PROSPECT HILL TRUST
PROSPECT HILL PRIME MONEY MARKET FUND (THE ''FUND'')
SUPPLEMENT DATED DECEMBER 11, 1995
TO THE PROSPECTUS DATED MAY 1, 1995
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
On December 8, 1995, Prospect Hill Trust entered into an agreement providing
for a reorganization (the ''Reorganization'') in which the existing Hub and
Spoke(R) structure, of which the Fund is a part, would be restructured so that
the Fund and the Cash Reserve Portfolio (the ''Cash Reserve'') of Principal
Preservation Portfolios, Inc. would operate through a dual class structure
within Cash Reserve, rather than as separately incorporated spokes of the Hub
and Spoke(R) structure. The Board of Trustees believes that the elimination of
multiple investment companies and other duplicative expenses associated with the
present Hub and Spoke(R) structure would have the effect of reducing the Fund's
expense ratio, thereby making it more competitive with other institutional money
market funds and potentially resulting in increased asset growth. In the
Reorganization, shareholders of the Fund would receive, in exchange for their
shares of the Fund, an equal number of shares of Cash Reserve's Class Y Common
Stock valued at $1.00 per share. As described in more detail below, the shares
of Cash Reserve Class Y Common Stock so received would be similar in all
material respects to the presently outstanding shares of the Fund, and the
holders thereof would have substantially the same rights and privileges with
respect to their shares as shareholders of the Fund presently have with respect
to their Fund shares.
The Reorganization would be consummated in accordance with the provisions of
an Agreement and Plan of Reorganization and Liquidation pursuant to which Cash
Reserve would acquire all of the assets, subject to the liabilities, of the Fund
in exchange for shares of Class Y Common Stock of Cash Reserve. The Class Y
Common Stock of Cash Reserve so received by the Fund would be distributed pro
rata to shareholders of the Fund, and subsequently, the Fund would be dissolved.
The Reorganization is subject to approval by the shareholders of the Fund. It
is presently anticipated that a special meeting of the shareholders of the Fund
will be held on December 28, 1995 and, subject to approval of the Reorganization
by the shareholders of the Fund at that meeting, that the Reorganization would
become effective as of the close of business on December 29, 1995. Proxy
materials soliciting approval of the Reorganization by shareholders of the Fund
have been prepared and filed with the Securities and Exchange Commission, and
will be distributed to shareholders of the Fund in advance of the special
meeting. Costs and expenses associated with the Reorganization, including legal
and accounting fees and costs associated with soliciting approval from the
Fund's shareholders, will be borne by B.C. Ziegler and Company, and no part of
such costs and expenses will be borne by the Fund or its shareholders.
Following the proposed Reorganization, Ziegler Asset Management, Inc.
(''ZAMI'') would continue to manage the assets of the Fund pursuant to an
investment advisory agreement substantively identical (including advisory fees
paid thereunder) to the current Investment Advisory Agreement by and between
ZAMI and The Prime Portfolios (on behalf of the Prime Money Market Portfolio).
The investment objective and the investment policies and programs presently
employed by ZAMI in managing the Hub's assets would not be affected by the
Reorganization. In addition, ZAMI and its affiliates would continue to provide
administrative services, custodian and depository services, transfer and
dividend disbursing agent services, and accounting/pricing services with respect
to the Fund's assets and the shares of Cash Reserve's Class Y Common Stock
issued in the Reorganization.
As noted, following the Reorganization, administrative services will be
provided to Cash Reserve by ZAMI under the terms of a new administrative
services agreement to be entered into between ZAMI and Principal Preservation.
This new administrative services agreement will be substantially identical to
the present administrative services agreement between The Prime Portfolios (on
behalf of The Prime Money Market Portfolio) and B.C. Ziegler, with the exception
that the fees provided thereunder will be increased from the present rate of
0.10% of average daily net assets up to $200 Million, and 0.05% of such assets
over $200 Million, to the rate of 0.15% of average daily net assets up to $200
Million, and 0.10% on average net assets over $200 Million. This increase is the
result of a restructuring of all administrative service fees currently provided
to the entire Hub and Spoke(R) complex. It is anticipated that this increase in
the rate of administrative fees will be more than offset by cost savings
expected to be realized as a result of the Reorganization, and that the
Reorganization will have the effect of reducing the total expenses that
otherwise would be incurred by the Fund.
The following table provides: (1) a summary of expenses relating to purchases
and sales of shares of the Fund, and the aggregate annual operating expenses for
the Fund and The Prime Money Market Portfolio (the ''Hub'') of The Prime
Portfolios, as a percentage of average net assets of the Fund; and (2) the pro
forma comparison of expenses estimated with respect to purchases and sales of
shares of Cash Reserve Class Y Common Stock, and the annual operating expenses
of Cash Reserve allocated to the Class Y Common Stock, as a percentage of
average net assets allocated to the Class Y Common Stock. Shares of the Fund are
sold, and shares of Class Y Common Stock of Cash Reserve would be sold, without
a sales charge or a Rule 12b-1 distribution fee.
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
CASH RESERVE CLASS Y
THE FUND COMMON STOCK
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Investment Management Fee................. 0.20% 0.20%
Distribution (Rule 12b-1) Fees............ None None
Other Expenses
Administrative Service Fees............. 0.10% 0.15%(1)<F1>
Miscellaneous........................... 0.48%(2)<F2> 0.29%(3)<F3>
Total Other Expenses...................... 0.58% 0.44%
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TOTAL OPRATING EXPENSES.............. 0.78% 0.64%
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(1)<F1>Adjusted to reflect increase in administrative fees payable following
the Reorganization with respect to Class Y Common Stock of Cash Reserve as
compared to those presently paid with respect to shares of the Fund.
(2)<F2>Miscellaneous other expenses of the Fund reflect actual expenses during
the year ended December 31, 1994. Expenses incurred in future years may be
higher or lower on a percentage basis than those shown in the table,
depending upon the gross amount of such expenses and fluctuations in the
average net assets of the Fund.
(3)<F3>The difference between this ratio and the comparable ratio for the Fund
is attributable to the elimination of certain duplicative expenses
associated with the Hub and Spoke(R) structure that is expected to result
from the Reorganization, such as compensation to outside trustees, audit
fees, registration fees, legal fees, etc. Such cost savings are partially
offset by the increased administrative service fees. See footnote (1) above.
