FIRST PRAIRIE MUNICIPAL BOND FUND /, 485BPOS, 1995-01-17

FIRST PRAIRIE MUNICIPAL BOND FUND /
485BPOS, 1995-01-17

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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. 12 /X/

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 /X/

Amendment No. 12 /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)

<PAGE>

It is proposed that this filing will become effective
(check appropriate box)

/ / immediately upon filing pursuant to paragraph (b)

/X/ on January 27, 1995 pursuant to paragraph (b)

/_/ 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:

/X/ 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.

<PAGE>

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 7

5 Management of the Fund 26

5(a) Management's Discussion of Fund's *

6 Capital Stock and Other
Securities 48

7 Purchase of Securities Being Offered 28

8 Redemption or Repurchase 37

9 Pending Legal Proceedings *

- -------------------------------------
NOTE: * Omitted since answer is negative or inapplicable.

Items in
Part B of
Form N-1A Caption Page
- --------- ------- ----
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

- --------------------
NOTE: * Omitted since answer is negative or inapplicable.
<PAGE>

16 Investment Advisory and Other Services B-10
<PAGE>
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-31

Items in
Part C of
Form N-1A Caption Page
- --------- ------- ----
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-- January 27, 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 ("FCIMCO" 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 FCIMCO, 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 January 27, 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 Three First
National Plaza, Chicago, Illinois, 60670, or call 1-800-370-9446.

- ----------------------------------------------------------------

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 . . . . . . . . . . . . . . . . . . . . . .

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<F1> 5.00% none

____________________________
<FN> 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>

ANNUAL FUND OPERATING EXPENSES CLASS A CLASS B CLASS I
(as a percentage of average
daily net assets)
<S> <C> <C> <C>
Management Fees .40% .40% .40%
12b-1 Fees none .75% none
Other Expenses .68% .68% .15%
Total Fund Operating Expenses 1.08% 1.83% .55%

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<F1> CLASS I
<S> <C> <C> <C> <C>
1 YEAR $ 56 $ 70 $ 19 $ 6
3 YEARS $ 78 $ 90 $ 57 $ 18
5 YEARS $102 $122 $ 99 $ 31
10 YEARS<F2> $170 $214 $214 $ 69
- ------------------------
<FN> Assuming no redemption of Class B shares
<FN> Ten-year figures assume conversion of Class B shares to
Class A shares at end of eighth 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. FCIMCO, 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."

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, total investment return, ratios to average net
assets and other supplemental data for Class A and Class B of
the Fund<F1> for each period indicated. This information has
been derived from information provided in the Fund's financial
statements. As of the date of the financial statements, Class I
shares had not been offered and, accordingly, no financial data
are available for such Class.

CLASS A CLASS B
------------------------------------------------------------------- ---------------------------
Six Month
Period Fiscal Six Month
Ended Year Period Ended
August 31, Ended August 31,
1994 February 1994
Fiscal Year Ended February 28/29 (Unaudited) 28, 1994<F3> (Unaudited)
-------------------------------------------------- ----------- -------- -------------
1989<F2> 1990 1991 1992 1993 1994
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of year $11.94 $11.82 $11.77 $12.10 $12.49 $13.25 $12.13 $12.37 $12.14
------- ------- ------- ------- ------- ------- ------- ------- -------

INVESTMENT OPERATIONS:
Investment income--net .89 .81 .81 .76 .70 .63 .30 .03 .26
Net realized and unrealized
gain (loss) on investments (.12) .28 .33 .47 1.01 (.15) (.22) (.23) (.22)

TOTAL FROM INVESTMENT
OPERATIONS .77 1.09 1.14 1.23 1.71 .48 .08 (.20) .04

DISTRIBUTIONS:
Dividends from investment
income-net (.89) (.81) (.81) (.76) (.70) (.63) (.30) (.03) (.26)

Dividends from net
realized gain on
investments -- (.33) -- (.08) (.25) (.96) -- -- --
Dividends from excess net
realized gain on
investments -- -- -- -- -- (.01) -- -- --
------- ------- ------- ------- ------- ------- ------- -------- -------
TOTAL DISTRIBUTIONS (.89) (1.14) (.81) (.84) (.95) (1.60) (.30) (.03) (.26)

Net asset value, end of
year $11.82 $11.77 $12.10 $12.49 $13.25 $12.13 $11.91 $12.14 $11.92
======= ======= ======= ======= ======= ======= ======= ======== =======
TOTAL INVESTMENT
RETURN:<F4> 6.82%<F5> 9.39% 10.13% 10.50% 14.37% 3.70% 1.35%<F5> (1.64%)<F6> .79%<F5>
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to
average net assets -- -- -- -- -- -- -- .50%<F5> .50%<F5>
Ratio of net investment
income to average net
assets 7.46%<F5> 6.60% 6.87% 5.99% 5.49% 4.85% 4.97%<F5> 4.10%<F5> 4.45%<F5>
Decrease reflected in
above expense ratios due
to undertakings 2.25%<F5> 2.75% 2.75% 2.75% 1.59% 1.44% 1.93%<F5> 2.41%<F5> 2.46%<F5>

Portfolio Turnover Rate 36.19%<F6> 85.07% 32.40% 66.28% 88.53% 175.06 109.42%<F5> 175.06% 109.42%<F6>
Net Assets, end of year
(000's omitted) $673 $1,192 $2,244 $6,591 $11,290 $9,234 $8,176 $2 $2
________________
<FN> On September 12, 1989 and on January 17, 1995, the management policies of the Municipal Bond Fund were changed as described
under "General Information."
<FN> From March 1, 1988 (commencement of operations) to February 28, 1989.
<FN> From February 8, 1994 (commencement of initial offering) to February 28, 1994.
<FN> Exclusive of sales charge.
<FN> Annualized.
<FN> Not annualized.
</TABLE>

Further information about the Fund's performance is contained in
the Fund's annual report, 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 FCIMCO, 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 FCIMCO, FNBC or appropriate
Service Agent for redemption instructions. Investors who are
not clients of FCIMCO, 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 FCIMCO, 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 $500,000 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. FCIMCO 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.

FCIMCO serves as investment adviser for the Fund pursuant
to an Investment Advisory Agreement dated as of _____________.
Under the Investment Advisory Agreement, FCIMCO, 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. FCIMCO is
responsible for making investment decisions for the Fund,<PAGE>

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. FCIMCO has
advised the Fund that in making its investment decisions FCIMCO
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 FCIMCO 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. FCIMCO 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.

FCIMCO serves as the Fund's administrator pursuant to an
Administration Agreement with the Fund. Under the
Administration Agreement, FCIMCO 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
FCIMCO a monthly fee at the annual rate of .15% of the value of
the Fund's average daily net assets. FCIMCO 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 FCIMCO and the<PAGE>

Sub-Administrator. FCIMCO, 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
FCIMCO. The expenses borne by the Fund include the following:
taxes, interest, brokerage fees and commissions, if any, fees of<PAGE>

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 share-
holders' 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 share-
holder 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 administra-
tion 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, FCIMCO 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
FCIMCO at a later time for any amounts which may be waived, nor
will the Fund reimburse FCIMCO 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.]<PAGE>

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 FCIMCO, 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 FCIMCO, FNBC or their affiliates for their
Fiduciary Accounts maintained at FCIMCO, 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. FCIMCO 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<PAGE>

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<PAGE>

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>
TOTAL SALES LOAD

<CAPTION>
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>
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>

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 1.00% First or Second
than $2,500,000

$2,500,000 to less 0.50% First
than $5,000,000

$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 FCIMCO, 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 FCIMCO, FNBC of their affiliates or a Service Agent
should contact such entity directly for appropriate
instructions, as well as for information about conditions<PAGE>

pertaining to the account and any related fees. Service Agents
FCIMCO 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 FCIMCO 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 FCIMCO 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, FCIMCO,
certain affiliates of FCIMCO 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
revious 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.<PAGE>

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, FCIMCO, certain affiliates
of FCIMCO 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<PAGE>

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:
CDSC as a
% of Amount
Year Since Invested or
Purchase Payment Redemption
Was Made Proceeds

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.

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 FCIMCO, 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 FCIMCO, 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 .75% 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. FCIMCO, 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. FCIMCO, 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 FCIMCO, 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)
January 27, 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 January 27, 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 "FCIMCO") 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-

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>
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 FCIMCO 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. FCIMCO 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 FCIMCO, 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 FCIMCO. The Advisory Agreement will
terminate automatically in the event of its assignment (as
defined in the Act).

FCIMCO 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
FCIMCO: ________________________.

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, FCIMCO 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. FCIMCO has engaged Concord Holding Corporation
(the "Sub-Administrator") to assist it in providing certain
administrative services to the Fund. Pursuant to its agreement
with FCIMCO (the "Sub-Administration Agreement"), the
Administrator assists FCIMCO 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 FCIMCO.

The Fund has agreed that FCIMCO 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 FCIMCO 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 FCIMCO. 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 FCIMCO, 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 FCIMCO under the
Agreement, or FCIMCO 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 FCIMCO 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 FCIMCO 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.

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.

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.

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.

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.

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.

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.
<TABLE>

<CAPTION>
FIRST PRAIRIE MUNICIPAL BOND FUND, INSURED SERIES
(incorporated as First Prairie Tax Exempt Bond Fund, Inc.)

STATEMENT OF INVESTMENTS AUGUST 31, 1994 (UNAUDITED)

LONG-TERM MUNICIPAL INVESTMENTS - 98.7% PRINCIPAL AMOUNT VALUE
- ---------------------------------------- ---------------- -----
<S>
CALIFORNIA - 14.2% <C> <C>
Santa Clara County, COP, American Baptist Homes West
(Terraces of Los Gatos Project) 8%, 3/1/2018
(Insured; California Health Facility
Construction Loan Program)
(Prerefunded 3/1/1998) (a) . . . . . . . . . . . . . . . . . . . . . $ 1,000,000 $1,122,700

COLORADO - 4.7%
Adams County, SFMR 8.875%, 8/1/2011
(Prerefunded 8/1/2003) (a) . . . . . . . . . . . . . . . . . . . . . . 300,000 375,162

DISTRICT OF COLUMBIA - 2.8%
District of Columbia 7.25%, 6/1/2002 (Insured; AMBAC)
(Prerefunded 6/1/1999) (a) . . . . . . . . . . . . . . . . . . . . . . 200,000 223,220

FLORIDA - 9.0%
Broward County Educational Facilities Authority,
Revenue, Refunding (Nova Southeastern
University Project) 5.875%, 4/1/2007
(Insured; Connie Lee) . . . . . . . . . . . . . . . . . . . . . . . . 400,000 400,396

Jacksonville, Guaranteed Entitlement Revenue,
Refunding 5.60%, 10/1/2003 (Insured; AMBAC) . . . . . . . . . . . . . 300,000 310,119

ILLINOIS - 29.9%
Chicago, Wastewater Transmission Revenue 6.75%,
11/15/2020 (Insured; FGIC)
(Prerefunded 11/15/2000) (a) . . . . . . . . . . . . . . . . . . . . . 290,000 321,523

Illinois Health Facilities Authority, Revenue,
Refunding:
(Bromenn Healthcare) 6%,
8/15/2005 (Insured; FGIC) . . . . . . . . . . . . . . . . . . . . . . 275,000 286,809

(Evangelical Hospitals) 6%, 4/15/2000
(Insured;
FGIC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,037,370

Regional Transportation Authority 8%, 6/1/2003
(Insured; AMBAC) . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000 295,203

Northern Cook County, Solid Waste Agency,
Contract Revenue 6.40%, 5/1/2006
(Insured; MBIA) . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000 420,772

INDIANA - 5.0%
Indiana Health Facility Financing Authority, HR,
Refunding (Columbus Regional Hospital)
5.25%, 8/15/2004 (Insured; CGIC) . . . . . . . . . . . . . . . . . . . 400,000 395,412

FIRST PRAIRIE MUNICIPAL BOND FUND, INSURED SERIES
(incorporated as First Prairie Tax Exempt Bond Fund, Inc.)

NEVADA - 10.9%
Churchill County Health Care Facilities,
Revenue (Western Health Network) 5.80%, 1/1/2006
(Insured; MBIA) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 200,000 $ 199,652

Clark County, Passenger Facility Charge Revenue
(Las Vegas McCarran International Airport)
5.80%, 7/1/2003 (Insured; AMBAC) . . . . . . . . . . . . . . . . . . . 300,000 310,446

Henderson Sewer 7.20%, 1/1/2007 (Insured; MBIA) . . . . . . . . . . . . 325,000 352,329

PENNSYLVANIA - 12.5%
Philadelphia, Gas Works Revenue:
5%, 8/1/2003 (Insured; FSA) . . . . . . . . . . . . . . . . . . . . . 315,000 307,465

5.10%, 8/1/2004 (Insured; FSA) . . . . . . . . . . . . . . . . . . . . 700,000 681,905

RHODE ISLAND - 5.6%
Pawtucket 5.25%, 4/15/2000 (Insured; FGIC) . . . . . . . . . . . . . . 240,000 242,894

State of Rhode Island, Construction Capital
Development Loan 6%, 5/15/2002 (Insured; FGIC) . . . . . . . . . . . 190,000 199,040

TENNESSEE - 4.1%
Bristol Health and Educational Facilities Board, Revenue,
Refunding (Bristol Memorial Hospital) 6.75%, 9/1/2007
(Insured; FGIC) . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 327,780
-----------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $7,698,235) . . . . . . . . $ 7,810,197
===========

SHORT-TERM MUNICIPAL INVESTMENTS - 1.3%

IDAHO;
Bonner County, IDC, EDR, VRDN (McFarland Cascade Project)
2.75%, 10/1/2007 (LOC; Seattle First National Bank)
(b,c) (cost $100,000) . . . . . . . . . . . . . . . . . . . . . . . . 100,000 $ 100,000
===========
TOTAL INVESTMENTS - 100.0% (cost $7,798,235) . . . . . . . . . . . . . $ 7,910,197
===========

</TABLE>

<TABLE>

<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>

AMBAC American Municipal Bond Assurance Corporation IDC Industrial Development Corporation
CGIC Capital Guaranty Insurance Corporation LOC Letter of Credit
COP Certificates of Participation
EDR Economic Development Revenue MBIA Municipal Bond Insurance Association
FGIC Financial Guaranty Insurance Corporation PCR Pollution Control Revenue
FSA Financial Security Assurance SFMR Single Family Mortgage Revenue
HR Hospital Revenue VRDN Variable Rate Demand Note

</TABLE>

<TABLE>

<CAPTION>
SUMMARY OF COMBINED RATINGS

PERCENTAGE OF VALUE

<S> <C> <C> <C>
STANDARD INSURED
FITCH(D) OR MOODY'S OR & POOR'S SERIES

AAA Aaa AAA 98.7%
AA Aa AA --
A A A --
F1 MIG1 & VMIG1 SP1 1.3%

100.0%

</TABLE>

NOTES TO STATEMENTS OF INVESTMENTS:

(a) 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.
(b) Secured by bank letters of credit.
(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 currency provides creditworthiness information for
a limited number of investments.
(e) At August 31, 1994, 26.5% of the Insured Series'
investments are insured by FGIC.

See notes to financial statements.

<TABLE>

FIRST PRAIRIE MUNICIPAL BOND FUND
(incorporated as First Prairie Tax Exempt Bond Fund, Inc.)
____________________________________________________________________________________________________________

STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1994 (UNAUDITED)

<CAPTION>
<C>
<S> INSURED
ASSETS: SERIES

Investments in securities, at value
(cost $7,798,235) -- see statement . . . . . . . . . . $7,910,197
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,471
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,832
Receivable for subscriptions to Common Stock . . . . . . . . . . . . . . . . . . . . . 250
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,244
Due from The Dreyfus Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,771
8,203,765

LIABILITIES:
Payable for Common Stock redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,410
25,410
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,178,355
==========

REPRESENTED BY:
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,350,184
Accumulated net realized (loss) on investments . . . . . . . . . . . . . . . . . . . . . (283,791)
Accumulated net unrealized appreciation on investments -- Note 3 . . . . . . . . . . . . 111,962
NET ASSETS at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,178,355
==========
Shares of Common Stock outstanding:
Class A Shares:
(2.5 billion shares of $.001 par value authorized) . . . . . . . . . . . . . . . . . 686,420
Class B Shares:
(2.5 billion shares of $.001 par value authorized) . . . . . . . . . . . . . . . . . 166

NET ASSET VALUE per share:
Class A Shares:
($8,176,380 + 686,420 shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.91
Class B Shares:
($1,975 + 166 shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.92

See notes to financial statements.
</TABLE>

<TABLE>

STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1994 (UNAUDITED)

<C>
<S> INSURED
SERIES
INVESTMENT INCOME:

INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 216,149

EXPENSES -- Note 1(c):

Investment advisory fee -- Note 2(a) . . . . . . . . . . . . . . . . . . . . . . . $ 17,386
Administration fee -- Note 2(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 8,693
Shareholder servicing costs -- Note 2(b, c) . . . . . . . . . . . . . . . . . . . . 18,170
Legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,162
Auditing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,072
Registration fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,009
Prospectus and shareholders' reports -- Note 2(b) . . . . . . . . . . . . . . . . . 7,460
Custodian fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,192
Directors' fees and expenses -- Note 2(d) . . . . . . . . . . . . . . . . . . . . . 915
Distribution fees (Class B Shares) -- Note 2(b) . . . . . . . . . . . . . . . . . 5
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,661
83,725

Less--expense reimbursement from Adviser and
Dreyfus due to undertakings -- Note 2(a) . . . . . . . . . . . . . . . . . . . . . 83,720

TOTAL EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

INVESTMENT INCOME -- NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216,144

REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:

Net realized (loss) on investments -- Note 3 . . . . . . . . . . . . . . . . . . . $(277,173)
Net unrealized appreciation (depreciation) on investments . . . . . . . . . . . . . 104,501

NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . (172,672)

NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . $ 43,472

See notes to financial statements.
</TABLE>

<TABLE>

<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS

INSURED SERIES
YEAR ENDED SIX MONTHS ENDED
FEBRUARY 28, AUGUST 31, 1994
1994 (UNAUDITED)

<S> <C> <C>
OPERATIONS:
Investment income -- net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 497,241 $ 216,144
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . 607,250 (277,173)
Net unrealized appreciation (depreciation) on investments
for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (728,931) 104,501

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . 375,560 43,472

DIVIDENDS TO SHAREHOLDERS:
From investment income -- net:
Class A shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (497,237) (216,100)
Class B shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) (44)
From net realized gain on investments:
Class A shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (717,815) --
Class B shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
In excess of net realized gain on investments:
Class A shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,618) --
Class B shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
TOTAL DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,221,674) (216,144)

CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold:
Class A shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,586,206 171,406
Class B shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 --
Dividends reinvested:
Class A shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 956,593 166,770
Class B shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 43
Cost of shares redeemed:
Class A shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,752,746) (1,223,327)
Class B shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
(DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS . . . . . . . . . . (1,207,943) (885,108)
TOTAL (DECREASE) IN NET ASSETS . . . . . . . . . . . . . . . . . . . . . (2,054,057) (1,057,780)
NET ASSETS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,290,192 9,236,135
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,236,135 $ 8,178,355

</TABLE>

<TABLE>

<CAPTION> SHARES

CLASS A CLASS B
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
FEBRUARY 28, AUGUST 31, 1994 FEBRUARY 28, AUGUST 31, 1994
1994 (UNAUDITED) 1994* (UNAUDITED)

<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold . . . . . . . . . . . . . . . . . . . 275,363 14,324 161 --
Shares issued for dividends reinvested . . . . . . . 75,829 14,092 1 4
Shares redeemed . . . . . . . . . . . . . . . . . . (441,865) (103,123) -- --
NET INCREASE (DECREASE) IN SHARES
OUTSTANDING . . . . . . . . . . . . . . . . . (90,673) (74,707) 162 4

____________________
* From February 8, 1994 (commencement of initial offering) to February 28, 1994.

See notes to financial statements.

</TABLE>

FIRST PRAIRIE MUNICIPAL BOND FUND
(incorporated as First Prairie Tax Exempt Bond Fund, Inc.)

Financial Highlights

Reference is made to p. 5 of the Fund's Prospectus, dated
January 27, 1995.

FIRST PRAIRIE MUNICIPAL BOND FUND
(incorporated as First Prairie Tax Exempt Bond Fund, Inc.)

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

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 ("Dreyfus") serves as the Fund's
administrator. Dreyfus Service Corporation, a wholly-owned
subsidiary of Dreyfus, acted as the distributor of the Fund's
shares until August 24, 1994. Effective August 24, 1994,
Dreyfus became a direct subsidiary of Mellon Bank, N.A.

On August 24, 1994, Premier Mutual Fund Services, Inc.
("Premier") was engaged as the Fund's distributor. Premier,
located at One Exchange Place, Boston, Massachusetts 02109, is a
wholly-owned subsidiary of Institutional Administration
Services, Inc., a provider of mutual fund administration
services, the parent company of which is Boston Institutional
Group, Inc.

Each Series offers both Class A and Class B shares. 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 are readily available and are
representative of the bid side of the market in the judgment of
the Service 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, original issue
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.

Dividends in excess of net realized gain on investments 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
applicable provisions of the Internal Revenue Code, and to make
distributions of income and net realized capital gain sufficient
to relieve it from substantially all Federal income and excise
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 Dreyfus 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 Dreyfus, or the Adviser and Dreyfus 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 Intermediate Series, the Adviser and
Dreyfus have currently undertaken to reimburse all fees and
expenses in excess of an annual rate of .25 of 1% (excluding
12b-1 fee) of the Series' average daily net assets. During the
six months ended August 31, 1994, the Adviser and Dreyfus
reimbursed the Series $90,179 and $78,409, respectively. With
respect to the Insured Series, the Adviser and Dreyfus have
currently undertaken to reimburse all fees and expenses
(excluding 12b-1 fee). During the six months ended August 31,
1994, the Adviser and Dreyfus reimbursed the Series $28,253 and
$55,467, respectively.

First Chicago Investment Services, Inc., an affiliate of
the Adviser, retained $5,033 and $3,411 during the six months
ended August 31, 1994 from commissions earned on sales of Class
A shares of the Intermediate Series and Insured Series,
respectively.

Dreyfus Service Corporation retained $513 and $313 during
the six months ended August 31, 1994 from commissions earned on
sales of Class A shares of the Intermediate Series and Insured
Series, respectively.

No amounts were retained by Dreyfus Service Corporation
during the period ended August 31, 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, each Series
pays the Service Agents (which may include the Adviser, Dreyfus
and Dreyfus Service Corporation) 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. During the six
months ended August 31, 1994, $99 and $5 was charged to the
Intermediate Series and the Insured Series pursuant to the Class
B Distribution Plan, respectively.

(C) Under the Shareholder Services Plan, each Series pays
the Service Agents (which may include the Adviser, Dreyfus and
Dreyfus Service Corporation) at 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 six
months ended August 31, 1994, $34,634 and $50 were chargeable to
the Intermediate Series Class A and Class B shares,
respectively, and $10,864 and $2 were chargeable to 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
Dreyfus. 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.

NOTE 3--SECURITIES TRANSACTIONS:

The following summarizes the securities transactions by the
Fund, which, consisted entirely of long-term and short-term
municipal investments, for the six months ended August 31, 1994:

PURCHASES SALES

Intermediate Series . . . . . $40,318,526 $43,935,069
Insured Series . . . . . . . $14,390,686 $15,891,224

At August 31, 1994, accumulated net unrealized appreciation
on investments was $73,507, consisting of $230,916 gross
unrealized appreciation and $157,409 gross unrealized
depreciation for the Intermediate Series.

At August 31, 1994, accumulated net unrealized appreciation
on investments was $111,962, consisting of $136,458 gross
unrealized appreciation and $24,496 gross unrealized
depreciation for the Insured Series.

At August 31, 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).

<TABLE>

FIRST PRAIRIE MUNICIPAL BOND FUND, INSURED SERIES
(incorporated as First Prairie Tax Exempt Bond Fund, Inc.) -- See Note 1
____________________________________________________________________________________________________________
<CAPTION>
STATEMENT OF INVESTMENTS FEBRUARY 28, 1994

PRINCIPAL
MUNICIPAL BONDS -- 90.7% AMOUNT VALUE
<S> <C> <C>
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
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 -- 100.00% (cost $9,605,167) . . . . . . . . . . . . . . . . . . . . . . . $9,612,628
==========
</TABLE>

<TABLE>

<CAPTION>
SUMMARY OF ABBREVIATIONS

<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
CGIC Capital Guaranty Insurance Company
MBIA Municipal Bond Insurance Association
FSA Financial Security Assurance PCR Pollution Control Revenue

HR Hospital Revenue
VRDN Variable Rate Demand Notes
</TABLE>

<TABLE>

SUMMARY OF COMBINED RATINGS (UNAUDITED)

<CAPTION>
PERCENTAGE OF VALUE
STANDARD INSURED
FITCH(D) OR MOODY'S OR & POOR'S SERIES

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.

<TABLE>

<CAPTION>
FIRST PRAIRIE MUNICIPAL BOND FUND
(incorporated as First Prairie Tax Exempt Bond Fund, Inc.) -- See Note 1
____________________________________________________________________________________________________________

STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1994

<S> <C>
INSURED
ASSETS: SERIES
Investments in securities, at value
(cost $9,605,167) -- see statement . . . . . . . . $9,612,628
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,655
Receivable for investment securities sold . . . . . . . . . . . . . . . . . . . . . . 1,022,427
Interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,713
Receivable for subscriptions to Common Stock . . . . . . . . . . . . . . . . . . . . . --
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,257
Due from Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,398
10,840,078

LIABILITIES:
Payable for investment securities purchased . . . . . . . . . . . . . . . . 1,584,160
Payable for Common Stock redeemed . . . . . . . . . . . . . . . . . . . . . . --
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . 19,783
1,603,943
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,236,135

REPRESENTED BY:
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,235,292
Accumulated distributions in excess of net realized gain on investments -- Note 1(d) (6,618)
Accumulated net unrealized appreciation on investments -- Note 3 . . . . . . . . . . 7,461
NET ASSETS at value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,236,135

Shares of Common Stock outstanding:
Class A Shares:
(2.5 billion shares of $.001 par value authorized) . . . . . . . . . . . . . . . . 761,127
Class B Shares:
(2.5 billion shares of $.001 par value authorized) . . . . . . . . . . . . . . . . 162

NET ASSET VALUE per share:
Class A Shares:
($9,234,168 + 761,127 shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . $12.13
Class B Shares:
($1,967 + 162 shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12.14

</TABLE>

<TABLE>

FIRST PRAIRIE MUNICIPAL BOND FUND
(incorporated as First Prairie Tax Exempt Bond Fund, Inc.) -- See Note 1
____________________________________________________________________________________________________________
<CAPTION>
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1994
INSURED
SERIES
<S> <C>
INVESTMENT INCOME:

INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 497,242

EXPENSES -- Note 1(c):

Investment advisory fee -- Note 2(a) . . . . . . . . . . . $ 40,987
Administration fee -- Note 2(a) . . . . . . . . . . . . . . 20,494
Shareholder servicing costs -- Note 2(b,c) . . . . . . . . 35,683
Auditing fees . . . . . . . . . . . . . . . . . . . . . . . 6,932
Legal fees . . . . . . . . . . . . . . . . . . . . . . . . 8,335
Prospectus and shareholders' reports -- Note 2(b) . . . . . 7,974
Registration fees . . . . . . . . . . . . . . . . . . . . . 12,769
Custodian fees . . . . . . . . . . . . . . . . . . . . . . 4,436
Directors' fees and expenses -- Note 2(d) . . . . . . . . . 1,443
Distribution fees (Class B Shares) -- Note 2(b) . . . . . 1
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 8,444
147,498

Less--expense reimbursement from Adviser and
Administrator due to undertakings -- Note 2(a) . . . . . 147,497

TOTAL EXPENSES . . . . . . . . . . . . . . . . . . . . . 1

INVESTMENT INCOME -- NET . . . . . . . . . . . . . . . . 497,241

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

Net realized gain on investments -- Note 3 . . . . . . . . $ 607,250
Net unrealized (depreciation) on investments . . . . . . . (728,931)

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . (121,681)

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . $ 375,560

See notes to financial statements.
</TABLE>

<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.

See notes to financial statements.
</TABLE>

FIRST PRAIRIE MUNICIPAL BOND FUND
(incorporated as First Prairie Tax Exempt Bond Fund, Inc.) --
See Note 1
________________________________________________________________

FINANCIAL HIGHLIGHTS

Reference is made to p.5 of the Fund's Prospectus, dated
January 27, 1995.

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 financial statements are those
of the Insured Series only. 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, the 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.

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.

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 l% 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.

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:

<TABLE>

<CAPTION>
Purchases Sales
<S> <C> <C>
Insured Series . . . . . $31,384,159 $32,589,954
</TABLE>

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 statement of investments, of First
Prairie Municipal Bond Fund, Insured Series (incorporated as
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 First Prairie Municipal Bond
Fund, Insured Series, at
February 28, 1994, the results of its operations for the year
then ended, the changes in its 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.

New York, New York
April 6, 1994

<PAGE>
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:

Financial Highlights from March 1, 1988 (commencement of
operations) to August 31, 1994.

Included in Part B of the Registration Statement:

Statement of Investments at August 31, 1994.
Statement of Assets and Liabilities at August 31, 1994.
Statement of Operations for the six months ended August 31,
1994.
Statements of Changes of Net Assets for the year ended
February 28, 1994 and the six months ended August 31, 1994.
Financial Highlights from March 1, 1988 (commencement of
operations) to August 31, 1994.

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.

(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)

Number of Record
Holders as of November 15,
Title of Class 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 certifies
that it meets all of the requirements for effectiveness of this
Post-Effective Amendment to the Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in this City of New York, and State
of New York, on the 17th day of January, 1995.

FIRST PRAIRIE TAX EXEMPT BOND
FUND, INC.

BY: /s/Joseph F. Kissel
Joseph F. Kissel, 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.
<TABLE>

Signatures Title Date
<S> <C> <C>

/s/Joseph F. Kissel President January 17, 1995
Joseph F. Kissel (Principal
Executive Officer)

/s/Richard A. Fabietti Treasurer January 17, 1995
Richard A. Fabietti (Principal Financial
and Accounting Officer)

/s/John P. Gould Trustee January 17, 1995
John P. Gould

/s/Marilyn McCoy Trustee January 17, 1995
Marilyn McCoy

/s/Raymond D. Oddi Trustee January 17, 1995
Raymond D. Oddi

</TABLE>

FIRST PRAIRIE TAX EXEMPT BOND FUND INC.

Post-Effective Amendment No. 12 to
Registration Statement on Form N-1A
under the Securities Act of 1933
and the Investment Company Act of 1940

EXHIBITS

<PAGE>
INDEX TO EXHIBITS

Exhibit
Number Page

(11) Consent of Ernst & Young LLP, independent
auditors . . . . . . . . . . . . . . . . .

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions
Condensed Financial Information" and "Counsel and Independent Auditors"
and to the use of our report on First Prairie Municipal Bond Fund,
Insured Series, dated April 6, 1994, in this
Registration Statement (Form N-1A 33-18954) of First
Prairie Tax Exempt Bond Fund, Inc.

ERNST & YOUNG LLP

New York, New York
January 17, 1995