Registration Nos. 33-18954
811-5414
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 11 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 11 X
(Check appropriate box or boxes)
FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.
(Exact Name of Registrant as Specified in Charter)
c/o The First National Bank of Chicago
Three First National Plaza
Chicago, Illinois 60670
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 732-
4231
Bradford M. Markham, Esq.
Three First National Plaza
Chicago, Illinois 60670
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)(i)
on (date) pursuant to paragraph (a)(i)
75 days after filing pursuant to paragraph (a)(ii)
on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
Registrant has registered an indefinite number of shares of its
common stock under the Securities Act of 1933 pursuant to Section
24(f) of the Investment Company Act of 1940. Registrant's Rule
24f-2 Notice for the fiscal year ended February 28, 1994 was
filed on April 27, 1994.
FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part A of
Form N-1A Caption Page
1 Cover Page Cover
2 Synopsis 3
3 Condensed Financial Information 5
4 General Description of Registrant 5
5 Management of the Fund 24
5(a) Management's Discussion of Fund's
Performance *
6 Capital Stock and Other
Securities 46
7 Purchase of Securities Being
Offered 26
8 Redemption or Repurchase 35
9 Pending Legal Proceedings
Items in
Part B of
Form N-1A
10 Cover Page Cover
11 Table of Contents Cover
12 General Information and History B-26
13 Investment Objectives and
Policies B-3
14 Management of the Fund B-9
15 Control Persons and Principal B-10
Holders of Securities
16 Investment Advisory and Other
Services B-10
FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.
Cross-Reference Sheet Pursuant to Rule 495(a) (continued)
Items in
Part B of
Form N-1A Caption Page
17 Brokerage Allocation B-24
18 Capital Stock and Other
Securities B-26
19 Purchase, Redemption and Pricing
of Securities Being Offered B-12, B-16
20 Tax Status B-18
21 Underwriters B-12
22 Calculations of Performance Data B-20
23 Financial Statements B-30
Items in
Part C of
Form N-1A
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under C-3
Common Control with Registrant
26 Number of Holders of Securities C-4
27 Indemnification C-4
28 Business and Other Connections of C-5
Investment Adviser
29 Principal Underwriters C-5
30 Location of Accounts and Records C-6
31 Management Services C-6
32 Undertakings C-6
_________________________
NOTE: * Omitted since answer is negative or inapplicable.
PRAIRIE MUNICIPAL BOND FUND
PROSPECTUS
First Chicago Investment Management
Company
INVESTMENT ADVISER
Concord Financial Group, Inc.
DISTRIBUTOR
Prospectus begins on page one.
<PAGE>
PRAIRIE MUNICIPAL BOND FUND
- ---------------------------------------------------------------
PROSPECTUS--__________, 1995
First Prairie Municipal Bond Fund (the "Fund") is an open-end,
non-diversified, management investment company, known as a
municipal bond fund. Its goal is to provide investors with as
high a level of current income exempt from Federal income tax as
is consistent with the preservation of capital.
First Chicago Investment Management Company ("FIMCO" or the
"Investment Adviser") serves as the Fund's investment adviser and
administrator.
Concord Financial Group, Inc. (the "Distributor") serves as
the Fund's distributor.
By this Prospectus, Class A, Class B and Class I shares of the
Fund are being offered. Class A shares are subject to a sales
charge imposed at the time of purchase and Class B shares are
subject to a contingent deferred sales charge imposed on
redemptions made within six years of purchase. Class A and
Class B shares are offered to any investor. The Fund offers
these alternatives to permit an investor to choose the method of
purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the
shares and other circumstances.
Class I shares are offered without a sales charge and are sold
only to qualified trust, custody and/or agency account clients of
FIMCO, The First National Bank of Chicago ("FNBC"), American
National Bank and Trust Company ("ANB") or their affiliates and
to certain qualified employee benefit plans or other programs.
Other differences between the Classes include the services
offered to and expenses borne by each Class and certain voting
rights, as described herein.
Fund shares are not deposits or obligations of, or guaranteed
by, any bank, and are not federally insured by the Federal
Deposit Insurance Corporation ("FDIC"), the Federal Reserve
Board, or any other agency. Fund shares involve certain
investment risks, including the possible loss of principal.
Investors should recognize that the share price, yield and
investment return of the Fund fluctuate and are not guaranteed.
This Prospectus sets forth concisely information about the
Fund that an investor should know before investing. It should be
read and retained for future reference.
Part B (also known as the Statement of Additional
Information), dated ____________, 1995, which may be revised from
time to time, provides a further discussion of certain areas in
this Prospectus and other matters which may be of interest to
some investors. It has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. For
a free copy, write to the Fund at
__________, or call __________________.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
Fee Table. . . . . . . . . . . . . . . . . . . . . . . . . . .
Condensed Financial Information. . . . . . . . . . . . . . . .
Highlights . . . . . . . . . . . . . . . . . . . . . . . . . .
Alternative Purchase Methods . . . . . . . . . . . . . . . . .
Description of the Fund. . . . . . . . . . . . . . . . . . . .
Management of the Fund . . . . . . . . . . . . . . . . . . . .
How to Buy Fund Shares . . . . . . . . . . . . . . . . . . . .
Shareholder Services . . . . . . . . . . . . . . . . . . . . .
How to Redeem Fund Shares. . . . . . . . . . . . . . . . . . .
Distribution Plan and Shareholder Services Plan. . . . . . . .
Dividends, Distributions and Taxes . . . . . . . . . . . . . .
Performance Information. . . . . . . . . . . . . . . . . . . .
General Information. . . . . . . . . . . . . . . . . . . . . .
<PAGE>
FEE TABLE
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS I
<S> <C> <C> <C>
Maximum Sales Load Imposed
on Purchases (as a percentage
of offering price) 4.50% none none
Maximum Deferred Sales
Charge Imposed on Redemptions
(as a percentage of the amount
subject to charge) none* 5.00% none
____________________________
* A contingent deferred sales charge of up to 1.00% may be assessed on
certain redemptions of Class A shares purchased without an initial sales
charge as part of an investment of $1 million or more.
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average
daily net assets)
<S> <C> <C> <C>
Management Fees .40% .40% .40%
12b-1 Fees none .50% none
Other Expenses ____% ____% ____%
Total Fund Operating Expenses ____% ____% ____%
EXAMPLE
An investor would pay the following
expenses on a $1,000 investment,
assuming (1) 5% annual return and
(2) except where noted, redemption
at the end of each time period:
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS B* CLASS I
<S> <C> <C> <C> <C>
1 YEAR $___ $___ $___ $___
3 YEARS $___ $___ $___ $___
5 YEARS $___ $___ $___ $___
10 YEARS** $___ $___ $___ $___
* Assuming no redemption of Class B shares
** Ten-year figures assume conversion of Class B shares to Class A shares at
end of sixth year following the date of purchase.
</TABLE>
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE
EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE FUND'S ACTUAL PERFORMANCE
WILL VARY AND MAY RESULT IN AN ACTUAL RETURN GREATER OR LESS THAN
5%.
The purpose of the foregoing table is to assist investors in
understanding the various costs and expenses that investors in
the Fund will bear, directly or indirectly, the payment of which
will reduce investors' return on an annual basis. Long-term
investors in Class B shares could pay more in 12b-1 fees than the
economic equivalent of paying a front-end sales charge. For
Class I shares, Other Expenses and Total Fund Operating Expenses
are based on estimated expenses for the current fiscal year. The
information in the foregoing table does not reflect any fee
waivers or expense reimbursement arrangements that may be in
effect. FIMCO, FNBC and their affiliates and certain Service
Agents (as defined below) may charge their clients direct fees
for effecting transactions in Fund shares; such fees are not
reflected in the foregoing table. See "Management of the Fund,"
"How to Buy Fund Shares" and "Distribution Plan and Shareholder
Services Plan."
<PAGE>
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited
(except where noted) by Ernst & Young LLP, the Fund's independent
auditors, whose report thereon appears in the Statement of
Additional Information. Further financial data and related notes
are included in the Statement of Additional Information,
available upon request. Class I shares had not been offered as
of the date of the financial statements and, accordingly, no
financial data are available for Class I.
FINANCIAL HIGHLIGHTS Contained below is per share operating
performance data for a share of common stock outstanding, total
investment return, ratios to average net assets and other
supplemental data for the Fund(1) for each period indicated.
This
information has been derived from information provided in the
Fund's financial statements.
[TO BE PROVIDED BY AMENDMENT]
Further information about the Fund's performance is contained in
the Fund's annual report for the fiscal year ended February 28,
1994, which may be obtained without charge by writing to the
address or calling the number set forth on the cover page of this
Prospectus.
HIGHLIGHTS
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this
Prospectus.
THE FUND The Fund is an open-end, non-diversified, management
investment company, known as a municipal bond fund.
INVESTMENT OBJECTIVE The Fund's goal is to provide investors
with as high a level of current income exempt from
Federal income tax as is consistent with the preservation of
capital.
MANAGEMENT POLICIES The Fund will invest at least 80% of its net
assets in Municipal Obligations, under normal
circumstances. At least 65% of the Fund's net assets will be
invested in bonds, debentures and other debt instruments.
The Fund will purchase Municipal Obligations only if
they are rated at least: Baa, MIG-2/VMIG-2 or Prime-1 (P-1) by
Moody's Investors Service, Inc. ("Moody's"); BBB, SP-2 or A-1 by
Standard & Poor's Corporation ("S&P"); BBB or F-2 by
Fitch Investors Service, Inc. ("Fitch"); BBB or Duff-2 by Duff &
Phelps Credit Rating Co. ("Duff"); or, if not rated,
of comparable quality as determined by the Adviser.
The Fund may engage in certain investment techniques,
such as futures and options transactions and lending
portfolio securities, each of which involves risk and the gains
from which may give rise to taxable income.
MUNICIPAL OBLIGATIONS Municipal Obligations are debt obligations
issued by states, territories and possessions of the
United States, by the District of Columbia, and their political
subdivisions, agencies and instrumentalities, or
multistate agencies or authorities, the interest from which is,
in the opinion of bond counsel to the issuer, exempt
from Federal income tax. Municipal Obligations are generally
issued to obtain funds for various public purposes. They
also include certain industrial development bonds issued by or on
behalf of public authorities. Municipal Obligations
are classified as general obligation bonds, revenue bonds and
notes.
INVESTMENT ADVISER First Chicago Investment Management Company
is the Fund's investment adviser and administrator.
The Fund has agreed to pay the Investment Adviser a monthly fee
at the annual rate of .40 of 1% of the value of the
Fund's average daily net assets.
ALTERNATIVE PURCHASE METHODS The Fund offers Class A, Class B
and Class I shares. Each Class A, Class B and Class I
share represents an identical pro rata interest in the Fund's
investment portfolio.
Class A shares are sold at net asset value per share plus
an initial sales charge imposed at the time of purchase.
The initial sales charge may be reduced or waived for certain
purchases. See "How to Buy Fund Shares--Class A Shares."
Class A shares are subject to an annual service fee.
Class B shares are sold at net asset value per share with
no initial sales charge at the time of purchase; as a
result, the entire purchase price is immediately invested in the
Fund. Class B shares are subject to a contingent
deferred sales charge ("CDSC"), which is assessed only if the
Class B shares are redeemed within six years of purchase.
See "How to Redeem Shares--Contingent Deferred Sales
Charge--Class B Shares." Class B shares are subject to an annual
distribution fee and service fee. The distribution fee paid by
Class B will cause Class B to have a higher expense
ratio and to pay lower dividends than Class A. Approximately
eight years after the date of purchase, Class B shares
automatically will convert to Class A shares, based on the
relative net asset values for shares of each such Class, and
will no longer be subject to a distribution fee.
Class I shares are sold at net asset value with no sales
charge. Class I shares are offered exclusively to
qualified trust, custody and/or agency account clients of FNBC,
ANB or their affiliates ("Fiduciary Accounts") and
qualified benefit plans or other programs with assets in excess
of $100 million ("Eligible Retirement Plans"). Class I
shares held by investors who after purchasing Class I shares
terminate their Fiduciary Accounts automatically will
convert to Class A shares, based on the relative net asset values
for shares of each such Class.
See "Alternative Purchase Methods."
HOW TO BUY FUND SHARES Orders for the purchase of Class A and
Class B shares may be placed through a number of
institutions including FIMCO, FNBC and their affiliates,
including First Chicago Investment Services, Inc. ("FCIS"), a
registered broker-dealer, the Distributor and certain other
banks, securities dealers and other industry professionals
such as investment advisers, accountants and estate planning
firms (collectively, "Service Agents").
Investors purchasing Class I shares through their
Fiduciary Accounts at FNBC, ANB or their affiliates should
contact such entity directly for appropriate instructions, as
well as for information about conditions pertaining to
the account and any related fees. Class I shares may be
purchased for a Fiduciary Account or Eligible Retirement Plan
only by a custodian, trustee, investment manager or other entity
authorized to act on behalf of such Account or Plan.
The minimum initial investment is $1,000. All subsequent
investments must be at least $100.
See "How to Buy Fund Shares."
SHAREHOLDER SERVICES The Fund offers its shareholders certain
services and privileges including: Exchange Privilege,
Letter of Intent and Automatic Investment Plan. Certain services
and privileges may not be available through all
Service Agents.
FREE CHECKWRITING--CLASS A SHARES Investors in Class A
to shares may request on the Account Application that the Fund
provide Redemption Checks drawn on the Fund's account.
Redemption Checks may be made payable to any person in the
amount of $500 or more. There is no charge for this service.
HOW TO REDEEM FUND SHARES Generally, investors should
contact their representatives at FIMCO, FNBC or appropriate
Service Agent for redemption instructions. Investors who
are not clients of FIMCO, FNBC or a Service Agent may redeem Fund
shares by written request to the Fund's transfer
agent.
See "How to Redeem Fund Shares."
MONTHLY DIVIDENDS The Fund ordinarily declares dividends
from net investment income daily. Dividends are
usually paid on the last calendar day of each month, and are
automatically reinvested in additional shares unless the investor
elects payment in cash.
Distributions from net realized securities gains, if any,
generally are declared and paid once a year. Investors may
choose whether to receive distributions in cash or to
reinvest in additional shares at net asset value.
ALTERNATIVE PURCHASE METHODS
The Fund offers investors three methods of purchasing
Fund shares. Orders for purchases of Class I shares,
however, may be placed only for certain eligible investors as
described below. An investor who is not eligible to
purchase Class I shares may choose from Class A and Class B the
Class of shares that best suits the investor's needs,
given the amount of purchase, the length of time the investor
expects to hold the shares and any other relevant
circumstances. Each Class A, Class B and Class I share
represents an identical pro rata interest in the Fund's
investment portfolio.
Class A shares are sold at net asset value per share plus
a maximum initial sales charge of 4.50% of the public
offering price imposed at the time of purchase. The initial
sales charge may be reduced or waived for certain
purchases. See "How to Buy Fund Shares--Class A Shares." Class
A shares are subject to an annual service fee at the
rate of up to .25 of 1% of the value of the average daily net
assets of Class A. See "Distribution Plan and
Shareholder Services Plan--Shareholder Services Plan."
Class B shares are sold at net asset value per share with
no initial sales charge at the time of purchase; as a
result, the entire purchase price is immediately invested in the
Fund. Class B shares are subject to a maximum 5.00%
CDSC, which is assessed only if Class B shares are redeemed
within six years of purchase. See "How to Buy Fund Shares-
- -Class B Shares" and "How to Redeem Fund Shares--Contingent
Deferred Sales Charge--Class B Shares." These shares are
subject to an annual service fee and distribution fee. See
"Distribution Plan and Shareholder Services Plan."
Approximately eight years after the date of purchase, Class B
shares automatically will convert to Class A shares,
based on the relative net asset values for shares of each Class,
and will no longer be subject to the distribution fee.
Class B shares that have been acquired through the reinvestment
of dividends and distributions will be converted on a
pro rata basis together with other Class B shares, in the
proportion that a shareholder's Class B shares converting to
Class A shares bears to the total Class B shares not acquired
through the reinvestment of dividends and distributions.
Class I shares are sold at net asset value with no sales
charge. Class I shares are sold exclusively to qualified
trust, custody and/or agency account clients of FIMCO, FNBC or
their affiliates ("Fiduciary Accounts") and to qualified
benefit plans or other programs with assets in excess of $100
million ("Eligible Retirement Plans"). Class I shares
are not subject to an annual service fee or distribution fee.
Class I shares held by investors who after purchasing
Class I shares for their Fiduciary Accounts terminate such
Accounts automatically will convert to Class A shares, based
on the relative net asset values for shares of each such Class.
Class B shares will receive lower per share dividends and
at any given time the performance of Class B should be
expected to be lower than for shares of each other Class because
of the higher expenses borne by Class B. Similarly,
Class A shares will receive lower per share dividends and the
performance of Class A should be expected to be lower
than Class I shares because of the higher expenses borne by Class
A. See "Fee Table."
An investor who is not eligible to purchase Class I
shares should consider whether, during the anticipated life of
the investor's investment in the Fund, the accumulated
distribution fee and CDSC on Class B shares prior to conversion
would be less than the initial sales charge, if any, on Class A
shares purchased at the same time, and to what extent,
if any, such differential would be offset by the return of Class
A. Additionally, investors qualifying for reduced
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing
Class A shares because the accumulated continuing distribution
fees on Class B shares may exceed the initial sales
charge on Class A shares during the life of the investment.
Generally, Class A shares may be more appropriate for
investors who invest $_________ or more in Fund shares.
DESCRIPTION OF THE FUND
[FOR LEFT MARGIN SIDE BAR: THE FUND'S GOAL IS TO PROVIDE
AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL
INCOME TAX AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL.]
INVESTMENT OBJECTIVE The Fund's goal is to provide investors
with as high a level of current income exempt from
Federal income tax as is consistent with the preservation of
capital. The Fund's investment objective cannot be
changed without approval by the holders of a majority (as defined
in the Investment Company Act of 1940) of its
outstanding voting shares. There can be no assurance that the
Fund's investment objective will be achieved.
[FOR LEFT MARGIN SIDE BAR: THE FUND INVESTS PRIMARILY IN
A PORTFOLIO OF MUNICIPAL OBLIGATIONS, THE INTEREST FROM
WHICH IS EXEMPT FROM FEDERAL INCOME TAX.]
MUNICIPAL OBLIGATIONS Municipal Obligations are debt obligations
issued by states, territories and possessions of the
United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or multi-
state agencies or authorities, the interest from which is, in the
opinion of bond counsel to the issuer, exempt from
Federal income tax. Municipal Obligations generally include debt
obligations issued to obtain funds for various public
purposes as well as certain industrial development bonds issued
by or on behalf of public authorities. Municipal
Obligations are classified as general obligation bonds, revenue
bonds and notes. General obligation bonds are secured
by the issuer's pledge of its faith, credit and taxing power for
the payment of principal and interest. Revenue bonds
are payable from the revenue derived from a particular facility
or class of facilities or, in some cases, from the
proceeds of a special excise or other specific revenue source,
but not from the general taxing power. Tax exempt
industrial development bonds, in most cases, are revenue bonds
that generally do not carry the pledge of the credit of
the issuing municipality, but generally are guaranteed by the
corporate entity on whose behalf they are issued. Notes
are short-term instruments which are obligations of the issuing
municipalities or agencies and are sold in anticipation
of a bond sale, collection of taxes or receipt of other revenues.
Municipal Obligations include municipal
lease/purchase agreements which are similar to installment
purchase contracts for property or equipment issued by
municipalities. Municipal Obligations bear fixed, floating or
variable rates of interest, which are determined in some
instances by formulas under which the Municipal Obligation's
interest rate will change directly or inversely to changes
in interest rates or an index, or multiples thereof, in many
cases subject to a maximum and minimum. Certain Municipal
Obligations are subject to redemption at a date earlier than
their stated maturity pursuant to call options, which may
be separated from the related Municipal Obligation and purchased
and sold separately.
[FOR LEFT MARGIN SIDE BAR: MUNICIPAL OBLIGATIONS
PURCHASED BY THE FUND MUST BE RATED AT LEAST INVESTMENT GRADE BY
A NATIONALLY RECOGNIZED INDEPENDENT RATING AGENCY.]
MANAGEMENT POLICIES It is a fundamental policy of the Fund that
it will invest at least 80% of the value of its net
assets (except when maintaining a temporary defensive position)
in Municipal Obligations. At least 65% of the value of
the Fund's net assets (except when maintaining a temporary
defensive position) will be invested in bonds, debentures
and other debt instruments.
The Fund will purchase Municipal Obligations only if
rated at least Baa, MIG-2/VMIG-2 or Prime-1 (P-1) by Moody's,
BBB, SP-2 or A-1 by S&P, BBB or F-2 by Fitch or BBB or Duff-2 by
Duff. See "Appendix" in the Statement of Additional
Information. Municipal Obligations rated Baa by Moody's or BBB
by S&P, Fitch or Duff are considered investment grade
obligations; those rated BBB by S&P, Fitch and Duff are regarded
as having an adequate capacity to pay principal and
interest, while those rated Baa by Moody's are considered medium
grade obligations and have speculative
characteristics. The Fund also may invest in securities which,
while not rated, are determined by the Investment
Adviser to be of comparable quality to the rated securities in
which the Fund may invest. The Fund also may invest in
Taxable Investments of the quality described below.
The Fund may invest more than 25% of the value of its
total assets in Municipal Obligations which are related in
such a way that an economic, business or political development or
change affecting one such security also would affect
the other securities; for example, securities the interest upon
which is paid from revenues of similar types of
projects, or securities of issuers that are located in the same
state. As a result, the Fund may be subject to greater
risk as compared to a fund that does not follow this practice.
From time to time, the Fund may invest more than 25% of
the value of its total assets in industrial development
bonds which, although issued by industrial development
authorities, may be backed only by the assets and revenues of
the non-governmental users. Interest on Municipal Obligations
(including certain industrial development bonds) which
are specified private activity bonds, as defined in the Internal
Revenue Code of 1986, as amended (the "Code"), issued
after August 7, 1986, while exempt from Federal income tax, is a
preference item for the purpose of the alternative
minimum tax. Where a regulated investment company receives such
interest, a proportionate share of any exempt-interest
dividend paid by the investment company may be treated as such a
preference item to the shareholder. The Fund may
invest without limitation in such Municipal Obligations if the
Investment Adviser determines that their purchase is
consistent with the Fund's investment objective. See "Other
Investment Considerations" below.
The Fund may purchase floating and variable rate demand
notes and bonds, which are tax exempt obligations
ordinarily having stated maturities in excess of one year, but
which permit the holder to demand payment of principal
at any time, or at specified intervals. Variable rate demand
notes include master demand notes which are obligations
that permit the Fund to invest fluctuating amounts, which may
change daily without penalty, pursuant to direct
arrangements between the Fund, as lender, and the borrower. The
interest rates on these obligations fluctuate from
time to time. Frequently, such obligations are secured by
letters of credit or other credit support arrangements
provided by banks. Use of letters of credit or other credit
support arrangements will not adversely affect the tax
exempt status of these obligations. Because these obligations
are direct lending arrangements between the lender and
borrower, it is not contemplated that such instruments generally
will be traded, and there generally is no established
secondary market for these obligations, although they are
redeemable at face value. Accordingly, where these
obligations are not secured by letters of credit or other credit
support arrangements, the Fund's right to redeem is
dependent on the ability of the borrower to pay principal and
interest on demand. Each obligation purchased will meet
the quality criteria established for the purchase of Municipal
Obligations. The Investment Adviser, on behalf of the
Fund, will consider on an ongoing basis the creditworthiness of
the issuers of the floating and variable rate demand
obligations in the Fund's portfolio. The Fund will not invest
more than 15% of the value of its net assets in floating
or variable rate demand obligations as to which it cannot
exercise the demand feature on not more than seven days'
notice if there is no secondary market available for these
obligations, and in other illiquid securities.
The Fund may purchase from financial institutions
participation interests in Municipal Obligations (such as
industrial development bonds and municipal lease/purchase
agreements). A participation interest gives the Fund an
undivided interest in the Municipal Obligation in the proportion
that the Fund's participation interest bears to the
total principal amount of the Municipal Obligation. These
instruments may have fixed, floating or variable rates of
interest. If the participation interest is unrated, or has been
given a rating below that which otherwise is
permissible for purchase by the Fund, the participation interest
will be backed by an irrevocable letter of credit or
guarantee of a bank that the Board of Directors has determined
meets the prescribed quality standards for banks set
forth below, or the payment obligation otherwise will be
collateralized by U.S. Government securities. For certain
participation interests, the Fund will have the right to demand
payment, on not more than seven days' notice, for all
or any part of the Fund's participation interest in the Municipal
Obligation, plus accrued interest. As to these
instruments, the Fund intends to exercise its right to demand
payment only upon a default under the terms of the
Municipal Obligation, as needed to provide liquidity to meet
redemptions, or to maintain or improve the quality of its
investment portfolio. The Fund will not invest more than 15% of
the value of its net assets in participation interests
that do not have this demand feature, and in other illiquid
securities.
The Fund may purchase tender option bonds. A tender
option bond is a Municipal Obligation (generally held
pursuant to a custodial arrangement) having a relatively long
maturity and bearing interest at a fixed rate
substantially higher than prevailing short-term tax exempt rates,
that has been coupled with the agreement of a third
party, such as a bank, broker-dealer or other financial
institution, pursuant to which such institution grants the
security holders the option, at periodic intervals, to tender
their securities to the institution and receive the face
value thereof. As consideration for providing the option, the
financial institution receives periodic fees equal to
the difference between the Municipal Obligations fixed coupon
rate and the rate, as determined by a remarketing or
similar agent at or near the commencement of such period, that
would cause the securities, coupled with the tender
option, to trade at par on the date of such determination. Thus,
after payment of this fee, the security holder
effectively holds a demand obligation that bears interest at the
prevailing short-term tax exempt rate. The Investment
Adviser, on behalf of the Fund, will consider on an ongoing basis
the creditworthiness of the issuer of the underlying
Municipal Obligation, of any custodian and of the third party
provider of the tender option. In certain instances and
for certain tender option bonds, the option may be terminable in
the event of a default in payment of principal or
interest on the underlying Municipal Obligations and for other
reasons. The Fund will not invest more than 15% of the
value of its net assets in illiquid securities, which would
include tender option bonds as to which it cannot exercise
the tender feature on not more than seven days' notice if there
is no secondary market available for these obligations.
The Fund may purchase custodial receipts representing the
right to receive certain future principal and interest
payments on Municipal Obligations which underlie the custodial
receipts. A number of different arrangements are
possible. In a typical custodial receipt arrangement, an issuer
or a third party owner of Municipal Obligations
deposits such obligations with a custodian in exchange for two
classes of custodial receipts. The two classes have
different characteristics, but, in each case, payments on the two
classes are based on payments received on the
underlying Municipal Obligations. One class has the
characteristics of a typical auction rate security, where at
specified intervals its interest rate is adjusted, and ownership
changes, based on an auction mechanism. This class's
interest rate generally is expected to be below the coupon rate
of the underlying Municipal Obligations and generally
is at a level comparable to that of a Municipal Obligation of
similar quality and having a maturity equal to the period
between interest rate adjustments. The second class bears
interest at a rate that exceeds the interest rate typically
borne by a security of comparable quality and maturity; this rate
also is adjusted, but in this case inversely to
changes in the rate of interest of the first class. If the
interest rate on the first class exceeds the coupon rate of
the underlying Municipal Obligations, its interest rate will
exceed the rate paid on the second class. In no event
will the aggregate interest paid with respect to the two classes
exceed the interest paid by the underlying Municipal
Obligations. The value of the second class and similar securities
should be expected to fluctuate more than the value
of a Municipal Obligation of comparable quality and maturity and
their purchase by the Fund should increase the
volatility of its net asset value and, thus, its price per share.
These custodial receipts are sold in private
placements. The Fund also may purchase directly from issuers,
and not in a private placement, Municipal Obligations
having characteristics similar to custodial receipts. These
securities may be issued as part of a multi-class offering
and the interest rate on certain classes may be subject to a cap
or floor.
The Fund may invest up to 15% of the value of its net
assets in securities as to which a liquid trading market
does not exist, provided such investments are consistent with the
Fund's investment objective. Such securities may
include securities that are not readily marketable, such as
certain securities that are subject to legal or contractual
restrictions on resale and repurchase agreements providing for
settlement in more than seven days after notice. As to
these securities, the Fund is subject to a risk that should the
Fund desire to sell them when a ready buyer is not
available at a price the Fund deems representative of their
value, the value of the Fund's net assets could be
adversely affected. However, if a substantial market of
qualified institutional buyers develops pursuant to Rule 144A
under the Securities Act of 1933, as amended, for certain of
these securities held by the Fund, the Fund intends to
treat such securities as liquid securities in accordance with
procedures approved by the Fund's Board of Directors.
Because it is not possible to predict with assurance how the
market for restricted securities pursuant to Rule 144A
will develop, the Fund's Board of Directors has directed the
Investment Adviser to monitor carefully the Fund's
investments in such securities with particular regard to trading
activity, availability of reliable price information
and other relevant information. To the extent that, for a period
of time, qualified institutional buyers cease
purchasing restricted securities pursuant to Rule 144A, the
Fund's investing in such securities may have the effect of
increasing the level of illiquidity in the Fund's portfolio
during such period.
The Fund may acquire "stand-by commitments" with respect
to Municipal Obligations held in its portfolio. Under a
stand-by commitment, the Fund obligates a broker, dealer or bank
to repurchase at the Fund's option specified
securities at a specified price and, in this respect, stand-by
commitments are comparable to put options. The exercise
of a stand-by commitment, therefore, is subject to the ability of
the seller to make payment on demand. The Fund will
acquire stand-by commitments solely to facilitate its portfolio
liquidity and does not intend to exercise its rights
thereunder for trading purposes. The Fund may pay for stand-by
commitments if such action is deemed necessary thus
increasing to a degree the cost of the underlying Municipal
Obligation and similarly decreasing such security's yield
to investors. The Fund also may acquire call options on specific
Municipal Obligations. The Fund generally would
purchase these call options to protect the Fund from the issuer
of the related Municipal Obligation redeeming, or other
holder of the call option from calling away, the Municipal
Obligation before maturity. The sale by the Fund of a call
option that it owns on a specific Municipal Obligation could
result in the receipt of taxable income by the Fund.
From time to time, on a temporary basis other than for
temporary defensive purposes (but not to exceed 20% of the
value of the Fund's net assets) or for temporary defensive
purposes, the Fund may invest in taxable short-term
investments ("Taxable Investments") consisting of: notes of
issuers having, at the time of purchase, a quality rating
within the two highest grades of Moody's, S&P, Fitch or Duff;
obligations of the U.S. Government, its agencies or
instrumentalities; commercial paper rated not lower than P-1 by
Moody's, A-1 by S&P, F-1 by Fitch or Duff-1 by Duff;
certificates of deposit of U.S. domestic banks, including foreign
branches of domestic banks, with assets of one
billion dollars or more; time deposits; bankers' acceptances and
other short-term bank obligations; and repurchase
agreements in respect of any of the foregoing. Dividends paid by
the Fund that are attributable to income earned by
the Fund from Taxable Investments will be taxable to investors.
See "Dividends, Distributions and Taxes." Except for
temporary defensive purposes, at no time will more than 20% of
the value of the Fund's net assets be invested in
Taxable Investments. Under normal market conditions, the Fund
anticipates that not more than 5% of the value of its
total assets will be invested in any one category of Taxable
Investments. Taxable Investments are more fully described
in the Statement of Additional Information, to which reference
hereby is made.
[FOR LEFT MARGIN SIDE BAR: THE FUND MAY USE VARIOUS
INVESTMENT TECHNIQUES WHICH INVOLVE CERTAIN RISKS.]
INVESTMENT TECHNIQUES The Fund may employ, among others, the
investment techniques described below. Use of these
techniques may give rise to taxable income. Options and futures
transactions involve so-called "derivative
securities."
WHEN-ISSUED SECURITIES New issues of Municipal Obligations
usually are offered on a when-issued basis, which means
that delivery and payment for such Municipal Obligations
ordinarily take place within 45 days after the date of the
commitment to purchase. The payment obligation and the interest
rate that will be received on the Municipal
Obligations are fixed at the time the Fund enters into the
commitment. The Fund will make commitments to purchase such
Municipal Obligations only with the intention of actually
acquiring the securities, but the Fund may sell these
securities before the settlement date if it is deemed advisable,
although any gain realized on such sale would be
taxable. The Fund will not accrue income in respect of a
when-issued security prior to its stated delivery date. No
additional when-issued commitments will be made for the Fund if
more than 20% of the value of its net assets would be
so committed.
Municipal Obligations purchased on a when-issued basis
and the securities held in the Fund's portfolio are subject
to changes in value (both generally changing in the same way,
i.e., appreciating when interest rates decline and
depreciating when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and
changes, real or anticipated, in the level of interest rates.
Municipal Obligations purchased on a when-issued basis
may expose the Fund to risk because they may experience such
fluctuations prior to their actual delivery. Purchasing
Municipal Obligations on a when-issued basis can involve the
additional risk that the yield available in the market
when the delivery takes place actually may be higher than that
obtained in the transaction itself. A segregated
account consisting of cash, cash equivalents or U.S. Government
securities or other high quality liquid debt securities
at least equal at all times to the amount of the when-issued
commitments will be established and maintained at the
Fund's custodian bank. Purchasing securities on a when-issued
basis when the Fund is fully or almost fully invested may
result in greater potential fluctuation in the value of the
Fund's net assets and its net asset value per share.
[FOR LEFT MARGIN SIDE BAR: THE FUND MAY ENGAGE IN
FUTURES AND OPTIONS TRANSACTIONS, SUBJECT TO APPLICABLE
REGULATIONS.]
FUTURES TRANSACTIONS--IN GENERAL The Fund is not a commodity
pool. However, as a substitute for a comparable market
position in the underlying securities and for hedging purposes,
the Fund may engage in futures and options on futures
transactions as described below.
The Fund's commodities transactions must constitute bona
fide hedging or other permissible transactions pursuant
to regulations promulgated by the Commodity Futures Trading
Commission. In addition, the Fund may not engage in such
transactions if the sum of the amount of initial margin deposits
and premiums paid for unexpired commodity options,
other than for bona fide hedging transactions, would exceed 5% of
the liquidation value of the Fund's assets, after
taking into account unrealized profits and unrealized losses on
such contracts it has entered into; provided, however,
that in the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in
calculating the 5%. Pursuant to regulations and/or published
positions of the Securities and Exchange Commission, the
Fund may be required to segregate cash or high quality money
market instruments in connection with its commodities
transactions in an amount generally equal to the value of the
underlying commodity. To the extent the Fund engages in
the use of futures and options on futures for other than bona
fide hedging purposes, the Fund may be subject to
additional risk.
Initially, when purchasing or selling futures contracts
the Fund will be required to deposit with its custodian in
the broker's name an amount of cash or cash equivalents up to
approximately 10% of the contract amount. This amount is
subject to change by the exchange or board of trade on which the
contract is traded and members of such exchange or
board of trade may impose their own higher requirements. This
amount is known as "initial margin" and is in the nature
of a performance bond or good faith deposit on the contract which
is returned to the Fund upon termination of the
futures position, assuming all contractual obligations have been
satisfied. Subsequent payments, known as "variation
margin," to and from the broker will be made daily as the price
of the index or securities underlying the futures
contract fluctuates, making the long and short positions in the
futures contract more or less valuable, a process known
as "marking-to-market." At any time prior to the expiration of a
futures contract, the Fund may elect to close the
position by taking an opposite position at the then prevailing
price, which will operate to terminate the Fund's
existing position in the contract.
Although the Fund intends to purchase or sell futures
contracts only if there is an active market for such
contracts, no assurance can be given that a liquid market will
exist for any particular contract at any particular
time. Many futures exchanges and boards of trade limit the
amount of fluctuation permitted in futures contract prices
during a single trading day. Once the daily limit has been
reached in a particular contract, no trades may be made
that day at a price beyond the limit or trading may be suspended
for specified periods during the trading day. Futures
contract prices could move to the limit for several consecutive
trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and
potentially subjecting the Fund to substantial losses. If it is
not possible or the Fund determines not to close a futures
position in anticipation of adverse price movements, the
Fund will be required to make daily cash payments of variation
margin. In such circumstances, an increase in the value
of the portion of the Fund's portfolio being hedged, if any, may
offset partially or completely losses on the futures
contract. However, no assurance can be given that the price of
the securities being hedged will correlate with the
price movements in a futures contract and thus provide an offset
to losses on the futures contract.
In addition, to the extent the Fund is engaging in a
futures transaction as a hedging device, due to the risk of
an imperfect correlation between securities in the Fund's
portfolio that are the subject of a hedging transaction and
the futures contract used as a hedging device, it is possible
that the hedge will not be fully effective in that, for
example, losses on the portfolio securities may be in excess of
gains on the futures contract or losses on the futures
contract may be in excess of gains on the portfolio securities
that were the subject of the hedge. In futures
contracts based on indexes, the risk of imperfect correlation
increases as the composition of the Fund's portfolio
varies from the composition of the index. In an effort to
compensate for the imperfect correlation of movements in the
price of the securities being hedged and movements in the price
of futures contracts, the Fund may buy or sell futures
contracts in a greater or lesser dollar amount than the dollar
amount of the securities being hedged if the historical
volatility of the futures contract has been less or greater than
that of the securities. Such "over hedging" or "under
hedging" may adversely affect the Fund's net investment results
if market movements are not as anticipated when the
hedge is established.
Successful use of futures by the Fund also is subject to
the Investment Adviser's ability to predict correctly
movements in the direction of the market or interest rates. For
example, if the Fund has hedged against the
possibility of a decline in the market adversely affecting the
value of securities held in its portfolio and prices
increase instead, the Fund will lose part or all of the benefit
of the increased value of securities which it has
hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Fund
has insufficient cash, it may have to sell securities to meet
daily variation margin requirements. Such sales of
securities may, but will not necessarily, be at increased prices
which reflect the rising market. The Fund may have to
sell securities at a time when it may be disadvantageous to do
so.
An option on a futures contract gives the purchaser the
right, in return for the premium paid, to assume a
position in a futures contract (a long position if the option is
a call and a short position if the option is a put) at
a specified exercise price at any time during the option exercise
period. The writer of the option is required upon
exercise to assume an offsetting futures position (a short
position if the option is a call and a long position if the
option is a put). Upon exercise of the option, the assumption of
offsetting futures positions by the writer and holder
of the option will be accompanied by delivery of the accumulated
cash balance in the writer's futures margin account
which represents the amount by which the market price of the
futures contract, at exercise, exceeds, in the case of a
call, or is less than, in the case of a put, the exercise price
of the option on the futures contract.
Call options sold by the Fund with respect to futures
contracts will be covered by, among other things, entering
into a long position in the same contract at a price no higher
than the strike price of the call option, or by
ownership of the instruments underlying, or instruments the
prices of which are expected to move relatively
consistently with the instruments underlying, the futures
contract. Put options sold by the Fund with respect to
futures contracts will be covered when, among other things, cash
or liquid securities are placed in a segregated
account to fulfill the obligation undertaken.
The Fund may utilize municipal bond index futures to
protect against changes in the market value of the Municipal
Obligations in its portfolio or which it intends to acquire.
Municipal bond index futures contracts are based on an
index of long-term Municipal Obligations. The index assigns
relative values to the Municipal Obligations included in
the index, and fluctuates with changes in the market value of
such Municipal Obligations. The contract is an agreement
pursuant to which two parties agree to take or make delivery of
an amount of cash based upon the difference between the
value of the index at the close of the last trading day of the
contract and the price at which the index contract was
originally written. The acquisition or sale of a municipal bond
index futures contract enables the Fund to protect its
assets from fluctuations in rates on tax exempt securities
without actually buying or selling such securities.
[FOR LEFT MARGIN SIDE BAR: THE FUND MAY HEDGE AGAINST
RISING OR FALLING INTEREST RATES BY PURCHASING OR SELLING
INTEREST RATE FUTURES CONTRACTS.]
INTEREST RATE FUTURES CONTRACTS AND OPTIONS ON INTEREST RATE
FUTURES CONTRACTS The Fund may purchase and sell interest
rate futures contracts and options on interest rate futures
contracts as a substitute for a comparable market position
and to hedge against adverse movements in interest rates. To the
extent the Fund has invested in interest rate futures
contracts or options on interest rate futures contracts as a
substitute for a comparable market position, the Fund will
be subject to the investment risks of having purchased the
securities underlying the contract.
The Fund may purchase call options on interest rate
futures contracts to hedge against a decline in interest rates
and may purchase put options on interest rate futures contracts
to hedge its portfolio securities against the risk of
rising interest rates.
If the Fund has hedged against the possibility of an
increase in interest rates adversely affecting the value of
securities held in the Fund's portfolio and rates decrease
instead, the Fund will lose part or all of the benefit of
the increased value of the securities which it has hedged because
it will have offsetting losses in its futures
positions. In addition, in such situations, if the Fund has
insufficient cash, it may have to sell securities to meet
daily variation margin requirements at a time when it may be
disadvantageous to do so. These sales of securities may,
but will not necessarily, be at increased prices which reflect
the decline in interest rates.
The Fund may sell call options on interest rate futures
contracts to partially hedge against declining prices of
its portfolio securities. If the futures price at expiration of
the option is below the exercise price, the Fund will
retain the full amount of the option premium which provides a
partial hedge against any decline that may have occurred
in the Fund's portfolio holdings. The Fund may sell put options
on interest rate futures contracts to hedge against
increasing prices of the securities which are deliverable upon
exercise of the futures contract. If the futures price
at expiration of the option is higher than the exercise price,
the Fund will retain the full amount of the option
premium which provides a partial hedge against any increase in
the price of securities which the Fund intends to
purchase. If a put or call option sold by the Fund is exercised,
the Fund will incur a loss which will be reduced by
the amount of the premium it receives. Depending on the degree
of correlation between changes in the value of its
portfolio securities and changes in the value of its futures
positions, the Fund's losses from existing options on
futures may to some extent be reduced or increased by changes in
the value of its portfolio securities.
The Fund also may sell options on interest rate futures
contracts as part of closing purchase transactions to
terminate its options positions. No assurance can be given that
such closing transactions can be effected or that
there will be a correlation between price movements in the
options on interest rate futures and price movements in the
Fund's portfolio securities which are the subject of the hedge.
In addition, the Fund's purchase of such options will
be based upon predictions as to anticipated interest rate trends,
which could prove to be inaccurate.
LENDING PORTFOLIO SECURITIES From time to time, the Fund may
lend securities from its portfolio to brokers, dealers
and other financial institutions needing to borrow securities to
complete certain transactions. Such loans may not
exceed 33-1/3% of the value of the Fund's total assets. In
connection with such loans, the Fund will receive
collateral consisting of cash, U.S. Government securities or
irrevocable letters of credit which will be maintained at
all times in an amount equal to at least 100% of the current
market value of the loaned securities. The Fund can
increase its income through the investment of such collateral.
The Fund continues to be entitled to payments in
amounts equal to the interest or other distributions payable on
the loaned security and receives interest on the amount
of the loan. Such loans will be terminable at any time upon
specified notice. The Fund might experience risk of loss
if the institution with which it has engaged in a portfolio loan
transaction breaches its agreement with the Fund.
BORROWING MONEY As a fundamental policy, the Fund is permitted
to borrow money to the extent permitted under the
Investment Company Act of 1940. However, the Fund currently
intends to borrow money only for temporary or emergency
(not leveraging) purposes, in an amount up to 15% of the value of
its total assets (including the amount borrowed)
valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing
is made. While borrowings exceed 5% of the Fund's total assets,
the Fund will not make any additional investments.
[FOR LEFT MARGIN SIDE BAR: THE FUND HAS ADOPTED CERTAIN
FUNDAMENTAL POLICIES INTENDED TO LIMIT THE RISK OF ITS
INVESTMENT PORTFOLIO. THESE POLICIES CANNOT BE CHANGED WITHOUT
APPROVAL BY A MAJORITY OF SHAREHOLDERS.]
CERTAIN FUNDAMENTAL POLICIES The Fund may (i) borrow money to
the extent permitted under the Investment Company Act of
1940; and (ii) invest up to 25% of its total assets in the
securities of issuers in any industry, provided that there
is no such limitation on investments in Municipal Obligations
and, for temporary defensive purposes, obligations issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities (industrial development bonds, where the
payment of principal and interest is the ultimate responsibility
of companies within the same industry, are grouped
together as an "industry"). This paragraph describes fundamental
policies that cannot be changed without approval by
the holders of a majority (as defined in the Investment Company
Act of 1940) of the Fund's outstanding voting shares.
See "Investment Objective and Management Policies--Investment
Restrictions" in the Statement of Additional Information.
CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES The Fund may (i)
pledge, hypothecate, mortgage or otherwise encumber its
assets, but only to secure permitted borrowings; and (ii) invest
up to 15% of its net assets in repurchase agreements
providing for settlement in more than seven days after notice and
in other illiquid securities (which securities could
include participation interests (including municipal
lease/purchase agreements) that are not subject to the demand
feature described above, and floating and variable rate demand
obligations as to which the Fund cannot exercise the
related demand feature described above and as to which there is
no secondary market). See "Investment Objective and
Management Policies--Investment Restrictions" in the Statement of
Additional Information.
[FOR LEFT MARGIN SIDE BAR: SECURITIES IN WHICH THE FUND
INVESTS ARE SUBJECT TO THE RISK OF MARKET PRICE
FLUCTUATIONS AND CHANGES IN THE CREDIT RATING OR FINANCIAL
CONDITION OF THE ISSUERS.]
OTHER INVESTMENT CONSIDERATIONS Even though interest-bearing
securities are investments which promise a stable stream
of income, the prices of such securities are inversely affected
by changes in interest rates and, therefore, are
subject to the risk of market price fluctuations. Certain
securities that may be purchased by the Fund, such as those
with interest rates that fluctuate directly or indirectly based
on multiples of a stated index, are designed to be
highly sensitive to changes in interest rates and can subject the
holders thereof to extreme reductions of yield and
possibly loss of principal. The values of fixed-income
securities also may be affected by changes in the credit rating
or financial condition of the issuing entities. Once the rating
of a portfolio security has been changed, the Fund
will consider all circumstances deemed relevant in determining
whether to continue to hold the security. Certain
securities purchased by the Fund, such as those rated Baa by
Moody's and BBB by S&P, Fitch and Duff, may be subject to
such risk with respect to the issuing entity and to greater
market fluctuations than certain lower yielding, higher
rated fixed-income securities. Obligations which are rated Baa
by Moody's are considered medium grade obligations;
they are neither highly protected nor poorly secured, and are
considered by Moody's to have speculative
characteristics. Bonds rated BBB by S&P are regarded as having
adequate capacity to pay interest and repay principal,
and while such bonds normally exhibit adequate protection
parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to
pay interest and repay principal for bonds in this
category than in higher rated categories. Fitch considers the
obligor's ability to pay interest and repay principal on
bonds rated BBB to be adequate; adverse changes in economic
conditions and circumstances, however, are more likely to
have an adverse impact on these bonds and, therefore, impair
timely payment. Bonds rated BBB by Duff are considered to
have below average protection factors but still considered
sufficient for prudent investment. See "Appendix" in the
Statement of Additional Information. The Fund's net asset value
generally will not be stable and should fluctuate
based upon changes in the value of the Fund's portfolio
securities. Securities in which the Fund will invest may earn a
higher level of current income than certain shorter-term or
higher quality securities which generally have greater
liquidity, less market risk and less fluctuation in market value.
Certain municipal lease/purchase obligations in which the
Fund may invest may contain "non-appropriation" clauses
which provide that the municipality has no obligation to make
lease payments in future years unless money is
appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease/purchase obligations are secured
by the leased property, disposition of the leased property in the
event of foreclosure might prove difficult. In
evaluating the credit quality of a municipal lease/purchase
obligation that is unrated, the Investment Adviser will
consider, on an ongoing basis, a number of factors including the
likelihood that the issuing municipality will
discontinue appropriating funding for the leased property.
[FOR LEFT MARGIN SIDE BAR: CHANGES IN THE FEDERAL INCOME
TAX CODE COULD AFFECT THE PERFORMANCE OF THE FUND.
CONSULT YOUR TAX ADVISER CONCERNING THE EFFECT OF ANY SUCH
PROVISIONS.]
Certain provisions in the Code relating to the issuance
of Municipal Obligations may reduce the volume of
Municipal Obligations qualifying for Federal tax exemption. One
effect of these provisions could be to increase the
cost of the Municipal Obligations available for purchase by the
Fund and thus reduce the available yield. Investors
should consult their tax advisers concerning the effect of these
provisions on an investment in the Fund. Proposals
that may restrict or eliminate the income tax exemption for
interest on Municipal Obligations may be introduced in the
future. If any such proposal were enacted that would reduce the
availability of Municipal Obligations for investment
by the Fund so as to adversely affect Fund shareholders, the Fund
would reevaluate its investment objective and
policies and submit possible changes in the Fund's structure to
shareholders for their consideration. If legislation
were enacted that would treat a type of Municipal Obligation as
taxable, the Fund would treat such security as a
permissible Taxable Investment within the applicable limits set
forth herein.
The Fund's classification as a "non-diversified"
investment company means that the proportion of its assets that
may be invested in the securities of a single issuer is not
limited by the Investment Company Act of 1940. A
"diversified" investment company is required by the Investment
Company Act of 1940 generally to invest, with respect to
75% of its total assets, not more than 5% of such assets in the
securities of a single issuer. However, the Fund
intends to conduct its operations so as to qualify as a
"regulated investment company" for purposes of the Code, which
requires that, at the end of each quarter of its taxable year,
(i) at least 50% of the market value of the Fund's total
assets be invested in cash, U.S. Government securities, the
securities of other regulated investment companies and
other securities, with such other securities of any one issuer
limited for the purposes of this calculation to an
amount not greater than 5% of the value of such total assets and
(ii) not more than 25% of the value of the Fund's
total assets be invested in the securities of any one issuer
(other than U.S. Government securities or the securities
of other regulated investment companies). Since a relatively
high percentage of the Fund's assets may be invested in
the securities of a limited number of issuers, the Fund's
portfolio securities may be more susceptible to any single
economic, political or regulatory occurrence than the portfolio
securities of a diversified investment company.
Investment decisions for the Fund are made independently
from those of other investment companies or investment
advisory accounts that may be advised by the Investment Adviser.
However, if such other investment companies or
managed accounts are prepared to invest in, or desire to dispose
of, Municipal Obligations or Taxable Investments at
the same time as the Fund, available investments or opportunities
for sales will be allocated equitably to each of
them. In some cases, this procedure may adversely affect the
size of the position obtained for or disposed of by the
Fund or the price paid or received by the Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER AND ADMINISTRATOR First Chicago Investment
Management Company, located at Three First National
Plaza, Chicago, Illinois 60670, is the Fund's investment adviser
and administrator. FIMCO is a newly-formed,
registered investment adviser and a wholly-owned subsidiary of
The First National Bank of Chicago ("FNBC"), a wholly-
owned subsidiary of First Chicago Corporation, a registered bank
holding company. FNBC is a commercial bank offering a
wide range of banking and investment services to customers
throughout the United States and around the world. As of
June 30, 1994, FNBC was one of the largest commercial banks in
the United States and the largest in the mid-western
United States in terms of assets ($41.8 billion) and in terms of
deposits ($23.8 billion). As of June 30, 1994, FNBC
provided personal investment management services to portfolios
containing approximately $9.6 billion in assets.
FIMCO serves as investment adviser for the Fund pursuant
to an Investment Advisory Agreement dated as of
_____________. Under the Investment Advisory Agreement, FIMCO,
subject to the supervision of the Fund's Board of
Directors and in conformity with Maryland law and the stated
policies of the Fund, provides the day-to-day management
of the Fund's investments. FIMCO is responsible for making
investment decisions for the Fund, placing purchase and
sale orders (which may be allocated to various dealers based on
their sale of Fund shares) and providing research,
statistical analysis and continuous supervision of the Fund's
investment portfolio. FIMCO has advised the Fund that in
making its investment decisions FIMCO does not obtain or use
material inside information in its or any of its
affiliate's possession.
Under the terms of the Investment Advisory Agreement, the
Fund has agreed to pay FIMCO a monthly fee at the annual
rate of .40 of 1% of the value of the Fund's average daily net
assets. Prior to ________, 199_, FNBC served as the
Fund's investment adviser. No fees were paid by the Fund for the
fiscal year ended February 28, 1994 and for the
period March 1, 1994 through _______, 199_, pursuant to various
undertakings by FNBC.
The Fund's primary portfolio manager is John H. Erickson.
He has held that position since the Fund's inception,
and has been employed by FNBC since August 1, 1979. FIMCO also
provides research services for the Fund as well as for
other funds it advises through a professional staff of portfolio
managers and securities analysts.
FIMCO serves as the Fund's administrator pursuant to an
Administration Agreement with the Fund. Under the
Administration Agreement, FIMCO generally assists in all aspects
of the Fund's operations, other than providing
investment advice, subject to the overall authority of the Fund's
Board in accordance with Maryland law. Under the
terms of the Administration Agreement, the Fund has agreed to pay
FIMCO a monthly fee at the annual rate of .15% of the
value of the Fund's average daily net assets. FIMCO has engaged
Concord Holding Corporation, located at 125 West 55th
Street, New York, New York 10019 (the "Sub-Administrator"), to
assist it in providing certain administrative services
for the Fund pursuant to a Master Sub-Administration Agreement
between FIMCO and the Sub-Administrator. FIMCO, from
its own funds, will pay the Sub-Administrator for the
Sub-Administrator's services.
Prior to ______, 199_, The Dreyfus Corporation served as
the Fund's administrator pursuant to an administration
agreement with the Fund (the "Prior Administration Agreement").
Under the terms of the Prior Administration Agreement,
the Fund agreed to pay The Dreyfus Corporation a monthly fee at
the annual rate of .20 of 1% of the value of the Fund's
average daily net assets. No fees were paid by the Fund for the
fiscal year ended February 28, 1994, pursuant to
various undertakings by The Dreyfus Corporation. For the period
March 1, 1994 through ______, 199_, the Fund paid The
Dreyfus Corporation an administration fee at the effective annual
rate of .__ of 1% of the value of the Fund's average
daily net assets.
DISTRIBUTOR Concord Financial Group, Inc., located at 125 West
55th Street, New York, New York 10019, serves as the
Fund's principal underwriter and distributor of the Fund's
shares. The Distributor, a wholly-owned subsidiary of the
Sub-Administrator, was organized to distribute shares of mutual
funds to institutional and retail investors. The
Distributor distributes the shares of other investment companies
with over $21 billion in assets.
[FOR LEFT MARGIN SIDE BAR: ____________________ IS THE FUND'S
TRANSFER AGENT.]
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN
_______________________, is the Fund's Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). The Bank of New York,
110 Washington Street, New York, New York 10286, is the
Fund's Custodian.
EXPENSES All expenses incurred in the operation of the Fund are
borne by the Fund, except to the extent specifically
assumed by FIMCO. The expenses borne by the Fund include the
following: taxes, interest, brokerage fees and
commissions, if any, fees of Board members, Securities and
Exchange Commission fees, state Blue Sky qualification fees,
advisory and administration fees, charges of custodians, transfer
and dividend disbursing agents' fees, certain
insurance premiums, industry association fees, outside auditing
and legal expenses, costs of independent pricing
services, costs of maintaining corporate existence, costs
attributable to investor services (including, without
limitation, telephone and personnel expenses), costs of
shareholders' reports and corporate meetings and any
extraordinary expenses. Class A and Class B shares are subject
to an annual service fee for ongoing personal services
relating to shareholder accounts and services related to the
maintenance of shareholder accounts. In addition, Class B
shares are subject to an annual distribution fee for advertising,
marketing and distributing Class B shares pursuant to
a distribution plan adopted in accordance with Rule 12b-1 under
the Investment Company Act of 1940. See "Distribution
Plan and Shareholder Services Plan."
The imposition of the investment advisory and
administration fees, as well as other operating expenses,
including
the fees paid under the Distribution Plan and Shareholder
Services Plan, will have the effect of reducing the yield to
investors. From time to time, FIMCO may waive receipt of its
fees and/or voluntarily assume certain expenses of the
Fund, which would have the effect of lowering the Fund's overall
expense ratio and increasing yield to investors at the
time such amounts were waived or assumed, as the case may be.
The Fund will not pay FIMCO at a later time for any
amounts which may be waived, nor will the Fund reimburse FIMCO
for any amounts which may be assumed.
HOW TO BUY FUND SHARES
[FOR LEFT MARGIN SIDE BAR: THE FUND OFFERS A NUMBER OF
CONVENIENT WAYS TO PURCHASE SHARES.]
INFORMATION APPLICABLE TO ALL PURCHASERS When purchasing Fund
shares, an investor must specify the Class of shares
being purchased. If no Class of shares is specified, Class A
shares will be purchased.
Class A and Class B shares are offered to the general
public and may be purchased through a number of
institutions, including FIMCO, FNBC and their affiliates, other
Service Agents, and directly through the Distributor.
Orders for purchases of Class I shares may be placed only
for clients of FIMCO, FNBC or their affiliates for their
Fiduciary Accounts maintained at FIMCO, FNBC or one of their
affiliates and Eligible Retirement Plans with assets in
excess of $100 million. Class I shares may be purchased for a
Fiduciary Account or Eligible Retirement Plan only by a
custodian, trustee, investment manager or other entity authorized
to act on behalf of such Account or Plan.
Share certificates will not be issued. It is not
recommended that the Fund be used as a vehicle for Keogh, IRA or
other qualified retirement plans. The Fund reserves the right to
reject any purchase order.
[FOR LEFT MARGIN SIDE BAR: YOU CAN OPEN AN ACCOUNT WITH
AS LITTLE AS $1,000. SUBSEQUENT INVESTMENTS CAN BE AS
LITTLE AS $100.]
The minimum initial investment for each Class is $1,000.
All subsequent investments must be at least $100. The
initial investment must be accompanied by the Fund's Account
Application. FIMCO and Service Agents may impose initial
or subsequent investment minimums which are higher or lower than
those specified above and may impose different
minimums for different types of accounts or purchase
arrangements.
[FOR LEFT MARGIN SIDE BAR: ORDERS RECEIVED BY THE CLOSE
OF TRADING ON THE FLOOR OF THE NEW YORK STOCK EXCHANGE
(CURRENTLY 4:00 P.M., NEW YORK TIME) WILL BE EXECUTED AT THAT
DAY'S PUBLIC OFFERING PRICE. ORDERS RECEIVED LATER WILL
BE EXECUTED AT THE NEXT BUSINESS DAY'S PRICE.]
If an order is received by the Transfer Agent by the
close of trading on the floor of the New York Stock Exchange
(currently 4:00 p.m., New York time) on any business day (which,
as used herein, shall include each day the New York
Stock Exchange is open for business, except Martin Luther King,
Jr. Day, Columbus Day and Veterans Day), Fund shares
will be purchased at the public offering price determined as of
the close of trading on the floor of the New York Stock
Exchange on that day. Otherwise, Fund shares will be purchased
at the public offering price determined as of the close
of trading on the floor of the New York Stock Exchange on the
next business day.
[FOR LEFT MARGIN SIDE BAR: NET ASSET VALUE IS DETERMINED
AT THE CLOSE OF TRADING ON THE FLOOR OF THE NEW YORK
STOCK EXCHANGE (CURRENTLY 4:00 P.M. NEW YORK TIME) ON EACH
BUSINESS DAY.]
Shares of the Fund are sold on a continuous basis. Net
asset value per share of each Class is determined as of
the close of trading on the floor of the New York Stock Exchange
(currently 4:00 p.m., New York time), on each business
day. For purposes of determining net asset value per share,
options and futures contracts will be valued 15 minutes
after the close of trading on the New York Stock Exchange. Net
asset value per share of each Class is computed by
dividing the value of the Fund's net assets represented by such
Class (i.e., the value of its assets less liabilities)
by the total number of its shares of such Class outstanding. The
Fund's investments are valued each business day by an
independent pricing service approved by the Board of Directors
and are valued at fair value as determined by the
pricing service. The pricing service's procedures are reviewed
under the general supervision of the Board of
Directors. For further information regarding the methods
employed in valuing the Fund's investments, see
"Determination of Net Asset Value" in the Fund's Statement of
Additional Information.
Federal regulations require that an investor provide a
certified Taxpayer Identification Number ("TIN") upon
opening or reopening an account. See "Dividends, Distributions
and Taxes" and the Fund's Account Application for
further information concerning this requirement. Failure to
furnish a certified TIN to the Fund could subject an
investor to a $50 penalty imposed by the Internal Revenue Service
(the "IRS").
[FOR LEFT MARGIN SIDE BAR: CLASS A SHARES ARE SOLD WITH
A MAXIMUM SALES LOAD OF 4.50%. THERE ARE SEVERAL WAYS TO
REDUCE OR ELIMINATE THE SALES LOAD.]
CLASS A SHARES The public offering price for Class A shares is
the net asset value per share of that Class plus a
sales load as shown below:
<TABLE>
<CAPTION>
TOTAL SALES LOAD
As a % of
As a % of Dealers' Reallowance
offering price
net asset value as a % of
AMOUNT OF TRANSACTION per share
per share offering price
<S> <C>
<C> <C>
Less than $50,000 4.50
4.70 4.00
$50,000 to less than $100,000 4.00
4.20 3.50
$100,000 to less than $250,000 3.00
3.10 2.50
$250,000 to less than $500,000 2.00
2.00 1.50
$500,000 to less than $1,000,000 1.50
1.50 1.25
$1,000,000 and above none
none none
</TABLE>
There is no initial sales charge on purchases of $1,000,000
or more of Class A shares. However, if an investor purchases
Class A shares without an initial sales charge as part of an
investment of at least $1,000,000 and redeems those shares within
a certain period after purchase, a CDSC will be imposed at the
time of redemption as described below. The terms contained in
the section of the Fund's Prospectus entitled "How to Redeem Fund
Shares--Contingent Deferred Sales Charge--Class B" (other than
the amount of the CDSC and its time periods) are applicable to
the Class A shares subject to a CDSC. Letter of Intent and Right
of Accumulation apply to such purchases of Class A shares. The
following table sets forth the rates of such CDSC for the
indicated time periods:
<TABLE>
<CAPTION>
Amount of CDSC as a % of
Transactions at Amount Invested or
Year Since Purchase
Offering Price Redemption Proceeds
Payment Was Made
<S> <C>
<C>
$1,000,000 to less than $2,500,000 1.00%
First or Second
$2,500,000 to less than $5,000,000 0.50%
First
$5,000,000 and above 0.25%
First
</TABLE>
The dealer reallowance may be changed from time to
time but will remain the same for all dealers. With
respect to purchases of $1,000,000 or more of Class A
shares made through Service Agents (other than FIMCO, FNBC
or their affiliates), the Distributor may pay such Service
Agents from its own funds a fee of up to 1.00% of the
amount invested to compensate such Service Agents for
their distribution assistance in connection with such
purchases.
Full-time employees of NASD member firms and full
time employees of other financial institutions which have
entered into an agreement with the Distributor pertaining
to the sale of Fund shares (or which otherwise have a
brokerage-related or clearing arrangement with an NASD
member firm or other financial institution with respect to
sales of Fund shares), their spouses and minor children,
and accounts opened by a bank, trust company or thrift
institution, acting as a fiduciary or custodian, may
purchase Class A shares for themselves or itself, as the
case may be, at net asset value, provided that they have
furnished the Distributor appropriate notification of such
status at the time of the investment and such other
information as it may request from time to time in order
to verify eligibility for this privilege. This privilege
also applies to full-time employees of financial
institutions affiliated with NASD member firms whose
employees are eligible to purchase Class A shares at net
asset value. In addition, Class A shares may be purchased
at net asset value for accounts registered under the
Uniform Gifts to Minors Act or Uniform Transfers to Minors
Act which are opened through FCIS. Class A shares also
may be purchased at net asset value on behalf of clients
of FNBC or its affiliates for their custody accounts.
Class A shares are also offered at net asset value to
directors and full-time or part-time employees of First
Chicago Corporation, or any of its affiliates and
subsidiaries, retired employees of First Chicago
Corporation, or any of its affiliates and subsidiaries,
Board members of a fund advised by the Investment Adviser,
including members of the Fund's Board, or the spouse or
minor child of any of the foregoing.
Class A shares may be purchased at net asset value
through certain broker-dealers, registered investment
advisers and other financial institutions which have
entered into an agreement with the Distributor, which
includes a requirement that such shares be sold for the
benefit of clients participating in a "wrap account" or a
similar program under which such clients pay a fee to such
broker-dealer, registered investment advisers or other
financial institution.
Class A shares also may be purchased at net asset
value, without a sales charge, with the proceeds from the
redemption of shares of an investment company sold with a
sales charge or commission and not distributed by the
Distributor. (This does not include shares of a mutual
fund which were or would be subject to a contingent
deferred sales charge upon redemption.) The purchase must
be made within 60 days of the redemption, and the
Distributor must be notified by the investor in writing,
or by the investor's investment professional, at the time
the purchase is made. The Distributor will offer to pay
dealers an amount equal to . % of the net asset value of
shares purchased by the dealers' clients or customers in
this manner. If an investor purchasing shares in this
manner redeems those shares within one year after
purchase, a % CDSC will be imposed at the time of
redemption.
In fiscal 1994, FCIS, an affiliate of the Investment
Adviser, retained $34,389 with respect to the Fund from
sales loads on Class A shares. The dealer reallowance may
be changed from time to time but will remain the same for
all dealers.
CLASS B SHARES The public offering price for Class B
shares is the net asset value per share of that Class. No
initial sales charge is imposed at the time of purchase.
A CDSC is imposed, however, on certain redemptions of
Class B shares as described under "How to Redeem Fund
Shares." The Distributor may compensate certain Service
Agents for selling Class B shares at the time of purchase
from its own assets. Proceeds of the CDSC and
distribution fees payable to the Distributor, in part, are
used to defray these expenses.
CLASS I SHARES The public offering price for Class I
shares is the net asset value per share of that class. No
sales charge is imposed for Class I shares.
[FOR LEFT MARGIN SIDE BAR: CONTACT YOUR INVESTMENT
REPRESENTATIVE OR SERVICE AGENT TO LEARN HOW TO PURCHASE
SHARES.]
PURCHASING SHARES THROUGH ACCOUNTS WITH THE ADVISER OR A
SERVICE AGENT Investors who desire to purchase shares
through their accounts at FIMCO, FNBC of their affiliates
or a Service Agent should contact such entity directly for
appropriate instructions, as well as for information about
conditions pertaining to the account and any related fees.
Service Agents FIMCO and FNBC may charge clients direct
fees for effecting transactions in shares, as well as fees
for other services provided to clients in connection with
accounts through which shares are purchased. These fees,
if any, would be in addition to fees received by a Service
Agent under the Shareholder Services Plan or fees received
by FIMCO under the Investment Advisory Agreement or
Administration Agreement. Each Service Agent has agreed
to transmit to its clients a schedule of such fees. In
addition, Service Agents FIMCO and FNBC may receive
different levels of compensation for selling different
classes of shares and may impose minimum account and other
conditions, including conditions which might affect the
availability of certain shareholder privileges described
in this Prospectus. Certain investor accounts with FNBC
and its affiliates and certain Service Agents may be
eligible for an automatic investment privilege, commonly
called a "sweep," under which amounts in excess of a
certain minimum held in these accounts will be invested
automatically in shares at predetermined intervals. Each
investor desiring to use this privilege should consult
FNBC or his Service Agent for details. It is the
responsibility of FNBC and Service Agents to transmit
orders on a timely basis.
Copies of the Fund's Prospectus and Statement of
Additional Information may be obtained from the
Distributor, FIMCO, certain affiliates of FIMCO or certain
Service Agents, as well as from the Fund.
[FOR LEFT MARGIN SIDE BAR: REDUCED SALES LOADS FOR
CLASS A SHARES APPLY TO CERTAIN PURCHASES OF SHARES OF THE
FUND AND OTHER ELIGIBLE PRAIRIE FUNDS.]
RIGHT OF ACCUMULATION--CLASS A SHARES Reduced sales loads
apply to any purchase of Class A shares of the Fund where
the dollar amount of shares being purchased, plus the
value of shares of the Fund, and shares of certain other
funds advised by the Investment Adviser purchased with a
sales load or acquired by a previous exchange of shares
purchased with a sales load (hereinafter referred to as
"Eligible Funds") held by an investor and any related
"purchaser" as defined in the Statement of Additional
Information, is $50,000 or more. If, for example, an
investor previously purchased and still holds Class A
shares of the Fund, or of any other Eligible Fund or
combination thereof, with an aggregate current market
value of $40,000 and subsequently purchases Class A shares
of the Fund or an Eligible Fund having a current value of
$20,000, the sales load applicable to the subsequent
purchase would be reduced to 4.00% of the offering price
(4.20% of the net asset value). All present holdings of
Eligible Funds may be combined to determine the current
offering price of the aggregate investment in ascertaining
the sales load applicable to each subsequent purchase.
To qualify for reduced sales loads, at the time of a
purchase an investor or his Service Agent must notify the
Distributor if orders are made by wire, or the Transfer
Agent if orders are made by mail. The reduced sales load
is subject to confirmation of the investor's holdings
through a check of appropriate records.
SHAREHOLDER SERVICES
The Exchange Privilege and Automatic Investment Plan
are available to shareholders of any class. The Letter of
Intent and Reinstatement Privilege are available only for
Class A and Class B shareholders, respectively. In
addition, such services and privileges may not be
available to clients of certain Service Agents and some
Service Agents may impose certain conditions on their
clients which are different from those described in this
Prospectus. Each investor should consult his Service
Agent in this regard.
[FOR LEFT MARGIN SIDE BAR: THERE IS NO CHARGE FOR
EXCHANGES WITH CERTAIN OTHER PRAIRIE FUNDS.]
EXCHANGE PRIVILEGE The Exchange Privilege enables an
investor to purchase, in exchange for shares of the Fund,
shares of the same Class of other funds advised by the
Investment Adviser. This privilege may be expanded to
permit exchanges between the Fund and other funds that, in
the future, may be advised by the Investment Adviser.
Shares of the same Class of funds purchased by
exchange will be purchased on the basis of relative net
asset value per share as follows:
A. Exchanges for shares of funds that are offered
without a sales load will be made without a
sales load.
B. Shares of funds purchased without a sales load
may be exchanged for shares of other funds sold
with a sales load, and the applicable sales load
will be deducted.
C. Shares of funds purchased with a sales load may
be exchanged without a sales load for shares of
other funds sold without a sales load.
D. Shares of funds purchased with a sales load,
shares of funds acquired by a previous exchange
from shares purchased with a sales load and
additional shares acquired through reinvestment
of dividends or distributions of any such funds
(collectively referred to herein as "Purchased
Shares") may be exchanged for shares of other
funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the
sales load applicable to the Offered Shares
exceeds the maximum sales load that could have
been imposed in connection with the Purchased
Shares (at the time the Purchased Shares were
acquired), without giving effect to any reduced
loads, the difference will be deducted.
E. Shares of funds subject to a CDSC that are
exchanged for shares of another fund will be
subject to the higher applicable CDSC of the two
funds, and for purposes of calculating CDSC
rates and conversion periods, if any, will be
deemed to have been held since the date the
shares being exchanged were initially purchased.
To accomplish an exchange under item D above,
shareholders must notify the Transfer Agent of their prior
ownership of fund shares and their account number.
No fees currently are charged shareholders directly
in connection with exchanges although the Fund reserves
the right, upon not less than 60 days' written notice, to
charge shareholders a nominal fee in accordance with rules
promulgated by the Securities and Exchange Commission.
The Fund reserves the right to reject any exchange request
in whole or in part. The Exchange Privilege may be
modified or terminated at any time upon notice to
shareholders.
The exchange of shares of the Fund for shares of
another is treated for Federal income tax purposes as a
sale of the shares given in exchange by the shareholder
and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
[FOR LEFT MARGIN SIDE BAR: BY SIGNING A LETTER OF
INTENT TO PURCHASE ADDITIONAL CLASS A SHARES WITHIN 13
MONTHS, YOU BECOME ELIGIBLE FOR ANY REDUCED SALES CHARGES
APPLYING TO THE TOTAL PURCHASE.]
LETTER OF INTENT--CLASS A SHARES By signing a Letter of
Intent form, available from the Distributor, FIMCO,
certain affiliates of FIMCO or certain Service Agents, an
investor becomes eligible for the reduced sales load
applicable to the total number of Eligible Fund shares
purchased in a 13-month period (beginning up to 30 days
before the date of execution of the Letter of Intent)
pursuant to the terms and conditions set forth in the
Letter of Intent. A minimum initial purchase of $5,000 is
required. To compute the applicable sales load, the
offering price of shares the investor holds (on the date
of submission of the Letter of Intent) in any Eligible
Fund that may be used toward "Right of Accumulation"
benefits described above may be used as a credit toward
completion of the Letter of Intent. However, the reduced
sales load will be applied only to new purchases.
The Transfer Agent will hold in escrow 5% of the
amount indicated in the Letter of Intent for payment of a
higher sales load if the investor does not purchase the
full amount indicated in the Letter of Intent. The escrow
will be released when the investor fulfills the terms of
the Letter of Intent by purchasing the specified amount.
Assuming completion of the total minimum investment
specified under a Letter of Intent, an adjustment will be
made to reflect any reduced sales load applicable to
shares purchased during the 30-day period before
submission of the Letter of Intent. In addition, if the
investor's purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect the
investor's total purchase at the end of 13 months. If
total purchases are less than the amount specified, the
investor will be requested to remit an amount equal to the
difference between the sales load actually paid and the
sales load applicable to the aggregate purchases actually
made. If such remittance is not received within 20 days,
the Transfer Agent, as attorney-in-fact pursuant to the
terms of the Letter of Intent, will redeem an appropriate
number of Class A shares held in escrow to realize the
difference. Signing a Letter of Intent does not bind the
investor to purchase, or the Fund to sell, the full amount
indicated at the sales load in effect at the time of
signing, but the investor must complete the intended
purchase to obtain the reduced sales load. At the time an
investor purchases shares, he must indicate his intention
to do so under a Letter of Intent. Purchases pursuant to
a Letter of Intent will be made at the then current net
asset value, plus the lower of the applicable sales load
in effect at the time such Letter of Intent was executed
or the current applicable sales load.
AUTOMATIC INVESTMENT PLAN. The Automatic Investment Plan
permits an investor to purchase shares at regular
intervals selected by the investor. Provided the
investor's bank or other financial institution allows
automatic withdrawals, shares may be purchased by
transferring funds from the bank account designated by the
investor. At the investor's option, the account
designated will be debited in the specified amount, and
shares will be purchased, once a month, on either the
first or fifteenth day, or twice a month, on both days.
Only an account maintained at a domestic financial
institution which is an Automated Clearing House member
may be so designated. To establish an Automatic
Investment Plan account, the investor must check the
appropriate box and supply the necessary information on
the Account Application. Investors may obtain the
necessary applications from the Distributor. An investor
may cancel his or her participation in the Plan or change
the amount of purchase at any time by mailing written
notification to __________________, and such notification
will be effective three business days following receipt.
The Fund may modify or terminate the Automatic Investment
Plan at any time or charge a service fee. No such fee
currently is contemplated.
REINSTATEMENT PRIVILEGE. The Reinstatement Privilege
enables investors who have redeemed Class A or Class B
shares to repurchase, within 30 days of such redemption,
Class A or Class B shares in an amount not to exceed the
redemption proceeds received. Class A shares so
reinstated will be offered at a purchase price equal to
the then-current net asset value of Class A determined
after a reinstatement request and payment for Class A
shares are received by the Transfer Agent. With respect
to Class B shares so reinstated, the CDSC applicable on
redemption of the acquired Class B shares will be
calculated from the date of the initial purchase of such
Class B shares previously redeemed. This privilege also
enables such investors to reinstate their account for the
purpose of exercising the Exchange Privilege. To use the
Reinstatement Privilege, an investor must submit a written
reinstatement request to the Transfer Agent. The
reinstatement request and payment must be received within
30 days of the trade date of the redemption. There
currently are no restrictions on the number of times an
investor may use this privilege.
HOW TO REDEEM FUND SHARES
[FOR LEFT MARGIN SIDE BAR: YOU CAN REDEEM FUND
SHARES AT ANY TIME.]
GENERAL An investor may request redemption of his shares
at any time. Redemption requests should be transmitted to
the Transfer Agent as described below. An investor who
has purchased shares through his Fiduciary Account or as a
participant in an Eligible Retirement Plan must redeem
shares by following instructions pertaining to such
Account or Plan. It is the responsibility of FNBC to
transmit the redemption order to the Transfer Agent and
credit the investor's account with the redemption proceeds
on a timely basis. When a request is received in proper
form, the Fund will redeem the shares at the next
determined net asset value as described below. If an
investor holds Fund shares of more than one Class, any
request for redemption must specify the Class of shares
being redeemed. If an investor fails to specify the Class
of shares to be redeemed, Class A shares will be redeemed
first. If an investor owns fewer shares of the Class than
specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further
instructions from the investor or his Service Agent.
The Fund imposes no charges when shares are redeemed.
However, the Distributor may impose a CDSC as described
below. Service Agents may charge a nominal fee for
effecting redemptions of Fund shares. The value of the
shares redeemed may be more or less than their original
cost, depending upon the Series' then-current net asset
value.
The Fund ordinarily will make payment for all shares
redeemed within seven days after receipt by the Transfer
Agent of a redemption request in proper form, except as
provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF AN INVESTOR HAS PURCHASED FUND
SHARES BY CHECK OR THROUGH THE AUTOMATIC INVESTMENT PLAN
AND SUBSEQUENTLY SUBMITS A WRITTEN REDEMPTION REQUEST TO
THE TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL BE
TRANSMITTED TO THE INVESTOR PROMPTLY UPON BANK CLEARANCE
OF THE INVESTOR'S PURCHASE CHECK OR THE AUTOMATIC
INVESTMENT PLAN ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS
DAYS OR MORE. IN ADDITION, THE FUND WILL NOT HONOR
REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE FOR
A PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE
TRANSFER AGENT OF THE PURCHASE CHECK OR THE AUTOMATIC
INVESTMENT PLAN ORDER AGAINST WHICH SUCH REDEMPTION IS
REQUESTED. THESE PROCEDURES WILL NOT APPLY IF THE
INVESTOR OTHERWISE HAS A SUFFICIENT COLLECTED BALANCE IN
HIS ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE
TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES
WILL ACCRUE AND BE PAYABLE, AND THE INVESTOR WILL BE
ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL
OWNERSHIP. Fund shares will not be redeemed until the
Transfer Agent has received the investor's Account
Application.
The Fund reserves the right to redeem an investor's
account at the Fund's option upon not less than 45 days'
written notice if the account's net asset value is $500 or
less and remains so during the notice period.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES A CDSC
payable to the Distributor may be imposed on redemptions
of Class B shares depending on the number of years such
shares were held by the investor. The following table
sets forth the rates of the CDSC applied for the Fund:
<TABLE>
<CAPTION>
CDSC as a
% of Amount
Year Since Invested or
Purchase Payment Redemption
Was Made Proceeds
<S> <C>
First . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.00
Second. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.00
Third . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.00
Fourth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.00
Fifth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.00
Sixth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.00
Seventh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Eighth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
________________
*Conversion to Class A shares.
</TABLE>
In determining whether a CDSC is applicable to a
redemption, the calculation will be made in a manner that results
in the lowest possible rate. Class B shares redeemed will not be
subject to a CDSC to the extent that the value of
such shares represents capital appreciation or reinvestment of
dividends or distributions. It will be assumed that the
redemption is made first of Class B shares acquired pursuant to
the reinvestment of dividends and distributions or
representing any capital appreciation in the value of the Class B
shares held by the investor; then of Class B shares
held for the longest period of time.
WAIVER OF CDSC The CDSC will be waived in connection with (a)
redemptions made within one year after the death of the
shareholder, (b) redemptions by shareholders after age 70-1/2 for
purposes of the minimum required distribution from an
IRA, Keogh plan or custodial account pursuant to Section 403(b)
of the Code, (c) distributions from a qualified plan
upon retirement, (d) redemptions of shares acquired through a
contribution in excess of permitted amounts, (e)
redemptions initiated by the Fund of accounts with net assets of
less than $500, and (f) redemptions by such
shareholders as the Securities and Exchange Commission or its
staff may permit.
CONVERSION OF CLASS B SHARES Class B shares automatically
convert to Class A shares (and thus become subject to the
lower expenses borne by Class A shares) in the eighth year after
the date of purchase, together with the pro rata
portion of all Class B shares representing dividends and other
distributions paid in additional Class B shares. The
conversion will be effected at the relative net asset values per
share of the two Classes on the first business day of
the month following the seventh anniversary of the original
purchase occurs. If any exchanges of Class B shares during
the eight-year period occurred, the holding period for the shares
exchanged will be counted toward the eight-year
period. At the time of the conversion the net asset value per
share of the Class A shares may be higher or lower than
the net asset value per share of the Class B shares; as a result,
depending on the relative net asset values per share,
a shareholder may receive fewer or more Class A shares than the
number of Class B shares converted.
The Fund reserves the right to cease offering Class B
shares for sale at any time or reject any order for the
purchase of Class B shares and to cease offering any services
provided by Service Agent.
PROCEDURES An investor who has purchased shares through his
account at FIMCO, FNBC or a Service Agent must redeem
shares by following instructions pertaining to such account. If
an investor has given his Service Agent authority to
instruct the Transfer Agent to redeem shares and to credit the
proceeds of such redemption to a designated account at
the Service Agent, the investor may redeem shares only in this
manner and in accordance with a written redemption
request described below. It is the responsibility of FIMCO, FNBC
or the Service Agent, as the case may be, to transmit
the redemption order and credit the investor's account with the
redemption proceeds on a timely basis.
An investor may redeem or exchange shares by telephone if
the investor has checked the appropriate box on the
Account Application. By selecting a telephone redemption or
exchange privilege, an investor authorizes the Transfer
Agent to act on telephone instructions from any person
representing himself or herself to be the investor, or a
representative of the investor's Service Agent, and reasonably
believed by the Transfer Agent to be genuine. The Fund
will require the Transfer Agent to employ reasonable procedures,
such as requiring a form of personal identification,
to confirm that instructions are genuine and, if it does not
follow such procedures, the Fund or the Transfer Agent may
be liable for any losses due to unauthorized or fraudulent
instructions. Neither the Fund nor the Transfer Agent will
be liable for following telephone instructions reasonably
believed to be genuine.
During times of drastic economic or market conditions, an
investor may experience difficulty in contacting the
Transfer Agent by telephone to request a redemption or exchange
of Fund shares. In such cases, investors should
consider using the other redemption procedures described herein.
Use of these other redemption procedures may result
in the investor's redemption request being processed at a later
time than it would have been if telephone redemption
had been used. During the delay, the Fund's net asset value may
fluctuate.
WRITTEN REDEMPTION REQUESTS. Investors may redeem shares by
written request mailed to Prairie Municipal Bond Fund,
___________________. Redemption requests must be signed by each
shareholder, including each owner of a joint account,
and each signature must be guaranteed. The Transfer Agent has
adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted
from domestic banks, brokers, dealers, credit unions,
national securities exchanges, registered securities
associations, clearing agencies and savings associations, as well
as from participants in the New York Stock Exchange Medallion
Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP"), and the Stock Exchanges Medallion
Program.
[FOR LEFT MARGIN SIDE BAR: THE FUND PROVIDES FREE
REDEMPTION CHECKS FOR CLASS A WHICH YOU CAN USE IN AMOUNTS OF
$500 OR MORE.]
CHECK REDEMPTION PRIVILEGE--CLASS A SHARES An investor may
request on the Account Application or by later written
request to the Fund that the Fund provide Redemption Checks drawn
on the Fund's account. Redemption Checks may be made
payable to the order of any person in the amount of $500 or more.
Potential fluctuations in the net asset value of
Class A shares should be considered in determining the amount of
the check. Redemption Checks should not be used to
close an account. Redemption Checks are free, but the Transfer
Agent will impose a fee for stopping payment of a
Redemption Check at the investor's request or if the Transfer
Agent cannot honor the Redemption Check due to
insufficient funds or other valid reason. An investor should
date his Redemption Checks with the current date when the
investor writes them. Please do not postdate Redemption Checks.
If an investor does, the Transfer Agent will honor,
upon presentment, even if presented before the date of the check,
all postdated Redemption Checks which are dated
within six months of presentment of payment, if they are
otherwise in good order. Shares for which certificates have
been issued may not be redeemed by Redemption Check. This
Privilege may be modified or terminated at any time by the
Fund or the Transfer Agent upon notice to holders of Class A
shares.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
Class B shares of the Fund are subject to an annual
distribution fee pursuant to the Distribution Plan. Class A
and Class B shares of the Fund are subject to an annual service
fee pursuant to the Shareholder Services Plan.
DISTRIBUTION PLAN--(Class B only) Under the Distribution Plan,
adopted pursuant to Rule 12b-1 under the 1940 Act, the
Fund has agreed to pay the Distributor for advertising, marketing
and distributing Class B shares of the Fund at an
aggregate annual rate of .50% of the value of the average daily
net assets of Class B. The Distributor may pay one or
more Service Agents in respect of these services. FIMCO, FNBC
and their affiliates may act as Service Agents and
receive fees under the Distribution Plan. The Distributor
determines the amounts, if any, to be paid to Service Agents
under the Distribution Plan and the basis on which such payments
are made. The fees payable under the Distribution
Plan are payable without regard to actual expenses incurred.
SHAREHOLDER SERVICES PLAN--(Class A and Class B) Under the
Shareholder Services Plan, the Fund pays the Distributor for
the provision of certain services to the holders of these shares
a fee at an annual rate of .25% of the value of the
average daily net assets of Class A or Class B. The services
provided may include personal services relating to
shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other
information, and services related to the maintenance of
shareholder accounts. Under the Shareholder Services Plan, the
Distributor may make payments to Service Agents in respect of
these services. FIMCO, FNBC and their affiliates may act
as Service Agents and receive fees under the Shareholder Services
Plan. The Distributor determines the amounts to be
paid to Service Agents. Each Service Agent is required to
disclose to its clients any compensation payable to it by
the Fund pursuant to the Shareholder Services Plan and any other
compensation payable by their clients in connection
with the investment of their assets in Fund shares.
DIVIDENDS, DISTRIBUTIONS AND TAXES
[FOR LEFT MARGIN SIDE BAR: THE FUND ORDINARILY DECLARES
DIVIDENDS FROM ITS NET INVESTMENT ON EACH BUSINESS DAY.]
The Fund ordinarily declares dividends from its net investment
income on each business day. Shares begin earning
dividends on the day immediately available finds ("Federal Funds"
(monies of member banks within the Federal Reserve
System which are held on deposit at a Federal Reserve Bank)) are
received by the Transfer Agent in written or
telegraphic form. If a purchase order is not accompanied by
remittance in Federal Funds, there may be a delay between
the time the purchase becomes effective and the time the shares
purchased start earning dividends. If an investor's
payment is not made in Federal Funds, it must be converted into
Federal Funds. This usually occurs within one business
day of receipt of a bank wire and within two business days of
receipt of a check drawn on a member bank of the Federal
Reserve System. Checks drawn on banks which are not members of
the Federal Reserve System may take considerably longer
to convert into Federal Funds.
[FOR LEFT MARGIN SIDE BAR: DIVIDENDS ARE USUALLY PAID ON
THE LAST CALENDAR DAY OF EACH MONTH AND AUTOMATICALLY
REINVESTED IN ADDITIONAL SHARES WITH NO SALES CHARGE, OR PAID IN
CASH IF YOU SO REQUEST.]
Dividends usually are paid on the last calendar day of
each month, and are automatically reinvested in additional
shares of the Fund at net asset value without a sales load or, at
the investor's option, paid in cash. The Fund's
earnings for Saturdays, Sundays and holidays are declared as
dividends on the preceding business day. If an investor
redeems all shares in his account at any time during the month,
all dividends to which such investor is entitled are
paid to the investor along with the proceeds of the redemption.
Distributions from net realized securities gains, if
any, generally are declared and paid by the Fund once a year, but
the Fund may make distributions on a more frequent basis to
comply with the distribution
requirements of the Code, in all events in a manner consistent
with the provisions of the Investment Company Act of 1940. The
Fund will not make distributions from net realized securities
gains unless capital loss carryovers, if any, have been utilized
or have expired. Investors may choose whether to receive
distributions in cash or to reinvest in additional shares of the
same Class at net asset value without a sales load. All
expenses are accrued daily and deducted before declaration of
dividends to investors.
[FOR LEFT MARGIN SIDE BAR: DIVIDENDS FROM CERTAIN
INVESTMENTS AND CAPITAL GAIN DISTRIBUTIONS ARE NOT TAX EXEMPT.]
Except for dividends from Taxable Investments, the Fund
anticipates that a substantial portion of the dividends paid by
the Fund will not be subject to Federal income tax. Dividends
derived from Taxable Investments, together with distributions
from any net realized short-term securities gains and all or a
portion of any gains realized from the sale of other disposition
of certain market discount bonds, paid by the Fund are taxable
as ordinary income whether received in cash or reinvested in
additional Fund shares. No dividend paid by the Fund will
qualify for the dividends received deduction allowable to
certain U.S. corporations. Distributions from net realized
long-term securities gains of the Fund generally are taxable as
long-term capital gains for Federal income tax purposes if an
investor is a citizen or resident of the United States.
Dividends and distributions attributable to gains derived from
securities transactions and from the use of certain of the
investment techniques described under "Description of the Fund--
Investment Techniques," will be subject to Federal income tax.
The Code provides that the net capital gain of an individual
generally will not be subject to Federal income tax at a rate in
excess of 28%. Under the Code, interest on indebtedness
incurred or continued to purchase or carry Fund shares which is
deemed to relate to exempt-interest dividends is not deductible.
The Code provides for the "carryover" of some or all of
the
sales load imposed on Class A shares if an investor exchanges
his Class A shares for shares of another fund advised by the
Investment Adviser within 91 days of purchase and such other
fund reduces or eliminates its otherwise applicable sales load
charge for the purpose of the exchange. In this case, the
amount of the sales load charge for the Fund's Class A shares,
up to the amount of the reduction of the sales load charge on
the exchange, is not included in the basis of the Fund's shares
for purposes of computing gain or loss on the exchange, and
instead is added to the basis of the other fund shares received
in the exchange.
Although all or a substantial portion of the dividends
paid
by the Fund may be excluded by shareholders of the Fund from
their gross income for Federal income tax purposes, the Fund may
purchase specified private activity bonds, the interest from
which may be (i) a preference item for purposes of the
alternative minimum tax, (ii) a component of the "adjusted
current earnings" preference item for purposes of the corporate
alternative minimum tax as well as a component in computing the
corporate environmental tax or (iii) a factor in determining the
extent to which an investor's Social Security benefits are
taxable. If the Fund purchases such securities, the portion of
the Fund's dividends related thereto will not necessarily be tax
exempt to an investor who is subject to the alternative minimum
tax and/or tax on Social Security benefits and may cause an
investor to be subject to such taxes.
Taxable dividends derived from net investment income and
distributions from net realized short-term securities gains paid
by the Fund to a foreign investor generally are subject to U.S.
nonresident withholding taxes at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in
a tax treaty. Distributions from net realized long-term
securities gains paid by the Fund to a foreign investor as well
as the proceeds of any redemptions from a foreign investor's
account, regardless of the extent to which gain or loss may be
realized, generally will not be subject to U.S. nonresident
withholding tax. However, such distributions may be subject to
backup withholding, as described below, unless the foreign
investor certifies his non-U.S. residency status.
[FOR LEFT MARGIN SIDE BAR: NOTICE AS TO THE TAX STATUS
OF
YOUR DIVIDENDS AND DISTRIBUTIONS WILL BE MAILED TO YOU EACH
YEAR. YOU WILL ALSO RECEIVE REGULAR SUMMARIES OF YOUR ACCOUNT.]
Notice as to the tax status of an investor's dividends
and
distributions will be mailed to such investor annually. Each
investor also will receive periodic summaries of such investor's
account which will include information as to dividends and
distributions from net securities gains, if any, paid during the
year. These statements set forth the dollar amount of income
exempt from Federal tax and the dollar amount, if any, subject
to Federal tax, the amount, if any, of interest which gives rise
to a preference item for the purpose of the alternative minimum
tax and the percentage of tax exempt income attributable to the
respective states. These dollar amounts will vary depending on
the size and length of time the investor has invested in a
Series. If the Fund pays dividends derived from taxable income,
it intends to designate as taxable the same percentage of the
day's dividends as the actual taxable income earned on that day
bears to total income earned on that day. Thus, the percentage
of the dividend designated as taxable, if any, may vary from day
to day.
[FOR LEFT MARGIN SIDE BAR: AN INVESTOR WHO DOES NOT
FURNISH THE FUND WITH A CORRECT TAXPAYER IDENTIFICATION NUMBER,
MAY BE SUBJECT TO 31% WITHHOLDING TAX ON ALL TAXABLE DIVIDENDS,
DISTRIBUTIONS AND REDEMPTION PROCEEDS.]
Federal regulations generally require the Fund to
withhold
("backup withholding") and remit to the U.S. Treasury 31% of
taxable dividends, distributions from net realized securities
gains and the proceeds of any redemption, regardless of the
extent to which gain or loss may be realized, paid to a
shareholder if such shareholder fails to certify either that the
TIN furnished in connection with opening an account is correct
or that such shareholder has not received notice from the IRS of
being subject to backup withholding as a result of a failure to
properly report taxable dividend or interest income on a Federal
income tax return. Furthermore, the IRS may notify the Fund to
institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has failed to
properly report taxable dividend and interest income on a
Federal income tax return.
A TIN is either the Social Security number or employer
identification number of the record owner of the account. Any
tax withheld as a result of backup withholding does not
constitute an additional tax imposed on the record owner of the
account, and may be claimed as a credit on the record owner's
Federal income tax return.
Management of the Fund believes that the Fund has
qualified
for the fiscal year ended February 28, 1994 as a "regulated
investment company" under Subchapter M of the Code and has
satisfied conditions which will enable interest from Municipal
Obligations, which is exempt from Federal income tax with
respect to the Fund, to retain such tax exempt status when
distributed to the Fund's shareholders. As a regulated
investment company, the Fund will not pay Federal income taxes
on net investment income and net realized capital gains
otherwise taxable to it that is distributed to investors. The
Fund is subject to a non-deductible 4% excise tax, measured with
respect to certain undistributed amounts of taxable investment
income and capital gains, if any.
The foregoing is a general summary of the applicable
provisions of the Code and Treasury regulations presently in
effect, and does not address state or local taxes. It does not
discuss all of the aspects of Federal income taxation that may
be relevant to investors who are subject to special treatment
under the Federal income tax laws (for example, foreign
corporations or persons). In addition, dividends and
distributions from the Fund or Fund shares themselves may be
subject to state and local taxes. Investors should consult
their tax advisers regarding specific questions as to Federal,
state and local tax law.
PERFORMANCE INFORMATION
For purposes of advertising, performance is calculated on
several bases, including current yield, tax equivalent yield,
average annual total return and/or total return. These total
return figures reflect changes in the price of the shares and
assume that any income dividends and/or capital gains
distributions made by the Fund during the measuring period were
reinvested in shares of the same Class. Class A total return
figures include the maximum initial sales charge and Class B
total return figures include any applicable CDSC. These figures
also take into account any applicable service and distribution
fees. Performance for each Class will be calculated separately.
[FOR LEFT MARGIN SIDE BAR: "CURRENT YIELD" IS THE FUND'S
NET INVESTMENT INCOME OVER A 30-DAY PERIOD, EXPRESSED AS AN
ANNUAL PERCENTAGE AND ASSUMING ALL INCOME IS REINVESTED.]
Current yield refers to the Fund's annualized net
investment income per share over a 30-day period, expressed as a
percentage of the maximum offering price per share in the case
of Class A or the net asset value per share in the case of Class
B or Class I at the end of the period. For purposes of
calculating current yield, the amount of net investment income
per share during that 30-day period, computed in accordance with
regulatory requirements, is compounded by assuming that it is
reinvested at a constant rate over a six-month period. An
identical result is then assumed to have occurred during a
second six-month period which, when added to the result for the
first six months, provides an "annualized" yield for an entire
one-year period. Calculations of the Fund's current yield may
reflect absorbed expenses pursuant to any undertaking that may
be in effect. See "Management of the Fund."
Tax equivalent yield is calculated by determining the
pre-tax yield which, alter being taxed at a stated rate, would be
equivalent to a stated current yield calculated as described
above.
Average annual total return is calculated pursuant to a
standardized formula which assumes that an investment in the
Fund was purchased with an initial payment of $1,000 and that
the investment was redeemed at the end of a stated period of
time, after giving effect to the reinvestment of dividends and
distributions during the period. The return is expressed as a
percentage rate which, if applied on a compounded annual basis,
would result in the redeemable value of the investment at the
end of the period. Advertisements of the Fund's performance
will include the Fund's average annual total return of Class A
and Class B for one, five and ten year periods, or for shorter
time periods depending upon the length of time during which the
Fund has operated. Computations of average annual total return
for periods of less than one year represent an annualization of
the Fund's actual return for the applicable period.
[FOR LEFT MARGIN SIDE BAR: "TOTAL RETURN" COMBINES THE
INCOME AND PRINCIPAL CHANGES FOR A SPECIFIED PERIOD, ASSUMING
ALL DIVIDENDS AND DISTRIBUTIONS ARE REINVENTED.]
Total return is computed on a per share basis and assumes
the reinvestment of dividends and distributions. Total return
generally is expressed as a percentage rate which is calculated
by combining the income and principal changes for a specified
period and dividing by the maximum offering price per share in
the case of Class A or the net asset value per share in the case
of Class B or Class I at the beginning of the period.
Advertisements may include the percentage rate of total return
or may include the value of a hypothetical investment at the end
of the period which assumes the application of the percentage
rate of total return. Total return also may be calculated by
using the net asset value per share at the beginning of the
period instead of the maximum offering price per share at the
beginning of the period for Class A shares or without giving
effect to any applicable CDSC at the end of the period for Class
B shares. Calculations based on the net asset value per share
do not reflect the deduction of any sales load which, if
reflected, would reduce the performance quoted.
[FOR LEFT MARGIN SIDE BAR: PERFORMANCE VARIES FROM TIME
TO
TIME AND PAST RESULTS ARE NOT NECESSARILY REPRESENTATIVE OF
FUTURE RESULTS.]
Performance will vary from time to time and past results
are not necessarily representative of future results. Each
investor should remember that performance is a function of
portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not
provide a basis for comparison with other investments or other
investment companies using a different method of calculating
performance.
Comparative performance information may be used from time
to time in advertising or marketing the Fund's shares, including
data from Lipper Analytical Services, Inc., Morningstar, Inc.,
Moody's Bond Survey Bond Index, Lehman Brothers Municipal Bond
Index and other industry publications.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on December 8,
1987, and commenced operations on March 1, 1988. On __________,
199_, the Fund changed its name from First Prairie Tax Exempt
Bond Fund, Inc. to Prairie Municipal Bond Fund. The Fund is
authorized to issue 10 billion shares of Common Stock, par value
$.001 per share. The Fund's shares are classified into three
classes--Class A, Class B and Class I. Each share has one vote
and shareholders will vote in the aggregate and not by class
except as otherwise required by law or with respect to any
matter which affects only one class.
Prior to ________, 1995, the Fund was a "series fund"
which
permitted investors to invest in two separate portfolios: the
Intermediate Series and the Insured Series. Effective on such
date, the Fund transferred the assets and liabilities of the
Intermediate Series to a series of a newly-formed investment
company and the Insured Series became the Fund's sole portfolio
and adopted the Fund's current management policies. From
September 12, 1989 through _____, 1995, the Insured Series was
required to invest at least 65% of the value of its total assets
in Municipal Obligations insured as to timely payment of
principal and interest by recognized insurers of Municipal
Obligations. Prior to September 12, 1989, the Insured Series
(then the "Long-Term Series") was not required to invest such
portion of its assets in insured Municipal Obligations and,
under normal market conditions, the dollar- weighted average
maturity of its portfolio exceeded ten years and it invested in
Municipal Obligations rated A or better by Moody's or S&P. Any
reference herein and in the Statement of Additional Information
to the Fund, including any financial information and performance
data, relating to such periods reflect the Fund's portfolio as
constituted prior to such revisions.
Unless otherwise required by the Investment Company Act of
1940, ordinarily it will not be necessary for the Fund to hold
annual meetings of shareholders. As a result, Fund shareholders
may not consider each year the election of Directors or the
appointment of auditors. However, pursuant to the Fund's
By-Laws, the holders of at least 10% of the shares outstanding
and entitled to vote may require the Fund to hold a special
meeting of shareholders for purposes of removing a Director from
office and for any other purpose. Fund shareholders may remove
a Director by the affirmative vote of a majority of the Fund's
outstanding voting shares. In addition, the Board of Directors
will call a meeting of shareholders for the purpose of electing
Directors if, at any time, less than a majority of the Directors
then holding office had been elected by shareholders.
The Transfer Agent maintains a record of each investor's
ownership and sends confirmations and statements of account.
Investor inquiries may be made to the investor's Service
Agent, including FIMCO, or by writing to the Fund at the address
shown on the front cover or by calling the telephone number
shown on the front cover.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND IN THE FUND'S OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFER OF THE FUND'S SHARES, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH,
OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT LAWFULLY BE
MADE.
<PAGE>
PRAIRIE MUNICIPAL BOND FUND
CLASS A, CLASS B AND CLASS I SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
_______, 1995
This Statement of Additional Information, which is not a
prospectus,
supplements and should be read in conjunction with the current
Prospectus
of Prairie Municipal Bond Fund (the "Fund"), dated _______, 1995,
as it may
be revised from time to time. To obtain a copy of the Fund's
Prospectus,
please write to the Fund at ___________________________, or call
toll free ______________.
First Chicago Investment Management Company (the "Investment
Adviser"
or "FIMCO") serves as the Fund's investment adviser and
administrator.
Concord Financial Group, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies . . . . . B-2
Management of the Fund . . . . . . . . . . . . . . . . B-10
Management Arrangements. . . . . . . . . . . . . . . . B-12
Purchase of Fund Shares. . . . . . . . . . . . . . . . B-15
Distribution Plan and Shareholder Services Plan. . . . B-18
Redemption of Fund Shares. . . . . . . . . . . . . . . B-20
Determination of Net Asset Value . . . . . . . . . . . B-26
Portfolio Transactions . . . . . . . . . . . . . . . . B-27
Dividends, Distributions and Taxes . . . . . . . . . . B-27
Performance Information. . . . . . . . . . . . . . . . B-29
Information About the Fund . . . . . . . . . . . . . . B-32
Counsel and Independent Auditors . . . . . . . . . . . B-32
Appendix . . . . . . . . . . . . . . . . . . . . . . . B-33
Financial Statements . . . . . . . . . . . . . . . . . B-
Report of Independent Auditors . . . . . . . . . . . . B-
<PAGE>
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Description of the Fund."
The average distribution of investments (at value) in
Municipal Obligations by ratings for the fiscal year ended
February 28, 1994, computed on a monthly basis, was as follows:
<TABLE>
<CAPTION>
Percentage of Value
Fitch Investors Moody's Investors Standard & Poor's
Service, Inc. Service, Inc. Corporation
("Fitch") or ("Moody's") or ("S&P")
<S> <C> <C> <C>
AAA Aaa AAA 84.7%
AA Aa AA 1.1
A A A .3
BBB Baa BBB 1.5
F1 MIG 1/VMIG 1 SP1 8.8
F1 P1 A1 3.6
100.0%
</TABLE>
Municipal Obligations. The term "Municipal Obligations"
generally includes debt obligations issued to obtain funds for
various public purposes, including the construction of a wide
range of public facilities such as airports, bridges, highways,
housing, hospitals, mass transportation, schools, streets and
water and sewer works. Other public purposes for which
Municipal Obligations may be issued include refunding
outstanding obligations, obtaining funds for general operating
expenses and lending such funds to other public institutions and
facilities. In addition, certain types of industrial
development bonds are issued by or on behalf of public
authorities to obtain funds to provide for the construction,
equipment, repair or improvement of privately operated housing
facilities, sports facilities, convention or trade show
facilities, airport, mass transit, industrial, port or parking
facilities, air or water pollution control facilities and
certain local facilities for water supply, gas, electricity, or
sewage or solid waste disposal; the interest paid on such
obligations may be exempt from Federal income tax, although
current tax laws place substantial limitations on the size of
such issues. Such obligations are considered to be Municipal
Obligations if the interest paid thereon qualifies as exempt
from Federal income tax in the opinion of bond counsel to the
issuer. There are, of course, variations in the security of
Municipal Obligations, both within a particular classification
and between classifications.
Floating and variable rate demand notes and bonds are tax
exempt obligations ordinarily having stated maturities in excess
of one year, but which permit the holder to demand payment of
principal at any time, or at specified intervals. The issuer of
such obligations ordinarily has a corresponding right, after a
given period, to prepay in its discretion the outstanding
principal amount of the obligation plus accrued interest upon a
specified number of days' notice to the holders thereof. The
interest rate on a floating rate demand obligation is based on a
known lending rate, such as a bank's prime rate, and is adjusted
automatically each time such rate is adjusted. The interest
rate on a variable rate demand obligation is adjusted
automatically at specified intervals.
The yields on Municipal Obligations are dependent on a
variety of factors, including general economic and monetary con-
ditions, money market factors, conditions in the Municipal Obli-
gations market, size of a particular offering, maturity of the
obligation and rating of the issue. The imposition of the
Fund's advisory and administration fees, as well as other
operating expenses, including fees paid under the Fund's
Shareholder Services Plan with respect to Class A and Class B
and the Distribution Plan with respect to Class B only, will
have the effect of reducing the yield to investors.
Municipal lease obligations or installment purchase
contract obligations (collectively, "lease obligations") have
special risks not ordinarily associated with Municipal
Obligations. Although lease obligations do not constitute
general obligations of the municipality for which the
municipality's taxing power is pledged, a lease obligation
ordinarily is backed by the municipality's covenant to budget
for, appropriate and make the payments due under the lease
obligation. However, certain lease obligations contain
"non-appropriation" clauses which provide that the municipality
has no obligation to make lease or installment purchase payments
in future years unless money is appropriated for such purpose on
a yearly basis. Although "non-appropriation" lease obligations
are secured by the leased property, disposition of the property
in the event of foreclosure might prove difficult. The Fund
will seek to minimize these risks by not investing more than 15%
of its total assets in lease obligations that contain
"non-appropriation" clauses, and by investing only in those
"non-appropriation" lease obligations where (1) the nature of
the leased equipment or property is such that its ownership or
use is essential to a governmental function of the municipality,
(2) the lease payments will commence amortization of principal
at an early date resulting in an average life of seven years or
less for the lease obligation, (3) appropriate covenants will be
obtained from the municipal obligor prohibiting the substitution
or purchase of similar equipment if lease payments are not
appropriated, (4) the lease obligor has maintained good market
acceptability in the past, (5) the investment is of a size that
will be attractive to institutional investors, and (6) the
underlying leased equipment has elements of portability and/or
use that enhance its marketability in the event foreclosure on
the underlying equipment is ever required. The staff of the
Securities and Exchange Commission currently considers certain
lease obligations to be illiquid. Accordingly, not more than
15% of the value of the Fund's net assets will be invested in
lease obligations that are illiquid and in other illiquid
securities. See "Investment Restriction No. 11" below.
The Fund will purchase tender option bonds only when it is
satisfied that the custodial and tender option arrangements,
including the fee payment arrangements, will not adversely
affect the tax status of the underlying Municipal Obligations
and that payment of any tender fees will not have the effect of
creating taxable income for the Fund. Based on the tender
option bond agreement, the Fund expects to be able to value the
tender option bond at par; however, the value of the instrument
will be monitored to assure that it is valued at fair value.
Ratings of Municipal Obligations. Subsequent to its
purchase by the Fund, an issue of rated Municipal Obligations
may cease to be rated or its rating may be reduced below the
minimum required for purchase by the Fund. Neither event will
require the sale of such Municipal Obligations by the Fund, but
the Investment Adviser will consider such event in determining
whether the Fund should continue to hold the Municipal
Obligations. To the extent that the ratings given by Moody's,
S&P, Fitch or Duff for Municipal Obligations may change as a
result of changes in such organizations or their rating systems,
the Fund will attempt to use comparable ratings as standards for
its investments in accordance with the investment policies
contained in the Fund's Prospectus and this Statement of
Additional Information. The ratings of Moody's, S&P, Fitch and
Duff represent their opinions as to the quality of the Municipal
Obligations which they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective
and are not absolute standards of quality. Although these
ratings may be an initial criterion for selection of portfolio
investments, the Investment Adviser also will evaluate these
securities and the creditworthiness of the issuers of such
securities based upon financial and other available information.
Futures Contracts and Options on Futures Contracts. Upon
exercise of an option, the writer of the option delivers to the
holder of the option the futures position and the accumulated
balance in the writer's futures margin account, which represents
the amount by which the market price of the futures contract
exceeds, in the case of a call, or is less than, in the case of
a put, the exercise price of the option on the futures contract.
The potential loss related to the purchase of an option on a
futures contract is limited to the premium paid for the option
(plus transaction costs). Because the value of the option is
fixed at the time of sale, there are no daily cash payments to
reflect changes in the value of the underlying contract;
however, the value of the option does change daily and that
change would be reflected in the net asset value of the Series.
Lending Portfolio Securities. To a limited extent, the
Fund may lend its portfolio securities to brokers, dealers and
other financial institutions, provided it receives cash
collateral which at all times is maintained in an amount equal
to at least 100% of the current market value of the securities
loaned. By lending its portfolio securities, the Fund can
increase its income through the investment of the cash
collateral. For purposes of this policy, the Fund considers
collateral consisting of U.S. Government securities or
irrevocable letters of credit issued by banks whose securities
meet the standards for investment by the Fund to be the
equivalent of cash. Such loans may not exceed 33-1/3% of the
Fund's total assets. From time to time, the Fund may return to
the borrower or a third party which is unaffiliated with the
Fund, and which is acting as a "placing broker," a part of the
interest earned from the investment of collateral received for
securities loaned.
The Securities and Exchange Commission currently requires
that the following conditions must be met whenever portfolio
securities are loaned: (1) the Fund must receive at least 100%
cash collateral from the borrower; (2) the borrower must
increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the
Fund must be able to terminate the loan at any time; (4) the
Fund must receive reasonable interest on the loan, as well as
any interest or other distributions payable on the loaned
securities, and any increase in market value; and (5) the Fund
may pay only reasonable custodian fees in connection with the
loan. These conditions may be subject to future modification.
Taxable Investments. Securities issued or guaranteed by
the U.S. Government or its agencies or instrumentalities include
U.S. Treasury securities, which differ in their interest rates,
maturities and times of issuance. Treasury Bills have initial
maturities of one year or less; Treasury Notes have initial
maturities of one to ten years; and Treasury Bonds generally
have initial maturities of greater than ten years. Some
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, for example, Government National Mortgage
Association pass-through certificates, are supported by the full
faith and credit of the U.S. Treasury; others, such as those of
the Federal Home Loan Banks, by the right of the issuer to
borrow from the U.S. Treasury; others, such as those issued by
the Federal National Mortgage Association, by discretionary
authority of the U.S. Government to purchase certain obligations
of the agency or instrumentality; and others, such as those
issued by the Student Loan Marketing Association, only by the
credit of the agency or instrumentality. These securities bear
fixed, floating or variable rates of interest. Principal and
interest may fluctuate based on generally recognized reference
rates or the relationship of rates. While the U.S. Government
provides financial support to such U.S. Government-sponsored
agencies or instrumentalities, no assurance can be given that it
will always do so, since it is not so obligated by law. The
Fund will invest in such securities only when it is satisfied
that the credit risk with respect to the issuer is minimal.
Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs.
Certificates of deposit are negotiable certificates
representing the obligation of a bank to repay funds deposited
with it for a specified period of time.
Time deposits are non-negotiable deposits maintained in a
banking institution for a specified period of time (in no event
longer than seven days) at a stated interest rate. Investments
in time deposits generally are limited to London branches of
domestic banks that have total assets in excess of $1 billion.
Time deposits which may be held by the Fund will not benefit
from insurance from the Bank Insurance Fund or the Savings
Association Insurance Fund administered by the Federal Deposit
Insurance Corporation.
Bankers' acceptances are credit instruments evidencing the
obligation of a bank to pay a draft drawn on it by a customer.
These instruments reflect the obligation both of the bank and of
the drawer to pay the face amount of the instrument upon
maturity. Other short-term bank obligations may include
uninsured, direct obligations bearing fixed, floating or
variable interest rates.
Repurchase agreements involve the acquisition by the Fund
of an underlying debt instrument, subject to an obligation of
the seller to repurchase, and the Fund to resell, the instrument
at a fixed price, usually not more than one week after its
purchase. The Fund's custodian or subcustodian will have
custody of, and will hold in a segregated account, securities
acquired by the Fund under a repurchase agreement. Repurchase
agreements are considered by the staff of the Securities and
Exchange Commission to be loans by the Fund. In an attempt to
reduce the risk of incurring a loss on a repurchase agreement,
the Fund will enter into repurchase agreements only with
domestic banks with total assets in excess of $1 billion or
primary government securities dealers reporting to the Federal
Reserve Bank of New York, with respect to securities of the type
in which the Fund may invest, and will require that additional
securities be deposited with it if the value of the securities
purchased should decrease below resale price. The Investment
Adviser will monitor on an ongoing basis the value of the
collateral to assure that it always equals or exceeds the
repurchase price. Certain costs may be incurred in connection
with the sale of the securities if the seller does not
repurchase them in accordance with the repurchase agreement. In
addition, if bankruptcy proceedings are commenced with respect
to the seller of the securities, realization on the securities
by the Fund may be delayed or limited. The Fund will consider
on an ongoing basis the creditworthiness of the institutions
with which it enters into repurchase agreements.
Investment Restrictions. The Fund has adopted investment
restrictions numbered 1 through 8 as fundamental policies.
These restrictions cannot be changed without approval by the
holders of a majority (as defined in the Investment Company Act
of 1940, as amended (the "Act")) of the Fund's outstanding
voting shares. Investment restrictions numbered 9 through 13
are not fundamental policies and may be changed by vote of a
majority of the Directors at any time. The Fund may not:
1. Invest more than 25% of its assets in the
securities of issuers in any single industry; provided that
there shall be no such limitation on the purchase of
Municipal Obligations and, for temporary defensive
purposes, obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
2. Borrow money, except to the extent permitted under
the Act. For purposes of this investment restriction, the
entry into options, forward contracts, futures contracts,
including those relating to indexes, and options on futures
contracts or indexes shall not constitute borrowing.
3. Purchase or sell real estate, or oil and gas
interests, but the Fund may invest in Municipal Obligations
secured by real estate or interests therein.
4. Underwrite the securities of other issuers, except
that the Fund may bid separately or as part of a group for
the purchase of Municipal Obligations directly from an
issuer for its own portfolio to take advantage of the lower
purchase price available, and except to the extent the Fund
may be deemed an underwriter under the Securities Act of
1933, as amended, by virtue of disposing of portfolio
securities.
5. Make loans to others, except through the purchase
of debt obligations and the entry into repurchase
agreements; however, the Fund may lend its portfolio
securities in an amount not to exceed 33-1/3% of the value
of its total assets. Any loans of portfolio securities
will be made according to guidelines established by the
Securities and Exchange Commission and the Fund's Board of
Directors.
6. Issue any senior security (as such term is defined
in Section 18(f) of the Act), except to the extent that the
activities permitted in Investment Restriction Nos. 2, 7, 8
and 11 may be deemed to give rise to a senior security.
7. Purchase securities on margin, but the Fund may
make margin deposits in connection with transactions in
options, forward contracts, futures contracts, including
those relating to indexes, and options on futures contracts
or indexes.
8. Invest in commodities, except that the Fund may
purchase and sell forward contracts, futures contracts,
including those relating to indexes, and options on futures
contracts or indexes.
9. Purchase securities other than Municipal
Obligations and Taxable Investments and those arising out
of transactions in futures and options or as otherwise
provided in the Fund's Prospectus.
10. Invest in securities of other investment
companies, except to the extent permitted under the Act.
11. Pledge, hypothecate, mortgage or otherwise
encumber its assets, except to the extent necessary to
secure permitted borrowings and to the extent related to
the deposit of assets in escrow in connection with the
purchase of securities on a when-issued or delayed-delivery
basis and collateral and initial or variation margin
arrangements with respect to options, forward contracts,
futures contracts, including those related to indexes and
options on futures contracts, or indexes.
12. Enter into repurchase agreements providing for
settlement in more than seven days after notice or purchase
securities which are illiquid (which securities could
include participation interests (including municipal
lease/purchase agreements) that are not subject to the
demand feature described in the Fund's Prospectus and
floating and variable rate demand notes and bonds as to
which the Fund cannot exercise the demand feature described
in the Fund's Prospectus on less than seven day's notice
and as to which there is no secondary market), if, in the
aggregate, more than 15% of its net assets would be so
invested.
13. Invest in companies for the purpose of exercising
control.
For purposes of Investment Restriction No. 1, industrial
development bonds, where the payment of principal and interest
is the ultimate responsibility of companies within the same
industry, are grouped together as an "industry." If a per-
centage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change
in values or assets will not constitute a violation of such
restriction.
The Fund may make commitments more restrictive than the
restrictions listed above so as to permit the sale of it shares
in certain states. Should the Fund determine that a commitment
is no longer in the best interests of the Fund and its
shareholders, the Fund reserves the right to revoke the
commitment by terminating the sale of its shares in the state
involved.
MANAGEMENT OF THE FUND
Directors and officers of the Fund, together with informa-
tion as to their principal business occupations during at least
the last five years, are shown below.
Directors of the Fund
JOHN P. GOULD, Director. Distinguished Service Professor of
Economics of the University of Chicago Graduate School of
Business. From 1983 to 1993, Dean of the University of
Chicago Graduate School of Business. Dean Gould also
serves as Director of Harpor Capital Advisors. His address
is 1101 East 58th Street, Chicago, Illinois 60637.
MARILYN McCOY, Director. Vice President of Administration
and Planning of Northwestern University. From 1981 to
1985, she was the Director of Planning and Policy
Development for the University of Colorado. She also
serves on the Board of Directors of Evanston Hospital,
the Chicago Metropolitan YMCA, the Chicago Network and
United Charities. Mrs. McCoy is a member of the
Chicago Economics Club. Her address is 1100 North
Lake Shore Drive, Chicago, Illinois 60611.
RAYMOND D. ODDI, Director. Private consultant. A Director of
Caremark International, Inc. and Medisense, Inc., companies
in the health care industry, and Baxter Credit Union. From
1978 to 1986, Senior Vice President of Baxter
International, Inc., a company engaged in the production of
medical care products. He also is a member of the Illinois
Society of Certified Public Accountants. His address is
1181 Loch Lane, Lake Forest, Illinois 60045.
Each Director also is a trustee of First Prairie Cash
Management, First Prairie Diversified Asset Fund, First Prairie
Money Market Fund, First Prairie Municipal Money Market Fund,
First Prairie U.S. Government Income Fund and First Prairie U.S.
Treasury Securities Cash Management.
The Fund does not pay any remuneration to its officers and
Directors other than fees and expenses to Directors who are not
officers, directors, employees or holders of 5% or more of the
outstanding voting securities of FIMCO or any of its affiliates.
Such fees and expenses totalled $1,443 for the fiscal year ended
February 28, 1994, for all such Directors as a group.
For so long as the Fund's plans described in the section
captioned "Distribution Plan and Shareholder Services Plan"
remain in effect, the Directors of the Fund who are not
"interested persons" of the Fund, as defined in the Act, will be
selected and nominated by the Directors who are not "interested
persons" of the Fund.
Officers of the Fund
[TO BE PROVIDED]
Directors and officers of the Fund, as a group, owned less
than 1% of the Fund's shares of common stock outstanding on
November 15, 1994.
MANAGEMENT ARRANGEMENTS
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED
"MANAGEMENT OF THE FUND."
Investment Advisory Agreement. FIMCO provides investment
advisory services pursuant to the Investment Advisory Agreement
(the "Advisory Agreement") dated ______, 199__ with the Fund,
which is subject to annual approval by (i) the Fund's Board of
Directors or (ii) vote of a majority (as defined in the Act) of
the Fund's outstanding voting securities, provided that in
either event the continuance also is approved by a majority of
the Directors who are not "interested persons" (as defined in
the Act) of the Fund or FIMCO, by vote cast in person at a
meeting called for the purpose of voting on such approval. The
Advisory Agreement is terminable without penalty, on 60 days'
notice, by the Fund's Board of Directors or by vote of the
holders of a majority of the Fund's shares or, upon not less
than 90 days' notice, by FIMCO. The Advisory Agreement will
terminate automatically in the event of its assignment (as
defined in the Act).
FIMCO is responsible for investment decisions for the Fund
in accordance with the stated policies of the Fund, subject to
the approval of the Fund's Board. All purchases and sales are
reported for the Directors' review at the meeting subsequent to
such transactions.
The following persons are officers and/or directors of
FIMCO: ________________________.
As compensation for the Investment Adviser's services to
the Fund, the Fund has agreed to pay the Investment Adviser a
fee, computed daily and paid monthly, at an annual rate of .40
of 1% of the value of the Fund's average daily net assets.
Prior to ________, 199_, The First National Bank of Chicago
("FNBC") provided management services to the fund pursuant to an
investment advisory agreement (the "Prior Agreement"). For the
fiscal years ended February 28/29, 1992, 1993 and 1994, no fees
were paid by the Fund to FNBC pursuant to various undertakings
by FNBC.
Administration and Sub-Administration Agreements. Pursuant
to an Administration Agreement dated ______________, 199_ with
the Fund, FIMCO assists in all aspects of the Fund's operations,
other than providing investment advice, subject to the overall
authority of the Fund's Board in accordance with Maryland law.
FIMCO has engaged Concord Holding Corporation (the "Sub-
Administrator") to assist it in providing certain administrative
services to the Fund. Pursuant to its agreement with FIMCO (the
"Sub-Administration Agreement"), the Administrator assists FIMCO
in furnishing the Fund clerical help and accounting, data
processing, bookkeeping, internal auditing and legal services
and certain other services required by the Fund, preparing
reports to the Fund's shareholders, tax returns, reports to and
filings with the Securities and Exchange Commission and state
Blue Sky authorities, calculating the net asset value of the
Fund's shares and generally in providing for all aspects of the
Fund's operation, other than providing investment advice. The
fees payable to the Sub-Administrator for its services are paid
by FIMCO.
The Fund has agreed that FIMCO and the Sub-Administrator
will not be liable for any error of judgment or mistake of law
or for any loss suffered by the Trust in connection with the
matters to which respective agreements relate, except for a loss
resulting from wilful misfeasance, bad faith or gross negligence
on the part of FIMCO in the performance of its obligations or
from reckless disregard by it of its obligations and duties
under its Agreements or on the part of the Sub-Administrator in
the performance of its obligations or from reckless disregard by
it of its obligations and duties under its agreement.
Prior to ____________, 199_, The Dreyfus Corporation
("Dreyfus") provided the Fund administrative services pursuant
to an administration agreement (the "Prior Administration
Agreement"). As compensation for Dreyfus' services to the Fund,
the Fund agreed to pay Dreyfus pursuant to the Prior
Administration Agreement a fee, computed daily and paid monthly,
at an annual rate of .20 of 1% of the value of the Fund's
average daily net assets. For the fiscal years ended February
28/29, 1992, 1993 and 1994, no fees were paid by the Fund to
Dreyfus pursuant to various undertakings by Dreyfus. For the
period March 1, 1994 through ____________, 199_, the Fund paid
Dreyfus $________ pursuant to the Prior Administration
Agreement.
Expenses and Expense Information. All expenses incurred in
the operation of the Fund are borne by the Fund, except to the
extent specifically assumed by FIMCO. The expenses borne by the
Fund include the following: taxes, interest, brokerage fees and
commissions, if any, fees of Directors who are not officers,
directors, employees or holders of 5% or more of the outstanding
voting securities of FIMCO, Securities and Exchange Commission
fees, state Blue Sky qualification fees, advisory and
administration fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums,
industry association fees, outside auditing and legal expenses,
costs of maintaining corporate existence, costs of independent
pricing services, costs attributable to investor services
(including, without limitation, telephone and personnel
expenses), costs of shareholders' reports and corporate
meetings, and any extraordinary expenses. Class A and Class B
shares are subject to an annual service fee for ongoing personal
services relating to shareholder accounts and services related
to the maintenance of shareholder accounts. In addition, Class
B shares are subject to an annual distribution fee for
advertising, marketing and distributing Class B shares pursuant
to a distribution plan adopted in accordance with Rule 12b-1
under the Act. See "Distribution Plan and Shareholder Services
Plan."
The Agreement provides that if, in any fiscal year, the
aggregate expenses of the Fund, exclusive of taxes, brokerage,
interest on borrowings and (with the prior written consent of
the necessary state securities commissions) extraordinary
expenses, but including the advisory fee, exceed the expense
limitation of any state having jurisdiction over the Fund, the
Fund may deduct from the payment to be made to FIMCO under the
Agreement, or FIMCO will bear, such excess expense to the extent
required by state law. Such deduction or payment, if any, will
be estimated daily, and reconciled and effected or paid, as the
case may be, on a monthly basis.
The aggregate of the fees payable to FIMCO is not subject
to reduction as the value of the Fund's net assets increases.
PURCHASE OF FUND SHARES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED
"HOW TO BUY FUND SHARES."
The Distributor. The Distributor serves as the Fund's
distributor pursuant to an agreement which is renewable
annually.
Using Federal Funds. ____________, the Fund's transfer and
dividend disbursing agent (the "Transfer Agent"), or the Fund
may attempt to notify the investor upon receipt of checks drawn
on banks that are not members of the Federal Reserve System as
to the possible delay in conversion into Federal Funds and may
attempt to arrange for a better means of transmitting the money.
If the investor is a customer of a securities dealer, bank or
other financial institution and his order to purchase Fund
shares is paid for other than in Federal Funds, the securities
dealer, bank or other financial institution acting on behalf of
its customer, will complete the conversion into, or itself
advance, Federal Funds generally on the business day following
receipt of the customer order. The order is effective only when
so converted and received by the Transfer Agent. An order for
the purchase of Fund shares placed by an investor with
sufficient Federal Funds or cash balance in his brokerage
account with a securities dealer, bank or other financial
institution will become effective on the day that the order,
including Federal Funds, is received by the Transfer Agent.
Sales Loads--Class A. The scale of sales loads applies to
purchases of Class A shares made by any "purchaser," which term
includes an individual and/or spouse purchasing securities for
his, her or their own account or for the account of any minor
children, or a trustee or other fiduciary purchasing securities
for a single trust estate or a single fiduciary account
(including a pension, profit-sharing or other employee benefit
trust created pursuant to a plan qualified under Section 401 of
the Internal Revenue Code of 1986, as amended (the "Code"))
although more than one beneficiary is involved; or a group of
accounts established by or on behalf of the employees of an
employer or affiliated employers pursuant to an employee benefit
plan or other program (including accounts established pursuant
to Sections 403(b), 408(k), and 457 of the Code); or an
organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of
buying redeemable securities of a registered investment company
and provided that the purchases are made through a central
administration or a single dealer, or by other means which
result in economy of sales effort or expense.
Offering Prices. Based upon the Fund's net asset value at the
close of business on February 28, 1994, the maximum offering
price of the Fund's shares would have been as follows:
Class A shares:
NET ASSET VALUE per share. . . . . . . . . . . .$12.13
Sales Load for individual sales
of shares aggregating less than
$50,000 - 4.5% of offering price
(approximately 4.7% of net asset
value per share) . . . . . . . . . . . . . . . .57
Offering price to public . . . . . . . . . . . .$12.70
Class B shares:
NET ASSET VALUE, redemption price
and offering price to public*. . . . . . . . .$12.14
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED
"DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN."
Distribution Plan. Rule l2b-1 (the "Rule") adopted by the
Securities and Exchange Commission under the Act provides, among
other things, that an investment company may bear expenses of
distributing its shares only pursuant to a plan adopted in
accordance with the Rule. The Fund's Board of Directors has
adopted such a plan (the "Distribution Plan") with respect to
Class B shares pursuant to which the Fund pays for advertising,
marketing and distributing Class B shares. The Fund's Board of
Directors believes that there is a reasonable likelihood that
the Distribution Plan will benefit the Fund and holders of its
Class B shares. In some states, certain financial institutions
effecting transactions in Fund shares may be required to
register as dealers pursuant to state law.
A quarterly report of the amounts expended under the
Distribution Plan, and the purposes for which such expenditures
were incurred, must be made to the Directors for their review.
In addition, the Distribution Plan provides that it may not be
amended to increase materially the costs which holders of Class
B shares may bear for distribution pursuant to the Distribution
Plan without the approval of the holders of Class B shares and
that other material amendments of the Distribution Plan must be
approved by the Board of Directors, and by the Directors who are
neither "interested persons" (as defined in the Act) of the Fund
or FIMCO nor have any direct or indirect financial interest in
the operation of the Distribution Plan or in any agreements
entered into in connection with the Distribution Plan, by vote
cast in person at a meeting called for the purpose of
considering such amendments. The Distribution Plan is subject
to annual approval by such vote of the Directors cast in person
at a meeting called for the purpose of voting on the
Distribution Plan. The Distribution Plan was approved by the
Fund's Board of Directors, including a majority of the Directors
who are not "interested persons," at a meeting held on
October 1, 1993. The Distribution Plan is terminable at any
time by vote of a majority of the Directors who are not
"interested persons" and have no direct or indirect financial
interest in the operation of the Distribution Plan or in any
agreements entered into in connection with the Distribution
Plan, or by vote of the holders of a majority of Class B shares.
For the period from February 8, 1994 (effective date of the
Distribution Plan) through February 28, 1994, $1.00 was charged
to the Fund, with respect to Class B shares, under the
Distribution Plan.
Shareholder Services Plan. The Fund has adopted a
Shareholder Services Plan, pursuant to which the Fund pays the
Distributor for the provision of certain services to the holders
of Class A and Class B shares.
A quarterly report of the amounts expended under the
Shareholder Services Plan, and the purposes for which such
expenditures were incurred, must be made to the Directors for
their review. In addition, the Shareholder Services Plan
provides that it may not be amended without approval of the
Board of Directors, and by the Directors who are neither
"interested persons" (as defined in the Act) of the Fund nor
have any direct or indirect financial interest in the operation
of the Shareholder Services Plan or in any agreements entered
into in connection with the Shareholder Services Plan, by vote
cast in person at a meeting called for the purpose of
considering such amendments. The Shareholder Services Plan is
subject to annual approval by such vote of the Directors cast in
person at a meeting called for the purpose of voting on the
Shareholder Services Plan. The Shareholder Services Plan was so
approved on October 1, 1993. The Shareholder Services Plan is
terminable at any time by vote of a majority of the Directors
who are not "interested persons" and who have no direct or
indirect financial interest in the operation of the Shareholder
Services Plan or in any agreements entered into in connection
with the Shareholder Services Plan.
For the period from February 8, 1994 (effective date of the
Shareholder Services Plan) through February 28, 1994,
approximately $1,272 was charged to the Fund, with respect to
Class A shares, under the Shareholder Services Plan, which
amount was not paid pursuant to various undertakings in effect.
No amount was charged to the Fund, with respect to Class B
shares.
Prior Rule 12b-1 Plan. As of February 8, 1994, the Fund
terminated its then existing Rule 12b-1 plan, which provided for
payments to be made for advertising, marketing and/or
distributing Class A shares and servicing holders of Class A
shares. For the period from March 1, 1993 through February 8,
1994, no payments were made under the prior Rule 12b-1 plan
pursuant to various undertakings in effect.
REDEMPTION OF FUND SHARES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED
"HOW TO REDEEM FUND SHARES."
Check Redemption Privilege--Class A. An investor may
indicate on the Account Application or by later written request
that the Fund provide Redemption Checks ("Checks") drawn on the
Fund's account. Checks will be sent only to the registered
owner(s) of the account and only to the address of record. The
Account Application or later written request must be manually
signed by the registered owner(s). Checks may be made payable
to the order of any person in an amount of $500 or more. When a
Check is presented to the Transfer Agent for payment, the
Transfer Agent, as the investor's agent, will cause the Fund to
redeem a sufficient number of full or fractional Class A shares
in the investor's account to cover the amount of the Check.
Dividends are earned until the Check clears. After clearance, a
copy of the Check will be returned to the investor. Investors
generally will be subject to the same rules and regulations that
apply to checking accounts, although election of this Privilege
creates only a shareholder-transfer agent relationship with the
Transfer Agent.
If the amount of the Check is greater than the value of the
shares in an investor's account, the Check will be returned
marked insufficient funds. Checks should not be used to close
an account.
Redemption Commitment. The Fund has committed itself to
pay in cash all redemption requests by any shareholder of
record, limited in amount during any 90-day period to the lesser
of $250,000 or 1% of the value of the Fund's net assets at the
beginning of such period. Such commitment is irrevocable
without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of
such amount, the Board of Directors reserves the right to make
payments in whole or in part in securities or other assets in
case of an emergency or any time a cash distribution would
impair the liquidity of the Fund to the detriment of the
existing shareholders. In such event, the securities would be
valued in the same manner as the Fund's portfolio is valued. If
the recipient sold such securities, brokerage charges would be
incurred.
Suspension of Redemptions. The right of redemption may be
suspended or the date of payment postponed (a) during any period
when the New York Stock Exchange is closed (other than customary
weekend and holiday closings), (b) when trading in the markets
the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the Securities and Exchange Commission
so that disposal of the Fund's investments or determination of
its net asset value is not reasonably practicable, or (c) for
such other periods as the Securities and Exchange Commission by
order may permit to protect the Fund's shareholders.
DETERMINATION OF NET ASSET VALUE
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED
"HOW TO BUY FUND SHARES."
Valuation of Portfolio Securities. The Fund's investments
are valued by an independent pricing service (the "Service")
approved by the Board of Directors. When, in the judgment of
the Service, quoted bid prices for investments are readily
available and are representative of the bid side of the market,
these investments are valued at the mean between the quoted bid
prices (as obtained by the Service from dealers in such
securities) and asked prices (as calculated by the Service based
upon its evaluation of the market for such securities). Other
investments (which constitute a majority of the portfolio
securities) are carried at fair value as determined by the
Service, based on methods which include consideration of:
yields or prices of municipal bonds of comparable quality,
coupon, maturity and type; indications as to values from
dealers; and general market conditions. The Service may employ
electronic data processing techniques and/or a matrix system to
determine valuations. The Service's procedures are reviewed by
the Fund's officers under the general supervision of the Board
of Directors. Expenses and fees of the Fund, including the
investment advisory and administration fees (reduced by the
expense limitation, if any) and expenses under the Shareholder
Services Plan with respect to Class A and Class B shares, and
fees pursuant to the Distribution Plan, with respect to Class B
shares only, are accrued daily and taken into account for the
purpose of determining the net asset value of Fund shares.
Because of the difference in operating expenses incurred by each
Class, the per share net asset value of each Class will differ.
New York Stock Exchange Closings. The holidays (as
observed) on which the New York Stock Exchange is closed
currently are: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold
to parties acting as either principal or agent. Newly-issued
securities are purchased directly from the issuer or from an
underwriter; other purchases and sales usually are placed with
those dealers from which it appears that the best price or
execution will be obtained. Ordinarily, no brokerage
commissions, as such, are paid by the Fund for such purchases
and sales, although the price paid usually includes an
undisclosed compensation to the dealer acting as agent. The
prices paid to underwriters of newly-issued securities usually
include a concession paid by the issuer to the underwriter, and
purchases of after-market securities from dealers ordinarily are
executed at a price between the bid and asked price. No
brokerage commissions have been paid by the Fund to date.
Transactions are allocated to various dealers by the Fund's
investment personnel in their best judgment. The primary
consideration is prompt and effective execution of orders at the
most favorable price. Subject to that primary consideration,
dealers may be selected for research, statistical or other
services to enable the Investment Adviser to supplement its own
research and analysis with the views and information of other
securities firms and may be selected based upon their sales of
Fund shares.
Research services furnished by brokers through which the
Fund effects securities transactions may be used by the
Investment Adviser in advising other funds or accounts it may
advise and, conversely, research services furnished to the
Investment Adviser by brokers in connection with other funds or
accounts the Investment Adviser may advise may be used by the
Investment Adviser in advising the Fund. Although it is not
possible to place a dollar value on these services, it is the
opinion of the Investment Adviser that the receipt and study of
such services should not reduce its overall research expenses.
DIVIDENDS, DISTRIBUTIONS AND TAXES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED
"DIVIDENDS, DISTRIBUTIONS AND TAXES."
The Code provides that if a shareholder has not held his
shares for more than six months (or such shorter period as the
Internal Revenue Service may prescribe by regulation) and has
received an exempt-interest dividend with respect to such
shares, any loss incurred on the sale of such shares will be
disallowed to the extent of the exempt-interest dividend
received. In addition, any dividend or distribution paid
shortly after an investor's purchase may have the effect of
reducing the net asset value of his shares below the cost of his
investment. Such a distribution would be a return on the
investment in an economic sense although taxable as stated in
"Dividends, Distributions and Taxes" in the Prospectus.
Under Section 1256 of the Code, gain or loss the Fund
realizes from certain futures and options transactions will be
treated as 60% long-term capital gain or loss and 40% short-term
capital gain or loss. Gain or loss will arise upon exercise or
lapse of such futures and options as well as from closing
transactions. In addition, any such futures or options
remaining unexercised at the end of the Fund's taxable year will
be treated as sold for their then fair market value, resulting
in additional gain or loss to the Fund characterized in the
manner described above.
Ordinarily, gains and losses realized from portfolio
transactions will be headed as capital gain or loss. However,
all or a portion of any gains realized from the sale or other
disposition of certain market discount bonds will be treated as
ordinary income under Section 1276. In addition, all or a
portion of the gain realized from engaging in "conversion
transactions" may be treated as ordinary income under Section
1258. "Conversion transactions" are defined to include certain
option and straddle transactions, transactions marketed or sold
to produce capital gains, or transactions described in Treasury
regulations to be issued in the future.
Offsetting positions held by the Fund involving certain
futures and options transactions may constitute "straddles."
"Straddles" are defined to include "offsetting positions" in
actively traded personal property. The tax treatment of
"straddles" is governed by Sections 1092 and 1258 of the Code,
which, in certain circumstances, overrides or modifies the
provisions of Section 1256. As such, all or a portion of any
short or long-term capital gain from certain "straddle" and/or
conversion transactions may be recharacterized to ordinary
income.
If the Fund were treated as entering into "straddles" by
reason of its futures and options transactions, such "straddles"
would be characterized as "mixed straddles" if the futures or
options transactions comprising a part of such "straddles" were
governed by Section 1256 of the Code. The Fund may make one or
more elections with respect to "mixed straddles." If no
election is made, to the extent the "straddle" and conversion
transaction rules apply to positions established by the Fund,
losses realized by the Fund will be deferred to the extent of
unrealized gain in the offsetting position. Moreover, as a
result of the "straddle" rules, short-term capital losses on
"straddle" positions may be recharacterized as long-term capital
loss, and long-term capital gain may be treated as short-term
capital gain or ordinary income.
PERFORMANCE INFORMATION
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED
"PERFORMANCE INFORMATION."
The offering of Class B shares commenced on February 8,
1994 and, accordingly, only limited performance data are
available for Class B. Class I had not been offered as of the
date hereof and, accordingly, no performance data are available
for Class I.
The current yield for Class A for the 30-day period ended
February 28, 1994, was 4.40%, which reflects the absorption of
certain expenses and/or a waiver of fees, without which the
yield for the 30-day period ended February 28, 1994 would have
been 3.03%. Current yield is computed pursuant to a formula
which operates as follows: The amount of the Fund's expenses
accrued for the 30-day period (net of reimbursements) is
subtracted from the amount of the dividends and interest earned
(computed in accordance with regulatory requirements) by the
Fund during the period. That result is then divided by the
product of: (a) the average daily number of shares outstanding
during the period that were entitled to receive dividends, and
(b) the maximum offering price per share in the case of Class A
or the net asset value per share in the case of Class B or Class
I on the last day of the period less any undistributed earned
income per share reasonably expected to be declared as a
dividend shortly thereafter. The quotient is then added to 1,
and that sum is raised to the 6th power, after which 1 is
subtracted. The current yield is then arrived at by multiplying
the result by 2.
Based upon a 1994 Federal income tax rate of 39.6%, the tax
equivalent yield for Class A for the 30-day period ended
February 28, 1994 was 7.28%, which reflects the absorption of
certain expenses and/or a waiver of fees, without which the tax
equivalent yield for Class A for the 30-day period ended
February 28, 1994 would have been 5.02%. See "Management of the
Fund" in the Prospectus. Tax equivalent yield is computed by
dividing that portion of the current yield (calculated as
described above) which is tax exempt by 1 minus a stated tax
rate and adding the quotient to that portion, if any, of the
yield of the Fund that is not tax exempt.
The tax equivalent yields noted above represent the
application of the highest Federal marginal personal income tax
rate presently in effect. The tax equivalent yield figures,
however, do not reflect the potential effect of any state or
local (including, but not limited to, county, district or city)
taxes, including applicable surcharges. In addition, there may
be pending legislation which could affect such stated tax rate
or yields. Each investor should consult its tax adviser, and
consider its own factual circumstances and applicable tax laws,
in order to ascertain the relevant tax equivalent yield.
Average annual total return is calculated by determining
the ending redeemable value of an investment purchased with a
hypothetical $1,000 payment made at the beginning of the period
(assuming the reinvestment of dividends and distributions),
dividing by the amount of the initial investment, taking the
"n"th root of the quotient (where "n" is the number of years in
the period) and subtracting 1 from the result. A Class's
average annual total return figures calculated in accordance
with such formula assume that in the case of Class A the maximum
sales load had been deducted from the hypothetical initial
investment at the time of purchase or in the case of Class B the
maximum applicable CDSC has been paid upon redemption at the end
of the period. The average annual total return for Class A for
the 1, 5 and 6 year periods ended February 28, 1994 was -.94%,
8.55% and 8.27%, respectively. Class B shares were first
offered for sale on February 8, 1994 and, therefore, no relevant
average annual total return data for the fiscal year ended
February 28, 1994 was available for Class B.
Total return is calculated by subtracting the amount of the
applicable Series' maximum offering price per share in the case
of Class A or the net asset value per share in the case of Class
B or Class I at the beginning of a stated period from the net
asset value per share at the end of the period (after giving
effect to the reinvestment of dividends and distributions during
the period), and dividing the result by the maximum offering
price per share in the case of Class A or the net asset value
per share in the case of Class B or Class I at the beginning of
the period. Total return also may be calculated based on the
net asset value per share at the beginning of the period instead
of the maximum offering price per share at the beginning of the
period for Class A shares or without giving effect to any
applicable CDSC at the end of the period for Class B shares. In
such cases, the calculation would not reflect the deduction of
the sales load with respect to Class A shares or any applicable
CDSC with respect to Class B shares, which, if reflected, would
reduce the performance quoted.
The total return for Class A for the period March 1, 1988
(commencement of operations) to February 28, 1994, based on
maximum offering price per share, was 61.08%. Based on net
asset value per share, the total return for Class A was 68.63%
for this period. The total return for the period February 8,
1994 (commencement of initial offering of Class B shares)
through February 28, 1994 for Class B, after giving effect to
the maximum applicable CDSC, was -4.58%; without giving effect
to the maximum applicable CDSC the total return for Class B was
- -1.64% for this period.
From time to time, the Fund may use hypothetical tax
equivalent yields or charts in its advertising. These
hypothetical yields or charts will be used for illustrative
purposes only and are not indicative of a Series' past or future
performance.
From time to time, advertising for the Fund may describe
the costs of a college education at public or private
institutions; how such costs may increase over time, based on an
assumed rate of growth; and how investments in the Fund can be
used to help pay for such costs. Advertisements for the Fund
also may refer to comparisons of the Fund's performance with
historical rates of inflation or may describe how an investment
in the Fund may be used to fund retirement costs or other
economic goals. From time to time advertising materials for the
Fund also may refer to Morningstar ratings and related analyses
supporting the rating.
INFORMATION ABOUT THE FUND
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE READ IN
CONJUNCTION WITH THE SECTION IN THE FUND'S PROSPECTUS ENTITLED
"GENERAL INFORMATION."
Each Fund share has one vote and, when issued and paid for
in accordance with the terms of the offering, is fully paid and
non-assessable. Fund shares have no preemptive or subscription
rights and are freely transferable.
The Fund sends annual and semi-annual financial statements
to all its shareholders and sends statements concerning
shareholder accounts monthly.
COUNSEL AND INDEPENDENT AUDITORS
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New
York 10004-2696, as counsel for the Fund, has rendered its
opinion as to certain legal matters regarding the due
authorization and valid issuance of the shares of Common Stock
being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York
10019, independent auditors, have been selected as auditors of
the Fund.
<PAGE>
APPENDIX
Description of S&P, Moody's, Fitch and Duff ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment
of the creditworthiness of an obligor with respect to a specific
obligation.
The ratings are based on current information furnished
by the issuer or obtained by S&P from other sources it considers
reliable, and will include: (1) likelihood of default-capacity
and willingness of the obligor as to the timely payment of
interest and repayment of principal in accordance with the terms
of the obligation; (2) nature and provisions of the obligation;
and (3) protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other
arrangement under the laws of bankruptcy and other laws
affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.
AA
Debt rated AA has a very strong capacity to pay
interest and repay principal and differs from the highest rated
issues only in a small degree.
A
Principal and interest payments on bonds in this
category are regarded as safe. This rating describes the third
strongest capacity for payment of debt service. It differs from
the two higher ratings because:
General Obligation Bonds -- There is some weakness in
the local economic base, in debt burden, in the balance between
revenues and expenditures, or in quality of management. Under
certain adverse circumstances, any one such weakness might
impair the ability of the issuer to meet debt obligations at
some future date.
Revenue Bonds -- Debt service coverage is good, but
not exceptional. Stability of the pledged revenues could show
some variations because of increased competition or economic
influences on revenues. Basic security provisions, while
satisfactory, are less stringent. Management performance
appears adequate.
BBB
Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse
conditions, several of the above factors could contribute to a
lesser capacity for payment of debt service. The difference
between "A" and "BBB" rating is that the latter shows more than
one fundamental weakness, or one very substantial fundamental
weakness, whereas the former shows only one deficiency among the
factors considered.
Revenue Bonds -- Debt coverage is only fair.
Stability of the pledged revenues could show substantial
variations, with the revenue flow possibly being subject to
erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger.
Plus (+) or minus (-): The ratings from AA to BBB may
be modified by the addition of a plus or minus designation to
show relative standing within the major ratings categories.
Municipal Note Ratings
SP-1
The issuers of these municipal notes exhibit very
strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics
are given a plus sign (+) designation.
SP-2
The issuers of these municipal notes exhibit
satisfactory capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment
of the likelihood of timely payment of debt having an original
maturity of no more than 365 days. Issues assigned an A rating
are regarded as having the greatest capacity for timely payment.
Issues in this category are delineated with the numbers 1, 2 and
3 to indicate the relative degree of safety.
A-1
This designation indicates that the degree of safety
regarding timely payment is either overwhelming or very strong.
Those issues determined to possess overwhelming safety
characteristics are denoted with a plus sign (+) designation.
A-2
Capacity for timely payment on issues with this
designation is strong. However, the relative degree of safety
is not as high as for issues designated A-1.
Moody's
Municipal Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa
Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what generally are known as high-grade bonds. They are
rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A
Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper medium-
grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the
future.
Baa
Bonds which are rated Baa are considered as medium-
grade obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Moody's applies the numerical modifiers 1, 2 and 3 to
show relative standing within the major rating categories,
except in the Aaa category. The modifier 1 indicates a ranking
for the security in the higher end of a rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3
indicates a ranking in the lower end of a rating category.
Municipal Note Ratings
Moody's ratings for state and municipal notes and
other short-term loans are designated Moody's Investment Grade
(MIG). Such ratings recognize the differences between
short-term credit risk and long-term risk. Factors affecting
the liquidity of the borrower and short-term cyclical elements
are critical in short-term ratings, while other factors of major
importance in bond risk, long-term secular trends for example,
may be less important over the short run.
A short-term rating may also be assigned on an issue
having a demand feature. Such ratings will be designated as
VMIG or, if the demand feature is not rated, as NR.
Short-term ratings on issues with demand features are
differentiated by the use of the VMIG symbol to reflect such
characteristics as payment upon periodic demand rather than
fixed maturity dates and payment relying on external liquidity.
Additionally, investors should be alert to the fact that the
source of payment may be limited to the external liquidity with
no or limited legal recourse to the issuer in the event the
demand is not met.
Moody's short-term ratings are designated Moody's
Investment Grade as MIG 1 or VMIG 1 through MIG 4 or VMIG 4. As
the name implies, when Moody's assigns a MIG or VMIG rating, all
categories define an investment grade situation.
MIG 1/VMIG 1
This designation denotes best quality. There is
present strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG 2/VMIG 2
This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding
group.
Commercial Paper Ratings
The rating Prime-1 (P-1) is the highest commercial
paper rating assigned by Moody's. Issuers of P-1 paper must
have a superior capacity for repayment of short-term promissory
obligations, and ordinarily will be evidenced by leading market
positions in well established industries, high rates of return
on funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad
margins in earnings coverage of fixed financial charges and high
internal cash generation, and well established access to a range
of financial markets and assured sources of alternate liquidity.
Fitch
Bond Ratings
The ratings represent Fitch's assessment of the issuer's
ability to meet the obligations of a specific debt issue or
class of debt. The ratings take into consideration special
features of the issue, its relationship to other obligations of
the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the
political and economic environment that might affect the
issuer's future financial strength and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and
of the highest credit quality. The obligor has an exceptionally
strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest
and repay principal is very strong, although not quite as strong
as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is
generally rated F-1+.
A
Bonds rated A are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and
repay principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and
of satisfactory credit quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances,
however, are more likely to have an adverse impact on these
bonds and, therefore, impair timely payment. The likelihood
that the ratings of these bonds will fall below investment grade
is higher than for bonds with higher ratings.
Plus (+) and minus (-) signs are used with a rating symbol
to indicate the relative position of a credit within the rating
category.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that
are payable on demand or have original maturities of up to three
years, including commercial paper, certificates of deposit,
medium-term notes, and municipal and investment notes.
Although the credit analysis is similar to Fitch's bond
rating analysis, the short-term rating places greater emphasis
than bond ratings on the existence of liquidity necessary to
meet the issuer's obligations in a timely manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of assurance
for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than issues rated F-1+.
Duff
Bond Ratings
AAA
Bonds rated AAA are considered highest credit quality. The
risk factors are negligible, being only slightly more than for
risk-free U.S. Treasury debt.
AA
Bonds rated AA are considered high credit quality.
Protection factors are strong. Risk is modest but may vary
slightly from time to time because of economic conditions.
A
Bonds rated A have protection factors which are average but
adequate. However, risk factors are more variable and greater
in periods of economic stress.
BBB
Bonds rated BBB are considered to have below average
protection factors but still considered sufficient for prudent
investment. Considerable variability in risk during economic
cycles.
Plus (+) and minus (-) signs are used with a rating symbol
(except AAA) to indicate the relative position of a credit
within the rating category.
Commercial Paper Rating
The rating Duff-1 is the highest commercial paper rating
assigned by Duff. Paper rated Duff-1 is regarded as having very
high certainty of timely payment with excellent liquidity
factors which are supported by ample asset protection. Risk
factors are minor.
<PAGE>
FINANCIAL STATEMENTS
[To be filed by Amendment]
FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits - List
(a) Financial Statements:
Included in Part A of the Registration Statement:
To be filed by Amendment.
Included in Part B of the Registration Statement:
To be filed by Amendment.
Item 24. Financial Statements and Exhibits - List (continued)
(b) Exhibits:
(1) (a) The Registrant's Articles of Incorporation are
incorporated by reference to Exhibit (1) of the
Registration Statement on Form N-1A, filed on
December 9, 1987.
(b) Amendment dated June 14, 1989 to the Registrant's
Articles of Incorporation is incorporated by
reference to Exhibit (1)(b) of Post-Effective
Amendment No. 2 to the Registration Statement on
Form N-1A, filed on June 28, 1989.
(c) Amendment dated September 12, 1989 to the
Registrant's Articles of Incorporation is
incorporated by reference to Exhibit (1)(c) of
Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A, filed on
June 29, 1990.
(d) Amendment dated January 26, 1994 to the
Registrant's Articles of Incorporation is
incorporated by reference to Exhibit (1)(d) of
Post-Effective Amendment No. 9 to the
Registration Statement on Form N-1A, filed on
February 4, 1994.
(2) The Registrant's By-Laws, as amended, are
incorporated by reference to Exhibit (2) of Post-
Effective Amendment No. 5 to the Registration
Statement on Form N-1A, filed on May 14, 1991.
(4) The specimen certificate for shares issued by the
Registrant is incorporated by reference to
Exhibit (4) of the Registration Statement on Form
N-1A, filed on December 9, 1987.
(5) (a) Investment Advisory Agreement, will be filed by
Amendment.
(b) Administration Agreement, will be filed by
Amendment.
(6) (a) Distribution Agreement, will be filed by
Amendment.
(b) Forms of Service Agreements, will be filed by
Amendment.
(8) (a) The Custody Agreement, as amended and restated,
is incorporated by reference to Exhibit (8)(a) of
Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A, filed on
June 29, 1990.
(8) (b) The Sub-Custodian Agreements are incorporated by
reference to Exhibit (8)(b) of Post-Effective
Amendment No. 1 to the Registration Statement on
Form N-1A, filed on June 21, 1988, except with
respect to the Chemical Bank Sub-Custodian
Agreement, which is incorporated by reference to
Exhibit 8(b) of Post-Effective Amendment No. 2 to
the Registration Statement on Form N-1A, filed on
June 28, 1989.
(9) Shareholder Services Plan, will be filed by
Amendment.
(10) The opinion and consent of Registrant's counsel
is incorporated by reference to Exhibit (10) of
Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A, filed on December 21,
1987.
(11) Consent of Independent Auditors, will be filed by
Amendment.
(15) Distribution Plan, will be filed by Amendment.
(16) Yield Computation and Performance Information is
incorporated by reference to Exhibit (16) of
Post-Effective Amendment No. 10 to the
Registration Statement on Form N-1A, filed on
June 27, 1994.
Other Exhibits: (a) Powers of Attorney are incorporated by
reference to Other Exhibits (a) of
Post-Effective Amendment Nos. 4 and 10
to the Registration Statement on Form
N-1A, filed on June 29, 1990 and
June 27, 1994, respectively.
(b) Registrant's Certificate of Assistant
Secretary is incorporated by reference
to Other Exhibit (b) of Post-Effective
Amendment No. 2 to the Registration
Statement on Form N-1A, filed on June
28, 1989.
Item 25. Persons Controlled by or Under Common Control with
Registrant
Not Applicable
Item 26. Number of Holders of Securities
(1) (2)
Title of Class Number of Record
Holders as of November 15,
1994
Class A Shares of Common
Stock, par value $.001 per
share 222
Class B Shares of Common
Stock, par value $.001 per
share 1
Class I Shares of Common
Stock, par value $.001 per
share 0
Item 27. Indemnification
Reference is made to Article SEVENTH, as amended, of the
Registrant's Articles of Incorporation, incorporated by
reference to Exhibit (1)(b) of Post-Effective Amendment No. 2 to
the Registration Statement on Form N-1A, filed on June 28, 1989.
The application of these provisions is limited by Article VIII of
the Registrant's By-Laws, as amended, incorporated by reference
to Exhibit (2) of Post-Effective Amendment No. 5 to the
Registration Statement on Form N-1A, filed on May 14, 1991 and
the following undertaking set forth in the rules promulgated by
the Securities and Exchange Commission:
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
such Act and will be governed by the final adjudication of such
issue.
Reference also is made to the Distribution Agreement to
be filed as Exhibit 6 hereto.
Item 28. Business and Other Connections of Investment Adviser
(a) Investment Adviser
Registrant is fulfilling the requirement of this Item 28
to provide a list of the officers and directors of First Chicago
Investment Management Company (the "Investment Adviser"),
together with information as to any other business, profession,
vocation or
employment of a substantial nature engaged in by the Investment
Adviser or those of its officers and directors during the past
two years, by incorporating by reference the information
contained in
the Form ADV filed with the SEC pursuant to the Investment
Advisers Act of 1940 by the Investment Adviser (SEC File No.
801-_____).
(b) Sub-Investment Adviser
Registrant is fulfilling the requirement of this Item 28
to provide a list of the officers and directors of ANB Investment
Management and Trust Company (the "Sub-Adviser"), together with
information as to any other business, profession, vocation or
employment of a substantial nature engaged in by the Sub-Adviser
or those of its officers and directors during the past two years,
by
incorporating by reference the information contained in the Form
ADV filed with the SEC pursuant to the Investment Advisers Act of
1940 by the Sub-Adviser (SEC File No. 801-_____).
Item 29. Principal Underwriters
(a) Other investment companies for which Registrant's
principal underwriter (exclusive distributor) acts as principal
underwriter or exclusive distributor:
The Infinity Mutual Funds, Inc.
Emerald Fund, Inc.
Pacific Horizon Funds, Inc.
(b) The information required by this Item 29(b)
regarding each director or officer of Concord Financial Group,
Inc.
is incorporated by reference to Schedule A of Form BD filed by
Concord Financial Group, Inc. pursuant to the Securities Exchange
Act of 1934 (SEC File No. 8-37601).
Item 30. Location of Accounts and Records
1. First Chicago Investment Management Company
Three First National Plaza
Chicago, Illinois 60670
2. Concord Financial Group, Inc.
125 West 55th Street
11th Floor
New York, New York 10019
Item 31. Management Services
Not Applicable
Item 32. Undertakings
Registrant hereby undertakes
(1) to call a meeting of shareholders for the purpose
of voting upon the question of removal of a
director or directors when requested in writing to
do so by the holders of at least 10% of the
Registrant's outstanding shares of common stock and
in connection with such meeting to comply with the
provisions of Section 16(c) of the Investment
Company Act of 1940 relating to shareholder
communications.
(2) To furnish each person to whom a prospectus is
delivered with a copy of its latest annual report
to shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant has
duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, and State of Illinois on the
16th day of November, 1994.
FIRST PRAIRIE TAX EXEMPT BOND
FUND, INC.
BY: /s/Marie E. Connolly
Marie E. Connolly, President
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, this Amendment to
the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signatures Title Date
/s/Marie E. Connolly President and November 16, 1994
Marie E. Connolly Treasurer (Principal
Executive Officer
and Principal
Financial and
Accounting Officer)
/s/John P. Gould Trustee November 16, 1994
John P. Gould
/s/Marilyn McCoy Trustee November 16, 1994
Marilyn McCoy
/s/Raymond D. Oddi Trustee November 16, 1994
Raymond D. Oddi
