great as the "F-1+" and "F-1"
ratings.
"F-3" - Securities possess fair credit quality. Issues
assigned this rating have characteristics suggesting that the degree of
assurance for timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment grade.
"F-S" - Securities possess weak credit quality. Issues
assigned this rating have characteristics suggesting a minimal degree of
assurance for timely payment and are vulnerable to near-term adverse changes
in financial and economic conditions.
"D" - Securities are in actual or imminent payment
default.
Fitch may also use the symbol "LOC" with its short-term
ratings to indicate that the rating is based upon a letter of credit issued
by a commercial bank.
Thomson BankWatch short-term ratings assess the likelihood of
an untimely or incomplete payment of principal or interest of unsubordinated
instruments having a maturity of one
A-3
<PAGE>
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."
"TBW-3" - This designation represents the lowest investment
grade category and indicates that while the debt is more susceptible to
adverse developments (both internal and external) than obligations with
higher ratings, capacity to service principal and interest in a timely
fashion is considered adequate.
"TBW-4" - This designation indicates that the debt is regarded
as non-investment grade and therefore speculative.
IBCA assesses the investment quality of unsecured debt with an
original maturity of less than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for short-term debt ratings:
"A1+" - Obligations which posses a particularly strong credit
feature are 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 good capacity for
timely repayment.
"A3" - Obligations are supported by a satisfactory
capacity for timely repayment.
"B" - Obligations for which there is an uncertainty as to the
capacity to ensure timely repayment.
"C" - Obligations for which there is a high risk of default or
which are currently in default.
A-4
<PAGE>
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.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. "BB"
indicates the lowest degree of speculation and "C" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
"BB" - Debt has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The "BB" rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied "BBB-" rating.
"B" - Debt has a greater vulnerability to default but
currently has the capacity to meet interest payments and principal
repayments. Adverse business, financial or economic conditions will likely
impair capacity or willingness to pay interest and repay principal. The "B"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BB" or "BB-" rating.
A-5
<PAGE>
"CCC" - Debt has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The "CCC"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "B" or "B-" rating.
"CC" - This rating is typically applied to debt subordinated
to senior debt that is assigned an actual or implied "CCC" rating.
"C" - This rating is typically applied to debt subordinated to
senior debt which is assigned an actual or implied "CCC-" debt rating. The
"C" rating may be used to cover a situation where a bankruptcy petition has
been filed, but debt service payments are continued.
"CI" - This rating is reserved for income bonds on which no
interest is being paid.
"D" - Debt is in payment default. This rating is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. "D" rating is also used upon
the filing of a bankruptcy petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC"
may be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories.
"r" - This rating is attached to highlight derivative, hybrid,
and certain other obligations that S & P believes may experience high
volatility or high variability in expected returns due to non-credit risks.
Examples of such obligations are: securities whose principal or interest
return is indexed to equities, commodities, or currencies; certain swaps and
options; and interest only and principal only mortgage securities. The
absence of an "r" symbol should not be taken as an indication that an
obligation will exhibit no volatility or variability in total return.
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
A-6
<PAGE>
likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
"Aa" - Bonds are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in "Aaa" securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in "Aaa" securities.
"A" - Bonds possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
"Baa" - Bonds considered medium-grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of
these ratings provide questionable protection of interest and principal ("Ba"
indicates some speculative elements; "B" indicates a general lack of
characteristics of desirable investment; "Caa" represents a poor standing;
"Ca" represents obligations which are speculative in a high degree; and "C"
represents the lowest rated class of bonds). "Caa," "Ca" and "C" bonds may be
in default.
Con. (---) - Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience,
(c) rentals which begin when facilities are completed, or (d) payments to
which some other limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or elimination of
basis of condition.
(P)... - When applied to forward delivery bonds, indicates
that the rating is provisional pending delivery of the bonds. The rating may
be revised prior to delivery if changes occur in the legal documents or the
underlying credit quality of the bonds.
A-7
<PAGE>
Note: Those bonds in the Aa, A, Baa, Ba and B groups which
Moody's believes possess the strongest investment attributes are designated
by the symbols, Aa1, A1, Baa1, Ba1 and B1.
The following summarizes the long-term debt ratings used by
Duff & Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit
quality. The risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt.
"AA" - Debt is considered of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below average protection factors but
such protection factors are still considered sufficient for prudent
investment. Considerable variability in risk is present during economic
cycles.
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of
these ratings is considered to be below investment grade. Although below
investment grade, debt rated "BB" is deemed likely to meet obligations when
due. Debt rated "B" possesses the risk that obligations will not be met when
due. Debt rated "CCC" is well below investment grade and has considerable
uncertainty as to timely payment of principal, interest or preferred
dividends. Debt rated "DD" is a defaulted debt obligation, and the rating
"DP" represents preferred stock with dividend arrearages.
To provide more detailed indications of credit quality, the
"AA," "A," "BBB," "BB" and "B" ratings may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within these major
categories.
The following summarizes the highest four ratings used by
Fitch for corporate and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
"AA" - Bonds considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest
and repay principal is very strong, although not quite as strong
A-8
<PAGE>
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 "BBB" may be modified by the
addition of a plus (+) or minus (-) sign to show relative standing within
these major rating categories.
IBCA assesses the investment quality of unsecured debt with an
original maturity of more than one year which is issued by bank holding
companies and their principal bank subsidiaries. The following summarizes the
rating categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest expectation
of investment risk. Capacity for timely repayment of principal and interest
is substantial, such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk substantially.
"AA" - Obligations for which there is a very low expectation
of investment risk. Capacity for timely repayment of principal and interest
is substantial, such that 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
A-9
<PAGE>
principal and interest is adequate, although adverse changes in business,
economic or financial conditions are more likely to lead to increased
investment risk than for obligations in other categories.
"BB," "B," "CCC," "CC," and "C" - Obligations are assigned one
of these ratings where it is considered that speculative characteristics are
present. "BB" represents the lowest degree of speculation and indicates a
possibility of investment risk developing. "C" represents the highest degree
of speculation and indicates that the obligations are currently in default.
IBCA may append a rating of plus (+) or minus (-) to a rating
below "AAA" 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.
"BB," "B," "CCC," and "CC," - These designations are assigned
by Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
A-10
<PAGE>
"D" - This designation indicates that the long-term debt is in
default.
PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC"
may include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
Municipal Note Ratings
A Standard and Poor's rating reflects the liquidity concerns
and market access risks unique to notes due in three years or less. The
following summarizes the ratings used by Standard & Poor's Ratings Group for
municipal notes:
"SP-1" - The issuers of these municipal notes exhibit very
strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are given a plus
(+) designation.
"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
A-11
<PAGE>
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.
A-12
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Included in Part A hereof:
Financial Highlights for:
- Cash Management Fund
- Treasury Prime Cash Management Fund
- U.S. Government Securities Cash Management Fund
(2) Incorporated by reference in Part B hereof:
The audited financial statements and related notes
thereto as well as the auditor's reports thereon
included as a part of the Annual Report to Shareholders
for the year or period ended December 31, 1996 with
respect to each of the Cash Management Fund, Treasury
Prime Cash Management Fund and U.S. Government
Securities Cash Management Fund are incorporated herein
by reference to such Annual Report as filed with the
Securities and Exchange Commission on March 7, 1997
pursuant to Rule 30b2-1 of the Investment Company Act of
1940 (Nos. 33-13990/811-5148).
(b) 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.
(b) Amendment No. 1 to the Amended and Restated
Declaration of Trust dated as of September 12,
1996 is incorporated herein by reference to
exhibit 1(b) of Post-Effective Amendment No. 39 to
Registrant's Registration Statement on Form N-1A
filed with the Commission on December 30, 1996.
(2) Bylaws of Registrant is incorporated herein by
reference to exhibit (2) of Pre-Effective
Amendment No. 1 to the Registrant's
C-1
<PAGE>
Registration Statement on Form N-1A filed with the
Commission on July 24, 1987.
(3) None.
(4) None.
(5) (a) Co-Advisory Agreement among Registrant, NBD
Bank ("NBD") and First Chicago Investment
Management Company ("FCIMCO") dated as of
April 12, 1996 is incorporated herein by
reference to exhibit 5(a) of Post-Effective
Amendment No. 39 to Registrant's Registration
Statement on Form N-1A filed with the
Commission on December 30, 1996.
(b) Form of Addendum No. 1 to Advisory Agreement
between Registrant and First Chicago NBD
Investment Management Company ("FCNIMCO") relating
to the Pegasus Treasury Cash Management and High
Yield Bond Funds (Series CC and DD).
(6) (a) Distribution Agreement between Registrant and
BISYS Fund Services ("BISYS") dated as of June
11, 1996 is incorporated herein by reference
to exhibit 6(a) of Post-Effective Amendment
No. 39 to Registrant's Registration Statement
on Form N-1A filed with the Commission on
December 30, 1996.
(b) Form of Addendum No. 1 to Distribution Agreement
between Registrant and BISYS relating to the
Pegasus Treasury Cash Management and High Yield
Bond Funds (Series CC and DD).
(7) Deferred Compensation Plan is incorporated herein
by reference to exhibit (7) of Post- Effective
Amendment No. 30 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on April 15, 1996.
(8) (a) Amended and Restated Custodian Agreement dated
May 16, 1989 between Registrant and National
Bank of Detroit for Series A, B, C, 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.
C-2
<PAGE>
(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 State-
ment on Form N-1A filed with the Commission on
February 28, 1991.
(c) Addendum No. 2 dated April 28, 1992 to the
Amended and Restated Custodian Agreement
between Registrant and NBD relating to the
Woodward Equity Index Fund (Series N) is
incorporated herein by reference to exhibit
(8)(d) of Post-Effective Amendment No. 10 to
the Registrant's Registration Statement on
Form N-1A filed with the Commission on
September 8, 1992.
(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 State-
ment 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.
C-3
<PAGE>
(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 dated November 30, 1994 to the
Amended and Restated Custodian Agreement
between Registrant and NBD relating to the
Woodward International Equity Fund (Series T)
is incorporated herein by reference to exhibit
(8)(i) of Post-Effective Amendment No. 25 to
the Registrant's Registration Statement on
Form N-1A filed with the Commission on July
28, 1995.
(i) Addendum No. 8 to the Amended and Restated
Custodian Agreement between Registrant and NBD
relating to the Woodward Cash Management, U.S.
Government Securities Cash Management,
Treasury Prime Cash Management, Equity Income,
Small Cap Opportunity, Intermediate Municipal
Bond, Income, International Bond, Managed
Assets Conservative and Managed Assets Growth
Funds is incorporated herein by reference to
exhibit (8)(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 Addendum No. 9 to the Amended and
Restated Custodian Agreement between Registrant
and NBD relating to the Pegasus Treasury Cash
Management and High Yield Bond Funds (Series CC
and DD).
(k) Global Custody Agreement dated November 21,
1994 between Barclays Bank, PLC and NBD
relating to Series A, B, C, M, N, O, P, Q, R,
S, T, U and V is incorporated herein by
reference to exhibit (8)(k) of Post-Effective
Amendment No. 25 to the Registrant's
Registration Statement on Form N-1A filed with
the Commission on July 28, 1995.
(9) (a) Co-Administration Agreement among the
Registrant, NBD, FCIMCO and BISYS dated as of
June 11, 1996 is incorporated herein by
C-4
<PAGE>
reference to exhibit 9(a) of Post-Effective
Amendment No. 39 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on December 30, 1996.
(b) Form of Addendum No. 1 to the Co- Administration
Agreement among Registrant, FCNIMCO and BISYS
relating to the Pegasus Treasury Cash Management
and High Yield Bond Funds (Series CC and DD).
(c) Transfer Agency and Services Agreement between
the Registrant and First Data Investor
Services Group, Inc. ("FDISG") dated August 5,
1996 is incorporated herein by reference to
exhibit (9)(a) of Post-Effective Amendment No.
39 to the Registrant's Registration Statement
on Form N-1A filed with the Commission on
December 30, 1996.
(d) Form of Addendum No. 1 to the Transfer Agency and
Services Agreement between Registrant and FDISG
relating to the Pegasus Treasury Cash Management
and High Yield Bond Funds (Series CC and DD).
(e) Shareholder Services Plan including form of
Service Agreement with respect to Class A Shares
is incorporated herein by reference to exhibit
(9)(p) of Post-Effective Amendment No. 30 to the
Registrant's Registration Statement on Form N-1A
filed with the Commission on April 15, 1996.
(f) Shareholder Administrative Services Plan including
form of Service Agreement is incorporated herein by
reference to exhibit (9)(q) of Post-Effective
Amendment No. 30 to the Registrant's Registration
Statement on Form N-1A filed with the Commission on
April 15, 1996.
(g) Agency Agreement between Registrant and NBD dated
March 11, 1996 is incorporated herein by
reference to exhibit 9(e) of Post-Effective
Amendment No. 40 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on April 30, 1997.
(h) Agency Agreement between Registrant and Putnam
Fiduciary Trust Company dated November 1, 1996.
C-5
<PAGE>
(i) Agency Agreement between Registrant and BISYS
dated March 18, 1997.
*(10) Opinion of Drinker Biddle & Reath LLP, counsel
for the Registrant.
(11) (a) Consent of Arthur Andersen LLP.
(b) Consent of Ernst & Young LLP.
(c) Consent of Drinker Biddle & Reath LLP.
(12) None.
(13) None.
(14) None.
(15) (a) Distribution Plan for Class B Shares is
incorporated herein by reference to exhibit
(15)(b) of Post-Effective Amendment No. 30 of the
Registrant's Registration Statement on Form N-1A
filed with the Commission on April 15, 1996.
(b) Distribution and Services Plan including form of
Agreement (relating to the Cash Management Funds)
is incorporated herein by reference to exhibit
(15)(c) of Post-Effective Amendment No. 34 to the
Registrant's Registration Statement on Form N-1A
filed with the Commission on July 24, 1996.
(16) (a) Schedules of Performance Computations are
incorporated herein by reference to exhibit (16)
of Post-Effective Amendment No. 5 to the
Registrant's Registration Statement on Form N-1A
filed with the Commission on February 28, 1991.
(b) Schedules of Performance Computations with
respect to the Woodward Michigan Tax-Exempt
Money Market Fund, Growth/Value Fund,
Opportunity Fund, Intrinsic Value Fund,
Intermediate Bond Fund and Bond Fund are
incorporated herein by reference to Exhibit
(16)(b) of Post-Effective Amendment No. 7 to
the Registrant's Registration Statement on
- --------
* Filed with the Commission on March 3, 1997 under Rule 24f-2 as part
of Registrant's 24f-2 Notice.
C-6
<PAGE>
Form N-1A filed with the Commission on December 3,
1991.
(c) Schedules of Performance Computations with
respect to the Woodward Equity Index Fund and
the Woodward Treasury Money Market Fund are
incorporated herein by reference to Exhibit
16(c) of Post-Effective Amendment No. 14 to
the Registrant's Registration Statement on
Form N-1A filed with the Commission on April
29, 1993.
(d) Schedules of Performance Computations with
respect to the Woodward Municipal Bond Fund
and Woodward Michigan Municipal Bond Fund are
incorporated herein by reference to Exhibit
16(d) of Post-Effective Amendment No. 15 to
the Registrant's Registration Statement on
Form N-1A filed with the Commission on July
30, 1993.
(e) Schedules of Performance Computations with respect
to the Woodward Balanced Fund are incorporated
herein by reference to Exhibit 16(e) of
Post-Effective Amendment No. 22 to the
Registrant's Registration Statement on Form N-1A
filed with the Commission on July 29, 1994.
(f) Schedules of Performance Computations with respect
to the Woodward Capital Growth and Short Bond
Funds are incorporated herein by reference to
exhibit (16)(f) of Post-Effective Amendment No. 23
to the Registrant's Registration Statement on Form
N-1A filed with the Commission on January 27,
1995.
(g) Schedules of Performance Computations with respect
to the Woodward International Equity Fund is
incorporated herein by reference to exhibit
(16)(g) of Post-Effective Amendment No. 25 to the
Registrant's Registration Statement on Form N-1A
filed with the Commission on July 28, 1995.
(h) Schedules of Performance Computations with
respect to the Pegasus Cash Management,
Treasury Prime Cash Management and U.S.
Government Securities Cash Management Funds
are incorporated herein by reference to
exhibit (16)(h) of Post-Effective Amendment
No. 34 to the Registrant's Registration
C-7
<PAGE>
Statement on Form N-1A filed with the Commission
on July 24, 1996.
(17) None.
(18) Amended Rule 18f-3 Plan is incorporated herein by
reference to exhibit (18)(b) of Post-Effective
Amendment No. 34 to the Registrant's Registration
Statement on Form N-1A filed with the Commission
on July 24, 1996.
(27) Financial Data Schedules.
C-8
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
Registrant is controlled by its Board of Trustees. However,
under the Investment Company Act of 1940, NBD Bank may be deemed a
controlling person of the Registrant because such entity possesses or shares
investment or voting power with respect to more than 25% of the outstanding
shares of the Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The following table sets forth information as to all record
holders of Registrant's securities as of March 31, 1997:
<TABLE>
<CAPTION>
Number
of
Record
Title of Class Holders
-------------- -------
<S> <C>
Growth and Value Fund -- Class A 4,926
Growth and Value Fund -- Class B 84
Growth and Value Fund -- Class I 9
Small-Cap Opportunity Fund -- Class A 921
Small-Cap Opportunity Fund -- Class B 48
Small-Cap Opportunity Fund -- Class I 8
Mid-Cap Opportunity Fund -- Class A 7,998
Mid-Cap Opportunity Fund -- Class B 71
Mid-Cap Opportunity Fund -- Class I 11
Intrinsic Value Fund -- Class A 2,364
Intrinsic Value Fund -- Class B 89
Intrinsic Value Fund -- Class I 8
Equity Index Fund -- Class A 653
Equity Index Fund -- Class B 37
Equity Index Fund -- Class I 8
Equity Income Fund -- Class A 614
Equity Income Fund -- Class B 135
Equity Income Fund -- Class I 7
Growth Fund -- Class A 1,687
Growth Fund -- Class B 82
Growth Fund -- Class I 8
International Equity Fund -- Class A 1,258
International Equity Fund -- Class B 138
International Equity Fund -- Class I 12
Managed Assets Conservative Fund -- Class A 2,374
Managed Assets Conservative Fund -- Class B 349
Managed Assets Conservative Fund -- Class I 6
Managed Assets Balanced Fund -- Class A 1,075
Managed Assets Balanced Fund -- Class B 173
Managed Assets Balanced Fund -- Class I 5
Managed Assets Growth Fund -- Class A 56
</TABLE>
C-9
<PAGE>
<TABLE>
<CAPTION>
Number
of
Record
Title of Class Holders
-------------- -------
<S> <C>
Managed Assets Growth Fund -- Class B 48
Managed Assets Growth Fund -- Class I 2
Bond Fund -- Class A 2,365
Bond Fund -- Class B 36
Bond Fund -- Class I 8
Intermediate Bond Fund -- Class A 805
Intermediate Bond Fund -- Class B 16
Intermediate Bond Fund -- Class I 6
Income Fund -- Class A 200
Income Fund -- Class B 33
Income Fund -- Class I 5
Short Bond Fund -- Class A 42
Short Bond Fund -- Class B 5
Short Bond Fund -- Class I 6
Municipal Bond Fund -- Class A 666
Municipal Bond Fund -- Class B 29
Municipal Bond Fund -- Class I 9
Michigan Municipal Bond Fund -- Class A 570
Michigan Municipal Bond Fund -- Class B 5
Michigan Municipal Bond Fund -- Class I 4
Intermediate Municipal Bond Fund -- Class A 338
Intermediate Municipal Bond Fund -- Class B 25
Intermediate Municipal Bond Fund -- Class I 7
International Bond Fund -- Class A 706
International Bond Fund -- Class B 9
International Bond Fund -- Class I 5
Money Market Fund -- Class A 34,172
Money Market Fund -- Class B 3
Money Market Fund -- Class I 179
Treasury Money Market Fund -- Class A 2,474
Treasury Money Market Fund -- Class I 93
Municipal Money Market Fund -- Class A 2,559
Municipal Money Market Fund -- Class I 17
Michigan Municipal Money Market Fund -- Class A 257
Michigan Municipal Money Market Fund -- Class I 6
Cash Management Fund -- Service 4
Cash Management Fund -- Institutional 181
Treasury Prime Cash Management Fund -- Service 4
Treasury Prime Cash Management Fund -- Institutional 4
U.S. Government Securities
Cash Management Fund -- Service 5
U.S. Government Securities
Cash Management Fund -- Institutional 7
</TABLE>
C-10
<PAGE>
ITEM 27. INDEMNIFICATION
Indemnification of Registrant's Distributor against certain
losses is provided for in Section 10 of the Distribution Agreement
incorporated herein by reference as Exhibit (6)(a). 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)(a). Indemnification of Registrant's Transfer Agent and Dividend
Disbursing Agent is provided for in Article 10 of the Transfer Agency and
Services 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.
Section 5.1 of the Registrant's Amended and Restated
Declaration of Trust, incorporated herein by reference as Exhibit (1)(a),
provides for the indemnification of the Registrant's shareholders.
Section 5.4 of the Registrant's Amended and Restated
Declaration of Trust, incorporated herein by reference as Exhibit (1)(a),
provides for the indemnification of the Registrant's trustees and officers:
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.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISERS
The Registrant's investment adviser, First Chicago NBD
Investment Management Company ("FCNIMCO"), is a registered investment adviser
and wholly-owned subsidiary of The First National Bank of Chicago ("FNBC"),
which in turn is a wholly-owned
C-11
<PAGE>
subsidiary of First Chicago NBD Corporation, a registered bank
holding company.
Registrant is fulfilling the requirement of this Item 28 to
provide a list of the officers and directors of FCNIMCO, together with
information as to any other business, profession, vocation or employment of a
substantial nature engaged in by FCNIMCO or those of its officers and
directors during the past two years, by incorporating by reference the
information contained in the Form ADV filed with the SEC pursuant to the
Investment Advisers Act of 1940 by FCNIMCO (SEC File No. 801-47947).
ITEM 29. PRINCIPAL UNDERWRITER
(a) BISYS Fund Services acts as distributor and co-
administrator for the Registrant. BISYS Fund Services also
distributes the securities of American Performance Funds,
AmSouth Mutual Funds, The ARCH Fund, Inc., BB&T Mutual
Funds Group, Centura Funds, The Coventry Group, Empire
Builder Tax Free Bond Fund, First Choice Funds Trust,
Fountain Square Funds, Hirtle Callaghan Trust, HSBC Funds
Trust, HSBC Mutual Funds Trust, The Infinity Mutual Funds,
Inc., Intrust Funds, The Kent Funds, MarketWatch Funds,
Meyers Sheppard Investment Trust, Minerva Funds, MMA Praxis
Mutual Funds, The M.S.D & T Funds, Inc., Pacific Capital
Funds, The Parkstone Advantage Funds, The Parkstone Group
of Funds, Qualivest Funds, The Republic Advisors Funds
Trust, The Republic Funds Trust, The Riverfront Funds,
Inc., SBSF Funds, Inc. dba Key Mutual Funds, Sefton Funds,
The Sessions Group, Summit Investment Trust, The Time
Horizon Funds and The Victory Portfolios, each of which is
an open-end management investment company.
(b) The information required by this Item 29 with respect to
each director, officer or partner of BISYS Fund Services is
incorporated by reference to their Form BD (File No.
8-32480) filed by BISYS Fund Services with the Securities
and Exchange Commission pursuant to the Securities Exchange
Act of 1934.
(c) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
(a) NBD Bank, 900 Tower Drive, Troy, Michigan 48098 (records
relating to its function as former adviser, custodian
and transfer and dividend disbursing agent).
C-12
<PAGE>
(b) First of Chicago NBD Investment Management Company,
Three First National Plaza, 70 West Madison, Chicago,
Illinois 60670 (records relating to its functions as
advisor and co-administrator).
(c) BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio
43219 (records relating to its functions as distributor and
co-administrator).
(d) Drinker Biddle & Reath LLP, 1345 Chestnut Street,
Philadelphia, Pennsylvania 19107-3496 (Registrant's
Declaration of Trust, By-Laws and Minute Books).
(e) First Data Investor Services Group, Inc., 4400 Computer
Drive, Westborough, Massachusetts 01581-5120 (records
relating to its function as transfer agent and dividend
disbursing agent).
ITEM 31. MANAGEMENT SERVICES
Inapplicable.
ITEM 32. UNDERTAKINGS
Registrant undertakes to call a meeting of shareholders for
the purpose of voting upon the question of removal of a trustee or trustees
if requested to do so by the holders of at least 10% of Registrant's
outstanding shares. Registrant will stand ready to assist shareholder
communications in connection with any meeting of shareholders as prescribed
in Section 16(c) of the Investment Company Act of 1940.
Registrant undertakes to furnish each person to whom a
prospectus is delivered a copy of the Registrant's most recent annual report
to shareholders, upon request and without charge.
Registrant hereby undertakes to file a post-effective
amendment with respect to the Treasury Cash Management Fund, containing
financial statements that need not be certified within four to six months
from the effective date of this Post-Effective
Amendment.
C-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has duly caused this
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Detroit, State of
Michigan, on the 14th day of May, 1997.
PEGASUS FUNDS
Registrant
/s/Donald G. Sutherland
-----------------------
Donald G. Sutherland
President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment to Registrant's Registration Statement has been
signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/Donald G. Sutherland President and May 14, 1997
- ------------------------ Trustee
Donald G. Sutherland
/s/John P. Gould Chairman and May 14, 1997
- ------------------------ Trustee
John P. Gould
/s/D'Ray Moore Treasurer May 14, 1997
- ------------------------ (Chief Financial
D'Ray Moore Officer
/s/Will M. Caldwell Trustee May 14, 1997
- ------------------------
Will M. Caldwell
/s/Nicholas J. De Grazia Trustee May 14, 1997
- ------------------------
Nicholas J. De Grazia
/s/Marilyn McCoy Trustee May 14, 1997
- ------------------------
Marilyn McCoy
/s/Julius L. Pallone Trustee May 14, 1997
- ------------------------
Julius L. Pallone
/s/Donald L. Tuttle Trustee May 14, 1997
- ------------------------
Donald L. Tuttle
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
(5)(b) Form of Addendum No. 1 to Advisory Agreement
(6)(b) Form of Addendum No. 1 to Distribution Agreement
(8)(j) Form of Addendum No. 9 to Amended and Restated
Custodian Agreement
(9)(b) Form of Addendum No. 1 to Co-Administration
Agreement
(9)(d) Form of Addendum No. 1 to Transfer Agency and
Services Agreement
(9)(f) Agency Agreement between Registrant and Putnam Fiduciary
Trust Company dated November 1, 1997
(9)(g) Agency Agreement between Registrant and BISYS Fund Services
dated March 18, 1997
(11)(a) Consent of Arthur Andersen LLP
(11)(b) Consent of Ernst & Young LLP
(11)(c) Consent of Drinker Biddle & Reath LLP
(27) Financial Data Schedules
EXHIBIT (5)(b)
ADDENDUM NO. 1 TO ADVISORY AGREEMENT
This Addendum, dated as of the ____ day of __________ 1997, is
entered into between PEGASUS FUNDS (the "Trust"), a Massachusetts business
trust, and FIRST CHICAGO NBD INVESTMENT MANAGEMENT COMPANY ("FCNIMCO"), a
registered investment adviser.
WHEREAS, the Trust, and FCNIMCO have entered into an Advisory
Agreement dated April 12, 1996 ("Advisory Agreement"), pursuant to which the
Trust appointed FCNIMCO to act as investment adviser ("Adviser") to the
Trust's Money Market, Treasury Money Market, Municipal Money Market, Michigan
Municipal Money Market, Cash Management, U.S. Government Securities Cash
Management, Treasury Prime Cash Management, Growth, International Equity,
Equity Index, Growth and Value, Intrinsic Value, Mid-Cap Opportunity, Equity
Income, Small-Cap Opportunity, Bond, Short Bond, Michigan Municipal Bond,
Intermediate Municipal Bond, Municipal Bond, Income, Intermediate Bond,
International Bond, Managed Assets Balanced, Managed Assets Conservative and
Managed Assets Growth Funds (each a "Fund");
WHEREAS, Article 1(b) of the Advisory Agreement provides that
in the event the Trust establishes one or more additional portfolios with
respect to which it desires to retain FCNIMCO to act as the Adviser under the
Advisory Agreement, the Trust shall so notify FCNIMCO in writing and if
FCNIMCO is willing to render such services it shall notify the Trust in
writing, and the compensation to be paid to FCNIMCO pursuant to Article 5 of
the Advisory Agreement;
WHEREAS, pursuant to Article 1(b) of the Advisory Agreement,
the Trust has notified FCNIMCO that it has established the Treasury Cash
Management and High Yield Bond Funds and that it desires to retain FCNIMCO to
act as the Adviser therefor, and FCNIMCO has notified the Trust that it is
willing to serve as Adviser for such Funds.
NOW THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Appointment. The Trust hereby appoints FCNIMCO to act as
Adviser to the Trust for the Treasury Cash Management Fund and High Yield
Bond Fund for the period and on the terms set forth in the Advisory
Agreement. FCNIMCO hereby accepts such appointment and agrees to render the
services set forth in the Advisory Agreement for the compensation herein
provided.
<PAGE>
2. Compensation. For the services provided and the expenses
assumed pursuant to the Advisory Agreement, the Trust will pay the Adviser,
and the Adviser will accept as full compensation therefor, a fee, computed
daily and payable monthly, at the annual rate of .20% and ___% of the
Treasury Cash Management and High Yield Bond Funds' average daily net assets,
respectively.
3. Capitalized Terms. From and after the date hereof, the term
"Fund" as used in the Advisory Agreement shall be deemed to include the
Treasury Cash Management Fund and High Yield Bond Fund. Capitalized terms
used herein and not otherwise defined shall have the meanings ascribed to
them in the Advisory Agreement.
4. Miscellaneous. Except to the extent supplemented hereby,
the Advisory Agreement shall remain unchanged and in full force and effect
and is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this
Addendum as of the date and year first above written.
PEGASUS FUNDS
By:________________________________
Donald G. Sutherland
President and Trustee
FIRST CHICAGO NBD INVESTMENT
MANAGEMENT COMPANY
By:________________________________
Name:
Title:
EXHIBIT (6)(b)
ADDENDUM NO. 1 TO DISTRIBUTION AGREEMENT
This Addendum, dated as of the ____ day of _____, 1997, is
entered into between PEGASUS FUNDS (the "Trust"), a Massachusetts business
trust, and BISYS FUND SERVICES LIMITED PARTNERSHIP, d/b/a/ BISYS FUND
SERVICES ("BISYS").
WHEREAS, BISYS and the Trust have entered into the
Distribution Agreement (the "Distribution Agreement") dated June 11, 1996
with respect to shares of beneficial interest in the Trust's Money Market,
Treasury Money Market, Municipal Money Market, Michigan Municipal Money
Market, Cash Management, U.S. Government Securities Cash Management, Treasury
Prime Cash Management, Growth, International Equity, Equity Index, Growth and
Value, Intrinsic Value, Mid-Cap Opportunity, Equity Income, Small-Cap
Opportunity, Bond, Short Bond, Michigan Municipal Bond, Intermediate
Municipal Bond, Municipal Bond, Income, Intermediate Bond, International
Bond, Managed Assets Balanced, Managed Assets Conservative and Managed Assets
Growth Funds (each a "Series");
WHEREAS, Section 1(d) of the Distribution Agreement provides
that in the event the Trust establishes one or more additional portfolios
with respect to which it desires to retain BISYS to act as the exclusive
distributor and representative under the Distribution Agreement, the Trust
shall so notify BISYS in writing and if BISYS is willing to render such
services it shall notify the Trust in writing, subject to such approval as
may be required pursuant to Section 12 of the Distribution Agreement and any
necessary regulatory and shareholder approvals, and the compensation to be
paid to BISYS shall be that which is agreed to in writing by the Trust and
BISYS;
WHEREAS, pursuant to Section 1(d) of the Distribution
Agreement, the Trust has notified BISYS that it has established the Treasury
Cash Management Fund and High Yield Bond Fund and that it desires to retain
BISYS to act as the exclusive distributor and representative therefor, and
BISYS has notified the Trust that it is willing to serve as exclusive
distributor and representative for such Funds.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Appointment. The Trust hereby appoints BISYS to act as
exclusive distributor and representative to the Trust for the Treasury Cash
Management Fund and High Yield Bond Fund for the period and on the terms set
forth in the Distribution
<PAGE>
Agreement. BISYS hereby accepts such appointment and agrees to
render the services set forth in the Distribution Agreement.
2. Capitalized Terms. From and after the date hereof, the
term "Series" as used in the Distribution Agreement shall be deemed to
include the Treasury Cash Management Fund and High Yield Bond Fund.
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Distribution Agreement.
3. Miscellaneous. Except to the extent supplemented
hereby, the Distribution Agreement shall remain unchanged and in full force
and effect and is hereby ratified and confirmed in all respects as
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this
Addendum as of the date and year first above written.
PEGASUS FUNDS
By:____________________________________
Donald G. Sutherland
President and Trustee
BISYS FUND SERVICES LIMITED PARTNERSHIP
By: BISYS FUND SERVICES, INC.,
its general partner
By:_______________________________
Name:
Title:
- 2 -
EXHIBIT (8)(j)
ADDENDUM NO. 9 TO
AMENDED AND RESTATED
CUSTODIAN AGREEMENT
This Addendum, dated as of the ______ day of _________, 1997,
is entered into between PEGASUS FUNDS (the "Trust"), a Massachusetts business
trust, and NBD BANK ("NBD" or the "Custodian"), a state-chartered bank
incorporated under the laws of Michigan.
WHEREAS, the Trust and NBD have entered into an Amended and
Restated Custodian Agreement dated May 16, 1989 and Addenda Nos. 1, 2, 3, 4,
5, 6, 7 and 8 (the "Custodian Agreement"), pursuant to which the Trust
appointed NBD to act as Custodian to the Trust's Money Market Fund, Municipal
Money Market Fund, Growth and Value Fund, Mid-Cap Opportunity Fund, Intrinsic
Value Fund, Intermediate Bond Fund, Bond Fund, Michigan Municipal Money
Market Fund, Equity Index Fund, Treasury Money Market Fund, Municipal Bond
Fund, Michigan Municipal Bond Fund, Managed Assets Balanced Fund, Growth
Fund, Short Bond Fund, U.S. Government Income Fund, International Equity
Fund, Cash Management Fund, U.S. Government Securities Cash Management Fund,
Treasury Prime Cash Management Fund, Equity Income Fund, Small-Cap
Opportunity Fund, Intermediate Municipal Bond Fund, Income Fund,
International Bond Fund, Managed Assets Conservative Fund and Managed Assets
Growth Fund;
WHEREAS, Article XIV, Paragraph 9 of the Custodian Agreement
provides that in the event the Trust establishes one or more additional
portfolios with respect to which it desires to retain NBD to act as the
custodian under the Custodian Agreement, the Trust shall so notify NBD in
writing and if NBD is willing to render such services it shall notify the
Trust in writing, and the compensation to be paid to NBD shall be that which
is agreed to in writing by the Trust and NBD pursuant to Article XII,
Paragraph 7 of the Custodian Agreement;
WHEREAS, pursuant to Article XIV, Paragraph 9 of the Custodian
Agreement, the Trust has notified NBD that it intends to establish the
Treasury Cash Management Fund and High Yield Bond Fund and that it desires to
retain NBD to act as the custodian therefor, and NBD has notified the Trust
that it is willing to serve as custodian for such Funds.
NOW THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Appointment. The Trust hereby appoints NBD to act as
Custodian to the Trust for the Treasury Cash Management Fund and High Yield
Bond Fund for the period and on the terms set forth in the Custodian
Agreement. NBD hereby accepts such appointment
<PAGE>
and agrees to render the services set forth in the Custodian Agreement, for
the compensation provided in Appendix A hereto.
2. Capitalized Terms. From and after the date hereof, the
terms "Fund" and "Series" as used in the Custodian Agreement shall be deemed
to include the Treasury Cash Management Fund and High Yield Bond Fund.
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Custodian Agreement.
3. Miscellaneous. Except to the extent supplemented hereby,
the Custodian Agreement shall remain unchanged and in full force and effect
and is hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this
Addendum as of the date and year first above written.
PEGASUS FUNDS
By: _______________________
Donald G. Sutherland
President and Trustee
NBD BANK
By: ________________________
Name:
Title:
-2-
<PAGE>
APPENDIX A
For the services provided pursuant to the Custodian Agreement
with respect to the Treasury Cash Management Fund and High Yield Bond Fund,
the Custodian will accept the following fees:
(a) With respect to the High Yield Bond Fund:
Basic Annual Account Charge $1,000
Annual Security Fee
First $20,000,000 = .0003
Next $20,000,000 = .00025
Next $20,000,000 = .0002
Next $40,000,000 = .00015
Next $200,000,000 = .000125
Balance over $300,000,000 = .0001
Asset Fee $1.541 per security held at end of month.
Security Transactions:
$13.00 for each Pass-Through Certificate Payment
$35.00 for Option Transactions requiring Escrow Receipts
$20.00 for all other security transactions
Accounting Statements:
Cash Statement - $50 per statement
Inventories - $50 per inventory
(b) With respect to the Treasury Cash Management
Fund:
Unit Price
Clearing and settlement transaction $11.00
Accounting entry and vault/safekeeping
transactions $12.00
Activity Processing
A. Master Control Fund Accounting
Annual maintenance $ 6.25
Debit activity $ .15
Credit activity $ .35
<PAGE>
B. Master Settlement Accounting
Account maintenance $ 9.25
Debit activity $ .15
Credit activity $ .35
Check supplies $ 6.25
C. Out-of-Pocket Expenses. In addition to the service fees
above, the Trust will reimburse the Custodian for its out-of-
pocket expenses including, but not limited to, postage, telephone,
telex, facsimile, Federal Express and Federal Reserve wire fees,
incurred on behalf of the Trust.
-2-
EXHIBIT (9)(b)
ADDENDUM NO. 1 TO CO-ADMINISTRATION AGREEMENT
This Addendum, dated as of the ____ day of _________, 1997, is
entered into between PEGASUS FUNDS (the "Trust"), a Massachusetts business
trust, FIRST CHICAGO NBD INVESTMENT MANAGEMENT COMPANY ("FCNIMCO"), a
registered investment adviser, and BISYS FUND SERVICES LIMITED PARTNERSHIP,
d/b/a, BISYS FUND SERVICES ("BISYS") (each an "Administrator" and
collectively, the Administrators").
WHEREAS, the Trust, FCNIMCO and BISYS have entered into a
Co-Administration Agreement dated June 11, 1996 ("Co- Administration
Agreement"), pursuant to which the Trust appointed FCNIMCO and BISYS to act
as Administrators to the Trust's Money Market, Treasury Money Market,
Municipal Money Market, Michigan Municipal Money Market, Cash Management,
U.S. Government Securities Cash Management, Treasury Prime Cash Management,
Growth, International Equity, Equity Index, Growth and Value, Intrinsic
Value, Mid-Cap Opportunity, Equity Income, Small-Cap Opportunity, Bond, Short
Bond, Michigan Municipal Bond, Intermediate Municipal Bond, Municipal Bond,
Income, Intermediate Bond, International Bond, Managed Assets Balanced,
Managed Assets Conservative and Managed Assets Growth Funds (each a "Fund");
NOW THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Appointment. The Trust hereby appoints FCNIMCO and BISYS to
act as Administrators to the Trust for the Treasury Cash Management Fund and
High Yield Bond Fund for the period and on the terms set forth in the
Co-Administration Agreement. FCNIMCO and BISYS hereby accept such appointment
and agree to render the services set forth in the Co-Administration Agreement
for the compensation herein provided.
2. Compensation. For the services provided and the expenses
assumed pursuant to the Co-Administration Agreement, the Trust will pay the
Administrators, and the Administrators will accept as full compensation
therefor, a fee, computed daily and payable monthly, at the annual rate of
.15% of each of the Treasury Cash Management and High Yield Bond Funds'
average daily net assets, respectively.
3. Capitalized Terms. From and after the date hereof, the term
"Fund" as used in the Co-Administration Agreement shall be deemed to include
the Treasury Cash Management Fund and High Yield Bond Fund. Capitalized terms
used herein and not otherwise defined shall have the meanings ascribed to
them in the Co- Administration Agreement.
<PAGE>
4. Miscellaneous. Except to the extent supplemented hereby, the
Co-Administration Agreement shall remain unchanged and in full force and
effect and is hereby ratified and confirmed in all respects as supplemented
hereby.
IN WITNESS WHEREOF, the undersigned have executed this
Addendum as of the date and year first above written.
PEGASUS FUNDS
By:________________________________
Donald G. Sutherland
President and Trustee
FIRST CHICAGO NBD INVESTMENT
MANAGEMENT COMPANY
By:________________________________
Name:
Title:
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS FUND SERVICES, INC.,
its general partner
By:____________________________
Name:
Title:
EXHIBIT (9)(d)
ADDENDUM NO. 1 TO TRANSFER AGENCY AND SERVICES AGREEMENT
This Addendum, dated as of the ____ day of ________, 1997, is
entered into between PEGASUS FUNDS (the "Trust"), a Massachusetts business
trust, and FIRST DATA INVESTOR SERVICES GROUP, INC. ("FDISG"), a
Massachusetts Corporation.
WHEREAS, the Trust and FDISG have entered into a Transfer
Agency and Services Agreement dated August 5, 1996 (the "Transfer Agency
Agreement"), pursuant to which the Trust appointed FDISG to act as transfer
agent (the "Transfer Agent") to the Trust's Growth Fund, International Equity
Fund, Equity Index Fund, Growth and Value Fund, Intrinsic Value Fund, Mid-Cap
Opportunity Fund, Equity Income Fund, Small-Cap Opportunity Fund, Bond Fund,
Short Bond Fund, Intermediate Bond Fund, Municipal Bond Fund, Michigan
Municipal Bond Fund, Intermediate Municipal Bond Fund, Income Fund,
International Bond Fund, Money Market Fund, Treasury Money Market Fund,
Municipal Money Market Fund, Michigan Municipal Money Market Fund, Cash
Management Fund, U.S. Government Securities Cash Management Fund, Treasury
Prime Cash Management Fund, Managed Assets Balanced Fund, Managed Assets
Conservative Fund and Managed Assets Growth Fund (each, a "Fund");
WHEREAS, Article 14 of the Transfer Agency Agreement provides
that in the event the Trust establishes one or more additional portfolios
with respect to which it desires to retain FDISG to act as the Transfer Agent
under the Transfer Agency Agreement, the Trust shall so notify FDISG in
writing, and if FDISG is willing to render such services in accordance with
the fees set forth in Schedule B of the Transfer Agency Agreement, the
parties shall amend the Schedule of Portfolios to include such additional
portfolios;
WHEREAS, pursuant to Article 14 of the Transfer Agency
Agreement, the Trust has notified FDISG that it has established the Treasury
Cash Management Fund and High Yield Bond Fund (each, a "Fund") and that it
desires to retain FDISG to act as the Transfer Agent therefor, and FDISG has
notified the Trust that it is willing to serve as Transfer Agent for such
Funds.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Appointment. The Trust hereby appoints FDISG to act as
Transfer Agent to the Trust for the Treasury Cash Management Fund and High
Yield Bond Fund for the period and on the terms set forth in the Transfer
Agency Agreement. FDISG hereby accepts such appointment and agrees to render
the services set
<PAGE>
forth in the Transfer Agency Agreement, for the compensation set forth in
Schedule B of the Transfer Agency Agreement.
2. Capitalized Terms. From and after the date hereof, the
terms "Fund" and "Funds" as used in the Transfer Agency Agreement, as amended
shall be deemed to include the Treasury Cash Management Fund and High Yield
Bond Fund. Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Transfer Agency Agreement.
3. Miscellaneous. Except to the extent supplemented hereby,
the Transfer Agency Agreement shall remain unchanged and in full force and
effect and is hereby ratified and confirmed in all respects as supplemented
hereby.
IN WITNESS WHEREOF, the undersigned have executed this
Addendum as of the date and year first above written.
PEGASUS FUNDS
By:____________________________________
Donald G. Sutherland
President and Trustee
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:_____________________________________
Name:
Title:
- 2 -
Exhibit (9)(f)
PEGASUS FUNDS
Agency Agreement
THIS AGENCY AGREEMENT made as of the 1st day of November, 1996, by
and between Pegasus Funds (the "Trust"), a registered investment company
under the Investment Company Act of 1940 (the "1940 Act"), and Putnam
Fiduciary Trust Company, a Massachusetts trust company with its principal
office at One Post Office Square, Boston, Massachusetts ("PFTC").
WHEREAS, PFTC has agreed to provide certain administrative and
recordkeeping services as agent for certain employee benefit plans, profit
sharing plans and retirement plans identified in Schedule A, as amended from
time to time (the "Plans") for certain portfolios of the Trust (the "Funds"),
and is a transfer agent registered under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"); and
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, the parties hereto agree as follows:
Section 1. Appointment of PFTC. The Trust hereby appoints PFTC as an
agent for the Trust for the sole purpose of accepting orders for the
purchase, and requests for redemption ("Instructions"), of the authorized and
issued shares of beneficial interest or common stock of the Funds (the
"Shares") purchased, held or redeemed by a Plan. PFTC accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
Section 2. Duties of the Parties.
2.01 PFTC shall perform the following services:
(a) Receive from the Plans orders for the
purchase of Shares by the close of regular trading on the New York
Stock Exchange (the "Close of Trading") each business day that the
New York Stock Exchange is open for business ("Business Day"),
transmit such orders to the Transfer Agent for acceptance on such
Business Day and promptly deliver or instruct the Plans (or the
Plans' Trustee(s) as the case may be) to deliver payment and
appropriate documentation therefor to Transfer Agent for acceptance;
(b) Receive from the Plans by the close of
Trading each Business Day redemption requests and redemption
directions, transmit such requests and directions to the Transfer
Agent and deliver appropriate documentation
<PAGE>
therefor to Transfer Agent, in each case for acceptance on
such Business Day; and
(c) As instructed, maintain adequate records
related to, and advise Transfer Agent as to, the foregoing. To the
extent required under the 1940 Act and rules thereunder, PFTC agrees
that such records maintained by it will be preserved, maintained and
made available in accordance with the provisions of the 1940 Act and
rules thereunder, and copies or, if required, originals, will be
surrendered promptly. Subject to the foregoing, records surrendered
hereunder shall be in machine readable or optical disk form. This
provision shall survive the termination of this Agreement.
2.02 PFTC shall maintain adequate offices, personnel
and computer and other equipment to perform the services contemplated by this
Agreement. PFTC shall notify the Trust promptly in the event that it becomes
unable for any reason to perform the services contemplated by, or any other
of its obligations under, this Agreement.
2.03 The parties hereto shall take all steps
necessary to ensure that the arrangements provided for in this Agreement are
properly disclosed to the Plans.
2.04 In accordance with procedures established from
time to time by agreement of the parties hereto, the Trust shall instruct the
Transfer Agent to furnish to PFTC, for each Fund, no later than 6:30 P.M.
Eastern Time on each Business Day as appropriate:
(a) Net asset value information as of the
Close of Trading each Business Day when such information is
used for crediting accounts; and
(b) Dividend and capital gains distribution
information, as it arises, when such information is used for
crediting accounts; and
(c) Daily accrual for interest rate factor
(mil rate) information with respect to Funds which declare dividends
daily, when such information is used for crediting accounts.
2.05 Orders derived from, and in amounts equal
to, Instructions received by PFTC prior to the Close of Trading on any
Business Day ("Day 1") shall be transmitted by 9:30 a.m. (Eastern Time) on
the next Business Day. Such trades will be effected at the net asset value of
each Fund's shares calculated as of the Close of Trading on Day 1 subject to
the terms of such Fund's prospectus.
-2-
<PAGE>
2.06 PFTC agrees that all books, records,
information and data pertaining to the business of the Transfer Agent which
are exchanged or received pursuant to the negotiation or the carrying out of
this Agreement shall remain confidential and shall not be voluntarily
disclosed to any other person, except as may be required by law.
2.07 PFTC shall maintain or provide for redundant
facilities and shall maintain or provide for backup files of its records
maintained hereunder and shall store such back-up files in a secure
off-premises location, so that in the event of a power failure or other
interruption of whatever cause at the location of its records such records
are maintained intact and transactions can be processed at another location.
2.08 The parties hereto shall furnish to each
other such information as may reasonably be requested (including, without
limitation, periodic certifications confirming the provision of the services
described herein), and will otherwise cooperate with each other (including
without limitation any auditors designated by the Trust) in connection with
reports to the Trust's Board of Trustees concerning this Agreement and the
monies paid or payable pursuant hereto, as well as any other reports or
filings that may be required by law.
2.09 The parties hereto shall comply with federal
and state securities laws and regulations thereunder in connection with their
responsibilities under this Agreement.
2.10 In accordance with the procedures established from
time to time by agreement of the parties hereto, the Trust shall cause the
Transfer Agent to promptly furnish to PFTC in the frequency requested, for
each Fund:
(a) copies of prospectuses, financial
statements, reports or other materials relating to each Fund, and
updates of such materials, in the quantity requested by PFTC as such
updates become available; and
(b) performance data for each Fund,
including without limitation total return and current yield
information computed in accordance with applicable regulations and
other performance information as PFTC may reasonably request.
2.11 Purchases and sales of the Funds are subject to
the terms of the Funds' prospectuses.
2.12 The Trust hereby authorizes PFTC, for purposes of
subsection 2.10 concerning the transmission of performance data, to utilize
Lipper Analytical Services in reporting the performance of the Fund(s).
-3-
<PAGE>
Section 3. Compensation. For the services which PFTC will render to
the Trust under this Agreement, the Trust will pay to PFTC a fee on a monthly
basis, at the rate or rates as set forth in Schedules B1 and B2.
Section 4. Representations and Warranties.
4.01 Each party represents and warrants to the
other party that:
(a) It is duly organized, validly existing
and in good standing under the laws of its state of
organization;
(b) It has legal power and authority to
carry on its business, and is registered or licensed as required, in
each jurisdiction where it conducts its business and the
registrations are and will remain in full force and effect during the
term of this Agreement;
(c) It is empowered by its charter and
bylaws and under applicable law to enter into and perform
this Agreement; and
(d) All requisite actions have been taken to
authorize it to enter into and to perform this Agreement.
4.02 In addition, PFTC represents and warrants to
the Trust that:
(a) It is duly registered as a transfer
agent under section 17A of the Exchange Act; and
(b) It maintains and knows of no reason why
it cannot or will not during the term hereof maintain adequate
offices, personnel and computer and other equipment to perform the
services contemplated by this Agreement.
4.03 In addition, the Trust represents and warrants
that it is registered as an investment company under the 1940 Act.
Section 5. Indemnification.
5.01 Each party (an "Indemnitor") agrees to
indemnify and hold harmless the other party, their respective trustees or
directors, officers, agents, employees and each person, if any, who controls
them within the meaning of the Securities Act of 1933 ("1933 Act")
(collectively, "Indemnified Parties"), against any losses, claims, damages,
liabilities or expenses (including any legal or other expenses reasonably
incurred by them in connection with investigating or defending such loss,
claim or action) to which an Indemnified Party may
-4-
<PAGE>
become subject insofar as those losses, claims, damages, liabilities or
expenses (or actions in respect thereof), arise out of or are based upon (a)
any negligent act or omission by an Indemnitor or its agents relating to the
performance of its obligations under this Agreement; (b) any breach by the
Indemnitor of its representations or warranties contained in this Agreement;
(c) the Indemnitor's failure to comply with any of the terms of this
Agreement; or (d) the acceptance by any Indemnified Party of any transaction
or account maintenance information from the Indemnitor with respect to the
Plans or their assets. Each party represents and warrants that at all times
it has sufficient financial resources, whether through a fidelity bond or
otherwise, to meet all of its indemnification obligations arising under this
Agreement.
Notwithstanding the foregoing, there shall be no
indemnification obligation between the parties arising out of the failure of
any Plan to provide good funds for the settlement of any transaction
authorized by a Plan.
5.02 In order that the indemnification provisions
contained herein shall apply, upon the assertion of a claim or loss for which
either party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such assertion or
loss, and shall keep the other advised with respect to all developments
concerning such claim. An Indemnitor shall have the option to assume the
defense of a claim at its expense, or to participate at its expense with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in
any case in which the other party may be required to indemnify it except with
the other party's prior written consent.
5.03 The obligations of the parties hereto under
this Section 5 shall survive the termination of this Agreement.
Section 6. Acknowledgements. PFTC acknowledges that the Trust, as a
registered investment company under the 1940 Act, is subject to the
provisions of the 1940 Act and regulations thereunder, and that the offer and
sale of its shares are subject to the provisions of federal and state laws
and regulations applicable to the offer and sale of securities. The Trust
acknowledges that PFTC is not responsible for the Trust's compliance with
such laws and regulations.
Section 7. Duration and Termination of Agreement. This Agreement
will become effective as of the date hereof and may be terminated by either
party upon ninety (90) days written notice to the other party. This Agreement
shall terminate immediately upon written notice to the other party in the
event that:
-5-
<PAGE>
(a) PFTC becomes unable for any reason to perform the
services contemplated by this Agreement;
(b) The Trust ceases to offer investment alternatives
under the Plans; or
(c) At any time, the authorizations, licenses, qualifications
or registrations required to be maintained by PFTC in connection with
the performance of its duties hereunder shall lapse or cease to
remain in full force and effect.
Upon termination of this Agreement, each party shall return to the other
party all copies of confidential or proprietary materials or information
received from such other party hereunder other than materials or information
required to be retained by such party under applicable law or regulations.
The obligations of the parties under this section shall survive the
termination of this Agreement.
Section 8. Assignment. Neither this Agreement nor any rights or
obligations hereunder may be assigned or delegated by either party without
the written consent of the other party. This Agreement shall inure to the
benefit of and be binding upon the parties and their respective permitted
successors and assigns.
Section 9. Notices. Notices hereunder shall be in writing, shall be
delivered personally, sent by certified mail, return receipt requested, or
sent by facsimile machine in accordance with procedures established by
agreement of the parties hereto, and shall be addressed to a party either at
his address below or at a changed address specified by it in a notice to the
other party hereto:
Pegasus Funds
c/o NBD Bank
900 Tower Drive
Troy, Michigan 48007-7058
Attn: Dane Criger
Putnam Fiduciary Trust Company
One Post Office Square
Boston, Massachusetts 02109
Attn: Karnig Durgarian
Section 10. Amendment. This Agreement may be amended or modified
only by a written agreement executed by both parties. The parties may add
additional employee benefit plans, profit sharing plans or retirement plans
to the provisions of this Agreement by executing one or more Schedules to
this Agreement identifying such plans and specifying the compensation payable
by
-6-
<PAGE>
the Trust with respect thereto. Each such Schedule shall be signed by both
parties.
Section 11. Trust Liability. The names "Pegasus Funds" and "Trustees
of Pegasus Funds" refer, respectively, to the trust created and the trustees,
as trustees but not individually or personally, acting from time to time
under a Declaration of Trust dated April 21, 1987, as amended, 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
the Trust. The obligations of the Trust entered into in the name or on behalf
thereof by any of the trustees, representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
trustees, shareholders or representatives of the Trust personally, but bind
only the trust property, and all persons dealing with any portfolio of the
Trust must look solely to the trust property belonging to such portfolio for
the enforcement of any claims against the Trust.
Section 12. Governing Law. This Agreement shall be constructed and
the provisions thereof interpreted under and in accordance with the laws of
The Commonwealth of Massachusetts.
Section 13. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and supersedes any prior agreement with
respect to the subject matter hereof whether oral or written. This Agreement
is intended to set forth the rights, duties and responsibilities between the
Trust and PFTC with respect to the matters covered herein. Nothing contained
in the Agreement is intended to convey rights to any third parties such as
Plans, Plan participants or the Transfer Agent.
Section 14. Headings. Paragraphs headings in this Agreement are
included for convenience or reference only and are not to be used to construe
or interpret this Agreement.
IN WITNESS HEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
PUTNAM FIDUCIARY TRUST COMPANY
By: /s/ K. H. Durgarian
---------------------------
Name: Karnig H. Durgarian
Title: Managing Director
PEGASUS FUNDS
By: /s/ D'Ray Moore Brewer
---------------------------
Name: D'Ray Moore Brewer
Title: Treasurer
-7-
<PAGE>
SCHEDULE A
LIST OF PLANS
I. First Chicago/NBD Plans
First Chicago Corporation Savings Incentive Plan
NBD Bancorp, Inc. Savings and Investment Plan
II. Institutional Plans
Honigman Miller Schwartz and Cohn Income Deferral Plan
Honigman Miller Schwartz and Cohn Profit Sharing Plan
III. Retail Plans
McKay Hochman Prototype Plan
Bayer Bess Vanderwarker Employees Profit Sharing Plan
Don R. Fruchey Profit Sharing and 401(k) Plan
-8-
<PAGE>
SCHEDULE B 1
FEES AND EXPENSES
The fees referred to in Section 3 of this Agreement shall be as
follows:
I. For those Plans listed in Part I of Schedule A, Putnam shall
receive a fee as follows:
a. $1 per transaction, which includes a payroll contribution to a
mutual fund in a participant account, enrollments and telephone calls
to live operators. Exchanges or transfers are not transactions for
purposes of this calculation; and
b. $3 per participant mutual fund account per annum; and
c. An annual charge of 0.18% (18 basis points) on the Trust's
equity, balanced and asset allocation funds, 0.19% (19 basis points)
on the Trust's fixed income funds and 0.20% (20 basis points) on the
Trust's money market funds.
d. All basis point charges are based on the average daily net
assets invested by the Plans in the Funds.
II. Such fees shall be fixed for a period of three years. However, in the
event that Putnam changes its standard sub- transfer agent pricing
and such a change would reduce the sub-transfer agent fees paid by
the Trust's mutual funds, then the Trust will receive the benefits of
such a change.
-9-
<PAGE>
SCHEDULE B 2
FEES AND EXPENSES
The fees referred to in Section 3 of this Agreement shall be as follows:
For those Plans listed in Part II of Schedule A, Putnam shall receive
a fee as follows:
a. $1 per transaction, which includes a payroll
contribution to a mutual fund in a participant account,
enrollments and telephone calls to live operators.
Exchanges or transfers are not transactions for purposes of
this calculation; and
b. $3 per participant mutual fund account per annum; and
c. An annual charge of 0.18% (18 basis points) on the Trust's
equity, balanced and asset allocation funds, 0.19% (19 basis points)
on the Trust's fixed income funds and 0.20% (20 basis points) on the
Trust's money market funds.
d. All basis point charges are based on the average daily net
assets invested by the Plans in the Funds.
-10-
<PAGE>
SCHEDULE B 3
FEES AND EXPENSES
The fees referred to in Section 3 of this Agreement shall be as
follows:
For those Plans listed in Part III of Schedule A, Putnam shall
receive a fee as follows:
a. $1 per transaction, which includes a payroll contribution to a
mutual fund in a participant account, enrollments and telephone calls
to live operators. Exchanges or transfers are not transactions for
purposes of this calculation; and
b. $3 per participant mutual fund account per annum; and
c. An annual charge of 0.18% (18 basis points) on the Trust's
equity, balanced and asset allocation funds, 0.19% (19 basis points)
on the Trust's fixed income funds and 0.20% (20 basis points) on the
Trust's money market funds; provided, however, that the total fees
paid in any year shall not exceed the following:
Equity, Balanced and Asset Allocation Funds 25 basis points
Fixed Income Funds 26 basis points
Money Market Funds 27 basis points
d. All basis point charges are based on the average daily
net assets invested by the Plans in the Funds.
-11-
Exhibit (9)(g)
AGENCY AGREEMENT
THIS AGREEMENT made as of the 18th day of March, 1997, by and among
PEGASUS FUNDS (the "Fund"), a Massachusetts business trust registered as an
open-end management investment company under the Investment Company Act of
1940 (the "1940 Act"); BISYS FUND SERVICES, INC. ("BFS"), a Delaware
corporation; and BISYS QUALIFIED PLAN SERVICES, INC., a Delaware corporation
("BQPS").
W I T N E S S E T H:
WHEREAS, the Fund has caused First Data Investor Services Group,
Inc., the transfer agent, dividend disbursement agent and shareholder
servicing agent for the Fund (the "Transfer Agent") to establish a master
account for each investment portfolio of the Fund identified on Schedule A
(individually, a "Portfolio"; collectively, the "Portfolios") on its mutual
fund shareholder accounting system reflecting the aggregate ownership of such
Portfolios by each of the tax-qualified defined contribution plans made
available by First Chicago NBD Bank (individually, a "Plan"; collectively,
the "Plans") for which BQPS has agreed to provide Plan recordkeeping
services;
WHEREAS, it is intended that BQPS will establish individual accounts
on its defined contribution plan record-keeping system reflecting all
transactions by or on behalf of participants and beneficiaries under the
Plans which result in purchases or redemptions by the Plans of shares of the
Portfolios;
WHEREAS, it is intended that BFS will act as a servicing agent for
the Fund to receive orders by the Plans for purchases and redemptions of
shares of the Portfolios resulting from transactions by or on behalf of the
Plan participants and beneficiaries which are recorded on BQPS' defined
contribution plan record-keeping system;
WHEREAS, the parties hereto have agreed to utilize the Fund/SERV
system established by National Securities Clearing Corporation ("NSCC") for
the placement and settlement of Fund trades ("Fund/SERV"); and
WHEREAS, it is intended that the settlement of trades through
Fund/SERV will provide for the settlement of trades within three days of each
trade date.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto, intending to be legally bound, hereby agree and
declare as follows:
Section 1. Appointment as Servicing, Agent. BFS is hereby appointed
as a Servicing Agent for the Fund to receive orders, in
<PAGE>
accordance with the procedures outlined in Section 5 hereof, for the
purchases and redemptions by the Plans of shares of the Portfolios. Such
purchases and redemptions shall be based on participant-level transactions
made by or on behalf of participants and beneficiaries under the Plans which
are recorded on BQPS' defined contribution plan record-keeping system. For
purposes of this Agreement, "participant-level transactions" shall include:
(a) any authorized direction to invest contributions by or on
behalf of any Plan participant in any Portfolio in accordance with
the terms and conditions of the applicable Plan and the Fund's
prospectuses;
(b) any authorized direction to transfer or exchange existing
amounts held on behalf of any participant or beneficiary by the
applicable Plan to any Portfolio in accordance with the terms and
conditions of the Plan and the Fund's prospectuses;
(c) any authorized direction to transfer or exchange existing
amounts invested in any Portfolio on behalf of any participant or
beneficiary by the applicable Plan to any other investment option
offered under the Plan in accordance with the terms and conditions of
the Plan and the Fund's prospectuses; and
(d) any authorized direction to pay loan, withdrawal or
distribution proceeds to a participant or beneficiary by the
applicable Plan from the Fund in accordance with the terms and
conditions of the Plan and the Fund's prospectuses.
BQPS will notify the Fund in writing of any changes in a Plan which
would have an effect on the aforementioned procedures. BQPS shall maintain
records for each Plan and for the participants thereof reflecting all shares
of each Portfolio purchased and redeemed by each Plan based on
participant-level transactions (including the date and price for all
transactions and share balances) and all reinvestments by each Plan of
dividends and capital gains distributions paid by the Portfolios. BQPS shall
reconcile on each business day all transactions by each Plan involving shares
of the Portfolios (including purchases, redemptions and reinvestments of
dividends and capital gains distributions) with the corresponding
participant-level transactions on BQPS' defined contribution plan
record-keeping system.
Section 2. Appointment of Subcontractor. BFS may, in its discretion,
appoint in writing other parties that are qualified to perform the services
that BFS is responsible for providing under this Agreement and are reasonably
acceptable to the Fund
-2-
<PAGE>
(individually, a "Subcontractor") to carry out some or all of its
responsibilities under this Agreement. It is understood that any such
Subcontractor shall be the agent of BFS and not the agent of the Fund or the
Transfer Agent; it is further understood that BFS shall be fully responsible
for the acts of such Subcontractor and shall not be relieved of any of its
responsibilities hereunder by the appointment of such Subcontractor.
Section 3. Fees. The Fund shall pay BFS for the services to be
provided by BFS under this Agreement in accordance with, and in the manner
set forth in, Schedule B hereto.
Section 4. Reimbursement of Expenses. In addition to paying BFS the
fees described in Section 3 hereof, the Fund agrees to reimburse BFS for its
out-of-pocket expenses in providing services hereunder, including without
limitation, the following:
(a) All freight and other delivery and bonding charges
incurred by BFS in delivering materials to shareholders or any of the
parties to this Agreement;
(b) All direct telephone, telephone transmission and telecopy
or other electronic transmission expenses incurred by BFS as required
to perform the services to be provided by BFS hereunder;
(c) Costs of postage, couriers, stock computer paper,
statements, labels, envelopes, checks, reports, letters, tax forms,
proxies, notices or other form of printed material which shall be
required by BFS for the performance of the services to be provided
hereunder;
(d) The cost of microfilm or microfiche of records or other
materials; and
(e) Any expenses BFS shall incur at the written direction of a
duly authorized officer of the Fund.
Section 5. Accepting Purchase and Redemption Orders. In accordance
with the procedures set forth below, BFS will receive orders by the Plans for
purchases and redemptions of shares of the Portfolios resulting from
participant-level transactions which are recorded on BQPS' defined
contribution plan recordkeeping system. In the case of any such purchase or
redemption order received by BQPS on any business day prior to the time the
net asset value of shares of the Portfolio is determined, the order shall be
accorded a trade date on the accounting system maintained on behalf of the
Fund that is the date of receipt of the order by BQPS. In the case of any
such purchase or redemption order received by BQPS on any business day after
the time the net asset value of shares of the Portfolio is
-3-
<PAGE>
determined, the order shall be accorded a trade date on such accounting
system that is the next business day that the Portfolio is open for trading.
(a) Receipt by BQPS of Participant-Level Transactions. It is
understood by the parties that BQPS may receive participant-level
transactions in various formats, including directions in writing, by
computer magnetic tape, diskette or electronic data transmission, or
by any other accepted method for transmitting defined contribution
plan data that is adopted for the Plans. All participant-level
transactions shall be received and processed by BQPS in accordance
with its standard transaction processing procedures that apply to all
investment options offered under the Plans which procedures shall be
in accordance with the procedures outlined in the Fund's current
prospectuses and applicable provisions of law. BQPS shall maintain
records sufficient to identify the date of receipt of all
participant-level transactions involving the Portfolios and shall
make such records available upon request for examination by the Fund
or its designated representative or, at the request of the Fund, by
appropriate governmental authorities. Under no circumstances shall
BQPS change, alter or manipulate any participant-level transactions
received by it in good order.
(b) Transmission by the Transfer Agent of Share Price,
Dividend and Capital Gains Information. The Fund will cause the
Transfer Agent to transmit to BFS, by 6:00 p.m. Eastern time on each
business day that the Fund is open for trading, a telefax identifying
the net asset value per share (or "share price") of each Portfolio as
of the close of trading on that business day. The Fund will also
cause the Transfer Agent to transmit to BFS, by 6:00 p.m. Eastern
time on or before each record date established for the payment of
dividends or capital gains distributions by any Portfolio, a telefax
containing the dividend or capital gains distribution rate for such
payment.
(c) Placement and Settlement of Trades on Behalf of the Plans.
Based on the aggregate participant-level transactions received by BFS
on each business day that the Fund is open for trading, net purchase
and redemption orders shall be transmitted to the Transfer Agent via
Fund/SERV on the same date that such orders are received by BFS;
provided, however, that money market fund purchase and redemption
orders will be placed up to three days following receipt of such
orders. The Fund will cause the Transfer Agent to make available a
trading desk until 7:00 p.m. Eastern time each day for purposes of
processing redemption orders.
-4-
<PAGE>
(d) Monthly Statements by the Transfer Agent. The Fund will
cause the Transfer Agent to provide to BFS, by the 15th business day
of each calendar month, a statement for the preceding calendar month
reflecting the shares of each Portfolio held by the Plans as of the
end of such preceding month and all transactions by the Plans in each
Portfolio during such preceding month.
(e) Establishment of Networking Accounts; Transmission of
Files. The Fund will cause the Transfer Agent to establish an
appropriate NSCC Network Level 4 account for Plan-related omnibus
accounts. The Fund will also cause the Transfer Agent to transmit
files to BFS reflecting current Portfolio positions in such
networking accounts. Such files shall be transmitted on a semimonthly
basis at such times that are agreed upon by the parties.
(f) Processing Adjustments. In the event of any error or delay
with respect to the procedures outlined in this Section 5 which is
caused by the Fund or the Transfer Agent, the Fund will cause the
Transfer Agent to make any adjustments on the Transfer Agent's
accounting system necessary to correct such error or delay and the
Fund shall reimburse BFS for any losses or reasonable costs incurred
directly as a result of the error or delay. In the event of any error
or delay with respect to the procedures outlined in this Section 5(f)
which is caused by BFS or BQPS, the Fund will cause the Transfer
Agent to make any adjustments on the Transfer Agent's accounting
system necessary to correct such error or delay provided that the
Fund shall be reimbursed by BFS or BQPS for any losses or reasonable
costs incurred by the Fund or by the Transfer Agent directly as a
result of the error or delay. In the event of any such adjustments on
the Transfer Agent's accounting system, BFS shall make the
corresponding adjustments on its accounting system and BQPS shall
make the corresponding adjustments on its defined contribution plan
record-keeping system. BFS, BQPS and the Fund, respectively, each
agree to provide the others prompt notice of any errors or delays of
the type referred to in this Section 5(f) and to use reasonable
efforts to take such action as may be appropriate to avoid or
mitigate any such costs or losses.
(g) Contingency Procedures. BFS and BQPS shall develop
appropriate, mutually agreeable contingency procedures to protect the
Plan participants and beneficiaries from any significant investment
loss or market exposure attributable to transmission failures.
Section 6. Fund Communications. The following materials and
information with respect to the Fund shall be furnished where
-5-
<PAGE>
appropriate or required by applicable law to fiduciaries, participants and
beneficiaries under the Plans:
(a) Fund's Prospectuses, Annual Reports and Proxy Materials.
The Fund or its designee shall make available to Plan sponsors
current prospectuses, shareholder reports, and proxy statements and
related materials for the Fund. The Fund or its designee shall also
furnish additional supplies of such materials for individual
participants.
(b) Review by the Fund of Participant Communications
Materials. It is understood by the parties that, based on the current
prospectuses for the Fund and the information supplied under Section
6(a) above, BQPS may prepare communications or disclosure materials
for participants and beneficiaries under the Plans which describe the
Fund in the same format as that used for the other investment options
offered under the Plans. BQPS shall supply the Fund or the designated
representative of the Fund with copies of such materials on the Fund
within a reasonable period of time in advance of their intended
distribution to the Plan participants and beneficiaries. BQPS and the
Fund shall establish a mutually agreeable time frame in which such
materials shall be reviewed by the Fund or the designated
representative of the Fund for any errors, omissions or objections.
BQPS agrees not to use any such materials without the approval of the
Fund or the designated representative of the Fund.
Section 7. Standard of Care; Reliance on Records and Instructions;
Indemnification.
(a) BFS and BQPS shall use their best efforts to ensure the
accuracy of all services performed under this Agreement, but shall
not be liable to the Fund for any action taken or omitted by them in
the absence of bad faith, willful misfeasance, negligence or reckless
disregard by them of their obligations and duties. BFS and BQPS each
agrees to indemnify and hold harmless the Fund and its employees,
agents, trustees, officers and nominees from and against any and all
claims, demands, actions and suits, whether groundless or otherwise,
and from and against any and all judgments, liabilities, losses,
damages, costs, charges, reasonable counsel fees and other expenses
of every nature and character (i) arising out of the indemnifying
party's bad faith, willful misfeasance, negligence or reckless
disregard of its obligations and duties hereunder; (ii) arising out
of any breach by the indemnifying party of a material provision of
this Agreement; (iii) arising out of any breach by the indemnifying
party of any representation, warranty or covenant made in this
Agreement; or (iv) based, if applicable, upon reasonable reliance on
information,
-6-
<PAGE>
records, instructions or requests given or made to the Fund by the
indemnifying party; provided that this indemnification shall not
apply to actions or omissions of the Fund and its employees, agents,
trustees, officers and nominees in cases of their own bad faith,
willful misfeasance, negligence or reckless disregard by them of
their obligations and duties; and further provided that, prior to
confessing any claim against it which may be the subject of this
indemnification, the Fund shall give each of BFS and BQPS written
notice of and reasonable opportunity to defend against said claim in
its own name or in the name of the Fund.
(b) The Fund agrees to indemnify and hold harmless BFS, BQPS
and their employees, agents, directors, officers and nominees from
and against any and all claims, demands, actions and suits, whether
groundless or otherwise, and from and against any and all judgments,
liabilities, losses, damages, costs, charges, reasonable counsel fees
and other expenses of every nature and character (i) arising out of
the Fund's bad faith, willful misfeasance, negligence or reckless
disregard of its obligations and duties hereunder; (ii) arising out
of any breach by the Fund of a material provision of this Agreement;
(iii) arising out of any breach by the Fund of any representation,
warranty or covenant made in this Agreement; or (iv) based, if
applicable, upon reasonable reliance on information, records,
instructions or requests given or made to BFS and/or BQPS by or on
behalf of the Fund; provided that this indemnification shall not
apply to actions or omissions of BFS or BQPS and their employees,
agents, directors, officers and nominees in cases of their own bad
faith, willful misfeasance, negligence or reckless disregard by them
of their obligations and duties; and further provided that prior to
confessing any claim against them which may be the subject of this
indemnification, BFS and/or BQPS shall give the Fund written notice
of and reasonable opportunity to defend against said claim in its own
name or in the name of BFS and/or BQPS.
Section 8. Maintenance of Computer Systems and Other Equipment;
Uncontrollable Events. BFS and BQPS shall maintain adequate and reliable
computer and other equipment necessary or appropriate to carry out their
obligations under this Agreement. In the event of computer or other equipment
failures at their own facilities beyond their reasonable control, BFS and
BQPS shall use their best efforts to minimize service interruptions. BFS and
BQPS represent and warrant that the various procedures and systems which they
have implemented with regard to safekeeping from loss or damage attributable
to fire, theft or any other cause of the records, data, equipment, facilities
and other property used in the performance of their obligations hereunder are
adequate and that they will make such changes therein from
-7-
<PAGE>
time to time as are required for the secure performance of their obligations
hereunder. Notwithstanding the foregoing, BFS and BQPS assume no
responsibility hereunder, and shall not be liable for any damage, loss of
data, delay or any other loss whatsoever caused by events beyond their
reasonable control.
Section 9. Confidentiality. All information, books, records, and data
supplied by one party to any other party or parties in connection with the
negotiation or carrying out of this Agreement are and shall remain the
property of the party supplying such information, books, records, or data and
shall be kept confidential by the other parties except as may be required by
law.
Section 10. Effective Date; Duration and Termination of Agreement.
This Agreement shall be effective as of the date first written above. Any
party to this Agreement may terminate such Agreement upon ninety (90) days'
written notice to the other parties (which notice may be waived by any of the
parties). This Agreement shall automatically terminate upon the
discontinuance of the Fund as an investment option offered under the Plans or
if, at any time, the authorizations, licenses, qualifications or
registrations required to be maintained by BFS or BQPS in connection with the
performance of their duties hereunder shall lapse or cease to remain in full
force and effect.
Section 11. Representations and Warranties. BFS and BQPS each
represent that it has obtained, and shall maintain, all authorizations,
licenses, qualifications or registrations of any governmental body required
of it in connection with this Agreement and the registrations are and will
remain in full force and effect during the term of this Agreement. BFS, BQPS
and the Fund each represents and warrants that at all times it has sufficient
financial resources, whether through a fidelity bond or otherwise, to meet
all of its indemnification obligations arising under this Agreement. In
addition, each of the parties hereto represents that it has been duly
authorized to enter into this Agreement.
Section 12. Amendments. The parties hereto may agree in writing to
amend this Agreement at any time in whole or in part.
Section 13. Assignment. This Agreement and the rights and duties
hereunder shall not be assignable by any of the parties hereto except by the
specific written consent of the other parties; provided, however, that this
Section 13 shall not limit or in any way affect BFS' right to appoint a
Subcontractor pursuant to Section 2 hereof. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and permitted assigns.
-8-
<PAGE>
Section 14. Notices. Any notice provided hereunder shall be
sufficiently given when sent by registered or certified mail, postage
prepaid, to the party required to be served with such notice at the following
addresses: for BFS, 3435 Stelzer Road, Columbus, Ohio 43219, facsimile number
(614) 470-8725, Attn: George O. Martinez; for BQPS, 323 Norristown Road,
Ambler, Pennsylvania, 19002, facsimile number (215) 542-1888, Attn: Eric
Hill; for the Fund, 3435 Stelzer Road, Columbus, Ohio 43219, facsimile number
(614) 470-8715, Attn: D'Ray Moore. Any notice, except a notice of termination
pursuant to Section 10, may also be sent by confirmed facsimile transmission,
which shall be deemed to have been given when sent. Any of the parties hereto
may, from time to time, specify in writing to the other parties a different
address or facsimile number for purposes of receiving notice pursuant to this
Section 14.
Section 15. Headings. Paragraph headings in this Agreement are
included for convenience only and are not to be used to construe or interpret
this Agreement.
Section 16. Governing Law. This Agreement shall be governed by, and
its provisions shall be construed in accordance with, the laws of the State
of Ohio.
Section 17. Matters Relating to the Fund as a Massachusetts Business
Trust. The names "Pegasus Funds" and "Trustees of Pegasus Funds" refer,
respectively, to the business trust created and the trustees, as trustees but
not individually or personally, acting from time to time under an Amended and
Restated Declaration of Trust dated as of May 1, 1992, to which reference is
hereby made and a copy of which is on file at the office of the Secretary of
the Commonwealth of Massachusetts and elsewhere as required by law, and to
any and all amendments thereto so filed or hereafter filed. The obligations
of the Fund entered into in the name or on behalf thereof by any of the
trustees, shareholders or representatives or agents are made not
individually, but in such capacities, and are not binding upon any of the
trustees, shareholders or representatives of the Fund personally, but bind
only the assets of the Fund, and all persons dealing with any portfolio of
the Fund must look solely to the assets of the Fund belonging to such
portfolio for the enforcement of any claims against the Fund.
Section 18. Sole Agreement. This Agreement is the sole agreement
whereby BFS acts as servicing agent for the Fund, and it supersedes any and
all preexisting agreements whereby BFS or
-9-
<PAGE>
its affiliates acted as servicing agents for the Fund's predecessor
investment companies.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on their behalf by their duly authorized officers as
of the day and year first above written.
BISYS FUND SERVICES, INC.
By:______________________________
Title:___________________________
Date:____________________________
BISYS QUALIFIED PLAN SERVICES, INC.
By:______________________________
Title:___________________________
Date:____________________________
PEGASUS FUNDS
By:_______________________________
Title:____________________________
Date:_____________________________
-10-
<PAGE>
SCHEDULE A
FUND PORTFOLIOS:
Money Market Fund
Treasury Money Market Fund
Municipal Money Market Fund
Michigan Municipal Money Market Fund
Cash Management Fund
U.S. Government Securities Cash Management Fund
Treasury Prime Cash Management Fund
Growth Fund
International Equity Fund
Equity Index Fund
Growth and Value Fund
Intrinsic Value Fund
Mid-Cap Opportunity Fund
Small-Cap Opportunity Fund
Equity Income Fund
Bond Fund
Intermediate Bond Fund
Municipal Bond Fund
Short Bond Fund
Michigan Municipal Bond Fund
Intermediate Municipal Bond Fund
Income Fund
International Bond Fund
Managed Assets Balanced Fund
Managed Assets Conservative Fund
Managed Assets Growth Fund
A-1
<PAGE>
SCHEDULE B
FEES:
As compensation for its services hereunder, the Fund shall pay
BFS a fee, computed daily and payable monthly, at the annual
rate of .25% of the average net assets attributable to shares
owned by the Plans of each Fund portfolio listed on Schedule A
hereto.
B-1
Exhibit (11)(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 21, 1997 included in the Pegasus Cash Management Funds' Annual
Report to Shareholders for the year ended December 31, 1996 (and to all
references to our Firm) included in or made a part of this registration
statement on Form N-1A (Post-Effective Amendment No. 41 to the Pegasus Funds'
registration statement under the Securities Act of 1933).
ARTHUR ANDERSEN LLP
Detroit, Michigan,
May 14, 1997
Exhibit (11)(b)
CONSENT OF PUBLIC AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "Independent Auditors" in the Statement of
Additional Information, and to the incorporation by reference of our report
on the Statement of Changes in Net Assets and Financial Highlights of The
Prairie Institutional Funds dated February 22, 1996 in this Registration
Statement (Form N-1A No. 33-13990) of Pegasus Funds.
/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
New York, New York
May 14, 1997
Exhibit (11)(c)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference to our
Firm under the caption "Counsel" in the Statement of Additional Information
that is included in Post-Effective Amendment No. 41 to the Registration
Statement of Pegasus Funds on Form N-1A under the Securities Act of 1933, as
amended. This consent does not constitute a consent under section 7 of the
Securities Act of 1933, and in consenting to the use of our name and the
references to our Firm under such caption 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 said section 7 or the rules and
regulations of the Securities and Exchange Commission thereunder.
/s/DRINKER BIDDLE & REATH LLP
-----------------------------
DRINKER BIDDLE & REATH LLP
Philadelphia, Pennsylvania
May 14, 1997
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<EXPENSES-NET> 2,280
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<SHARES-REINVESTED> 2,721
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<PAID-IN-CAPITAL-COMMON> 576,724
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