PRESIDENT'S LETTER
Dear Shareholder:
We are pleased to provide you with this annual report for the First
Prairie U.S. Government Income Fund Intermediate Series Class A shares.
The Fund is managed as a diversified mutual fund which seeks to provide
investors with as high a level of current income as is consistent with the
preservation of capital. To this end, since the Fund's inception on March 5,
1993 through the end of the reporting period on January 31, 1994, Class A
shares paid income dividends of approximately $.47 per share. This is
equivalent to an annualized distribution rate per share of 5.98%, based
upon the closing maximum offering price per share on January 31, 1994,
adjusted for capital gain distributions.
At the end of the fiscal year, the Fund had an average portfolio
maturity of 4.3 years, down from 4.98 years on July 31, 1993. Given our
current forecast for higher interest rates in 1994, management remains
cautious toward longer-term securities which are at price risk should
interest rates rise. Your Fund's portfolio manager currently prefers to be
invested in the middle maturities of the yield curve.
As of the end of January, Treasury securities represented 72.2% of
Fund net assets, Mortgage-Backed Certificates 23.6% (Government
National Mortgage Association 1.7%, Federal National Mortgage
Association 1.9%, and Collateralized Mortgage Obligations 20.0%) and Cash
4.2%. As of January 31, 1994, the Lehman Brothers Intermediate
Government Bond Index,* the Fund's market benchmark, held 87% in
Treasuries and 13% in agencies.
During the fiscal year, the Fund's Treasury holdings generally
contributed positively to the Fund's performance. Intermediate Treasuries,
as measured by the Lehman Brothers Intermediate Treasury Bond Index*
outperformed the Lehman Brothers Intermediate Agency Bond Index,*
during the reporting period (for purposes of this comparison, the period
used is February 28, 1993 through January 31, 1994).
However, given our forecast of higher interest rates, the Treasury
component of the Fund's portfolio was reduced from approximately 95% of
net assets to approximately 72% as mortgage securities have been added.
Currently, the Fund's strategy is to continue to add to the Mortgage
position due to anticipated weakness in the Treasury market. In a rising
interest rate environment, mortgage securities are expected to
outperform Treasuries as prepayments on mortgages decrease. However,
we must be careful of extension risk, since the average lives of the
mortgages will also increase as it is less likely that refinancings will
occur. To seek protection against severe extension risk, the Fund has
purchased Collateralized Mortgage Obligations that have less extension
risk than pass-through mortgages. Premium mortgage pass-throughs are
still somewhat expensive as compared to Treasuries given expected
prepayments. As rates rise, the price of pass-through mortgages should
take into account slowing prepayments and extension risk, at which point
the Fund may add more pass-through mortgages at better valuations. The
yield premium that mortgages generally have over Treasuries could then
add positively to the performance of the Fund.
Longer term, management views the market cautiously, expecting a
rise in short and long interest rates. We believe the market is currently
weighing the probability of a continuation of the strong economic growth
seen in the fourth quarter of 1993. The Fund's defensive posture
illustrates our conviction that the market has not yet priced in higher
inflation expectations in long-term rates nor has it priced in higher
short-term rates based on a probable Federal Reserve Board tightening.
We look forward to serving your investment needs.
Sincerely,
(Joseph S.DiMartino Signature Logo)
Joseph S.DiMartino
President
February 23, 1994
New York, N.Y.
* SOURCE: LIPPER ANALYTICAL SERVICES, INC. - Lehman Brothers
Intermediate Government Bond Index consists of all public obligations of
the U.S. Treasury and all publicly issued debt of U.S. Government agencies
and quasi-federal corporations, and corporate debt guaranteed by the U.S.
Government with maturities of 1 to 10 years; Lehman Brothers
Intermediate Agency Bond Index consists of all publicly issued debt of U.S.
Government agencies and quasi-federal corporations, and corporate debt
guaranteed by the U.S. Government with maturities of 1 to 10 years;
Lehman Brothers Intermediate Treasury Bond Index consists of all public
obligations of the U.S. Treasury with maturities of 1 to 10 years. All
indices are widely accepted, unmanaged indices of various bond market
performance.
FIRST PRAIRIE U.S. GOVERNMENT INCOME FUND, INTERMEDIATE SERIES
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN FIRST
PRAIRIE U.S. GOVERNMENT INCOME FUND, INTERMEDIATE SERIES CLASS A
SHARES AND THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT BOND
INDEX
(Exhibit A)
Past performance is not predictive of future performance.
The above illustration compares a $10,000 investment in Class A shares
of First Prairie U.S. Government Income Fund Intermediate Series on
3/5/93 (Inception Date) to a $10,000 investment made in the Lehman
Brothers Intermediate Government Bond Index on that date. For
comparative purposes, the value of the Index on 2/28/93 is used as the
beginning value on 3/5/93. All dividends and capital gain distributions are
reinvested.
The Fund's performance takes into account the maximum initial sales
charge on Class A shares and all other applicable fees and expenses. The
Lehman Brothers Intermediate Government Bond Index is an unmanaged
index and consists of all public obligations of the U.S. Treasury and all
publicly issued debt of U.S. Government agencies and quasi-federal
corporations, and corporate debt guaranteed by the U.S. Government with
maturities of 1 to 10 years and an outstanding par value of $100 million.
The Index does not take into account charges, fees and other expenses.
Further information relating to Fund performance, including expense
reimbursements, if applicable, is contained in the Condensed Financial
Information section of the Prospectus and elsewhere in this report.
*Source: Lehman Brothers
<TABLE>
<CAPTION>
FIRST PRAIRIE U.S. GOVERNMENT INCOME FUND, INTERMEDIATE SERIES
STATEMENT OF INVESTMENTS JANUARY 31, 1994
PRINCIPAL
BOND AND NOTES-95.8% AMOUNT VALUE
---------- ----------
<S> <C> <C>
MORTGAGE-BACKED CERTIFICATES-23.6%
Federal Home Loan Mortgage Corporation,
Guaranteed Mortgage Participation Certificates
Series 1118, Class H, 8 1/4%, 7/15/2001.................................... $ 500,000 $ 518,594
Federal Home Loan Mortgage Corporation,
Guaranteed Mortgage Participation Certificates
Series 98, Class E, 8 1/4%, 11/15/2020..................................... 250,000 259,883
Federal National Mortgage Association,
Guaranteed Mortgage Pass Thru Certificates
7%, 6/1/2023............................................................... 96,956 99,410
Federal National Mortgage Association,
Guaranteed Pass Thru Certificates
Series 174, Class K, 7%, 4/25/2006......................................... 250,000 257,812
Government National Mortgage Association,
Guaranteed Mortgage Pass Thru Certificates
8 1/2%, 3/15/2023.......................................................... 82,862 88,068
----------
TOTAL MORTGAGE-BACKED CERTIFICATES............................................. $1,223,767
==========
U.S. TREASURY NOTES-72.2%
5 1/8%, 2/28/1998.......................................................... $ 210,000 $ 212,592
5 1/8%, 6/30/1998.......................................................... 400,000 403,812
5 3/8%, 5/31/1998.......................................................... 375,000 382,149
6 7/8%, 4/30/1997.......................................................... 75,000 80,227
7 3/8%, 5/15/1996.......................................................... 750,000 800,742
7 1/2%, 11/15/2001......................................................... 200,000 225,687
7 1/2%, 5/15/2002.......................................................... 150,000 169,640
7 3/4%, 2/15/1995.......................................................... 200,000 208,391
7 7/8%, 11/15/1999......................................................... 415,000 471,025
8 5/8%, 8/15/1994.......................................................... 240,000 246,787
8 7/8%, 11/15/1997......................................................... 480,000 548,625
----------
TOTAL U.S. TREASURY NOTES.................................................................. $3,749,677
==========
TOTAL INVESTMENTS
(cost $4,764,350).......................................................... 95.8% $4,973,444
====== ==========
CASH AND RECEIVABLES (NET)..................................................... 4.2% $ 218,954
====== ==========
NET ASSETS..................................................................... 100.0% $5,192,398
====== ==========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
FIRST PRAIRIE U.S. GOVERNMENT INCOME FUND, INTERMEDIATE SERIES
STATEMENT OF ASSETS AND LIABILITIES JANUARY 31, 1994
<S> <C>
ASSETS:
Investments in securities, at value
(cost $4,764,350)-see statement........................................ $4,973,444
Cash....................................................................... 58,364
Interest receivable........................................................ 70,383
Prepaid expenses-Note 1(e)................................................. 73,493
Due from The First National Bank of Chicago................................ 88,532
----------
5,264,216
LIABILITIES;
Accrued expenses and other liabilities..................................... 71,818
----------
NET ASSETS..................................................................... $5,192,398
==========
REPRESENTED BY:
Paid-in capital............................................................ $4,982,098
Accumulated undistributed net realized gain on investments................. 1,206
Accumulated net unrealized appreciation on investments-Note 3.............. 209,094
----------
NET ASSETS at value............................................................ $5,192,398
==========
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)................ 7,860
==========
Class F Shares
(unlimited number of $.001 par value shares authorized)................ 621,543
==========
NET ASSET VALUE per share:
Class A Shares
($64,878 / 7,860 shares)............................................... $8.25
=====
Class F Shares
($5,127,520 / 621,543 shares).......................................... $8.25
=====
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS FROM MARCH 5, 1993 (COMMENCEMENT OF OPERATIONS) TO JANUARY 31, 1994
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME............................................................ $ 269,055
EXPENSES:
Management fee-Note 2(a)............................................... $ 26,010
Legal fees............................................................. 29,536
Auditing fees.......................................................... 22,037
Organization expenses.................................................. 14,391
Shareholders' reports.................................................. 7,055
Shareholder servicing costs-Note 2(b).................................. 5,323
Trustees' fees and expenses-Note 2(c).................................. 4,277
Registration fees...................................................... 2,508
Custodian fees......................................................... 946
Miscellaneous.......................................................... 2,397
----------
114,480
Less-expense reimbursement from Manager due to undertakings............ 114,480
----------
TOTAL EXPENSES..................................................... --
----------
INVESTMENT INCOME-NET.............................................. 269,055
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized gain on investments-Note 3.................................... $ 13,430
Net unrealized (depreciation) on investments-Note 1........................ (60,015)
----------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS.................. (46,585)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................... $ 222,470
==========
See notes to financial statements.
</TABLE>
<TABLE>
FIRST PRAIRIE U.S. GOVERNMENT INCOME FUND, INTERMEDIATE SERIES
STATEMENT OF CHANGES IN NET ASSETS
FROM MARCH 5, 1993 (COMMENCEMENT OF OPERATIONS) TO JANUARY 31, 1994
<S> <C>
OPERATIONS:
Investment income-net................................................................... $ 269,055
Net realized gain on investments........................................................ 13,430
Net unrealized (depreciation) on investments for the period............................. (60,015)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................ 222,470
----------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares...................................................................... (1,326)
Class F shares...................................................................... (267,729)
Net realized gain on investments:
Class A shares...................................................................... (152)
Class F shares...................................................................... (12,072)
----------
TOTAL DIVIDENDS................................................................. (281,279)
----------
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares...................................................................... 51,267
Class F shares...................................................................... 5,247,186
Dividends reinvested:
Class A shares...................................................................... 1,484
Class F shares...................................................................... 5,299
Cost of shares redeemed:
Class A shares...................................................................... --
Class F shares...................................................................... (154,029)
----------
INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS.................... 5,151,207
----------
TOTAL INCREASE IN NET ASSETS................................................ 5,092,398
NET ASSETS:
Beginning of period..................................................................... 100,000
----------
End of period........................................................................... $5,192,398
==========
SHARES
--------------------------
YEAR ENDED
JANUARY 31, 1994*
--------------------------
CLASS A CLASS F
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Shares sold................................................................ 6,185 628,922
Shares issued for dividends reinvested..................................... 180 639
Shares redeemed............................................................ -- (18,488)
---------- ----------
NET INCREASE IN SHARES OUTSTANDING..................................... 6,365 611,073
========== ==========
- -------------------
*From March 5, 1993 (commencement of operations) through January 31, 1994.
See notes to financial statements.
</TABLE>
<TABLE>
FIRST PRAIRIE U.S. GOVERNMENT INCOME FUND, INTERMEDIATE SERIES
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for the period March 5, 1993
(commencement of operations) to January 31, 1994. This information has been
derived from information provided in the Fund's financial statements.
Class A Shares Class F Shares
-------------- --------------
<S> <C> <C>
PER SHARE DATA:
Net asset value, beginning of period....................................... $8.36 $8.36
----- -----
INVESTMENT OPERATIONS:
Investment income-net...................................................... .47 .47
Net realized and unrealized (loss) on investments.......................... (.09) (.09)
----- -----
TOTAL FROM INVESTMENT OPERATIONS....................................... .38 .38
----- -----
DISTRIBUTIONS:
Dividends from investment income-net....................................... (.47) (.47)
Dividends from net realized gain on investments............................ (.02) (.02)
----- -----
TOTAL DISTRIBUTIONS.................................................... (.49) (.49)
----- -----
Net asset value, end of period............................................. $8.25 $8.25
===== =====
TOTAL INVESTMENT RETURN (1) 5.16%(2) 5.16%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.................................... -- --
Ratio of net investment income to average net assets....................... 5.96%(2) 6.21%(2)
Decrease reflected in above expense ratios due to undertaking
by the Manager......................................................... 3.67%(2) 2.64%(2)
Portfolio Turnover Rate.................................................... 26.54%(3) 26.54%(3)
Net Assets, end of period (000's Omitted).................................. $65 $5,128
- ----------------------
(1) Exclusive of sales charge.
(2) Annualized.
(3) Not Annualized.
See notes to financial statements.
</TABLE>
FIRST PRAIRIE U.S. GOVERNMENT INCOME FUND, INTERMEDIATE SERIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
First Prairie U.S. Government Income Fund (the "Fund") was organized
as a Massachusetts business trust on March 12, 1992 and operates as a
series company currently offering one series, the Intermediate Series (the
"Series"). The Series had no operations prior to March 5, 1993 other than
matters relating to its organization and registration as a diversified
open-end management investment company under the Investment Company
Act of 1940 ("Act") and the Securities Act of 1933 and the sale and
issuance of 1,495 Class A shares and 10,470 Class F shares of Beneficial
Interest ("Initial Shares") to The Dreyfus Corporation ("Dreyfus"). Dreyfus
provides certain administrative services to the Fund-see Note 2(a). The
First National Bank of Chicago ("Manager") serves as the Fund's
investment adviser.
On March 3, 1993, the Manager acting as Trustee for Personal Trust
Government Bond Fund ("Bond Fund") agreed to transfer the assets of Bond
Fund, subject to Bond Fund's liabilities, to the Series in exchange for
Class F shares of Beneficial Interest of the Series at net asset value (the
"Exchange"). The Exchange became effective after the close of business
on March 4, 1993, at which time the Series issued 475,345 Class F shares
valued at $8.36 per share to participants in the Bond Fund in exchange for
the Bond Fund's net assets valued at $3,972,686. The Bond Fund's net
assets included $269,109 of unrealized appreciation which was
transferred to the Fund in the Exchange. The Fund commenced operations
on March 5, 1993.
Dreyfus Service Corporation ("Distributor") acts as the distributor of
the Fund's shares. The Distributor is a wholly-owned subsidiary of Dreyfus.
The Series offers both Class A and Class F shares. Class A shares are
subject to a sales charge imposed at the time of purchase and Class F
shares are offered without a sales charge. Other differences between the
two Classes include the services offered to and the expenses borne by
each Class.
(A) PORTFOLIO VALUATION: The Series' investments (excluding short-
term investments) are valued each business day by an independent pricing
service ("Service") approved by the Board of Trustees. Investments for
which quoted bid prices in the judgment of the Service are readily
available and are representative of the bid side of the market are valued
at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the
Service based upon its evaluation of the market for such securities). Other
investments (which constitute a majority of the portfolio securities) are
carried at fair value as determined by the Service, based on methods
which include consideration of: yields or prices of securities of
comparable quality, coupon, maturity and type; indications as to values
from dealers; and general market conditions. Short-term investments are
carried at amortized cost, which approximates value.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss
from securities transactions are recorded on the identified cost basis.
Interest income including, where applicable, amortization of discount on
investments, is recognized on the accrual basis.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to
declare dividends daily from investment income-net. Such dividends are
paid monthly. Dividends from net realized capital gain are normally
declared and paid annually, but the Series may make distributions on a
more frequent basis to comply with the distribution requirements of the
Internal Revenue Code. However, to the extent that net realized capital
gain can be offset by capital loss carryovers, if any, it is the policy of the
Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the provisions
available to certain investment companies, as defined in applicable
sections of the Internal Revenue Code, and to make distributions of
taxable income sufficient to relieve it from all, or substantially all,
Federal income taxes.
FIRST PRAIRIE U.S. GOVERNMENT INCOME FUND, INTERMEDIATE SERIES
NOTES TO FINANCIAL STATEMENTS (continued)
(E) OTHER: Organization expenses paid by the Series are included in
prepaid expenses and are being amortized to operations from March 5,
1993, the date operations commenced, over the period during which it is
expected that a benefit will be realized, not to exceed five years. At
January 31, 1994, the unamortized balance of such expenses amounted to
$70,941. In the event that any of the Initial Shares are redeemed during
the amortization period, the redemption proceeds will be reduced by any
unamortized organization expenses in the same proportion as the number
of such shares being redeemed bears to the number of such shares
outstanding at the time of such redemption.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the
Manager, the management fee is computed at the annual rate of .60 of 1%
of the average daily value of the Series' net assets and is payable monthly.
The Agreement further provides that if in any full fiscal year the
aggregate expenses of the Series, exclusive of taxes, brokerage, interest
on borrowings and extraordinary expenses, exceed the expense limitation
of any state having jurisdiction over the Series, the Series may deduct
from the payments to be made to the Manager, or the Manager will bear
such excess to the extent required by state law.
The Manager has engaged Dreyfus to assist it in providing certain
administrative services for the Series pursuant to a separate agreement
between the Manager and Dreyfus. Pursuant to its agreement with Dreyfus,
the Manager has agreed to pay Dreyfus a monthly fee at the annual rate of
.08 of 1% of the value of the Series' average daily net assets. Dreyfus is
currently waiving its administration fee.
The Manager has undertaken from March 5, 1993 to reimburse all fees
and expenses of the Series. Pursuant to the undertaking, the Manager
waived its fee of $26,010 and reimbursed excess expenses of $88,470 for
the period ended January 31, 1994.
The undertaking may be modified by the Manager from time to time,
provided that the resulting expense
reimbursement would not be less than the amount required pursuant to the
Agreement.
The Distributor retained $120 during the period ended January 31, 1994
from commissions earned on sales of the Fund's Class A shares.
(B) The Series has adopted a Service Plan (the "Plan") pursuant to
which it has agreed to pay costs and expenses in connection with
advertising and marketing Class A shares of the Series and payments made
to one or more Service Agents (which may include the Manager, Dreyfus
and the Distributor) based on the value of the Series' Class A shares
owned by clients of the Service Agent. These advertising and marketing
expenses and fees of the Service Agents may not exceed an annual rate of
.25 of 1% of the Series' Class A average daily net assets. The Plan also
separately provides for the Series to bear the costs of preparing, printing
and distributing certain of the Series' prospectuses and statements of
additional information and costs associated with implementing and
operating the Plan, not to exceed the greater of $100,000 or .005 of 1% of
the Series' Class A average daily net assets for any full fiscal year. For
the period ended January 31, 1994, the Series was charged $56 pursuant
to the Plan, but these amounts were not paid by the Series pursuant to the
undertaking in effect (see Note 2 (a)).
(C) Certain officers and trustees of the Fund are "affiliated persons,"
as defined in the Act, of the Manager or Dreyfus. Each trustee who is not
an "affiliated person" receives from the Fund an annual fee of $1,000 and
an attendance fee of $250 per meeting.
(D) On December 5, 1993, Dreyfus entered into an Agreement and Plan of
Merger providing for the merger of Dreyfus with a subsidiary of Mellon
Bank Corporation ("Mellon").
FIRST PRAIRIE U.S. GOVERNMENT INCOME FUND, INTERMEDIATE SERIES
NOTES TO FINANCIAL STATEMENTS (continued)
Following the merger, it is planned that Dreyfus will be a direct
subsidiary of Mellon Bank, N.A. Closing of this merger is subject to a
number of contingencies, including the receipt of certain regulatory
approvals and the approvals of the stockholders of Dreyfus and of Mellon.
The merger is expected to occur in mid-1994, but could occur later.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales (including paydowns) of
investment securities, excluding short-term securities, during the period
ended January 31, 1994, amounted to $5,944,132 and $1,202,939,
respectively.
At January 31, 1994, accumulated net unrealized appreciation on
investments was $209,094, consisting of $211,840 gross unrealized
appreciation and $2,746 gross unrealized depreciation.
At January 31, 1994, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
FIRST PRAIRIE U.S. GOVERNMENT INCOME FUND, INTERMEDIATE SERIES
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
FIRST PRAIRIE U.S. GOVERNMENT INCOME FUND, INTERMEDIATE SERIES
We have audited the accompanying statement of assets and liabilities
of First Prairie U.S. Government Income Fund, Intermediate Series,
including the statement of investments, as of January 31, 1994, and the
related statements of operations and changes in net assets and financial
highlights for the period from March 5, 1993 (commencement of
operations) to January 31, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of January 31, 1994 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of First Prairie U.S. Government Income Fund, Intermediate Series
at January 31, 1994, and the results of its operations, the changes in its
net assets and the financial highlights for the period from March 5, 1993
to January 31, 1994, in conformity with generally accepted accounting
principles.
(Ernst and Young Signature Logo)
New York, New York
March 11, 1994
Important Tax Information (Unaudited)
For Federal Tax purposes the Series hereby designates $.0105 per share
as a long-term capital gain distribution of the $.0196 per share paid on
December 8, 1993.
FIRST PRAIRIE
U.S. GOVERNMENT INCOME FUND
INTERMEDIATE SERIES
144 Glenn Curtiss Boulevard
Uniondale, NY 11556
Investment Adviser
THE FIRST NATIONAL BANK
OF CHICAGO
Three First National Plaza
Chicago, IL 60670
Distributor
DREYFUS SERVICE CORPORATION
200 Park Avenue
New York, NY 10166
Custodian
THE BANK OF NEW YORK
110 Washington Street
New York, NY 10286
Transfer Agent &
DIVIDEND DISBURSING AGENT
THE SHAREHOLDER SERVICES GROUP, INC.
P.O. Box 9671
Providence, RI 02940
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 375AR941
FIRST
(First Prairie Logo)
PRAIRIE
U.S. GOVERNMENT
INCOME FUND
INTERMEDIATE
SERIES
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN FIRST PRAIRIE U.S. GOVERNMENT INCOME FUND,
INTERMEDIATE SERIES CLASS A SHARES AND THE LEHMAN
BROTHERS INTERMEDIATE GOVERNMENT BOND INDEX
EXHIBIT A:
__________________________________________________________
| | LEHMAN BROTHERS | FIRST PRAIRIE U.S. |
| | INTERMEDIATE | GOVERNMENT INCOME FUND,|
| PERIOD | GOVERNMENT | INTERMEDIATE SERIES |
| | BOND INDEX* | CLASS A |
|----------- | ----------------- | -----------------------|
| 3/5/93 | 10,000 | 9,698 |
| 3/31/93 | 10,037 | 9,664 |
| 4/30/93 | 10,115 | 9,739 |
| 5/31/93 | 10,088 | 9,710 |
| 6/30/93 | 10,234 | 9,845 |
| 7/31/93 | 10,254 | 9,874 |
| 8/31/93 | 10,407 | 9,996 |
| 9/30/93 | 10,449 | 10,045 |
| 10/31/93 | 10,474 | 10,060 |
| 11/30/93 | 10,422 | 10,024 |
| 12/31/93 | 10,465 | 10,063 |
| 1/31/94 | 10,569 | 10,155 |
|___________ | _________________ | _______________________|
_________________________________________________________
| FIRST PRAIRIE U.S. GOVERNMENT INCOME FUND, |
| INTERMEDIATE SERIES CLASS A |
|---------------------------------------------------------|
| ACTUAL AGGREGATE TOTAL RETURN |
| FROM 3/5/93 TO 1/31/94 |
| REFLECTS MAXIMUM SALES CHARGE |
|---------------------------------------------------------|
| 1.55% |
|---------------------------------------------------------|
