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PROSPECTUS OCTOBER 31, 1994
FIRST PRAIRIE CASH MANAGEMENT
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FIRST PRAIRIE CASH MANAGEMENT (THE "FUND") IS AN OPEN-END,
DIVERSIFIED, MANAGEMENT INVESTMENT COMPANY, KNOWN AS A MONEY MARKET MUTUAL
FUND. ITS GOAL IS TO PROVIDE INVESTORS WITH AS HIGH A LEVEL OF CURRENT INCOME
AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL AND THE MAINTENANCE OF
LIQUIDITY.
THE FUND IS DESIGNED FOR INSTITUTIONAL INVESTORS, INCLUDING BANKS,
ACTING FOR THEMSELVES OR IN A FIDUCIARY, ADVISORY, AGENCY, CUSTODIAL OR
SIMILAR CAPACITY, PUBLIC AGENCIES AND MUNICIPALITIES. FUND SHARES MAY NOT BE
PURCHASED DIRECTLY BY INDIVIDUALS, ALTHOUGH INSTITUTIONS MAY PURCHASE SHARES
FOR ACCOUNTS MAINTAINED BY INDIVIDUALS. SUCH INSTITUTIONS HAVE AGREED TO
TRANSMIT COPIES OF THIS PROSPECTUS TO EACH INDIVIDUAL OR ENTITY FOR WHOSE
ACCOUNT THE INSTITUTION PURCHASES FUND SHARES, TO THE EXTENT REQUIRED BY LAW.
THE FUND'S SHARES ARE SOLD WITHOUT A SALES CHARGE. INVESTORS CAN
INVEST OR REINVEST IN OR REDEEM SHARES AT ANY TIME WITHOUT CHARGE OR PENALTY.
THE FIRST NATIONAL BANK OF CHICAGO (THE "MANAGER") SERVES AS THE
FUND'S INVESTMENT ADVISER.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
MUTUAL FUND SHARES ARE NOT DEPOSITS OF OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY. MONEY MARKET MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
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
OCTOBER 31, 1994, 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 144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW YORK
11556-0144, OR CALL 1-800-821-1185. WHEN TELEPHONING, ASK FOR OPERATOR 666.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE PAGE
<S> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES........ 2 HOW TO BUY FUND SHARES........... 9
CONDENSED FINANCIAL INFORMATION....... 2 EXCHANGE PRIVILEGE............... 10
YIELD INFORMATION..................... 3 HOW TO REDEEM FUND SHARES........ 10
DESCRIPTION OF THE FUND............... 3 DIVIDENDS, DISTRIBUTIONS AND TAXES... 11
MANAGEMENT OF THE FUND................ 7 GENERAL INFORMATION.................. 13
</TABLE>
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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.
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<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
<S> <C>
Management Fee (after expense reimbursement)............................................ .23%
Other Expenses.......................................................................... .08%
Total Fund Operating Expenses (after expense reimbursement)............................. .31%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
An investor would pay the following
expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at
the end of each time period: $3 $10 $17 $39
</TABLE>
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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%.
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The purpose of the foregoing table is to assist investors in
understanding the various costs and expenses borne by the Fund, and therefore
indirectly by investors, the payment of which will reduce investors' return
on an annual basis. The expenses noted above, without reimbursement, would
be: Management Fees_.35% and Total Fund Operating Expenses_.43%; and the
amount of expenses that an investor would pay, assuming redemption after one,
three, five and ten years, would be $4, $14, $24 and $54, respectively. The
Manager has undertaken until such time as it gives investors at least 90
days' notice to the contrary that if, in any fiscal year, certain expenses,
including the management fee, exceed .35 of 1% of the value of the Fund's
average net assets for the fiscal year, the Fund may deduct from the payment
to be made to the Manager under the Management Agreement, or the Manager will
bear, such excess expense. Institutions effecting transactions in Fund shares
for the accounts of their clients may charge their clients direct fees in
connection with such transactions; such fees are not reflected in the
foregoing table. See "Management of the Fund."
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited 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.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share
of beneficial interest outstanding, total investment return, ratios to
average net assets and other supplemental data for each year indicated. This
information has been derived from the Fund's financial statements.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
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PER SHARE DATA: 1993(1) 1994
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<S> <C> <C>
Net asset value, beginning of year................................................... $1.0000 $.9999
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INVESTMENT OPERATIONS:
Investment income--net .............................................................. .0297 .0333
Net realized (loss) on investments................................................... (.0001) (.0006)
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TOTAL FROM INVESTMENT OPERATIONS..................................................... .0296 .0327
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DISTRIBUTIONS:
Dividends from investment income-net................................................. (.0297) (.0333)
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Net asset value, end of year......................................................... $ .9999 $ .9993
======= =======
TOTAL INVESTMENT RETURN................................................................ 3.25%(2) 3.38%
RATIOS / SUPPLEMENTAL DATA:
Ratio of expenses to average net assets ............................................. .05%(2) .31%
Ratio of net investment income to average net assets................................. 3.19%(2) 3.33%
Decrease reflected in above expense ratios due to
undertakings by the Manager.......................................................... .51%(2) .12%
Net Assets, end of year (000's omitted).............................................. $175,713 $243,820
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(1)From July 30, 1992 (commencement of operations) to June 30, 1993.
(2)Annualized.
</TABLE>
Page 2
YIELD INFORMATION
From time to time, the Fund advertises its yield and effective yield.
Both yield figures are based on historical earnings and are not intended to
indicate future performance. It can be expected that these yields will
fluctuate substantially. The yield of the Fund refers to the income generated
by an investment in the Fund over a seven-day period (which period will be
stated in the advertisement). This income is then annualized. That is, the
amount of income generated by the investment during that week is assumed to
be generated each week over a 52-week period and is shown as a percentage of
the investment. The effective yield is calculated similarly, but, when
annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment. The Fund's
yield and effective yield may reflect absorbed expenses pursuant to any
undertaking that may be in effect. See "Management of the Fund."
Yield information is useful in reviewing the Fund's performance, but
because yields will fluctuate, under certain conditions such information may
not provide a basis for comparison with domestic bank deposits, other
investments which pay a fixed yield for a stated period of time, or other
investment companies which may use a different method of computing yield.
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., Bank Rate Monitor trademark, N. Palm Beach, Fla.
33408, IBC/Donoghue's Money Fund Report, Morningstar, Inc. and other industry
publications.
DESCRIPTION OF THE FUND
WHEN USED IN THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL
INFORMATION, THE TERMS "INVESTOR" AND "SHAREHOLDER" REFER TO THE INSTITUTION
PURCHASING FUND SHARES AND DO NOT REFER TO ANY INDIVIDUAL OR ENTITY FOR WHOSE
ACCOUNT THE INSTITUTION MAY PURCHASE FUND SHARES. Such institutions have
agreed to transmit copies of this Prospectus and all relevant Fund materials,
including proxy materials, to each individual or entity for whose account the
institution purchases Fund shares, to the extent required by law.
INVESTMENT OBJECTIVE--The Fund's goal is to provide investors with as high a
level of current income as is consistent with the preservation of capital and
the maintenance of liquidity. 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 the Fund's outstanding voting shares.
There can be no assurance that the Fund's investment objective will be
achieved. Because, as described below, the Fund will invest only in highest
rated or comparable short-term securities, its portfolio securities may not
earn as high a level of current income as long-term or lower quality
securities which generally have less liquidity, greater market risk and more
fluctuation in market value.
MANAGEMENT POLICIES--To achieve its goal, the Fund invests in short-term
money market obligations, including securities issued or guaranteed by the
U.S . Government or its agencies or instrumentalities, certificates of
deposit, time deposits, bankers' acceptances and other short-term obligations
issued by domestic banks, foreign branches of domestic banks, foreign
subsidiaries of domestic banks, domestic and foreign branches of foreign banks
and thrift institutions, repurchase agreements, and high quality domestic
and foreign commercial paper and other short-term corporate obligations,
including those with floating or variable rates of interest. In addition, the
Fund is permitted to lend portfolio securities to the extent described below.
During normal market conditions, at least 25% of the Fund's total assets will
be invested in bank obligations. The Fund will not invest more than one-third
of its assets in securities issued by foreign branches of foreign banks and
in commercial paper issued by foreign corporations.
The Fund seeks to maintain a net asset value of $1.00 per share for
purchases and redemptions. To do so, the Fund uses the amortized cost method
of valuing its securities pursuant to Rule 2a-7 under the Investment Company
Act of 1940, certain requirements of which are summarized below.
Page 3
In accordance with Rule 2a-7, the Fund is required to maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 13 months or less and invest only
in U.S. dollar denominated securities determined in accordance with
procedures established by the Board of Trustees to present minimal credit
risks and which are rated in one of the two highest rating categories for
debt obligations by at least two nationally recognized statistical rating
organizations (or one rating organization if the instrument was rated by only
one such organization) or, if unrated, are of comparable quality as
determined in accordance with procedures established by the Board of
Trustees. Moreover, the Fund will purchase only securities so rated in the
highest rating category or, if unrated, of comparable quality as determined
in accordance with procedures established by the Board of Trustees. The
nationally recognized statistical rating organizations currently rating
instruments of the type the Fund may purchase are Moody's Investors Service,
Inc., Standard & Poor's Corporation, Duff & Phelps, Inc., Fitch Investors
Service, Inc., IBCA Limited and IBCA Inc. and Thomson BankWatch, Inc., and
their rating criteria are described in the Appendix to the Fund's Statement
of Additional Information.
In addition, the Fund will not invest more than 5% of its total
assets in the securities (including the securities collateralizing a
repurchase agreement) of, or subject to puts issued by, a single issuer,
except that (i) the Fund may invest more than 5% of its total assets in a
single issuer for a period of up to three business days in certain limited
circumstances, (ii) the Fund may invest in obligations issued or guaranteed
by the U.S. Government without any such limitation, and (iii) the limitation
with respect to puts does not apply to unconditional puts if no more than 10%
of the Fund's total assets is invested in securities issued or guaranteed by
the issuer of the unconditional put. As to each security, these percentages
are measured at the time the Fund purchases the security. For further
information regarding the amortized cost method of valuing securities, see
"Determination of Net Asset Value" in the Fund's Statement of Additional
Information. There can be no assurance that the Fund will be able to maintain
a stable net asset value of $1.00 per share.
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 and Small Business
Administration guaranteed loans, 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 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. Interest rates 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.
The Fund will invest in certificates of deposit, time deposits,
bankers' acceptances and other short-term obligations issued by domestic
banks, foreign branches of domestic banks, foreign subsidiaries of domestic
banks, domestic and foreign branches of foreign banks and thrift
institutions. See "Risk Factors" below. Certificates of deposit are
negotiable certificates evidencing the obligation of a bank or thrift
institution 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
Page 4
than seven days) at a stated interest rate. 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. The other short-term
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
sub-custodian 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 registered or unregistered securities dealers
or banks with total assets in excess of one billion dollars, 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 Fund will limit further the
entities with which it will enter into repurchase agreements to those whose
securities are eligible for purchase by the Fund. The Manager 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 by the Fund 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.
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs. The commercial paper purchased by
the Fund will consist only of direct obligations issued by domestic and
foreign entities. The other corporate obligations in which the Fund may
invest consists of high quality, U.S. dollar denominated short-term bonds and
notes issued by domestic and foreign corporations.
The Fund may purchase floating and variable rate demand notes, which
are obligations ordinarily having stated maturities in excess of 13 months,
but which permit the holder to demand payment of principal at any time, or at
specified intervals not exceeding 13 months, in each case upon not more than
30 days' notice. 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. 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 obligations plus accrued interest upon a
specified number of days' notice to the holders of such obligations. 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. Frequently, such
obligations are secured by letters of credit or other credit support
arrangements provided by banks. 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. Such obligations frequently are not rated by credit
rating agencies and the Fund may invest in obligations which are not so rated
only if the Manager determines that at the time of the investment the
obligations are of compara-
Page 5
ble quality to the other obligations in which the Fund may invest.
The Manager, on behalf of the Fund, will consider on an ongoing basis the
creditworthiness of the issuers of floating and variable rate demand
obligations in the Fund's portfolio. The Fund will not invest
more than 10% of the value of its net assets in floating or variable rate
demand obligations as to which the Fund 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 securities that are illiquid. See
"Certain Fundamental Policies" below.
The Fund may invest up to 10% 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. However, if a substantial market of qualified institutional
buyers develops pursuant to Rule 144A under the Securities Act of 1933, as
amended, for such 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 Trustees. 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 Trustees has directed the Manager 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 such 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.
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 331/3%
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 issued by financial institutions. Such
collateral 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. The Fund will limit the entities with which it will
enter into securities lending transactions to those whose securities are
eligible for purchase by the Fund.
CERTAIN FUNDAMENTAL POLICIES -- The Fund (i) may borrow money from banks, but
only for temporary or emergency (not leveraging) purposes in an amount up to
15% of the value of the Fund's 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 value of the Fund's total assets, the Fund will not make any
additional investments; (ii) may pledge, hypothecate, mortgage or otherwise
encumber its assets, but only to secure borrowings for temporary or emergency
purposes; (iii) may invest up to 5% of the value of its total assets in the
obligations of any issuer, except that up to 25% of the value of the Fund's
total assets may be invested (subject to the provisions of Rule 2a-7), and
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities may be purchased, without regard to any such limitation;
(iv) will invest, under normal market conditions, at least 25% of the value
of its total assets in securities issued by banks and may invest up to 25% of
the value of its total assets in the securities of issuers in any other
industry, provided that there is no limitation on investments in obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; and (v) may invest up to 10% of its net assets in
repurchase agreements providing for settlement in more than seven days after
notice and in other securities that are illiquid (which securi-
Page 6
ties could include floating and variable rate demand obligations as to which
the Fund cannot exercise the demand feature described above and as to which
there is no secondary market). 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.
RISK FACTORS -- Since the Fund's portfolio may contain securities issued by
foreign branches of domestic and foreign banks, domestic and foreign branches
of domestic banks, and commercial paper issued by foreign issuers, the Fund
may be subject to additional investment risks with respect to such securities
that are different in some respects from those incurred by a fund which
invests only in debt obligations of U.S. domestic issuers, although such
obligations may be higher yielding when compared to the securities of U.S.
domestic issuers. Such risks include possible future political and economic
developments, the possible imposition of foreign withholding taxes on
interest income payable on the securities, the possible establishment of
exchange controls or the adoption of other foreign governmental restrictions
which might adversely affect the payment of principal and interest on these
securities and the possible seizure or nationalization of foreign deposits.
OTHER INVESTMENT CONSIDERATIONS -- The Fund attempts to increase yields by
trading to take advantage of short-term market variations. This policy is
expected to result in high portfolio turnover but should not adversely affect
the Fund since the Fund usually does not pay brokerage commissions when it
purchases short-term debt obligations. The value of the portfolio securities
held by the Fund will vary inversely to changes in prevailing interest rates.
Thus, if interest rates have increased from the time a security was
purchased, such security, if sold, might be sold at a price less than its
cost. Similarly, if interest rates have declined from the time a security was
purchased, such security, if sold, might be sold at a price greater than its
purchase cost. In either instance, if the security was purchased at face
value and held to maturity, no gain or loss would be realized.
Investment decisions for the Fund are made independently from those
of other investment companies, investment advisory accounts, custodial
accounts, individual trust accounts and commingled funds that may be advised
by the Manager. However, if such other investment companies or managed
accounts are prepared to invest in, or desire to dispose of, securities of
the type in which the Fund invests 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
MANAGER -- The Manager, located at Three First National Plaza, Chicago,
Illinois 60670, is the Fund's investment adviser. The Manager, a wholly-owned
subsidiary of First Chicago Corporation, a registered bank holding company,
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, it was one of the largest commercial banks in the United States and
the largest in the mid-western United States in terms of assets ($64 billion)
and in terms of deposits ($28.5 billion). As of June 30, 1994, the Manager
provided investment management services to portfolios containing
approximately $9.6 billion in assets. The Manager serves as investment
adviser for the Fund pursuant to a Management Agreement dated as of October
2, 1991. Under the Management Agreement, the Manager supervises and assists
in the overall management of the Fund's affairs, subject to the overall
authority of the Fund's Board of Trustees and in conformity with
Massachusetts law and the stated policies of the Fund. The Manager is
responsible for making investment decisions for the Fund, placing purchase
and sale orders (which may be allocated to various dealers based on their
sales of Fund shares) and providing research,
Page 7
statistical analysis and continuous supervision of the investment portfolio.
The Manager provides these services through its Investment Management
Department. The investment advisory services of the Manager are not exclusive
under the terms of the Management Agreement. The Manager is free to, and does,
render investment advisory services to others including other investment
companies as well as commingled trust funds and a broad spectrum of individual
trust and investment management portfolios, which have varying investment
objectives. The Manager has advised the Fund that in making its investment
decisions the Manager does not obtain or use material inside information in
the possession of any division or department of the Manager or in the
possession of any affiliate of the Manager.
The Manager has engaged The Dreyfus Corporation ("Dreyfus"), located
at 200 Park Avenue, New York, New York 10166, to assist it in providing
certain administrative services for the Fund pursuant to a separate agreement
between it and Dreyfus. Dreyfus is a wholly-owned subsidiary of Mellon Bank,
N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation. The
Manager, from its own funds, will pay Dreyfus for Dreyfus' services. Dreyfus
was formed in 1947 and as of September 30, 1994, managed or administered
approximately $69 billion in assets for more than 1.9 million investor
accounts nationwide.
Under the terms of the Management Agreement, the Fund has agreed to
pay the Manager a monthly fee at the annual rate of .35 of 1% of the value of
the Fund's average daily net assets. For the fiscal year ended June 30, 1994,
the Fund paid the Manager a monthly management fee at the effective annual
rate of .23 of 1% of the value of the Fund's average daily net assets
pursuant to undertakings by the Manager.
GLASS-STEAGALL ACT -- The Glass-Steagall Act and other applicable laws
prohibit Federally chartered or supervised banks from engaging in certain
aspects of the business of issuing, underwriting, selling and/or distributing
securities, although banks such as the Manager are permitted to purchase and
sell securities upon the order and for the account of their customers. The
Manager has advised the Fund of its belief that it may perform the services
for the Fund contemplated by the Management Agreement and this Prospectus with
out violating the Glass-Steagall Act or other applicable banking laws or
regulations. The Manager has pointed out, however, that there are no cases
deciding whether a bank such as the Manager may perform services comparable
to those performed by the Manager and that future changes in either Federal
or state statutes and regulations relating to permissible activities of banks
and their subsidiaries and affiliates, as well as future judicial or
administrative decisions or interpretations of present and future statutes
and regulations, could prevent the Manager from continuing to perform such
services for the Fund. If the Manager were to be prevented from providing
such services to the Fund, the Fund's Board of Trustees would review the
Fund's relationship with the Manager and consider taking all actions
necessary in the circumstances.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN -- The Shareholder
Services Group, Inc., a subsidiary of First Data Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, 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 the Manager. The
expenses borne by the Fund include the following: organizational costs,
taxes, interest, brokerage fees and commissions, if any, fees of Trustees who
are not officers, directors, employees or holders of 5% or more of the
outstanding voting securities of the Manager, Securities and Exchange
Commission fees, state Blue Sky qualification fees, advisory fees, charges of
custodians, transfer and dividend disbursing agents' fees, certain insurance
premiums, industry association fees, outside auditing and legal expenses,
costs of maintaining the Fund's existence, costs of independent pricing
services, costs attributable to investor services (including, without
limitation, telephone and personnel expenses), costs of shareholders' reports
and meetings, costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to
existing shareholders, and any extraordinary expenses.
Page 8
The Manager has undertaken until such time as it gives investors at
least 90 days' notice to the contrary 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 management
fee, exceed .35 of 1% of the value of the Fund's average net assets for the
fiscal year, the Fund may deduct from the payment to be made to the Manager
under the Management Agreement, or the Manager will bear, such excess
expense.
HOW TO BUY FUND SHARES
The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"), located at One Exchange Place, Boston, Massachusetts 02109.
The Distributor 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.
The Fund is designed for institutional investors, including banks
(such as the Manager), acting for themselves or in a fiduciary, advisory,
agency, custodial or similar capacity, public agencies and municipalities.
Fund shares may not be purchased directly by individuals, although
institutions may purchase shares for accounts maintained by individuals.
Generally, each investor will be required to open a single master account
with the Fund for all purposes. In certain cases, the Fund may request
investors to maintain separate master accounts for shares held by the
investor (i) for its own account, for the account of other institutions and
for accounts for which the institution acts as a fiduciary, and (ii) for
accounts for which the investor acts in some other capacity. An institution
may arrange with the Transfer Agent for sub-accounting services and will be
charged directly for the cost of such services. Certain accounts 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 pre-determined intervals. Each
investor desiring to use this Privilege should consult its bank for details.
The minimum initial investment is $1,000,000 or any lesser amount if,
in the Distributor's opinion, the investor has adequate intent and
availability of funds to reach a future level of investment of $1,000,000.
There is no minimum for subsequent purchases. The initial investment must be
accompanied by the Fund's Account Application. The Fund does not impose any
sales charges in connection with purchases of its shares, although
institutions may charge their clients fees in connection with purchases for
the accounts of their clients. Share certificates are issued only upon the
investor's written request. No certificates are issued for fractional shares.
The Fund reserves the right to reject any purchase order.
Fund shares may be purchased by wire, by telephone or through
compatible computer facilities. All payments should be made in U.S. dollars
and, to avoid fees and delays, should be drawn only on U.S. banks. Investors
may telephone orders for purchase of the Fund's shares by calling
1-800-227-0072 or, if calling from overseas, 1-401-455-3309. For instructions
concerning purchases and to determine whether their computer facilities are
compatible with those of the Fund, investors should call 1-800-227-0072 or,
if calling from overseas, 1-401-455-3309.
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form and Federal Funds (monies
of member banks in the Federal Reserve System which are held on deposit at a
Federal Reserve Bank) are received by the Transfer Agent. If an investor does
not remit Federal Funds, its payment 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. Prior to receipt of Federal Funds, the investor's money will not be
invested.
The Fund's net asset value per share is determined as of 2:00 p.m.,
Chicago time, on each day the New York Stock Exchange is open for business,
except on Martin Luther King, Jr. Day, Columbus Day
Page 9
and Veterans Day. Net asset value per share is computed by dividing the value
of the Fund's net assets (i.e., the value of its assets less liabilities) by
the total number of shares outstanding. See "Determination of Net Asset Value"
in the Fund's Statement of Additional Information.
Investors whose payments are received in or converted into Federal
Funds by 2:00 p.m., Chicago time, by the Transfer Agent will receive the
dividend declared that day. Investors whose payments are received in or
converted into Federal Funds after 2:00 p.m., Chicago time, by the Transfer
Agent will begin to accrue dividends on the following business day.
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").
EXCHANGE PRIVILEGE
The Exchange Privilege enables an investor to purchase, in exchange
for shares of the Fund, shares of First Prairie U.S. Treasury Securities Cash
Management, a fund advised by the Manager, which has the same investment
objective, but different management policies that may be of interest to
investors. The Exchange Privilege may be expanded to permit exchanges between
the Fund and certain other funds that, in the future, may be advised by the
Manager, to the extent the shares of such funds are offered for sale in the
investor's state of residence. If an investor desires to use this Privilege,
the investor should consult the Manager or call 1-800-645-6561 to determine
if it is available and whether any conditions are imposed on its use.
To use this Privilege, an investor must give exchange instructions to
the Transfer Agent in writing, by wire or by telephone. If an investor
previously has established the Telephone Exchange Privilege, the investor may
telephone exchange instructions by calling 1-800-227-0072 or, if calling from
overseas,1-401-455-3309. See "How to Redeem Fund Shares_Procedures." Before
any exchange, the investor must obtain and should review a copy of the current
prospectus of the fund into which the exchange is being made. Prospectuses
may be obtained by calling 1-800-645-6561, the Manager or certain affiliates
of the Manager. When establishing a new account by exchange, the shares being
exchanged must have a value of at least $1,000,000.
Shares will be exchanged at the next determined net asset value. 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 shareholder
s. See "Exchange Privilege" in the Statement of Additional Information.
The exchange of shares of one 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.
HOW TO REDEEM FUND SHARES
GENERAL--Investors may request redemption of shares at any time and the
shares will be redeemed at the next determined net asset value.
The Fund imposes no charges when shares are redeemed. Institutions
may charge their clients a nominal fee for effecting redemptions of Fund
shares. Any certificates representing Fund shares being redeemed must be
submitted with the redemption request. The value of the shares redeemed may
be more or less than their original cost, depending upon the Fund's
then-current net asset value.
Page 10
If a request for redemption is received in proper form by the
Transfer Agent by 2:00 p.m., Chicago time, the proceeds of the redemption, if
transfer by wire is requested, ordinarily will be transmitted in Federal
Funds on the same day and the shares will not receive the dividend declared
on that day. If the request is received later that day by the Transfer Agent,
the shares will receive the dividend on the Fund's shares declared on that
day and the proceeds of redemption, if wire transfer is requested, ordinarily
will be transmitted in Federal Funds on the next business day.
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.
PROCEDURES -- Investors may redeem shares by wire or telephone, or through
compatible computer facilities as described below.
An investor may redeem or exchange shares by telephone if the
investor has checked the appropriate box on the Fund's Account Application or
has filed a Shareholder Services Form with the Transfer Agent. 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 an authorized representative of the investor 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 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, investors 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.
REDEMPTION BY WIRE OR TELEPHONE -- Investors may redeem Fund shares by wire
or telephone. The redemption proceeds will be paid by wire transfer.
Investors can redeem shares by telephone by calling 1-800-227-0072 or, if
calling from overseas, 1-401-455-3309. The Fund reserves the right to refuse
any request made by wire or telephone and may limit the amount involved or
the number of telephone redemptions. This procedure may be modified or
terminated at any time by the Transfer Agent or the Fund. The Fund's
Statement of Additional Information sets forth instructions for redeeming
shares by wire. Shares for which certificates have been issued may not be
redeemed by wire or telephone.
REDEMPTION THROUGH COMPATIBLE COMPUTER FACILITIES -- The Fund makes available
to institutions the ability to redeem shares through compatible computer
facilities. Investors desiring to redeem shares in this manner should call
1-800-227-0072 or, if calling from overseas, 1-401-455-3309 to determine
whether their computer facilities are compatible and to receive instructions
for redeeming shares in this manner.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily declares dividends from net investment income on
each day the New York Stock Exchange is open for business, except on Martin
Luther King, Jr. Day, Columbus Day and Veterans Day. Fund shares begin
earning income dividends on the day the purchase order is effective.
Dividends usually are paid on the last calendar day of each month, and are
automatically reinvested in additional Fund shares at net asset value 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 its account at any time during the
month, all dividends to which the investor is entitled will be paid along
with the proceeds of the redemption. Distributions from net realized
securities gains, if any, generally are declared and paid once a year, but
the Fund may make distrib-
Page 11
utions on a more frequent basis to comply with the distribution requirements
of the Internal Revenue Code of 1986, as amended (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 Fund shares at net asset value. All expenses are accrued daily
and deducted before declaration of dividends to investors.
Dividends paid by the Fund derived from net investment income,
together with distributions from any net realized short term securities gains
and all or a portion any of gains realized from the sale or other disposition
of certain market discount bonds, will be taxable to U.S. investors 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, if any, of the Fund will be taxable to
U.S. investors as long-term capital gains regardless of how long investors
have held Fund shares and whether such distributions are received in cash or
reinvested in additional Fund shares. 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%.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by the Fund with respect to Fund shares
beneficially owned by a foreign person generally are subject to U.S.
nonresident withholding taxes at the rate of 30%, unless the foreign person
claims the benefit of a lower rate specified in a tax treaty. Distributions
from net realized long-term securities gains paid by the Fund with respect to
Fund shares beneficially owned by a foreign person 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
person certifies his non-U.S. residency status.
Notice as to the tax status of dividends and distributions will be
mailed to investors annually. Each investor also will receive periodic
summaries of its account which will include information as to dividends and
distributions from securities gains, if any, paid during the year.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends and
distributions from net realized securities gains of the Fund 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 June 30, 1994 as a "regulated investment company" under the
Code. The Fund intends to continue to so qualify if such qualification is in
the best interests of its shareholders. Such qualification relieves the Fund
of any liability for Federal income tax to the extent its earnings are
distributed in accordance with applicable provisions of the Code. 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.
Dividends and distributions may be subject to certain state and local
taxes. Each investor and beneficial holder of Fund shares should consult its
tax adviser regarding specific questions as to Federal, state or local taxes.
Page 12
GENERAL INFORMATION
The Fund was organized as an unincorporated business trust under the
laws of the Commonwealth of Massachusetts pursuant to an Agreement and
Declaration of Trust (the "Trust Agreement") dated September 12, 1990, and
commenced operations on July 30, 1992. The Fund is authorized to issue an
unlimited number of shares of beneficial interest, par value $.001 per share.
Each share has one vote. Investors have agreed to vote Fund shares for which
they are the record owners according to voting instructions received from the
beneficial holder of such shares.
Under Massachusetts law, shareholders could, under certain
circumstances, be held liable for the obligations of the Fund. However, the
Trust Agreement disclaims shareholder liability for acts or obligations of
the Fund and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Fund or a
Trustee. The Trust Agreement provides for indemnification from the Fund's
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Fund. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its
obligations, a possibility which management believes is remote. Upon payment
of any liability incurred by the Fund, the shareholder paying such liability
will be entitled to reimbursement from the general assets of the Fund. The
Trustees intend to conduct the operations of the Fund in such a way as to
avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Fund. As discussed under "Management of the Fund" in the
Statement of Additional Information, the Fund ordinarily will not hold
shareholder meetings; however, shareholders under certain circumstances may
have the right to call a meeting of shareholders for the purpose of voting to
remove Trustees.
The Transfer Agent maintains a record of each investor's ownership
and sends confirmations and statements of account.
Investor inquiries may be made by writing to the Fund at the address
shown on the front cover or by calling the appropriate telephone number.
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 13
PROSPECTUS
FIRST (First Prairie wheat Logo) PRAIRIE
CASH
MANAGEMENT
*No sales load
*No redemption fee
*Exchange privileges
THE FIRST NATIONAL BANK OF CHICAGO
Manager
PREMIER MUTUAL FUND SERVICES, INC.
Distributor
370P4103194
__________________________________________________________________________
FIRST PRAIRIE CASH MANAGEMENT
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
OCTOBER 31, 1994
__________________________________________________________________________
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus
of First Prairie Cash Management (the "Fund"), dated October 31, 1994 as
it may be revised from time to time. To obtain a copy of the Fund's
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call toll free 1-800-821-1185.
The First National Bank of Chicago (the "Manager") serves as the
Fund's investment adviser.
Premier Mutual Fund Services, 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-5
Management Agreement. . . . . . . . . . . . . . . . . . . . . . . . . B-8
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . B-10
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . . . . B-10
Determination of Net Asset Value. . . . . . . . . . . . . . . . . . . B-12
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . . B-13
Exchange Privilege. . . . . . . . . . . . . . . . . . . . . . . . . . B-13
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . . B-14
Yield Information . . . . . . . . . . . . . . . . . . . . . . . . . . B-14
Information About the Fund. . . . . . . . . . . . . . . . . . . . . . B-15
Counsel and Independent Auditors. . . . . . . . . . . . . . . . . . . B-15
Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-16
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . B-18
Report of Independent Auditors. . . . . . . . . . . . . . . . . . . . B-25
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."
Portfolio Securities.
Bank Obligations. Domestic commercial banks organized under Federal
law are supervised and examined by the Comptroller of the Currency and are
required to be members of the Federal Reserve System and to have their
deposits insured by the Federal Deposit Insurance Corporation (the
"FDIC"). Domestic banks organized under state law are supervised and
examined by state banking authorities but are members of the Federal
Reserve System only if they elect to join. In addition, state banks whose
certificates of deposit ("CDs") may be purchased by the Fund are insured
by the FDIC (although such insurance may not be of material benefit to the
Fund, depending on the principal amount of the Cds of each bank held by
the Fund) and are subject to Federal examination and to a substantial body
of Federal law and regulation. As a result of Federal or state laws and
regulations, domestic branches of domestic banks whose Cds may be
purchased by the Fund generally are required, among other things, to
maintain specified levels of reserves, are limited in the amounts which
they can loan to a single borrower and are subject to other regulation
designed to promote financial soundness. However, not all of such laws
and regulations apply to the foreign branches of domestic banks.
Obligations of foreign branches of domestic banks, foreign
subsidiaries of domestic banks, and domestic and foreign branches of
foreign banks, such as Cds and time deposits ("TDs"), may be general
obligations of the parent banks in addition to the issuing branch, or may
be limited by the terms of a specific obligation and governmental
regulation. Such obligations are subject to different risks than are
those of domestic banks. These risks include foreign economic and
political developments, foreign governmental restrictions that may
adversely affect payment of principal and interest on the obligations,
foreign exchange controls and foreign withholding and other taxes on
interest income. Foreign branches and subsidiaries are not necessarily
subject to the same or similar regulatory requirements that apply to
domestic banks, such as mandatory reserve requirements, loan limitations,
and accounting, auditing and financial recordkeeping requirements. In
addition, less information may be publicly available about a foreign
branch of a domestic bank or about a foreign bank than about a domestic
bank.
Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may
be limited by the terms of a specific obligation or by Federal or state
regulation as well as governmental action in the country in which the
foreign bank has its head office. A domestic branch of a foreign bank
with assets in excess of $1 billion may be subject to reserve requirements
imposed by the Federal Reserve System or by the state in which the branch
is located if the branch is licensed in that state.
In addition, Federal branches licensed by the Comptroller of the
Currency and branches licensed by certain states ("State Branches") may be
required to: (1) pledge to the regulator, by depositing assets with a
designated bank within the state, a certain percentage of their assets as
fixed from time to time by the appropriate regulatory authority; and (2)
maintain assets within the state in an amount equal to a specified
percentage of the aggregate amount of liabilities of the foreign bank
payable at or through all of its agencies or branches within the state.
The deposits of Federal and State Branches generally must be insured by
the FDIC if such branches take deposits of less than $100,000.
In view of the foregoing factors associated with the purchase of Cds
and Tds issued by foreign branches of domestic banks, by foreign
subsidiaries of domestic banks, by foreign branches of foreign banks or by
domestic branches of foreign banks, the Manager carefully evaluates such
investments on a case-by-case basis.
The Fund may purchase Cds issued by banks, savings and loan
associations and similar thrift institutions with less than $1 billion in
assets, which are members of the FDIC, provided the Fund purchases any
such CD in a principal amount of not more than $100,000, which amount
would be fully insured by the Bank Insurance Fund or the Savings
Association Insurance Fund administered by the FDIC. Interest payments on
such a CD are not insured by the FDIC. The Fund will not own more than
one such CD per such issuer.
Foreign Securities. Foreign securities markets generally are not as
developed or efficient as those in the United States. Securities of some
foreign issuers are less liquid and more volatile than securities of
comparable U.S. issuers. Similarly, volume and liquidity in most foreign
securities markets are less than in the United States and, at times,
volatility of price can be greater than in the United States.
Furthermore, some of these securities are subject to brokerage taxes
levied by foreign governments, which have the effect of increasing the
cost of such investment and reducing the realized gain or increasing the
realized loss on such securities at the time of sale. Custodial expenses
for a portfolio of non-U.S. securities generally are higher than for a
portfolio of U.S. securities. Income earned or received by the Fund from
sources within foreign countries may be reduced by withholding and other
taxes.
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 the 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 value of
the Fund's total assets. From time to time, the Fund may return to the
borrower and/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.
Investment Restrictions. The Fund has adopted the following
restrictions 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 (the "Act")) of the Fund's outstanding
voting shares. The Fund may not:
1. Purchase common stocks, preferred stocks, warrants or other
equity securities, or purchase corporate bonds or debentures,
state bonds, municipal bonds or industrial revenue bonds.
2. Borrow money, except from banks for temporary or emergency (not
leveraging) purposes in an amount up to 15% of the value of the
Fund's total assets (including the amount borrowed) based on 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 value of the Fund's total assets,
the Fund will not make any additional investments.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to secure borrowings for temporary or emergency purposes.
4. Sell securities short or purchase securities on margin.
5. Write or purchase put or call options or combinations thereof.
6. Underwrite the securities of other issuers or enter into
repurchase agreements providing for settlement in more than
seven days or purchase securities which are illiquid (which
securities could include floating and variable rate demand
obligations as to which no secondary market exists and the Fund
cannot exercise the demand feature described in the Prospectus
on less than seven days' notice), if, in the aggregate, more
than 10% of its net assets would be so invested.
7. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or oil and gas
interests.
8. Make loans to others, except through the purchase of debt
obligations referred to in the Fund's Prospectus, except that
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 Trustees.
9. Invest more than 5% of its assets in the obligations of any one
issuer, except that up to 25% of the value of the Fund's total
assets may be invested (subject to Rule 2a-7 under the Act)
without regard to any such limitations.
10. Invest less than 25% of its assets in securities issued by banks
or invest more than 25% of its assets in the securities of
issuers in any other industry, provided that there shall be no
limitation on the purchase of obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities.
Notwithstanding the foregoing, for temporary defensive purposes
the Fund may invest less than 25% of its assets in bank
obligations.
11. Invest in companies for the purpose of exercising control.
12. Invest in securities of other investment companies, except as
they may be acquired as part of a merger, consolidation or
acquisition of assets.
While not a fundamental policy, the Fund will not invest in oil, gas
and other mineral leases, or real estate limited partnerships.
If a percentage 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 Fund 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 Fund shares in the state
involved.
MANAGEMENT OF THE FUND
Trustees and officers of the Fund, together with information as to
their principal business occupations during at least the last five years,
are shown below.
Trustees and Officers of the Fund
JOHN P. GOULD, Trustee. 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.
Since 1986, Mr. Gould also has served as a Director of DFA Investment
Dimensions Group, a series mutual fund. Mr. Gould also serves as
Director of Harpor Capital Advisors. His address is 1101 East 58th
Street, Chicago, Illinois 60637.
MARILYN McCOY, Trustee. 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.
Ms. McCoy is a member of the Chicago Economic Club. Her address is
1100 North Lake Shore Drive, Chicago, Illinois 60611.
RAYMOND D. ODDI, Trustee. 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 and Chief Financial Officer of Baxter International, Inc.,
a company engaged in the production and distribution 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 of the "non-interested" Trustees also is a trustee of First
Prairie Diversified Asset Fund, First Prairie Money Market Fund, First
Prairie Municipal Money Market Fund, First Prairie U.S. Treasury
Securities Cash Management and First Prairie U.S. Government Income Fund
and a director of First Prairie Municipal Bond Fund.
The Fund does not pay any remuneration to its officers and Trustees
other than fees and expenses to Trustees who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of
the Manager or The Dreyfus Corporation ("Dreyfus"), or any affiliate of
either of them, which totaled $6,262 for the fiscal year ended June 30,
1994 for all such Trustees, as a group.
Ordinarily, there will be no meetings of shareholders for the purpose
of electing Trustees unless and until such time as less than a majority of
the Trustees holding office have been elected by shareholders, at which
time the Trustees then in office will call a shareholders' meeting for the
election of Trustees. Under the Act, shareholders of record of not less
than two-thirds of the outstanding shares of the Fund may remove a Trustee
through a declaration in writing or by vote cast in person or by proxy at
a meeting called for that purpose. Under the Fund's Agreement and
Declaration of Trust, the Trustees are required to call a meeting of
shareholders for the purpose of voting upon the question of removal of any
such Trustee when requested in writing to do so by the holders of record
of not less than 10% of the Fund's outstanding shares.
Officers of the Fund Not Listed Above
MARIE E. CONNOLLY, President and Treasurer. President and Chief Operating
Officer of the Distributor and an officer of other investment
companies advised or administered by the Manager. From December 1991
to July 1994, she was President and Chief Compliance Officer of Funds
Distributor, Inc., a wholly-owned subsidiary of The Boston Company,
Inc. Prior to December 1991, she served as Vice President and
Controller, and later as Senior Vice President, of The Boston Company
Advisors, Inc.
JOHN E. PELLETIER, Secretary. Senior Vice President and General Counsel
of the Distributor and an officer of other investment companies
advised or administered by the Manager. From February 1992 to July
1994, he served as Counsel for The Boston Company Advisors, Inc.
Prior thereto, he was employed as an Associate at Ropes & Gray, and
prior to August 1990, he was employed as an Associate at Sidley &
Austin.
JOSEPH F. TOWER,III, Assistant Treasurer. Senior Vice President,
Treasurer and Chief Financial Officer of the Distributor and an
officer of other investment companies advised or administered by the
Manager. From July 1988 to August 1994, he was employed by The
Boston Company, Inc. where he held various management positions in
the Corporate Finance and Treasury areas.
FREDERICK C. DEY, Assistant Treasurer. Senior Vice President of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From 1988 to August 1994, he was
Manager of the High Performance Fabric Division of Springs Industries
Inc.
ERIC B. FISCHMAN, Assistant Secretary. Associate General Counsel of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From September 1992 to August 1994, he
was an attorney with the Board of Governors of the Federal Reserve
System. Prior to September 1992, he attended the Boston University
School of Law.
RUTH D. LEIBERT, Assistant Secretary. Assistant Vice President of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From March 1992 to July 1994, she was a
Compliance Officer for The Managers Funds, a registered investment
company. From March 1990 until September 1991, she was Development
Director of The Rockland Center for the Arts and, prior thereto, was
employed as a Research Assistant for the Bureau of National Affairs.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
Trustees and officers of the Fund, as a group, owned less than 1% of
the Fund's shares of beneficial interest outstanding on August 24, 1994.
MANAGEMENT AGREEMENT
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
Management Agreement. The Manager provides management services
pursuant to the Management Agreement (the "Agreement") dated October 2,
1991 with the Fund, which is subject to annual approval by (i) the Fund's
Board of Trustees or (ii) vote of a majority (as defined in the Act) of
the outstanding voting securities of the Fund, provided that in either
event the continuance also is approved by a majority of the Trustees who
are not "interested persons" (as defined in the Act) of the Fund or the
Manager, by vote cast in person at a meeting called for the purpose of
voting on such approval. The Board of Trustees, including a majority of
the Trustees who are not "interested persons" of any party to the
Agreement, last voted to renew the Agreement on December 10, 1993. The
Agreement is terminable without penalty, on 60 days' notice, by the Fund's
Board of Trustees or by vote of the holders of a majority of the Fund's
shares or, upon not less than 90 days' notice, by the Manager. The
Agreement will terminate automatically in the event of its assignment (as
defined in the Act).
The Manager is responsible for investment decisions and manages the
Fund's portfolio of investments in accordance with the stated policies of
the Fund, subject to the approval of the Fund's Board of Trustees. All
purchases and sales are reported for the Trustees' review at the meeting
subsequent to such transactions.
As compensation for the Manager's services to the Fund, the Fund has
agreed to pay the Manager a monthly management fee at the annual rate of
.35 of 1% of the value of the Fund's average daily net assets. For the
period July 30, 1992 (commencement of operations) through June 30, 1993,
no management fee was paid by the Fund pursuant to an undertaking by the
Manager. For the fiscal year ended June 30, 1994, the management fee
payable by the Fund was $892,114, which was reduced by $304,836, pursuant
to undertakings in effect, resulting in a net fee paid by the Fund of
$587,278.
The Manager has engaged Dreyfus to assist it in providing certain
administrative services to the Fund. Pursuant to its agreement with the
Manager (the "Administration Agreement"), Dreyfus furnishes the Fund
clerical help and accounting, data processing, bookkeeping, internal
auditing and legal services and certain other services required by the
Fund, prepares reports to the Fund's shareholders, tax returns, reports to
and filings with the Securities and Exchange Commission and state Blue Sky
authorities, calculates the net asset value of the Fund's shares and
generally assists the Manager in providing for all aspects of the Fund's
operation, other than providing investment advice. The fees payable to
Dreyfus for its services are paid by the Manager.
The Fund has agreed that neither the Manager nor Dreyfus will be
liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the matters to which the Agreement
or the Administration Agreement relates, except for a loss resulting from
wilful misfeasance, bad faith or gross negligence on the part of the
Manager in the performance of its obligations or from reckless disregard
by it of its obligations and duties under the Agreement or on the part of
Dreyfus in the performance of its obligations or from reckless disregard
by it of its obligations and duties under the Administration Agreement.
The Administration Agreement contains a similar provision whereby the
Manager has agreed to limit Dreyfus' liability.
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 the Manager. The expenses borne by the Fund
include the following: organizational costs, taxes, interest, brokerage
fees and commissions, if any, fees of Trustees who are not officers,
directors, employees or holders of 5% or more of the outstanding voting
securities of the Manager or Dreyfus, Securities and Exchange Commission
fees, state Blue Sky qualification fees, advisory fees, charges of
custodians, transfer and dividend disbursing agents' fees, certain
insurance premiums, industry association fees, outside auditing and legal
expenses, costs of maintaining the Fund's existence, costs of independent
pricing services, costs attributable to investor services (including,
without limitation, telephone and personnel expenses), costs of
shareholders' reports and meetings, costs of preparing and printing
prospectuses and statements of additional information for regulatory
purposes and for distribution to existing shareholders, and any
extraordinary expenses.
The Manager has agreed 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
management fee, exceed the expense limitation of any state having
jurisdiction over the Fund, the Fund may deduct from the payment to be
made to the Manager under the Management Agreement, or the Manager 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 the Manager is not subject to
reduction as the value of the Fund's net assets increases.
Glass-Steagall Act. For an additional discussion of the Glass-
Steagall Act in connection with the Fund's operations, see the Fund's
Prospectus.
From time to time, legislation has been introduced and may be
reintroduced in Congress, which would permit a bank, a bank holding
company or a subsidiary thereof to organize, sponsor, control and
distribute shares of an investment company such as the Fund,
notwithstanding present restrictions under the Glass-Steagall Act and the
Federal Bank Holding Company Act of 1956. As described herein, the Fund
is currently distributed by the Distributor, and Dreyfus, its parent,
sponsors the Fund and provides it with administrative services. If
current restrictions preventing a bank from legally sponsoring,
organizing, controlling or distributing shares of an investment company
were relaxed, the Fund expects that the Manager would consider the
possibility of offering to perform some or all of the services now
provided by Dreyfus or the Distributor. It is not possible, of course, to
predict whether or in what form such legislation might be enacted or the
terms upon which the Manager might offer to provide services.
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. The Distributor also
acts as distributor for the other funds in the First Prairie Family of
Funds, the funds in the Dreyfus Family of Funds and certain other
investment companies.
Transactions through Securities Dealers. In some states, banks or
other financial institutions effecting transactions in Fund shares may be
required to register as dealers pursuant to state law.
Using Federal Funds. The Shareholder Services Group, Inc., 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 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 a 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. In some states, banks
or other financial institutions effecting transactions in Fund shares may
be required to register as dealers pursuant to state law.
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."
Redemption by Wire or Telephone. By using this Privilege, the
investor authorizes the Transfer Agent to act on wire or telephone
redemption instructions from any person representing himself or herself to
be an authorized representative of the investor and reasonably believed by
the Transfer Agent to be genuine. Ordinarily, the Fund will initiate
payment for shares redeemed pursuant to this procedure on the same
business day if the Transfer Agent receives the redemption request in
proper form prior to 2:00 p.m., Chicago time, on such day; otherwise, the
Fund will initiate payment on the next business day. Redemption proceeds
will be transferred by Federal Reserve wire only to a bank that is a
member of the Federal Reserve System.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmission:
Transfer Agent's
Transmittal Code Answer Back Sign
---------------- ------------------
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-
654-7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
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 Trustees reserves the right to make payments in whole
or in part in securities or other assets of the Fund 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
closing), (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."
Amortized Cost Pricing. The valuation of the Fund's portfolio
securities is based upon their amortized cost which does not take into
account unrealized capital gains or losses. This involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While
this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower
than the price the Fund would receive if it sold the instrument.
The Board of Trustees has established, as a particular responsibility
within the overall duty of care owed to the Fund's investors, procedures
reasonably designed to stabilize the Fund's price per share as computed
for the purpose of purchases and redemptions at $1.00. Such procedures
include review of the Fund's portfolio holdings by the Board of Trustees,
at such intervals as it deems appropriate, to determine whether the Fund's
net asset value calculated by using available market quotations or market
equivalents deviates from $1.00 per share based on amortized cost. In
such review, investments for which market quotations are readily available
will be valued at the most recent bid price or yield equivalent for such
securities or for securities of comparable maturity, quality and type, as
obtained from one or more of the major market makers for the securities to
be valued. Other investments and assets will be valued at fair value as
determined in good faith by the Board of Trustees.
The extent of any deviation between the Fund's net asset value based
upon available market quotations or market equivalents and $1.00 per share
based on amortized cost will be examined by the Board of Trustees. If
such deviation exceeds 1/2 of 1%, the Board of Trustees will consider what
action, if any, will be initiated. In the event the Board of Trustees
determines that a deviation exists which may result in material dilution
or other unfair results to investors or existing shareholders, it has
agreed to take such corrective action as it regards as necessary and ap-
propriate, including: selling portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity;
withholding dividends or paying distributions from capital or capital
gains; redeeming shares in kind; or establishing a net asset value per
share by using available market quotations or market equivalents.
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 directly from the
issuer or from an underwriter or a market maker for the securities.
Ordinarily, no brokerage commissions are paid by the Fund for such
purchases. Purchases from underwriters of portfolio securities may
include a concession paid by the issuer to the underwriter and the
purchase price paid to, and sales price received from, market makers for
the securities may reflect the spread 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 Manager 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 Manager in advising other funds
or accounts it advises and, conversely, research services furnished to the
Manager by brokers in connection with other funds or accounts the Manager
advises may be used by the Manager in advising the Fund. Although it is
not possible to place a dollar value on these services, it is the opinion
of the Manager that the receipt and study of such services should not
reduce its overall research expenses.
EXCHANGE PRIVILEGE
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Exchange
Privilege."
By using this Privilege, the investor authorizes the Transfer Agent
to act on exchange instructions from any person representing himself or
herself to be an authorized representative of the investor and reasonably
believed by the Transfer Agent to be genuine. Telephone exchanges may be
subject to limitations as to the amount involved or the number of
telephone exchanges permitted. Shares will be exchanged at the net asset
value next determined after receipt of an exchange request in proper form.
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 investors.
This Privilege is available to shareholders resident in any state in
which shares of the fund being acquired may legally be sold.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in Fund's Prospectus entitled "Dividends,
Distributions and Taxes"
Ordinarily, gains and losses realized from portfolio transactions
will be treated 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 of
the Internal Revenue Code of 1986, as amended.
YIELD INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Yield
Information."
For the seven-day period ended June 30, 1994, the Fund's yield was
4.03% and its effective yield was 4.11%. These yields reflect the
absorption of certain expenses by the Manager and/or the waiver of part of
the management fee, without which the Fund's seven-day yield and effective
yield for the period ended June 30, 1994 would have been 3.97% and 4.05%,
respectively. See "Management of the Fund" in the Prospectus. Yield is
computed in accordance with a standardized method which involves
determining the net change in the value of a hypothetical pre-existing
Fund account having a balance of one share at the beginning of a seven
calendar day period for which yield is to be quoted, dividing the net
change by the value of the account at the beginning of the period to
obtain the base period return, and annualizing the results (i.e.,
multiplying the base period return by 365/7). The net change in the value
of the account reflects the value of additional shares purchased with
dividends declared on the original share and any such additional shares
and fees that may be charged to the shareholder's account, in proportion
to the length of the base period and the Fund's average account size, but
does not include realized gains and losses or unrealized appreciation and
depreciation. Effective yield is computed by adding 1 to the base period
return (calculated as described above), raising that sum to a power equal
to 365 divided by 7, and subtracting 1 from the result.
Yields will fluctuate and are not necessarily representative of
future results. Each investor should remember that yield is a function of
the type and quality of the instruments in the portfolio, portfolio
maturity and operating expenses. An investor's principal in the Fund is
not guaranteed. See "Determination of Net Asset Value" for a discussion
of the manner in which the Fund's price per share is determined.
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 are of one class and have equal rights as to
dividends and in liquidation. Shares have no preemptive, subscription or
conversion rights and are freely transferable.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
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 beneficial interest 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.
APPENDIX
Description of the highest commercial paper, bond and other short-
and long-term rating categories assigned by Standard & Poor's Corporation
("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch Investors
Service, Inc. ("Fitch"), Duff & Phelps, Inc. ("Duff"), IBCA Limited and
IBCA Inc. ("IBCA") and Thomson BankWatch, Inc. ("BankWatch"):
Commercial Paper and Short-Term Ratings
The designation A-1 by S&P 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.
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 of funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins
and 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.
The rating Fitch-1 (Highest Grade) is the highest commercial paper
rating assigned by Fitch. Paper rated Fitch-1 is regarded as having the
strongest degree of assurance for timely payment.
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.
The designation A1 by IBCA indicates that the obligation is supported
by a very strong capacity for timely repayment. Those obligations rated
A1+ are supported by the highest capacity for timely repayment.
The rating TBW-1 is the highest short-term rating assigned by
BankWatch; the rating indicates that the degree of safety regarding timely
repayment of principal and interest is very strong.
Bond and Long-Term Ratings
Bonds rated AAA are considered by S&P to be the highest grade
obligations and possess an extremely strong capacity to pay principal and
interest.
Bonds which are rated Aaa by Moody's are judged to be of the best
quality.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high
grade, broadly marketable, suitable for investment by trustees and
fiduciary institutions and liable to but slight market fluctuation other
than through changes in the money rate. The prime feature of an AAA bond
is a showing of earnings several times or many times interest
requirements, with such stability of applicable earnings that safety is
beyond reasonable question whatever changes occur in conditions.
Bonds rated AAA by Duff are considered to be of the highest credit
quality. The risk factors are negligible, being only slightly more than
U.S. Treasury debt.
Obligations rated AAA by IBCA have the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest
is substantial, such that adverse changes in business, economic or
financial conditions are unlikely to increase investment risk
significantly.
IBCA also assigns a rating to certain international and U.S. banks.
An IBCA bank rating represents IBCA's current assessment of the strength
of the bank and whether such bank would receive support should it
experience difficulties. In its assessment of a bank, IBCA uses a dual
rating system comprised of Legal Ratings and Individual Ratings. In
addition, IBCA assigns banks Long- and Short-Term Ratings as used in the
corporate ratings discussed above. Legal Ratings, which range in
gradation from 1 through 5, address the question of whether the bank would
receive support provided by central banks or shareholders if it
experienced difficulties, and such ratings are considered by IBCA to be a
prime factor in its assessment of credit risk. Individual Ratings, which
range in gradations from A through E, represent IBCA's assessment of a
bank's economic merits and address the question of how the bank would be
viewed if it were entirely independent and could not rely on support from
state authorities or its owners.
In addition to ratings of short-term obligations, BankWatch assigns a
rating to each issuer it rates, in gradations of A through E. BankWatch
examines all segments of the organization including, where applicable, the
holding company, member banks or associations, and other subsidiaries. In
those instances where financial disclosure is incomplete or untimely, a
qualified rating (QR) is assigned to the institution. BankWatch also
assigns, in the case of foreign banks, a country rating which represents
an assessment of the overall political and economic stability of the
country in which the bank is domiciled.
<TABLE>
<CAPTION>
First Prairie Cash Management
Statement of Investments JUNE 30, 1994
Principal
NEGOTIABLE BANK CERTIFICATES OF DEPOSIT-11.9% Amount Value
- --------------------------------------------- ------------- ----------
<S> <C> <C>
Dai-Ichi Kangyo Bank Ltd. (Yankee)
4.16%, 7/20/94.......................................................... $ 10,000,000 $ 10,000,311
Mitsubishi Bank Ltd. (Yankee)
4.50%, 8/15/94.......................................................... 10,000,000 10,002,807
Rabobank Nederland N.V. (Yankee)
4.20%, 8/12/94.......................................................... 9,000,000 8,993,483
-------------
TOTAL NEGOTIABLE BANK CERTIFICATES OF DEPOSIT
(cost $28,996,601)...................................................... $ 28,996,601
--------------
--------------
BANKERS' ACCEPTANCES-8.2%
- -------------------------
Fuji Bank Ltd. (Yankee)
4.51%, 8/15/94.......................................................... $ 10,000,000 $ 9,944,250
Sakura Bank Ltd. (Yankee)
4.39%, 7/15/94.......................................................... 10,000,000 9,983,044
--------------
TOTAL BANKERS' ACCEPTANCES (cost $19,927,294)............................... $ 19,927,294
--------------
--------------
COMMERCIAL PAPER-34.6%
- ----------------------
ABN-Amro Bank N.V.
4.53%, 8/17/94.......................................................... $ 10,000,000 $ 9,941,511
Banc One Corp.
4.51%, 8/31/94.......................................................... 10,000,000 9,924,597
Bank of Nova Scotia
3.84%, 7/11/94.......................................................... 10,000,000 9,989,444
Barclays Bank of Canada
4.67%, 10/3/94.......................................................... 10,000,000 9,879,889
Enterprise Funding Corp.
4.60%, 9/23/94 (a)...................................................... 10,000,000 9,894,300
Iris Partners L.P.
3.97%, 7/12/94 (a)...................................................... 5,084,000 5,077,895
MCA Funding Corp.
4.63%, 10/24/94......................................................... 10,000,000 9,854,653
WMX Technologies Inc.
4.71%, 10/18/94......................................................... 10,000,000 9,859,814
Woodside Finance Ltd.
4.56%, 9/12/94.......................................................... 10,000,000 9,908,750
--------------
TOTAL COMMERCIAL PAPER (cost $84,330,853)................................... $ 84,330,853
--------------
--------------
CORPORATE NOTES-8.2%
- --------------------
General Electric Capital Corp.
3.48%, 8/25/94.......................................................... $ 10,000,000 $ 9,999,311
Merrill Lynch & Co. Inc.
4.40%, 6/7/95 (b)....................................................... 10,000,000 10,000,000
--------------
TOTAL CORPORATE NOTES (cost $19,999,311).................................... $ 19,999,311
--------------
--------------
First Prairie Cash Management
Statement of Investments (continued) JUNE 30, 1994
Principal
SHORT-TERM BANK NOTES-4.1% Amount Value
- --------------------------
-------------- ------------
NationsBank of North Carolina N.A.
3.52%, 8/18/94.......................................................... $ 5,000,000 $ 4,999,869
PNC Bank N.A.
3.63%, 1/20/95.......................................................... 5,000,000 4,997,859
--------------
TOTAL SHORT-TERM BANK NOTES (cost $9,997,728)............................... $ 9,997,728
--------------
--------------
U.S. TREASURY BILLS-4.0%
- ------------------------
4.59%, 12/15/94
(cost $9,792,410)....................................................... $ 10,000,000 $ 9,792,410
--------------
--------------
U.S. GOVERNMENT AGENCIES-16.4%
- ------------------------------
Agency for International Development
Floating Rate Notes
5.05%, 5/1/2023 (b)..................................................... $ 5,000,000 $ 5,000,000
Federal Home Loan Banks
Floating Rate Notes
4.92%, 3/17/2000 (b).................................................... 10,000,000 10,000,000
Student Loan Marketing Association
Floating Rate Notes
3.99%, 6/8/95 (b)....................................................... 25,000,000 25,000,000
--------------
TOTAL U.S. GOVERNMENT AGENCIES (cost $40,000,000)........................... $ 40,000,000
--------------
--------------
TOTAL INVESTMENTS
(cost $213,044,197)............................................ 87.4% $213,044,197
------- --------------
------- --------------
CASH AND RECEIVABLES (NET)......................................... 12.6% $ 30,775,727
------- --------------
------- --------------
NET ASSETS .................................................. 100.0% $243,819,924
------- --------------
------- --------------
Notes To Statement of Investments:
(a) Backed by an irrevocable letter of credit.
(b) Variable interest rate - subject to periodic change.
See notes to financial statements.
</TABLE>
<TABLE>
First Prairie Cash Management
Statement of Assets and Liabilities JUNE 30, 1994
<S> <C> <C>
ASSETS:
Investments in securities, at value-Note 1(a)........................... $213,044,197
Cash.................................................................... 4,934,072
Receivable for investment securities sold............................... 25,168,213
Interest receivable..................................................... 779,843
Prepaid expenses........................................................ 65,750
--------------
243,992,075
LIABILITIES:
Due to The First National Bank of Chicago............................... $ 96,084
Accrued expenses and other liabilities.................................. 76,067 172,151
------------ ------------
NET ASSETS ................................................................ $243,819,924
--------------
--------------
REPRESENTED BY:
Paid-in capital......................................................... $243,979,657
Accumulated net realized (loss) on investments.......................... (159,733)
--------------
NET ASSETS at value applicable to 243,979,657 outstanding shares of
Beneficial Interest, equivalent to $1.00 per share (unlimited number of
$.001 par value shares authorized)...................................... $243,819,924
--------------
--------------
NET ASSET VALUE, offering and redemption price per share
($243,819,924 / 243,979,657 shares)..................................... $1.00
-----
-----
Statement of Operations YEAR ENDED JUNE 30, 1994
INVESTMENT INCOME:
Interest Income......................................................... $ 9,285,026
Expenses:
Management fee-Note 2(a).............................................. $ 892,114
Professional fees..................................................... 49,300
Registration fees..................................................... 48,880
Custodian fees........................................................ 42,222
Prospectus and shareholders' reports.................................. 17,514
Trustees' fees and expenses-Note 2(b)................................. 6,262
Shareholder servicing costs........................................... 3,753
Miscellaneous......................................................... 35,851
------------
1,095,896
Less-reduction in management fee due
to undertakings-Note 2(a)......................................... 304,836
------------
Total Expenses.................................................. 791,060
-------------
INVESTMENT INCOME-NET....................................................... 8,493,966
NET REALIZED (LOSS) ON INVESTMENTS-Note 1(b)................................ (136,023)
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 8,357,943
------------
------------
See notes to financial statements.
</TABLE>
<TABLE>
First Prairie Cash Management
Statement of Changes in Net Assets
Year Ended June 30,
------------------------------------
1993* 1994
-------------- --------------
<S> <C> <C>
OPERATIONS:
Investment income-net................................................ $ 2,487,708 $ 8,493,966
Net realized (loss) on investments................................... (23,710) (136,023)
-------------- --------------
Net Increase In Net Assets Resulting From Operations............... 2,463,998 8,357,943
-------------- --------------
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net................................................ (2,487,708) (8,493,966)
-------------- --------------
BENEFICIAL INTEREST TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold........................................ 1,971,179,813 2,167,517,783
Dividends reinvested................................................. 100,330 654,107
Cost of shares redeemed.............................................. (1,795,643,634) (2,099,928,742)
-------------- --------------
Increase In Net Assets From Beneficial Interest Transactions....... 175,636,509 68,243,148
-------------- --------------
Total Increase In Net Assets................................... 175,612,799 68,107,125
NET ASSETS:
Beginning of year.................................................... 100,000 175,712,799
-------------- --------------
End of year.......................................................... $ 175,712,799 $ 243,819,924
-------------- --------------
-------------- --------------
* From July 30, 1992 (commencement of operations) to June 30, 1993.
See notes to financial statements.
</TABLE>
First Prairie Cash Management
Financial Highlights
Reference is made to Page 2 of the Prospectus dated October 31, 1994.
See notes to financial statements.
First Prairie Cash Management
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act ("Act") as a
diversified open-end management investment company. The First National Bank
of Chicago ("Manager") serves as the Fund's investment adviser. The Dreyfus
Corporation ("Dreyfus") provides certain administrative services to the
Fund-see Note 2(a). Dreyfus Service Corporation ("Distributor"), a
wholly-owned subsidiary of Dreyfus, acts as the exclusive distributor of the
Fund's shares, which are sold without a sales charge.
It is the Fund's policy to maintain a continuous net asset value per
share of $1.00; the Fund has adopted certain investment, portfolio valuation
and dividend and distribution policies to enable it to do so.
(A) PORTFOLIO VALUATION: Investments are valued at amortized cost, which
has been determined by the Fund's Board of Trustees to represent the fair
value of the Fund's investments.
(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 is recognized on the accrual basis. Cost of investments represent
amortized cost.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain, if any, are normally declared and
paid annually, but the Fund may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Fund not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, 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 taxable income
sufficient to relieve it from all, or substantially all, Federal income
taxes.
The Fund has an unused capital loss carryover of approximately $19,000
available for Federal income tax purposes to be applied against future net
securities profits, if any realized subsequent to June 30, 1994. The
carryover does not include net realized securities losses from November 1,
1993 through June 30, 1994 which are treated, for Federal income tax
purposes, as arising in fiscal 1995. If not applied, the carryover expires in
fiscal 2002.
At June 30, 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).
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .35 of 1% of the average
daily value of the Fund's net assets and is payable monthly. The Agreement
further provides that if in any full fiscal year the aggregate expenses of
the Fund exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Fund, the Fund may deduct from the payments to be made
to the Manager, or the Manager will bear such excess to the extent required
by
First Prairie Cash Management
NOTES TO FINANCIAL STATEMENTS (continued)
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 (excluding 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 the Fund's net assets in accordance
with California "blue sky" regulations.
The Manager has engaged Dreyfus to assist it in providing certain
administrative services for the Fund pursuant to a Master Administration
Agreement between the Manager and Dreyfus. Pursuant to its agreement with
Dreyfus, the Manager has agreed to pay Dreyfus a monthly fee at the annual
rate of .05 of 1% of the value of the Fund's average daily net assets. During
the year ended June 30, 1994, $127,445 is payable to Dreyfus by the Manager
pursuant to the agreement.
However, the Manager had undertaken from June 1, 1993 to November 30,
1993 to reduce the management fee paid by and reimburse such excess expenses
of the Fund, to the extent that the Fund's aggregate expenses (excluding
certain expenses as described above) exceeded specified annual percentages of
the Fund's average daily net assets. The Manager has currently undertaken
from December 1, 1993 to assume all expenses of the Fund in excess of an
annual rate of .35 of 1% of the Fund's average daily net assets. The
reduction in management fee, pursuant to the undertakings, amounted to
$304,836, for the year ended June 30, 1994.
The undertaking may be modified by the Manager from time to time,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the Agreement.
(B) Certain officers and trustees of the Fund are "affiliated persons,"
as defined in the Act, of the Manager and/or the Distributor. Each trustee
who is not an "affiliated person" receives an annual fee of $1,500 and an
attendance fee of $250 per meeting.
(C) On December 5, 1993, Dreyfus entered into an Agreement and Plan of
merger 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 August 1994, but could occur later.
First Prairie Cash Management
Report of Ernst & Young LLP, Independent Auditors
SHAREHOLDERS AND BOARD OF TRUSTEES
FIRST PRAIRIE CASH MANAGEMENT
We have audited the accompanying statement of assets and liabilities of
First Prairie Cash Management, including the statement of investments, as of
June 30, 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 June 30, 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 Cash Management at June 30, 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.
(Signature Logo)
New York, New York
August 3, 1994
