Registration Nos. 33-46405
811-6597
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/X/
Pre-Effective Amendment No. 4
/X/
Post-Effective Amendment No. _____ /
/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940/X/
Amendment No. __ /
/
(Check appropriate box or boxes)
PRAIRIE INSTITUTIONAL FUNDS
(formerly, First Prairie Quality Income Fund)
(Exact Name of Registrant as Specified in Charter)
c/o The First National Bank of Chicago
Thre e First National Plaza
Chicago, Illinois 60670 60670
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (312)
732-4231
Bradford M. Markham, Esq.
c/o The First National Bank of Chicago
Three First National Plaza
Chicago, Illinois 60670
(Name and Address of Agent for Service)
copy to:
Lewis G. Cole, Esq.
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004-2696
Approximate Date of Proposed Public Offering: As soon as
practicable
after this Registration Statement is declared effective.
It is proposed that this filing will become effective
(check
appropriate box)
____ immediately upon filing pursuant to paragraph (b)
____ on (date) pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)
____ on (date) pursuant to paragraph (a) of Rule 485.
<PAGE>
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part A of
Form N-1A Caption Page
1 Cover Page Cover
2 Synopsis 3
3 Condensed Financial Information *
4 General Description of Registrant 4, 21
5 Management of the Fund 11
5(a) Management's Discussion of Fund's *
Performance
6 Capital Stock and Other Securities 21
7 Purchase of Securities Being Offered 13
8 Redemption or Repurchase 15
9 Pending Legal Proceedings *
Items in
Part B of
Form N-1A
10 Cover Page B-1
11 Table of Contents B-1
12 General Information and History *
13 Investment Objectives and Policies B-2
14 Management of the Fund B-11
15 Control Persons and Principal Holders
of Securities B-11
16 Investment Advisory and Other Services B-11
17 Brokerage Allocation B-18
Items in
Part B of
Form N-1A Caption Page
18 Capital Stock and Other Securities B-21
19 Purchase, Redemption and Pricing of
Securities Being Offered B-14
20 Tax Status *
21 Underwriters B-14
22 Calculations of Performance Data *
23 Financial Statements B-27
Items in
Part C of
Form N-1A
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under Common
Control with Registrant C-2
26 Number of Holders of Securities C-2
27 Indemnification C-2
28 Business and Other Connections of
Investment Adviser C-3
29 Principal Underwriters C-3
30 Location of Accounts and Records C-3
31 Management Services C-3
32 Undertakings C-4
- ---------
*Omitted since answer is negative or inapplicable.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
Cash Management Fund
Municipal Cash Management Fund
Treasury Prime Cash Management Fund
U.S. Government Securities Cash Management Fund
PROSPECTUS
First Chicago Investment Advisors, Inc.
Manager
Concord Financial Group, Inc.
Distributor
Prospectus begins on page one.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
PROSPECTUS - __________,
1994
Prairie Institutional Funds (the "Trust") is an
open-end, management investment company, known as a series fund.
By this Prospectus, the Trust is offering Class A and Class B
shares of four separate diversified, money market series (each,
a
"Fund"): Cash Management Fund, Municipal Cash Management Fund,
Treasury Prime Cash Management Fund and U.S. Government
Securities
Cash Management Fund. Each 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, and,
in
the case of the Municipal Cash Management Fund, exempt from
Federal income tax.
Each 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.
Each 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 imposed by the Fund.
Class A shares and Class B shares are identical,
except
as to the services offered to and expenses borne by each Class.
Class B bears certain costs pursuant to a Service Plan adopted
in
accordance with Rule 12b-1 under the Investment Company Act of
1940.
First Chicago Investment Advisors, Inc. (the
"Manager")
serves as each Fund's investment adviser.
Concord Financial Group, Inc. (the "Distributor")
serves
as each Fund's distributor.
An investment in a Fund is neither insured nor
guaranteed by the U.S. Government. There can be no assurance
that
each Fund will be able to maintain a stable net asset value of
$1.00 per share.
Mutual fund shares are not deposits or obligations of,
or guaranteed or endorsed by, any bank, and are not federally
insured by the Federal Deposit Insurance Corporation ("FDIC"),
the
Federal Reserve Board, or any other agency. Money market mutual
shares involve certain investment risks, including the possible
loss of principal.
______________________
This Prospectus sets forth concisely information about
the Trust and Funds 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 ___________, 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 Trust at _________________________, or call
______________.
________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
________________________________________________________________
Table of Contents
Annual Fund Operating Expenses. . . . . . . . . . . .
Description of the Funds. . . . . . . . . . . . . . .
Management of the Trust . . . . . . . . . . . . . . .
How to Buy Fund Shares. . . . . . . . . . . . . . . .
Exchange Privilege. . . . . . . . . . . . . . . . . .
How to Redeem Fund Shares . . . . . . . . . . . . . .
Service Plan. . . . . . . . . . . . . . . . . . . . .
Dividends, Distributions and Taxes. . . . . . . . . .
Yield Information . . . . . . . . . . . . . . . . . .
General Information . . . . . . . . . . . . . . . . .
Appendix. . . . . . . . . . . . . . . . . . . . . . .
<PAGE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
<S> <C>
<C>
Cash Management
Municipal Cash
Series
Management Series
Class A Class B
Class A Class B
Shares Shares
Shares Shares
Management Fees. . . . . . . . . . . .35% .35% .35%
.35%
12b-1 Fees (distribution and servicing) None .25% None
.25%
Total Fund Operating Expenses. . . . . .35% .60% .35%
.60%
Example:
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:
Class A Class B
Class A Class B
Shares Shares
Shares Shares
1 Year. . . . . . . . . . . $ 4 $ 6 $
4 $ 6
3 Years . . . . . . . . . . $10 $19
$10 $19
U.S. Government
Treasury Prime Cash
Securities Cash
Management Series
Management Series
Class A Class B
Class A Class B
Shares Shares
Shares Shares
Management Fees. . . . . . . . . .35% .35%
.35% .35%
12-b Fees (distribution and servicing) None .25%
None .25%
Total Fund Operating Expenses. . . . .35% .60%
.35% .60%
Example:
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:
Class A Class B
Class A Class B
Shares Shares
Shares Shares
1 Year . . . . . . . . $ 4 $ 6
$ 4 $ 6
3 Years. . . . . . . . $10 $19
$10 $19
</TABLE>
The amounts listed in the examples should not be considered as
representative of future expenses and actual expenses may be
greater or less than those indicated. Moreover, while the
example assumes a 5% annual return, each Fund's actual
performance will vary and may result in an actual return greater
or less than 5%.
The purpose of the foregoing table is to assist investors in
understanding the various costs and expenses borne by a Fund,
and therefore indirectly by investors, the payment of which will
reduce investors' return on an annual basis. The Manager has
undertaken, as to each Fund, 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% and .60% of the value of the average net assets of
Class A and Class B, respectively, for the fiscal year, the
Trust 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 may charge their clients direct fees in connection with
such transactions; such fees are not reflected in the foregoing
table. See "Management of the Trust," "How to Buy Fund Shares"
and "Service Plan."
DESCRIPTION OF THE FUNDS
General
The Trust is a "series fund," which is a mutual fund
divided into separate portfolios. Each portfolio is treated as
a separate entity for certain matters under the Investment
Company Act of 1940, as amended (the "1940 Act"), and for other
purposes, and a shareholder of one portfolio is not deemed to be
a shareholder of any other portfolio. As described below, for
certain matters Trust shareholders vote together as a group; as
to others they vote separately by Fund.
By this Prospectus, two classes of shares of each Fund
are being offered--Class A shares and Class B shares (each such
class being referred to as a "Class"). The Classes are
identical, except that Class B shares are subject to an annual
distribution and service fee at the rate of .25% of the value of
the average daily net assets of Class B. The fee is payable to
the Trust's distributor for advertising, marketing and
distributing Class B shares and for ongoing personal services
relating to Class B shareholder accounts and services related to
the maintenance of such shareholder accounts pursuant to a
Service Plan adopted in accordance with Rule 12b-1 under the
1940 Act. The Trust's distributor may make payments to certain
financial institutions, securities dealers and other industry
professionals (collectively, "Service Agents") in respect of
these services. See "Service Plan." The distribution and
service fee paid by Class B will cause such Class to have a
higher expense ratio and to pay lower dividends than Class A.
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
Each 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, and, in the case of
the Municipal Cash Management Fund, exempt from Federal income
tax. Each Fund's investment objective cannot be changed without
approval by the holders of a majority (as defined in the 1940
Act) of such Fund's outstanding voting shares. There can be no
assurance that the Fund's investment objective will be achieved.
Securities in which the Funds invest 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
Each Fund seeks to maintain a net asset value of $1.00
per share for purchases and redemptions. To do so, the Trust
uses the amortized cost method of valuing each Fund's securities
pursuant to Rule 2a-7 under the 1940 Act, certain requirements
of which are summarized below.
In accordance with Rule 2a-7, each 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, in
the case of the Cash Management Fund and Municipal Cash
Management Fund, 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. The Cash Management Fund and Municipal Cash
Management Fund will purchase only instruments 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 Cash
Management Fund and Municipal Cash Management Fund may purchase
are Moody's Investors Service, Inc., ("Moody's"), Standard &
Poor's Corporation ("S&P"), Duff and Phelps, Inc., Fitch
Investors Service, Inc. ("Fitch"), IBCA Limited and IBCA Inc.,
and Thomson BankWatch, Inc. and their rating criteria are
described in the Appendix to the Statement of Additional
Information. For further information regarding the amortized
cost method of valuing securities, see "Determination of Net
Asset Value" in the Statement of Additional Information. There
can be no assurance that each Fund will be able to maintain a
stable net asset value of $1.00 per share.
. Cash Management 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. See "Appendix--Portfolio Securities." In addition,
the Fund is permitted to lend portfolio securities to the extent
described under "Appendix--Investment Practices." 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 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.
. Municipal Cash Management Fund invests at least 80%
of the value of its net assets (except when maintaining a
temporary defensive position) in Municipal Obligations.
Municipal Obligations are debt obligations issued by states,
territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies
and instrumentalities, or multi-state agencies or authorities,
the interest from which is, in the opinion of bond counsel to
the issuer, exempt from Federal income tax. See "Appendix--
Portfolio Securities."
From time to time, the Fund may invest more than 25%
of the value of its total assets in industrial development bonds
which, although issued by industrial development authorities,
may be backed only by the assets and revenues of the
non-governmental users. Interest on Municipal Obligations
(including certain industrial development bonds) which are
specified private activity bonds, as defined in the Internal
Revenue Code of 1986, as amended (the "Code"), issued after
August 7, 1986, while exempt from Federal income tax, is a
preference item for the purpose of the alternative minimum tax.
Where a regulated investment company receives such interest, a
proportionate share of any exempt-interest dividend paid by the
investment company may be treated as such a preference item to
the shareholder. The Fund may invest without limitation in such
Municipal Obligations if the Manager determines that their
purchase is consistent with the Fund's investment objective.
See "Risk Factors--Fixed-Income Securities" below.
From time to time, on a temporary basis other than for
temporary defensive purposes (but not to exceed 20% of the value
of the Fund's net assets) or for temporary defensive purposes,
the Fund may invest in taxable money market instruments of the
type in which the Cash Management Fund may invest. Dividends
paid by the Fund that are attributable to income earned by it
from these securities will be taxable to investors. See
"Dividends, Distributions and Taxes." If the Fund purchases
taxable money market instruments the Trust will value them using
the amortized cost method and comply with the provisions of Rule
2a-7 relating to purchases of taxable instruments. Under normal
market conditions, the Trust anticipates that not more than 5%
of the value of the Fund's total assets will be invested in any
one category of these securities. See "Appendix--Portfolio
Securities."
. Treasury Prime Cash Management Fund invests only in
securities issued or guaranteed as to principal or interest by
the U.S. Government. These securities include U.S. Treasury
securities, which differ in their interest rates, maturities and
times of issuance. See "Appendix--Portfolio Securities." The
Fund does not invest in repurchase agreements, securities issued
by agencies or instrumentalities of the Federal government that
are not guaranteed by the U.S. Government or any other type of
money market instrument or security.
. U.S. Government Securities Cash Management Fund
invests only in short-term securities issued or guaranteed as to
principal or interest by the U.S. Government, its agencies or
instrumentalities and may enter into repurchase agreements. See
"Appendix--Portfolio Securities." The Fund also may lend
securities from its portfolio as described under "Appendix--
Investment Practices."
Certain Fundamental Policies
Each Fund may (i) invest up to 25% of the value of its
total assets in the securities of issuers in a single industry,
provided there is no limitation on the purchase of obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or, in the case of the Municipal Cash
Management Fund, Municipal Obligations; and (ii) pledge,
hypothecate, mortgage or otherwise encumber its assets, but only
to secure permitted borrowings (this policy, however, is not
fundamental in the case of the Municipal Cash Management Fund
and Treasury Prime Cash Management Fund). In addition, (i) each
of the Municipal Cash Management Fund and Treasury Prime Cash
Management Fund may borrow money to the extent permitted under
the 1940 Act; (ii) each of the Cash Management Fund and U.S.
Government Securities Cash Management Fund 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; (iii) each of
the Cash Management Fund and Municipal Cash Management Fund may
invest up to 5% of its total 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 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; and (iv) the Cash
Management Fund will invest, except when it has adopted a
temporary defensive position, at least 25% of its total assets
in securities issued by banks, including foreign banks and
branches. This paragraph describes, except as noted,
fundamental policies that cannot be changed as to a Fund without
approval by the holders of a majority (as defined in the 1940
Act) of such Fund's outstanding voting shares. See "Investment
Objective and Management Policies--Investment Restrictions" in
the Statement of Additional Information.
Certain Additional Non-Fundamental Policy
Each Fund may invest up to 10% of the value of its net
assets in illiquid securities. See "Investment Objective and
Management Policies--Investment Restrictions" in the Statement
of Additional Information.
Risk Factors
Foreign Securities--(Cash Management Fund) Since the Cash
Management Fund's portfolio may contain securities issued by
foreign branches of domestic and foreign banks, domestic and
foreign branches of foreign banks and thrift institutions, 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.
Fixed-Income Securities--(Municipal Cash Management Fund)
Certain provisions in the Code relating to the issuance of
Municipal Obligations may reduce the volume of Municipal
Obligations qualifying for Federal tax exemption. One effect of
these provisions could be to increase the cost of the Municipal
Obligations available for purchase by the Fund and thus reduce
the available yield. Shareholders of the Municipal Cash
Management Fund should consult their tax advisers concerning the
effect of these provisions on an investment in the Fund.
Proposals that may restrict or eliminate the income tax
exemption for interest on Municipal Obligations may be
introduced in the future. If any such proposal were enacted
that would reduce the availability of Municipal Obligations for
investment by the Fund so as to adversely affect the Fund's
shareholders, the Trust would reevaluate the Fund's investment
objective and policies and submit possible changes in the Fund's
structure to shareholders for their consideration. If
legislation were enacted that would treat a type of Municipal
Obligation as taxable, the Trust would treat such security as a
permissible taxable investment within the applicable limits set
forth herein.
The Municipal Cash Management Fund may invest more
than 25% of the value of its total assets in Municipal
Obligations which are related in such a way that an economic,
business or political development or change affecting one such
security also would affect the other securities; for example,
securities the interest upon which is paid from revenues of
similar types of projects, or securities of issuers that are
located in the same state. As a result, the Fund may be subject
to greater risk as compared to a fund that does not follow this
practice.
Certain municipal lease/purchase obligations in which
the Municipal Cash Management Fund may invest may contain "non-
appropriation" clauses which provide that the municipality has
no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis.
Although "non-appropriation" lease/purchase obligations are
secured by the leased property, disposition of the leased
property in the event of foreclosure might prove difficult. In
evaluating the credit quality of a municipal lease/purchase
obligation that is unrated, the Manager will consider, on an
ongoing basis, a number of factors including the likelihood that
the issuing municipality will discontinue appropriating funding
for the leased property.
Other Investment Considerations--Each Fund will attempt 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 Funds
since each Fund usually will not pay brokerage commissions on
purchases of short-term debt obligations, including U.S.
Government securities. The value of the securities held by each
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 is held to maturity,
no gain or loss will be realized.
Each Fund may purchase securities on a when-issued
basis, which means that the price is fixed at the time of
commitment, but delivery and payment ordinarily take place a
number of days after the date of the commitment to purchase.
The Fund will make commitments to purchase such securities only
with the intention of actually acquiring the securities, but the
Fund may sell these securities before the settlement date if it
is deemed advisable, although any gain realized on such sale
would be taxable. The Fund will not accrue income in respect of
a when-issued security prior to its stated delivery date. No
additional when-issued commitments will be made by the Municipal
Cash Management Fund if more than 20% of the value of such
Fund's net assets would be so committed.
Securities purchased on a when-issued basis and
certain other securities held in the Fund's portfolio are
subject to changes in value (both generally changing in the same
way, i.e., appreciating when interest rates decline and
depreciating when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes,
real or anticipated, in the level of interest rates. Securities
purchased on a when-issued basis may expose the Fund to risk
because they may experience such fluctuations prior to their
actual delivery. Purchasing securities on a when-issued basis
can involve the additional risk that the yield available in the
market when the delivery takes place actually may be higher than
that obtained in the transaction itself. A segregated account
of the Fund consisting of cash, cash equivalents or U.S.
Government securities or other high quality liquid debt
securities at least equal at all times to the amount of the
when-issued commitments will be established and maintained at
the Trust's custodian bank. Purchasing securities on a when-
issued basis when the Fund is fully or almost fully invested may
result in greater potential fluctuation in the value of the
Fund's net assets and its net asset value per share.
Investment decisions for each Fund are made
independently from those of other investment companies or
investment advisory accounts 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 a Fund may invest at the same time as such
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 TRUST
Manager
The Manager, located at Three First National Plaza,
Chicago, Illinois 60670, is the Fund's investment adviser. The
Manager is a newly-formed, registered investment adviser and a
wholly-owned subsidiary of The First National Bank of Chicago
("FNBC"), which in turn is a wholly-owned subsidiary of First
Chicago Corporation, a registered bank holding company. FNBC is
a commercial bank offering a wide range of banking and
investment services to customers throughout the United States
and around the world. As of June 30, 1994, FNBC was one of the
largest commercial banks in the United States and the largest in
the mid-western United States in terms of assets ($41.8 billion)
and in terms of deposits ($23.8 billion). As of June 30, 1994,
FNBC provided investment management services to portfolios
containing approximately $9.6 billion in assets. The Manager
serves as investment adviser for the Trust pursuant to a
Management Agreement dated as of ____________, 1994. Under the
Management Agreement, the Manager supervises and assists in the
overall management of the Trust's affairs, subject to the
overall authority of the Trust's Board of Trustees and in
conformity with Massachusetts law and the stated policies of the
Trust. The Manager is responsible for making investment
decisions for the Trust, placing purchase and sale orders (which
may be allocated to various dealers based on their sales of Fund
shares) and providing research, statistical analysis and
continuous supervision of each Fund's investment portfolio. The
Manager has advised the Trust that in making its investment
decisions the Manager does not obtain or use material inside
information in the possession of any other division or
department of the Manager or in the possession of any affiliate
of the Manager.
The Manager has engaged Concord Holding Corporation,
located at 125 West 55th Street, New York, New York 10019 (the
"Administrator"), to assist it in providing certain
administrative services for the Trust pursuant to a Master
Administration Agreement between the Manager and the
Administrator. The Administrator currently provides
administrative services or sub-administrative services to other
investment companies with over $33 billion in assets. The
Manager, from its own funds, will pay the Administrator for the
Administrator's services.
Under the terms of the Management Agreement, the Trust
has agreed to pay the Manager a monthly fee at the annual rate
of .35 of 1% of the value of each Fund's average daily net
assets.
Distributor
Concord Financial Group, Inc. (the "Distributor"),
located at 125 West 55th Street, New York, New York 10019,
serves as the Trust's principal underwriter and distributor of
the Funds' shares. The Distributor, a wholly-owned subsidiary
of the Administrator, was organized to distribute shares of
mutual funds to institutional and retail investors. The
Distributor distributes the shares of other investment companies
with over $21 billion in assets.
Transfer and Dividend Disbursing Agent and Custodian
_____________________________________, is the Trust's
Transfer and Dividend Disbursing Agent (the "Transfer Agent").
__________________________________________________, is the
Trust's Custodian.
Expenses
All expenses incurred in the operation of the Trust
are borne by the Trust, except to the extent specifically
assumed by the Manager. The expenses borne by the Trust
include: 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 Trust'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. In addition,
Class B shares are subject to an annual distribution and service
fee pursuant to a plan adopted in accordance with Rule 12b-1
under the 1940 Act. See "Service Plan." Expenses attributable
to a particular Fund are charged against the assets of that
Fund; other expenses of the Trust are allocated among the Funds
on the basis determined by the Board of Trustees, including, but
not limited to, proportionately in relation to the net assets of
each Fund.
The Manager has undertaken, as to each Fund, 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 and .60 of 1% of the value of the
average net assets of Class A and Class B, respectively, for the
fiscal year, the Trust 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
Each Fund is designed for institutional investors,
including banks (such as FNBC), 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 Trust 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 those
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 Account Application. The Trust does not
impose any sales charges in connection with purchases of Fund
shares, although Service Agents and other institutions may
charge their clients fees in connection with purchases for the
accounts of their clients. These fees would be in addition to
any amounts which might be received under the Service Plan.
Service Agents may receive different levels of compensation for
selling different classes of shares. Each Service Agent has
agreed to transmit to its clients a schedule of such fees. The
Fund does not issue share certificates. The Trust reserves the
right to reject any purchase order. It is not recommended that
the Municipal Cash Management Fund be used as a vehicle for
Keogh, IRA or other qualified retirement plans.
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
purchases of Fund shares by calling ____________. For
instructions concerning purchases and to determine whether their
computer facilities are compatible with the Trust's, investors
should call _________________________.
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.
Each Fund's net asset value per share is determined as
of 2:00 p.m., Chicago time, on each day that the New York Stock
Exchange is open for business, except Martin Luther King, Jr.
Day, Columbus Day and Veterans Day. Net asset value per share
of each Class is computed by dividing the value of the Fund's
net assets represented by such Class (i.e., the value of its
assets less liabilities) by the total number of shares of such
Class outstanding. See "Determination of Net Asset Value" in
the 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 Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to the
Trust 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 a Fund, shares of the other
Funds offered by this Prospectus. The Exchange Privilege may be
expanded to permit exchanges between the Funds and certain other
series or funds that, in the future, may be advised by the
Manager, to the extent the shares of such series or 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 the Distributor 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 _______________ or, if calling
from overseas, by calling ________________. See "How to Redeem
Fund Shares--Procedures." 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 Trust
reserves the right, upon not less than 60 days' written notice,
to charge shareholders a nominal fee in accordance with rules
promulgated by the Securities and Exchange Commission. The Fund
reserves the right to reject any exchange request in whole or in
part. The Exchange Privilege may be modified or terminated at
any time upon notice to shareholders. See "Exchange Privilege"
in the Statement of Additional Information.
The exchange of shares of one series or 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 Trust imposes no charges when shares are redeemed.
Service Agents and other institutions may charge their clients a
nominal fee for effecting redemptions of Fund shares. The value
of the shares redeemed may be more or less than their original
cost, depending upon the relevant Fund's then-current net asset
value.
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 Trust 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 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
Trust 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 Trust or the Transfer Agent may be liable
for any losses due to unauthorized or fraudulent instructions.
Neither the Trust 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 ________________. The Trust 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 Trust. The Statement of Additional
Information sets forth instructions for redeeming shares by
wire.
Redemption Through Compatible Computer Facilities--The Trust
makes available to institutions the ability to redeem shares
through compatible computer facilities. Investors desiring to
redeem shares in this manner should call __________________ to
determine whether their computer facilities are compatible and
to receive instructions for redeeming shares in this manner.
SERVICE PLAN
(Class B Only)
Class B shares are subject to a Service Plan adopted
pursuant to Rule 12b-1 under the 1940 Act. Under the Service
Plan, each Fund pays the Distributor for advertising, marketing
and distributing the Fund's Class B shares and for the provision
of certain services to the holders of Class B shares a fee at
the annual rate of .25 of 1% of the value of the average daily
net assets of Class B. The services provided may include
personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding the Fund and providing
reports and other information, and services related to the
maintenance of such shareholder accounts. The fee payable for
such services is intended to be a "service fee" as defined in
Article III, Section 26 of the NASD Rules of Fair Practice.
Under the Service Plan, the Distributor may make payments to
Service Agents in respect of these services. The Manager, FNBC
and their affiliates may act as Service Agents and receive fees
under the Service Plan. The Distributor determines the amounts
to be paid to Service Agents. Each Service Agent is required to
disclose to its clients any compensation payable to it by the
Fund pursuant to the Service Plan and any other compensation
payable by their clients in connection with the investment of
their assets in Fund shares. From time to time, the Distributor
may defer or waive receipt of fees under the Service Plan while
retaining the ability to be paid by the Fund under the Service
Plan thereafter. The fees payable to the Distributor under the
Service Plan for advertising, marketing and distributing Class B
shares and for payments to Service Agents are payable without
regard to actual expenses incurred.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each 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 shares of the Fund from
which they were paid at net asset value or, at the investor's
option, paid in cash. Each 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 a Fund
may make distributions on a more frequent basis to comply with
the distribution requirements of the Code, in all events in a
manner consistent with the provisions of the 1940 Act. No Fund
will make distributions from net realized securities gains
unless capital loss carryovers, if any, have been utilized or
have expired. Investors may choose whether to receive
distributions in cash or to reinvest in additional shares of the
Fund from which they were paid at net asset value. All expenses
are accrued daily and deducted before declaration of dividends
to investors. Dividends paid by each Class will be calculated
at the same time and in the same manner and will be of the same
amount, except that the expenses attributable solely to Class A
or Class B will be borne exclusively by such Class. Class B
shares will receive lower per share dividends than Class A
shares because of the higher expenses borne by Class B. See
"Annual Fund Operating Expenses."
Dividends paid by the Cash Management, Treasury Prime
Cash Management and U.S. Government Securities Cash Management
Funds derived from net investment income and dividends paid by
the Municipal Cash Management Fund derived from taxable
investments, together with distributions from any net realized
short-term securities gains and all or a portion of any gain
realized from the sale or other disposition of certain market
discount bonds, will be taxable to U.S. investors as ordinary
income whether or not reinvested in additional Fund shares.
Distributions from net realized long-term securities gains, if
any, will be taxable as long-term capital gains for Federal
income tax purposes if the beneficial holder of Fund shares is a
citizen or resident of the United States, regardless of how long
investors have held shares and whether such distributions are
received in cash or reinvested in additional shares.
Except for dividends from taxable investments, the
Trust anticipates that substantially all dividends paid by the
Municipal Cash Management Fund will not be subject to Federal
income tax. Dividends and distributions paid by the Fund may be
subject to certain state and local taxes. Although all or a
substantial portion of the dividends paid by the Municipal Cash
Management Fund may be excluded by shareholders of the Fund from
their gross income for Federal income tax purposes, the Fund may
purchase specified private activity bonds, the interest from
which may be (i) a preference item for purposes of the
alternative minimum tax, (ii) a component of the "adjusted
current earnings" preference item for purposes of the corporate
alternative minimum tax as well as a component in computing the
corporate environmental tax or (iii) a factor in determining the
extent to which the Social Security benefits of a beneficial
holder of the Fund's shares are taxable. If the Fund purchases
such securities, the portion of its dividends related thereto
will not necessarily be tax exempt to a beneficial holder of the
Fund's shares who is subject to the alternative minimum tax
and/or tax on Social Security benefits and may cause such
investor to be subject to such taxes.
Dividends and distributions attributable to interest
from direct obligations of the United States and paid by the
Treasury Prime Cash Management Fund currently are not subject to
state personal income tax. The Trust intends to provide
shareholders of the Treasury Prime Cash Management Fund with a
statement which sets forth the percentage of dividends and
distributions paid by the Fund that is attributable to interest
income from direct obligations of the United States.
Dividends paid by a Fund derived from net investment
income, together with distributions from net realized short-term
securities gains and all or a portion of any gain realized from
the sale or other disposition of certain market discount bonds,
paid by such Fund to a foreign investor who is the beneficial
owner of such Fund's shares generally are subject to U.S.
nonresident withholding taxes at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in
a tax treaty. Distributions from net realized long-term
securities gains paid by the Fund to such foreign investor
generally will not be subject to U.S. nonresident withholding
tax. However, such distributions may be subject to backup
withholding, as described below, unless the foreign investor
certifies his non-U.S. residency status.
Federal regulations generally require the Trust to
withhold ("backup withholding") and remit to the U.S. Treasury
31% of dividends and distributions from net realized securities
gains 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 Trust 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.
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. For the
Municipal Cash Management Fund, these statements will set forth
the dollar amount of income exempt from Federal tax and the
dollar amount, if any, subject to Federal tax. These dollar
amounts will vary depending on the size and length of time of
the investor's investment in the Municipal Cash Management Fund.
If the Municipal Cash Management Fund pays dividends derived
from taxable income, it intends to designate as taxable the same
percentage of the day's dividend as the actual taxable income
earned on that day bears to total income earned on that day.
Thus, the percentage of the dividend designated as taxable, if
any, may vary from day to day. No dividend will qualify for the
dividends received deduction allowable to certain U.S.
corporations.
It is expected that each Fund will qualify as a
"regulated investment company" under the Code so long as such
qualification is in the best interests of its shareholders.
Qualification as a regulated investment company 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. Each Fund is subject to a non-
deductible 4% excise tax, measured with respect to certain
undistributed amounts of taxable income and capital gains, if
any.
Each investor and beneficial shareholder should
consult its tax adviser regarding questions as to Federal, state
or local taxes.
YIELD INFORMATION
From time to time, each Fund will advertise 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 substantial-
ly. The yield of a 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. Each Fund's yield and effective
yield may reflect absorbed expenses pursuant to any undertaking
that may be in effect. See "Management of the Trust." Both
yield figures also take into account any applicable distribution
and service fees. As a result, at any given time, the
performance of Class B should be expected to be lower than that
of Class A. See "Service Plan."
Tax equivalent yield for the Municipal Cash Management
Fund is calculated by determining the pre-tax yield which, after
being taxed at a stated rate, would be equivalent to a stated
yield or effective yield calculated as described above.
Yield information is useful in reviewing a Fund's per-
formance, 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 Fund shares, including
data from Lipper Analytical Services, Inc., Bank Rate Monitor*,
N. Palm Beach, Fla. 33408, IBC/Donoghue's Money Fund Report and
other industry publications.
GENERAL INFORMATION
The Trust 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 March 12, 1992, and has not engaged in active
business to the date of this Prospectus. The Trust is
authorized to issue an unlimited number of shares of beneficial
interest, par value $.001 per share. Each Fund's shares are
classified into two classes. Each share has one vote and
shareholders will vote in the aggregate and not by class except
as otherwise required by law or with respect to any matter which
affects only one class. Holders of Class B shares only,
however, will be entitled to vote on matters submitted to
shareholders pertaining to the Service Plan. 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.
To date, the Board of Trustees has authorized the
creation of four separate portfolios of shares. The other
portfolios are not being offered by this Prospectus. All
consideration received by the Trust for shares of one of the
portfolios and all assets in which such consideration is
invested will belong to that portfolio (subject only to the
rights of creditors of the Trust) and will be subject to the
liabilities related thereto. The income attributable to, and
the expenses of, one portfolio (and as to classes within a
portfolio) are treated separately from those of the other
portfolios (and classes). The Trust has the ability to create,
from time to time, new portfolios without shareholder approval.
Rule 18f-2 under the 1940 Act provides that any matter
required to be submitted under the provisions of the 1940 Act or
applicable state law or otherwise to the holders of the
outstanding voting securities of an investment company, such as
the Trust, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the
outstanding shares of each Fund affected by such matter. Rule
18f-2 further provides that a Fund shall be deemed to be
affected by a matter unless it is clear that the interests of
such Fund in the matter are identical or that the matter does
not affect any interest of such Fund. However, the Rule exempts
the selection of independent accountants and the election of
Trustees from the separate voting requirements of the Rule.
Under Massachusetts law, shareholders could, under
certain circumstances, be held liable for the obligations of the
Trust. However, the Trust Agreement disclaims shareholder
liability for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Trust or a
Trustee. The Trust Agreement provides for indemnification from
the Trust's property for all losses and expenses of any
shareholder held personally liable for the obligations of the
Trust. Thus, the risk of a shareholder incurring financial loss
on account of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its
obligations, a possibility which management believes is remote.
Upon payment of any liability incurred by the Trust, the
shareholder paying such liability will be entitled to
reimbursement from the general assets of the Trust. The
Trustees intend to conduct the operations of the Trust in such a
way so as to avoid, as far as possible, ultimate liability of
the shareholders for liabilities of the Trust. As described
under "Management of the Trust" in the Statement of Additional
Information, the Trust 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 Trust
at the address shown on the front cover or by calling the
telephone number shown on the front cover.
No person has been authorized to give any information or to make
any representations other than those contained in this
Prospectus and in the Trust's official sales literature in
connection with the offer of the Funds' shares, and, if given or
made, such other information or representations must not be
relied upon as having been authorized by the Trust. 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>
APPENDIX
Portfolio Securities
To the extent set forth in this Prospectus and except
as noted below, each Fund may invest in the following
securities:
U.S. Treasury Securities--Each Fund may invest in U.S.
Treasury securities which include Treasury Bills, Treasury Notes
and Treasury Bonds that 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.
U.S. Government Securities--In addition to U.S.
Treasury securities, each Fund (the U.S. Treasury Prime Cash
Management Fund to a limited extent) may invest in securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. Some obligations issued or guaranteed by
U.S. Government agencies and instrumentalities, for example,
Government National Mortgage Association pass-through
certificates, are supported by the full faith and credit of the
U.S. Treasury; others, such as those of the Federal Home Loan
Banks, by the right of the issuer to borrow from the 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 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. Each Fund will invest in such
securities only when the Trust is satisfied that the credit risk
with respect to the issuer is minimal.
Repurchase Agreements--Each Fund, except the U.S.
Treasury Prime Cash Management Fund, may enter into repurchase
agreements, which involve the acquisition by a Fund of an
underlying debt instrument, subject to an obligation of the
seller to repurchase, and such Fund to resell, the instrument at
a fixed price usually not more than one week after its purchase.
The Trust's custodian or sub-custodian will have custody of, and
will hold in a segregated account, securities acquired by a Fund
under a repurchase agreement. Repurchase agreements are
considered by the staff of the Securities and Exchange
Commission to be loans by the Fund entering into them. In an
attempt to reduce the risk of incurring a loss on a repurchase
agreement, each of these Funds 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 in which such 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 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 a 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. Each of these Funds will consider on an ongoing basis
the creditworthiness of the institutions with which it enters
into repurchase agreements.
Bank Obligations--The Cash Management Fund will, and,
to a limited extent, the Municipal Cash Management Fund may,
invest in bank obligations, including certificates of deposit,
time deposits, bankers' acceptances and other short-term
obligations of domestic banks, foreign subsidiaries of domestic
banks, foreign branches of domestic banks, and domestic and
foreign branches of foreign banks and thrift institutions.
Certificates of deposit are negotiable certificates evidencing
the obligation of a bank to repay funds deposited with it for a
specified period of time. Time deposits are non-negotiable
deposits maintained in a banking institution for a specified
period of time 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.
Commercial Paper and other Short-Term Corporate
Obligations--The Cash Management Fund and, to a limited extent,
the Municipal Cash Management Fund may invest in commercial
paper, which consists of short-term, unsecured promissory notes
issued to finance short-term credit needs. The commercial paper
purchased by these Series will consist only of direct
obligations issued by domestic and foreign entities. The other
corporate obligations in which these Funds may invest consist of
high quality, U.S. dollar denominated short-term bonds and notes
(including variable amount master demand notes) issued by
domestic and foreign corporations.
Floating and Variable Rate Obligations--The Cash
Management Fund and the Municipal Cash Management Fund also may
purchase floating and variable rate demand notes and bonds,
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 notes fluctuate from time
to time. The issuer of such obligations normally 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, if not so rated,
each of these Funds may invest in them only if the Manager
determines that at the time of investment the obligations are of
comparable 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 the
floating and variable rate demand obligations held by the Fund.
Neither of these Funds will invest more than 10% of the value of
its net assets in floating or variable rate demand obligations
as to which it cannot exercise the demand feature on not more
than seven days' notice if there is no secondary market
available for these obligations, and in other securities that
are illiquid.
Municipal Obligations--The Municipal Cash Management
Fund will invest in Municipal Obligations. Municipal
Obligations generally include debt obligations issued to obtain
funds for various public purposes as well as certain industrial
development bonds issued by or on behalf of public authorities.
Municipal Obligations are classified as general obligation
bonds, revenue bonds and notes. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing
power for the payment of principal and interest. Revenue bonds
are payable from the revenue derived from a particular facility
or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source, but not from
the general taxing power. Industrial development bonds, in most
cases, are revenue bonds and generally do not carry the pledge
of the credit of the issuing municipality, but generally are
guaranteed by the corporate entity on whose behalf they are
issued. Notes are short-term instruments which are obligations
of the issuing municipalities or agencies and are sold in
anticipation of a bond sale, collection of taxes or receipt of
other revenues. Municipal Obligations include municipal
lease/purchase agreements which are similar to installment
purchase contracts for property or equipment issued by
municipalities. Municipal Obligations bear fixed, floating or
variable rates of interest. Certain Municipal Obligations are
subject to redemption at a date earlier than their stated
maturity pursuant to call options, which may be separated from
the related municipal obligation and purchased and sold
separately.
Participation Interests--The Municipal Cash Management
Fund may purchase from financial institutions participation
interests in Municipal Obligations (such as industrial
development bonds and municipal lease/purchase agreements). A
participation interest gives the Fund an undivided interest in
the Municipal Obligation in the proportion that the Fund's
participation interest bears to the total principal amount of
the Municipal Obligation. These instruments may have fixed,
floating or variable rates of interest, with remaining
maturities of 13 months or less. If the participation interest
is unrated, or has been given a rating below that which
otherwise is permissible for purchase by the Fund, the
participation interest will be backed by an irrevocable letter
of credit or guarantee of a bank that the Board of Trustees has
determined meets the prescribed quality standards for banks set
forth above, or the payment obligation otherwise will be
collateralized by U.S. Government securities. For certain
participation interests, the Fund will have the right to demand
payment, on not more than seven days' notice, for all or any
part of the Fund's participation interest in the Municipal
Obligation, plus accrued interest. As to these instruments, the
Fund intends to exercise its right to demand payment only upon a
default under the terms of the Municipal Obligation, as needed
to provide liquidity to meet redemptions, or to maintain or
improve the quality of its investment portfolio. The Municipal
Cash Management Fund will not invest more than 10% of the value
of its net assets in participation interests that do not have
this demand feature, and in other illiquid securities.
Tender Option Bonds--The Municipal Cash Management
Fund may purchase tender option bonds. A tender option bond is
a Municipal Obligation (generally held pursuant to a custodial
arrangement) having a relatively long maturity and bearing
interest at a fixed rate substantially higher than prevailing
short-term tax exempt rates, that has been coupled with the
agreement of a third party, such as a bank, broker-dealer or
other financial institution, pursuant to which such institution
grants the security holders the option, at periodic intervals,
to tender their securities to the institution and receive the
face value thereof. As consideration for providing the option,
the financial institution receives periodic fees equal to the
difference between the Municipal Obligation's fixed coupon rate
and the rate, as determined by a remarketing or similar agent at
or near the commencement of such period, that would cause the
securities, coupled with the tender option, to trade at par on
the date of such determination. Thus, after payment of this
fee, the security holder effectively holds a demand obligation
that bears interest at the prevailing short-term tax exempt
rate. The Manager, on behalf of the Fund, will consider on an
ongoing basis the creditworthiness of the issuer of the
underlying Municipal Obligation, of any custodian and of the
third party provider of the tender option. In certain instances
and for certain tender option bonds, the option may be
terminable in the event of a default in payment of principal or
interest on the underlying Municipal Obligations and for other
reasons. The Municipal Cash Management Fund will not invest
more than 10% of the value of its net assets in securities that
are illiquid, which would include tender option bonds as to
which it cannot exercise the tender feature on not more than
seven days' notice if there is no secondary market available for
these obligations.
Stand-By Commitments--The Municipal Cash Management
Fund may acquire "stand-by commitments" with respect to
Municipal Obligations held in its portfolio. Under a stand-by
commitment, the Fund obligates a broker, dealer or bank to
repurchase, at the Fund's option, specified securities at a
specified price and, in this respect, stand-by commitments are
comparable to put options. The exercise of a stand-by
commitment therefore is subject to the ability of the seller to
make payment on demand. The Municipal Cash Management Fund will
acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder
for trading purposes. The Municipal Cash Management Fund may
pay for stand-by commitments if such action is deemed necessary,
thus increasing to a degree the cost of the underlying Municipal
Obligation and similarly decreasing such security's yield to
investors.
Investment Practices
Lending Portfolio Securities--From time to time, each
of the Cash Management Fund and U.S. Government Securities Cash
Management Fund may lend securities from its portfolio to
brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. Such loans
may not exceed 33-1/3% of the value of the relevant Fund's total
assets. In connection with such loans, each of these Funds will
receive collateral consisting of cash or U.S. Government
securities or, with respect to the Cash Management Fund only,
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. Each of these Funds can increase its income through
the investment of such collateral. Each of these Funds
continues to be entitled to payments in amounts equal to the
interest and 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. A Fund
might experience risk of loss if the institution with which it
has engaged in a portfolio loan transaction breaches its
agreement with such Fund.
Illiquid Securities--Each 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 its 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, participation interests that are not
subject to the demand feature described above, floating and
variable rate demand obligations as to which the Fund cannot
exercise the related demand feature described above on not more
than seven days' notice and as to which there is no secondary
market 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
certain unregistered securities held by a Fund, the Trust
intends to treat such securities as liquid securities in
accordance with procedures approved by the Trust'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 Trust's Board of Trustees has directed the
Manager to monitor carefully the investments of the Funds in
such securities with particular regard to trading activity,
availability of reliable price information and other relevant
information.
Borrowing Money--As a fundamental policy, each of the
Municipal Cash Management Fund and Treasury Prime Cash
Management Fund is permitted to borrow money to the extent
permitted under the 1940 Act. However, each of these Funds
currently intends to borrow money from banks for temporary or
emergency (not leveraging) purposes in an amount up to 15% of
the value of its total assets (including the amount borrowed)
valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing is
made. While borrowings exceed 5% of a Fund's total assets, such
Fund will not make any additional investments.
<PAGE>
PRAIRIE INSTITUTIONAL FUNDS
Cash Management Funds
CLASS A AND CLASS B SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
__________, 1994
This Statement of Additional Information, which is not
a prospectus, supplements and should be read in conjunction with
the current Prospectus of Cash Management Fund, Municipal Cash
Management Fund, Treasury Prime Cash Management Fund and U.S.
Government Securities Cash Management Fund (each, a "Fund") of
Prairie Institutional Funds (the "Trust"), dated _________,
1994, as it may be revised from time to time. To obtain a copy
of the Funds' Prospectus, please write to the Trust at
_______________________ or call toll free 1-800-________.
First Chicago Investment Advisors, Inc. (the
"Manager") serves as each Fund's investment adviser.
Concord Financial Group, Inc. (the "Distributor") is
the distributor of the Funds' shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies . . . . . . . B-2
Management of the Trust. . . . . . . . . . . . . . . . . . B-11
Management Agreement . . . . . . . . . . . . . . . . . . . B-11
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . B-14
Service Plan . . . . . . . . . . . . . . . . . . . . . . . B-15
Redemption of Fund Shares. . . . . . . . . . . . . . . . . B-16
Determination of Net Asset Value . . . . . . . . . . . . . B-17
Portfolio Transactions . . . . . . . . . . . . . . . . . . B-18
Exchange Privilege . . . . . . . . . . . . . . . . . . . . B-19
Dividends, Distributions and Taxes . . . . . . . . . . . . B-19
Yield Information. . . . . . . . . . . . . . . . . . . . . B-20
Information About the Trust. . . . . . . . . . . . . . . . B-21
Counsel and Independent Auditors . . . . . . . . . . . . . B-21
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . B-22
Financial Statements . . . . . . . . . . . . . . . . . . . B-27
Report of Independent Auditors . . . . . . . . . . . . . . B-__
<PAGE>
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be
read in conjunction with the section in the Funds' Prospectus
entitled "Description of the Funds."
Bank Obligations. (Cash Management Fund and, to a
limited extent, Municipal Cash Management Fund) 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 the 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. These 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.
These Funds 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. Neither of these Funds will own
more than one such CD per such issuer.
Foreign Securities. (Cash Management Fund) 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
Cash Management Fund from sources within foreign countries may
be reduced by withholding and other taxes.
Municipal Obligations. (Municipal Cash Management
Fund) The term "Municipal Obligations" generally includes debt
obligations issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities
such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works.
Other public purposes for which Municipal Obligations may be
issued include refunding outstanding obligations, obtaining
funds for general operating expenses and lending such funds to
other public institutions and facilities. In addition, certain
types of industrial development bonds are issued by or on behalf
of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately
operated housing facilities, sports facilities, convention or
trade show facilities, airport, mass transit, industrial, port
or parking facilities, air or water pollution control facilities
and certain local facilities for water supply, gas, electricity,
or sewage or solid waste disposal; the interest paid on such
obligations may be exempt from Federal income tax, although
current tax laws place substantial limitations on the size of
such issues. Such obligations are considered to be Municipal
Obligations if the interest paid thereon qualifies as exempt
from Federal income tax in the opinion of bond counsel to the
issuer. There are, of course, variations in the security of
Municipal Obligations, both within a particular classification
and between classifications.
Floating and variable rate demand notes and bonds are
tax exempt obligations ordinarily having stated maturities in
excess of 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. 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 thereof. The interest rate on a floating rate
demand obligation is based on a known lending rate, such as a
bank's prime rate, and is adjusted automatically each time such
rate is adjusted. The interest rate on a variable rate demand
obligation is adjusted automatically at specified intervals.
For the purpose of diversification under the
Investment Company Act of 1940 (the "1940 Act"), the
identification of the issuer of Municipal Obligations depends on
the terms and conditions of the security. When the assets and
revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government
creating the subdivision and the security is backed only by the
assets and revenues of the subdivision, such subdivision would
be deemed to be the sole issuer. Similarly, in the case of an
industrial development bond, if that bond is backed only by the
assets and revenues of the non-governmental user, then such non-
governmental user would be deemed to be the sole issuer. If,
however, in either case, the creating government or some other
entity guarantees a security, such a guaranty would be
considered a separate security and will be treated as an issue
of such government or other entity.
The yields on Municipal Obligations are dependent on a
variety of factors, including general economic and monetary
conditions, money market factors, conditions in the Municipal
Obligations market, size of a particular offering, maturity of
the obligation, and rating of the issue. The imposition of the
Fund's management fee, as well as other operating expenses, will
have the effect of reducing the yield to investors.
Municipal lease obligations or installment purchase
contract obligations (collectively, "lease obligations") have
special risks not ordinarily associated with Municipal
Obligations. Although lease obligations do not constitute
general obligations of the municipality for which the
municipality's taxing power is pledged, a lease obligation
ordinarily is backed by the municipality's covenant to budget
for, appropriate and make the payments due under the lease
obligation. However, certain lease obligations contain "non-
appropriation" clauses which provide that the municipality has
no obligation to make lease or installment purchase payments in
future years unless money is appropriated for such purpose on a
yearly basis. Although "non-appropriation" lease obligations
are secured by the leased property, disposition of the property
in the event of foreclosure might prove difficult. The
Municipal Cash Management Fund will seek to minimize these risks
by investing only in those lease obligations that (1) are rated
in one of the two highest categories for debt obligations by at
least two nationally recognized statistical rating organizations
(or one rating organization if the lease obligation was rated by
only one such organization); or (2) if unrated, are purchased
principally from the issuer or domestic banks or other
responsible third parties, in each case only if the seller shall
have entered into an agreement with the Municipal Cash
Management Fund providing the seller or other responsible third
party will either remarket or repurchase the lease obligations
within a short period after demand by the Fund. Not more than
10% of the value of the Fund's net assets will be invested in
lease obligations that are illiquid and in other illiquid
securities. See "Investment Restrictions" below.
The Municipal Cash Management Fund will not purchase
tender option bonds unless (a) the demand feature applicable
thereto is exercisable by the Fund within 13 months of the date
of such purchase upon no more than 30 days' notice and
thereafter is exercisable by the Fund no less frequently than
annually upon no more than 30 days' notice and (b) at the time
of such purchase, the Manager reasonably expects (i) based upon
its assessment of current and historical interest rate trends,
that prevailing short-term tax exempt rates will not exceed the
stated interest rate on the underlying Municipal Obligations at
the time of the next tender option to terminate the tender
option would not occur prior to the time of the next tender
opportunity. At the time of each tender opportunity, the Fund
will exercise the tender option with respect to any tender
option bonds unless the Manager reasonably expects, (x) based
upon its assessment of current and historical interest rate
trends, that prevailing short-term tax exempt rates will not
exceed the stated interest rate on the underlying Municipal
Obligations at the time of the next tender fee adjustment, and
(y) that the circumstances which might entitle the grantor of a
tender option to terminate the tender option would not occur
prior to the time of the next tender opportunity. The Municipal
Cash Management Fund will exercise the tender feature with
respect to tender option bonds, or otherwise dispose of its
tender option bonds, prior to the time the tender option is
scheduled to expire pursuant to the terms of the agreement under
which the tender option is granted. The Municipal Cash
Management Fund otherwise will comply with the provisions of
Rule 2a-7 in connection with the purchase of tender option
bonds, including, without limitation, the requisite
determination by the Board of Trustees that the tender option
bonds in question meet the quality standards described in Rule
2a-7, which, in the case of a tender option bond subject to a
conditional demand feature, would include a determination that
the security has received both the required short-term and long-
term quality rating or is determined to be of comparable
quality. In the event of a default of the Municipal Obligation
underlying a tender option bond, or the termination of the
tender option agreement, the Municipal Cash Management Fund
would look to the maturity date of the underlying security for
purposes of compliance with Rule 2a-7 and, if its remaining
maturity was greater than 13 months, the Fund would sell the
security as soon as would be practicable. The Municipal Cash
Management Fund will purchase tender option bonds only when it
is satisfied that the custodial and tender option arrangements,
including the fee payment arrangements, will not adversely
affect the tax exempt status of the underlying Municipal
Obligations and that payment of any tender fees will not have
the effect of creating taxable income for the Fund. Based on
the tender option bond agreement, the Municipal Cash Management
Fund expects to be able to value the tender option bond at par;
however, the value of the instrument will be monitored to assure
that it is valued at fair value.
If, subsequent to its purchase by the Municipal Cash
Management Fund, (a) an issue of rated Municipal Obligations
ceases to be rated in the highest rating category by at least
two ratings organizations (or one rating organization if the
instrument was rated by only one such organization), or the
Trust's Board determines that it is no longer of comparable
quality; or (b) the Manager becomes aware that any portfolio
security not so highly rated or any unrated security has been
given a rating by any rating organization below the rating
organization's second highest rating category, the Trust's Board
will reassess promptly whether such security presents minimal
credit risk and will cause the Trust to take such action as it
determines is in the best interest of the Fund and its
shareholders, provided that the reassessment required by clause
(b) is not required if the portfolio security is disposed of or
matures within five business days of the Manager becoming aware
of the new rating and the Trust's Board is subsequently notified
of the Manager's actions.
To the extent that the ratings given by Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's
Corporation ("S&P") or Fitch Investors Service Inc. ("Fitch")
for Municipal Obligations may change as a result of changes in
such organizations or their rating systems, the Municipal Cash
Management Fund will attempt to use comparable ratings as
standards for its investments in accordance with the investment
policies contained in the Prospectus and this Statement of
Additional Information. The ratings of Moody's, S&P and Fitch
represent their opinions as to the quality of the Municipal
Obligations which they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective
and are not absolute standards of quality. Although these
ratings may be an initial criterion for selection of portfolio
investments, the Manager will also evaluate these securities and
the creditworthiness of the issuers of such securities.
Lending Portfolio Securities. (Cash Management Fund
and U.S. Government Securities Cash Management Fund) To a
limited extent, each of these Funds may lend its portfolio
securities to brokers, dealers and other financial institutions,
provided it receives cash collateral which at all times is
maintained in an amount equal to at least 100% of the current
market value of the securities loaned. By lending its portfolio
securities, the Fund can increase its income through the
investment of the cash collateral. For purposes of this policy,
the Trust considers collateral consisting of U.S. Government
securities or, in the case of the Cash Management Fund only,
irrevocable letters of credit issued by banks whose securities
meet the standards for investment by the Fund to be the
equivalent of cash. Such loans may not exceed 33-1/3% of the
Fund's total assets. From time to time, the Fund may return to
the borrower or a third party which is unaffiliated with the
Fund, and which is acting as a "placing broker," a part of the
interest earned from the investment of collateral received for
securities loaned.
The Securities and Exchange Commission currently
requires that the following conditions must be met whenever
portfolio securities are loaned: (1) the Fund must receive at
least 100% cash collateral from the borrower; (2) the borrower
must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the
Fund must be able to terminate the loan at any time; (4) the
Fund must receive reasonable interest on the loan, as well as
any interest or other distributions payable on the loaned
securities, and any increase in market value; and (5) the Fund
may pay only reasonable custodian fees in connection with the
loan. These conditions may be subject to future modification.
Investment Restrictions
Cash Management and U.S. Government Securities Cash
Management Funds only. Each of the Cash Management Fund and
U.S. Government Securities Cash Management Fund has adopted
investment restrictions numbered 1 through 9 below as
fundamental policies. In addition, the Cash Management Fund has
adopted investment restrictions numbered 12 and 13 and the U.S.
Government Securities Cash Management Fund has adopted
investment restriction number 14 as additional fundamental
policies. These restrictions cannot be changed, as to a Fund,
without approval by the holders of a majority (as defined in the
1940 Act) of such Fund's outstanding voting shares. Investment
restrictions numbered 10 and 11 below are not fundamental
policies and may be changed by vote of a majority of the Trust's
Trustees at any time. Neither of these Funds may:
1. 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.
2. Pledge, hypothecate, mortgage or otherwise
encumber its assets, except to secure borrowings for temporary
or emergency purposes.
3. Sell securities short or purchase securities on
margin.
4. Write or purchase put or call options or
combinations thereof.
5. Act as an underwriter of securities of other
issuers, except to the extent the Fund may be deemed an
underwriter under the Securities Act of 1933, as amended, by
virtue of disposing of portfolio securities.
6. Purchase or sell real estate, real estate
investment trust securities, commodities or commodity contracts,
or oil and gas interests.
7. 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
Trust's Trustees.
8. Invest in companies for the purpose of exercising
control.
9. Invest in securities of other investment
companies, except as they may be acquired as part of a merger,
consolidation or acquisition of assets.
10. Enter into repurchase agreements providing for
settlement in more than seven days after notice or purchase
securities which are illiquid, if, in the aggregate, more than
10% of the value of the Fund's net assets would be so invested.
11. Invest in oil, gas and other mineral leases, or
real estate limited partnerships.
The following investment restrictions numbered 12 and
13 apply only to the Cash Management Fund. The Cash Management
Fund may not:
12. Invest more than 5% of its assets in the
obligations of any one issuer, except that up to 25% of the
value of the Cash Management Fund's total assets may be invested
(subject to Rule 2a-7 under the 1940 Act) without regard to any
such limitations.
13. Invest less than 25% of its total 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 Cash Management Fund may invest less
than 25% of its total assets in bank obligations.
The following investment restriction number 14 applies
only to the U.S. Government Securities Cash Management Fund.
The U.S. Government Securities Cash Management Fund may not:
14. Invest more than 25% of its total assets in the
securities of issuers in any single industry, provided that
there shall be no such limitation on investments in obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
Municipal Cash Management and Treasury Prime Cash
Management Funds only. Each of the Municipal Cash Management
Fund and Treasury Prime Cash Management Fund has adopted
investment restrictions numbered 1 through 7 below as
fundamental policies. In addition, the Municipal Cash
Management Fund has adopted investment restriction number 13 and
the Treasury Prime Cash Management Fund has adopted investment
restriction number 14 as additional fundamental policies. These
restrictions cannot be changed, as to a Fund, without approval
by the holders of a majority (as defined in the 1940 Act) of
such Fund's outstanding voting shares. Investment restrictions
numbered 8 through 12 are not fundamental policies and may be
changed by vote of a majority of the Trust's Trustees at any
time. Neither of these Funds may:
1. Invest in commodities, except that each of these
Funds may purchase and sell options, forward contracts, futures
contracts, including those relating to indexes, and options on
futures contracts or indexes.
2. Purchase, hold or deal in real estate, or oil,
gas or other mineral leases or exploration or development
programs, but each of these Funds may purchase and sell
securities that are secured by real estate or issued by
companies that invest or deal in real estate.
3. Borrow money, except to the extent permitted
under the 1940 Act. For purposes of this investment
restriction, a Fund's entry into options, forward contracts,
futures contracts, including those relating to indexes, and
options on futures contracts or indexes shall not constitute
borrowing.
4. Make loans to others, except through the purchase
of debt obligations and the entry into repurchase agreements.
5. Act as an underwriter of securities of other
issuers, except to the extent a Fund may be deemed an under-
writer under the Securities Act of 1933, as amended, by virtue
of disposing of portfolio securities, and except that the
Municipal Cash Management Fund may bid separately or as part of
a group for the purchase of Municipal Obligations directly from
an issuer for its own portfolio to take advantage of the lower
purchase price available.
6. Issue any senior security (as such term is
defined in Section 18(f) of the 1940 Act), except to the extent
the activities permitted under Investment Restriction Nos. 1, 3,
9 and 10 may be deemed to give rise to senior securities.
7. Purchase securities on margin, but each of these
Funds may make margin deposits in connection with transactions
in options, forward contracts, futures contracts, including
those relating to indexes, and options on futures contracts or
indexes.
8. Invest in the securities of a company for the
purpose of exercising management or control, but each of these
Funds will vote the securities it owns in its portfolio as a
shareholder in accordance with its views.
9. Pledge, mortgage or hypothecate its assets,
except to the extent necessary to secure permitted borrowings
and to the extent related to the deposit of assets in escrow in
connection with writing covered put and call options and the
purchase of securities on a when-issued or forward commitment
basis and collateral and initial or variation margin
arrangements with respect to options, forward contracts, futures
contracts, including those relating to indexes, and options on
futures contracts or indexes.
10. Purchase, sell or write puts, calls or
combinations thereof, except as described in the Prospectus and
this Statement of Additional Information.
Enter into repurchase agreements providing for
settlement in more than seven days after notice or purchase
securities which are illiquid, if, in the aggregate, more than
10% of the value of the Fund's net assets would be so invested.
12. Invest in securities of other investment
companies, except to the extent permitted under the Act.
The following investment restriction number 13 applies
only to the Municipal Cash Management Fund. The Municipal Cash
Management Fund may not:
13. Invest more than 25% of its total assets in the
securities of issuers in any single industry, provided that
there shall be no such limitation on the purchase of Municipal
Obligations and, for temporary defensive purposes, obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
The following investment restriction number 14 applies
only to the Treasury Prime Cash Management Fund. The Treasury
Prime Cash Management Fund may not:
14. Invest more than 25% of its total assets in the
securities of issuers in any single industry, provided that
there shall be no such limitation on investments in obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
For purposes of the Municipal Cash Management Fund's
Investment Restriction No. 13, industrial development bonds,
where the payment of principal and interest is the ultimate
responsibility of companies within the same industry, are
grouped together as an "industry."
If a 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 Trust may make commitments more restrictive than
the restrictions listed above so as to permit the sale of a
Fund's shares in certain states. Should the Trust determine
that a commitment is no longer in the best interests of a Fund
and its shareholders, the Trust reserves the right to revoke the
commitment by terminating the sale of such Fund's shares in the
state involved.
MANAGEMENT OF THE TRUST
Trustees and officers of the Trust, together with
information as to their principal business occupations during at
least the last five years, are shown below. Each Trustee who is
deemed to be an "interested person" of the Fund, as defined in
the 1940 Act, is indicated by an asterisk.
Trustees and Officers of the Trust
[TO BE PROVIDED]
For so long as a Fund's plan described in the section
captioned "Service Plan" remains in effect, the Trustees of the
Trust who are not "interested persons" of the Trust, as defined
in the 1940 Act, will be selected and nominated by the Trustees
who are not "interested persons" of the Trust.
Officers of the Trust Not Listed Above
[TO BE PROVIDED]
MANAGEMENT AGREEMENT
The following information supplements and should be
read in conjunction with the section in the Funds' Prospectus
entitled "Management of the Trust."
Management Agreement. The Manager provides management
services pursuant to the Management Agreement (the "Agreement")
dated , 1994, with the Trust. As to each Fund, the
Agreement is subject to annual approval by (i) the Trust's Board
of Trustees or (ii) vote of a majority (as defined in the 1940
Act) of the outstanding voting securities of such 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 1940 Act) of the Trust or the Manager, by vote
cast in person at a meeting called for the purpose of voting on
such approval. As to each Fund, the Agreement is terminable
without penalty, on 60 days' notice, by the Trust's Board of
Trustees or by vote of the holders of a majority of such Fund's
shares, or, on not less than 90 days' notice, by the Manager.
The Agreement will terminate automatically, as to the relevant
Fund, in the event of its assignment (as defined in the 1940
Act).
The Manager is responsible for investment decisions
and manages each Fund's portfolio of investments in accordance
with the stated policies of such Fund, subject to the approval
of the Trust'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
Trust, the Trust has agreed to pay the Manager a monthly
management fee at the annual rate of .35 of 1% of the value of
each Fund's average daily net assets.
The Manager has engaged Concord Holding Corporation
(the "Administrator") to assist it in providing certain
administrative services to the Trust. Pursuant to its agreement
with the Manager (the "Administration Agreement"), the
Administrator furnishes the Trust clerical help and accounting,
data processing, bookkeeping, internal auditing and legal
services and certain other services required by the Trust,
prepares reports to the Funds' shareholders, tax returns,
reports to and filings with the Securities and Exchange
Commission and state Blue Sky authorities, calculates the net
asset value of each Fund's shares and generally assists the
Manager in providing for all aspects of the Trust's operation,
other than providing investment advice. The fees payable to the
Administrator for its services are paid by the Manager.
The Trust has agreed that neither the Manager nor the
Administrator will be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust in
connection with the matters to which 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 the Administrator 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 the
Administrator's liability.
Expenses and Expense Information. All expenses
incurred in the operation of the Trust are borne by the Trust,
except to the extent specifically assumed by the Manager. The
expenses borne by the Trust include: 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 the Administrator, 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 Trust'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. In addition,
Class B of each Fund is subject to an annual distribution and
service fee. See "Service Plan." Expenses attributable to a
particular Fund are charged against the assets of that Fund;
other expenses of the Trust are allocated among the Funds on the
basis determined by the Board of Trustees, including, but not
limited to, proportionately in relation to the net assets of
each Fund.
The Manager has undertaken, as to each Fund, 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 and .60 of 1% of the value of the
average net assets of Class A and Class B, respectively, for the
fiscal year, the Trust may deduct from the payment to be made to
the Manager under the Agreement, or the Manager will bear, such
excess expense.
In addition, the Agreement provides that if, in any
fiscal year, the aggregate expenses of a 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 Trust 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.
PURCHASE OF FUND SHARES
The following information supplements and should be
read in conjunction with the section in the Funds' Prospectus
entitled "How to Buy Fund Shares."
The Distributor. The Distributor serves as the
Trust's distributor pursuant to an agreement which is renewable
annually.
Using Federal Funds. ______________________, the
Trust's transfer and dividend disbursing agent (the "Transfer
Agent"), or the Trust 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, generally 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 institutions
effecting transactions in Fund shares may be required to
register as dealers pursuant to state law.
SERVICE PLAN
(CLASS B ONLY)
The following information supplements and should be
read in conjunction with the section in the Funds' Prospectus
entitled "Service Plan."
Rule 12b-1 (the "Rule") adopted by the Securities and
Exchange Commission under the 1940 Act provides, among other
things, that an investment company may bear expenses of
distributing its shares only pursuant to a plan adopted in
accordance with the Rule. The Trust's Board of Trustees has
adopted such a plan (the "Service Plan") with respect to each
Fund's Class B shares, pursuant to which each Fund pays the
Distributor for advertising, marketing and distributing such
Fund's Class B shares and for the provision of certain services
to the holders of Class B shares. Under the Service Plan, the
Distributor may make payments to certain financial institutions,
securities dealers and other financial industry professionals
(collectively, "Service Agents") in respect to these services.
The Trust's Board of Trustees believes that there is a
reasonable likelihood that the Service Plan will benefit each
Fund and the holders of Class B shares.
A quarterly report of the amounts expended under the
Service Plan, and the purposes for which such expenditures were
incurred, must be made to the Trustees for their review. In
addition, the Service Plan provides that it may not be amended
to increase materially the costs which holders of Class B shares
may bear pursuant to the Service Plan without the approval of
the holders of Class B shares and that other material amendments
of the Service Plan must be approved by the Board of Trustees
and by the Trustees who are not "interested persons" (as defined
in the 1940 Act) of the Trust and have no direct or indirect
financial interest in the operation of the Service Plan or in
any agreements entered into in connection with the Service Plan,
by vote cast in person at a meeting called for the purpose of
considering such amendments. The Service Plan is subject to
annual approval by such vote of the Trustees cast in person at a
meeting called for the purpose of voting on the Service Plan.
The Service Plan was so approved by the Trustees at a meeting
held on , 1994. As to each Fund, the Service Plan may be
terminated at any time by vote of a majority of the Trustees who
are not "interested persons" and have no direct or indirect
financial interest in the operation of the Service Plan or in
any agreements entered into in connection with the Service Plan
or by vote of the holders of a majority of such Fund's Class B
shares.
REDEMPTION OF FUND SHARES
The following information supplements and should be
read in conjunction with the section in the Funds' Prospectus
entitled "How to Redeem Fund Shares."
Redemption by Wire or Telephone. By using this
procedure, the investor authorizes the Transfer Agent to act on
wire or telephone redemption instructions from any person
representing himself or herself to an authorized representative
of the investor and reasonably believed by the Transfer Agent to
be genuine. Ordinarily, the Trust 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 Trust 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
_______________ _________________
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 Trust has committed itself
to pay in cash all redemption requests by any shareholder of
record of a Fund, limited in amount during any 90-day period to
the lesser of $250,000 or 1% of the value of such 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 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 securities are 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 Funds' Prospectus
entitled "How to Buy Fund Shares."
Amortized Cost Pricing. The valuation of each 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 pro-
vides 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 procedures, as a
particular responsibility within the overall duty of care owed
to each Fund's investors, reasonably designed to stabilize the
Fund's price per share as computed for purposes of purchases and
redemptions at $1.00. Such procedures include review of each
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 of the portfolio of the
Cash Management Fund, Treasury Prime Cash Management Fund and
U.S. Government Securities Cash Management Fund, 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
of these Funds will be valued at fair value as determined in
good faith by the Board of Trustees. Market quotations and
market equivalents used in such review of the Municipal Cash
Management Fund are obtained from an independent pricing service
(the "Service") approved by the Board of Trustees. The Service
will value the Municipal Cash Management Fund's investments
based on methods which include consideration of: yields or
prices of municipal obligations of comparable quality, coupon,
maturity and type; indications of values from dealers; and
general market conditions. The Service also may employ
electronic data processing techniques and/or a matrix system to
determine valuations.
The extent of any deviation between a Fund's net asset
value based upon available market quotations or market equiva-
lents and $1.00 per share based on amortized cost will be ex-
amined by the Board of Trustees. If such deviation exceeds 1/2
of 1%, the Board of Trustees will consider what actions, 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 appropriate, 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
Newly-issued portfolio securities of the Municipal Cash
Management Fund and portfolio securities of each other Fund
ordinarily are purchased directly from the issuer or from an
underwriter or a market maker for the securities. Other
purchases and sales for the Municipal Cash Management Fund
usually are placed with those dealers from which it appears that
the best price or execution will be obtained. 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 any
Fund to date.
Transactions are allocated to various dealers by the
Trust'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 the Manager's overall
research expenses.
EXCHANGE PRIVILEGE
The following information supplements and should be
read in conjunction with the section in the Funds' 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 Trust 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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be
read in conjunction with the section in Funds' 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 the gain realized from the 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 Funds' Prospectus
entitled "Yield Information."
Yield will be 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.
Tax equivalent yield for the Municipal Cash Management
Fund is computed by dividing that portion of the yield or
effective yield (calculated as described above) which is tax
exempt by 1 minus a stated tax rate and adding the quotient to
that portion, if any, of the yield of the Fund that is not tax
exempt.
The tax equivalent figure, however, does not include
the potential effect of any state or local (including, but not
limited to, county, district or city) taxes, including
applicable surcharges. In addition, there may be pending
legislation which could affect such stated tax rates or yields.
Each investor should consult its tax adviser, and consider its
own factual circumstances and applicable tax laws, in order to
ascertain the relevant tax equivalent yield.
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 TRUST
The following information supplements and should be
read in conjunction with the section in the Funds' Prospectus
entitled "General Information."
Each Fund share has one vote and, when issued and paid
for in accordance with the terms of the offering, is fully paid
and non-assessable. Fund shares have no preemptive,
subscription or conversion rights and are freely transferable.
The Trust will send annual and semi-annual financial
statements to all its shareholders.
COUNSEL AND INDEPENDENT AUDITORS
Stroock & Stroock & Lavan, 7 Hanover Square, New York,
New York 10004-2594, as counsel for the Trust, 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 Funds' Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New
York 10019, independent auditors, have been selected as auditors
of the Trust.
<PAGE>
APPENDIX
Description of the highest commercial paper, municipal
bond and note 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 and Phelps, Inc. ("Duff"), IBCA Limited and
IBCA Inc. ("IBCA") and Thomson BankWatch, Inc. ("BankWatch"):
S&P
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.
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of
the creditworthiness of an obligor with respect to a specific
obligation.
The ratings are based on current information furnished
by the issuer or obtained by S&P from other sources it considers
reliable, and will include: (1) likelihood of default-capacity
and willingness of the obligor as to the timely payment of
interest and repayment of principal in accordance with the terms
of the obligation; (2) nature and provisions of the obligation;
and (3) protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other
arrangement under the laws of bankruptcy and other laws
affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.
AA
Debt rated AA has a very strong capacity to pay
interest and repay principal and differs from the highest rated
issues only in small degree. The AA ratings may be modified by
the addition of a plus (+) or a minus (-) sign, which is used to
show relative standing within the category.
Municipal Note Ratings
SP-1
The issuers of these municipal notes exhibit very
strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics
are given a plus (+) designation.
SP-2
The issuers of these municipal notes exhibit
satisfactory capacity to pay principal and interest.
Moody's
Commercial Paper and Short-Term Ratings
The rating Prime-1 (P-1) is the highest commercial
paper rating assigned by Moody's. Issuers of P-1 paper must
have a superior capacity for repayment of short-term promissory
obligations and ordinarily will be evidenced by leading market
positions in well established industries, high rates of return
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.
Municipal Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa
Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what generally are known as high grade bonds. They are
rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
Moody's applies the numerical modifiers 1, 2 and 3 to
show relative standing within the AA rating category. The
modifier 1 indicates a ranking for the security in the higher
end of a rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end
of a rating category.
Municipal Note Ratings
Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade (MIG).
Such ratings recognize the difference between short-term credit
risk and long-term risk. Factors affecting the liquidity of the
borrower and short-term cyclical elements are critical in short-
term ratings, while other factors of major importance in bond
risk, long-term secular trends for example, may be less
important over the short run.
A short-term rating may also be assigned on an issue
having a demand feature. Such ratings will be designated as
VMIG or, if the demand feature is not rated, as NR. Short-term
ratings on issues with demand features are differentiated by the
use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates
and payment relying on external liquidity. Additionally,
investors should be alert to the fact that the source of payment
may be limited to the external liquidity with no or limited
legal recourse to the issuer in the event the demand is not met.
Moody's short-term ratings are designated Moody's
Investment Grade as MIG 1 or VMIG 1 through MIG 4 or VMIG 4. As
the name implies, when Moody's assigns a MIG or VMIG rating, all
categories define an investment grade situation.
MIG 1/VMIG 1
This designation denotes best quality. There is
present strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG 2/VMIG 2
This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding
group.
Fitch
Commercial Paper and Short-Term Ratings
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.
Municipal Bond Ratings
The ratings represent Fitch's assessment of the
issuer's ability to meet the obligations of a specific debt
issue or class of debt. The ratings take into consideration
special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and
operative performance of the issuer and of any guarantor, as
well as the political and economic environment that might affect
the issuer's future financial strength and credit quality.
AAA
Bonds rated AAA are considered to be investment grade
and of the highest credit quality. The obligor has an
exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably
foreseeable events.
AA
Bonds rated AA are considered to be investment grade
and of very high credit quality. The obligor's ability to apply
interest and repay principal is very strong, although not quite
as strong as bonds rated AAA. Because bonds rated in the AAA
and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these
issuers is generally rated F-1+. Plus (+) and minus (-) signs
are used with a rating symbol to indicate the relative position
of a credit within the rating category.
Duff
Commercial Paper and Short-Term Ratings
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.
AAA
Bonds rated AAA are considered highest credit quality.
The risk factors are negligible, being only slightly more than
for risk-free U.S. Treasury debt.
AA
Bonds rated AA are considered high credit quality.
Protection factors are strong. Risk is modest but may vary
slightly from time to time because of economic conditions. Plus
(+) and minus (-) signs are used with a rating to indicate the
relative position of a credit within the AA rating category.
IBCA
Commercial Paper and Short-Term Ratings
The designation A-1 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.
Bond and Long-Term Ratings
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.
BankWatch
Commercial Paper and Short-Term Ratings
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.
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.
<PAGE>
FINANCIAL STATEMENTS
[To Be Provided]
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Statement of Assets and Liabilities as of
_________, 1994*
(2) Report of Ernst & Young LLP, Independent
Auditors, dated _________, 1994*
(b) Exhibits:
(1) Amended and Restated Agreement and
Declaration of Trust*
(2) By-Laws*
(5) Management Agreement*
(6) Distribution Agreement*
(8) Custody Agreement*
(9) Master Administration Agreement*
(10) Opinion (including consent) of
Stroock & Stroock & Lavan*
(11) Consent of Independent Auditors*
(15) Service Plan*
Other Exhibit:
Secretary's Certificate*
* To be filed by amendment.
<PAGE>
Item 25. Persons Controlled by or Under Common Control with
Registrant
Not applicable.
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Title of Class Holders
Shares of beneficial interest,
par value $.001 per share ________
Cash Management Fund ________
Municipal Cash Management Fund ________
Treasury Prime Cash Management Fund ________
U.S. Government Securities Cash
Management Fund ________
Item 27. Indemnification
Reference is made to Article EIGHTH of the Registrant's
Declaration of Trust to be filed as Exhibit 1 hereto. The
application of these provisions is limited by Article 10 of the
Registrant's By-Laws to be filed as Exhibit 2 hereto and by the
following undertaking set forth in the rules promulgated by the
Securities and Exchange Commission:
Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may
be permitted to trustees, officers and
controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the
registrant has been advised that in the
opinion of the Securities and Exchange Commis-
sion such indemnification is against public
policy as expressed in such Act and is,
therefore, unenforceable. In the event that a
claim for indemnification against such
liabilities (other than the payment by the
registrant of expenses incurred or paid by a
trustee, officer or controlling person of the
registrant in the successful defense of any
action, suit or proceeding) is asserted by
such trustee, officer or controlling person in
connection with the securities being
registered, the registrant will, unless in the
opinion of its counsel the matter has been
settled by controlling precedent, submit to a
court of appropriate jurisdiction the question
whether such indemnification by it is against
public policy as expressed in such Act and
will be governed by the final adjudication of
such issue.
Reference also is made to the Distribution Agreement to
be filed as Exhibit 6 hereto.
Item 28. Business and Other Connections of Investment Adviser
Registrant is fulfilling the requirement of this
Item 28 to provide a list of the officers and directors of First
Chicago Investment Advisors, Inc. (the "Manager"), together with
information as to any other business, profession, vocation or
employment of a substantial nature engaged in by the Manager or
those of its officers and directors during the past two years,
by incorporating by reference the information contained in the
Form ADV filed with the SEC pursuant to the Investment Advisers
Act of 1940 by the Manager (SEC File No. 801-_____).
Item 29. Principal Underwriters
(a) Other investment companies for which Registrant's
principal underwriter (exclusive distributor) acts as principal
underwriter or exclusive distributor:
The Infinity Mutual Funds, Inc.
Emerald Fund, Inc.
Pacific Horizon Funds, Inc.
(b) The information required by this Item 29(b)
regarding each director or officer of Concord Financial Group,
Inc. is incorporated by reference to Schedule A of Form BD filed
by Concord Financial Group, Inc. pursuant to the Securities
Exchange Act of 1934 (SEC File No. 8-37601).
Item 30. Location of Accounts and Records
1. First Chicago Investment Advisors, Inc.
Three First National Plaza
Chicago, Illinois 60670
2. Concord Financial Group, Inc.
125 West 55th Street
11th Floor
New York, New York 10019
Item 31. Management Services
Not Applicable
Item 32. Undertakings
Registrant hereby undertakes
(1) to file a post-effective amendment, using
financial statements which need not be certified,
within four to six months from the effective date
of Registrant's 1933 Act Registration Statement.
(2) to call a meeting of shareholders for the purpose
of voting upon the question of removal of a
trustee or trustees when requested in writing to
do so by the holders of at least 10% of the
Registrant's outstanding shares of beneficial
interest and in connection with such meeting to
comply with the provisions of Section 16(c) of
the Investment Company Act of 1940 relating to
shareholder communications.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant has
duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, and State of New York on
the
26th day of September, 1994.
PRAIRIE INSTITUTIONAL FUNDS
BY: /s/David Stephens
David Stephens
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, this Amendment to
the
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signatures Title Date
/s/David Stephens Principal Executive
David Stephens Officer and Principal
Financial and Accounting
Officer
/s/John P. Gould* Trustee
John P. Gould
/s/Marilyn McCoy* Trustee
Marilyn McCoy
/s/Raymond D. Oddi* Trustee
Raymond D. Oddi
*By: /s/David Stephens September 26, 1994
David Stephens,
Attorney-in-fact
