LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to report that Class A shares of the First Prairie
Municipal Bond Fund (incorporated under the name First Prairie Tax Exempt
Bond Fund, Inc.) continued to provide competitive returns during the fiscal
year ended February 28, 1994.
For the fiscal year ended February 28, 1994, Class A shares of the
Intermediate Series provided a distribution rate per share of 4.61%, based
upon the closing maximum offering price on February 28, 1994, adjusted
for capital gain distributions.*
We are also pleased to report that all dividends paid from net
investment income were exempt from Federal income tax.**
Effective February 8, 1994, your Fund began operating under the name
First Prairie Municipal Bond Fund. This allows the Fund to invest, without
limitation, in municipal securities whose income is subject to the Federal
Alternative Minimum Tax. As a result, the Fund should benefit from
additional yield without incurring any additional risk. To determine
whether you may be subject to the Federal Alternative Minimum Tax and
its consequences to you, you should consult your tax advisor.
As we reported in the Fund's semi-annual report on August 31, 1993,
your Fund has been in a defensive mode for most of the past 12 months.
This was based on our expectation that, due to the strength of the
economic recovery in the U.S. and the possibility of renewed inflation,
interest rates would start moving up at some point during the year. This
analysis was borne out late in 1993 and as a result, we have increased the
defensive tactics of the Fund as we seek to protect investors against
declining bond prices.
During the fiscal year, your Series' short-term reserve position was
gradually increased. By the end of the reporting period, the Intermediate
Series held approximately 22% of its assets in these investments. Of
course, we expect to reinvest short-term holdings when we believe that it
is warranted by market conditions. However, we do not believe that the
decline in the bond market has yet run its course. In our estimation, the
Federal Reserve Board may take further steps to tighten credit, following
up on its move in early February. Furthermore, the increasing strength of
economic activity would most likely push interest rates upward, even
without intervention by the Federal Reserve.
We fully recognize that holding a significant amount of reserves can
result in some temporary loss of yield on the portfolio. However, we
believe this to be a prudent strategy to protect net asset value. We
anticipate that later in 1994, the bond market should stabilize, at which
point we expect to begin reinvesting some of these holdings.
As far as distribution of investments is concerned, we are at present
overweighting General Obligation Bonds as compared to Revenue Bonds.
This is based on the belief that as the domestic economy improves, G.O.s
will benefit and thus, at current market levels, they offer good value.
Under current conditions, we continue to believe that it is particularly
important to stress high quality in buying municipal issues for the
portfolio. Accordingly, a considerable amount of management effort is
being expended on credit research.
We thank you for your confidence in the Fund and look forward to
serving your future investment needs.
Sincerely,
First National Bank of Chicago
Investment Advisor
March 10, 1994
New York, N.Y.
* Distribution rate per share is based upon dividends per share paid
from net investment income during the period, divided by the maximum
offering price per share at the end of the period, adjusted for capital gain
distributions.
** Income may be subject to state and local taxes. A portion of the
income may be subject to the Federal Alternative Minimum Tax for certain
investors.
[Exhibit A]
Past performance is not predictive of future performance.
The above illustration compares a $10,000 investment in Class A shares
of First Prairie Municipal Bond Fund Intermediate Series on 3/1/88
(Inception Date) to a $10,000 investment made in the Lehman Brothers 5-
Year Municipal Bond Index on that date. All dividends and capital gain
distributions are reinvested.
The Fund's performance takes into account the current maximum initial
sales charge on Class A shares (3.0%) and all other applicable fees and
expenses. Unlike the Fund, the Lehman Brothers 5-Year Municipal Bond
Index is an unmanaged total return performance benchmark for the
investment-grade, 5-year tax exempt bond market, consisting of
municipal bonds with maturities of more than 4 years and less than 6
years. The Index does not take into account charges, fees and other
expenses. Further information relating to Fund performance, including
expense reimbursements, if applicable, is contained in the Condensed
Financial Information section of the Prospectus and elsewhere in this
report.
*Source: Lehman Brothers
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to report that Class A shares of the First Prairie
Municipal Bond Fund (incorporated under the name First Prairie Tax Exempt
Bond Fund, Inc.) continued to provide competitive returns during the fiscal
year ended February 28, 1994.
For the fiscal year ended February 28, 1994, Class A Shares of the
Insured Series provided a distribution rate per share of 4.60%, based upon
the closing maximum offering price on February 28, 1994, adjusted for
capital gain distributions.*
We are also pleased to report that all dividends paid from net
investment income were exempt from Federal income tax.**
Effective February 8, 1994, your Fund began operating under the name
First Prairie Municipal Bond Fund. This allows the Fund to invest, without
limitation, in municipal securities whose income is subject to the Federal
Alternative Minimum Tax. As a result, the Fund should benefit from
additional yield without incurring any additional risk. To determine
whether you may be subject to the Federal Alternative Minimum Tax and
its consequences to you, you should consult your tax advisor.
As we reported in the Fund's semi-annual report on August 31, 1993,
your Fund has been in a defensive mode for most of the past 12 months.
This was based on our expectation that, due to the strength of the
economic recovery in the U.S. and the possibility of renewed inflation,
interest rates would start moving up at some point during the year. This
analysis was borne out late in 1993 and as a result, we have increased the
defensive tactics of the Fund as we seek to protect investors against
declining bond prices.
During the fiscal year, your Series' short-term reserve position was
gradually increased. By the end of the reporting period, the Insured Series
held approximately 9% of its assets in these investments. Of course, we
expect to reinvest short-term holdings when we believe that it is
warranted by market conditions. However, we do not believe that the
decline in the bond market has yet run its course. In our estimation, the
Federal Reserve Board may take further steps to tighten credit, following
up on its move in early February. Furthermore, the increasing strength of
economic activity would most likely push interest rates upward, even
without intervention by the Federal Reserve.
We fully recognize that holding a significant amount of reserves can
result in some temporary loss of yield on the portfolio. However, we
believe this to be a prudent strategy to protect net asset value. We
anticipate that later in 1994, the bond market should stabilize, at which
point we expect to begin reinvesting some of these holdings.
As far as distribution of investments is concerned, we are at present
overweighting General Obligation Bonds as compared to Revenue Bonds.
This is based on the belief that as the domestic economy improves, G.O.s
will benefit and thus, at current market levels, they offer good value.
Under current conditions, we continue to believe that it is particularly
important to stress high quality in buying municipal issues for the
portfolio. Accordingly, a considerable amount of management effort is
being expended on credit research.
We thank you for your confidence in the Fund and look forward to
serving your future investment needs.
Sincerely,
First National Bank of Chicago
Investment Advisor
March 10, 1994
New York, N.Y.
* Distribution rate per share is based upon dividends per share paid
from net investment income during the period, divided by the maximum
offering price per share at the end of the period, adjusted for capital gain
distributions.
** Income may be subject to state and local taxes. A portion of the
income may be subject to the Federal Alternative Minimum Tax for certain
investors.
[Exhibit B]
Past performance is not predictive of future performance.
The above illustration compares a $10,000 investment in Class A shares
of First Prairie Municipal Bond Fund Insured Series on 3/1/88 (Inception
Date) to a $10,000 investment made in the Lehman Brothers 10-Year
Municipal Bond Index on that date. All dividends and capital gain
distributions are reinvested.
The Fund's performance takes into account the maximum initial sales
charge on Class A shares and all other applicable fees and expenses. Unlike
the Fund, the Lehman Brothers 10-Year Municipal Bond Index is an
unmanaged total return performance benchmark for the investment-grade,
10-year tax exempt bond market, consisting of municipal bonds with
maturities of more than 8 years and less than 12 years. The Index does not
take into account charges, fees and other expenses. Further information
relating to Fund performance, including expense reimbursements, if
applicable, is contained in the Condensed Financial Information section of
the Prospectus and elsewhere in this report.
*Source: Lehman Brothers
FIRST PRAIRIE MUNICIPAL BOND FUND, INTERMEDIATE SERIES
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS FEBRUARY 28, 1994
PRINCIPAL
MUNICIPAL BONDS-78.0% AMOUNT VALUE
----------- -----------
<S> <C> <C>
ALASKA-3.3%
Alaska Student Loan Corp., Student Loan Revenue
5.50%, 7/1/2004 (Insured; AMBAC).................................................... $ 1,000,000 $ 1,013,030
ARIZONA-.9%
University of Arizona, University Revenues 6.75%, 6/1/2001.............................. 250,000 280,370
CALIFORNIA-4.0%
Fresno, Health Facility Revenue, Refunding (Holy Cross Health System Corp.):
4.875%, 12/1/2001................................................................... 575,000 582,182
5.10%, 12/1/2003.................................................................... 635,000 647,668
COLORADO-1.7%
Denver City and County, Airport Systems Subordinated Revenue
6.35%, 12/1/1994 (LOC; Sumitomo Trust and Banking Co., Ltd.) (a).................... 500,000 512,625
ILLINOIS-14.4%
Chicago O'Hare International Airport, Revenue, Refunding (General Second Lien)
5.20%, 1/1/2002 (Insured; MBIA)..................................................... 1,000,000 1,014,710
Illinois Health Facilities Authority, Improvement Revenue, Refunding:
(Illinois Masonic Medical Center) 4.90%, 10/1/2000.................................. 825,000 823,119
(Swedish Covenant) 6.10%, 8/1/2008.................................................. 1,000,000 1,021,220
Metropolitan Pier and Exposition Authority, Dedicated State Tax Revenue:
6.125%, 6/1/2000.................................................................... 500,000 534,565
6.50%, 6/15/2027.................................................................... 1,000,000 1,047,170
INDIANA-5.1%
Indiana Bond Bank, Revenue (Revolving Fund Program) 5.80%, 2/1/2002..................... 500,000 523,305
Indiana Health Facility Financing Authority, HR, Refunding
(Floyd Memorial Hospital Project) 6.625%, 2/15/2022................................. 1,000,000 1,064,010
IOWA-.3%
Iowa School Corps., Warrants Certificates 3.60%, 12/30/1994 (Insured; CGIC)............. 100,000 100,490
MICHIGAN-3.0%
Michigan Hospital Finance Authority, Revenue, Refunding (McLaren Obligation Group)
2.75%, 10/15/1994................................................................... 925,000 920,616
MINNESOTA-4.1%
Minneapolis and Saint Paul Metropolitan Airports Commission 5%, 1/1/1996................ 1,250,000 1,274,363
NEVADA-2.4%
City of Las Vegas, Refunding 6.20%, 10/1/2001........................................... 500,000 540,110
Nevada Housing Division (Single Family Program) 7.20%, 10/1/1998........................ 200,000 212,254
NEW MEXICO-.7%
New Mexico Educational Assistance Foundation, Student Loan Revenue 3.20%, 12/1/1994..... 200,000 200,246
NORTH DAKOTA-.3%
State of North Dakota, Student Loan Revenue 7.40%, 1/1/1998 (Insured; AMBAC)............ 70,000 76,901
OHIO-8.0%
Franklin County, HR, Refunding (Riverside United Methodist):
5.10%, 5/15/2000.................................................................... 780,000 795,740
5.20%, 5/15/2001.................................................................... 435,000 445,736
Ohio Public Facilities Commission (Higher Education Capital Facilities) 5.30%, 12/1/1997 1,180,000 1,229,194
FIRST PRAIRIE MUNICIPAL BOND FUND, INTERMEDIATE SERIES
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1994
PRINCIPAL
MUNICIPAL BONDS (CONTINUED) AMOUNT VALUE
----------- -----------
PENNSYLVANIA-7.0%
Philadelphia, Gas Works Revenue:
4.90%, 8/1/2002..................................................................... $ 1,200,000 $ 1,172,256
5.10%, 8/1/2004..................................................................... 1,000,000 971,020
TEXAS-3.6%
Brazos River Authority, PCR (Texas Utilities-Electric) 8.25%, 12/1/2016 (Insured; FGIC). 500,000 556,500
Texas Housing Agency, SFMR 7.35%, 3/1/1998.............................................. 50,000 52,318
Weslaco Health Facilities Development Corp., HR (Knapp Medical Center Project)
4.70%, 6/1/2002..................................................................... 500,000 492,650
UTAH-6.8%
Intermountain Power Agency, Special Obligation (5th Crossover) 7%, 7/1/2015 (Insured; FGIC) 1,775,000 1,958,038
Utah Building Ownership Authority, LR (Department Employment Security Project)
7.50%, 8/15/2003 (Prerefunded 8/15/1998)(b)......................................... 100,000 112,869
Utah Housing Finance Agency, Single Family Mortgage 7.70%, 1/1/1998..................... 25,000 25,894
WASHINGTON-3.4%
Snohomish County Public Utility District No. 001, Electric Revenue (Generation System)
5.25%, 1/1/2004..................................................................... 1,050,000 1,044,341
WISCONSIN-9.0%
State of Wisconsin, Transportation Revenue 5.30%, 7/1/1995.............................. 500,000 513,325
Wisconsin Health and Educational Facilities Authority, Revenue
(Milwaukee Regional Medical Center, Inc. Project) 6.50%, 8/1/2013 (Insured; AMBAC) 2,000,000 2,132,020
Wisconsin Housing and Economic Development Authority, Homeownership Revenue:
7.50%, 9/1/1997..................................................................... 50,000 51,545
7.70%, 9/1/1998..................................................................... 75,000 77,057
-----------
TOTAL MUNICIPAL BONDS (cost $23,806,385)................................................ $24,019,457
===========
SHORT-TERM MUNICIPAL INVESTMENTS-22.0%
ARKANSAS-.8%
Magnolia, IDR, VRDN (American Fuel Cell) 2.55% (LOC; Barclays Bank)(a,c)................ $ 250,000 $ 250,000
MINNESOTA-13.0%
Osseo Independent School District No. 279, Revenue:
2.90%, 5/1/1994..................................................................... 1,000,000 1,000,000
2.93%, 5/1/1994..................................................................... 3,000,000 3,000,000
NEW YORK-.3%
New York City, GO, VRDN 2.30% (Line of Credit; FGIC)(c)................................. 100,000 100,000
NORTH CAROLINA-4.2%
Person County Industrial Facilities and Pollution Control Financing Authority, SWDR, VRDN
(Carolina P&L) 2.30% (LOC; Fuji Bank)(a,c).......................................... 1,300,000 1,300,000
TEXAS-3.4%
Panhandle-Plains Higher Education Authority, Student Loan Revenue, Refunding 2.90%, 9/1/1994 1,040,000 1,038,419
WASHINGTON-.3%
Pierce County Economic Development Corp., Industrial Revenue, VRDN
(Northwest Banking Project) 2.55% (LOC; Barclays Bank)(a,b)......................... 100,000 100,000
-----------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $6,790,000)................................ $ 6,788,419
===========
TOTAL INVESTMENTS-100.0% (cost $30,596,385)............................................. $30,807,876
===========
FIRST PRAIRIE MUNICIPAL BOND FUND, INSURED SERIES
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1994
PRINCIPAL
MUNICIPAL BONDS-90.7% AMOUNT VALUE
----------- -----------
DISTRICT OF COLUMBIA-2.4%
District of Columbia 7.25%, 6/1/2002 (Prerefunded 6/1/1999) (Insured; AMBAC)(b)......... $ 200,000 $ 228,644
FLORIDA-3.3%
Jacksonville, Guaranteed Entitlement Revenue, Refunding 5.60%, 10/1/2003 (Insured; AMBAC) 300,000 316,491
ILLINOIS-7.1%
Hoffman Estates, Refunding 5.30%, 12/1/2004 (Insured; MBIA)............................. 250,000 253,785
Northern Cook County Solid Waste Agency, Contract Revenue
6.40%, 5/1/2006 (Insured; MBIA)..................................................... 400,000 433,116
IOWA-4.8%
Iowa School Corp., Warrants Certificates 3.60%, 12/30/1994 (Insured; CGIC).............. 150,000 150,735
Muscatine, Electric Revenue, Refunding 5.50%, 1/1/2001 (Insured; AMBAC)................. 300,000 312,279
KENTUCKY-3.7%
Jefferson County Health Facilities, Revenue (Jewish Hospital Healthcare Services, Inc.)
6.55%, 5/1/2022 (Insured; AMBAC).................................................... 325,000 352,485
LOUISIANA-4.2%
Louisiana Public Facilities Authority, Special Insured Assessment Revenue, Refunding
3.45%, 4/1/1995 (Insured; FSA)...................................................... 400,000 400,416
MINNESOTA-3.2%
Minneapolis and Saint Paul Metropolitan Airports Commission 5%, 1/1/1996................ 300,000 305,847
NEVADA-7.1%
Clark County, Passenger Facility Charge Revenue (Las Vegas McCarran International Airport)
5.80%, 7/1/2003 (Insured; AMBAC).................................................... 300,000 318,405
Henderson Sewer 7.20%, 1/1/2007 (Insured; MBIA)......................................... 325,000 361,686
OHIO-4.3%
Ohio Public Facilities Commission, Higher Education Capital Facilities
5.30%, 12/1/1997 (Insured; FSA)..................................................... 400,000 416,676
PENNSYLVANIA-15.3%
Philadelphia, Gas Works Revenue:
5%, 8/1/2003........................................................................ 315,000 307,242
5.10%, 8/1/2004..................................................................... 1,200,000 1,165,224
SOUTH CAROLINA-21.7%
Piedmont Municipal Power Agency, Electric Revenue, Refunding 6.30%, 1/1/2022 (Insured; MBIA) 1,000,000 1,040,540
South Carolina Public Service Authority, Electric System Expansion Revenue, Refunding
7%, 7/1/2022 (Insured; AMBAC)....................................................... 1,000,000 1,045,990
TEXAS-2.7%
Houston, Water and Sewer System Revenue, Refunding 5.75%, 12/1/2003 (Insured; MBIA)..... 250,000 264,317
WASHINGTON-10.9%
Seattle Municipality Metropolitan, Sewer Revenue 6.30%, 1/1/2033 (Insured; MBIA)........ 1,000,000 1,048,750
-----------
TOTAL MUNICIPAL BONDS (cost $8,715,167)................................................. $ 8,722,628
===========
SHORT-TERM MUNICIPAL INVESTMENTS-9.3%
IOWA-1.1%
Des Moines Methodist System, Inc., Hospital Facility Revenue, VRDN
(Iowa Methodist Medical Center Project) 2.40% (LOC; Fuji Bank)(a,c)................. $ 100,000 $ 100,000
FIRST PRAIRIE MUNICIPAL BOND FUND, INSURED SERIES
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1994
PRINCIPAL
SHORT-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
----------- -----------
NEW YORK-3.1%
New York State Energy Research and Development Authority, PCR, VRDN
(Niagara Mohawk Power) 2.35% (LOC; Toronto-Dominion Bank)(a,c)...................... $ 300,000 $ 300,000
WASHINGTON-5.1%
Pierce County Economic Development Corp., Industrial Revenue, VRDN (Northwest Banking Project)
2.55% (LOC; Toronto Dominion Bank)(a,c)............................................. 160,000 160,000
Washington Community Economic Revitalization Board, Economic Revenue, VRDN
2.55% (LOC; Industrial Bank of Japan)(a,c).......................................... 330,000 330,000
-----------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $890,000).................................. $ 890,000
===========
TOTAL INVESTMENTS-100.0% (cost $9,605,167).............................................. $ 9,612,628
===========
</TABLE>
<TABLE>
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
CGIC Capital Guaranty Insurance Company LR Lease Revenue
FGIC Financial Guaranty Insurance Corporation MBIA Municipal Bond Insurance Association
FSA Financial Security Assurance PCR Pollution Control Revenue
GO General Obligation SFMR Single Family Mortgage Revenue
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
IDR Industrial Development Revenue VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
PERCENTAGE OF VALUE
--------------------
STANDARD INTERMEDIATE INSURED
FITCH(D) OR MOODY'S OR & POOR'S SERIES SERIES
- - -------- ------- -------- ------------ -------
<S> <C> <C> <C> <C>
AAA Aaa AAA 33.1% 75.4%
AA Aa AA 24.9 -
A A A 29.4 -
BBB Baa BBB 6.9 15.3
F1 MIG1 & VMIG1 SP1 .7 2.7
F1(e) P1(e) A1(e) 5.0 6.6
------ ------
100.0% 100.0%
====== ======
</TABLE>
NOTES TO STATEMENTS OF INVESTMENTS:
(a) Secured by bank letters of credit.
(b) Bonds which are prerefunded are collateralized by U.S. Government securities
which are held in escrow and are used to pay principal and interest on the
tax-exempt issue and to retire the bonds in full at the earliest refunding
date.
(c) Securities payable on demand. The interest rate, which is subject to change
is based upon bank prime rates or an index of market interest rates.
(d) Fitch currently provides creditworthiness information for a limited amount
of investments.
(e) The ratings F1, P1, and A1 are the highest ratings assigned tax exempt
commercial paper by Fitch, Moody's and Standard & Poor's, respectively.
(f) At February 28, 1994, 35.4% of the Insured Series' investments are insured
by MBIA and 26.8% are insured by AMBAC.
See notes to financial statements.
FIRST PRAIRIE MUNICIPAL BOND FUND
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1994
INTERMEDIATE INSURED
ASSETS: SERIES SERIES
----------- -----------
<S> <C> <C>
Investments in securities, at value
(cost $30,596,385 and $9,605,167, respectively)-see statement................... $30,807,876 $ 9,612,628
Cash................................................................................ -- 34,655
Receivable for investment securities sold........................................... 991,427 1,022,427
Interest receivable................................................................. 287,640 103,713
Receivable for subscriptions to Common Stock........................................ 10,000 -
Prepaid expenses.................................................................... 10,101 6,257
Due from Administrator.............................................................. 104,059 60,398
----------- -----------
32,211,103 10,840,078
----------- -----------
LIABILITIES:
Payable for investment securities purchased......................................... 2,208,788 1,584,160
Payable for Common Stock redeemed................................................... 1,113,453 -
Accrued expenses and other liabilities.............................................. 50,503 19,783
----------- -----------
3,372,744 1,603,943
----------- -----------
NET ASSETS.............................................................................. $28,838,359 $ 9,236,135
=========== ===========
REPRESENTED BY:
Paid-in capital..................................................................... $28,564,872 $ 9,235,292
Accumulated undistributed net realized gain on investments.......................... 61,996 -
Accumulated distributions in excess of net realized gain on investments-Note 1(d)... - (6,618)
Accumulated net unrealized appreciation on investments-Note 3....................... 211,491 7,461
----------- -----------
NET ASSETS at value..................................................................... $28,838,359 $ 9,236,135
=========== ===========
Shares of Common Stock outstanding:
Class A Shares:
(2.5 billion shares of $.001 par value authorized).............................. 2,365,884
===========
(2.5 billion shares of $.001 par value authorized).............................. 761,127
===========
Class B Shares:
(2.5 billion shares of $.001 par value authorized).............................. 981
===========
(2.5 billion shares of $.001 par value authorized).............................. 162
===========
NET ASSET VALUE per share:
Class A Shares:
($28,826,406 / 2,365,884 shares)................................................ $12.18
======
($9,234,168 / 761,127 shares)................................................... $12.13
======
Class B Shares:
($11,953 / 981 shares).......................................................... $12.18
======
($1,967 / 162 shares)........................................................... $12.14
======
See notes to financial statements.
</TABLE>
<TABLE>
FIRST PRAIRIE MUNICIPAL BOND FUND
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
S0TATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1994
INTERMEDIATE INSURED
SERIES SERIES
----------- -----------
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME..................................................................... $ 1,411,868 $ 497,242
----------- -----------
EXPENSES-Note 1(c):
Investment advisory fee-Note 2(a)............................................... $ 116,711 $ 40,987
Administration fee-Note 2(a).................................................... 58,356 20,494
Shareholder servicing costs-Note 2(b,c)......................................... 89,165 35,683
Auditing fees................................................................... 25,765 6,932
Legal fees...................................................................... 25,719 8,335
Prospectus and shareholders' reports-Note 2(b).................................. 13,664 7,974
Registration fees............................................................... 12,239 12,769
Custodian fees.................................................................. 9,701 4,436
Directors' fees and expenses-Note 2(d).......................................... 4,414 1,443
Distribution fees (Class B Shares)-Note 2(b).................................... 1 1
Miscellaneous................................................................... 13,353 8,444
----------- -----------
369,088 147,498
Less-expense reimbursement from Adviser and
Administrator due to undertakings-Note 2(a)................................. 352,071 147,497
----------- -----------
TOTAL EXPENSES.......................................................... 17,017 1
----------- -----------
INVESTMENT INCOME-NET................................................... 1,394,851 497,241
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments-Note 3............................................. $ 1,275,347 $ 607,250
Net unrealized (depreciation) on investments........................................ (1,243,092) (728,931)
----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.................. 32,255 (121,681)
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................... $ 1,427,106 $ 375,560
=========== ===========
</TABLE>
See notes to financial statements.
FIRST PRAIRIE MUNICIPAL BOND FUND
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INTERMEDIATE SERIES
--------------------------
YEAR ENDED FEBRUARY 28,
--------------------------
1993 1994
----------- -----------
<S> <C> <C>
OPERATIONS:
Investment income-net............................................................... $ 1,174,284 $ 1,394,851
Net realized gain on investments.................................................... 302,855 1,275,347
Net unrealized appreciation (depreciation) on investments for the year.............. 1,086,267 (1,243,092)
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ 2,563,406 1,427,106
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares.................................................................. (1,174,284) (1,394,847)
Class B shares.................................................................. - (4)
----------- -----------
Net realized gain on investments:
Class A shares.................................................................. (251,807) (1,471,722)
Class B shares.................................................................. - -
----------- -----------
TOTAL DIVIDENDS............................................................. (1,426,091) (2,866,573)
----------- -----------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold:
Class A shares.................................................................. 12,024,536 6,634,160
Class B shares.................................................................. - 12,000
Dividends reinvested:
Class A shares.................................................................. 952,307 1,972,927
Class B shares.................................................................. - 4
Cost of shares redeemed:
Class A shares.................................................................. (4,539,502) (6,226,132)
Class B shares.................................................................. - -
----------- -----------
INCREASE IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS...................... 8,437,341 2,392,959
----------- -----------
TOTAL INCREASE IN NET ASSETS............................................ 9,574,656 953,492
NET ASSETS:
Beginning of year................................................................... 18,310,211 27,884,867
----------- -----------
End of year......................................................................... $27,884,867 $28,838,359
=========== ===========
</TABLE>
<TABLE>
SHARES
----------------------------------------
CLASS A CLASS B
----------------------- ------------
YEAR ENDED FEBRUARY 28, YEAR ENDED
----------------------- FEBRUARY 28,
1993 1994 1994*
--------- --------- ---------
<S> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold........................................................ 976,152 523,996 980
Shares issued for dividends reinvested............................. 77,235 158,309 1
Shares redeemed.................................................... (367,959) (496,647) -
--------- --------- ---------
NET INCREASE IN SHARES OUTSTANDING......................... 685,428 185,658 981
========= ========= =========
</TABLE>
- - ----------------------------
* From February 8, 1994 (commencement of initial offering) to February 28, 1994.
See notes to financial statements.
FIRST PRAIRIE MUNICIPAL BOND FUND
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE> INSURED SERIES
--------------------------
YEAR ENDED FEBRUARY 28,
--------------------------
1993 1994
----------- -----------
<S> <C> <C>
OPERATIONS:
Investment income-net............................................................... $ 474,329 $ 497,241
Net realized gain on investments.................................................... 249,775 607,250
Net unrealized appreciation (depreciation) on investments for the year.............. 556,530 (728,931)
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ 1,280,634 375,560
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares.................................................................. (474,329) (497,237)
Class B shares.................................................................. - (4)
----------- -----------
Net realized gain on investments:
Class A shares.................................................................. (172,263) (717,815)
Class B shares.................................................................. - -
----------- -----------
Excess net realized gain on investments:
Class A shares.................................................................. - (6,618)
Class B shares.................................................................. - -
----------- -----------
TOTAL DIVIDENDS............................................................. (646,592) (1,221,674)
----------- -----------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold:
Class A shares.................................................................. 6,253,771 3,586,206
Class B shares.................................................................. - 2,000
Dividends reinvested:
Class A shares.................................................................. 515,334 956,593
Class B shares.................................................................. - 4
Cost of shares redeemed:
Class A shares.................................................................. (2,704,291) (5,752,746)
Class B shares.................................................................. - -
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS........... 4,064,814 (1,207,943)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS................................. 4,698,856 (2,054,057)
NET ASSETS:
Beginning of year................................................................... 6,591,336 11,290,192
----------- -----------
End of year......................................................................... $11,290,192 $ 9,236,135
=========== ===========
SHARES
--------------
CLASS A CLASS B
------------------------ -----------
YEAR ENDED FEBRUARY 28, YEAR ENDED
------------------------ FEBRUARY 28,
1993 1994 1994*
--------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................ 496,701 275,363 161
Shares issued for dividends reinvested................................. 40,732 75,829 1
Shares redeemed........................................................ (213,167) (441,865) -
--------- ----------- -----------
NET INCREASE (DECREASE) IN SHARES OUTSTANDING.................. 324,266 (90,673) 162
============= =========== ===========
- - --------------------------
* From February 8, 1994 (commencement of initial offering) to February 28, 1994.
</TABLE>
See notes to financial statements.
FIRST PRAIRIE MUNICIPAL BOND FUND, INTERMEDIATE SERIES
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
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 each year indicated. This information has been
derived from information provided in the Fund's financial statements.
<TABLE>
CLASS A SHARES CLASS B SHARES
------------------------------------------------- --------------------
FISCAL YEAR ENDED,
------------------------------------------------- YEAR ENDED
PER SHARE DATA: 1990 1991 1992 1993 1994 FEBRUARY 28, 1994(1)
------ ------ ------ ------ ------ --------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year............. $11.43 $11.65 $11.95 $12.25 $12.79 $12.32
------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net.......................... .78 .80 .76 .64 .61 .03
Net realized and unrealized gain (loss)
on investments............................. .22 .31 .37 .68 .01 (.14)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS........... 1.00 1.11 1.13 1.32 .62 (.11)
------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment income-net........... (.78) (.80) (.76) (.64) (.61) (.03)
Dividends from net realized gain
on investments............................. -- (.01) (.07) (.14) (.62) --
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS........................ (.78) (.81) (.83) (.78) (1.23) (.03)
------ ------ ------ ------ ------ ------
Net asset value, end of year................... $11.65 $11.95 $12.25 $12.79 $12.18 $12.18
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) 9.00% 9.94% 9.78% 11.26% 4.94% (.93%)(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets........ -- -- -- -- .06% .75%(4)
Ratio of net investment income to
average net assets......................... 6.62% 6.76% 6.15% 5.16% 4.78% 1.68%(4)
Decrease reflected in above expense
ratios due to undertakings by the
Adviser and Administrator (limited to
the expense limitation provision of the
Investment Advisory and
Administration Agreements)................. 2.75% 2.75% 1.72% 1.31% 1.21% 2.25%(4)
Portfolio Turnover Rate........................ 46.68% 12.22% 86.91% 63.67% 167.95% 167.95%
Net Assets, end of year (000's Omitted)........ $4,582 $7,251 $18,310 $27,885 $28,826 $12
- - -------------------------
(1) From February 8, 1994 (commencement of initial offering) to February 28, 1994.
(2) Exclusive of sales charges.
(3) Not annualized.
(4) Annualized.
</TABLE>
See notes to financial statements.
FIRST PRAIRIE MUNICIPAL BOND FUND, INSURED SERIES
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
FINANCIAL HIGHLIGHTS (CONTINUED)
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 each year indicated. This information
has been derived from information provided in the Fund's financial statements.
<TABLE>
CLASS A SHARES CLASS B SHARES
------------------------------------------------- --------------------
FISCAL YEAR ENDED, FEBRUARY,
------------------------------------------------- YEAR ENDED
PER SHARE DATA: 1990 1991 1992 1993 1994 FEBRUARY 28, 1994(1)
------ ------ ------ ------ ------ --------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year............. $11.82 $11.77 $12.10 $12.49 $13.25 $12.37
------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS:
Investment income-net.......................... .81 .81 .76 .70 .63 .03
Net realized and unrealized gain (loss)
on investments............................. .28 .33 .47 1.01 (.15) (.23)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS........... 1.09 1.14 1.23 1.71 .48 (.20)
------ ------ ------ ------ ------ ------
DISTRIBUTIONS:
Dividends from investment income-net........... (.81) (.81) (.76) (.70) (.63) (.03)
Dividends from net realized gain on
investments................................ (.33) -- (.08) (.25) (.96) --
Dividends from excess net
realized gain on investments............... -- -- -- -- (.01) --
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS........................ (1.14) (.81) (.84) (.95) (1.60) (.03)
------ ------ ------ ------ ------ ------
Net asset value, end of year................... $11.77 $12.10 $12.49 $13.25 $12.13 $12.14
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN(2) 9.39% 10.13% 10.50% 14.37% 3.70% (1.64%)(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets........ -- -- -- -- -- .50%(4)
Ratio of net investment income to average
net assets................................. 6.60% 6.87% 5.99% 5.49% 4.85% 4.10%(4)
Decrease reflected in above expense ratios
due to undertakings by the Adviser
and Administrator (limited to the
expense limitation provision of the
Investment Advisory and
Administration Agreements)................. 2.75% 2.75% 2.75% 1.59% 1.44% 2.41%(4)
Portfolio Turnover Rate........................ 85.07% 32.40% 66.28% 88.53% 175.06% 175.06%
Net Assets, end of year (000's Omitted)........ $1,192 $2,244 $6,591 $11,290 $9,234 $2
- - --------------------------
(1) From February 8, 1994 (commencement of initial offering) to February 28, 1994.
(2) Exclusive of sales charges.
(3) Not annualized.
(4) Annualized.
</TABLE>
See notes to financial statements.
FIRST PRAIRIE MUNICIPAL BOND FUND
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940
("Act") as a non-diversified open-end management investment company
and operates as a series company issuing two classes of Common Stock:
the Intermediate Series and the Insured Series. The Fund accounts
separately for the assets, liabilities and operations of each series. The
First National Bank of Chicago ("Adviser") serves as the Fund's
investment adviser. The Dreyfus Corporation ("Administrator") serves as
the Fund's administrator. Dreyfus Service Corporation ("Distributor"), a
wholly-owned subsidiary of the Administrator, acts as the distributor of
the Fund's shares.
Effective February 8, 1994, your Fund began operating under the name
First Prairie Municipal Bond Fund.
On December 29, 1993, shareholders approved an amendment to the Fund's
Articles of Incorporation to provide for the issuance of additional classes
of shares. On October 1, 1993, the Fund's Board of Directors classified the
Fund's existing shares as Class A shares and authorized the issuance of 5
billion shares of $.001 par value Class B shares for the Intermediate
Series and the Insured Series. The Fund began offering both Class A and
Class B shares on February 8, 1994 for the Intermediate Series and the
Insured Series. 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 at the time of redemption on redemptions
made within five years of purchase. Other differences between the two
classes include the services offered to and the expenses borne by each
Class and certain voting rights.
(A) PORTFOLIO VALUATION: Each series' investments are valued each
business day by an independent pricing service ("Service") approved by the
Board of Directors. Investments for which quoted bid prices in the
judgment of the Service are readily available and are representative of
the bid side of the market 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 securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general
market conditions.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss
from securities transactions are recorded on the identified cost basis.
Interest income, adjusted for amortization of premiums and, when
appropriate, discounts on investments, is earned from settlement date and
recognized on the accrual basis. Securities purchased or sold on a when-
issued or delayed-delivery basis may be settled a month or more after the
trade date.
(C) EXPENSES: Expenses directly attributable to each series are charged
to that series' operations; expenses which are applicable to both series
are allocated between them.
(D) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund, with
respect to both series, to declare dividends daily from investment
income-net. Such dividends are paid monthly. Dividends from net realized
capital gain, with respect to both series, are normally declared and paid
annually, but each series may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue
Code. However, to the extent that a net realized capital gain of either
series can be reduced by capital loss carryovers, if any, of that series,
such gain will not be distributed.
FIRST PRAIRIE MUNICIPAL BOND FUND
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Dividends in excess of net realized gains on investment for financial
statement purposes result primarily from losses from securities
transactions during the year ended February 28, 1994 which are treated
for Federal income tax purposes as arising in Fiscal 1995.
(E) FEDERAL INCOME TAXES: It is the policy of each series to continue to
qualify as a regulated investment company, which can distribute tax
exempt dividends, by complying with the provisions available to certain
investment companies, as defined in applicable sections of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from all, or substantially all, Federal income
taxes. For Federal income tax purposes, each series is treated as a single
entity for the purpose of determining such qualification.
NOTE 2-INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER
TRANSACTIONS WITH AFFILIATES:
(A) Fees payable by the Fund pursuant to the provisions of an
Investment Advisory Agreement with the Adviser and an Administration
Agreement with the Administrator are payable monthly based on annual
rates of .40 of 1% and .20 of 1%, respectively, of the average daily value
of each series' net assets. The agreements further provide that if in any
full fiscal year the aggregate expenses of either series, excluding interest
on borrowings, taxes, brokerage and extraordinary expenses, exceed the
expense limitation of any state having jurisdiction over the Fund, that
series may deduct from the payments to be made to the Adviser and the
Administrator, or the Adviser and the Administrator will bear their
proportionate share of such excess to the extent required by state law.
The most stringent state expense limitation applicable to the Fund
presently requires reimbursement of expenses in any full fiscal year that
such expenses (exclusive of distribution expenses and certain expenses as
described above) exceed 2 1/2% of the first $30 million, 2% of the next
$70 million and 1 1/2% of the excess over $100 million of the average
value of either series' net assets in accordance with the California "blue
sky" regulations.
With respect to the Insured Series, the Adviser and the Administrator
had undertaken to reimburse all fees and expenses (excluding 12b-1 fee).
During the year ended February 28, 1994, the Adviser and the
Administrator reimbursed the series $40,987 and $106,510, respectively.
Pursuant to the undertakings, with respect to the Intermediate Series, the
adviser and the administrator had undertaken through November 21, 1993
to reimburse all fees and expenses of the series and thereafter, had
undertaken, from November 22, 1993 through December 29, 1993 to reduce
the advisory and the administration fee paid by, or reimburse such excess
expenses of the Series to the extent that the Series' aggregate expenses
(excluding certain expenses as described above) exceeded specified annual
percentages of the Series' average daily net assets. The Adviser and the
Administrator have currently undertaken from December 30, 1993 to
waive receipt of the Advisory fee and the Administration fee paid by the
Series in excess of an annual rate of .25 of 1% (excluding 12b-1 fee) of
the Series' average daily net assets. The Adviser and the Administrator
reimbursed the series $116,711 and $235,360, respectively.
First Chicago Investment Services, Inc. an affiliate of the Adviser,
retained $124,945 and $34,389 during the year ended February 28, 1994
from commissions earned on sales of Intermediate Series shares and
Insured Series shares, respectively.
The Distributor retained $10,274 and $2,251 during the year ended
February 28, 1994 from commissions earned on sales of Intermediate
Series shares and Insured Series shares, respectively.
FIRST PRAIRIE MUNICIPAL BOND FUND
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
No amounts were retained by the Distributor during the period ended
February 28, 1994 from contingent deferred sales charges imposed upon
redemptions of the Fund's Class B Shares for the Intermediate Series and
Insured Series.
(B) Under the Distribution Plan ("Class B Distribution Plan") adopted
pursuant to Rule 12b-1 under the Act, effective February 8, 1994, each
Series pays the Service Agents (which may include the Adviser, the
Administrator and the Distributor) at an annual rate of .50 of 1% of the
value of each Series' Class B shares average daily net assets, for the
costs and expenses in connection with advertising, marketing and
distributing each Series' Class B shares. Each Series may make payments
to one or more Service Agents (a securities dealer, financial institution,
or other industry professional) based on the value of each Series' Class B
shares owned by clients of the Service Agent.
Prior to February 8, 1994, each Series' Service Plan ("prior Service
Plan") provided that each Series pay the Service Agents (which may
include the Adviser, the Administrator and the Distributor), at an annual
rate of .25 of 1% of the value of each Series' average daily net assets, for
costs and expenses in connection with advertising, marketing and
distribution of each Series' shares and for servicing shareholder accounts.
Each Series made payments to one or more Service Agents based on the
value of each Series' shares owned by clients of the Service Agent. The
prior Service Plan also provided for each Series to bear the costs of
preparing, printing and distributing certain of the Fund's prospectuses and
statements of additional information and costs associated with
implementing and operating the Plan, not to exceed the greater of
$100,000 or .005 of 1% of each Series' average daily net assets for any
full fiscal year.
During the period ended February 28, 1994 $75,139 and $28,654 was
charged to the Intermediate Series and the Insured Series pursuant to the
prior Service plan and $1 and $1 was charged to the Intermediate Series
and the Insured Series pursuant to the Class B Distribution Plan.
(C) Under the Shareholder Services Plan, effective February 8, 1994,
each Series pays the Service Agents (which may include the Adviser, the
Administrator and the Distributor) an annual rate of .25 of 1% of the value
of the Series' average daily net assets of Class A and Class B shares for
servicing shareholder accounts. The services provided may include
personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding each Series and providing reports and
other information, and services related to the maintenance of shareholder
accounts. For the period ended February 28, 1994, $4,122 and $1,272 were
chargeable to the Intermediate Series and the Insured Series Class A and
Class B shares, respectively, pursuant to the Shareholder Services Plan,
but these amounts were not paid pursuant to the undertakings in effect
(see Note 2(a)).
(D) Certain officers and directors of the Fund are "affiliated persons,"
as defined in the Act, of the Adviser or the Administrator. Each director
who is not an "affiliated person" receives from the Fund an annual fee of
$1,500 and an attendance fee of $250 per meeting.
(E) On December 5, 1993, Dreyfus entered into an agreement and Plan of
Merger (the "Merger Agreement") providing for the merger of Dreyfus with
a subsidiary of Mellon Bank Corporation ("Mellon").
Following the merger, it is planned that Dreyfus will be a direct
subsidiary of Mellon Bank, N.A. Closing of this merger is subject to a
number of contingencies, including receipt of certain regulatory approvals
and approvals of the stockholders of Dreyfus and of Mellon. The merger is
expected to occur in mid-1994, but could occur later.
FIRST PRAIRIE MUNICIPAL BOND FUND
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3-SECURITIES TRANSACTIONS:
The following summarizes the securities transactions by the Fund,
which consisted entirely of municipal bonds and short-term tax exempt
investments, for the year ended February 28, 1994:
PURCHASES SALES
----------- -----------
Intermediate Series............ $88,155,866 $85,466,890
Insured Series................. $31,384,159 $32,589,954
At February 28, 1994, accumulated net unrealized appreciation on
investments was $211,491, consisting of $331,530 gross unrealized
appreciation and $120,039 gross unrealized depreciation for the
Intermediate Series.
At February 28, 1994, accumulated net unrealized appreciation on
investments was $7,461, consisting of $97,713 gross unrealized
appreciation and $90,252 gross unrealized depreciation for the Insured
Series.
At February 28, 1994, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
FIRST PRAIRIE MUNICIPAL BOND FUND
We have audited the accompanying statement of assets and liabilities,
including the statements of investments, of First Prairie Municipal Bond
Fund (comprising, respectively, the Intermediate Series and the Insured
Series) (formerly First Prairie Tax Exempt Bond Fund, Inc.) as of February
28, 1994, and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of February 28, 1994 by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of each of the respective series constituting First Prairie
Municipal Bond Fund at February 28, 1994, the results of their operations
for the year then ended, the changes in their net assets for each of the
two years in the period then ended, and the financial highlights for each of
the indicated years, in conformity with generally accepted accounting
principles.
(Ernst & Young Signature Logo)
New York, New York
April 6, 1994
FIRST PRAIRIE MUNICIPAL BOND FUND
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
IMPORTANT TAX INFORMATION (UNAUDITED)
INTERMEDIATE SERIES
In accordance with Federal tax law, the Series hereby makes the
following designations regarding its fiscal year ended February 28, 1994:
All the dividends paid from investment income-net are "exempt-
interest dividends" (not generally subject to regular Federal income tax).
The Series hereby designates $.0161 per share as a long-term capital
gain distribution of the $.1137 per share paid on August 31, 1993. The
Series also designates $.2865 per share as a long-term capital gain
distribution of the $.5031 per share paid on December 14, 1993.
As required by Federal tax law rules, shareholders will receive
notification of their portion of the Series' taxable ordinary dividends (if
any) and capital gain distributions (if any) paid for the 1994 calendar year
on Form 1099-DIV which will be mailed by January 31, 1995.
INSURED SERIES
In accordance with Federal tax law, the Series hereby makes the
following designations regarding its fiscal year ended February 28, 1994:
All the dividends paid from investment income-net are "exempt-
interest dividends" (not generally subject to regular Federal income tax).
The Series hereby designates $.0436 per share as a long-term capital
gain distribution of the $.1294 per share paid on August 31, 1993. The
Series also designates $.5213 per share as a long-term capital gain
distribution of the $.8442 per share paid on December 14, 1993.
As required by Federal tax law rules, shareholders will receive
notification of their portion of the Series' taxable ordinary dividends (if
any) and capital gain distributions (if any) paid for the 1994 calendar year
on Form 1099-DIV which will be mailed by January 31, 1995.
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to welcome you as a shareholder in Class B shares of the
First Prairie Municipal Bond Fund and to provide you with this first Annual
Report.
Since the inception of Class B shares on February 8, 1994 through
February 28, 1994, Class B shares of the Intermediate Series provided an
annualized distribution rate per share of 3.81%, based upon the closing net
asset value per share on February 28, 1994.*
Currently, your Fund is in a defensive mode as we seek to protect
investors against declining bond prices. This is based on our expectation
that, due to the strength of the economic recovery in the U.S. and the
possibility of renewed inflation, interest rates would increase.
We are also pleased to report that all dividends paid from net
investment income were exempt from Federal income tax.**
By the end of the reporting period, the Intermediate Series held
approximately 22% of its assets in short-term reserve positions. Of
course, we expect to reinvest our short-term holdings when we believe
that it is warranted by market conditions. However, we do not believe that
the decline in the bond market has yet run its course. In our estimation,
the Federal Reserve Board may take further steps to tighten credit,
following up on its move in early February. Furthermore, the increasing
strength of economic activity would most likely push interest rates
upward, even without intervention by the Federal Reserve.
We fully recognize that holding a significant amount of reserves can
result in some temporary loss of yield on the portfolio. However, we
believe this to be a prudent strategy to protect net asset value. We
anticipate that later in 1994, the bond market should stabilize, at which
point we expect to begin reinvesting some of these holdings.
As far as distribution of investments is concerned, we are at present
overweighting General Obligation Bonds as compared to Revenue Bonds.
This is based on the belief that as the domestic economy improves, G.O.s
will benefit and thus, at current market levels, they offer good value.
Under current conditions, we continue to believe that it is particularly
important to stress high quality in buying municipal issues for the
portfolio. Accordingly, a considerable amount of management effort is
being expended on credit research.
We thank you for your confidence in the Fund and look forward to
serving your future investment needs.
Sincerely,
First National Bank of Chicago
Investment Advisor
March 10, 1994
New York, N.Y.
* Annualized distribution rate per share is based upon dividends per
share paid from net investment income during the period, divided by the
net asset value per share at the end of the period.
** Income may be subject to state and local taxes. A portion of the
income may be subject to the Federal Alternative Minimum Tax for certain
investors.
[Exhibit C]
Actual Class B performance, based on Class B expenses, would have been
different from the performance shown in the graph if Class B had been in
existence for the entire period.
Past performance is not predictive of future performance.
*The performance data set forth in the above graph for Class B of the
Insured Series of First Prairie Municipal Bond Fund has been calculated by
using the performance data for Class A from March 1, 1988
(commencement of operations of the Series) through February 7, 1994 and
the performance data for Class B from February 8, 1994 (commencement
of operations of Class B shares) through February 28, 1994 (fiscal year
end). The data for Class A takes into account all applicable fees and
expenses of Class A during the indicated period, but does not reflect any
initial sales charges. The data for Class B similarly takes into account all
applicable fees and expenses of Class B during the indicated period, but
does not reflect the deduction of any contingent deferred sales charges. In
each case, the performance data reflects the reinvestment of all dividends
and capital gain distributions.
The above graph compares the performance of a $10,000 investment in
Class B (calculated by using the performance data for Class A and Class B
as described above) to a $10,000 investment in the Lehman Brothers 10-
Year Municipal Bond Index on 3/1/88. All dividends and capital gain
distributions are reinvested.
Unlike the Fund, the Lehman Brothers 10-Year Municipal Bond Index is an
unmanaged total return performance benchmark for the investment grade,
10-year tax exempt bond market, consisting of municipal bonds with
maturities of more than 8 years and less than 12 years. The Index does not
take into account charges, fees and other expenses. Further information
relating to Fund performance, including expense reimbursements, if
applicable, is contained in the Condensed Financial Information section of
the Prospectus and elsewhere in this report.
**Source: Lehman Brothers
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to welcome you as a shareholder in Class B shares of the
First Prairie Municipal Bond Fund and to provide you with this first Annual
Report.
Since inception of Class B shares on February 8, 1994 through February
28, 1994, Class B shares of the Insured Series provided an annualized
distribution rate per share of 4.15%, based upon the closing net asset
value per share on February 28, 1994.*
Currently, your Fund is in a defensive mode as we seek to protect
investors against declining bond prices. This is based on our expectation
that, due to the strength of the economic recovery in the U.S. and the
possibility of renewed inflation, interest rates would increase.
We are also pleased to report that all dividends paid from net
investment income were exempt from Federal income tax.**
By the end of the reporting period, the Insured Series held
approximately 9% of its assets in short-term reserve positions. Of course,
we expect to reinvest our short-term holdings when we believe that it is
warranted by market conditions. However, we do not believe that the
decline in the bond market has yet run its course. In our estimation, the
Federal Reserve Board may take further steps to tighten credit, following
up on its move in early February. Furthermore, the increasing strength of
economic activity would most likely push interest rates upward, even
without intervention by the Federal Reserve.
We fully recognize that holding a significant amount of reserves can
result in some temporary loss of yield on the portfolio. However, we
believe this to be a prudent strategy to protect net asset value. We
anticipate that later in 1994, the bond market should stabilize, at which
point we expect to begin reinvesting some of these holdings.
As far as distribution of investments is concerned, we are at present
overweighting General Obligation Bonds as compared to Revenue Bonds.
This is based on the belief that as the domestic economy improves, G.O.s
will benefit and thus, at current market levels, they offer good value.
Under current conditions, we continue to believe that it is particularly
important to stress high quality in buying municipal issues for the
portfolio. Accordingly, a considerable amount of management effort is
being expended on credit research.
We thank you for your confidence in the Fund and look forward to
serving your future investment needs.
Sincerely,
First National Bank of Chicago
Investment Advisor
March 10, 1994
New York, N.Y.
* Annualized distribution rate per share is based upon dividends per
share paid from net investment income during the period, divided by the
net asset value per share at the end of the period.
** Income may be subject to state and local taxes. A portion of the
income may be subject to the Federal Alternative Minimum Tax for certain
investors.
[Exhibit D]
Actual Class B performance, based on Class B expenses, would have been
different from the performance shown in the graph if Class B had been in
existence for the entire period.
Past performance is not predictive of future performance.
*The performance data set forth in the above graph for Class B of the
Intermediate Series of First Prairie Municipal Bond Fund has been
calculated by using the performance data for Class A from March 1, 1988
(commencement of operations of the Series) through February 7, 1994 and
the performance data for Class B from February 8, 1994 (commencement
of operations of Class B shares) through February 28, 1994 (fiscal year
end). The data for Class A takes into account all applicable fees and
expenses of Class A during the indicated period, but does not reflect any
initial sales charges. The data for Class B similarly takes into account all
applicable fees and expenses of Class B during the indicated period, but
does not reflect the deduction of any contingent deferred sales charges. In
each case, the performance data reflects the reinvestment of all dividends
and capital gain distributions.
The above graph compares the performance of a $10,000 investment in
Class B (calculated by using the performance data for Class A and Class B
as described above) to a $10,000 investment in the Lehman Brothers 5-
Year Municipal Bond Index on 3/1/88. All dividends and capital gain
distributions are reinvested.
Unlike the Fund, the Lehman Brothers 5-Year Municipal Bond Index is an
unmanaged total return performance benchmark for the investment grade,
5-year tax exempt bond market, consisting of municipal bonds with
maturities of more than 4 years and less than 6 years. The Index does not
take into account charges, fees and other expenses. Further information
relating to Fund performance, including expense reimbursements, if
applicable, is contained in the Condensed Financial Information section of
the Prospectus and elsewhere in this report.
**Source: Lehman Brothers
FIRST PRAIRIE
MUNICIPAL BOND FUND
144 Glenn Curtiss Boulevard
Uniondale, NY 11556
Investment Adviser
THE FIRST NATIONAL BANK
OF CHICAGO
Three First National Plaza
Chicago, IL 60670
Administrator
THE DREYFUS CORPORATION
200 Park Avenue
New York, NY 10166
Distributor
DREYFUS SERVICE CORPORATION
200 Park Avenue
New York, NY 10166
Custodian
THE BANK OF NEW YORK
110 Washington Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
THE SHAREHOLDER SERVICES GROUP, INC.
P.O. Box 9671
Providence, RI 02940
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 729/770AR942
FIRST (First Prairie Logo)
PRAIRIE
MUNICIPAL
BOND FUND
ANNUAL REPORT
FEBRUARY 28, 1994
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN FIRST PRAIRIE MUNICIPAL BOND FUND, INSURED SERIES
CLASS A SHARES AND THE LEHMAN BROTHERS 10-YEAR
MUNICIPAL BOND INDEX
EXHIBIT A:
___________________________________________________
| | | |
| | LEHMAN BROTHERS | FIRST PRAIRIE |
| PERIOD | 10-YEAR |MUNICIPAL BOND FUND,|
| | MUNICIPAL | INSURED SERIES |
| | BOND INDEX * | CLASS A |
|-----------|-----------------|--------------------|
| 3/1/88 | 10,000 | 9,552 |
| 5/31/88 | 9,898 | 9,275 |
| 8/31/88 | 10,125 | 9,607 |
| 11/30/88 | 10,317 | 9,936 |
| 2/28/89 | 10,494 | 10,204 |
| 5/31/89 | 10,870 | 10,690 |
| 8/31/89 | 11,089 | 10,822 |
| 11/30/89 | 11,349 | 11,104 |
| 2/28/90 | 11,517 | 11,162 |
| 5/31/90 | 11,670 | 11,327 |
| 8/31/90 | 11,771 | 11,378 |
| 11/30/90 | 12,278 | 11,987 |
| 2/28/91 | 12,619 | 12,292 |
| 5/31/91 | 12,883 | 12,591 |
| 8/31/91 | 13,178 | 12,865 |
| 11/30/91 | 13,511 | 13,171 |
| 2/29/92 | 13,807 | 13,582 |
| 5/31/92 | 14,081 | 13,811 |
| 8/31/92 | 14,619 | 14,264 |
| 11/30/92 | 14,857 | 14,551 |
| 2/28/93 | 15,843 | 15,534 |
| 5/31/93 | 15,815 | 15,390 |
| 8/31/93 | 16,503 | 15,938 |
| 11/30/93 | 16,596 | 16,050 |
| 2/28/94 | 16,688 | 16,107 |
|--------------------------------------------------|
|----------------------------------------------------------|
|FIRST PRAIRIE MUNICIPAL BOND FUND, INSURED SERIES CLASS A |
|----------------------------------------------------------|
| AVERAGE ANNUAL TOTAL RETURNS ENDED ON 2/28/94 |
| REFLECTS MAXIMUM SALES CHARGE |
|----------------------------------------------------------|
| | | SINCE INCEPTION |
| 1 YEAR | 5 YEAR | (3/1/88) |
|-----------|-----------------|----------------------------|
| (0.94%) | 8.55%| 8.27% |
|----------------------------------------------------------|
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN FIRST PRAIRIE MUNICIPAL BOND FUND, INSURED SERIES
CLASS B SHARES (AS DESCRIBED BELOW)* AND THE LEHMAN
BROTHERS 10-YEAR MUNICIPAL BOND INDEX**
EXHIBIT A:
___________________________________________________
| | | |
| | LEHMAN BROTHERS | FIRST PRAIRIE |
| PERIOD | 10-YEAR |MUNICIPAL BOND FUND,|
| | MUNICIPAL | INSURED SERIES |
| | BOND INDEX ** | CLASS B |
|-----------|-----------------|--------------------|
| 3/1/88 | 10,000 | 10,000 |
| 5/31/88 | 9,898 | 9,710 |
| 8/31/88 | 10,125 | 10,058 |
| 11/30/88 | 10,317 | 10,402 |
| 2/28/89 | 10,494 | 10,683 |
| 5/31/89 | 10,870 | 11,191 |
| 8/31/89 | 11,089 | 11,330 |
| 11/30/89 | 11,349 | 11,625 |
| 2/28/90 | 11,517 | 11,685 |
| 5/31/90 | 11,670 | 11,859 |
| 8/31/90 | 11,771 | 11,912 |
| 11/30/90 | 12,278 | 12,549 |
| 2/28/91 | 12,619 | 12,868 |
| 5/31/91 | 12,883 | 13,182 |
| 8/31/91 | 13,178 | 13,469 |
| 11/30/91 | 13,511 | 13,789 |
| 2/29/92 | 13,807 | 14,219 |
| 5/31/92 | 14,081 | 14,458 |
| 8/31/92 | 14,619 | 14,933 |
| 11/30/92 | 14,857 | 15,233 |
| 2/28/93 | 15,843 | 16,262 |
| 5/31/93 | 15,815 | 16,112 |
| 8/31/93 | 16,503 | 16,685 |
| 11/30/93 | 16,596 | 16,802 |
| 2/28/94 | 16,688 | 16,872 |
|--------------------------------------------------|
|----------------------------------------------------------|
|FIRST PRAIRIE MUNICIPAL BOND FUND, INSURED SERIES CLASS B |
|----------------------------------------------------------|
| AVERAGE ANNUAL TOTAL RETURNS ENDED ON 2/28/94 |
| REFLECTS APPLICABLE CONTINGENT DEFERRED SALES CHARGE |
|----------------------------------------------------------|
| | | SINCE INCEPTION |
| 1 YEAR | 5 YEAR | (3/1/88) |
|-----------|-----------------|----------------------------|
| 1.00%| 9.43%| 9.11% |
|----------------------------------------------------------|
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
FIRST PRAIRIE MUNICIPAL BOND FUND, INTERMEDIATE SERIES
CLASS A SHARES AND THE LEHMAN BROTHERS 5-YEAR
MUNICIPAL BOND INDEX
EXHIBIT A:
___________________________________________________
| | | |
| | LEHMAN BROTHERS | FIRST PRAIRIE |
| PERIOD | 5-YEAR |MUNICIPAL BOND FUND,|
| | MUNICIPAL |INTERMEDIATE SERIES |
| | BOND INDEX * | CLASS A |
|-----------|-----------------|--------------------|
| 3/1/88 | 10,000 | 9,704 |
| 5/31/88 | 9,982 | 9,780 |
| 8/31/88 | 10,076 | 9,918 |
| 11/30/88 | 10,243 | 10,227 |
| 2/28/89 | 10,329 | 10,365 |
| 5/31/89 | 10,629 | 10,696 |
| 8/31/89 | 10,851 | 10,906 |
| 11/30/89 | 11,109 | 11,173 |
| 2/28/90 | 11,288 | 11,298 |
| 5/31/90 | 11,422 | 11,426 |
| 8/31/90 | 11,620 | 11,525 |
| 11/30/90 | 12,013 | 12,090 |
| 2/28/91 | 12,358 | 12,422 |
| 5/31/91 | 12,562 | 12,672 |
| 8/31/91 | 12,839 | 12,953 |
| 11/30/91 | 13,155 | 13,271 |
| 2/29/92 | 13,485 | 13,636 |
| 5/31/92 | 13,694 | 13,802 |
| 8/31/92 | 14,147 | 14,219 |
| 11/30/92 | 14,353 | 14,447 |
| 2/28/93 | 15,003 | 15,173 |
| 5/31/93 | 14,977 | 15,137 |
| 8/31/93 | 15,422 | 15,596 |
| 11/30/93 | 15,499 | 15,782 |
| 2/28/94 | 15,611 | 15,923 |
|--------------------------------------------------|
|--------------------------------------------------------------|
|FIRST PRAIRIE MUNICIPAL BOND FUND, INTERMEDIATE SERIES CLASS A|
|--------------------------------------------------------------|
| AVERAGE ANNUAL TOTAL RETURNS ENDED ON 2/28/94 |
| REFLECTS MAXIMUM SALES CHARGE |
|--------------------------------------------------------------|
| | | SINCE INCEPTION |
| 1 YEAR | 5 YEAR | (3/1/88) |
|-----------|-----------------|--------------------------------|
| 1.76%| 8.31%| 8.06% |
|--------------------------------------------------------------|
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN FIRST PRAIRIE MUNICIPAL BOND FUND, INTERMEDIATE
SERIES CLASS B SHARES (AS DESCRIBED BELOW)* AND THE
LEHMAN BROTHERS 5-YEAR MUNICIPAL BOND INDEX**
EXHIBIT A:
___________________________________________________
| | | |
| | LEHMAN BROTHERS | FIRST PRAIRIE |
| PERIOD | 5-YEAR |MUNICIPAL BOND FUND,|
| | MUNICIPAL |INTERMEDIATE SERIES |
| | BOND INDEX ** | CLASS B |
|-----------|-----------------|--------------------|
| 3/1/88 | 10,000 | 10,000 |
| 5/31/88 | 9,982 | 10,079 |
| 8/31/88 | 10,076 | 10,221 |
| 11/30/88 | 10,243 | 10,539 |
| 2/28/89 | 10,329 | 10,682 |
| 5/31/89 | 10,629 | 11,023 |
| 8/31/89 | 10,851 | 11,239 |
| 11/30/89 | 11,109 | 11,514 |
| 2/28/90 | 11,288 | 11,643 |
| 5/31/90 | 11,422 | 11,775 |
| 8/31/90 | 11,620 | 11,877 |
| 11/30/90 | 12,013 | 12,459 |
| 2/28/91 | 12,358 | 12,801 |
| 5/31/91 | 12,562 | 13,059 |
| 8/31/91 | 12,839 | 13,348 |
| 11/30/91 | 13,155 | 13,676 |
| 2/29/92 | 13,485 | 14,053 |
| 5/31/92 | 13,694 | 14,223 |
| 8/31/92 | 14,147 | 14,653 |
| 11/30/92 | 14,353 | 14,888 |
| 2/28/93 | 15,003 | 15,636 |
| 5/31/93 | 14,977 | 15,600 |
| 8/31/93 | 15,422 | 16,072 |
| 11/30/93 | 15,499 | 16,264 |
| 2/28/94 | 15,611 | 16,405 |
|--------------------------------------------------|
|--------------------------------------------------------------|
|FIRST PRAIRIE MUNICIPAL BOND FUND, INTERMEDIATE SERIES CLASS B|
|--------------------------------------------------------------|
| AVERAGE ANNUAL TOTAL RETURNS ENDED ON 2/28/94 |
| REFLECTS APPLICABLE CONTINGENT DEFERRED SALES CHARGE |
|--------------------------------------------------------------|
| | | SINCE INCEPTION |
| 1 YEAR | 5 YEAR | (3/1/88) |
|-----------|-----------------|--------------------------------|
| 2.06%| 8.82%| 8.60% |
|--------------------------------------------------------------|
