Preliminary Copy
FIRST PRAIRIE U.S. GOVERNMENT INCOME FUND
(INTERMEDIATE SERIES)
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NOTICE OF MEETING OF SHAREHOLDERS
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To the Shareholders:
A Meeting of shareholders of the Intermediate Series of
First Prairie U.S. Government Income Fund (the "Fund") will be
held at the offices of [NAME, ADDRESS], on [DAY], ____________,
1995 at __:__ _.m. for the following purposes:
1. To approve certain changes to a fundamental policy
of the Fund and to approve its status as a non-diversified
investment company; and
2. To transact such other business as may properly
come before the meeting, or any adjournment or adjournments
thereof.
Shareholders of record at the close of business on
December 5, 1994, will be entitled to receive notice of and to
vote at the meeting.
By Order of the Board of Trustees
[NAME]
[TITLE]
[PLACE]
___________, 1994
WE NEED YOUR PROXY VOTE IMMEDIATELY
A SHAREHOLDER MAY THINK HIS VOTE IS NOT IMPORTANT, BUT
IT IS VITAL. BY LAW, THE MEETING OF SHAREHOLDERS OF
THE FUND WILL HAVE TO BE ADJOURNED WITHOUT CONDUCTING
ANY BUSINESS IF LESS THAN A MAJORITY OF ITS SHARES
ELIGIBLE TO VOTE IS REPRESENTED. IN THAT EVENT, THE
FUND, AT SHAREHOLDERS' EXPENSE, WOULD CONTINUE TO
SOLICIT VOTES IN AN ATTEMPT TO ACHIEVE A QUORUM.
CLEARLY, YOUR VOTE COULD BE CRITICAL TO ENABLE THE FUND
TO HOLD THE MEETING AS SCHEDULED, SO PLEASE RETURN YOUR
PROXY CARD IMMEDIATELY. YOU AND ALL OTHER SHAREHOLDERS
WILL BENEFIT FROM YOUR COOPERATION.
<PAGE>
Preliminary Copy
FIRST PRAIRIE U.S. GOVERNMENT INCOME FUND
(INTERMEDIATE SERIES)
PROXY STATEMENT
Meeting of Shareholders
to be held on _________, 1995
This Proxy Statement is furnished in connection with a
solicitation of proxies by the Board of First Prairie U.S.
Government Income Fund (the "Fund") to be used at the meeting of
shareholders (the "Meeting") of the Intermediate Series of the
Fund, to be held on [DAY], ___________, 1995 at __:__ _.m., at
the offices of [NAME, ADDRESS] for the purposes set forth in the
accompanying Notice of Meeting of Shareholders. Shareholders of
record at the close of business on December 5, 1994 (each, a
"Shareholder" and, collectively, the "Shareholders") are entitled
to receive notice of and to vote at the Meeting. Shareholders
are entitled to one vote for each share of beneficial interest of
the Fund, par value $.001 per share ("Share"), held and
fractional votes for each fractional Share held. Shares are
classified into three classes--Class A, Class B and Class F.
Only Class A and Class F shares are outstanding. Holders of
Class A and Class F shares will vote in the aggregate and not by
class with respect to Proposal No. 1 set forth below. Shares
represented by executed and unrevoked proxies will be voted in
accordance with the specifications made thereon. If the enclosed
form of proxy is executed and returned, it nevertheless may be
revoked by giving another proxy or by letter or telegram directed
to the Fund, which must indicate the Shareholder's name and
account number. To be effective, such revocation must be
received before the Meeting. Also, any Shareholder who attends
the Meeting in person may vote by ballot at such meeting, thereby
canceling any proxy previously given. As of ______________,
1994, __________ Shares were issued and outstanding.
[5% holders of the Fund to be inserted]
PROPOSAL 1. APPROVAL OF CERTAIN CHANGES TO A FUNDAMENTAL
POLICY AND STATUS AS A NON-DIVERSIFIED
INVESTMENT COMPANY
INTRODUCTION
The Fund commenced operations on March 5, 1993. As of
November __, 1994, the Fund's total assets were $______, of which
$______ was attributable to Class A and $______ to Class F. On
such date, the Fund had ______ beneficial owners, of which ______
were Class A Shareholders and ______ were Class F Shareholders.
The Fund's management believes that the Fund has not
attracted sufficient assets to operate effectively in the manner
for which the Fund was designed and, therefore, that it is in the
best interests of the Fund to broaden its investment policies to
attract new investors. Management believes that investors
generally would find more attractive a fund that is not limited
to investing primarily in U.S. Government Securities (as defined
in the Fund's current prospectus). Accordingly, on October 28,
1994, the Fund's Board unanimously approved the proposal set
forth herein.
The proposal requests Shareholder approval for the
deletion of the fundamental investment policy requiring the Fund
to invest at least 65% of the value of its total assets in U.S.
Government Securities and for changing the classification of the
Fund to a non-diversified investment company. As more fully
described below, if these changes are made the Fund intends to
invest at least 65% of its total assets in a portfolio of U.S.
dollar denominated, investment-grade fixed-income securities of
domestic and foreign issuers ("Fixed-Income Securities") rated A
or better by Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Corporation ("S&P"), Fitch Investors Service,
Inc. ("Fitch") or Duff & Phelps, Inc. ("Duff"). The Fund intends
to invest the remainder of its assets in U.S. dollar denominated,
investment-grade Fixed-Income Securities. In addition, the Fund
would be permitted to invest in Fixed-Income Securities which,
while not rated, are determined by the Fund's investment adviser
(the "Adviser") to be of comparable quality to those rated
securities in which the Fund may invest. The Fixed-Income
Securities in which the Fund intends to invest are expected to
have, under normal market conditions, a dollar-weighted average
maturity ranging between three and ten years. If Proposal No. 1
is adopted, the Fund's Board intends to change the Fund's name to
"Prairie Intermediate Bond Fund."
THE FUND'S CURRENT MANAGEMENT POLICIES
PORTFOLIO SECURITIES. The securities in which the Fund
currently is permitted to invest include: (i) U.S. Treasury
securities; (ii) obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities; (iii) mortgage-
related securities issued or guaranteed as to principal and
interest by the U.S. Government or its agencies or
instrumentalities; (iv) zero coupon U.S. Treasury securities; and
(v) repurchase agreements in respect of each of the foregoing.
As a fundamental policy, the Fund invests at least 65% of the
value of its total assets in the foregoing securities. These
securities are more fully described in the Fund's current
prospectus.
INVESTMENT TECHNIQUES. The Fund currently is permitted
to engage in various investment techniques including: (i)
leveraging; (ii) short-selling; (iii) options and futures
transactions; and (iv) lending portfolio securities. These
techniques are more fully described in the Fund's current
prospectus.
PROPOSED CHANGES
If Proposal No. 1 is approved, the Fund would continue
to be permitted to (i) invest in the portfolio securities
described above and (ii) engage in the investment techniques
described above. In addition, the Fund would be permitted (i) to
invest in the additional types of portfolio securities--
convertible securities; participation interests; additional types
of mortgage-related securities; asset-backed securities;
municipal obligations; unregistered notes; foreign government
obligations; securities of supranational entities; and money
market instruments--described below and (ii) to engage in an
additional investment technique--interest rate swaps--described
below. These securities would be rated within the two highest
rating categories by Moody's, S&P, Fitch or Duff, and the Fund's
portfolio would have a dollar-weighted average maturity described
above under "Introduction." The Fund also would be classified as
a non-diversified investment company.
ADDITIONAL PORTFOLIO SECURITIES. The additional types
of portfolio securities in which the Fund would be permitted to
invest include:
Convertible Securities--Convertible securities are
fixed-income securities that may be converted at either a stated
price or stated rate into underlying shares of common stock.
Convertible securities have general characteristics similar to
both fixed-income and equity securities. Although to a lesser
extent than with fixed-income securities generally, the market
value of convertible securities tends to decline as interest
rates increase and, conversely, tends to increase as interest
rates decline. In addition, because of the conversion feature,
the market value of convertible securities tends to vary with
fluctuations in the market value of the underlying common stock,
and, therefore, also will react to variations in the general
market for equity securities. A unique feature of convertible
securities is that as the market price of the underlying common
stock declines, convertible securities tend to trade increasingly
on a yield basis, and so may not experience market value declines
to the same extent as the underlying common stock. When the
market price of the underlying common stock increases, the prices
of the convertible securities tend to rise as a reflection of the
value of the underlying common stock. While no securities
investments are without risk, investments in convertible
securities generally entail less risk than investments in common
stock of the same issuer.
As fixed-income securities, convertible securities
are
investments that provide for a stable stream of income with
generally higher yields than common stocks. Of course, like all
fixed-income securities, there can be no assurance of current
income because the issuers of the convertible securities may
default on their obligations. Convertible securities, however,
generally offer lower interest or dividend yields than non-
convertible securities of similar quality because of the
potential for capital appreciation. A convertible security, in
addition to providing fixed income, offers the potential for
capital appreciation through the conversion feature, which
enables the holder to benefit from increases in the market price
of the underlying common stock. There can be no assurance of
capital appreciation, however, because securities prices
fluctuate.
Convertible securities generally are subordinated to
other similar but non-convertible securities of the same issuer,
although convertible bonds, as corporate debt obligations, enjoy
seniority in right of payment to all equity securities, and
convertible preferred stock is senior to common stock, of the
same issuer. Because of the subordination feature, however,
convertible securities typically have lower ratings than similar
non-convertible securities.
Participation Interests--A participation interest gives
the purchaser an undivided interest in a security in the
proportion that such purchaser's participation interest bears to
the total principal amount of the security. These instruments
may have fixed, floating or variable rates of interest. If the
participation interest is unrated, or has been given a rating
below that which is permissible for purchase by the Fund, the
participation interest will be backed by an irrevocable letter of
credit or guarantee of a bank, or the payment obligation
otherwise will be collateralized by U.S. Government securities,
or, in the case of unrated participation interests, the Adviser
must have determined that the instrument is of comparable quality
to those instruments in which the Fund may invest.
Mortgage-Related Securities--Mortgage-related
securities are securities collateralized by pools of mortgage
loans assembled for sale to investors by various governmental
agencies, such as the Government National Mortgage Association
and government-related organizations such as the Federal National
Mortgage Association and the Federal Home Loan Mortgage
Corporation, as well as by private issuers such as commercial
banks, savings and loan institutions, mortgage banks and private
mortgage insurance companies, and similar foreign entities.
Mortgage-related securities are a form of derivative security.
The mortgage-related securities which may be purchased include
those with fixed, floating and variable interest rates, those
with interest rates that change based on multiples of changes in
interest rates and those with interest rates that change
inversely to changes in interest rates, as well as stripped
mortgage-backed securities. Stripped mortgage-backed securities
usually are structured with two classes that receive different
proportions of interest and principal distributions on a pool of
mortgage-backed securities or whole loans. A common type of
stripped mortgage-backed security will have one class receiving
some of the interest and most of the principal from the mortgage
collateral, while the other class will receive most of the
interest and the remainder of the principal. In the most extreme
case, one class will receive all of the interest (the interest-
only or "IO" class), while the other class will receive all of
the principal (the principal-only or "PO" class). Although
certain mortgage-related securities are guaranteed by a third
party or otherwise similarly secured, the market value of the
security, which may fluctuate, is not so secured. If a mortgage-
related security is purchased at a premium, all or part of the
premium may be lost if there is a decline in the market value of
the security, whether resulting from changes in interest rates or
prepayments in the underlying mortgage collateral. As with other
interest-bearing securities, the prices of certain of these
securities are inversely affected by changes in interest rates.
However, though the value of a mortgage-related security may
decline when interest rates rise, the converse is not necessarily
true, since in periods of declining interest rates the mortgages
underlying the security are more likely to prepay. For this and
other reasons, a mortgage-related security's stated maturity may
be shortened by unscheduled prepayments on the underlying
mortgages, and, therefore, it is not possible to predict
accurately the security's return to the Fund. Moreover, with
respect to stripped mortgage-backed securities, if the underlying
mortgage securities experience greater than anticipated
prepayments of principal, the Fund may fail to fully recoup its
initial investment in these securities even if the securities are
rated in the highest rating category by a nationally recognized
statistical rating organization. In addition, regular payments
received in respect of mortgage-related securities include both
interest and principal. No assurance can be given as to the
return the Fund will receive when these amounts are reinvested.
The Fund is currently permitted to invest in mortgage-
related securities that are issued or guaranteed by the U.S.
Government or its agencies or instrumentalities. If Proposal No.
1 is adopted, the Fund would be permitted to invest in mortgage-
related securities of private issuers or guarantors of the type
enumerated above.
Asset-Backed Securities--The securitization techniques
used for asset-backed securities are similar to those used for
mortgage-related securities. Asset-backed securities are a form
of derivative security. These securities include debt securities
and securities with debt-like characteristics. The collateral
for these securities has included home equity loans, automobile
and credit card receivables, boat loans, computer leases,
airplane leases, mobile home loans, recreational vehicle loans
and hospital account receivables. The Fund may invest in these
and other types of asset-backed securities that may be developed
in the future.
Asset-backed securities present certain risks that are
not presented by mortgage-backed securities. Primarily, these
securities do not have the benefit of the same security interest
in the related collateral. Credit card receivables generally are
unsecured and the debtors are entitled to the protection of a
number of state and Federal consumer credit laws, many of which
give such debtors the right to set off certain amounts owed on
the credit cards, thereby reducing the balance due. Most issuers
of asset-backed securities backed by automobile receivables
permit the servicers of such receivables to retain possession of
the underlying obligations. If the servicer were to sell these
obligations to another party, there is a risk that the purchaser
would acquire an interest superior to that of the holders of the
related asset-backed securities. In addition, because of the
large number of vehicles involved in a typical issuance and
technical requirements under state laws, the trustee for the
holders of asset-backed securities backed by automobile
receivables may not have a proper security interest in all of the
obligations backing such receivables. Therefore, there is the
possibility that recoveries on repossessed collateral may not, in
some cases, be available to support payments on these securities.
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 multistate
agencies or authorities. While, in general, municipal
obligations are tax exempt securities having relatively low
yields as compared to taxable, non-municipal obligations of
similar quality, certain issues of municipal obligations, both
taxable and non-taxable, offer yields comparable and in some
cases greater than the yields available on other permissible
investments. 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. Dividends received by Shareholders
which are attributable to interest income received by the Fund
from municipal obligations generally will be subject to Federal
income tax. Municipal obligations bear fixed, floating or
variable rates of interest, which are determined in some
instances by formulas under which the municipal obligation's
interest rate will change directly or inversely to changes in
interest rates or an index, or multiples thereof, in many cases
subject to a maximum and minimum. The Fund currently intends to
invest no more than 25% of its assets in municipal obligations.
However, this percentage may be varied from time to time without
Shareholder approval.
Unregistered Notes--The Fund would be permitted to
purchase unsecured promissory notes which are not readily
marketable and have not been registered under the Securities Act
of 1933, as amended.
Foreign Government Obligations; Securities of
Supranational Entities--The Fund would be permitted to invest in
obligations issued or guaranteed by one or more foreign
governments or any of their political subdivisions, agencies or
instrumentalities that are determined by the Adviser to be of
comparable quality to the other obligations in which the Fund may
invest. Such securities also include debt obligations of
supranational entities. Supranational entities include
international organizations designated or supported by
governmental entities to promote economic reconstruction or
development and international banking institutions and related
government agencies. Examples include the International Bank for
Reconstruction and Development (the World Bank), the European
Coal and Steel Community, the Asian Development Bank and the
InterAmerican Development Bank. The percentage of the Fund's
assets invested in securities issued by foreign governments will
vary depending on the relative yields of such securities, the
economic and financial markets of the countries in which the
investments are made and the interest rate climate of such
countries.
Money Market Instruments--The Fund may invest in the
following types of money market instruments, each of which at the
time of purchase must have or be deemed to have under the rules
of the Securities and Exchange Commission remaining maturities of
13 months or less.
U.S. Government Securities--The Fund will continue to
be able to invest in securities issued or guaranteed as to
principal and interest by the U.S. Government or its agencies or
instrumentalities.
Bank Obligations--Bank obligations include
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, domestic savings and loan
associations and other banking institutions. With respect to
such securities issued by foreign branches of domestic banks,
foreign subsidiaries of domestic banks, and domestic and foreign
branches of foreign banks, the Fund may be subject to additional
investment risks that are different in some respects from those
incurred by a fund which invests only in debt obligations 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.
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.
Certain Corporate Obligations--Commercial paper
consists of short-term, unsecured promissory notes issued by
domestic or foreign entities to finance short-term credit needs.
Floating and variable rate demand notes and bonds are obligations
ordinarily having stated maturities in excess of one year, but
which permit the holder to demand payment of principal at any
time or at specified intervals. Variable rate demand notes
include variable amount master demand notes, which are
obligations that permit the Fund to invest fluctuating amounts at
varying rates of interest pursuant to direct arrangements between
the Fund, as lender, and the borrower. These notes permit daily
changes in the amounts borrowed. As mutually agreed between the
parties, the Fund may increase the amount under the notes at any
time up to the full amount provided by the note agreement, or
decrease the amount, and the borrower may repay up to the full
amount of the note without penalty. 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, plus accrued interest, at any time. 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.
ADDITIONAL INVESTMENT TECHNIQUE
Interest Rate Swaps--Interest rate swaps involve the
exchange by the Fund with another party of its commitments to pay
or receive interest (for example, an exchange of floating-rate
payments for fixed-rate payments).
The Fund would expect to enter into interest rate
swaps on a net basis. In so doing, the two payment streams are
netted out, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. If the Fund enters
into an interest rate swap, it would maintain a segregated
account in the full amount accrued on a daily basis of the Fund's
obligations with respect to the swap. The Fund will enter into
swap transactions with counterparties only if: (i) for
transactions with maturities under one year, such counterparty
has outstanding short-term paper rated at least A-1 by S&P,
Prime-1 by Moody's, F-1 by Fitch or Duff-1 by Duff, or (ii) for
transactions with maturities greater than one year, the
counterparty has outstanding debt securities rated at least Aa by
Moody's or AA by S&P, Fitch or Duff. If there is a default by
the other party to such a transaction, the Fund will have
contractual remedies pursuant to the agreements related to the
transaction.
The use of swaps is a highly specialized activity which
involves investment techniques and risks different from those
associated with ordinary portfolio security transactions. There
is no limit on the amount of swap transactions that may be
entered into by the Fund. These transactions do not involve the
delivery of securities or other underlying assets or principal.
Accordingly, the risk of loss with respect to swaps is limited to
the net amount of payments that the Fund is contractually
obligated to make. If the other party to a swap defaults, the
Fund's risk of loss consists of the net amount of payments that
the Fund contractually is entitled to receive.
ADDITIONAL RISK FACTORS
All investments are associated with some degree of
risk. Thus, a broadening of investment opportunities results in
exposure to certain new risks. As a result of transacting in the
additional portfolio securities and engaging in the additional
investment technique, described above, the Fund will be exposed
to the investment risks described below.
FIXED-INCOME SECURITIES. Even though interest-bearing
securities are investments which promise a stable stream of
income, the prices of such securities are inversely affected by
changes in interest rates and, therefore, are subject to the risk
of market price fluctuations. The values of Fixed-Income
Securities also may be affected by changes in the credit rating
or financial condition of the issuing entities. Certain
securities that may be purchased by the Fund, such as those rated
Baa by Moody's and BBB by S&P, Fitch and Duff, may be subject to
such risk with respect to the issuing entity and to greater
market fluctuations than certain lower yielding, higher rated
Fixed-Income Securities. Securities which are rated Baa by
Moody's are considered medium grade obligations; they are neither
highly protected nor poorly secured, and are considered by
Moody's to have speculative characteristics. Securities rated
BBB by S&P are regarded as having adequate capacity to pay
interest and repay principal, and, while such debt securities
ordinarily exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal
for securities in this category than in higher rated categories.
Securities rated BBB by Fitch are considered investment grade and
of satisfactory credit quality; however, adverse changes in
economic conditions and circumstances are more likely to have an
adverse impact on these securities and, therefore, impair timely
payment. Securities rated BBB by Duff have below average
protection factors but nonetheless are considered sufficient for
prudent investment.
FOREIGN SECURITIES. Foreign securities markets
generally are not as developed or efficient as those in the
United States. Securities of some foreign issuers are less
liquid and more volatile than securities of comparable U.S.
issuers. Similarly, volume and liquidity in most foreign
securities markets are less than in the United States and, at
times, volatility of price can be greater than in the United
States. In addition, there may be less publicly available
information about a non-U.S. issuer, and non-U.S. issuers
generally are not subject to uniform accounting and financial
reporting standards, practices and requirements comparable to
those applicable to U.S. issuers.
Because evidences of ownership of such securities
usually are held outside the United States, the Fund will be
subject to additional risks which include possible adverse
political and economic developments, possible seizure or
nationalization of foreign deposits and possible adoption of
governmental restrictions which might adversely affect the
payment of principal and interest on the foreign securities or
might restrict the payment of principal and interest to investors
located outside the country of the issuers, whether from currency
blockage or otherwise. Custodial expenses for a portfolio of
non-U.S. securities generally are higher than for a portfolio of
U.S. securities.
Furthermore, some of these securities may be subject to
brokerage or stamp 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. Income received by the Fund
from sources within foreign countries may be reduced by
withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States,
however, may reduce or eliminate such taxes. All such taxes paid
by the Fund will reduce its net income available for distribution
to the shareholders.
MORTGAGE-RELATED SECURITIES. No assurance can be given
as to the liquidity of the market for certain mortgage-backed
securities, such as collateralized mortgage obligations and
stripped mortgage-backed securities. Determination as to the
liquidity of interest-only and principal-only fixed mortgage-
backed securities issued by the U.S. Government or its agencies
and instrumentalities will be made in accordance with guidelines
established by the Fund's Board. In accordance with such
guidelines, the Adviser will monitor investments in such
securities with particular regard to trading activity,
availability of reliable price information and other relevant
information. The Fund intends to treat other stripped mortgage-
backed securities as illiquid securities.
NON-DIVERSIFIED CLASSIFICATION. The classification of
the Fund as a "non-diversified" investment company means that the
proportion of the Fund's assets that may be invested in the
securities of a single issuer is not limited by the Investment
Company Act of 1940 (the "1940 Act"). A "diversified" investment
company is required by the 1940 Act generally, with respect to
75% of its total assets, to invest not more than 5% of such
assets in the securities of a single issuer and to hold not more
than 10% of the voting securities of any single issuer. However,
the Fund intends to conduct its operations so as to qualify as a
"regulated investment company" for purposes of the Internal
Revenue Code of 1986, as amended, which requires that, at the end
of each quarter of its taxable year, (i) at least 50% of the
market value of its total assets be invested in cash, U.S.
Government securities, the securities of other regulated
investment companies and other securities, with such other
securities of any one issuer limited for the purposes of this
calculation to an amount not greater than 5% of the value of the
Fund's total assets and (ii) not more than 25% of the value of
its total assets be invested in the securities of any one issuer
(other than U.S. Government securities or the securities of other
regulated investment companies). Since a relatively high
percentage of a non-diversified fund's assets may be invested in
the securities of a limited number of issuers, some of which may
be within the same industry or economic sector, the Fund's
portfolio securities may be more susceptible to any single
economic, political or regulatory occurrence than the portfolio
securities of a diversified investment company.
RATINGS. The ratings of Moody's, S&P, Fitch and Duff
represent their opinions as to the quality of the obligations
which they undertake to rate. Ratings are relative and
subjective and, although ratings may be useful in evaluating the
safety of interest and principal payments, they do not evaluate
the market value risk of such obligations. Therefore, although
these ratings may be an initial criterion for selection of
portfolio investments, the Adviser also will evaluate such
obligations and the ability of their issuers to pay interest and
principal. The Fund will rely on the Adviser's judgment,
analysis and experience in evaluating the creditworthiness of an
issuer. In this evaluation, the Adviser will take into
consideration, among other things, the issuer's financial
resources, its sensitivity to economic conditions and trends, the
quality of the issuer's management and regulatory matters. It
also is possible that a rating agency might not timely change the
rating on a particular issue to reflect subsequent events. Once
the rating of a security held by the Fund has been changed, the
Adviser will consider all circumstances deemed relevant in
determining whether such Fund should continue to hold the
security.
REQUIRED VOTE AND BOARD'S RECOMMENDATION
Approval for Proposal No. 1 will be sought by two
separate votes, as set forth in the Proxy Card accompanying this
Proxy Statement: the first will be to change the Fund's
fundamental policy requiring it to invest at least 65% of its
total assets in U.S. Government Securities (the "Policy Vote");
the second will be to change the Fund's classification to non-
diversified (the "Classification Vote"). The votes are
independent; however, if the Policy Vote is not obtained and the
Classification Vote is obtained, the Fund's classification will
not be changed.
Each of the Policy Vote and the Classification Vote
will be approved separately upon obtaining the affirmative vote
of the holders of (a) 67% of the voting securities present at the
Meeting, if the holders of more than 50% of the Fund's
outstanding voting securities are present or represented by
proxy, or (b) more than 50% of the Fund's outstanding voting
securities, whichever is less.
THE FUND'S BOARD, INCLUDING THE "NON-INTERESTED" BOARD
MEMBERS, RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" PROPOSAL NO. 1.
ADDITIONAL INFORMATION
If Proposal No. 1 is approved, the Fund's management
intends to implement the following changes which do not require
shareholder vote.
LOWER MANAGEMENT FEES. Pursuant to a Management
Agreement, the Fund currently pays FNBC a monthly fee at the
annual rate of .60 of 1% of the value of the Fund's average daily
net assets in consideration of FNBC's providing investment
advisory and administrative services. If Proposal No. 1 is
implemented, the Fund will enter into an Investment Advisory
Agreement with First Chicago Investment Management Company
("FIMCO"), a newly formed subsidiary of The First National Bank
of Chicago ("FNBC"), pursuant to which the Fund will pay FIMCO a
monthly fee at the annual rate of .40 of 1% of the value of the
Fund's average daily net assets. In addition, the Fund will
enter into an Administration Agreement with FIMCO, pursuant to
which the Fund will pay FIMCO a monthly fee at the annual rate of
.15 of 1% of the value of the Fund's average daily net assets.
As a result, the aggregate management fee paid by the Fund for
investment advisory and administrative services will be lower
than the fee currently paid by the Fund.
LOWER INITIAL SALES CHARGE. The schedule of the
initial sales charge imposed on the Fund's Class A shares will be
changed. While the maximum initial sales charge will remain the
same, the initial sales charge imposed at higher purchase levels
will be lower than that currently imposed on Class A shares.
The schedules of the initial sales charge to be imposed
on the Fund's Class A shares and the initial sales charge
currently imposed on such shares are set forth below:
<TABLE>
NEW TOTAL SALES LOAD
<CAPTION>
As a % of As a % of Dealers' Reallowance
offering price net asset value as a % of
AMOUNT OF TRANSACTION per share per share offering price
- --------------------- -------------- --------------- --------------------
<S> <S> <S> <S>
Less than $50,000 3.00 3.10 2.75
$50,000 to less than $100,000 2.50 2.60 2.25
$100,000 to less than $250,000 2.00 2.00 1.75
$250,000 to less than $500,000 1.50 1.50 1.25
$500,000 to less than $1,000,000 1.00 1.00 0.75
$1,000,000 and above none none none
</TABLE>
<TABLE>
CURRENT TOTAL SALES LOAD
<CAPTION>
As a % of As a % of Dealers' Reallowance
offering price net asset value as a % of
AMOUNT OF TRANSACTION per share per share offering price
- --------------------- -------------- --------------- --------------------
<S> <C> <C> <C>
Less than $100,000 3.00 3.10 2.75
$100,000 to less than $500,000 2.50 2.55 2.25
$500,000 to less than $1,000,000 2.00 2.00 1.75
$1,000,000 and above 1.00 1.00 1.00
</TABLE>
While there is no initial sales charge under the new
schedule on purchases of $1,000,000 or more of Class A shares, if
an investor redeems those shares within a certain period after
purchase, a contingent deferred sales charge ("CDSC") will be
imposed at the time of redemption. Class A shares of the Fund
currently are not subject to such a CDSC at the time of
redemption. The following table sets forth the CDSC to be
imposed on the Fund's Class A shares for the indicated time
periods:
<TABLE>
<CAPTION>
AMOUNT OF CDSC AS A % YEAR SINCE
TRANSACTIONS AT OF AMOUNT INVESTED PURCHASE WAS
OFFERING PRICE OR REDEMPTION PROCEEDS MADE
<S> <C> <C>
$1,000,000 to 1.00% First or Second
less than
$2,500,000
$2,500,000 to less 0.50% First
than $5,000,000
$5,000,000 and above 0.25% First
</TABLE>
OTHER MATTERS
The Fund's Board members are not aware of any other
matters which may come before the Meeting. However, should any
such matters properly come before the Meeting, it is the
intention of the persons named in the accompanying form of proxy
to vote the proxy in accordance with their judgment on such
matters.
VOTING INFORMATION
The Fund will bear the cost of soliciting proxies. In
addition to the use of the mails, proxies may be solicited
personally, by telephone or by telegraph, and the Fund may pay
persons holding Shares in their names or those of their nominees
for their expenses in sending soliciting materials to their
principals.
If a proxy is properly executed and returned
accompanied by instructions to withhold authority to vote,
represents a broker "non-vote" (that is, a proxy from a broker or
nominee indicating that such person has not received instructions
from the beneficial owner or other person entitled to vote Shares
on a particular matter with respect to which the broker or
nominee does not have discretionary power) or is marked with an
abstention (collectively, "abstentions"), the Shares represented
thereby will be considered to be present at the Meeting for
purposes of determining the existence of a quorum for the
transaction of business. Abstentions, however, will have the
effect of a "no" vote for the purpose of obtaining requisite
approval for Proposal No. 1.
NOTICE TO BANKS, BROKER/DEALERS AND VOTING TRUSTEES
AND THEIR NOMINEES
Please advise the Fund, in care of
___________________, Attention: [NAME, ADDRESS], whether other
persons are the beneficial owners of Shares for which proxies are
being solicited from you, and, if so, the number of copies of the
Proxy Statement and other soliciting material you wish to receive
in order to supply copies to the beneficial owners of Shares.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
THEREFORE, SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND IN PERSON ARE
URGED TO COMPLETE, DATE, SIGN AND RETURN THE PROXY CARD IN THE
ENCLOSED STAMPED ENVELOPE.
Dated: ________________, 1994
<PAGE>
Preliminary Copy
FIRST PRAIRIE U.S. GOVERNMENT INCOME FUND
(INTERMEDIATE SERIES)
The undersigned shareholder of the Intermediate Series of
First Prairie U.S. Government Income Fund (the "Fund") hereby
appoints __________________ and ___________________, and each of
them, the attorneys and proxies of the undersigned, with full
power of substitution, to vote, as indicated herein, all of the
shares of beneficial interest of the Fund standing in the name of
the undersigned at the close of business on December 5, 1994, at
a Meeting of Shareholders to be held at the offices of [NAME],
[ADDRESS], at __:__ _.m. on [DAY], _________, 1995, and at any
and all adjournments thereof, with all of the powers the
undersigned would possess if then and there personally present
and especially (but without limiting the general authorization
and power hereby given) to vote as indicated on the proposal, as
more fully described in the Proxy Statement for the meeting.
Please mark boxes in blue or black ink.
1. Policy Vote: To approve certain changes to a
fundamental policy of the Fund.
/__/ FOR /__/ AGAINST /__/ ABSTAIN
Classification Vote: To approve a change in the
Fund's classification to a non-diversified investment company.
/__/ FOR /__/ AGAINST /__/ ABSTAIN
2. In their discretion, the proxies are authorized to
vote upon such other business as may properly come before the
meeting, or any adjournment(s) or postponement(s) thereof.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES AND WILL BE
VOTED FOR THE ABOVE PROPOSAL UNLESS OTHERWISE INDICATED.
Signature(s) should be exactly as name or
names appearing on this proxy. If shares
are held jointly, each holder should sign.
If signing is by attorney, executor,
administrator, trustee or guardian, please
give full title.
Dated:________________, 1994
________________________________
Signature(s)
________________________________
Signature(s)
Sign, Date and Return the Proxy
Card Promptly Using the
Enclosed Envelope
