<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, 1998
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, BANK ONE CORPORATION OR ITS AFFILIATES,
AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, FEDERAL
DEPOSIT INSURANCE CORPORATION, OR ANY GOVERNMENTAL AGENCY. AN INVESTMENT IN
THE FUND IS NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENT
AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT
$1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
<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
Schedule of Portfolio Investments.................. 7
Notes to Financial Statements...................... 24
Financial Highlights............................... 32
Report of Independent Public Acoountants........... 35
</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>
A MESSAGE FROM THE INVESTMENT ADVISER
December 31, 1998
Dear Shareholder:
1998 Money Market in Review
The domestic economy continued to grow at a robust pace in 1998 despite global
economic turmoil. Many believed that the Asian and Russian financial problems
would spill over to the United States and cause an economic slowdown or even a
recession. Anticipating that some of the global financial problems would lead
to slower growth at home, the Federal Reserve made three quarter-point rate
cuts in September, October and November. As a result, the federal funds rate
stood at 4.75% on December 31, 1998, compared to 5.50% a year earlier.
The U.S. economy continued to enjoy some of the lowest inflation in many years.
As measured by the Consumer Price Index (CPI), inflation was up only 1.6% in
1998, which followed a 1.7% increase in 1997. Employment also remained strong,
with December's unemployment rate only 4.3%.
Short-term interest rates generally were lower than they were in 1997, with the
one-year Treasury bill yielding 4.52% at year-end 1998 versus 5.48% at year-end
1997. Likewise, money market fund yields dropped in 1998 and are likely to
continue to do so in 1999, as securities purchased in a higher interest rate
environment mature and the cash is reinvested at lower rates.
Municipal Money Market Review
Because of tremendous asset growth, lack of fixed-rate note supply and the
series of Federal Reserve rate cuts, tax-exempt money yields experienced
downward pressure throughout much of 1998. Investors continued to pour cash
into the market throughout the year, as witnessed by the sector growing to
$187.6 billion, compared to year-end 1997 levels of $159.8 billion, an increase
of 17.3%. In January alone, cash inflows totaled $8.8 billion, which set the
tone for generally lower yields throughout the year. By mid-April, positive
cash flows temporarily, and violently, reversed course, as more than $11
billion of liquidity was lost primarily due to payments of corporate and
individual tax liabilities.
The second half of any calendar year usually provides opportunities for bond
fund managers to extend maturities. However, the anticipated primary note
issuance did not materialize in 1998, as governmental coffers experienced
budget surpluses that mitigated the need to seek financing in the note market.
Additionally, the tremendous growth of "derivitized" municipal paper, whereby
fixed-rate notes are restructured into variable-rate securities, further
weakened an already supply-strained note market. In addition, the third- and
fourth-quarter rate cuts further exacerbated downward pressure on short-term
tax-exempt interest rates during 1998.
<PAGE>
Pending Merger Transaction
On October 2, 1998, First Chicago NBD Corporation, parent company to First
Chicago NBD Investment Management Company, merged with and into BANC ONE
CORPORATION at which time it was renamed BANK ONE CORPORATION. BANK ONE
CORPORATION has now begun the process of reorganizing the Pegasus Funds into
The One Group Family of Mutual Funds. In January, 1999, the Boards of Trustees
of the Pegasus Funds approved a proposed Agreement and Plan of Reorganization,
which is subject to Pegasus shareholder approval. If you were a shareholder as
of the December 18, 1998 record date, you should have now received a combined
proxy/prospectus which outlines in more detail the proposed Agreement and Plan
of Reorganization. Assuming approval by Pegasus shareholders, it is anticipated
the reorganization transaction will occur in March, 1999. We realize that you
have many choices when it comes to mutual fund investing, and we appreciate you
selecting the Pegasus Funds.
Sincerely,
/s/ George F. Abel
George F. Abel
Chief Investment Officer
First Chicago NBD Investment Management Company
The Fund's income may be subject to certain state and local taxes and,
depending on your tax status the federal alternative minimum tax.
<PAGE>
Pegasus Cash Management Funds
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Treasury Treasury Prime U.S. Government
Cash Cash Cash Securities Cash Municipal Cash
Management Management Management Management Management
Fund Fund Fund Fund Fund
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments, at amor-
tized cost $2,504,713,135 $ 65,461,391 $652,772,163 $ 706,976,313 $647,864,469
Repurchase agreements,
at cost 97,501,000 298,185,000 -- 873,034,000 --
- -----------------------------------------------------------------------------------------------------
Total 2,602,214,135 363,646,391 652,772,163 1,580,010,313 647,864,469
Cash 388 176 6,054,017 998 124,311
Interest receivable 8,715,495 1,276,448 2,634,230 2,986,817 3,832,550
Receivable from brokers
for investments sold -- -- -- 1,965,000 --
Deferred organization
costs, net 36,745 16,366 11,589 33,758 15,678
- -----------------------------------------------------------------------------------------------------
TOTAL ASSETS 2,610,966,763 364,939,381 661,471,999 1,584,996,886 651,837,008
- -----------------------------------------------------------------------------------------------------
LIABILITIES:
Accrued investment advi-
sory fees 356,616 45,413 69,175 270,298 92,006
Accrued administration
fees 356,615 48,657 74,505 212,182 86,255
Shareholder service fees
payable (Service
Shares) 843,039 214,839 252,047 345,773 43,853
Accrued custodian fees 7,549 1,104 1,901 1,941 5,386
Dividends payable 11,315,897 1,388,466 1,941,457 6,399,914 1,698,115
Other payables and ac-
crued expenses 214,913 30,211 60,331 166,555 66,156
- -----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 13,094,629 1,728,690 2,399,416 7,396,663 1,991,771
- -----------------------------------------------------------------------------------------------------
NET ASSETS $2,597,872,134 $363,210,691 $659,072,583 $1,577,600,223 $649,845,237
- -----------------------------------------------------------------------------------------------------
NET ASSET VALUE AND RE-
DEMPTION PRICE
PER SHARE:
Institutional Shares:
Net assets $1,076,044,889 $ 32,195,940 $189,629,535 $1,017,830,072 $588,601,864
Capital shares 1,076,203,889 32,195,940 189,631,215 1,018,236,471 588,601,864
- -----------------------------------------------------------------------------------------------------
Net asset value and re-
demption price per
share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------------------
Service Shares:
Net assets $1,521,827,245 $331,014,751 $469,443,048 $ 559,770,151 $ 61,243,373
Capital shares 1,521,870,142 331,014,751 469,439,832 559,871,101 61,243,373
- -----------------------------------------------------------------------------------------------------
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) $ 25,980,740 $ 3,632,107 $ 6,590,710 $ 15,781,076 $ 6,498,452
Additional paid-in cap-
ital 2,571,931,219 359,578,584 652,480,337 1,562,190,373 643,346,785
Accumulated undistrib-
uted net investment
income (loss) 162,074 -- 15,581 136,123 --
Accumulated
undistributed net
realized
gains (losses) (201,899) -- (14,045) (507,349) --
- -----------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $2,597,872,134 $363,210,691 $659,072,583 $1,577,600,223 $649,845,237
- -----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
3
<PAGE>
Pegasus Cash Management Funds
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For The Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Treasury Treasury Prime U.S. Government Municipal
Cash Management Cash Management Cash Management Securities Cash Cash Management
Fund Fund Fund Management Fund Fund
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME $120,725,661 $17,120,153 $19,736,100 $75,361,901 $17,121,184
- ---------------------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fee 4,310,762 634,363 799,120 2,760,668 984,583
Administration fees 3,233,072 475,772 599,340 2,067,835 738,438
Service plan fees
(Service Shares) 2,930,146 749,800 790,269 1,139,266 154,695
Custodial fees 47,672 4,780 8,444 9,867 10,695
Registration and filing
fees 197,691 33,174 38,997 123,635 53,499
Professional fees 78,570 34,000 34,910 53,746 36,962
Amortization of de-
ferred organization
costs 34,675 4,431 25,550 32,120 4,322
Transfer agent fee 251,407 16,501 20,367 73,745 28,944
Other expenses 298,393 43,219 78,746 -- 46,953
- ---------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 11,382,388 1,996,040 2,395,743 6,260,882 2,059,091
- ---------------------------------------------------------------------------------------------------------
Less: Expense reim-
bursements (907,915) (136,100) (207,054) (295,457) (179,890)
- ---------------------------------------------------------------------------------------------------------
NET EXPENSES 10,474,473 1,859,940 2,188,689 5,965,425 1,879,201
- ---------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME $110,251,188 $15,260,213 $17,547,411 $69,396,476 $15,241,983
- ---------------------------------------------------------------------------------------------------------
NET REALIZED GAINS
(LOSSES) ON INVESTMENTS 1 -- (205) 4,002 --
- ---------------------------------------------------------------------------------------------------------
NET INCREASE IN NET
ASSETS FROM OPERATIONS $110,251,189 $15,260,213 $17,547,206 $69,400,478 $15,241,983
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
Pegasus Funds
4
<PAGE>
Pegasus Cash Management Funds
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Treasury
Cash Management
Cash Management Fund Fund
---------------------------------------------------------------------------
Year Ended Year Ended Year Ended Period Ended
December 31, 1998 December 31, 1997 December 31, 1998 December 31, 1997(a)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 110,251,188 $ 50,222,489 $ 15,260,213 $ 3,335,785
Net realized gains
(losses) on
investments 1 -- -- --
- ----------------------------------------------------------------------------------------------------
Net increase in net
assets from operations 110,251,189 50,222,489 15,260,213 3,335,785
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM NET
INVESTMENT INCOME:
Institutional Shares (51,233,991) (25,209,373) (857,169) (25,600)
Service Shares (59,017,197) (25,013,116) (14,403,044) (3,310,185)
- ----------------------------------------------------------------------------------------------------
Total distributions to
shareholders (110,251,188) (50,222,489) (15,260,213) (3,335,785)
- ----------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold 15,928,731,741 9,535,537,549 1,952,248,975 569,961,617
Proceeds from shares
issued in connection
with conversion of
common trust funds 149,307,531 -- -- --
Net asset value of
shares issued in
reinvestment of
distributions to
shareholders 4,515,655 4,462,385 35,987 --
- ----------------------------------------------------------------------------------------------------
16,082,554,927 9,539,999,934 1,952,284,962 569,961,617
Less: payments for
shares redeemed (15,182,715,632) (8,960,162,558) (1,795,646,276) (363,389,612)
- ----------------------------------------------------------------------------------------------------
Net increase in net
assets from capital
share transactions 899,839,295 579,837,376 156,638,686 206,572,005
- ----------------------------------------------------------------------------------------------------
NET INCREASE IN NET
ASSETS 899,839,296 579,837,376 156,638,686 206,572,005
NET ASSETS:
Beginning of period 1,698,032,838 1,118,195,462 206,572,005 --
- ----------------------------------------------------------------------------------------------------
End of period $ 2,597,872,134 $ 1,698,032,838 $ 363,210,691 $ 206,572,005
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period from September 12, 1997 (commencement of operations) through
December 31, 1997.
See Notes to Financial Statements.
Pegasus Funds
5
<PAGE>
Pegasus Cash Management Funds
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Treasury Prime U.S. Government Securities
Cash Management Fund Cash Management Fund Municipal Cash Management Fund
-----------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Period Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1998 1997 1998 1997 1998 1997(b)
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 17,547,411 $ 11,652,050 $ 69,396,476 $ 37,744,030 $ 15,241,983 $ 2,483,210
Net realized gains
(losses) on
investments (205) (507) 4,002 4,536 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net increase in net
assets from
operations 17,547,206 11,651,543 69,400,478 37,748,566 15,241,983 2,483,210
- -----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM NET
INVESTMENT INCOME:
Institutional Shares (3,799,331) (1,457,277) (47,200,518) (24,156,026) (13,431,666) (1,845,036)
Service Shares (13,748,080) (10,194,773) (22,195,958) (13,588,004) (1,810,317) (638,174)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions to
shareholders (17,547,411) (11,652,050) (69,396,476) (37,744,030) (15,241,983) (2,483,210)
- -----------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
Proceeds from shares
sold 2,166,525,086 2,338,002,420 7,981,715,196 5,164,514,378 1,792,891,234 523,029,206
Proceeds from shares
issued in connection
with conversion of
common trust funds -- -- -- -- 178,163,818 --
Net asset value of
shares issued in
reinvestment of
distributions to
shareholders 903,849 395,431 1,683,915 1,116,975 95,406 13,719
- -----------------------------------------------------------------------------------------------------------------------------
2,167,428,935 2,338,397,851 7,983,399,111 5,165,631,353 1,971,150,458 523,042,925
Less: payments for
shares redeemed (1,832,759,109) (2,299,154,786) (7,297,830,410) (4,849,816,940) (1,579,543,976) (264,804,170)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase in net
assets from capital
share transactions 334,669,826 39,243,065 685,568,701 315,814,413 391,606,482 258,238,755
- -----------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET
ASSETS 334,669,621 39,242,558 685,572,703 315,818,949 391,606,482 258,238,755
NET ASSETS:
Beginning of period 324,402,962 285,160,404 892,027,520 576,208,571 258,238,755 --
- -----------------------------------------------------------------------------------------------------------------------------
End of period $ 659,072,583 $ 324,402,962 $ 1,577,600,223 $ 892,027,520 $ 649,845,237 $ 258,238,755
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(b) For the period from August 18, 1997 (commencement of operations) through
December 31, 1997.
See Notes to Financial Statements.
Pegasus Funds
6
<PAGE>
Pegasus Cash Management Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Principal Cost
Amount (Note 2)
--------- ---------
<S> <C> <C>
CERTIFICATES OF DEPOSIT -- 6.2%
Banking -- 1.5%
Chase Manhattan Bank, 4.86%, 4/21/99.............. $ 40,000,000 $ 40,000,000
--------------
Banking -- Foreign -- 4.7%
Bank Of Nova Scotia, 5.65%, 3/23/99............... 20,000,000 19,994,750
Banque Nationale De Paris, 5.65%, 2/26/99......... 23,000,000 22,998,306
Bayerische Landesbank Girozentrale, 5.64%,
3/15/99.......................................... 15,000,000 14,997,950
Credit Agricole Indosuez, 5.75%, 4/26/99.......... 2,000,000 1,999,681
Credit Suisse First Boston Bank, 5.80%, 6/11/99... 10,000,000 10,000,000
Societe Generale, 5.69%, 7/16/99.................. 20,000,000 20,084,412
Swiss Bank Corp., 5.74%, 6/11/99.................. 12,000,000 11,996,959
Westpac Banking Corp., 5.73%, 4/16/99............. 18,000,000 17,998,264
--------------
120,070,322
--------------
TOTAL CERTIFICATES OF DEPOSIT...................... 160,070,322
--------------
COMMERCIAL PAPER -- 51.0%
Banking -- 4.6%
Bank Of Nova Scotia, 5.19%, 1/6/99................ 50,000,000 49,963,958
Morgan JP & Co., 4.92%, 4/21/99................... 20,000,000 19,706,667
Republic New York Corp., 5.20%, 1/13/99........... 50,000,000 49,913,333
--------------
119,583,958
--------------
Banking -- Foreign -- 3.8%
Dresdner Bank AG, 5.26%, 1/7/99................... 50,000,000 49,956,750
UBS Finance (De) Inc., 4.90%, 5/20/99............. 50,000,000 49,054,028
--------------
99,010,778
--------------
Commercial Loans -- 2.6%
Greenwich Funding Corp., 5.25%, 1/5/99............ 35,000,000 34,979,763
Rose Inc., 5.60%, 1/11/99......................... 32,067,000 32,017,118
--------------
66,996,881
--------------
Loans -- 1.2%
Centric Capital Corp., 5.32%, 1/15/99............. 30,000,000 29,938,342
--------------
</TABLE>
Pegasus Funds
7
<PAGE>
Pegasus Cash Management Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- (Continued)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Principal Cost
Amount (Note 2)
--------- ---------
<S> <C> <C>
Receivables -- 3.3%
Quincy Capital Corp., 5.45%, 1/15/99.............. $ 35,561,000 $ 35,485,630
Quincy Capital Corp., 5.34%, 1/26/99.............. 50,000,000 49,814,584
--------------
85,300,214
--------------
Securities -- 4.6%
Sigma Finance Inc., 5.29%, 1/21/99................ 30,000,000 29,913,000
Sigma Finance Inc., 5.06%, 5/24/99................ 30,000,000 29,397,017
Trident Capital Finance Inc., 5.33%, 1/11/99...... 30,000,000 29,956,083
Trident Capital Finance Inc., 5.27%, 1/19/99...... 30,000,000 29,922,000
--------------
119,188,100
--------------
Sovereign -- 1.3%
Quebec (Province Of), 5.44%, 1/14/99.............. 35,000,000 34,931,244
--------------
Trade Rec./CC Rec./Auto Loan Rec. -- 6.5%
Barton Capital Corp., 5.38%, 1/13/99.............. 25,000,000 24,955,167
Corporate Receivables Corp., 5.50%, 1/4/99........ 30,000,000 29,986,250
Corporate Receivables Corp., 5.19%, 3/3/99........ 30,000,000 29,736,175
Windmill Funding Corp., 5.32%, 1/8/99............. 35,000,000 34,964,271
Windmill Funding Corp., 5.35%, 1/28/99............ 50,000,000 49,799,375
--------------
169,441,238
--------------
Trade/Term Receivables -- 23.1%
Amsterdam Funding Corp., 5.40%, 1/25/99........... 45,296,000 45,132,934
Apreco Inc., 5.16%, 2/8/99........................ 35,000,000 34,812,322
Aspen Funding Corp., 4.95%, 5/24/99............... 25,000,000 24,508,438
Ciesco L.P., 5.35%, 1/11/99....................... 50,000,000 49,925,694
Ciesco L.P., 5.30%, 1/20/99....................... 50,000,000 49,860,139
CXC Inc., 5.29%, 2/9/99........................... 50,000,000 49,713,458
CXC Inc., 5.25%, 2/17/99.......................... 25,000,000 24,828,646
Delaware Funding Corp., 5.33%, 2/10/99............ 50,000,000 49,703,889
Mont Blanc Capital Corp., 5.42%, 1/26/99.......... 11,040,000 10,998,983
Mont Blanc Capital Corp., 5.42%, 1/29/99.......... 30,000,000 29,875,167
Monte Rosa Capital Corp., 5.35%, 1/11/99.......... 15,000,000 14,977,708
Newport Funding Corp., 5.25%, 1/4/99.............. 100,000,000 99,956,251
Sheffield Receivables Corp., 5.52%, 1/25/99....... 15,150,000 15,094,248
Special Purpose Accounts Receivable, 5.23%,
1/28/99.......................................... 30,000,000 29,882,325
Variable Funding Capital Corp., 5.25%, 3/3/99..... 20,000,000 19,822,083
</TABLE>
Pegasus Funds
8
<PAGE>
Pegasus Cash Management Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- (Continued)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Principal Cost
Amount (Note 2)
--------- ---------
<S> <C> <C>
WCP Funding Inc., 5.47%, 1/12/99.................. $ 25,000,000 $ 24,958,215
WCP Funding Inc., 5.25%, 2/12/99.................. 30,000,000 29,819,050
--------------
603,869,550
--------------
TOTAL COMMERCIAL PAPER............................. 1,328,260,305
--------------
CORPORATE NOTES -- 7.1%
Automotive -- 0.2%
GE Engine Receivables Trust, 5.60%, 2/14/00*...... 6,031,500 6,031,500
--------------
Banking -- 3.5%
Abbey National Treasury Services, 5.72%, 6/11/99.. 27,000,000 26,990,877
Key Bank, 5.80%, 2/24/99*......................... 37,500,000 37,496,038
PNC Bank, 5.56%, 10/12/99*........................ 25,000,000 25,000,000
--------------
89,486,915
--------------
Brokerage Services -- 1.3%
Morgan Guaranty Trust Co., 5.57%, 9/27/99*........ 35,000,000 34,989,984
--------------
Transportation -- 0.7%
Wilmington Trust Co. (Del), Series B, Amtrak 93-B,
5.60%, 1/1/13*................................... 17,755,160 17,755,160
--------------
Various Receivables -- 1.4%
Strats Trust 1998-C, 144A, 5.57%, 4/13/99*........ 35,000,000 34,999,949
--------------
TOTAL CORPORATE NOTES.............................. 183,263,508
--------------
FUNDING AGREEMENTS -- 9.5%
Insurance -- 9.5%
General American Life Insurance Co., 5.24%,
1/19/00*......................................... 87,000,000 87,000,000
Peoples Benefit Life Insurance Co., 5.71%,
12/13/99*........................................ 35,000,000 35,000,000
Sunamerica Life Insurance Co., 5.36%, 10/2/99*.... 25,000,000 25,000,000
Sunamerica Life Insurance Co., 5.36%, 11/6/99*.... 25,000,000 25,000,000
Travelers Insurance Co., 5.43%, 11/6/99*.......... 25,000,000 25,000,000
Travelers Insurance Co., 5.55%, 12/13/99*......... 25,000,000 25,000,000
Western and Southern Life Insurance Co., 5.55%,
1/29/03*......................................... 25,000,000 25,000,000
--------------
TOTAL FUNDING AGREEMENTS........................... 247,000,000
--------------
</TABLE>
Pegasus Funds
9
<PAGE>
Pegasus Cash Management Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- (Continued)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Principal Cost
Amount (Note 2)
--------- ---------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 3.8%
Lehman Brothers Tri-Party, 5.15%, 1/4/99
(Collateralized by $232,166,704 various U.S.
Government Securities, 0.00%-12.50% 12/1/99-
11/1/05, market value $65,280,093)............... $ 64,000,000 $ 64,000,000
Lehman Brothers Tri-Party, 4.95%, 1/4/99
(Collateralized by $38,662,164 various U.S.
Treasury STRIPS, maturing 2/15/99-11/15/05,
market value $34,171,752)........................ 33,501,000 33,501,000
--------------
TOTAL REPURCHASE AGREEMENTS........................ 97,501,000
--------------
TIME DEPOSITS -- 22.6%
Banking -- 12.2%
Citibank N.A., 5.25%, 1/4/99...................... 30,000,000 30,000,000
Mellon Bank, 5.25%, 1/4/99........................ 100,000,000 100,000,000
State Street Bank, 4.00%, 1/4/99.................. 86,119,000 86,119,000
SunTrust Bank, 4.00%, 1/4/99...................... 100,000,000 100,000,000
--------------
316,119,000
--------------
Banking -- Foreign -- 10.4%
Banco Bilbao Vizcaya, 5.25%, 1/4/99............... 50,000,000 50,000,000
Credit Agricole Indosuez, 4.88%, 1/4/99........... 100,000,000 100,000,000
Deutsche Bank, 5.13%, 1/4/99...................... 70,000,000 70,000,000
Dresdner Bank, 5.13%, 1/4/99...................... 50,000,000 50,000,000
--------------
270,000,000
--------------
TOTAL TIME DEPOSITS................................ 586,119,000
--------------
TOTAL.............................................. $2,602,214,135
==============
</TABLE>
Percentages indicated are based on net assets of $2,597,872,134.
* Variable rate securities. The interest rate, which will change periodically,
is based upon an index of market rates. The rate reflected on the Schedule
of Portfolio Investments is the rate in effect at December 31, 1998.
Pegasus Funds
10
<PAGE>
Pegasus Cash Management Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- (Continued)
December 31, 1998
- --------------------------------------------------------------------------------
(a) Security exempt from registration under rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. Additional
information regarding these securities follows:
<TABLE>
<CAPTION>
Carrying Percentage
Acquisition Value Original Market of Total
Holding Date* Par Per Unit Cost Value Investments
------- ----------- ----------- -------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Travelers Insurance
Co. ................... 12/30/98 $25,000,000 $100.00 $ 25,000,000 $ 25,000,000 0.96%
Peoples Benefit Life
Insurance Co. ......... 5/13/98 35,000,000 100.00 35,000,000 35,000,000 1.35%
Sunamerica Life
Insurance Co. ......... 9/30/98 25,000,000 100.00 25,000,000 25,000,000 0.96%
Sunamerica Life
Insurance Co. ......... 11/19/97 25,000,000 100.00 25,000,000 25,000,000 0.96%
------------ ------------ -----
110,000,000 110,000,000 4.23%
</TABLE>
*Acquisition date refers to the first acquisition date in the case of
securities purchased in multiple lots.
See Notes to Financial Statements.
Pegasus Funds
11
<PAGE>
Pegasus Treasury Cash Management Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Principal Cost
Amount (Note 2)
--------- ---------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 82.1%
Barclays De Zoette Wedd, 4.75%, 1/4/99
(Collateralized by $53,328,600 various U.S. Treasury
Securities, 5.63%-5.88%, 11/15/99-12/31/99, market
value $54,060,486).................................. $53,000,000 $ 53,000,000
Bear Stearns, 4.85%, 1/4/99 (Collateralized by
$82,461,817 various U.S. Treasury Securities, 0.00%-
9.13%, 2/15/99-8/15/08, market value $66,687,743)... 65,000,000 65,000,000
Donaldson Lufkin, & Jenrette, 5.00%, 1/4/99
(Collateralized by $16,967,328 various U.S. Treasury
Securities, 0.00%-7.50%, 1/15/99-2/15/05, market
value $17,340,148).................................. 17,000,000 17,000,000
First Union Capital Markets, 4.98%, 1/4/99
(Collateralized by $16,666,921 various U.S. Treasury
Securities, 0.00%-13.75%, 1/7/99-5/15/06, market
value $17,355,345).................................. 17,000,000 17,000,000
Goldman Sachs, 4.70%, 1/4/99 (Collateralized by
$16,127,696 U.S. Treasury Notes, 5.88%, 11/15/05,
market value $17,340,087)........................... 17,000,000 17,000,000
Greenwich Capital Markets, Inc., 4.95%, 1/4/99
(Collateralized by $22,468,220 various U.S. Treasury
Strips, 2/15/99-11/15/08, market value $17,340,547). 17,000,000 17,000,000
Lehman Brothers, 4.95%, 1/4/99 (Collateralized by
$24,448,761 various U.S. Treasury Strips, 2/15/99-
11/15/05, market value $21,609,163)................. 21,185,000 21,185,000
Merrill Lynch, 4.80%, 1/4/99 (Collateralized by
$23,585,851 various U.S. Treasury Strips, 2/15/04-
11/15/08, market value $17,340,743)................. 17,000,000 17,000,000
Morgan Stanley, 4.65%, 1/4/99 (Collateralized by
$35,007,500 U.S. Treasury Notes, 7.00%, 7/15/06,
market value $41,003,680)........................... 40,000,000 40,000,000
Prudential, 4.50%, 1/4/99 (Collateralized by
$16,969,045 various U.S. Treasury Securities, 5.13%-
5.38%, 6/30/00-8/31/00, market value $17,340,197)... 17,000,000 17,000,000
Societe Generale, 4.80%, 1/4/99 (Collateralized by
$16,118,312 various U.S. Treasury Securities, 5.25%-
13.13%, 8/15/99-7/15/06, market value $17,348,919).. 17,000,000 17,000,000
------------
TOTAL REPURCHASE AGREEMENTS........................... 298,185,000
</TABLE>
Pegasus Funds
12
<PAGE>
Pegasus Treasury Cash Management Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- (Continued)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Principal Cost
Amount (Note 2)
--------- ---------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 18.0%
U.S. Treasury Notes -- 18.0%
8.87%, 2/15/99....................................... $10,000,000 $ 10,039,685
6.75%, 6/30/99....................................... 10,000,000 10,102,158
6.50%, 4/30/99....................................... 10,000,000 10,029,877
6.38%, 7/15/99....................................... 15,000,000 15,134,443
5.75%, 9/30/99....................................... 10,000,000 10,079,603
5.87%, 8/31/99....................................... 10,000,000 10,075,625
------------
TOTAL U.S. TREASURY OBLIGATIONS ...................... 65,461,391
------------
TOTAL................................................. $363,646,391
============
</TABLE>
- --------
Percentages indicated are based on net assets of $363,210,691.
See Notes to Financial Statements.
Pegasus Funds
13
<PAGE>
Pegasus Treasury Prime Cash Management Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Principal Cost
Amount (Note 2)
--------- ---------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 99.0%
U.S. Treasury Bills -- 76.5%
1/07/99............................................. $ 20,410,000 $ 20,397,210
1/14/99............................................. 22,311,000 22,282,801
1/21/99............................................. 153,781,000 153,404,494
1/28/99............................................. 66,416,000 66,205,249
2/04/99............................................. 60,702,000 60,449,854
2/11/99............................................. 51,918,000 51,656,362
2/18/99............................................. 53,015,000 52,705,099
3/04/99............................................. 52,526,000 52,130,039
3/18/99............................................. 13,407,000 13,283,454
3/25/99............................................. 12,404,000 12,276,738
------------
504,791,300
------------
U.S. Treasury Notes -- 22.5%
6.38%, 1/15/99...................................... 54,670,000 54,705,975
6.25%, 3/31/99...................................... 16,722,000 16,771,038
7.00%, 4/15/99...................................... 33,647,000 33,867,255
6.38%, 4/30/99...................................... 2,495,000 2,504,184
6.50%, 4/30/99...................................... 24,295,000 24,429,700
6.00%, 6/30/99...................................... 15,613,000 15,702,711
------------
147,980,863
------------
TOTAL U.S. TREASURY OBLIGATIONS...................... 652,772,163
------------
TOTAL................................................ $652,772,163
============
</TABLE>
- --------
Percentages indicated are based on net assets of $659,072,583.
See Notes to Financial Statements.
Pegasus Funds
14
<PAGE>
Pegasus U.S. Government Securities Cash Management Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Principal Cost
Amount (Note 2)
--------- ---------
<S> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGES -- 22.8%
Federal Home Loan Mortgage Corp. -- 18.3%
4.90%, 1/20/99.................................... $ 5,000,000 $ 4,987,069
4.91%, 2/3/99..................................... 40,000,000 39,819,967
4.68%, 2/9/99..................................... 50,000,000 49,746,500
5.45%, 2/19/99.................................... 46,655,000 46,336,262
4.95%, 2/26/99.................................... 55,000,000 54,572,981
5.61%, 3/12/99.................................... 20,000,000 19,999,233
4.99%, 3/15/99.................................... 25,000,000 24,747,035
4.60%, 3/26/99.................................... 50,000,000 49,463,333
--------------
289,672,380
--------------
Federal National Mortgage Assoc. -- 4.5%
5.35%, 1/20/99.................................... 30,000,000 30,001,459
5.37%, 2/26/99.................................... 20,000,000 19,992,934
5.01%, 3/1/99..................................... 10,570,000 10,483,211
5.63%, 5/5/99..................................... 10,000,000 9,995,767
--------------
70,473,371
--------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGES............. 360,145,751
--------------
U.S. GOVERNMENT AGENCY SECURITIES -- 22.0%
Federal Home Loan Bank -- 22.0%
5.03%, 1/4/99..................................... 35,000,000 34,985,329
5.08%, 1/13/99.................................... 25,000,000 24,957,667
5.12%, 1/20/99.................................... 25,000,000 24,932,444
4.62%, 1/22/99.................................... 50,000,000 49,856,500
5.02%, 2/24/99.................................... 30,000,000 29,774,100
4.96%, 3/19/99.................................... 5,040,000 4,986,531
5.07%, 3/26/99.................................... 35,000,000 34,996,375
5.50%, 3/26/99.................................... 25,000,000 24,993,779
5.72%, 5/6/99..................................... 15,000,000 14,997,837
5.00%, 10/27/99................................... 60,000,000 60,000,000
5.00%, 11/17/99................................... 10,000,000 10,000,000
5.12%, 11/17/99................................... 32,350,000 32,350,000
--------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES............ 346,830,562
--------------
</TABLE>
Pegasus Funds
15
<PAGE>
Pegasus U.S. Government Securities Cash Management Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- (Continued)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Principal Cost
Amount (Note 2)
--------- ---------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 55.4%
Bear Stearns, 4.85%, 1/4/99, (Collateralized by
$31,716,083 various U.S. Treasury Securities,
0.00%-9.13%, 2/15/99-8/15/08, market value
$25,649,132).................................... $ 25,000,000 $ 25,000,000
Donaldson Lufkin & Jenrette, 5.08%, 1/4/99
(Collateralized by $70,115,000 various U.S.
Government Securities, 4.38%-6.13%, 6/27/00-
7/14/03, market value $71,400,778).............. 70,000,000 70,000,000
Dresdner, 4.75%, 1/4/99 (Collateralized by
$70,866,000 various U.S. Government Securities,
0.00%-7.00%, 1/7/99-10/15/08, market value
$71,401,587).................................... 70,000,000 70,000,000
First Union Capital Markets, 5.08%, 1/4/99
(Collateralized by $250,332,000 various U.S.
Government Securities, 0.00%-7.50%, 1/4/99-
11/13/08, market value $255,270,021)............ 250,000,000 250,000,000
Greenwich Capital Markets, Inc., 4.95%, 1/4/99,
(Collateralized by $64,761,340 various U.S.
Treasury STRIPS, 0.00%, 2/15/99-11/15/08, market
value $49,981,575).............................. 49,000,000 49,000,000
HSBC, 5.10%, 1/4/99 (Collateralized by
$137,699,830 various U.S. Government Securities,
0.00%-7.55%, 1/4/99-3/27/07, market value
$136,716,668)................................... 134,034,000 134,034,000
Lehman Brothers, 5.15%, 1/4/99 (Collateralized by
$526,002,688 various U.S. Government Securities,
0.00%-12.50%, 12/1/99-11/1/05, market value
$147,900,212)................................... 145,000,000 145,000,000
Salomon Smith Barney, 4.90%, 1/4/99
(Collateralized by $70,597,579 various U.S.
Treasury Securities, 4.62%-6.37%, 5/15/00-
11/30/00, market value $72,431,417)............. 70,000,000 70,000,000
Societe Generale, 4.80%, 1/4/99, (Collateralized
by $56,888,160 various U.S. Treasury Securities,
5.25%-13.13%, 8/15/99-7/15/06, market value
$61,231,478).................................... 60,000,000 60,000,000
--------------
TOTAL REPURCHASE AGREEMENTS....................... 873,034,000
--------------
TOTAL............................................. $1,580,010,313
==============
</TABLE>
- --------
Percentages indicated are based on net assets of $1,577,600,223.
See Notes to Financial Statements.
Pegasus Funds
16
<PAGE>
Pegasus Municipal Cash Management Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Principal Cost
Amount (Note 2)
--------- ---------
<S> <C> <C>
MUNICIPAL SECURITIES -- 79.1%
Alabama -- 0.6%
Decatur Industrial Development Board Solid Waste
Disposal, Revenue, AMT, Trico Steel Company, 4.20%,
1/1/27, LOC: Chase Bank*............................ $ 900,000 $ 900,000
Decatur Industrial Development Board Solid Waste
Disposal, Revenue, AMT, Amoco Chemical Company
Project, 5.20%, 5/1/25*............................. 3,100,000 3,100,000
------------
4,000,000
------------
Alaska -- 2.9%
State Housing Financial Corp., Series A, 4.00%,
6/1/26*............................................. 19,000,000 19,000,000
------------
Arizona -- 0.8%
Maricopa County, Pollution Control Revenue, Arizona
Public Service Company, Series B, 5.10%, 5/1/29,
LOC: Morgan Guaranty*............................... 5,300,000 5,300,000
------------
California -- 2.3%
California Pollution Control Revenue Financing
Authority, Pollution Control Revenue, 5.00%,
11/1/26, LOC: Bank of America*...................... 10,600,000 10,600,000
California State Economic Development Financing
Authority Revenue, California Independent Systems
Project C, 5.15%, 4/1/08*........................... 4,400,000 4,400,000
------------
15,000,000
------------
Delaware -- 3.3%
Delaware State Economic Development Authority,
Revenue, Clean Power Project, Series A, 4.20%,
8/1/29, LOC: Canadian Imperial Bank*................ 21,200,000 21,200,000
------------
District of Columbia -- 0.7%
District of Columbia, American University, 4.00%,
10/1/15, LOC: National Westminster Bank*............ 4,400,000 4,400,000
------------
Florida -- 2.1%
Alachua County Health Facilities Authority, Revenue,
Series B, 4.00%, 12/1/26, MBIA*..................... 12,000,000 12,000,000
Dade County Health Facilities Authority Hospital,
Miami Children's Hospital Project, 3.40%, 9/1/25,
AMBAC*.............................................. 1,400,000 1,400,000
------------
13,400,000
------------
</TABLE>
Pegasus Funds
17
<PAGE>
Pegasus Municipal Cash Management Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- (Continued)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Principal Cost
Amount (Note 2)
--------- ---------
<S> <C> <C>
Georgia -- 2.9%
Columbus Hospital Authority Revenue, 4.00%, 1/1/18,
LOC:
SunTrust Bank*...................................... $10,800,000 $ 10,800,000
Georgia Municipal Gas Authority, Revenue, 3.90%,
11/1/06, LOC: Wachovia Bank*........................ 5,080,000 5,080,000
Gwinett County Hospital Authority Revenue, 4.05%,
9/1/27, MBIA*....................................... 3,000,000 3,000,000
------------
18,880,000
------------
Illinois -- 5.9%
Chicago GO, 4.40%, 1/1/99, MBIA...................... 4,000,000 4,000,000
Chicago GO, 3.55%, 2/4/99, LOC: Morgan Guaranty...... 10,000,000 10,000,000
Illinois Health Facilities Authority, Series C,
4.00%, 1/1/16, LOC: LaSalle National Bank*.......... 6,100,000 6,100,000
Illinois Health Facilities Authority Revenue,
Healthcorp Project, 5.10%, 11/01/20*................ 4,625,000 4,625,000
Illinois Health Facilities Revenue, 3.05%, 4/7/99.... 10,000,000 10,000,000
Southwestern Development Authority, Wood River
Project, Shell Oil Company, 5.20%, 11/1/25*......... 3,400,000 3,400,000
------------
38,125,000
------------
Indiana -- 0.5%
Rockport, PCR, AEP Generating Project, 5.10%, 7/1/25,
AMBAC*.............................................. 3,100,000 3,100,000
------------
Iowa -- 2.7%
Iowa Finance Authority Multi Family Partnership,
4.15%, 12/1/17, LOC: LaSalle National Bank*......... 3,900,000 3,900,000
Iowa Finance Authority Revenue, Private School
Facilities, 4.05%, 6/1/19, LOC: Allied Irish Bank*.. 13,360,000 13,360,000
------------
17,260,000
------------
Kentucky -- 4.8%
Carroll County, Collateralized Solid Waste Disposal,
Kentucky Utilities Company Project, Series A, 5.20%,
11/1/24*............................................ 5,700,000 5,700,000
Kentucky Asset/Liability Commission, Revenue, 4.00%,
6/25/99............................................. 10,250,000 10,282,173
Kentucky Interlocal Schools, 3.90%, 6/30/99.......... 15,000,000 15,018,544
------------
31,000,717
------------
</TABLE>
Pegasus Funds
18
<PAGE>
Pegasus Municipal Cash Management Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- (Continued)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Principal Cost
Amount (Note 2)
--------- ---------
<S> <C> <C>
Louisiana -- 1.5%
New Orleans Home Mortgage Authority, Single Family,
3.55%, 3/1/99, FNMA................................. $ 3,025,000 $ 3,025,000
Plaquemines Parish Environmental Revenue, AMT, 5.20%,
5/1/25*............................................. 2,300,000 2,300,000
Plaquemines Parish Environmental Revenue, AMT, 5.20%,
10/1/24*............................................ 4,700,000 4,700,000
------------
10,025,000
------------
Michigan -- 6.1%
Detroit Sewage Disposal, 4.05%, 7/1/23, MBIA, LOC:
Morgan Guaranty*.................................... 3,000,000 3,000,000
Grand Rapids Water Supply, 3.80%, 1/1/20, FGIC*...... 8,450,000 8,450,000
State Hospital Finance Authority, Revenue, 3.90%,
11/1/11*............................................ 10,300,000 10,300,000
State Housing Development Authority, AMT, 3.00%,
12/1/99............................................. 4,200,000 4,200,000
State Strategic Fund Limited Obligation, Pyper
Products Corp. Project, 4.20%, 10/1/18, LOC:
Comercia Bank*...................................... 300,000 300,000
State Strategic Fund, Limited Obligation Revenue,
5.05%, 9/1/30, LOC: Barclay's Bank*................. 900,000 900,000
University Of Michigan, Revenue, 5.15%, 12/01/24*.... 4,200,000 4,200,000
Wayne Charter County Airport Revenue, AMT, 4.15%,
12/1/16, LOC: Bayerische Landesbank*................ 7,900,000 7,900,000
Wayne Charter County Airport Revenue, AMT, 3.95%,
12/1/16, LOC: Bayerische Landesbank*................ 300,000 300,000
------------
39,550,000
------------
Minnesota -- 0.9%
Hennepin County, Series C, 3.85%, 12/1/02, SPA:
Westdeutsche Landesbank............................. 2,500,000 2,500,000
State Higher Education Facilities Authority Revenue,
Series 3-L2, 3.85%, 11/1/12, SPA: Norwest Bank*..... 3,600,000 3,600,000
------------
6,100,000
------------
Mississippi -- 0.6%
Mississippi Hospital Equipment & Facilities Authority
Revenue, 3.95%, 7/1/12, LOC: Rabobank Nederland*.... 4,000,000 4,000,000
------------
Nevada -- 0.6%
Clark County Industrial Development Revenue, AMT,
5.20%, 12/1/22, LOC: ABN AMRO*...................... 3,800,000 3,800,000
Washoe County Water Facilities Revenue, Sierra
Pacific Power Co. Project, 5.20%,12/12/20, LOC: UBS
AG*................................................. 300,000 300,000
------------
4,100,000
------------
</TABLE>
Pegasus Funds
19
<PAGE>
Pegasus Municipal Cash Management Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- (Continued)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Principal Cost
Amount (Note 2)
--------- ---------
<S> <C> <C>
New Mexico -- 2.7%
Albuquerque Airport Revenue, Series A, 3.95%, 7/1/17,
LOC: Bayerische Landesbank*......................... $ 5,500,000 $ 5,500,000
New Mexico State Transit, Tax and Revenue
Anticipation Notes, 3.75%, 6/30/99.................. 12,000,000 12,044,911
------------
17,544,911
------------
New York -- 3.4%
Municipal Assistance Corporation, NYC, 3.80%, 7/1/08,
LOC: Westdeutsche Bank*............................. 4,900,000 4,900,000
New York City Housing Development Corporation
Mortgage Revenue, 5.05%, 1/1/23, LOC: Chase
Manhatten Bank*..................................... 1,600,000 1,600,000
New York State Energy Development Authority Pollution
Control Revenue, Series B, 5.05%, 12/1/25, LOC:
Toronto Dominion Bank*.............................. 6,200,000 6,200,000
New York State Energy Development Authority Pollution
Control Revenue, Series A, 5.10%,12/1/26, LOC:
Toronto Dominion Bank*.............................. 3,000,000 3,000,000
New York Water Finance Authority, Water & Sewer
System Revenue, Series A, 5.20%, 6/15/25, FGIC*..... 900,000 900,000
New York, Series B, 5.00%, 10/1/20, FGIC*............ 5,400,000 5,400,000
------------
22,000,000
------------
North Carolina -- 1.8%
Mecklenburg County, Series C, 4.00%, 2/1/17, SPA:
First Union National Bank*.......................... 5,000,000 5,000,000
Raleigh Durham Airport Authority, Special Facilities
Revenue, American Airlines, Series B, 5.10%,
11/1/05, LOC: NationsBank*.......................... 3,000,000 3,000,000
Raleigh Durham Airport Authority, Special Facilities
Revenue, American Airlines, Series A, 5.10%,
11/1/15*............................................ 3,800,000 3,800,000
------------
11,800,000
------------
North Dakota -- 0.5%
Hebron Industrial Development Revenue, Dacco Inc.
Project, AMT, 4.30%, 3/1/15, LOC: National Bank*.... 3,000,000 3,000,000
------------
Ohio -- 0.3%
State Air Quality Development Authority Revenue,
Series A, 3.65%, 2/1/99, LOC: Toronto Dominion Bank. 2,000,000 2,000,000
------------
</TABLE>
Pegasus Funds
20
<PAGE>
Pegasus Municipal Cash Management Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- (Continued)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Principal Cost
Amount (Note 2)
--------- ---------
<S> <C> <C>
Oregon -- 5.8%
Oregon State Housing & Community Services, 3.65%,
8/31/99............................................. $ 5,000,000 $ 5,000,000
Oregon State Housing & Community Services, 3.75%,
5/13/99............................................. 14,195,000 14,195,000
Port Morrow Environmental Impact Revenue, General
Electric Company, AMT, 5.25%, 12/1/31*.............. 5,800,000 5,800,000
Port of Portland, Special Obligation Revenue, Horizon
Airlines Industries Inc., Project, 4.90%, 6/15/27,
LOC: Bank of Montreal*.............................. 12,800,000 12,800,000
------------
37,795,000
------------
Pennsylvania -- 7.3%
Allegheny County Hospital Development Authority
Revenue, 4.10%, 3/1/20, MBIA*....................... 15,800,000 15,800,000
Allegheny County Industrial Development Authority
Revenue, 4.05%, 10/1/25, LOC: PNC Bank*............. 7,700,000 7,700,000
Montgomery County, Industrial, 1/15/99, LOC: Canadian
Imperial Bank of Commerce........................... 10,900,000 10,900,000
New Castle Area Hospital Authority Revenue, Series
1995, 4.10%, 7/1/26, FSA, SPA: PNC Bank*............ 6,690,000 6,690,000
Pennsylvania Economic Development Financing Authority
Revenue, Niagara Plastics Company, Project D, 4.20%,
12/1/17, LOC: PNC Bank*............................. 3,100,000 3,100,000
Pennsylvania State Higher Education, Revenue, 4.10%,
4/1/17, LOC: PNC Bank*.............................. 2,800,000 2,800,000
------------
46,990,000
------------
South Carolina -- 4.4%
Charleston County Industrial Revenue, AMT, 5.20%,
8/1/28, LOC: UBS AG*................................ 6,200,000 6,200,000
Florence County, Solid Waste Disposal & Wastewater,
Roche Carolina Inc., Project, 5.20%, 4/1/28, LOC:
Deutsche Bank*...................................... 300,000 300,000
York County, Pollution Control Revenue, 3.30%,
3/15/99, CFC........................................ 22,350,000 22,350,000
------------
28,850,000
------------
South Dakota -- 0.5%
Lawrence County, Pollution Control Revenue, Homestake
Mining, Series B, 5.10%, 7/1/32, LOC: Chase
Manhatten Bank*..................................... 3,000,000 3,000,000
------------
</TABLE>
Pegasus Funds
21
<PAGE>
Pegasus Municipal Cash Management Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- (Continued)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Principal Cost
Amount (Note 2)
--------- ---------
<S> <C> <C>
Texas -- 4.4%
Brazos River Authority, Pollution Control, Revenue,
AMT, Utilities Electric Company, Series B, 5.30%,
6/1/30, AMBAC*...................................... $ 5,000,000 $ 5,000,000
Brazos River Harbor Navigation District, Revenue, Dow
Chemical Company Project, 5.30%, 5/1/23*............ 3,000,000 3,000,000
Gulf Coast Waste Disposal Authority Pollution Control
Revenue, Amoco Oil Company Project, 5.20%, 5/1/23*.. 2,400,000 2,400,000
Hockley County Industrial Development Corp. Pollution
Control Revenue, Amoco Oil Company Project, Put
Bond, 3.00%, 5/1/99*................................ 5,000,000 5,001,600
Port of Port Arthur Navigation District, Texaco Inc.,
Project, 5.10%, 10/1/24*............................ 3,000,000 3,000,000
South Texas Higher Education Authority, Series Z,
3.95%, 12/1/03, MBIA*............................... 5,500,000 5,500,000
South Texas Higher Education Authority, AMT, Revenue,
3.95%, 12/1/27*..................................... 5,000,000 5,000,000
------------
28,901,600
------------
Utah -- 2.8%
Intermountain Power Agency, 3.30%, 12/01/03, LOC:
Swiss Bank*......................................... 18,000,000 18,000,000
------------
Virginia -- 2.4%
King George County, Industrial Development Authority
Exempt Facilities Revenue, Birchwood Power Partners,
AMT, 5.20%, 3/1/27, LOC: Credit Suisse First
Boston*............................................. 3,800,000 3,800,000
Peninsula Port Authority Revenue, Zelgler Coal, AMT,
5.20%, 5/1/22, LOC: Bank of America*................ 12,100,000 12,100,000
------------
15,900,000
------------
Washington -- 2.0%
Port Seattle Revenue, AMT, 4.10%, 9/1/22, LOC:
Canadian Imperial Bank of Commerce*................. 13,000,000 13,000,000
------------
Wisconsin -- 1.6%
Waukesha School District, 3.90%, 8/20/99............. 10,500,000 10,519,241
------------
TOTAL MUNICIPAL SECURITIES ........................... 513,741,469
------------
</TABLE>
Pegasus Funds
22
<PAGE>
Pegasus Municipal Cash Management Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- (Continued)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Principal Cost
Amount (Note 2)
--------- ---------
<S> <C> <C>
TAX FREE COMMERCIAL PAPER -- 20.6%
Alaska -- 4.3%
Valdez Marine Terminal, 3.35%, 2/12/99, LOC: Bankers
Trust............................................... $11,900,000 $ 11,900,000
Valdez Marine Terminal, 2.95%, 2/19/99, LOC: Bankers
Trust............................................... 15,725,000 15,725,000
------------
27,625,000
------------
Florida -- 4.6%
Florida Municipal Power Agency, Series A, 2.95%,
3/11/99, LOC: First Union Bank...................... 6,500,000 6,500,000
Sarasota Public Hospital, Memorial Hospital, 3.15%,
2/12/99, LIQ: SunTrust Bank......................... 9,000,000 9,000,000
St Lucie County, PCR, Florida Power & Light, 2.95%,
2/22/99............................................. 15,000,000 15,000,000
------------
30,500,000
------------
Georgia -- 0.9%
Georgia Municipal Electric, 2.95%, 2/9/99, LOC:
Morgan Guaranty..................................... 6,000,000 6,000,000
------------
Indiana -- 2.6%
Indiana Development Finance Authority, Solid Waste
Pure Air Project, 3.00%, 3/11/99.................... 10,000,000 10,000,000
Jasper County Pollution Control Revenue, Northern
Indiana Public Service, Series B, 3.00%, 2/24/99.... 7,000,000 7,000,000
------------
17,000,000
------------
Kansas -- 1.2%
Burlington County, 2.90%, 4/9/99, LOC: Goldman Sachs. 7,700,000 7,700,000
------------
Michigan -- 0.3%
Regents of the University Of Michigan, Revenue,
3.10%, 2/10/99...................................... 2,000,000 2,000,000
------------
Ohio -- 1.4%
Ohio Water Development (Duke L & P) 1988, AMT, 3.15%,
1/29/99, LOC: Toronto Dominion Bank................. 8,850,000 8,850,000
------------
Pennsylvania -- 1.3%
North Eastern Hospital, 3.35%, 1/13/99, LOC: Bankers
Trust............................................... 8,260,000 8,260,000
------------
Tennessee -- 2.3%
Johnson County Medical Center, 3.10%, 2/25/99, MBIA.. 15,000,000 15,000,000
------------
</TABLE>
Pegasus Funds
23
<PAGE>
Pegasus Municipal Cash Management Fund
- --------------------------------------------------------------------------------
SCHEDULE OF PORTFOLIO INVESTMENTS -- (Continued)
December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amortized
Principal Cost
Amount (Note 2)
--------- ---------
<S> <C> <C>
Wisconsin -- 1.7%
Wisconsin TRANS Revenue, 3.55%, 01/15/99............. $11,188,000 $ 11,188,000
------------
TOTAL TAX-FREE COMMERCIAL PAPER....................... 134,123,000
------------
TOTAL................................................. $647,864,469
============
</TABLE>
- --------
Percentages indicated are based on net assets of $649,845,237.
* Variable rate securities having liquidity agreements. The interest rate,
which will change periodically, is based upon an index of market rates. The
rate reflected on the Schedule of Portfolio Investments is the rate in
effect at December 31, 1998.
AMBAC -- Insured by AMBAC Indemnity Corp.
AMT -- Alternative Minimum Tax Paper
CFC -- Cooperative Finance Co-op
FGIC -- Insured by Financial Guaranty Insurance Corp.
FNMA -- Insured by Federal National Mortgage Association
GO -- General Obligation
LIQ -- Liquidity
LOC -- Letter of Credit
MBIA -- Insured by Municipal Bond Insurance Association
PCR -- Pollution Control Revenue
SPA -- Standby Purchase Agreement
TRANS -- Tax Revenue Anticipation Notes
See Notes to Financial Statements.
Pegasus Funds
24
<PAGE>
Pegasus Cash Management Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) Organization
The Pegasus Funds ("Pegasus") was organized as a Massachusetts business trust
on April 21, 1987 and registered under the Investment Company Act of 1940 as
amended ("the Act"), as an open-end investment company. As of December 31,
1998, Pegasus consisted of thirty separate portfolios of which there were five
cash management funds (the "Pegasus Cash Management Funds" or the "Funds"), as
described below.
<TABLE>
<CAPTION>
Commencement
Date
------------
<S> <C>
Cash Management Fund......................................... 7/30/92
Treasury Cash Management Fund................................ 9/12/97
Treasury Prime Cash Management Fund.......................... 3/22/95
U.S. Government Securities Cash Management Fund.............. 6/2/92
Municipal Cash Management Fund............................... 8/18/97
</TABLE>
The Pegasus Cash Management Funds each offer two classes of shares,
Institutional Shares and Service Shares. Institutional Shares and Service
Shares are substantially the same except that Service Shares are subject to
fees payable under a Distribution and Services Plan adopted pursuant to Rule
12b-1 under the Act (the "Services Plan") at an annual rate of 0.25% of the
average daily net asset value of the outstanding Services Shares.
Merger:
On October 2, 1998, First Chicago NBD Investment Management Company's
("FCNIMCO") parent company, First Chicago NBD Corporation, merged with and into
BANC ONE CORPORATION at which time the newly combined company was renamed BANK
ONE CORPORATION. BANK ONE CORPORATION has now begun the process of reorganizing
their proprietary mutual funds: the Pegasus Funds and The One Group Family of
Mutual Funds. On January 12, 1999, the Board of Trustees of the Pegasus Funds
approved Reorganization Agreements, which are subject to shareholder approval.
Certain expenses incurred in connection with entering into and carrying out
provisions of the reorganization transactions, whether or not the transactions
contemplated thereby are consummated, will be paid by BANK ONE CORPORATION. The
reorganization is intended to be effected on a tax-free basis, so that none of
the Pegasus Funds' shareholders will recognize taxable gains or losses as a
result of the reorganization. A proxy statement/prospectus describing the
reorganization and the reasons therefore has been sent to Pegasus Funds'
shareholders.
Pegasus Funds
25
<PAGE>
Pegasus Cash Management Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (Continued)
- --------------------------------------------------------------------------------
Conversion of Common Trust Funds:
During the year ended December 31, 1998, the net assets of certain common
trust funds managed by FCNIMCO (the "Adviser") were exchanged in a tax-free
conversion for shares of the corresponding Pegasus Funds (Class I). The
transactions were accounted for by a method followed for tax purposes in a tax-
free business combination sometimes referred to as the pooling without
restatement method. The following is a summary of shares issued, net assets
converted and net asset value per share issued:
<TABLE>
<CAPTION>
Net Asset
Value
Shares Net Assets Per Share
Issued Converted Issued
----------- ------------ ---------
<S> <C> <C> <C>
September 18, 1998
Cash Management Fund................... 149,307,531 $149,307,531 $1.00
Municipal Cash Management Fund......... 178,163,818 178,163,818 1.00
</TABLE>
(2) Significant Accounting Policies
The following is a summary of significant accounting policies followed by the
Pegasus Cash Management Funds in preparation of the financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies. Following generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and reported amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates.
Investments
Pursuant to Rule 2a-7 of the Act, the Pegasus 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.
Investment security purchases and sales are accounted for on the trade date.
Realized gains and losses from security transactions are recorded on the
specific identified cost basis.
Pegasus invests in securities subject to repurchase agreements. 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 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. If the seller defaults, and the fair value of the collateral
declines, realization of the collateral by the Funds may be delayed or limited.
Pegasus Funds
26
<PAGE>
Pegasus Cash Management Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (Continued)
- --------------------------------------------------------------------------------
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 using the effective interest method.
Federal Income Taxes
It is Pegasus' policy to comply with the requirements of Subchapter M of the
Internal Revenue Code, as amended (the "Code") applicable to regulated
investment companies and to distribute substantially all 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, 1998, the Pegasus Cash Management Funds had capital loss
carryforwards and related expiration dates as follows:
<TABLE>
<CAPTION>
Fund 2001 2002 2003 2004 Total
---- ------- -------- ------- ---- --------
<S> <C> <C> <C> <C> <C>
Cash Management Fund............... $19,046 $150,686 $31,697 $469 $201,898
U.S. Government Securities Cash
Management Fund................... -- 449,624 57,338 -- $506,962
</TABLE>
Shareholder Dividends
Dividends from net investment income are declared daily and paid monthly for
the Funds. Distributions from net realized capital gains, if any, are normally
declared and paid annually, but each Fund may make distributions on a more
frequent basis to comply with the distribution requirements of the Code. To the
extent that net realized capital gains can be offset by capital loss
carryforwards, it is the policy of each Fund not to distribute such gains.
Deferred Organization Costs
Organization costs for Funds commencing operations prior to June 30, 1998 are
amortized on a straight-line basis over a five year period beginning with the
commencement of operations of each fund.
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 of each Fund. 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 on the basis of relative net
assets.
Restricted Securities
The Funds are permitted to invest in securities that are subject to legal or
contractual restrictions on resale. These securities generally may be resold in
transactions exempt from registration or to the public if the
Pegasus Funds
27
<PAGE>
Pegasus Cash Management Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (Continued)
- --------------------------------------------------------------------------------
securities are registered. The Fund does not have the right to demand that such
securities be registered. Disposal of these securities may involve time-
consuming negotiations and expense, and prompt sale at an acceptable price may
be difficult. Certain of these securities may be offered and sold to "qualified
institutional buyers" under Rule 144A of the Securities Act of 1933.
(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 Pegasus Cash
Management Fund for an advisory fee at a annual rate of 0.20% of each Fund's
average daily net assets.
Pegasus has entered into a Co-Administration Agreement with FCNIMCO and Fund
Services Limited Partnership, d/b/a BISYS Fund Services ("BISYS" or
Distributor) (collectively the "Co-Administrators") pursuant to which the Co-
Administrators have agreed to assist in aspects of each Pegasus Cash Management
Fund's administration and operations for a fee at an annual rate of 0.15% of
each Fund's average daily net assets.
For the year ended December 31, 1998, FCNIMCO voluntarily agreed to waive its
advisory fee to the extent that each Pegasus Cash Management Fund's expenses
exceed 0.35% of average daily net assets for Institutional Shares and 0.60% of
average daily net assets for Service Shares.
Pegasus has adopted a Distribution and Services Plan (the "Plan") pursuant to
Rule 12b-1 under the Act. Under the terms of such Plan, each Fund pays the
Distributor an annual fee of up to 0.25% of the average daily net assets of the
outstanding Service Shares for advertising, marketing, and distributing each
Pegasus 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 and its affiliates, for the provision of these
services.
BANK ONE CORPORATION, (an affiliate of FCNIMCO), serves as the Funds'
custodian. State Street Bank serves as the Funds' sub-custodian and is
compensated directly by the Funds with respect to these services.
Pegasus maintains an unfunded, nonqualified deferred compensation plan for its
Trustees. 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.
Pegasus Funds
28
<PAGE>
Pegasus Cash Management Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (Continued)
- --------------------------------------------------------------------------------
(4) Capital Share Transactions
Transactions in shares of the Funds are summarized below (at $1.00 per share):
<TABLE>
<CAPTION>
Cash Management Fund
---------------------------------
Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997
--------------- ----------------
<S> <C> <C>
Institutional Shares:
Shares issued........................ 10,320,125,285 6,087,058,701
Shares issued in connection with con-
version of common trust funds....... 149,307,531 --
Dividends reinvested................. 4,512,839 4,462,385
Shares redeemed...................... (10,103,170,328) (6,272,197,824)
--------------- ----------------
Net increase (decrease).............. 370,775,327 (180,676,738)
=============== ================
Service Shares:
Shares issued........................ 5,608,606,456 3,448,478,848
Dividends reinvested................. 2,816 --
Shares redeemed...................... (5,079,545,304) (2,687,964,734)
--------------- ----------------
Net increase......................... 529,063,968 760,514,114
=============== ================
Net increase in Fund.................. 899,839,295 579,837,376
=============== ================
<CAPTION>
Treasury Cash Management Fund
---------------------------------
Year Ended Period Ended
Dec. 31, 1998 Dec. 31, 1997(a)
--------------- ----------------
<S> <C> <C>
Institutional Shares:
Shares issued........................ 73,529,976 6,838,921
Dividends reinvested................. 35,987 --
Shares redeemed...................... (42,220,173) (5,988,771)
--------------- ----------------
Net increase......................... 31,345,790 850,150
=============== ================
Service Shares:
Shares issued........................ 1,878,718,999 563,122,696
Dividends reinvested................. -- --
Shares redeemed...................... (1,753,426,103) (357,400,841)
--------------- ----------------
Net increase......................... 125,292,896 205,721,855
--------------- ----------------
Net increase in Fund.................. 156,638,686 206,572,005
=============== ================
</TABLE>
- --------
(a) For the period from September 12, 1997 (commencement of operations) through
December 31, 1997.
Pegasus Funds
29
<PAGE>
Pegasus Cash Management Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Treasury Prime Cash
Management Fund
------------------------------
Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997
-------------- --------------
<S> <C> <C>
Institutional Shares:
Shares issued............................ 437,701,043 686,151,852
Dividends reinvested..................... 784,651 345,903
Shares redeemed.......................... (339,668,685) (665,804,296)
-------------- --------------
Net increase............................. 98,817,009 20,693,459
============== ==============
Service Shares:
Shares issued............................ 1,728,824,043 1,651,850,568
Dividends reinvested..................... 119,198 49,528
Shares redeemed.......................... (1,493,090,424) (1,633,350,490)
-------------- --------------
Net increase............................. 235,852,817 18,549,606
============== ==============
Net increase in Fund...................... 334,669,826 39,243,065
============== ==============
<CAPTION>
U.S. Government Securities
Cash Management Fund
------------------------------
Year Ended Year Ended
Dec. 31, 1998 Dec. 31, 1997
-------------- --------------
<S> <C> <C>
Institutional Shares:
Shares issued............................ 5,277,034,802 3,117,508,597
Dividends reinvested..................... 1,541,306 1,026,989
Shares redeemed.......................... (4,795,113,470) (2,953,336,804)
-------------- --------------
Net increase............................. 483,462,638 165,198,782
============== ==============
Service Shares:
Shares issued............................ 2,704,680,394 2,047,005,781
Dividends reinvested..................... 142,609 89,986
Shares redeemed.......................... (2,502,716,940) (1,896,480,136)
-------------- --------------
Net increase............................. 202,106,063 150,615,631
============== ==============
Net increase in Fund...................... 685,568,701 315,814,413
============== ==============
</TABLE>
Pegasus Funds
30
<PAGE>
Pegasus Cash Management Funds
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS -- (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Municipal Cash Management Fund
--------------------------------
Year Ended Period Ended
Dec. 31, 1998 Dec. 31, 1997(b)
-------------- ----------------
<S> <C> <C>
Institutional Shares:
Shares issued......................... 1,314,947,147 322,413,470
Shares issued in connection with con-
version of common trust funds........ 178,163,818 --
Dividends reinvested.................. 95,406 13,719
Shares redeemed....................... (1,106,309,332) (120,722,364)
-------------- ----------------
Net increase.......................... 386,897,039 201,704,825
============== ================
Service Shares:
Shares issued......................... 477,944,087 200,615,736
Dividends reinvested.................. -- --
Shares redeemed....................... (473,234,644) (144,081,806)
-------------- ----------------
Net increase.......................... 4,709,443 56,533,930
============== ================
Net increase in Fund................... 391,606,482 258,238,755
============== ================
</TABLE>
- --------
(b) For the period from August 18, 1997 (commencement of operations) through
December 31, 1997.
Pegasus Funds
31
<PAGE>
Pegasus Cash Management Funds
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS For a Share Outstanding Throughout the Period
<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 Investment Investment Affiliate of the Total
Period Income Investments Operations Income Investment Adviser Distributions
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CASH MANAGEMENT FUND
Institutional Shares
For The Year Ended
12/31/98 $0.9997 0.0523 -- 0.0523 (0.0523) -- (0.0523)
1997 $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/(4)/ $0.9994 0.0277 0.0002 0.0279 (0.0277) -- (0.0277)
1995/(5)/(9)/ $0.9993 0.0507 (0.0059) 0.0448 (0.0507) 0.0060 (0.0507)
1994/(9)/ $0.9999 0.0333 (0.0006) 0.0327 (0.0333) -- (0.0333)
Service Shares
For The Year Ended
12/31/98 $0.9999 0.0499 -- 0.0499 (0.0499) -- (0.0499)
1997 $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/(4)/ $0.9994 0.0264 0.0002 0.0266 (0.0264) -- (0.0264)
1995/(6)/ $1.0000 0.0245 (0.0006) 0.0239 (0.0245) -- (0.0245)
- --------------------------------------------------------------------------------------------------------------------------
TREASURY CASH MANAGEMENT FUND
Institutional Shares
For The Year Ended
12/31/98 $1.0000 0.0508 -- 0.0508 (0.0508) -- (0.0508)
1997/(8)/ $1.0000 0.0159 -- 0.0159 (0.0159) -- (0.0159)
Service Shares
For The Year Ended
12/31/98 $1.0000 0.0482 -- 0.0482 (0.0482) -- (0.0482)
1997/(8)/ $1.0000 0.0152 -- 0.0152 (0.0152) -- (0.0152)
- --------------------------------------------------------------------------------------------------------------------------
TREASURY PRIME CASH MANAGEMENT FUND
Institutional Shares
For The Year Ended
12/31/98 $0.9999 0.0467 -- 0.0467 (0.0467) -- (0.0467)
1997 $0.9999 0.0479 -- 0.0479 (0.0479) -- (0.0479)
1996 $1.0000 0.0474 (0.0001) 0.0473 (0.0474) -- (0.0474)
1995/(3)/ $1.0000 0.0399 -- 0.0399 (0.0399) -- (0.0399)
Service Shares
For The Year Ended
12/31/98 $1.0000 0.0441 -- 0.0441 (0.0441) -- (0.0441)
1997 $1.0000 0.0454 -- 0.0454 (0.0454) -- (0.0454)
1996 $1.0000 0.0449 -- 0.0449 (0.0449) -- (0.0449)
1995/(3)/ $1.0000 0.0380 -- 0.0380 (0.0380) -- (0.0380)
- --------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES CASH MANAGEMENT
FUND
Institutional Shares
For The Year Ended
12/31/98 $0.9992 0.0513 -- 0.0513 (0.0513) -- (0.0513)
1997 $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/(10)/ $0.9999 0.0492 (0.0010) 0.0482 (0.0492) -- (0.0492)
1994/(10)/ $1.0000 0.0302 (0.0001) 0.0301 (0.0302) -- (0.0302)
Service Shares
For The Year Ended
12/31/98 $0.9997 0.0490 -- 0.0490 (0.0490) -- (0.0490)
1997 $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/(2)/ $1.0000 0.0199 (0.0011) 0.0188 (0.0199) -- (0.0199)
- --------------------------------------------------------------------------------------------------------------------------
MUNICIPAL CASH MANAGEMENT FUND
Institutional Shares
For The Year Ended
12/31/98 $1.0000 0.0316 -- 0.0316 (0.0316) -- (0.0316)
1997/(7)/ $1.0000 0.0125 -- 0.0125 (0.0125) -- (0.0125)
Service Shares
For The Year Ended
12/31/98 $1.0000 0.0291 -- 0.0291 (0.0291) -- (0.0291)
1997/(7)/ $1.0000 0.0116 -- 0.0116 (0.0116) -- (0.0116)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
Pegasus Funds
32
<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 5.36% $1,076,045 0.35% 5.21% 0.39%
$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%/(5)/ $ 319,214 0.35% 5.11% 0.44%
$0.9993 3.38% $ 143,820 0.31% 3.33% 0.43%
$0.9999 5.10% $1,521,827 0.60% 5.04% 0.64%
$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 5.20% $ 32,196 0.35% 4.97% 0.40%
$1.0000 5.29%+ $ 850 0.35%+ 5.28%+ 0.41%+
$1.0000 4.94% $ 331,015 0.60% 4.82% 0.65%
$1.0000 5.04%+ $ 205,722 0.60%+ 5.03%+ 0.66%+
- --------------------------------------------------------------------------------------
$0.9999 4.76% $ 189,630 0.35% 4.55% 0.40%
$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 4.50% $ 469,443 0.60% 4.35% 0.65%
$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 5.26% $1,017,830 0.35% 5.11% 0.37%
$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%
$0.9997 5.00% $ 559,770 0.60% 4.87% 0.62%
$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 3.20% $ 588,602 0.35% 3.12% 0.39%
$1.0000 3.39%+ $ 201,705 0.35%+ 3.37%+ 0.41%+
$1.0000 2.95% $ 61,243 0.60% 2.90% 0.64%
$1.0000 3.14%+ $ 56,534 0.60%+ 3.12%+ 0.66%+
- --------------------------------------------------------------------------------------
</TABLE>
Pegasus Funds
33
<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, 1995 (initial offering date of Service Shares)
through May 31, 1995.
(3) For the period March 22, 1995 (commencement of operations) through
December 31, 1995.
(4) 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.
(5) 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%.
(6) For the period January 17, 1995 (initial offering date of Service Shares)
through June 30, 1995.
(7) For the period August 18, 1997 (commencement of operations) through
December 31, 1997.
(8) For the period September 12, 1997 (commencement of operations) through
December 31, 1997.
(9) For the year ended June 30.
(10) For the year ended May 31.
+ Annualized.
++ Not Annualized.
Pegasus Funds
34
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees and Shareholders of
the Pegasus Cash Management Funds:
We have audited the statements of assets and liabilities, including the
schedules of portfolio investments, of the Cash Management Funds of the PEGASUS
FUNDS (comprising, as indicated in Note 1, the Cash Management, Treasury Cash
Management, Treasury Prime Cash Management, U.S. Government Securities Cash
Management and Municipal Cash Management) as of December 31, 1998, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the three 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 and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1998 by 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, 1998, the results of their operations for the year
then ended, the changes in their net assets for each of the two years in the
periods then ended, and their financial highlights for each of the three years
in the periods then ended, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Detroit, Michigan,
February 12, 1999.
Pegasus Funds
35
<PAGE>
PEG-0059-2/99
