<PAGE>
Table of Contents
1 Letter to Shareholders
3 Statements of Assets and Liabilities
4 Statements of Operations
5 Statements of Changes in Net Assets
6 Portfolios of Investments
19 Notes to Financial Statements
26 Financial Highlights
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
THE FUNDS WILL BE ABLE TO
MAINTAIN A CONSTANT NET ASSET
VALUE OF $1.00 PER SHARE.
PEGASUS FUNDS
(800) 688-3350
INVESTMENT ADVISER
First Chicago NBD Investment Management Company (FCNIMCO)
Three First National Plaza, MS 0334
Chicago, IL 60670-0334
DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS
PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
Pegasus Funds
I
<PAGE>
June 30, 1998
Dear Pegasus Shareholder,
We are pleased to present your Semi-Annual Report for the Pegasus Money Market
Funds dated June 30, 1998. As of June 30, 1998 the seven-day annualized SEC
yields for the following Pegasus Funds (A shares) were:
<TABLE>
<CAPTION>
A SHARES
--------
<S> <C>
Money Market Fund................................................... 4.98%
Treasury Money Market Fund.......................................... 4.85%
Municipal Money Market Fund*........................................ 2.89%
Michigan Municipal Money Market Fund*............................... 2.80%
</TABLE>
This report contains the portfolios and financial statements for the Pegasus
Money Market Funds. All of the Funds purchase high quality money market
securities in accordance with their investment objectives and respective
management policies.
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 Funds. We will
continue to earn your trust by pursuing an investment strategy which seeks to
provide competitive yields while protecting the value of your principal.
LOGO
George F. Abel
Chief Investment Officer
First Chicago NBD Investment Management Company
*The fund's income may be subject to the federal alternative minimum tax.
<PAGE>
A MESSAGE FROM THE INVESTMENT ADVISER
June 30, 1998
Dear Pegasus Funds Shareholder,
The year has proven both exciting and rewarding thus far:
Both the stock and bond markets continue to provide excellent returns with the
S&P 500* advancing almost 18 percent, the foreign markets, as measured by the
Morgan Stanley EAFE Index**, advancing 16 percent and Lehman Brothers Aggregate
Index*** (bonds) providing a 4% return. We believe the domestic economic
picture remains healthy as does the European outlook. The primary dark cloud
remains the troubled Asian arena. We look for a continued positive domestic
environment although we do not expect the market to advance as sharply in the
second half of the year.
The Pegasus Family continues to grow with the recent launch of the Short
Municipal Bond Fund and the launch of an extended index fund in August of this
year. At that time the family will offer 9 equity funds, 10 fixed income funds,
9 money market funds, 3 managed asset funds (balanced funds) as well as a fixed
annuity and a group of variable annuity funds.
In May of this year, the parent of the adviser, First Chicago NBD Corp.,
announced plans to merge with BANC ONE CORPORATION. BANC ONE also has a strong
and proven investment management organization which, when combined with your
adviser, should provide an increased variety of investment options supported by
a stronger, more experienced combined organization. As the merger progresses we
will provide you with more information.
The investment adviser to the Pegasus Funds, First Chicago NBD Investment
Management Company, brings to you the expertise and heritage of an institution
that has been managing money for over 100 years. Our investment philosophy is a
simple one: a disciplined investment approach that seeks above average
performance over time while maintaining average risk.
I would like to thank you for the opportunity to serve your investment needs,
we appreciate that there are few greater trusts than the granting of ones'
investment funds to an adviser.
LOGO
George F. Abel
Chief Investment Officer
First Chicago NBD Investment Management Company
* The S&P 500 Index is an unmanaged index generally representative of the
U.S. stock market as a whole.
** The Morgan Stanley EAFE Index is an unmanaged index generally
representative of the foreign equity market as a whole.
*** The Lehman Brothers Aggregate Bond Index is an unmanaged index generally
representative of the bond market as a whole.
<PAGE>
PEGASUS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY MUNICIPAL MICHIGAN MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND
----------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in securi-
ties:
At cost $2,680,634,278 $1,060,701,211 $ 797,529,929 $107,175,438
- ------------------------------------------------------------------------------------------
At amortized cost $2,686,224,319 $1,060,324,694 $ 797,027,046 $106,928,580
Cash 148,650 522 340,224 78,181
Receivable for funds
shares sold 8,067,534 -- -- --
Interest receivable 21,421,341 5,753,915 5,623,437 962,806
Prepaids and other 346,829 17,614 -- 26,421
- ------------------------------------------------------------------------------------------
TOTAL ASSETS 2,716,208,673 1,066,096,745 802,990,707 107,995,988
- ------------------------------------------------------------------------------------------
LIABILITIES:
Payable for shares re-
deemed 673,723 -- 1,282,334 --
Payable for securities
purchased -- -- 35,087,500 --
Accrued administration
fees 334,476 123,490 99,691 13,695
Shareholder services
fees payable 709,002 138,125 127,360 20,369
Accrued investment advi-
sory fees 619,104 246,946 199,381 27,391
Accrued transfer agent
fees 77,740 124 985 520
Accrued custodial fees 4,406 733 2,459 827
Dividends payable 5,238,003 3,001,477 1,485,408 184,019
Other payables and ac-
crued expenses -- -- 40,886 --
- ------------------------------------------------------------------------------------------
TOTAL LIABILITIES 7,656,454 3,510,895 38,326,004 246,821
- ------------------------------------------------------------------------------------------
NET ASSETS $2,708,552,219 $1,062,585,850 $ 764,664,703 $107,749,167
- ------------------------------------------------------------------------------------------
NET ASSET VALUE AND RE-
DEMPTION PRICE PER
SHARE:
CLASS A SHARES:
Net assets $1,167,246,199 $ 219,101,494 $ 209,296,247 $ 37,229,831
Capital shares 1,167,243,404 219,118,222 209,350,372 37,230,395
- ------------------------------------------------------------------------------------------
Net asset value and re-
demption price per share $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------
CLASS B SHARES:
Net assets $ 1,180,010 $ -- $ -- $ --
Capital shares 1,180,010 -- -- --
- ------------------------------------------------------------------------------------------
Net asset value and re-
demption price per share $ 1.00 $ -- $ -- $ --
- ------------------------------------------------------------------------------------------
CLASS I SHARES:
Net assets $1,540,126,010 $ 843,484,356 $ 555,368,456 $ 70,519,336
Capital shares 1,540,126,011 843,484,356 555,370,081 70,519,759
- ------------------------------------------------------------------------------------------
Net asset value and re-
demption price per share $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital shares (unlim-
ited number of shares
authorized, par value
$.10 per share) $ 270,854,942 $ 106,260,258 $ 76,472,045 $ 10,775,015
Additional paid-in capi-
tal 2,437,694,483 956,342,320 688,248,408 96,975,139
Accumulated undistrib-
uted net realized gains
(losses) 2,794 (16,728) (55,750) (987)
- ------------------------------------------------------------------------------------------
TOTAL NET ASSETS $2,708,552,219 $1,062,585,850 $ 764,664,703 $107,749,167
- ------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
3
<PAGE>
PEGASUS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
Six Months Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY MUNICIPAL MICHIGAN MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND
---------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME $71,917,199 $27,406,551 $14,588,121 $1,866,367
- -----------------------------------------------------------------------------------
EXPENSES:
Investment advisory
fees 3,505,908 1,369,250 1,213,690 157,388
Administration fees 1,880,394 736,283 606,845 78,694
Transfer agent fees 755,866 47,559 40,585 4,495
Shareholder service
fees (Class A shares) 1,348,770 270,760 259,617 39,892
Shareholder service
fees (Class B shares) 633 -- -- --
12b-1 fees (Class B
shares) 1,900 -- -- --
Professional fees 47,521 24,382 23,795 12,637
Custodial fees 21,841 4,782 12,538 4,038
Registration, filing
fees and other expenses 305,233 66,787 17,694 14,307
Less: Expense reim-
bursement (248,482) -- -- (9,245)
- -----------------------------------------------------------------------------------
NET EXPENSES 7,619,584 2,519,803 2,174,764 302,206
- -----------------------------------------------------------------------------------
NET INVESTMENT INCOME $64,297,615 $24,886,748 $12,413,357 $1,564,161
- -----------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
4
<PAGE>
PEGASUS MONEY MARKET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
TREASURY
MONEY MARKET MONEY MARKET
FUND FUND
--------------------------------------------------------------------------
Six Months Six Months
Ended June 30, 1998 Year Ended Ended June 30, 1998 Year Ended
(Unaudited) Dec. 31, 1997 (Unaudited) Dec. 31, 1997
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment
income.......... $ 64,297,615 $ 123,162,205 $ 24,886,748 $ 53,563,614
Net realized
losses on in-
vestments....... -- -- -- --
- ---------------------------------------------------------------------------------------------
Net increase in
net assets from
operations...... 64,297,615 123,162,205 24,886,748 53,563,614
- ---------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM
NET INVESTMENT
INCOME (NOTE 2):
INVESTMENT INCOME
(Note 2):
Class A shares.. (26,909,141) (40,816,984) (5,281,100) (9,126,231)
Class B shares.. (10,730) (15,474) -- --
Class I shares.. (37,377,744) (82,329,747) (19,605,648) (44,437,383)
- ---------------------------------------------------------------------------------------------
Total distribu-
tions to share-
holders......... (64,297,615) (123,162,205) (24,886,748) (53,563,614)
- ---------------------------------------------------------------------------------------------
FROM CAPITAL
SHARE TRANSAC-
TIONS:
Proceeds from
shares sold..... 5,154,636,324 9,687,488,060 2,592,778,989 4,728,247,544
Net asset value
of shares issued
in reinvestment
of distributions
to shareholders. 35,568,504 59,792,177 6,966,494 13,617,762
- ---------------------------------------------------------------------------------------------
5,190,204,828 9,747,280,237 2,599,745,483 4,741,865,306
Less: payments
for shares re-
deemed.......... (4,673,684,709) (9,999,101,019) (2,516,882,325) (5,032,144,249)
- ---------------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets from
capital share
transactions.... 516,520,119 (251,820,782) 82,863,158 (290,278,943)
- ---------------------------------------------------------------------------------------------
NET INCREASE (DE-
CREASE) IN NET
ASSETS........... 516,520,119 (251,820,782) 82,863,158 (290,278,943)
NET ASSETS:
Beginning of pe-
riod............ 2,192,032,100 2,443,852,882 979,722,692 1,270,001,635
- ---------------------------------------------------------------------------------------------
End of period... $ 2,708,552,219 $ 2,192,032,100 $ 1,062,585,850 $ 979,722,692
- ---------------------------------------------------------------------------------------------
<CAPTION>
MUNICIPAL MICHIGAN MUNICIPAL
MONEY MARKET MONEY MARKET
FUND FUND
Six Months Six Months
Ended June 30, 1998 Year Ended Ended June 30, 1998 Year Ended
(Unaudited) Dec. 31, 1997 (Unaudited) Dec. 31, 1997
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment
income.......... $ 12,413,357 $ 26,737,246 $ 1,564,161 $ 3,911,361
Net realized
losses on in-
vestments....... -- (2,098) -- --
- ---------------------------------------------------------------------------------------------
Net increase in
net assets from
operations...... 12,413,357 26,735,148 1,564,161 3,911,361
- ---------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM
NET INVESTMENT
INCOME (NOTE 2):
INVESTMENT INCOME
(Note 2):
Class A shares.. (2,990,748) (5,495,113) (447,240) (1,691,184)
Class B shares.. -- -- -- --
Class I shares.. (9,422,609) (21,242,133) (1,116,921) (2,220,177)
- ---------------------------------------------------------------------------------------------
Total distribu-
tions to share-
holders......... (12,413,357) (26,737,246) (1,564,161) (3,911,361)
- ---------------------------------------------------------------------------------------------
FROM CAPITAL
SHARE TRANSAC-
TIONS:
Proceeds from
shares sold..... 933,635,071 2,227,511,937 176,852,564 385,607,333
Net asset value
of shares issued
in reinvestment
of distributions
to shareholders. 3,291,009 6,014,147 447,142 1,688,415
- ---------------------------------------------------------------------------------------------
936,926,080 2,233,526,084 177,299,706 387,295,748
Less: payments
for shares re-
deemed.......... (901,580,522) (2,318,368,395) (173,640,151) (404,815,670)
- ---------------------------------------------------------------------------------------------
Net increase
(decrease) in
net assets from
capital share
transactions.... 35,345,558 (84,842,311) 3,659,555 (17,519,922)
- ---------------------------------------------------------------------------------------------
NET INCREASE (DE-
CREASE) IN NET
ASSETS........... 35,345,558 (84,844,409) 3,659,555 (17,519,922)
NET ASSETS:
Beginning of pe-
riod............ 729,319,145 814,163,554 104,089,612 121,609,534
- ---------------------------------------------------------------------------------------------
End of period... $ 764,664,703 $ 729,319,145 $ 107,749,167 $ 104,089,612
- ---------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
5
<PAGE>
PEGASUS MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
COST
DESCRIPTION FACE AMOUNT (NOTE 2)
----------- ----------- ---------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS -- 8.67%
Allstate Life Insurance Co. Master Note, 5.87%,
7/1/98........................................... $ 10,000,000 $ 10,000,000
Commonwealth Life Insurance Co. Master Note,
5.86%, 7/1/98.................................... 5,000,000 5,000,000
General American Life Funding Agr. Master Note,
5.85%, 7/1/98.................................... 35,500,000 35,500,000
Paccar Leasing, Master Note, 5.93%, 7/1/98........ 15,000,000 15,000,000
Peoples Security Life Insurance Co. Master Note,
5.86%, 7/1/98.................................... 10,000,000 10,000,000
Sunamerica Life Insurance Co. Master Note, 5.83%,
7/1/98........................................... 14,000,000 14,000,000
Sun Life Insurance Co. of America Master Note,
5.79%, 7/1/98.................................... 25,000,000 25,000,000
Lehman Brothers, Revolving Repurchase Agreement,
6.10%, 7/1/98 (secured by various U.S.
Obligations with maturities ranging from 7/1/98
through 5/12/04 at various interest rates ranging
from 0.00% to 9.05%, all held at Chase Bank)..... 36,075,000 36,075,000
Smith Barney, Inc., Revolving Repurchase
Agreement, 6.10%, 7/1/98 (secured by U.S.
Treasury & Agency Obligations with maturities
ranging from 7/7/98 through 4/25/08 at various
interest rates ranging from 0.00% to 9.00%, all
held at The Bank of New York).................... 82,382,000 82,382,000
--------------
232,957,000
--------------
COMMERCIAL PAPER -- 42.17%
Aesop Funding Corp., 5.60%, 8/20/98............... 10,000,000 9,922,222
Akzo Nobel Inc., 5.50%, 7/9/98.................... 10,000,000 9,987,778
Aspen Funding Corp., 6.50%, 7/1/98................ 110,000,000 110,000,000
Atlantic Richfield Corp., 5.55%, 9/14/98.......... 15,000,000 14,826,563
Avnet Inc., 5.50%, 7/24/98........................ 5,000,000 4,982,430
Banca Serfin S.A., 5.65%, 8/31/98................. 30,000,000 29,712,792
Banco Buenos Aires S.A., 5.47%, 9/17/98........... 13,150,000 12,994,151
Banco Real S.A., 5.54%, 8/14/98................... 12,500,000 12,415,361
Barton Capital Corp., 5.55%, 7/17/98.............. 25,573,000 25,509,920
Block Financial Corp.:
5.53%, 7/22/98.................................. 16,762,000 16,707,929
5.53%, 8/27/98.................................. 14,000,000 13,877,418
Cargill Inc., 6.10%, 7/1/98....................... 50,000,000 50,000,000
Cassle Des Depots Et Cosignations, 6.25%, 7/1/98.. 36,000,000 36,000,000
Cendant Residential Inc., 5.60%, 7/27/98.......... 25,000,000 24,898,889
Centre Square Funding Corp. 5.65%, 7/27/98........ 19,595,000 19,515,042
Centric Capital Corp.:
5.55%, 7/20/98.................................. 32,242,000 32,147,558
5.71%, 9/2/98................................... 13,000,000 12,870,098
Commercial Credit Co.:
5.56%, 7/21/98.................................. 15,000,000 14,953,667
5.56%, 7/24/98.................................. 15,000,000 14,946,717
Dairy Investments LTD.:
5.55%, 7/29/98.................................. 10,000,000 9,956,833
5.55%, 8/11/98.................................. 10,000,000 9,936,792
Equipment Funding Inc.:
5.56%, 7/2/98................................... 10,000,000 9,998,456
5.56%, 7/7/98................................... 12,000,000 11,988,880
Explorer Pipeline Co., 5.55%, 7/22/98............. 20,000,000 19,935,250
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
6
<PAGE>
PEGASUS MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
COST
DESCRIPTION FACE AMOUNT (NOTE 2)
----------- ----------- ---------
<S> <C> <C>
Glencore Asset Funding:
5.65%, 7/23/98.................................. $ 18,000,000 $ 17,937,850
5.70%, 7/24/98.................................. 9,000,000 8,967,225
Great Lakes Chemical Corp., 5.53%, 8/14/98........ 15,000,000 14,898,617
Greenwich Funding Corp., 5.50%, 7/15/98........... 10,000,000 9,978,611
Greyhawk Funding LLC, 5.75%, 7/23/98.............. 40,000,000 39,859,444
KZH Holding Corp.:
5.65%, 7/17/98.................................. 22,107,000 22,051,487
5.58%, 8/18/98.................................. 24,054,000 23,875,038
5.56%, 9/1/98................................... 15,986,000 15,832,925
Mont Blanc Capital Corp., 5.60%, 7/30/98.......... 23,000,000 22,896,244
Monte Rosa Capital Corp., 5.59%, 8/14/98.......... 10,000,000 9,931,678
Prudential Funding Corp., 6.00%, 7/1/98........... 95,000,000 95,000,000
Sheffield Receivables Corp., 5.56%, 8/25/98....... 17,000,000 16,855,594
Siebe PLC:
5.55%, 7/23/98.................................. 25,000,000 24,915,208
5.54%, 7/28/98.................................. 22,000,000 21,908,590
Sigma Finance Inc., 5.56%, 8/13/98................ 23,000,000 22,847,254
Special Purpose Account Receivable Coop Corp.:
5.50%, 7/8/98................................... 29,000,000 28,968,986
5.55%, 7/16/98.................................. 21,000,000 20,951,438
Sun Belt Dix, Inc.:
5.55%, 7/21/98.................................. 10,400,000 10,367,933
5.55%, 8/25/98.................................. 27,000,000 26,771,062
5.55%, 9/1/98................................... 20,000,000 19,808,833
TI Group, Inc., 5.45%, 7/7/98..................... 13,000,000 12,988,192
Twin Towers Inc., 5.55%, 7/20/98.................. 18,186,000 18,132,730
Unum Corp., 5.60%, 7/21/98........................ 9,000,000 8,972,000
Volkswagen of America:
5.53%, 7/14/98.................................. 20,000,000 19,960,061
5.55%, 7/16/98.................................. 20,000,000 19,953,750
Windmill Funding Corp., 5.50%, 7/13/98............ 20,000,000 19,963,333
Wood Street Funding Inc.:
5.57%, 7/6/98................................... 14,000,000 13,989,169
5.56%, 7/13/98.................................. 16,000,000 15,970,347
--------------
1,132,638,345
--------------
BANKERS ACCEPTANCE NOTES -- 0.75%:
Abbey National Treasury Bank Note, 5.72%, 6/11/99. 8,000,000 7,994,207
National Australia Bank Note, 6.00%, 3/26/99...... 12,200,000 12,222,312
--------------
20,216,519
--------------
CORPORATE NOTES -- 20.12%
CIT Group Holdings, Medium Term Note, 5.875%,
12/15/98......................................... 30,000,000 30,027,751
GE Engine Receivables Trust, (A/R), 5.73%,
2/14/00.......................................... 17,208,378 17,208,378
Morgan Guaranty Trust Co.:
5.93%, 8/31/98.................................. 20,000,000 20,001,948
Key Bank, Senior Note, 5.63%, 2/24/99............. 7,000,000 6,996,863
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
7
<PAGE>
PEGASUS MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
COST
DESCRIPTION FACE AMOUNT (NOTE 2)
----------- ----------- ---------
<S> <C> <C>
Key Auto Finance, 5.835%, 1/5/99.................. $ 4,612,565 $ 4,612,565
Merrill Lynch Inc., (A/R), 6.85%.................. 125,000,000 125,000,000
Providian life Insurance Co., Funding Agreement,
5.89%............................................ 40,000,000 40,000,000
Sigma Finance, Medium Term Note:
5.84%, 8/4/98................................... 20,000,000 20,000,000
5.95%, 10/20/98................................. 15,000,000 15,000,000
Strats Trust 1998-C, (A/R), 5.77%, 4/13/99........ 35,000,000 34,999,857
Transamerica Life Insurance Co., Funding
Agreement, 5.85%, 12/9/02........................ 50,000,000 50,000,000
Travelers Life Ins & Annuity Co., Funding
Agreement
5.85%, 11/6/98.................................. 25,000,000 25,000,000
Wachovia Bank, Medium Term Note, 5.895%, 10/2/98.. 10,000,000 9,998,157
Western & Southern Insurance Co., Funding
Agreement, (A/R), 1/29/03........................ 25,000,000 25,000,000
Wheels Inc., Master Note, (A/R), 5.78%, 8/15/98... 75,000,000 75,000,000
Wilmington Trust Co.:
Amtrak 93-A, (A/R), 1/1/11...................... 8,592,429 8,592,429
Amtrak 93-I, (A/R), 1/1/11...................... 10,101,919 10,101,919
Amtrak 93-B, (A/R), 1/1/13...................... 22,977,508 22,977,508
--------------
540,517,375
--------------
CERTIFICATES OF DEPOSIT -- 17.49%
Banque Nationale De Paris:
5.815%, 10/5/98................................. 15,500,000 15,494,903
5.65%, 2/26/99.................................. 27,000,000 26,991,478
Bayerische Wechsel Bank, 5.94%, 10/22/98.......... 20,000,000 19,996,449
Canadian Imperial Bank of Commerce, 5.94%,
10/21/98......................................... 18,000,000 17,996,833
Commerzbank AG:
5.89%, 7/9/98................................... 27,000,000 27,000,018
5.94%, 10/23/98................................. 14,000,000 13,997,492
5.65%, 2/26/99.................................. 7,000,000 6,997,791
5.67%, 3/5/99................................... 15,000,000 14,994,430
Credit Agricole Indosuez, 5.75%, 4/26/99.......... 30,000,000 29,988,237
Crestar Bank, 5.55%, 7/8/98....................... 10,000,000 10,000,000
Deutsche Bank:
5.80%, 9/5/98................................... 22,000,000 21,998,990
5.66%, 4/14/99.................................. 15,000,000 14,987,573
Generale Bank, 6.015%, 12/16/98................... 38,500,000 38,502,541
Norddeutsche Landesbank Girozentrale:
5.9175%, 10/21/98............................... 26,000,000 25,995,996
5.72%, 4/16/99.................................. 23,000,000 22,985,071
Royal Bank of Canada, 5.955%, 8/13/98............. 14,000,000 13,999,291
Societe Generale:
5.945%, 8/28/98................................. 19,000,000 18,998,413
5.92%, 10/21/98................................. 20,000,000 19,996,480
5.58%, 1/22/99 ................................. 10,000,000 9,991,882
Standard Charter Bank, 5.58%, 7/10/98............. 25,000,000 25,000,000
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
8
<PAGE>
PEGASUS MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
COST
DESCRIPTION FACE AMOUNT (NOTE 2)
----------- ----------- ---------
<S> <C> <C>
Swiss Bank Corp.:
5.88%, 11/19/98.................................. $ 32,000,000 $ 31,997,635
5.74%, 6/11/99................................... 19,000,000 18,989,682
Westpac Banking Corp., 5.73%, 4/16/99.............. 23,000,000 22,993,895
--------------
469,895,080
--------------
TIME DEPOSITS -- 10.80%
ABN-Amro Bank N.V., 6.375%, 7/1/98................. 40,000,000 40,000,000
Bank of Tokyo-Mitsubishi, 6.75%, 7/1/98............ 40,000,000 40,000,000
BHF Bank AG, 6.25%, 7/1/98......................... 100,000,000 100,000,000
National Australia Bank, 5.8125%, 7/2/98........... 25,000,000 25,000,000
Norddeutsche Girozentrale Bank, 6.25%, 7/1/98...... 20,000,000 20,000,000
Republic National Bank NY, 6.50%, 7/1/98........... 65,000,000 65,000,000
--------------
290,000,000
--------------
TOTAL INVESTMENTS................................... $2,686,224,319
==============
</TABLE>
A/R -- Adjustable Rate
See Notes to Financial Statements.
Pegasus Funds
9
<PAGE>
PEGASUS TREASURY MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
COST
DESCRIPTION FACE AMOUNT (NOTE 2)
----------- ----------- ---------
<S> <C> <C>
TEMPORARY CASH INVESTMENTS -- 86.72%
Aubrey Langston Revolving Repurchase Agreement,
5.50%, 7/1/98 (secured by various U.S. Treasury
Notes with maturities ranging from 1/31/00 through
10/31/00 at various interest rates ranging from
5.375% to 7.75%, all held at Chase Bank)............ $30,000,000 $30,000,000
Barclays Inc., Revolving Repurchase Agreement, 5.50%,
7/1/98 (secured by various U.S. Treasury Notes with
maturities ranging from 6/30/99 through 7/31/00 at
various interest rates ranging from 6.125% to 6.75%,
all held at The Bank Of New York)................... 30,000,000 30,000,000
Bear Stearns & Co., Inc., Revolving Repurchase Agree-
ment, 5.90% 7/1/98 (secured by various U.S. Treasury
Obligations with maturities ranging from 8/15/98
through 5/15/08 at various interest rates ranging
from 0.00% to 8.875% all held at the Custodial Trust
Company)............................................ 168,000,000 168,000,000
Dresdner Inc., Revolving Repurchase Agreement, 5.40%,
7/1/98 (secured by U.S. Treasury Note maturing
9/30/98 at an interest of 4.75%, held at Chase
Bank)............................................... 36,000,000 36,000,000
First Union Capital Markets, Revolving Repurchase
Agreement, 6.00%, 7/1/98 (secured by various U.S.
Treasury Notes with maturities ranging from 12/31/98
through 2/15/07 at various interest rates ranging
from 5.75% to 6.25%, all held at Bankers Trust Com-
pany)............................................... 47,000,000 47,000,000
Goldman Sachs Agency, Revolving Repurchase Agreement,
5.50%, 7/1/98 (secured by U.S. Treasury Note matur-
ing 5/15/03 at an interest rate of 5.625%, held at
The Bank of New York)............................... 47,000,000 47,000,000
Greenwich Capital Markets, Inc., Revolving Repurchase
Agreement, 5.80%, 7/1/98 (secured by various U.S.
Treasury Obligations with maturities ranging from
8/15/98 through 2/15/08 at an interest rate of
0.00%, all held at Chase Bank)...................... 48,000,000 48,000,000
H.S.B.C. Treasury, Revolving Repurchase Agreement,
5.70%, 7/1/98 (secured by U.S. Treasury Notes with
maturities ranging from 8/31/98 to 3/31/00 at inter-
est rates ranging from 5.875% to 6.875%, all held at
Chase Bank)......................................... 241,000,000 241,000,000
Morgan Stanley Government Collateralized, Revolving
Repurchase Agreement, 5.70%, 7/1/98 (secured by U.S.
Treasury Bill with a maturity of 12/10/98 at an in-
terest rate of 0.00%, held at The Bank of New York). 24,000,000 24,000,000
Nomura Revolving Repurchase Agreement, 6.00%, 7/1/98
(secured by various U.S. Treasury Obligations with
maturities ranging from 2/15/00 through 2/15/08 at
various interest rates ranging from 0.00% to 6.25%,
all held at The Bank of New York)................... 47,000,000 47,000,000
NationsBank Capital Markets, Inc., Revolving Repur-
chase Agreement, 5.90%, 7/1/98 (secured by various
U.S. Treasury Obligations with maturities ranging
from 8/15/03 through 5/15/08, at various interest
rates ranging from 0.00% to 12.00%, all held at
Chase Bank)......................................... 47,000,000 47,000,000
Prudential Revolving Repurchase Agreement, 5.45%,
7/1/98 (secured by U.S. Treasury Note with a matu-
rity of 8/15/01 at an interest rate of 7.875%, held
at The Bank of New York)............................ 2,085,000 2,085,000
Salomon Brothers, Inc., Revolving Repurchase Agree-
ment, 5.95%, 7/1/98 (secured by various U.S. Trea-
sury Obligations with maturities ranging from
8/15/98 through 5/15/08 at various interest rates
ranging from 0.00% to 12.00%, all held at Chase
Bank)............................................... 47,000,000 47,000,000
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
10
<PAGE>
PEGASUS TREASURY MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
COST
DESCRIPTION FACE AMOUNT (NOTE 2)
----------- ----------- ---------
<S> <C> <C>
Societe Generale Treasury, Revolving Repurchase
Agreement, 6.00% 7/1/98 (secured by various U.S.
Treasury Obligations with maturities ranging from
7/1/98 through 5/12/04 at various interest rates
ranging from 0.00% to 9.05%, all held at Chase
Bank)............................................ $45,000,000 $ 45,000,000
--------------
859,085,000
--------------
U.S. GOVERNMENT OBLIGATIONS -- 13.28%
U.S. Treasury Notes:
6.250%, 07/31/98................................. 20,000,000 20,009,329
4.750%, 09/30/98................................. 10,000,000 9,975,624
5.125%, 11/30/98................................. 40,000,000 39,906,696
8.875%, 02/15/99................................. 40,000,000 40,799,367
6.500%, 04/30/99................................. 40,000,000 40,303,235
6.000%, 06/30/99................................. 50,000,000 50,245,443
--------------
201,239,694
--------------
TOTAL INVESTMENTS................................... $1,060,324,694
==============
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
11
<PAGE>
PEGASUS MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<TABLE>
<CAPTION>
AMORTIZED
INTEREST COST
DESCRIPTION RATING* RATE*** FACE AMOUNT (NOTE 2)
----------- ------- -------- ----------- ---------
<S> <C> <C> <C> <C>
ALABAMA -- 1.77%
Chatam Air Pollution Control, IDR,
CP, AMT, 10/9/98.................... VMIG 1 3.65% $ 9,600,000 $ 9,600,000
Decatur Industrial Development
Revenue, AMT, 1/1/27................ VMIG 1 3.65% 4,500,000 4,500,000
------------
14,100,000
------------
ALASKA -- 4.25%
Valdez Marine Revenue, Series C, CP,
7/9/98.............................. VMIG 1 3.70% 14,000,000 14,000,000
Valdez Marine Revenue, CP, 9/11/98... VMIG 1 3.65% 11,900,000 11,900,000
Valdez Marine Revenue, Series B,
5/1/31.............................. VMIG 1 3.60% 8,000,000 8,000,000
------------
33,900,000
------------
ARIZONA -- 0.75%
Chandler IDR-Parsons Municipal
Services, 12/15/09.................. **N/R 3.70% 4,500,000 4,500,000
Farmington PCR, Arizona Public
Services, AMT, 9/1/24............... P 1 4.30% 1,500,000 1,500,000
------------
6,000,000
------------
CALIFORNIA -- 0.96%
California State Veterans Revenue,
Series A, AMT, 8/1/98............... AA 2 8.30% 7,625,000 7,689,276
------------
COLORADO -- 0.88%
Fayette County Development Authority,
IDR, 8/15/07........................ VMIG 1 4.15% 7,000,000 7,000,000
------------
DELAWARE -- 2.91%
Delaware State Economic Development,
AMT, 8/1/29......................... **N/R 3.65% 23,200,000 23,200,000
------------
DISTRICT OF COLUMBIA -- 3.14%
District of Columbia TRAN, Series B,
9/30/98............................. MIG 1 4.50% 12,000,000 12,018,120
District of Columbia TRAN, Series C,
9/30/98............................. MIG 1 5.00% 9,500,000 9,526,340
District of Columbia American
University, 10/1/15................. VMIG 1 3.60% 3,500,000 3,500,000
------------
25,044,460
------------
FLORIDA -- 2.16%
Orange County Health Facilities
Revenue, 11/15/26................... **N/R 3.50% 2,750,000 2,750,000
St. Lucie County Power and Light, CP,
8/13/98............................. VMIG 1 3.60% 10,000,000 10,000,000
Sarasota Public Hospital, Series A,
CP, 10/8/98......................... VMIG 1 3.65% 4,500,000 4,500,000
------------
17,250,000
------------
GEORGIA -- 2.28%
Burke County Development Authority,
PCR, 7/1/24......................... VMIG 1 3.75% 6,295,000 6,295,000
Georgia Municipal Gas, Series A, AMT,
11/1/06............................. **N/R 3.40% 2,300,000 2,300,000
Gwinnett County Hospital Authority,
9/1/27.............................. **N/R 3.55% 5,000,000 5,000,000
Macon-Bibb County Hospital Revenue,
8/1/18.............................. Aa 3 3.60% 4,550,000 4,550,000
------------
18,145,000
------------
IDAHO -- 0.87%
Idaho Health Facilities, St. Lukes
Medical Center, 5/1/22.............. VMIG 1 3.75% 6,900,000 6,900,000
------------
ILLINOIS -- 7.00%
Carol Stream Multifamily Revenue,
AMT, 3/15/27........................ **N/R 3.65% 5,000,000 5,000,000
Chicago General Obligation, 2/4/99... VMIG 1 3.55% 20,000,000 20,000,000
Illinois Development Authority
Revenue, MBIA, 11/15/27............. VMIG 1 3.55% 15,000,000 15,000,000
Illinois Development Authority
Environment, AMT, 5/1/32............ **N/R 3.65% 14,325,000 14,325,000
Southwestern Development Authority,
AMT, 4/1/22......................... VMIG 1 3.90% 1,500,000 1,500,000
------------
55,825,000
------------
</TABLE>
Pegasus Funds
12
<PAGE>
PEGASUS MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<TABLE>
<CAPTION>
AMORTIZED
INTEREST COST
DESCRIPTION RATING* RATE*** FACE AMOUNT (NOTE 2)
----------- ------- -------- ----------- ---------
<S> <C> <C> <C> <C>
INDIANA -- 4.40%
Burns Harbor IDR, AMT, 3/1/16........ **N/R 3.70% $ 9,000,000 $ 9,000,000
Indiana DFA Solid Waste, CP, AMT,
7/10/98............................. VMIG 1 3.60% 15,000,000 15,000,000
Indiana Development Finance
Authority, PCR, AMT, 3/1/99......... VMIG 1 3.70% 11,100,000 11,100,000
------------
35,100,000
------------
IOWA -- 1.00%
Iowa Finance Authority Revenue,
6/1/19.............................. **N/R 3.65% 7,960,000 7,960,000
------------
KANSAS -- 0.72%
Burlington PCR, CP, AMT, 8/12/98..... P 1 3.60% 4,000,000 4,000,000
Butler County Solid Waste Disposal,
AMT, 8/1/24......................... A 1 4.00% 1,700,000 1,700,000
------------
5,700,000
------------
KENTUCKY -- 6.01%
Carroll County Solid Waste Disposal
Rev, AMT, 11/2/24................... VMIG 1 3.95% 3,800,000 3,800,000
Henderson Co. Solid Waste Disposal
Rev, AMT, 3/1/15.................... VMIG 1 3.60% 9,000,000 9,000,000
Kentucky Interlocal School
Transportation, TRAN, 6/30/99....... SP 1+ 3.90% 35,087,500 35,087,500
------------
47,887,500
------------
LOUISIANA -- 2.99%
Calcasieu Parish Sales Tax Revenue,
9/1/98.............................. **N/R 3.50% 3,770,000 3,770,000
Louisiana State General Obligation,
CP, 8/10/98......................... VMIG 1 3.45% 7,500,000 7,500,000
Plaquemines Parish, Environmental
Rev, AMT, 5/1/25.................... P 1 3.95% 2,900,000 2,900,000
South Louisiana Port Revenue, 1/1/27. VMIG 1 3.65% 6,900,000 6,900,000
St. Charles Pollution Control
Revenue, AMT, 11/1/21............... VMIG 1 3.90% 2,800,000 2,800,000
------------
23,870,000
------------
MICHIGAN -- 5.53%
Grand Rapids Water Supply Revenue,
1/1/20.............................. VMIG 1 3.30% 1,350,000 1,350,000
Jackson Co. Economic Development
Corp., Limited Obligation Revenue,
6/1/17.............................. **N/R 3.70% 100,000 100,000
Kent Hospital Finance Authority
Revenue, Ser A, 1/15/20............. VMIG 1 3.50% 400,000 400,000
Meridian Limited Obligation, EDC,
11/15/14............................ **N/R 3.70% 3,000,000 3,000,000
Michigan State General Obligation
Notes, 9/30/98...................... MIG 1 4.50% 15,000,000 15,035,993
Michigan State Housing Development
Authority, Series A, AMT, 2/25/99... **N/R 3.80% 4,200,000 4,200,000
Michigan State Hospital Finance
Authority, 6/1/01................... VMIG 1 3.45% 700,000 700,000
Michigan State Hospital Finance
Authority, 11/1/11.................. VMIG 1 3.40% 3,300,000 3,300,000
Michigan Higher Education Student
Loan Revenue, AMT, 10/1/15.......... VMIG 1 3.55% 100,000 100,000
Michigan State Strategic Fund Limited
Obligation, Petoskey Plastics, Inc.,
AMT, 8/1/16......................... **N/R 3.70% 2,100,000 2,100,000
Michigan State Strategic Fund Limited
Obligation, Saginaw Products Corp.,
AMT, 9/1/17......................... **N/R 3.70% 700,000 700,000
Michigan State Strategic Fund Limited
Obligation, Autocam Corp., AMT,
12/1/17............................. **N/R 3.70% 3,000,000 3,000,000
Michigan State Strategic Fund Limited
Obligation, AMT, 12/1/22............ **N/R 3.70% 2,200,000 2,200,000
Michigan State Hospital Finance
Authority, 12/1/23.................. VMIG 1 3.60% 800,000 800,000
Regents of University of Michigan,
CP, 9/9/98.......................... **N/R 3.60% 3,400,000 3,400,000
Wayne Charter County Airport Revenue,
AMT, 12/1/16........................ VMIG 1 3.60% 3,150,000 3,150,000
Wayne Charter County Airport Revenue,
Ser B, AMT, 12/1/16................. VMIG 1 3.50% 500,000 500,000
------------
44,035,993
------------
</TABLE>
Pegasus Funds
13
<PAGE>
PEGASUS MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<TABLE>
<CAPTION>
AMORTIZED
INTEREST COST
DESCRIPTION RATING* RATE*** FACE AMOUNT (NOTE 2)
----------- ------- -------- ----------- ---------
<S> <C> <C> <C> <C>
MINNESOTA -- 0.60%
Minneapolis Minnesota General
Obligation, 12/1/27................. VMIG 1 3.40% $ 4,750,000 $ 4,750,000
------------
MISSISSIPPI -- 1.63%
Claiborne County Pollution Control
Revenue, CP, 8/7/98................. VMIG 1 3.55% 13,000,000 13,000,000
------------
MISSOURI -- 1.62%
Missouri State Health & Educational
Facilities, 8/17/98................. Aaa 3.85% 4,900,000 4,900,000
Missouri State Development Finance
Board, 12/1/98...................... Aa 3 3.80% 8,000,000 8,000,000
------------
12,900,000
------------
NEBRASKA -- 1.94%
Nebraska Investment Finance Authority
Revenue Series C, AMT, 7/1/98....... **N/R 3.95% 15,500,000 15,500,000
------------
NEVADA -- 2.53%
Clark County Airport Revenue, Series
B, AMT, 7/8/98...................... VMIG 1 3.875% 8,500,000 8,500,000
Clark County Industrial Revenue, AMT,
12/1/22............................. VMIG 1 3.95% 8,700,000 8,700,000
Washoe County Water Facilities
Revenue, AMT, 12/1/20............... P 1 3.90% 3,000,000 3,000,000
------------
20,200,000
------------
NEW YORK -- 4.77%
New York City Municipal Water
Authority, CP, 7/10/98.............. P 1 3.90% 20,000,000 20,000,000
New York City Water, CP, 7/15/98..... P 1 3.60% 7,000,000 7,000,000
New York State Electric & Gas
Revenue, 12/1/98.................... Aaa 3.80% 11,000,000 11,000,000
------------
38,000,000
------------
NORTH CAROLINA -- 2.08%
Charlotte Airport Revenue, MBIA,
7/1/17.............................. VMIG 1 3.50% 7,000,000 7,000,000
Charlotte Mecklenberg Hospital
Authority, 1/15/26.................. VMIG 1 3.50% 3,085,000 3,085,000
North Carolina Community Hospital
Revenue, 8/15/18.................... **N/R 3.50% 6,500,000 6,500,000
------------
16,585,000
------------
OHIO -- 1.64%
Ohio State Air Quality Development
Revenue, AMT, 4/1/28................ VMIG 1 3.65% 6,200,000 6,200,000
Ohio Water Development Authority, CP,
AMT, 8/11/98........................ **N/R 3.70% 6,850,000 6,850,000
------------
13,050,000
------------
OREGON -- 2.40%
Oregon State Housing & Community
Services, 5/13/99................... MIG 1 3.75% 15,000,000 15,000,000
Port Morrow Environmental Revenue,
AMT, 12/1/31........................ VMIG 1 4.00% 4,100,000 4,100,000
------------
19,100,000
------------
PENNSYLVANIA -- 7.36%
Allegheny Co. IDR, VRDB, United
Jewish Federation, 10/1/25.......... VMIG 1 3.60% 1,600,000 1,600,000
Carbon County, CP, AMT, 8/6/98....... P 1 3.60% 5,000,000 5,000,000
Carbon County, Panther Creek, IDA,
CP, 10/9/98......................... P 1 3.55% 8,285,000 8,285,000
Indiana County Individual Development
Authority, PCR, AMT, 6/1/27......... VMIG 1 3.65% 25,000,000 25,000,000
Pennsylvania State Higher Educational
Facilities, 4/1/17.................. VMIG 1 3.60% 200,000 200,000
Temple University Obligation, Series
A, 5/14/99.......................... **N/R 3.78% 4,500,000 4,500,000
Venango Individual Development
Authority, CP, AMT, 8/7/98.......... **N/R 3.60% 14,050,000 14,050,000
------------
58,635,000
------------
</TABLE>
Pegasus Funds
14
<PAGE>
PEGASUS MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<TABLE>
<CAPTION>
AMORTIZED
INTEREST COST
DESCRIPTION RATING* RATE*** FACE AMOUNT (NOTE 2)
----------- ------- -------- ----------- ---------
<S> <C> <C> <C> <C>
PUERTO RICO -- 3.14%
Puerto Rico Commonwealth, TRAN,
Series A, 7/30/98................... MIG 1 4.50% $25,000,000 $ 25,014,591
------------
SOUTH CAROLINA -- 2.65%
Berkley County Industrial Development
Revenue, AMT, 4/1/28................ VMIG 1 3.90% 3,000,000 3,000,000
Florence County Solid Waste Disposal
Revenue, 4/1/28..................... **N/R 3.90% 3,100,000 3,100,000
Piedmont Municipal Power Agency
Revenue, 1/1/19..................... VMIG 1 3.50% 3,000,000 3,000,000
Spartanburg County Health Services
Revenue, 4/15/23.................... Aaa 3.65% 12,000,000 12,000,000
------------
21,100,000
------------
SOUTH DAKOTA -- 1.19%
South Dakota Housing Development
Authority Revenue, Series E, AMT,
12/14/00............................ VMIG 1 3.80% 9,500,000 9,500,000
------------
TENNESSEE -- 2.13%
Marion County Environmental
Authority, AMT, 8/1/98.............. **N/R 3.65% 7,000,000 7,000,000
Oak Ridge Individual Development
Revenue, AMT, 1/1/06................ Aa 3 3.70% 10,000,000 10,000,000
------------
17,000,000
------------
TEXAS -- 8.44%
Austin Combined Utilities, Series A,
CP, 7/14/98......................... P 1 3.50% 10,000,000 10,000,000
Austin Utilities, CP, 7/14/98........ P 1 3.55% 8,700,000 8,700,000
Austin Utility Systems, CP, 9/3/98... **N/R 3.65% 4,075,000 4,075,000
Brazos River Revenue, AMT, 4/1/32.... P 1 4.30% 9,000,000 9,000,000
Gulf Coast Waste Disposal Authority,
AMT, 5/1/23......................... VMIG 1 3.90% 1,400,000 1,400,000
Gulf Coast, IDA, AMT, 5/1/25......... VMIG 1 4.00% 10,700,000 10,700,000
North Central Health Facility
Revenue, CP, 6/1/21................. VMIG 1 3.90% 5,150,000 5,150,000
Panhandle Plan Higher Education
Authority Revenue, Series A, AMT,
6/1/21.............................. VMIG 1 3.50% 6,000,000 6,000,000
Texas Higher Education Authority,
MBIA, AMT, 12/1/27.................. VMIG 1 3.55% 6,200,000 6,200,000
Texas State Revenue, TRAN, Series A,
8/31/98............................. MIG 1 4.75% 6,000,000 6,010,226
------------
67,235,226
------------
UTAH -- 2.55%
Intermountain Power Agency, CP,
9/11/98............................. VMIG 1 3.45% 8,300,000 8,300,000
Intermountain Power Agency Revenue,
Series E, 9/15/98................... VMIG 1 3.45% 12,000,000 12,000,000
------------
20,300,000
------------
VERMONT -- 1.93%
Vermont Educational Health Building
Agency Revenue
11/1/98............................. Aa 3.85% 6,000,000 6,000,000
5/1/99.............................. Aa 3.75% 5,500,000 5,500,000
Vermont Student Assistance Revenue,
1/1/04.............................. VMIG 1 3.70% 3,900,000 3,900,000
------------
15,400,000
------------
VIRGINIA -- 1.71%
King George County Individual
Development Authority, AMT
11/1/25............................. **N/R 3.95% 6,700,000 6,700,000
3/1/27.............................. **N/R 3.95% 2,200,000 2,200,000
Roanoke Memorial Hospital, IDA,
Series C, 7/1/19.................... VMIG 1 3.50% 4,750,000 4,750,000
------------
13,650,000
------------
</TABLE>
Pegasus Funds
15
<PAGE>
PEGASUS MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<TABLE>
<CAPTION>
AMORTIZED
INTEREST COST
DESCRIPTION RATING* RATE*** FACE AMOUNT (NOTE 2)
----------- ------- -------- ----------- ---------
<S> <C> <C> <C> <C>
WASHINGTON -- 1.13%
Port Seattle Revenue, AMT, 9/1/22.... VMIG 1 3.65% $ 1,100,000 $ 1,100,000
Seattle Municipal Light & Power
Revenue, CP, 8/21/98................ VMIG 1 3.45% 7,900,000 7,900,000
------------
9,000,000
------------
WEST VIRGINIA -- 0.75%
West Virginia Public Energy, CP,
7/8/98.............................. Aaa 3.65% 6,000,000 6,000,000
------------
WYOMING -- 0.19%
Converse County Environment Revenue,
11/1/25............................. VMIG 1 4.15% 1,500,000 1,500,000
------------
TOTAL INVESTMENTS.................... $797,027,046
============
</TABLE>
INVESTMENT ABBREVIATIONS
AMBAC-- AMBAC Indemnity Corp.
AMT-- Alternate Minimum Tax
BIGI-- Bond Investors Guaranty Insurance Co.
CP-- Commercial Paper
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 -- 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 Standards & 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
June 30, 1998. 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.
Pegasus Funds
16
<PAGE>
PEGASUS MICHIGAN MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZED
INTEREST COST
DESCRIPTION RATING* RATE*** FACE AMOUNT (NOTE 2)
----------- ------- -------- ----------- ---------
<S> <C> <C> <C> <C>
MICHIGAN -- 100%
Ann Arbor ECD, Ltd. Obligation,
5/1/00.............................. **NR 3.60% $ 385,000 $ 385,000
Cornell Twp EDC, IDR, 7/17/98........ NR 3.75% 3,600,000 3,600,000
Delta Co. Econ Dev Corp Env Rv,
9/10/98............................. P 1 3.60% 3,810,000 3,810,000
Detroit Sewer Disposal, MBIA, Ser B,
7/1/98.............................. Aaa 5.00% 6,000,000 6,000,000
Grand Rapids Water Supply, RFD,
1/1/20.............................. VMIG 1 3.30% 4,100,000 4,100,000
Jackson Co EDC LTD OBL Rev, "AMT",
06/1/17............................. NR 3.70% 1,200,000 1,200,000
Kalamazoo Co. Econ Dev Corp Rev,
9/1/15.............................. NR 4.00% 1,000,000 1,000,000
Kalamazoo Econ Dev Corp Rev, 5/15/27. NR 3.55% 4,000,000 4,000,000
Kalamazoo Hosp Fin Auth Rev, 5/15/99. Aaa 3.85% 1,395,000 1,395,000
Kent Hospital, VRDB-Butterworth
Hospital, 1/15/20................... VMIG 1 3.65% 3,800,000 3,800,000
Michigan Comprehensive Transportation
RV RFD ESC State of Refunding Series
1988-1, 9/1/98...................... NR 7.625% 3,000,000 3,031,012
Michigan Higher Education Student
Loan, "AMT", AMBAC, Series XII-D,
10/1/15............................. VMIG 1 3.55% 3,000,000 3,000,000
Michigan Municipal Bond Authority
Revenue Series A, 7/31/98........... NR 4.25% 3,500,000 3,502,264
Michigan Municipal Bond Authority
Revenue, 9/18/98.................... NR 4.50% 1,400,000 1,401,748
Michigan State Building Authority
Revenue Series III, 10/15/98........ AA2 4.50% 5,000,000 5,009,560
Michigan State General Obligation
Notes Unlimited Tax, 9/30/98........ MIGI 4.50% 10,000,000 10,023,995
Michigan State Hospital VRDB-Hospital
Equipment Loan Program, Series A,
12/1/23............................. VMIG 1 3.60% 4,800,000 4,800,000
Michigan State Hospital Financial
Authority Revenue Hospital Charity
Obligation E, 11/01/11.............. VMIG 1 3.40% 4,700,000 4,700,000
Michigan State HDA, Ltd. Obligation
VRDB:
Laurel Valley, 12/1/07.............. VMIG 1 3.55% 3,600,000 3,600,000
Woodland Meadows, 3/1/13............ VMIG 1 3.55% 2,000,000 2,000,000
Michigan State HDA, "AMT", 7/9/98.... VMIG 1 3.80% 5,000,000 5,000,000
Michigan State HDA, Series B, 4/1/19. VMIG 1 3.50% 1,100,000 1,100,000
Michigan State HDA, Muni Family
Series A, "AMT", 2/25/99............ VMIG 1 3.80% 5,000,000 5,000,000
Michigan State Strategic Fund Ltd.
Obligation, 10/1/01................. Aa3 3.70% 1,500,000 1,500,000
Michigan State Strategic Fund Ltd.
Obligation AMT:
VRDB-Dennenlease LC, 4/1/10......... **N/R 3.70% 1,815,000 1,815,000
VRDB-Ironwood Plastics, Inc.,
11/1/11............................ **N/R 3.70% 1,155,000 1,155,000
VRDB-Petoskey Plastics, Inc.,
8/1/16............................. **N/R 3.70% 2,000,000 2,000,000
VRDB-Saginaw Products Corp., 9/1/17. **N/R 3.70% 2,300,000 2,300,000
VRDB-Quincy Str. Inc., 12/1/22...... **N/R 3.70% 800,000 800,000
Michigan State Strategic Fund PCR
VRDN-Consumers Power Co., 9/1/00.... A 1+ 3.55% 3,000,000 3,000,000
Michigan Underground, CP, 8/10/98.... P 1 3.70% 5,000,000 5,000,000
Regents of the University of
Michigan, CP, 8/07/98............... NR 3.63% 4,500,000 4,500,000
Wayne Charter Co. Airport AMT VRDB
Series A, 12/1/16................... VMIG 1 3.60% 3,200,000 3,200,000
Series B, 12/1/16................... VMIG 1 3.50% 200,000 200,000
------------
TOTAL INVESTMENTS.................... $106,928,580
============
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
17
<PAGE>
PEGASUS MICHIGAN MUNICIPAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
June 30, 1998
- --------------------------------------------------------------------------------
INVESTMENT ABBREVIATIONS
AMT -- Alternative Minimum Tax
AMBAC -- AMBAC Indemnity Corp.
BIGI -- Bond Investors Guaranty Insurance Co.
CP -- Commercial Paper
EDC -- Economic Development Corporation
EDR -- Economic Development Revenue
FGIC -- Financial Guaranty Insurance Company
FSA -- Financial Securities Assurance Corp.
GO -- General Obligation
HCFA -- Health Care Facilities
HR -- Housing Revenue
HDA -- Housing Development Authority
HFA -- Housing Finance Authority
IDA -- Industrial Development & Export Authority
IDR -- Industrial Development Revenue
MBIA -- Municipal Bond Insurance Association
PCR -- Pollution Control Revenue
PFA -- Public Facilities Authority
RFD -- Pre-Refunded Bond
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
June 30, 1998. 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 Notes to Financial Statements.
Pegasus Funds
18
<PAGE>
PEGASUS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(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 June 30, 1998,
Pegasus consisted of thirty separate portfolios of which there were four money
market funds (the Money Market Funds or the Funds), as described below.
PEGASUS MONEY MARKET FUND
PEGASUS TREASURY MONEY MARKET FUND
PEGASUS MUNICIPAL MONEY MARKET FUND
PEGASUS MICHIGAN MUNICIPAL MONEY MARKET FUND
The Money Market Funds commenced operations on January 4, 1988, except for the
Michigan Municipal Money Market Fund and the Treasury Money Market Fund, which
commenced operations on January 23, 1991 and January 1, 1993, respectively.
The Pegasus Money Market Funds (except for the Money Market Fund which offers
Class A, Class B, and Class I shares) each offer Class A shares and Class I
shares. Class A shares, Class B shares and Class I shares in a fund are
substantially the same except that Class A shares are subject to a shareholder
services fee pursuant to the Shareholder Services Plan and Class B shares are
subject to a contingent deferred sales charge imposed at the time of redemption
and are subject to fees charged pursuant to a distribution plan adopted
pursuant to Rule 12b-1 under the Act and fees charged pursuant to the
Shareholder Services Plan. Class I shares are not subject to any shareholder
service fees or distribution 12b-1 fees.
(2)SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Money Market Funds in preparation of the financial statements. The policies are
in conformity with generally accepted accounting principles for investment
companies. Following generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Investments
Pursuant to Rule 2a-7 of the Act, the Money Market 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 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 or 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 and Michigan Municipal Money Market Funds invest 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.
Pegasus Funds
19
<PAGE>
PEGASUS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
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 Funds have capital loss carryforwards and related
expiration dates as follows:
<TABLE>
<CAPTION>
FUND 1999 2001 2002 2003 2004 2005 TOTAL
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Treasury Money Market Fund $ -- $ -- $16,000 $ -- $ 1,000 $ -- $17,000
Municipal Money Market Fund 1,000 2,000 1,000 36,000 14,000 2,000 56,000
Michigan Municipal Money Market Fund -- -- -- -- 1,000 -- 1,000
</TABLE>
Shareholder Dividends
On each business day except 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
annually and paid annually, but each Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Code. To the
extent that net realized capital gains can be offset by capital loss
carryforwards, it is the policy of each Fund not to distribute such gains.
Expenses
Expenses directly attributable to a Fund are charged to that Fund's
operations; expenses which are applicable to all Funds are allocated among them
on the basis of relative net assets. Fund expenses directly attributable to a
class of shares are charged to that class; expenses which are applicable to all
classes are allocated among them. 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.
Multiple Classes of Capital Shares of Beneficial Interest
Each class of shares has equal rights as to earnings, assets and voting
privileges except that each class bears different distribution and shareholder
service expenses. Each class of shares has exclusive voting rights with respect
to matters that affect just that class. Dividends are declared separately for
each class. No class has preferential dividend rights; differences in per share
dividend rates are generally due to differences in separate class expenses.
Class B shares of the Pegasus Money Market Fund are available only to the
holders of Class B shares in the Pegasus non-money market funds who wish to
exchange their shares in such funds for shares in the Pegasus Money Market
Fund. Class B shares of the Pegasus Money Market Fund will automatically
convert to Class A shares at the time the exchanged shares would have
converted.
(3) INVESTMENT ADVISORY FEES, ADMINISTRATION FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
Pegasus has an Investment Advisory Agreement with FCNIMCO pursuant to which
FCNIMCO has agreed to provide the day-to-day management of each of the Money
Market Fund's investments for a monthly fee computed daily and payable monthly,
expressed as a percentage of each Money Market Fund's average daily net
Pegasus Funds
20
<PAGE>
PEGASUS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
assets, of 0.30% of the first $1.0 billion, 0.275% of the next $1.0 billion and
0.25% of each such Money Market Fund's average daily net assets in excess of
$2.0 billion.
Pegasus has a Co-Administration Agreement with FCNIMCO and BISYS Fund Services
(BISYS or Distributor) (collectively the Co-Administrators) pursuant to which
the Co-Administrators have agreed to assist in all aspects of each Money Market
Fund's operations for an administration fee, at an annual rate of 0.15% of each
Money Market Fund's average daily net assets.
BISYS serves as Pegasus' principal underwriter and distributor of the Funds'
shares. 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. See Note 4 for a summary of fee rates and
expenses pursuant to these agreements.
On April 10, 1998, First Chicago NBD Investment Management Company's parent
company, First Chicago NBD Corporation, entered into an agreement and plan of
merger with BANC ONE CORPORATION pursuant to which First Chicago NBD
Corporation will merge with and into BANC ONE CORPORATION. The merger is
conditioned upon, among other things, approval by holders of a majority of the
BANC ONE CORPORATION common stock, approval by holders of a majority of the
First Chicago NBD Corporation common stock, and receipt of certain regulatory
and governmental approvals.
(4) EXPENSES
For the period ended June 30, 1998, FCNIMCO voluntarily agreed to reimburse a
portion of the operating expenses of the Funds to the extent that the Funds'
expenses exceeded the following amounts (as a percentage of each Fund's average
daily net assets):
<TABLE>
<CAPTION>
MICHIGAN
TREASURY MUNICIPAL MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET MONEY MARKET
FUND FUND FUND FUND
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares 0.75% .075% 0.75% 0.75%
Class B Shares 1.50% N/A N/A N/A
Class I Shares 0.50% 0.50% 0.50% 0.50%
</TABLE>
Pegasus maintains an unfunded, nonqualified deferred compensation plan. This
plan allows an individual Trustee to elect to defer receipt of all or a
percentage of fees which otherwise would be payable for services performed.
The Funds' Class A shares and Class B shares have a Shareholder Services Plan
(the "Plan") pursuant to which the Funds pay the Distributor a fee, at an
annual rate of 0.25% of the average daily net assets of the outstanding Class A
shares and Class B shares. Pursuant to the terms of the Plan, the Distributor
has agreed to provide certain shareholder services to the holders of these
shares. Additionally, under the terms of the Plan, the Distributor may make
payments to other shareholder service agents which may include FCNIMCO and
their affiliates. For the period ended June 30, 1998, the Money Market Funds
paid the following amounts under the Plan:
<TABLE>
<CAPTION>
AMOUNTS PAID
- ------------------------------------------------
<S> <C>
Money Market Fund $1,349,403
Treasury Money Market Fund 270,760
Municipal Money Market Fund 259,617
Michigan Municipal Money
Market Fund 39,892
</TABLE>
The Money Market Fund's Class B shares have a distribution plan adopted
pursuant to Rule 12b-1 under the Act (the "12b-1 Plan") pursuant to which the
Money Market Fund has agreed to pay the Distributor for advertising, marketing
and distributing Class B shares of the Money Market Fund at an annual rate of
0.75% of the average net assets of the Money Market Fund's outstanding Class B
shares. Under the terms of the 12b-1 Plan, the Distributor may make payments to
FCNIMCO and their affiliates with respect to these services. For the period
ended June 30, 1998, the Money Market Fund paid $1,900 under the 12b-1 Plan
which was retained by the Distributor.
Pegasus Funds
21
<PAGE>
PEGASUS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
(5)CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Funds are summarized below:
<TABLE>
<CAPTION>
MONEY MARKET FUND
<S> <C> <C> <C> <C>
<CAPTION>
TREASURY MONEY MARKET FUND
<S> <C> <C> <C> <C>
----------------------------------------------------------------
<CAPTION>
Six Months Ended For the year ended
June 30, 1998 (Unaudited) December 31, 1997
<S> <C> <C> <C> <C>
<CAPTION>
Amount Shares Amount Shares
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Shares Issued $ 2,825,495,116 2,825,495,116 $ 4,662,663,756 4,662,663,756
Dividends Reinvested 25,317,312 25,317,312 39,487,594 39,487,594
Shares Redeemed (2,657,387,032) (2,657,387,032) (4,456,727,929) (4,456,727,929)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) $ 193,425,396 193,425,396 $ 245,423,421 245,423,421
- --------------------------------------------------------------------------------------------------
CLASS B SHARES:
Shares Issued $ 1,711,204 1,711,204 $ 3,505,576 3,505,576
Dividends Reinvested 10,351 10,351 24,606 24,606
Shares Redeemed (879,808) (879,808) (3,334,960) (3,334,960)
- --------------------------------------------------------------------------------------------------
Net increase $ 841,747 841,747 $ 195,222 195,222
- --------------------------------------------------------------------------------------------------
CLASS I SHARES:
Shares Issued $ 2,327,430,004 2,327,430,004 $ 5,021,318,728 5,021,318,728
Dividends Reinvested 10,240,841 10,240,841 20,279,977 20,279,977
Shares Redeemed (2,015,417,869) (2,015,417,869) (5,539,038,130) (5,539,038,130)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) $ 322,252,976 322,252,976 $ (497,439,425) (497,439,425)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund $ 516,520,119 516,520,119 $ (251,820,782) (251,820,782)
- --------------------------------------------------------------------------------------------------
<CAPTION>
Six Months Ended For the year ended
June 30, 1998 (Unaudited) December 31, 1997
<S> <C> <C> <C> <C>
----------------------------------------------------------------
<CAPTION>
Amount Shares Amount Shares
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Shares Issued $ 546,356,776 546,356,776 $ 1,093,249,460 1,093,249,460
Dividends Reinvested 5,039,733 5,039,733 8,689,041 8,689,041
Shares Redeemed (566,344,821) (566,344,821) (1,082,286,729) (1,082,286,729)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) $ (14,948,312) (14,948,312) $ 19,651,772 19,651,772
- --------------------------------------------------------------------------------------------------
CLASS B SHARES:
Shares Issued -- -- -- --
Dividends Reinvested -- -- -- --
Shares Redeemed -- -- -- --
- --------------------------------------------------------------------------------------------------
Net increase -- -- -- --
- --------------------------------------------------------------------------------------------------
CLASS I SHARES:
Shares Issued $2,046,422,213 2,046,422,213 $ 3,634,998,084 3,634,998,084
Dividends Reinvested 1,926,761 1,926,761 4,928,721 4,928,721
Shares Redeemed (1,950,537,504) (1,950,537,504) (3,949,857,520) (3,949,857,520)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) $ 97,811,470 97,811,470 $ (309,930,715) (309,930,715)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund $ 82,863,158 82,863,158 $ (290,278,943) (290,278,943)
- --------------------------------------------------------------------------------------------------
</TABLE>
Pegasus Funds
22
<PAGE>
PEGASUS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
(5)CAPITAL SHARE TRANSACTIONS
TRANSACTIONS IN SHARES OF THE FUNDS ARE SUMMARIZED BELOW:
<TABLE>
<CAPTION>
MUNICIPAL MONEY MARKET FUND
<S> <C> <C> <C> <C>
<CAPTION>
MICHIGAN MUNICIPAL MONEY MARKET FUND
<S> <C> <C> <C> <C>
---------------------------------------------------------
<CAPTION>
Six Months Ended For the year ended
June 30,1998 (Unaudited) December 31, 1997
<S> <C> <C> <C> <C>
<CAPTION>
Amount Shares Amount Shares
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Shares Issued $ 361,630,041 361,630,041 $ 489,667,505 489,667,505
Dividends Reinvested 2,927,813 2,927,813 5,398,206 5,398,206
Shares Redeemed (359,788,237) (359,788,237) (472,764,413) (472,764,413)
- --------------------------------------------------------------------------------------
Net increase (decrease) $ 4,769,617 4,769,617 $ 22,301,298 22,301,298
- --------------------------------------------------------------------------------------
CLASS I SHARES:
Shares Issued $ 572,005,030 572,005,030 $ 1,737,844,432 1,737,844,432
Dividends Reinvested 363,196 363,196 615,941 615,941
Shares Redeemed (541,792,285) (541,792,285) (1,845,603,982) (1,845,603,982)
- --------------------------------------------------------------------------------------
Net increase (decrease) $ 30,575,941 30,575,941 $ (107,143,609) (107,143,609)
- --------------------------------------------------------------------------------------
Net increase (decrease)
in Fund $ 35,345,558 35,345,558 $ (84,842,311) (84,842,311)
- --------------------------------------------------------------------------------------
<CAPTION>
Six Months Ended For the year ended
June 30,1998 (Unaudited) December 31, 1997
<S> <C> <C> <C> <C>
---------------------------------------------------------
<CAPTION>
Amount Shares Amount Shares
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES:
Shares Issued $ 47,754,865 47,754,865 $ 151,616,093 151,616,093
Dividends Reinvested 421,207 421,207 1,604,993 1,604,993
Shares Redeemed (40,148,067) (40,148,067) (196,108,154) (196,108,154)
- --------------------------------------------------------------------------------------
Net increase (decrease) $ 8,028,005 8,028,005 $ (42,887,068) (42,887,068)
- --------------------------------------------------------------------------------------
CLASS I SHARES:
Shares Issued $ 129,097,699 129,097,699 $ 233,991,240 233,991,240
Dividends Reinvested 25,935 25,935 83,422 83,422
Shares Redeemed (133,492,084) (133,492,084) (208,707,516) (208,707,516)
- --------------------------------------------------------------------------------------
Net increase (decrease) $ (4,368,450) (4,368,450) $ 25,367,146 25,367,146
- --------------------------------------------------------------------------------------
Net increase (decrease)
in Fund $ 3,659,555 3,659,555 $ (17,519,922) (17,519,922)
- --------------------------------------------------------------------------------------
</TABLE>
Pegasus Funds
23
<PAGE>
PEGASUS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
(6)PORTFOLIO COMPOSITION
The Michigan Municipal Money Market Fund does not have a diversified portfolio
since 100% of its investments are within the State of Michigan. Such
concentrations within a particular state may subject the fund more
significantly to economic changes occurring within that state.
(7)ILLIQUID SECURITIES
The Pegasus Money Market Funds may invest not more than 10% of the value of
their net assets in securities that are illiquid. Illiquid investments may
include securities having legal or contractual restrictions on resale or no
readily available market. At June 30, 1998, the Pegasus Money Market Fund owned
the following restricted securities (constituting 6.6% 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 discretion 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>
JUNE 30,
ACQUISITION PAR VALUE 1998 PERCENTAGE
SECURITY DATE VALUE PER UNIT VALUE OF NET ASSETS COST
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allstate Life Insurance Company 4/18/95 $10,000,000 $1.00 $ 10,000,000 0.4% $ 10,000,000
Commonwealth Life Insurance Company 4/18/95 5,000,000 1.00 5,000,000 0.2 5,000,000
Travelers Life Insurance Company 11/06/97 25,000,000 1.00 25,000,000 0.9 25,000,000
Peoples Security Life Insurance
Company 04/18/95 10,000,000 1.00 10,000,000 0.4 10,000,000
Providian Life & Health Insurance
Company 5/13/98 40,000,000 1.00 40,000,000 1.5 40,000,000
SunAmerica Life Insurance Company 07/01/97 14,000,000 1.00 14,000,000 0.5 14,000,000
SunAmerica Life Insurance Company 4/18/95 25,000,000 1.00 25,000,000 0.9 25,000,000
Transamerica Life Insurance and
Annuity Company 12/09/96 50,000,000 1.00 50,000,000 1.8 50,000,000
- -------------------------------------------------------------------------------------------------------------
$179,000,000 6.6% $179,000,000
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Pegasus Funds
24
<PAGE>
[INTENTIONALLY LEFT BLANK]
Pegasus Funds
25
<PAGE>
PEGASUS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights present a per share analysis of net investment income
and distributions from net investment income for the Money Market 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 Money Market Funds and other information for the periods presented.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE NET AND UNREALIZED TOTAL FROM FROM NET
BEGINNING INVESTMENT LOSSES ON INVESTMENT INVESTMENT TOTAL
OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME DISTRIBUTIONS
--------- ---------- -------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
MONEY MARKET FUND
CLASS A
SHARES
SIX MONTHS
ENDED
6/30/98
(UNAUDITED) $1.0000 0.0247 -- 0.0247 (0.0247) (0.0247)
December 31,
1997 $1.0000 0.0491 -- 0.0491 (0.0491) (0.0491)
December 31,
1996 $1.0000 0.0488 -- 0.0488 (0.0488) (0.0488)
December 31,
1995 $1.0000 0.0549 -- 0.0549 (0.0549) (0.0549)
December 31,
1994 $1.0000 0.0378 -- 0.0378 (0.0378) (0.0378)
December 31,
1993 $1.0000 0.0281 -- 0.0281 (0.0281) (0.0281)
CLASS B
SHARES
SIX MONTHS
ENDED
6/30/98
(UNAUDITED) $1.0000 0.0209 -- 0.0209 (0.0209) (0.0209)
December 31,
1997 $1.0000 0.0421 -- 0.0421 (0.0421) (0.0421)
December 31,
1996(/1/) $1.0000 0.0117 -- 0.0117 (0.0117) (0.0117)
CLASS I
SHARES
SIX MONTHS
ENDED
6/30/98
(UNAUDITED) $1.0000 0.0260 -- 0.0260 (0.0260) (0.0260)
December 31,
1997 $1.0000 0.0516 -- 0.0516 (0.0516) (0.0516)
December 31,
1996(/2/) $1.0000 0.0373 -- 0.0373 (0.0373) (0.0373)
- ----------------------------------------------------------------------------------------
TREASURY MONEY MARKET FUND
CLASS A
SHARES
SIX MONTHS
ENDED
6/30/98
(UNAUDITED) $0.9999 0.0242 -- 0.0242 (0.0242) (0.0242)
December 31,
1997 $0.9999 0.0481 -- 0.0481 (0.0481) (0.0481)
December 31,
1996 $1.0000 0.0474 (0.0001) 0.0473 (0.0474) (0.0474)
December 31,
1995 $1.0000 0.0539 -- 0.0539 (0.0539) (0.0539)
December 31,
1994 $1.0000 0.0370 -- 0.0370 (0.0370) (0.0370)
December 31,
1993 $1.0000 0.0273 -- 0.0273 (0.0273) (0.0273)
CLASS I
SHARES
SIX MONTHS
ENDED
6/30/98
(UNAUDITED) $1.0000 0.0254 -- 0.0254 (0.0254) (0.0254)
December 31,
1997 $1.0000 0.0507 -- 0.0507 (0.0507) (0.0507)
December 31,
1996(/2/) $1.0000 0.0361 -- 0.0361 (0.0361) (0.0361)
- ----------------------------------------------------------------------------------------
MUNICIPAL MONEY MARKET FUND
CLASS A
SHARES
SIX MONTHS
ENDED
6/30/98
(UNAUDITED) $0.0997 0.0143 -- 0.0143 (0.0143) (0.0143)
December 31,
1997 $0.9997 0.0296 -- 0.0296 (0.0296) (0.0296)
December 31,
1996 $1.0000 0.0295 (0.0003) 0.0292 (0.0295) (0.0295)
December 31,
1995 $1.0000 0.0335 -- 0.0335 (0.0335) (0.0335)
December 31,
1994 $1.0000 0.0242 -- 0.0242 (0.0242) (0.0242)
December 31,
1993 $1.0000 0.0196 -- 0.0196 (0.0196) (0.0196)
CLASS I
SHARES
SIX MONTHS
ENDED
6/30//98
(UUNAUDITED) $0.9999 0.0155 -- 0.0155 (0.0155) (0.0155)
December 31,
1997 $1.0000 0.0322 (0.0001) 0.0321 (0.0322) (0.0322)
December 31,
1996(/2/) $1.0000 0.0232 -- 0.0232 (0.0232) (0.0232)
- ----------------------------------------------------------------------------------------
MICHIGAN MUNICIPAL MONEY MARKET FUND
CLASS A
SHARES
SIX MONTHS
ENDED
6/30/98
(UNAUDITED) $1.0000 0.0139 -- 0.0139 (0.0139) (0.0139)
December 31,
1997 $1.0000 0.0296 -- 0.0296 (0.0296) (0.0296)
December 31,
1996 $1.0000 0.0289 -- 0.0289 (0.0289) (0.0289)
December 31,
1995 $1.0000 0.0329 -- 0.0329 (0.0329) (0.0329)
December 31,
1994 $1.0000 0.0235 -- 0.0235 (0.0235) (0.0235)
December 31,
1993 $1.0000 0.0181 -- 0.0181 (0.0181) (0.0181)
CLASS I
SHARES
SIX MONTHS
ENDED
6/30/98
(UNAUDITED) $1.0000 0.0152 -- 0.0152 (0.0152) (0.0152)
December 31,
1997 $1.0000 0.0321 -- 0.0321 (0.0321) (0.0321)
December 31,
1996(/2/) $1.0000 0.0225 -- 0.0225 (0.0225) (0.0225)
- ----------------------------------------------------------------------------------------
</TABLE>
(/1/For)the period September 14, 1996 (initial offering of Class B Shares)
through December 31, 1996.
(/2/For)the period March 30, 1996 (initial offering date of Class I Shares)
through December 31, 1996.
+ Annualized.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Pegasus Funds
26
<PAGE>
PEGASUS MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIO OF
RATIO OF NET EXPENSES
RATIO OF INVESTMENT TO AVERAGE NET
NET ASSETS EXPENSES INCOME TO ASSETS (EXCLUDING
NET ASSET VALUE END OF PERIOD TO AVERAGE NET AVERAGE NET FEE WAIVERS AND
END OF PERIOD TOTAL RETURN (000'S OMITTED) ASSETS ASSETS REIMBURSEMENTS)
- --------------- ------------ --------------- -------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
$1.0000 5.00%+ $1,167,246 0.75%+ 4.95%+ 0.75%+
$1.0000 5.04% $ 973,821 0.74% 4.90% 0.74%
$1.0000 4.99% $ 728,397 0.63% 4.87% --
$1.0000 5.63% $1,639,695 0.51% 5.49% --
$1.0000 3.86% $1,323,040 0.47% 3.78% --
$1.0000 2.85% $1,326,693 0.49% 2.81% --
$1.0000 4.22%+ $ 1,180 1.50%+ 4.20%+ 1.50%+
$1.0000 4.29% $ 338 1.49% 4.15% 1.49%
$1.0000 4.70%+ $ 143 1.48%+ 3.99%+ --
$1.0000 5.26%+ $1,540,126 0.50%+ 5.20%+ 0.50%+
$1.0000 5.29% $1,217,873 0.49% 5.15% 0.49%
$1.0000 5.06%+ $1,715,313 0.51%+ 4.99%+ --
- -------------------------------------------------------------------------------------------
$0.9999 4.88%+ $ 219,101 0.70%+ 4.84%+ --
$0.9999 4.92% $ 234,050 0.70% 4.80% --
$0.9999 4.83% $ 214,398 0.56% 4.82% --
$1.0000 5.53% $ 927,696 0.53% 5.39% --
$1.0000 3.77% $ 785,694 0.50% 3.70% --
$1.0000 2.77% $ 854,873 0.50% 2.73% --
$1.0000 5.14%+ $ 843,484 0.45%+ 5.09%+ --
$1.0000 5.18% $ 745,673 0.45% 5.05% --
$1.0000 4.89%+ $1,055,604 0.53%+ 4.85%+ --
- -------------------------------------------------------------------------------------------
$0.9997 2.88%+ $ 209,296 0.72%+ 2.86%+ --
$0.9997 3.01% $ 204,527 0.73% 2.96% --
$0.9997 2.96% $ 182,226 0.60% 2.97% --
$1.0000 3.41% $ 564,413 0.53% 3.35% --
$1.0000 2.45% $ 550,736 0.51% 2.42% --
$1.0000 1.98% $ 498,706 0.51% 1.96% --
$0.9999 3.12%+ $ 555,368 0.47%+ 3.11%+ --
$0.9999 3.26% $ 524,793 0.48% 3.21% --
$1.0000 3.13%+ $ 631,938 0.51%+ 3.06%+ --
- -------------------------------------------------------------------------------------------
$1.0000 2.80%+ $ 37,230 0.75%+ 2.79%+ 0.76%+
$1.0000 3.00% $ 29,202 0.75% 2.95% 0.79%
$1.0000 2.93% $ 72,089 0.74% 2.87% 0.77%
$1.0000 3.32% $ 122,057 0.69% 3.30% 0.76%
$1.0000 2.38% $ 78,640 0.67% 2.35% 0.75%
$1.0000 1.83% $ 52,557 0.65% 1.81% --
$1.0000 3.06%+ $ 70,519 0.50%+ 3.04%+ 0.51%+
$1.0000 3.26% $ 74,888 0.50% 3.20% 0.54%
$1.0000 3.03%+ $ 49,521 0.59%+ 3.02%+ 0.62%+
- -------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Pegasus Funds
27
