<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
Cash Management Fund
Treasury Cash Management Fund
Treasury Prime
Cash Management Fund
U.S. Government Securities
Cash Management Fund
Municipal Cash Management Fund
ANNUAL REPORT
December 31, 1997
PLEASE READ CAREFULLY: THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
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.
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
TABLE OF CONTENTS
<TABLE>
<S> <C>
Letter to Shareholders............................. 1
Statements of Assets and Liabilities............... 3
Statements of Operations........................... 4
Statements of Changes in Net Assets................ 5
Portfolio of Investments........................... 7
Notes to Financial Statements...................... 20
Financial Highlights............................... 26
Report of Independent Public Accountants........... 29
</TABLE>
INVESTMENT ADVISER
First Chicago NBD Investment Management Company (FCNIMCO)
Three First National Plaza, Chicago, IL 60670
----------------
DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
<PAGE>
December 31, 1997
Dear Pegasus Shareholder:
We are pleased to present the Annual Report for the Pegasus Cash Management
Funds dated December 31, 1997. This report contains the portfolios and
financial statements for the Funds, all of which purchase high quality money
market securities in accordance with their investment objectives and respective
management policies.
During 1997 we added two new institutional money market portfolios to the
Pegasus Cash Management Funds to meet a broader range of customer needs. The
Pegasus Treasury Cash Management Fund invests in U.S. Treasury securities and
repurchase agreements collateralized by such securities. The new Municipal Cash
Management Fund generates interest income that is generally exempt from Federal
income tax by investing in short-term municipal obligations, including general
obligation and revenue bonds and notes. Interest income produced from the
Municipal Cash Management Fund may be subject to the federal alternative
minimum tax.
A direct purchase plan was also developed in 1997. With a minimum initial
purchase of $1 million or more, institutional investors can now invest directly
with the Cash Management Funds through our 1-800-688-3350 Pegasus Shareholder
Servicing Group. This program complements our automated investment products
using the Pegasus Cash Management Funds.
As of December 31, 1997, the Pegasus Cash Management Fund, U.S. Government
Securities Cash Management Fund, Treasury Cash Management Fund, and Treasury
Prime Cash Management Fund were each assigned a AAA rating by Standard & Poor's
Rating Group and a Aaa rating by Moody's Investors Service, Inc. These ratings
reflect the Funds' capacity to maintain principal and limit exposure to loss.
The ratings are historical and are based upon the Funds' credit quality, market
price exposure and management.
The investment adviser to the Pegasus Funds, First Chicago NBD Investment
Management Company, brings you the expertise and heritage of an institution
that has been managing money for over 100 years. We thank you for the
confidence you have expressed by investing in the Pegasus Cash Management
Funds. We remain committed to pursuing an investment strategy which seeks to
provide competitive yields while protecting the value of your principal.
Sincerely,
LOGO
Deborah Edwards
Managing Director
First Chicago NBD Investment Management Company
<PAGE>
INVESTMENT YEAR IN REVIEW
It appears that the U.S. economy is experiencing an almost ideal combination of
continued growth, tame inflation, and strong employment. U.S. Federal Reserve
(Fed) policy makers left the benchmark Federal Funds (Fed Funds) rate unchanged
for most of 1997. The Fed last raised the Fed Funds rate from 5.25% to 5.50% on
March 25, 1997, as large gains in gross domestic product were reported for the
fourth quarter of 1996 (4.3%) and the first quarter of 1997 (4.9%). The Fed
worried that the strong economy would lead to increasing inflation. The economy
did remain strong for the rest of 1997, but excessive inflation did not appear.
For the year, inflation as measured by the consumer price index (CPI), was only
1.7%. The U.S. economy is enjoying some of the lowest inflation in more than a
decade. Except for 1986, when the collapse of oil prices led to a drop in the
CPI, inflation has not been so low since the 1960s.
Employment also remains strong. December's unemployment rate came in at 4.7%,
which followed November's 4.6%, the lowest in 24 years. The economy of 1997 has
caused many economists to re-think the traditional teaching that tight labor
markets almost certainly result in higher wages which in turn result in higher
prices as the wage increases are passed on to the consumer. However, wages are
rising. There are worker shortages in many industries and companies are
increasing compensation to retain and attract employees. And because of this,
the Fed will most certainly keep a watchful eye on wage pressures.
MUNICIPAL MONEY MARKET REVIEW
For much of the first part of 1997, the short-term tax-exempt market saw
excessive cash inflows with tax-free money funds at a record level of $150
billion in assets by the end of the first quarter. The Fed Funds increase in
March led many longer-term investors toward a more cautionary position by
shifting assets from the capital markets to the cash markets. By mid-April, the
positive cash flows which had been present for much of the early stages of the
year finally reversed as income-tax related redemptions caused tax-free assets
to fall by nearly $7 billion or almost 5%.
The second half of the year was supply driven with 83% ($37.4 billion) of total
1997 new issuances coming to market. This was a welcome source of relief for
fund managers as they deployed some of their excess liquidity into longer-term
notes. The combination of heavy supply and investor interest in the surging
equity market resulted in upward pressure on short-term tax-exempt interest
rates, resulting in a sharply inverted yield curve at year end. We expect the
curve to return to normal in the beginning of the year.
INTEREST RATE OUTLOOK
It appears that the Fed will hold a steady course until the problems in Asia
are resolved in the upcoming months. Some have talked of deflation, but this
seems unlikely as our domestic economy remains robust. U.S. Treasury yields
have been pushed down by a "flight to quality" causing the short-end of the
yield curve to invert. As the Asian problems are sorted out, the short-end of
the curve should become positively sloped again. It looks like 1998 will be
similar to 1997 with short-term interest rates generally holding relatively
steady in both the taxable and tax-exempt markets.
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY TREASURY PRIME
CASH CASH CASH U.S. GOVERNMENT MUNICIPAL CASH
MANAGEMENT MANAGEMENT MANAGEMENT SECURITIES CASH MANAGEMENT
FUND FUND FUND MANAGEMENT FUND FUND
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in securi-
ties:
At cost $1,693,909,807 $206,369,547 $323,252,227 $889,512,904 $257,679,504
- ----------------------------------------------------------------------------------------------------
At amortized cost $1,694,660,306 $206,363,105 $323,839,887 $890,186,212 $257,593,870
Cash 506 807 546 389 6,507
Interest receivable 9,966,508 1,262,273 1,632,046 5,782,878 1,490,384
Deferred organization
costs, net 71,420 20,798 37,139 65,878 19,999
Prepaids and other 154,851 8,530 38,392 6,223 8,947
- ----------------------------------------------------------------------------------------------------
TOTAL ASSETS 1,704,853,591 207,655,513 325,548,010 896,041,580 259,119,707
- ----------------------------------------------------------------------------------------------------
LIABILITIES:
Accrued investment advi-
sory fees 247,826 38,255 45,164 143,614 46,703
Accrued administration
fees 185,870 28,692 34,262 107,710 35,027
Shareholder service fees
payable (Service
Shares) 208,389 47,670 45,867 70,778 13,470
Accrued custodian fees 1,208 564 2,997 3,864 1,113
Dividends payable 6,166,301 967,337 1,011,162 3,617,938 767,548
Other payable and ac-
crued expenses 11,159 990 5,596 70,156 17,091
- ----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 6,820,753 1,083,508 1,145,048 4,014,060 880,952
- ----------------------------------------------------------------------------------------------------
NET ASSETS $1,698,032,838 $206,572,005 $324,402,962 $892,027,520 $258,238,755
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE AND RE-
DEMPTION PRICE PER
SHARE:
INSTITUTIONAL SHARES:
Net Assets $ 705,269,561 $ 850,150 $ 90,813,283 $534,364,374 $201,704,825
Capital shares 705,428,562 850,150 90,814,206 534,773,833 201,704,825
- ----------------------------------------------------------------------------------------------------
Net asset value and re-
demption price per
share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------------------------------------------
SERVICE SHARES:
Net assets $ 992,763,277 $205,721,855 $233,589,679 $357,663,146 $ 56,533,930
Capital shares 992,806,174 205,721,855 233,587,015 357,765,038 56,533,930
- ----------------------------------------------------------------------------------------------------
Net asset value and re-
demption price per
share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital shares
(unlimited number of
shares authorized, par
value $.01 per share) $ 16,982,347 $ 2,065,720 $ 3,244,012 $ 8,925,389 $ 2,582,388
Additional paid-in cap-
ital 1,681,252,391 204,506,285 321,157,209 883,613,482 255,656,367
Accumulated
undistributed net
realized gains
(losses) (201,900) -- 1,741 (511,351) --
- ----------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $1,698,032,838 $206,572,005 $324,402,962 $892,027,520 $258,238,755
- ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
Pegasus Funds 3
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Period Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY TREASURY PRIME U.S. GOVERNMENT MUNICIPAL
CASH MANAGEMENT CASH MANAGEMENT CASH MANAGEMENT SECURITIES CASH CASH MANAGEMENT
FUND FUND (A) FUND MANAGEMENT FUND FUND (B)
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME $54,798,142 $3,734,012 $13,105,724 $40,961,077 $2,793,026
- ---------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee 1,921,758 133,148 510,037 1,457,684 148,267
Administration fees 1,441,319 99,861 382,527 1,093,263 111,200
Service plan fees
(Service Shares) 1,227,854 165,217 556,037 679,593 50,555
Custodial fees 9,935 2,919 10,913 5,335 5,453
Registration and filing
fees 11,788 12,274 13,668 6,860 13,376
Professional fees 29,360 7,912 29,285 12,403 9,065
Amortization of de-
ferred organization
costs 34,675 3,040 25,550 32,120 3,699
Other expenses 178,497 7,183 31,446 18,149 9,183
Less: expense reim-
bursements (279,533) (33,327) (105,789) (88,360) (40,982)
- ---------------------------------------------------------------------------------------------------------
NET EXPENSES 4,575,653 398,227 1,453,674 3,217,047 309,816
- ---------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME $50,222,489 $3,335,785 $11,652,050 $37,744,030 $2,483,210
- ---------------------------------------------------------------------------------------------------------
NET REALIZED GAINS
(LOSSES) ON INVESTMENTS -- -- (507) 4,536 --
- ---------------------------------------------------------------------------------------------------------
NET INCREASE IN NET AS-
SETS FROM OPERATIONS $50,222,489 $3,335,785 $11,651,543 $37,748,566 $2,483,210
</TABLE>
- --------------------------------------------------------------------------------
(a) For the period from September 12, 1997 (commencement of operations) through
December 31, 1997.
(b) For the period from August 18, 1997 (commencement of operations) through
December 31, 1997.
See accompanying Notes to Financial Statements.
4 Pegasus Funds
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY
CASH MANAGEMENT
CASH MANAGEMENT FUND FUND
--------------------------------------------------------
Year Ended Year Ended Period Ended
December 31, 1997 December 31, 1996 December 31, 1997(a)
--------------------------------------------------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 50,222,489 $ 28,131,525 $ 3,335,785
Net realized gains
(losses) on invest-
ments -- (32) --
- ---------------------------------------------------------------------------------
Net increase in net as-
sets from operations 50,222,489 28,131,493 3,335,785
- ---------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARE-
HOLDERS FROM NET IN-
VESTMENT INCOME:
Institutional Shares (25,209,373) (21,315,342) (25,600)
Service Shares (25,013,116) (6,816,183) (3,310,185)
- ---------------------------------------------------------------------------------
Total distributions to
shareholders (50,222,489) (28,131,525) (3,335,785)
- ---------------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold 9,535,537,549 3,601,197,069 569,961,617
Net asset value of
shares issued in rein-
vestment of distribu-
tions to shareholders 4,462,385 2,720,665 --
- ---------------------------------------------------------------------------------
9,539,999,934 3,603,917,734 569,961,617
Less: payments for
shares redeemed (8,960,162,558) (2,996,599,096) (363,389,612)
- ---------------------------------------------------------------------------------
Net increase in net as-
sets from capital
share transactions 579,837,376 607,318,638 206,572,005
- ---------------------------------------------------------------------------------
NET INCREASE IN NET AS-
SETS 579,837,376 607,318,606 206,572,005
NET ASSETS:
Beginning of period 1,118,195,462 510,876,856 --
- ---------------------------------------------------------------------------------
End of period $ 1,698,032,838 $ 1,118,195,462 $ 206,572,005
</TABLE>
- --------------------------------------------------------------------------------
(a) For the period from September 12, 1997 (commencement of operations) through
December 31, 1997.
See accompanying Notes to Financial Statements.
Pegasus Funds 5
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MUNICIPAL
TREASURY PRIME U.S. GOVERNMENT SECURITIES CASH MANAGEMENT
CASH MANAGEMENT FUND CASH MANAGEMENT FUND FUND
---------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Period Ended
December 31, December 31, December 31, December 31, December 31,
1997 1996 1997 1996 1997(b)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 11,652,050 $ 10,125,658 $ 37,744,030 $ 28,593,227 $ 2,483,210
Net realized gains
(losses) on
investments (507) 4,248 4,536 8,700 --
- ----------------------------------------------------------------------------------------------------------------
Net increase in net
assets from
operations 11,651,543 10,129,906 37,748,566 28,601,927 2,483,210
- ----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHARE-
HOLDERS FROM NET IN-
VESTMENT INCOME:
Institutional Shares (1,457,277) (1,717,216) (24,156,026) (21,389,317) (1,845,036)
Service Shares (10,194,773) (8,408,442) (13,588,004) (7,203,910) (638,174)
- ----------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (11,652,050) (10,125,658) (37,744,030) (28,593,227) (2,483,210)
- ----------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold 2,338,002,420 2,257,327,819 5,164,514,378 4,081,677,457 523,029,206
Net asset value of
shares issued in
reinvestment of
distributions to
shareholders 395,431 490,552 1,116,975 1,174,078 13,719
- ----------------------------------------------------------------------------------------------------------------
2,338,397,851 2,257,818,371 5,165,631,353 4,082,851,535 523,042,925
Less: payments for
shares redeemed (2,299,154,786) (2,117,229,794) (4,849,816,940) (4,052,046,110) (264,804,170)
- ----------------------------------------------------------------------------------------------------------------
Net increase in net as-
sets from capital
share transactions 39,243,065 140,588,577 315,814,413 30,805,425 258,238,755
- ----------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET AS-
SETS 39,242,558 140,592,825 315,818,949 30,814,125 258,238,755
NET ASSETS:
Beginning of period 285,160,404 144,567,579 576,208,571 545,394,446 --
- ----------------------------------------------------------------------------------------------------------------
End of period $ 324,402,962 $ 285,160,404 $ 892,027,520 $ 576,208,571 $ 258,238,755
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(b)For the period from August 18, 1997 (commencement of operations) through
December 31, 1997.
See accompanying Notes to Financial Statements.
6 Pegasus Funds
<PAGE>
PEGASUS CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
FACE COST
DESCRIPTION AMOUNT (NOTE 2)
----------- ------ ---------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS -- 29.45%
Donaldson Lufkin Revolving Repurchase Agreement,
6.53%, 1/2/98 (secured by various U.S. Treasury
obligations with maturities ranging from 4/2/98
through 2/15/07 at various interest rates ranging
from 0.00% to 11.625%, all held at The Bank of New
York).............................................. $ 6,246,000 $ 6,246,000
Goldman Sachs, Revolving Repurchase Agreement,
6.50%, 1/2/98 (secured by U.S. Treasury Notes with
a maturity of 11/15/00, and an interest rate of
5.75%, all held at The Bank of New York)........... 14,830,000 14,830,000
H.S.B.C. Security Agency Revolving Repurchase
Agreement, 6.75%, 1/2/98 (secured by various Agency
obligations with maturities ranging from 1/2/98
through 12/23/98 at various interest rates ranging
from 0.00% to 8.20%, all held at Chase Bank)....... 271,000,000 271,000,000
Nomura Agency Revolving Repurchase Agreement, 6.75%,
1/2/98 (secured by various U.S. Treasury and Agency
obligations with maturities ranging from 1/29/98
through 10/10/07 at various interest rates ranging
from 0.00% to 7.40%, all held at The Bank of New
York).............................................. 144,000,000 144,000,000
Smith Barney Inc., Revolving Repurchase Agreement,
6.75%, 1/2/98 (secured by various U.S. Treasury &
Agency obligations with maturities ranging from
7/31/98 through 11/25/07 at various interest rates
ranging from 0.00% to 9.00%, all held at The Bank
of New York)....................................... 63,000,000 63,000,000
------------
499,076,000
------------
COMMERCIAL PAPER -- 16.76%
Banca Serafin S.A., 5.65%, 8/31/98.................. 20,000,000 19,240,389
Bank of Montreal, 6.25%, 1/9/98..................... 10,000,000 9,986,111
Calicia Funding Corp., 5.75%, 3/4/98................ 12,500,000 12,376,215
Centre SQ Funding Corp., 5.62%, 1/5/98.............. 20,000,000 19,987,511
Centric Capital Corp., 5.95%, 1/12/98............... 25,000,000 24,954,549
Corporate Receivables Corp., 5.75%, 3/10/98......... 10,000,000 9,891,389
Greenwich Funding Corp., 5.90%, 1/20/98............. 40,000,000 39,871,222
Glencore Asset Funding Corp., 6.25%, 1/12/98........ 20,000,000 19,961,806
National Cooperative Services Corp., 5.76%, 3/3/98.. 12,944,000 12,817,667
New Center Asset Trust, 6.80%, 1/2/98............... 75,000,000 74,985,833
Pooled Accounts Receivable Capital, 6.13%, 1/13/98.. 20,000,000 19,959,133
Windmill Funding Corp., 6.15%, 1/20/98.............. 20,077,000 20,011,833
------------
284,043,658
------------
</TABLE>
Pegasus Funds 7
<PAGE>
PEGASUS CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
FACE COST
DESCRIPTION AMOUNT (NOTE 2)
----------- ------ ---------
<S> <C> <C>
NOTES -- 13.88%
Associates Corp. of North America, 7.30%, 3/15/98. $ 1,000,000 $ 1,002,875
Associates Corp. of North America, Senior Note,
6.50%, 9/9/98.................................... 8,000,000 8,030,606
Bank of New York, 6.10%, 5/22/98.................. 10,000,000 9,996,131
CSA Funding, V/R, Note Series C, 3/31/98.......... 20,000,000 20,000,000
Federal National Mortgage Assn., Medium Term Note,
5.48%, 1/2/98.................................... 7,000,000 6,999,959
GE Engine Receivable Trust, V/R Note, 6.34%,
2/14/00.......................................... 10,714,874 10,714,874
General American Life Insurance Co., 5.85%,
1/30/98.......................................... 20,000,000 20,000,000
Key Auto Finance, 5.835%, 1/5/99.................. 10,000,000 10,000,000
KBL Capital Funding, Series A, V/R, 5/1/27........ 3,000,000 3,000,000
Morgan Guaranty Trust Co., 5.965%, 6/22/98........ 10,000,000 9,998,400
Saegertown Manufacturing Co. PA, V/R, 12/1/03..... 5,000,000 5,000,000
Sigma Finance Medium Term Note, 5.84%, 8/4/98..... 2,000,000 2,000,000
Sigma Finance Medium Term Note, 5.84%, 10/20/98... 15,000,000 15,000,000
Sigma Finance, Medium Term Note, 6.25%, 4/7/98.... 10,000,000 10,000,000
SunAmerica Life Insurance Company, 6.01%,
11/19/98*........................................ 25,000,000 25,000,000
Travelers Insurance Company, 5.91%, 11/6/98*...... 25,000,000 25,000,000
Travelers Insurance Company, 6.07%, 12/11/98...... 25,000,000 25,000,000
Wachovia Bank, Medium Term Note, 5.895%, 10/2/98.. 10,000,000 9,994,570
Wilmington Trust Co., Series B Amtrak 93-B, V/R,
1/1/13........................................... 18,403,050 18,403,050
--------------
235,140,465
--------------
CERTIFICATES OF DEPOSIT -- 8.97%
Canadian Imperial Bank of Commerce, 5.685%,
3/2/98........................................... 5,000,000 4,998,938
Canadian Imperial Bank of Commerce, 5.95%,
6/29/98.......................................... 2,000,000 2,000,296
Commerzbank AG , 5.89%, 7/9/98.................... 5,000,000 5,000,081
Credit Commercial De France, 5.90%, 9/17/98....... 20,000,000 19,993,215
Crestar Bank, 5.86%, 6/15/98...................... 25,000,000 25,000,000
Lasalle National Bank, 5.96%, 2/25/98............. 15,000,000 15,000,000
Morgan Guaranty Trust, 5.80%, 7/28/98............. 2,000,000 1,999,959
Norddeutsche Landesbank Girozentrale, 5.9175%,
10/21/98......................................... 10,000,000 9,995,971
Rabobank Nederland, 5.97%, 3/20/98................ 5,000,000 5,000,784
Royal Bank of Canada, 5.91%, 6/17/98.............. 10,000,000 10,002,844
Royal Bank of Canada, 5.88%, 9/17/98.............. 15,000,000 15,003,056
Societe Generale, 5.945%, 8/28/98................. 3,000,000 2,998,968
Societe Generale, 5.96%, 9/15/98.................. 20,000,000 20,011,870
</TABLE>
8 Pegasus Funds
<PAGE>
PEGASUS CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
FACE COST
DESCRIPTION AMOUNT (NOTE 2)
----------- ------ ---------
<S> <C> <C>
Swiss Bank Corp., 5.88%, 11/19/98.................. $10,000,000 $ 9,998,312
Westpac Banking Corp., 5.97%, 3/24/98.............. 5,000,000 4,998,889
--------------
152,003,183
--------------
TIME DEPOSITS -- 30.94%
Bank Brussel Lambert, 6.625%, 1/2/98............... 57,000,000 57,000,000
Bank of Montreal, 4.875%, 1/2/98................... 75,000,000 75,000,000
Citibank N.A., 4.50%, 1/2/98....................... 28,897,000 28,897,000
Istituto Bancario San Paolo, 6.875%, 1/2/98........ 50,000,000 50,000,000
Key Bank N.A., 6.75%, 1/2/98....................... 75,000,000 75,000,000
Southtrust Bank of AL, 5.00%, 1/2/98............... 48,500,000 48,500,000
Suntrust Bank, 6.75%, 1/2/98....................... 75,000,000 75,000,000
Union Bank of Switzerland, 8.50%, 1/2/98........... 50,000,000 50,000,000
Wachovia Bank of North Carolina N.A., 4.50%,
1/2/98............................................ 65,000,000 65,000,000
--------------
524,397,000
--------------
TOTAL INVESTMENTS................................... $1,694,660,306
==============
</TABLE>
V/R -- Variable Rate
* -- Restricted Security (see Note 5)
See accompanying Notes to Financial Statements.
Pegasus Funds 9
<PAGE>
PEGASUS TREASURY CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
FACE COST
DESCRIPTION AMOUNT (NOTE 2)
----------- ------ ---------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS -- 87.90%
Aubrey Lanston Revolving Repurchase Agreement, 6.50%,
1/2/98 (secured by various U.S. Treasury obligations
with maturities ranging from 11/30/99 through
11/15/06 at various interest rates ranging from
0.00% to 7.875%, all held at Chase Bank)............ $ 9,000,000 $ 9,000,000
Barclays Inc., Revolving Repurchase Agreement, 6.60%,
1/2/98 (secured by various U.S. Treasury obligations
with maturities ranging from 8/31/99 through
11/15/00 at various interest rates ranging from
5.875% to 8.500%, all held at The Bank of New York). 9,000,000 9,000,000
Bear Stearns & Co., Inc., Revolving Repurchase
Agreement, 6.50%, 1/2/98 (secured by various U.S.
Treasury obligations with maturities ranging from
8/15/98 through 11/15/07 at various interest rates
ranging from 0.00% to 8.00%, all held at the
Custodial Trust Company)............................ 49,000,000 49,000,000
Credit Suisse First Boston Revolving Repurchase
Agreement, 6.25%, 1/2/98 (secured by various U.S.
Treasury obligations with a maturity at 1/31/99 at
an interest rate of 5.00%, held at Chase Bank)...... 9,000,000 9,000,000
First Union Capital Markets, Revolving Repurchase
Agreement, 6.625%, 1/2/98 (secured by various U.S.
Treasury obligations with maturities ranging from
1/2/98 through 3/31/99 at various interest rates
ranging from 0.00% to 6.25%, all held at Bankers
Trust Company)...................................... 9,000,000 9,000,000
Goldman Sachs Agency, Revolving Repurchase Agreement,
6.50%, 1/2/98 (secured by U.S. Treasury Note
maturing 11/15/00 at an interest rate of 5.75%, held
at The Bank of New York)............................ 9,000,000 9,000,000
Greenwich Capital Markets, Inc., Revolving Repurchase
Agreement, 6.60%, 1/2/98 (secured by various U.S.
Treasury obligations with maturities ranging from
5/15/98 through 2/15/05 at an interest rate of 0.00%
held at Chase Bank)................................. 9,000,000 9,000,000
H.S.B.C. Treasury, Revolving Repurchase Agreement,
6.75%, 1/2/98 (secured by various U.S. Treasury
Notes with maturities ranging from 1/2/98 through
8/31/00, at various interest rates ranging from
0.00% to 6.25%, all held at Chase Bank)............. 9,000,000 9,000,000
Morgan Stanley & Co., Repurchase Agreement, 6.625%,
1/2/98 (secured by U.S. Treasury Note maturing
08/31/00, at an interest rate of 6.25%, held at
Chase Bank)......................................... 9,000,000 9,000,000
</TABLE>
10 Pegasus Funds
<PAGE>
PEGASUS TREASURY CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
FACE COST
DESCRIPTION AMOUNT (NOTE 2)
----------- ------ ---------
<S> <C> <C>
Nationsbank Revolving Repurchase Agreement, 6.625%,
1/2/98 (secured by various U.S. Treasury Notes with
maturities ranging from 2/15/02 through 8/15/07, at
various interest rates ranging from 5.625% to
9.375%, all held at Chase Bank)..................... $49,000,000 $ 49,000,000
Nomura Treasury, Revolving Repurchase Agreement,
6.75%, 1/2/98 (secured by various U.S. Treasury
Notes with maturities ranging from 11/15/98 through
5/15/04, at various interest rates ranging from
5.50% to 7.25%, all held at The Bank of New York)... 9,000,000 9,000,000
Salomon Brothers, Inc., Revolving Repurchase
Agreement, 6.625%, 1/2/98 (secured by various U.S.
Treasury obligations with maturities ranging from
7/15/98 through 2/28/02 at various interest rates
ranging from 5.75% to 8.25%, all held at Chase
Bank)............................................... 2,384,000 2,384,000
------------
181,384,000
------------
U.S. GOVERNMENT OBLIGATIONS -- 12.10%
U.S. Treasury Securities -- 12.10%
U.S. Treasury Notes:
6.125%, 08/13/98................................... 5,000,000 5,012,107
6.00%, 09/30/98.................................... 10,000,000 10,016,216
5.125%, 11/30/98................................... 10,000,000 9,950,782
------------
24,979,105
------------
TOTAL INVESTMENTS..................................... $206,363,105
============
</TABLE>
See accompanying Notes to Financial Statements.
Pegasus Funds 11
<PAGE>
PEGASUS TREASURY PRIME CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
FACE COST
DESCRIPTION AMOUNT (NOTE 2)
----------- ------ ---------
<S> <C> <C>
U.S. TREASURY SECURITIES -- 100.00%
U.S. Treasury Bills:
5.285%, 1/08/98..................................... $ 5,078,000 $ 5,072,993
4.93%, 1/15/98...................................... 8,074,000 8,058,144
5.19%, 1/22/98...................................... 58,130,000 57,954,189
5.355%, 2/5/98...................................... 53,415,000 53,147,064
5.37%, 2/12/98...................................... 59,525,000 59,174,340
5.05%, 2/19/98...................................... 18,547,000 18,417,999
5.18%, 2/26/98...................................... 17,610,000 17,468,339
5.50%, 3/5/98....................................... 10,000,000 9,905,938
5.18%, 3/19/98...................................... 10,000,000 9,889,206
5.14%, 4/2/98....................................... 14,255,000 14,067,806
5.49%, 4/30/98...................................... 297,000 291,625
------------
253,447,643
------------
U.S. Treasury Notes:
7.875%, 1/15/98..................................... 25,000,000 25,023,269
8.125%, 2/15/98..................................... 3,296,000 3,305,910
5.125%, 3/31/98..................................... 6,714,000 6,704,025
7.875%, 4/15/98..................................... 10,000,000 10,065,546
5.875%, 4/30/98..................................... 6,745,000 6,753,656
6.125%, 5/15/98..................................... 5,000,000 5,006,903
6.25%, 7/31/98...................................... 6,154,000 6,175,405
4.75%, 8/31/98...................................... 5,400,000 5,366,968
5.125%, 11/30/98.................................... 2,000,000 1,990,562
------------
70,392,244
------------
TOTAL INVESTMENTS..................................... $323,839,887
============
</TABLE>
See accompanying Notes to Financial Statements.
12 Pegasus Funds
<PAGE>
PEGASUS U.S. GOVERNMENT SECURITIES CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
COST
DESCRIPTION AMOUNT (NOTE 2)
----------- ------ ---------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS -- 67.30%
Bear Stearns, Revolving Repurchase Agreement, 6.50%,
1/2/98, (secured by various U.S. Treasury
obligations with maturities ranging from 08/15/98
to 11/15/07 at various interest rates ranging from
0.00% to 8.00%, all held at The Custodial Trust
Company)........................................... $ 25,000,000 $ 25,000,000
Donaldson Lufkin, Revolving Repurchase Agreement,
6.53%, 1/2/98, (secured by various U.S. Treasury
obligations with maturities ranging from 4/2/98 to
2/15/07 at various interest rates ranging from
0.00% to 9.25%, all held at The Bank of New York).. 36,061,000 36,061,000
First Union Capital Markets Treasury, Revolving
Repurchase Agreement, 6.625%, 1/2/98 (secured by
various U.S. Treasury obligations with maturities
ranging from 1/2/98 through 3/31/99 at various
interest rates ranging from 0.00% to 6.25%, all
held at Bankers Trust Company)..................... 35,000,000 35,000,000
Greenwich, Revolving Repurchase Agreement, 6.60%,
1/2/98 (secured by various U.S. Treasury
obligations with maturities ranging from 05/15/98
through 02/15/05, all at an interest rate of 0.00%,
held at Chase Bank)................................ 35,000,000 35,000,000
H.S.B.C. Treasury Inc., Revolving Repurchase
Agreement, 6.75%, 1/2/98 (secured by various U.S.
Treasury Notes with maturities ranging from 1/02/98
through 8/31/00, at various interest rates ranging
from 0.00% to 6.25%, all held at Chase Bank)....... 197,000,000 197,000,000
Lehman Brothers Agency Revolving Repurchase
Agreement, 6.63%, 1/2/98 (secured by various U.S.
Treasury obligations with maturities ranging from
12/4/00 through 11/1/04, at various interest rates
ranging from 0.00% to 9.00%, all held at Chase
Bank).............................................. 25,000,000 25,000,000
NationsBank Capital Markets, Inc., Revolving
Repurchase Agreement 6.625%, 1/2/98 (secured by
various U.S. Treasury Notes with maturities ranging
from 2/15/02 through 8/15/07 at various interest
rates ranging from 5.625% to 9.375%, all held at
Chase Bank)........................................ 25,000,000 25,000,000
Nomura Agency, Revolving Repurchase Agreement 6.75%,
1/2/98 (secured by various U.S. Treasury Notes with
maturities ranging from 11/15/98 through 5/15/04 at
various interest rates ranging from 5.50% to 7.25%,
all held at The Bank of New York).................. 181,000,000 181,000,000
Smith Barney Inc., Revolving Repurchase Agreement,
6.625%, 1/2/98 (secured by various U.S. Treasury &
Agency obligations with maturities ranging from
7/31/98 through 11/25/07 at various interest rates
ranging from 0.00% to 9.00%, all held at The Bank
of New York)....................................... 40,000,000 40,000,000
------------
599,061,000
------------
</TABLE>
Pegasus Funds 13
<PAGE>
PEGASUS U.S. GOVERNMENT SECURITIES CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
FACE COST
DESCRIPTION AMOUNT (NOTE 2)
----------- ------ ---------
<S> <C> <C>
AGENCY OBLIGATIONS -- 32.70%
Federal Farm Credit Bank, 5.45%, 03/3/98............ $ 5,000,000 $ 4,997,780
Federal Farm Credit Consolidated Bond, 5.51%,
1/2/98............................................. 4,500,000 4,499,977
Federal Farm Credit Bank Medium Term Note, 5.63%,
08/3/98............................................ 8,000,000 7,997,813
Federal Farm Credit Bank Note, 5.70%, 9/2/98........ 10,000,000 9,991,935
Federal Home Loan Bank:
5.72%, 7/21/98..................................... 10,000,000 9,998,091
5.73%, 9/08/98..................................... 4,500,000 4,496,262
5.80%, 9/18/98..................................... 6,000,000 6,001,421
5.04%, 10/01/98.................................... 3,000,000 2,981,149
5.90%, 10/20/98.................................... 26,000,000 25,993,947
5.30%, 11/18/98.................................... 4,400,000 4,376,840
5.86%, 11/25/98.................................... 12,000,000 11,994,931
5.681%, 1/13/98.................................... 8,000,000 7,999,961
5.73%, 1/27/98..................................... 7,000,000 6,999,875
6.54%, 5/11/98..................................... 2,000,000 2,003,301
Federal Home Loan Mortgage Corp.:
5.19%, 3/11/98..................................... 6,600,000 6,589,737
5.735%, 3/18/98.................................... 6,000,000 5,996,900
5.76%, 7/13/98..................................... 1,385,000 1,384,694
Federal National Mortgage Assn. Discount Notes:
1/23/98............................................ 20,000,000 19,932,778
2/11/98............................................ 10,000,000 9,935,653
2/26/98............................................ 30,000,000 29,740,067
3/05/98............................................ 10,000,000 9,902,350
3/06/98............................................ 10,000,000 9,900,800
3/30/98............................................ 10,000,000 9,862,622
Federal National Mortgage Assn. Medium Term Notes:
5.50%, 2/18/98..................................... 4,000,000 3,998,112
5.30%, 3/11/98..................................... 3,250,000 3,247,413
5.79%, 3/25/98..................................... 18,000,000 17,991,069
5.71%, 6/23/98..................................... 5,000,000 4,996,943
5.19%, 7/20/98..................................... 1,000,000 996,547
5.71%, 9/09/98..................................... 6,000,000 5,994,595
4.875%, 10/15/98................................... 13,450,000 13,350,334
5.23%, 11/25/98.................................... 6,005,000 5,972,095
</TABLE>
14 Pegasus Funds
<PAGE>
PEGASUS U.S. GOVERNMENT SECURITIES CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
COST (NOTE
DESCRIPTION FACE AMOUNT 2)
----------- ----------- ----------
<S> <C> <C>
Student Loan Marketing Assn. Medium Term Notes:
5.86%, 6/10/98...................................... $ 11,000,000 $ 10,993,876
5.82%, 9/16/98...................................... 10,000,000 10,005,344
------------
291,125,212
------------
TOTAL INVESTMENTS..................................... $890,186,212
============
</TABLE>
See accompanying Notes to Financial Statements.
Pegasus Funds 15
<PAGE>
PEGASUS MUNICIPAL CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
INTEREST FACE COST
DESCRIPTION RATING* RATE*** AMOUNT (NOTE 2)
----------- ------- -------- ----------- ------------
<S> <C> <C> <C> <C>
ALABAMA -- 0.35%
Decatur Industrial Development, AMT,
1/1/27............................. VMIG 1 3.80% $ 900,000 $ 900,000
------------
ALASKA -- 3.11%
City of Valdez, 5/1/31.............. VMIG 1 3.80% 8,000,000 8,000,000
------------
DELAWARE -- 2.56%
Delaware State, AMT, 10/1/29........ VMIG 1 5.25% 4,800,000 4,800,000
Delaware State Education AMT,
8/1/29............................. A1+ 3.75% 1,800,000 1,800,000
------------
6,600,000
------------
DISTRICT OF COLUMBIA -- 0.35%
District of Columbia American Uni-
versity, 10/1/15................... VMIG 1 3.85% 900,000 900,000
------------
FLORIDA -- 8.15%
Florida State Municipal Power CP,
4/7/98............................. P1 3.75% 11,500,000 11,500,000
Sarasota County Public Hospital
Florida, 2/27/98................... VMIG 1 3.80% 9,000,000 9,000,000
St. Lucie Florida, AMT, 1/1/27...... VMIG 1 5.10% 500,000 500,000
------------
21,000,000
------------
GEORGIA -- 6.21%
Burke Co. Pollution Control,
5/28/98............................ Aaa 3.80% 8,000,000 8,000,000
Gwinett Co. Georgia Hospital,
9/1/27............................. A1+ 3.70% 8,000,000 8,000,000
------------
16,000,000
------------
IDAHO -- 1.36%
Idaho Health Facility, 5/1/22....... VMIG 1 5.10% 3,500,000 3,500,000
------------
ILLINOIS -- 6.41%
Illinois HFA Facility Univ. of Chi-
cago, CP, 5/27/98.................. VMIG 1 3.75% 10,400,000 10,400,000
Illinois Health Facilities Authori-
ties Revenue, 1/1/16............... VMIG 1 3.75% 6,100,000 6,100,000
------------
16,500,000
------------
INDIANA -- 4.66%
Jasper Co. PCR IND SER B, CP,
4/6/98............................. VMIG 1 3.80% 7,000,000 7,000,000
Indiana DFA Solid Waste, AMT,
2/20/98............................ P1 3.75% 5,000,000 5,000,000
------------
12,000,000
------------
</TABLE>
16 Pegasus Funds
<PAGE>
PEGASUS MUNICIPAL CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
INTEREST FACE COST
DESCRIPTION RATING* RATE*** AMOUNT (NOTE 2)
----------- ------- -------- --------- ----------
<S> <C> <C> <C> <C>
KENTUCKY -- 6.96%
Carroll KY Support KY Util AMT, 11/2/24. VMIG 1 5.10% $ 900,000 $ 900,000
Clark Co. Pollution Control, 4/15/98.... VMIG 1 3.70% 9,000,000 9,000,000
Kentucky Asset/Liability Common Revenue,
6/25/98................................ MIG 1 4.50% 8,000,000 8,023,028
----------
17,923,028
----------
LOUISIANA -- 2.99%
Plaquiemines Parish AMT, 5/1/25......... P1 5.10% 4,500,000 4,500,000
Plaquiemines Parish Environment Revenue
AMT, 10/1/24........................... P1 5.10% 3,200,000 3,200,000
----------
7,700,000
----------
MICHIGAN -- 11.94%
Dearborn Economic Development Corp. Rev-
enue, 3/1/25........................... A1 3.70% 900,000 900,000
Delta Co. Mich EDC, CP, 3/11/98......... P1 3.55% 3,810,000 3,810,000
Holland Economic Development, 3/1/13.... A1 3.80% 2,800,000 2,800,000
Kent Hospital Financial Authority,
1/15/20................................ VMIG 1 3.65% 2,200,000 2,200,000
Michigan St. Hospital Financial Authori-
ty, 11/1/11............................ VMIG 1 3.65% 2,600,000 2,600,000
Michigan Underground, CP, 2/5/98........ P1 3.75% 8,440,000 8,440,000
Regents of the Univ. of Michigan,
1/14/98................................ A1+ 3.75% 7,600,000 7,600,000
Wayne Charter Co., AMT, 12/1/16......... VMIG 1 3.75% 2,400,000 2,400,000
----------
30,750,000
----------
MINNESOTA -- 2.45%
Hennepin Co. Minnesota, Series C,
12/1/02................................ VMIG 1 4.05% 2,000,000 2,000,000
Rochester GO, 11/1/99................... **N/R 4.10% 4,300,000 4,300,000
----------
6,300,000
----------
MISSISSIPPI -- 0.78%
Jackson Co. Mississippi, 6/1/23......... P1 4.95% 2,000,000 2,000,000
----------
NEVADA -- 0.39%
Clark Co. AMT, 10/1/30.................. A1+ 3.95% 1,000,000 1,000,000
----------
NEW MEXICO -- 3.12%
New Mexico St., 6/30/98................. MIG 1 4.50% 8,000,000 8,024,456
----------
NEW YORK -- 3.11%
New York City GO, 2/15/13............... VMIG 1 3.65% 8,000,000 8,000,000
----------
NORTH CAROLINA -- 0.99%
Raleigh Durham NC Airport, 11/1/15...... A1+ 5.00% 2,550,000 2,550,000
----------
</TABLE>
Pegasus Funds 17
<PAGE>
PEGASUS MUNICIPAL CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
INTEREST FACE COST
DESCRIPTION RATING* RATE*** AMOUNT (NOTE 2)
----------- ------- -------- ----------- ------------
<S> <C> <C> <C> <C>
OREGON -- 2.25%
Port Morrow Environmental Impact
Revenue, AMT, 12/1/31.............. VMIG 1 5.15% $ 5,800,000 $ 5,800,000
------------
PENNSYLVANIA -- 3.11%
Allegheny Co., IDR, VRDB-United Jew-
ish Federation, 10/1/25............ VMIG 1 4.25% 8,000,000 8,000,000
------------
PUERTO RICO -- 3.90%
Puerto Rico Commonwealth, 7/30/98... MIG 1 4.50% 10,000,000 10,042,264
------------
SOUTH CAROLINA -- 0.35%
Florence Co. Solid Waste Disposal,
AMT, 4/1/27........................ A1+ 5.10% 900,000 900,000
------------
SOUTH DAKOTA -- 1.94%
South Dakota Housing Development Au-
thority Revenue, AMT, 3/26/98...... VMIG 1 3.90% 5,000,000 4,999,958
------------
TENNESSEE -- 2.11%
Metro Govt. Nashville Davison Series
A, 11/15/98........................ Aa2 5.07% 5,375,000 5,436,081
------------
TEXAS -- 8.62%
Brazos River Authority TX, AMT,
6/21/95, 6/1/30.................... VMIG 1 5.10% 3,400,000 3,400,000
Brazos River Authority TX, AMT,
9/25/96, 6/1/30.................... VMIG 1 5.10% 9,600,000 9,600,000
Brazos River Authority TX, AMT,
2/12/97, 2/1/32.................... VMIG 1 5.10% 700,000 700,000
Gulf Coast AMT, 4/1/28.............. VMIG 1 5.10% 5,700,000 5,700,000
Matagorda Co. AMT, 11/1/28.......... VMIG 1 4.95% 2,400,000 2,400,000
West Side Calhoun AMT, 4/1/31....... Aa2 5.10% 400,000 400,000
------------
22,200,000
------------
UTAH -- 6.43%
Emery Co., 11/17/94, 11/1/24........ VMIG 1 5.00% 6,200,000 6,200,000
Internmountain Power Agency, Sup
Rev, 3/16/98....................... VMIG 1 3.75% 5,000,000 5,000,000
Utah St. School District Financial,
8/15/98............................ Aaa 8.38% 5,225,000 5,368,083
------------
16,568,083
------------
VIRGINIA -- 0.39%
King George Co. IDA. Revenue AMT,
3/1/27............................. A1+ 5.10% 1,000,000 1,000,000
------------
WASHINGTON -- 0.19%
Port Seattle Revenue, AMT, 9/1/22... VMIG 1 3.85% 500,000 500,000
------------
WEST VIRGINIA -- 2.33%
West VA Public Energy Authority Rev-
enue, AMT, 4/8/98.................. Aa1 3.80% 6,000,000 6,000,000
------------
</TABLE>
18 Pegasus Funds
<PAGE>
PEGASUS MUNICIPAL CASH MANAGEMENT FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORITIZED
INTEREST FACE COST
DESCRIPTION RATING* RATE*** AMOUNT (NOTE 2)
----------- ------- -------- ----------- ------------
<S> <C> <C> <C> <C>
WYOMING -- 2.52%
Sweetwater Co., AMT, 11/1/25......... VMIG 1 5.25% $ 6,500,000 $ 6,500,000
------------
TOTAL INVESTMENTS..................... $257,593,870
============
</TABLE>
INVESTMENT ABBREVIATIONS
AMBAC -- AMBAC Indemnity Corp.
AMT -- Alternative Minimum Tax
BIGI -- Bond Investors Guaranty Insurance Co.
CP -- Commercial Paper
DFA -- Development Finance Authority
EDC -- Economic Development Corporation
FGIC -- Financial Guaranty Insurance Company
FSA -- Financial Securities Assurance Corp.
GO -- General Obligation
HCF -- Health Care Facilities
HR -- Housing Revenue
HDA -- Housing Development Authority
HFA -- Housing Finance Authority
IDA -- Individual Development & Export Authority
IDR -- Industrial Development Revenue
MBIA -- Municipal Bond Insurance Association
PCR -- Pollution Control Revenue
PFA -- Public Facilities Authority
TAN -- Tax Anticipation Note
TRAN -- Tax Revenue Anticipation Note
UPDATE -- Unit Priced Daily Adjustable Tax Exempt Securities
VRDB -- Variable Rate Demand Bond
VRDN -- Variable Rate Demand Note
* Rating (not covered by the report of independent public accountants) --
Moody's when available, otherwise Standard & Poor's.
** N/R -- investment is not rated, yet deemed by the Investment Advisor as an
acceptable credit and having characteristics equivalent to obligations rated
AA or MIG 1 by Moody's, AA or A-1+ by Standard & Poor's.
***Interest rates on variable rate securities are adjusted periodically based on
appropriate indexes. The interest rates shown are the rates in effect at
December 31, 1997. The interest rate for all securities with maturity greater
than thirteen months has an automatic reset feature resulting in an effective
maturity of thirteen months or less.
See accompanying Notes to Financial Statements.
Pegasus Funds 19
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) GENERAL
The Pegasus Funds (Pegasus), was organized as a Massachusetts business trust
on April 21, 1987 and registered under the Investment Company Act of 1940 (the
Act), as amended, as an open-end investment company. As of December 31, 1997,
Pegasus consisted of twenty-nine separate portfolios of which there were five
cash management funds (the Cash Management Funds or the Funds), as described
below.
PEGASUS CASH MANAGEMENT FUND
PEGASUS TREASURY CASH MANAGEMENT FUND
PEGASUS TREASURY PRIME CASH MANAGEMENT FUND
PEGASUS U.S. GOVERNMENT SECURITIES CASH MANAGEMENT FUND
PEGASUS MUNICIPAL CASH MANAGEMENT FUND
The Cash Management Fund commenced operations on July 30, 1992, the Treasury
Cash Management Fund commenced operations on September 12, 1997, the Treasury
Prime Cash Management Fund commenced operations on March 22, 1995, the U.S.
Government Securities Cash Management Fund commenced operations on June 2, 1992
and the Municipal Cash Management Fund commenced operations on August 18, 1997.
First Chicago Corporation merged with NBD Bancorp. Inc. on December 1, 1995.
First Chicago Investment Management Company, an affiliate of First Chicago
Corporation, served as Investment Advisor to Prairie Institutional Funds, which
included the Prairie U.S. Government Securities Cash Management, Prairie
Treasury Prime Cash Management and Prairie Cash Management Funds. On July 13,
1996, pursuant to an Agreement and Plan of Reorganization which had received
approval from the shareholders of such Funds, the assets of the Prairie
Institutional Funds were transferred to the Pegasus U.S. Government Securities
Cash Management, Pegasus Treasury Prime Cash Management and Pegasus Cash
Management Funds, respectively, in exchange for shares of those funds. Prior to
July 13, 1996, the Pegasus Cash Management Funds held no assets and had not yet
commenced operations. The financial history contained herein therefore includes
such history of the Prairie Cash Management Funds, which ceased operations as
of July 12, 1996.
The Cash Management Funds each offer two classes of shares, Institutional
Shares and Service Shares. Institutional Shares and Service Shares are
substantially the same except that Service Shares are subject to fees payable
under a Distribution and Service Plan adopted pursuant to Rule 12b-1 under the
Act (the Service Plan) at an annual rate of 0.25% of the average daily net
asset value of the outstanding Services Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Cash Management Funds in preparation of the financial statements. The policies
are in conformity with generally accepted accounting principles for investment
companies. Following generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the financial statements and reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.
20 Pegasus Funds
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
Investments
Pursuant to Rule 2a-7 of the Act, the Cash Management Funds utilize the
amortized cost method to determine the carrying value of investment securities.
Under this method, investment securities are valued for both financial
reporting and federal tax purposes at amortized cost and any discount or
premium is amortized from the date of acquisition to maturity. The use of this
method results in a carrying value which approximates market value. Market
value is determined based upon quoted market prices or dealer quotes.
Investment security purchases and sales are accounted for on the trade date.
Realized gains and losses from security transactions are recorded on the
identified cost basis.
Pegasus invests in securities subject to repurchase agreements. First Chicago
NBD Investment Management Company (FCNIMCO), acting under the supervision of
the Board of Trustees, has established the following additional policies and
procedures relating to Pegasus' investments in securities subject to repurchase
agreements: 1) the value of the underlying collateral is required to equal or
exceed 102% of the funds advanced under the repurchase agreement including
accrued interest; 2) collateral is marked to market daily by FCNIMCO to assure
its value remains at least equal to 102% of the repurchase agreement amount;
and 3) funds are not disbursed by Pegasus or its agent unless collateral is
presented or acknowledged by the collateral custodian.
The Municipal Cash Management Fund invests in a majority of instruments whose
stated maturity is greater than one year, but whose rate of interest is
readjusted no less frequently than annually, or which possess demand features
and may therefore be deemed to have a maturity equal to the period remaining
until the next interest adjustment date or the demand date, whichever is
longer.
Investment Income
Interest income is recorded daily on the accrual basis adjusted for
amortization of premium and accretion of discount. Premiums and discounts are
amortized/accreted as required by the Internal Revenue Code, as amended (the
Code), and generally accepted accounting principles.
Federal Income Taxes
It is Pegasus' policy to comply with the requirements of Subchapter M of the
Code, applicable to regulated investment companies and to distribute net
investment income and realized gains to its shareholders. Therefore, no federal
income tax provision is required in the accompanying Financial Statements.
As of December 31, 1997, the Cash Management Funds had capital loss
carryforwards and related expiration dates as follows:
<TABLE>
<CAPTION>
FUND 2001 2002 2003 TOTAL
---- -------- --------- -------- ---------
<S> <C> <C> <C> <C>
U.S. Government Securities
Cash Management Fund......... $ -- $453,000 $58,000 $511,000
Cash Management Fund.......... 19,000 151,000 32,000 202,000
</TABLE>
Pegasus Funds 21
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
Shareholder Dividends
On each business day except those holidays the New York Stock Exchange
(Exchange), FCNIMCO or its bank affiliates observe, net investment income is
declared as a dividend, at the close of the Exchange, to shareholders of record
at such close. Such dividends are paid monthly. Distributions from net realized
capital gains, if any, are normally declared and paid annually, but each Fund
may make distributions on a more frequent basis to comply with the distribution
requirements of the Code. To the extent that net realized capital gains can be
offet by capital loss carryfowards, it is the policy of each Fund not to
distribute such gains.
Deferred Organization Costs
Organization costs are being amortized on a straight-line basis over the
five-year period beginning with the commencement of operations of each
portfolio.
Expenses:
Expenses directly attributable to a Cash Management Fund are charged to that
Cash Management Fund's operations; expenses which are applicable to all Cash
Management Funds are allocated among them on the basis of relative net assets.
Fund expenses directly attributable to a class of shares are charged to that
class; expenses which are applicable to all classes are allocated among them.
Pegasus monitors the rate at which expenses are charged to ensure that a proper
amount of expense is charged to income each year. This percentage is subject to
revision if there is a change in the estimate of the future net assets of the
Funds or a change in expectations as to the level of actual expenses.
(3) CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Cash Management Funds are summarized below (at
$1.00 per share):
<TABLE>
<CAPTION>
CASH MANAGEMENT FUND
------------------------------
Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996
-------------- --------------
<S> <C> <C>
Institutional Shares:
Shares issued............................ 6,087,058,701 2,462,204,127
Dividends reinvested..................... 4,462,385 2,719,445
Shares redeemed.......................... (6,272,197,824) (1,968,098,976)
-------------- --------------
Net increase (decrease).................. (180,676,738) 496,824,596
============== ==============
Service Shares:
Shares issued............................ 3,448,478,848 1,138,992,942
Dividends reinvested..................... -- 1,220
Shares redeemed.......................... (2,687,964,734) (1,028,500,120)
-------------- --------------
Net increase............................. 760,514,114 110,494,042
============== ==============
Net increase in Fund...................... 579,837,376 607,318,638
============== ==============
</TABLE>
22 Pegasus Funds
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY CASH
MANAGEMENT FUND
----------------
Period Ended
Dec. 31, 1997(a)
----------------
<S> <C> <C>
Institutional Shares:
Shares issued........................... 6,838,921
Dividends reinvested.................... --
Shares redeemed......................... (5,988,771)
--------------
Net increase............................ 850,150
==============
Service Shares:
Shares issued........................... 563,122,696
Dividends reinvested.................... --
Shares redeemed......................... (357,400,841)
--------------
Net increase............................ 205,721,855
==============
Net increase in Fund.................... 206,572,005
==============
<CAPTION>
TREASURY PRIME
CASH MANAGEMENT FUND
-------------------------------
YEAR ENDED YEAR ENDED
DEC. 31, 1997 DEC. 31, 1996
---------------- --------------
<S> <C> <C>
Institutional Shares:
Shares issued........................... 686,151,852 834,279,533
Dividends reinvested.................... 345,903 490,259
Shares redeemed......................... (665,804,296) (778,657,574)
-------------- --------------
Net increase............................ 20,693,459 56,112,218
============== ==============
Service Shares:
Shares issued........................... 1,651,850,568 1,423,048,286
Dividends reinvested.................... 49,528 293
Shares redeemed......................... (1,633,350,490) (1,338,572,220)
-------------- --------------
Net increase............................ 18,549,606 84,476,359
============== ==============
Net increase in Fund..................... 39,243,065 140,588,577
============== ==============
</TABLE>
--------------
(a) For the period from September 12, 1997 (commencement of
operations) through December 31, 1997.
Pegasus Funds 23
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES
CASH MANAGEMENT
-------------------------------
YEAR ENDED YEAR ENDED
DEC. 31, 1997 DEC. 31, 1996
--------------- --------------
<S> <C> <C>
Institutional Shares:
Shares issued.......................... 3,117,508,597 3,012,405,624
Dividends reinvested................... 1,026,989 1,114,598
Shares redeemed........................ (2,953,336,804) (3,133,810,559)
-------------- --------------
Net increase (decrease)................ 165,198,782 (120,290,337)
============== ==============
Service Shares:
Shares issued.......................... 2,047,005,781 1,069,271,833
Dividends reinvested................... 89,986 59,480
Shares redeemed........................ (1,896,480,136) (918,235,551)
-------------- --------------
Net increase........................... 150,615,631 151,095,762
============== ==============
Net increase in Fund.................... 315,814,413 30,805,425
============== ==============
<CAPTION>
MUNICIPAL
CASH MANAGEMENT
FUND
---------------
PERIOD ENDED
DEC.
31, 1997(B)
---------------
<S> <C> <C>
Institutional Shares:
Shares issued.......................... 322,413,470
Dividends reinvested................... 13,719
Shares redeemed........................ (120,722,364)
--------------
Net increase........................... 201,704,825
==============
Service Shares:
Shares issued.......................... 200,615,736
Dividends reinvested .................. --
Shares redeemed........................ (144,081,806)
--------------
Net increase........................... 56,533,930
==============
Net increase in Fund.................... 258,238,755
==============
</TABLE>
- --------------
(b) For the period from August 18, 1997 (commencement of operations) through
December 31, 1997.
(4) MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Pegasus has an Investment Advisory Agreement with FCNIMCO pursuant to which
FCNIMCO has agreed to provide the day-to-day management of each Cash Management
Fund for an advisory fee at a annual rate of 0.20% of each Cash Management
Fund's average daily net assets.
Pegasus has entered into a Co-Administration Agreement with FCNIMCO and BISYS
Fund Services (BISYS) (collectively the Co-Administrators) pursuant to which
the Co-Administrators have agreed to assist in all aspects of each Cash
Management Fund's operations for an administration fee at an annual rate of
0.15% of each Cash Management Fund's average daily net assets.
24 Pegasus Funds
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
For the year ended December 31, 1997, FCNIMCO agreed to limit each Cash
Management Fund's expenses to an annual amount not to exceed 0.35% of average
daily net assets for Institutional Shares and 0.60% of average daily net assets
for Service Shares. As a result, the Cash Management Fund, Treasury Cash
Management Fund, Treasury Prime Cash Management Fund, U.S. Government
Securities Cash Management Fund and the Municipal Cash Management Fund were
reimbursed for expenses of $279,533, $33,327, $105,789, $88,360, and $40,982,
respectively.
Pegasus has adopted a Distribution and Services Plan pursuant to Rule 12b-1
under the Act. Under the terms of such Plan, each Fund pays BISYS, the
distributor, an annual fee of 0.25% of the average daily net assets of the
outstanding Service Shares for advertising, marketing, and distributing each
Cash Management Fund's Service Shares and for the provision of certain services
to the holders of Service Shares. The Distributor may make payments to others,
including FCNIMCO, First Chicago NBD (FCNBD) and their affiliates, for the
provision of these services. For the period ended December 31, 1997, the Cash
Management Fund, the Treasury Cash Management Fund, the Treasury Prime Cash
Management Fund, the U.S. Government Securities Cash Management Fund and the
Municipal Cash Management Fund paid fees under the Service Plan in the amount
of $1,227,854, $165,217, $556,037, $679,593, and $50,555, respectively.
NBD Bank (an affiliate of FCNIMCO) is also compensated for its services as
Pegasus' custodian, and is reimbursed for certain out of pocket expenses
incurred on behalf of Pegasus.
Pegasus maintains an unfunded, nonqualified deferred compensation plan. The
plan allows an individual trustee to elect to defer receipt of all or a
percentage of fees which otherwise would be payable for services performed.
(5) ILLIQUID SECURITIES
The Pegasus Cash Management Funds may invest not more than 10% of the value of
their respective net assets in securities that are illiquid. Illiquid
investments may include securities having legal or contractual restrictions on
resale or no readily available market. At December 31, 1997, the Pegasus Cash
Management Fund owned the following restricted securities (constituting 3.0% of
net assets) which may not be publicly sold without registration under the
Securities Act of 1933 (the 1933 Act). The Fund does not have the right to
demand that such securities be registered. The value of these securities is
determined by valuations supplied by a pricing service or brokers or, if not
available, in good faith by or at the direction of the Trustees. Certain of
these securities may be offered and sold to "qualified institutional buyers"
under Rule 144A of the 1933 Act.
<TABLE>
<CAPTION>
ACQUISITION PAR VALUE PER 12/31/97 PERCENTAGE OF
SECURITY DATE VALUE UNIT VALUE NET ASSETS COST
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SunAmerica Life Insur-
ance Company........... 11/19/97 $25,000,000 $1.00 $25,000,000 1.5% $25,000,000
Travelers Insurance Com-
pany................... 11/6/97 25,000,000 1.00 25,000,000 1.5 25,000,000
- -------------------------------------------------------------------------------------------------
$50,000,000 3.0% $50,000,000
- -------------------------------------------------------------------------------------------------
</TABLE>
(6) PORTFOLIO COMPOSITION
Although the Municipal Cash Management Fund has a diversified investment
portfolio, the fund has investments in excess of 10% of its total investments
in the State of Michigan.
Pegasus Funds 25
<PAGE>
PEGASUS CASH MANAGEMENT FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
The Financial Highlights present a per share analysis of net investment income
and distributions from net investment income for the Cash Management Funds.
Additional quantitative measures expressed in ratio form analyze important
relationships between certain items presented in the financial statements.
These financial highlights have been derived from the financial statements of
the Cash Management Funds and other information for the periods presented.
<TABLE>
<CAPTION>
NET REALIZED DISTRIBUTIONS INCREASE DUE TO CAPITAL
NET ASSET VALUE NET GAINS TOTAL FROM FROM NET CONTRIBUTION FROM AN
BEGINNING OF INVESTMENT (LOSSES) ON INVESTMENTS INVESTMENT AFFILIATE OF THE TOTAL
PERIOD INCOME INVESTMENTS OPERATIONS INCOME INVESTMENT ADVISER DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CASH MANAGEMENT FUND
INSTITUTIONAL SHARES
For the year ended
12/31/97 0.9998 0.0528 (0.0001) 0.0527 (0.0528) -- (0.0528)
1996 0.9996 0.0508 0.0002 0.0510 (0.0508) -- (0.0508)
1995(/5/) 0.9994 0.0277 0.0002 0.0279 (0.0277) -- (0.0277)
1995(/6/)(/1//1/) 0.9993 0.0507 (0.0059) 0.0448 (0.0507) 0.0060 (0.0507)
1994(/1//1/) 0.9999 0.0333 (0.0006) 0.0327 (0.0333) -- (0.0333)
1993(/7/) 1.0000 0.0297 (0.0001) 0.0296 (0.0297) -- (0.0297)
SERVICE SHARES
For the year ended
12/31/97 0.9998 0.0503 0.0001 0.0504 (0.0503) -- (0.0503)
1996 0.9996 0.0484 0.0002 0.0486 (0.0484) -- (0.0484)
1995(/5/) 0.9994 0.0264 0.0002 0.0266 (0.0264) -- (0.0264)
1995(/8/) 1.0000 0.0245 (0.0006) 0.0239 (0.0245) -- (0.0245)
- ----------------------------------------------------------------------------------------------------------------------------------
TREASURY CASH MANAGEMENT FUND
INSTITUTIONAL SHARES
For the period ended
12/31/97(/1//0/) 1.0000 0.0159 -- 0.0159 (0.0159) -- (0.0159)
SERVICE SHARES
For the period ended
12/31/97(/1//0/) 1.0000 0.0152 -- 0.0152 (0.0152) -- (0.0152)
- ----------------------------------------------------------------------------------------------------------------------------------
TREASURY PRIME CASH MANAGEMENT FUND
INSTITUTIONAL SHARES
For the year ended
12/31/97 0.9999 0.0479 -- 0.0479 (0.0479) -- (0.0479)
1996 1.0000 0.0474 (0.0001) 0.0473 (0.0474) -- (0.0474)
1995(/4/) 1.0000 0.0399 -- 0.0399 (0.0399) -- (0.0399)
SERVICE SHARES
For the year ended
12/31/97 1.0000 0.0454 -- 0.0454 (0.0454) -- (0.0454)
1996 1.0000 0.0449 -- 0.0449 (0.0449) -- (0.0449)
1995(/4/) 1.0000 0.0380 -- 0.0380 (0.0380) -- (0.0380)
- ----------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES CASH MANAGEMENT FUND
INSTITUTIONAL SHARES
For the year ended
12/31/97 0.9988 0.0521 0.0004 0.0525 (0.0521) -- (0.0521)
1996 0.9990 0.0502 (0.0002) 0.0500 (0.0502) -- (0.0502)
1995(/1/) 0.9989 0.0320 0.0001 0.0321 (0.0320) -- (0.0320)
1995(/1//2/) 0.9999 0.0492 (0.0010) 0.0482 (0.0492) -- (0.0492)
1994(/1//2/) 1.0000 0.0302 (0.0001) 0.0301 (0.0302) -- (0.0302)
1993(/2/) 1.0000 0.0319 -- 0.0319 (0.0319) -- (0.0319)
SERVICE SHARES
For the year ended
12/31/97 0.9995 0.0496 0.0002 0.0498 (0.0496) -- (0.0496)
1996 0.9990 0.0478 0.0005 0.0483 (0.0478) -- (0.0478)
1995(/1/) 0.9989 0.0305 0.0001 0.0306 (0.0305) -- (0.0305)
1995(/3/) 1.0000 0.0199 (0.0011) 0.0188 (0.0199) -- (0.0199)
- ----------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL CASH MANAGEMENT FUND
INSTITUTIONAL SHARES
For the period ended
12/31/97(/9/) 1.0000 0.0125 -- 0.0125 (0.0125) -- (0.0125)
SERVICE SHARES
For the period ended
12/31/97(/9/) 1.0000 0.0116 -- 0.0116 (0.0116) -- (0.0116)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
26 Pegasus Funds
<PAGE>
<TABLE>
<CAPTION>
NET ASSETS RATIO OF RATIO OF NET RATIO OF EXPENSES TO
NET ASSET END OF EXPENSES TO INVESTMENT INCOME AVERAGE NET ASSETS
VALUE END TOTAL PERIOD AVERAGE NET TO AVERAGE (EXCLUDING FEE WAIVERS
OF PERIOD RETURN (000) ASSETS NET ASSETS AND REIMBURSEMENTS)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
0.9997 5.41% $705,270 0.35% 5.36% 0.38%
0.9998 5.23% $885,946 0.35% 5.19% 0.42%
0.9996 2.80%++ $389,127 0.35%+ 5.51%+ 0.43%+
0.9994 5.19%(/6/) $319,214 0.35% 5.11% 0.44%
0.9993 3.38% $143,820 0.31% 3.33% 0.43%
0.9999 3.25%+ $175,713 0.05%+ 3.19%+ 0.56%+
0.9999 5.15% $992,763 0.60% 5.11% 0.63%
0.9998 4.98% $232,249 0.60% 4.94% 0.67%
0.9996 2.68%++ $121,750 0.60%+ 5.25%+ 0.69%+
0.9994 2.47%++ $ 11,372 0.60%+ 5.46%+ 0.71%+
- ---------------------------------------------------------------------------------------------
1.0000 5.29+ $ 850 0.35%+ 5.28%+ 0.41%+
1.0000 5.04+ $205,722 0.60%+ 5.03%+ 0.66%+
- ---------------------------------------------------------------------------------------------
0.9999 4.90% $ 90,813 0.35% 4.79% 0.40%
0.9999 4.86% $ 70,120 0.35% 4.84% 0.46%
1.0000 4.06%++ $ 14,008 0.35%+ 5.16%+ 1.23%+
1.0000 4.64% $233,590 0.60% 4.54% 0.65%
1.0000 4.60% $215,040 0.60% 4.59% 0.71%
1.0000 3.86%++ $130,559 0.60%+ 4.72%+ 0.74%+
- ---------------------------------------------------------------------------------------------
0.9992 5.34% $534,364 0.35% 5.27% 0.36%
0.9988 5.15% $369,163 0.35% 5.09% 0.43%
0.9990 3.24%++ $489,395 0.35%+ 5.46%+ 0.42%+
0.9989 5.03% $475,248 0.34% 4.94% 0.41%
0.9999 3.06% $413,634 0.30% 3.02% 0.41%
1.0000 3.25%+ $264,527 0.02%+ 3.10%+ 0.49%+
0.9997 5.08% $357,663 0.60% 5.02% 0.61%
0.9995 4.89% $207,046 0.60% 4.84% 0.68%
0.9990 3.09%++ $ 56,000 0.60%+ 5.17%+ 0.69%+
0.9989 2.01%++ $ 16,702 0.57%+ 5.48%+ 0.66%+
- ---------------------------------------------------------------------------------------------
1.0000 3.39+ $201,705 0.35%+ 3.37%+ 0.41%+
1.0000 3.14+ $ 56,534 0.60%+ 3.12%+ 0.66%+
- ---------------------------------------------------------------------------------------------
</TABLE>
Pegasus Funds 27
<PAGE>
NOTES TO FINANCIAL HIGHLIGHTS
(/1/) For the period June 1, 1995 through December 31, 1995. Effective
June 1, 1995, the Fund changed its fiscal year end from May 31 to
December 31.
(/2/) For the period January 17, 1993 (commencement of operations) through
May 31, 1993.
(/3/) For the period January 17, 1995 (initial offering date of Service
Shares) through May 31, 1995.
(/4/) For the period March 22, 1995 (commencement of operations) through
December 31, 1995.
(/5/) 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.
(/6/) 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%.
(/7/) For the period July 30, 1992 (commencement of operations) through June
30, 1993.
(/8/) For the period January 17, 1995 (initial offering date of Service
Shares) through June 30, 1995.
(/9/) For the period August 18, 1997 (commencement of operations) through
December 31, 1997.
(/1//0/) For the period September 12, 1997 (commencement of operations) through
December 31, 1997.
(/1//1/) For the year ended June 30.
(/1//2/) For the year ended May 31.
+Annualized.
++Not Annualized.
28 Pegasus Funds
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees and Shareholders of
the Pegasus Cash Management Funds:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments of the Cash Management Funds of the
PEGASUS FUNDS (comprising, as indicated in Note 1, the Cash Management,
Treasury, Treasury Prime, U.S. Government Securities and Municipal) as of
December 31, 1997, and the related statements of operations for the periods
then ended, the statements of changes in net assets and the financial
highlights for each of the two years in the periods then ended. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights for the periods from inception to December 31, 1995 of the Cash
Management, Treasury Prime Cash Management and U.S. Government Securities Cash
Management Funds of the Pegasus Funds (formerly known as the Prairie
Institutional Funds) were audited by other auditors whose report dated February
22, 1996, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included physical counts and confirmation of
securities owned as of December 31, 1997 by inspection and correspondence with
custodians, banks, and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective funds constituting the Cash Management Funds of the Pegasus
Funds as of December 31, 1997, the results of their operations for the periods
then ended, the changes in their net assets and the financial highlights for
each of the two years in the periods then ended, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
February 17, 1998.
Pegasus Funds 29
<PAGE>
PEG-0050-0198
