PROSPECT HILL PRIME MONEY MARKET FUND
ANNUAL REPORT TO SHAREHOLDERS
DECEMBER 31, 1995
February 26, 1996
Dear Prospect Hill Shareholder,
During 1995, the portfolio manager of the Prime Money Market Portfolio continued
to reduce its positions in Farmers Home Administration and Small Business
Administration floating rate securities, and further diversified the portfolio
by investing in commercial paper issues with a laddered maturity structure.
Toward the end of 1995, the short end of the yield curve was inverted, resulting
in yields on overnight repurchase agreements that exceeded yields on three month
U.S. Treasury Bills. As the yield curve began to normalize, the manager began to
move into long U.S. Treasury Bills extending the portfolio's average maturity to
57 days on December 31, 1995.
As of December 31, 1995, the portfolio held approximately 17% in overnight
repurchase agreements collateralized by U. S. Treasury securities, 42% in
discount commercial paper and the remaining 40% in U.S. Government and Agency
obligations.
Management believes that during the first half of the year there will be
recessionary pressures on the Federal Reserve to lower the overnight lending
rate thereby causing short term interest rates to fall. The seven day yield of
Prospect Hill Prime Money Market Portfolio began the year at 4.78% and closed at
5.66% on December 31, 1995.
The results of the shareholders meeting held on December 28, 1995 to approve the
plan of Reorganization from Prospect Hill into a newly created Institutional
class (Class Y Common Stock) of Principal Preservation Cash Reserve Portfolio
were as follows:
Total Shares Outstanding 40,879,744
Shares Voted in Favor 26,540,892
Shares Voting Against 228,472
The Reorganization will eliminate multiple entities, which is expected to reduce
operating expenses of the Fund. The transaction is explained in more detail in
the footnotes to the accompanying financial statements of Prime Money Market
Portfolio and Prospect Hill Trust On behalf of the Trustees of both The Prime
Portfolios and Prospect Hill Trust, we appreciated the opportunity to serve you
and believe you will continue to enjoy a competitive yield on your investment
with Principal Preservation.
Sincerely,
/s/ Robert J. Tuszynski
Robert J. Tuszynski
Chairman
The Prime Portfolios
PROSPECT HILL PRIME MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
Per Share data for a Share Outstanding Throughout each Period:
April 5, 1993
For the year For the year (commencement of
ended December 31, ended December 31, operations) to
1995 1994 December 31, 1993
-------------- ------------- -----------------
Net asset value,
beginning of period $1.00 $1.00 $1.00
----- ----- -----
Net investment income 0.06 0.04 0.03
Dividends from net
investment income (0.06) (0.04) (0.03)
------ ------ ------
Net asset value, end of period $1.00 $1.00 $1.00
------ ------ ------
Total investment return(b)<F2> 5.74% 4.11% 3.51%(a)<F1>
RATIOS:
Net invesment income to
average net assets(c)<F3> 5.54% 4.05% 3.33%(a)<F1>
Expenses to average
net assets(c)<F3> 0.50% 0.60% 0.64%(a)<F1>
Capital Contributions to
average net assets(d)<F4> 0.20% - -
Total net assets
(000's omitted) $40,485 $43,362 $33,132
(a)<F1>Annualized.
(b)<F2>Had the advisors not made capital contributions as described in
the notes to the financial statements the adjusted total return would
have been 5.54%, 2.38% and 3,51% for 1995, 1994, and 1993, respectively.
(c)<F3>Reflects the Fund's share of Prime Money Market Portfolio's
expenses as well as a voluntary waiver of fees and an expense
reimbursement by the Portfolio's adviser. If the voluntary waivers and
expense reimbursement had not been in place, the retios of net
investment income and expenses to average net assets would have been
5.36% and 0.68%, respectively, for the year ended December 31, 1995,
3.86% and 0.78%, respectively, for the year ended December 31, 1994,
and 2.93% and 1.03%, respectively, for the period ended December 31,
1993.
(d)<F4>For the year ended December 31, 1995, the manner in which
capital contributions are presented changed from the prior year as a
result of a recent Securities and Exchange Commission Division of
Investment Management letter clarifying the presentation of capital
contributions. For the year endec December 31, 1995, capital
contributions are presented in the financial statements of both the
Fund and Prime Money Market Portfolio, whereas in 1994, capital
contributions were presented in the Prime Money Market Portfolio's
financial statements only.
See notes to financial statements.
PROSPECT HILL PRIME MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
ASSETS:
Investment in Prime Money Market Portfolio
at value (Note 2a) $40,673,857
----------
Total Assets 40,673,857
----------
LIABILITIES:
Dividends payable 111,293
Transfer agent fee payable (Note 3c) 5,926
Fund accounting fee payable (Note 3c) 3,000
Accrued expenses 68,991
-------
Total Liabilities 189,210
---------
NET ASSETS for 40,530,722 shares of beneficial
interest outstanding 40,484,647
----------
REPRESENTED BY:
Paid-in capital $40,619,033
Undistributed net income -
Accumulated net realized loss from Portfolio (134,386)
----------
Net Assets $40,484,647
----------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE $1.00
----------
----------
See notes to financial statements.
PROSPECT HILL PRIME MONEY MARKET FUND
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
INVESTMENT INCOME FROM PORTFOLIO (Note 2b):
Interest income $2,666,475
Allocated expenses (145,977)
----------
Net investment income from Portfolio 2,520,498
EXPENSES (Note 2d):
Professional fees 21,610
Insurance fees . 7,414
Compensation of trustees (Note 3b) 8,088
Registration fees 11,936
Transfer agent fees (Note 3c) 5,926
Fund accounting fees (Note 3c) 3,000
Printing fees 3,926
Miscellaneous expenses 11,105
-------
Total expenses 73,005
---------
NET INVESTMENT INCOME 2,447,493
Net realized loss from Portfolio (9,289)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,438,204
----------
----------
See notes to financial statements.
PROSPECT HILL PRIME MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
For the year For the year
ended ended
December 31, 1995 December 31, 1994
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income $2,447,493 $2,381,741
Net realized loss from Portfolio (9,289) (128,084)
--------- ---------
Net increase in net assets resulting
from operations 2,438,204 2,253,657
Distributions:
Net investment income (2,479,536) (2,349,698)
---------- ----------
Total distributions to shareholders (2,479,536) (2,349,698)
---------- -----------
Capital Transactions:
Proceeds from sales of shares 280,211,514 359,005,800
Reinvestment of dividends 1,222,737 1,331,481
Cost of shares redeemed (284,358,128) (350,011,932)
------------ ------------
Net (decrease) increase in net assets
resulting from share transactions (2,923,877) 10,325,349
Capital contributions(See footnote (d) on 88,313 --
page 3): ---------- -----------
Total (decrease) increase in net assets (2,876,896) 10,229,308
NET ASSETS:
Beginning of year 43,361,543 33,132,235
---------- ----------
End of year (including undistributed
net income of $ 0 and $39,611
respectively) $40,484,647 $43,361,543
----------- -----------
----------- -----------
See notes to financial statements.
PROSPECT HILL PRIME MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1 - ORGANIZATION
Prospect Hill Prime Money Market Fund (the "Fund") is a separate series of
Prospect Hill Trust (the "Trust"), formerly Prospect Hill Institutional Trust,
a Massachusetts business trust. The Trust is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund commenced operations on April 5, 1993.
Through December 31, 1995, the Fund sought to achieve its investment objective
of high current income to the extent consistent with stability of principal and
the maintenance of liquidity by investing all the investable assets of the Fund
in Prime Money Market Portfolio (the "Portfolio"), which, like the Fund, is
an open-end diversified management company, having the same investment
objectives as the Fund. The financial statements of the Portfolio, including the
Schedule of Investments, are included elsewhere in this report and should be
read in conjunction with the Fund's financial statements.
As discussed in Note 6, effective January 1, 1996, pursuant to the Agreement and
Plan of Reorganization and Liquidation dated December 8, 1995, the Fund withdrew
its investment in the Portfolio.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies of the Fund:
a) Valuation of Investments. The value of such investment reflects the Fund's
proportionate interest in the net assets of the Portfolio (32% at
December 31, 1995).
b) Interest Income and Dividends to Shareholders. The Fund earns interest
income, net of Portfolio expenses, daily on its investment in the Portfolio.
Dividends to shareholders are declared daily and paid monthly.
c) Federal Income Taxes. The Fund's policy is to comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies and
to distribute to shareholders all of its net investment income. Accordingly,
no provision for federal income or excise tax is necessary. As of
December 31, 1995, the Fund has a Federal income tax capital loss carry
forward of $42,762 expiring in 2002. A capital loss carry forward of $76,322
was utilized in the year ended December 31, 1995. It is the Fund's intention
to not make a distribution of any future realized capital gains until its
Federal income tax capital loss carry forward has been utilized.
d) Expense Allocation. The Fund bears all costs of its operations other than
expenses specifically assumed by Ziegler Asset Management, Inc. ("ZAMI"), the
Portfolio's Advisor, and B.C. Ziegler and Company ("BCZ"), the Trust's
Administrator and Distributor.
e) Other. All of the net income and realized gains (losses) of the Portfolio
are allocated pro rata among the Fund and the other investors in the
Portfolio in proportion to the average net assets of each fund at the time of
such determination.
f) Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
NOTE 3 - TRANSACTIONS WITH AFFILIATES
a) Administration and Distribution Services. On May 1, 1995, BCZ was
appointed as the administrator and distributor to the Trust. Prior thereto,
Signature Broker Dealer Services ("Signature") provided administrative and
distribution services to the Fund. BCZ provides the Trust general office
facilities and supervises the overall administration of the Trust. In
addition, BCZ, acting as agent for the Trust, is the distributor of shares of
the Fund. Neither BCZ or Signature received compensation directly from the
Fund for its administrative or distribution services provided to the Fund
during the year ended December 31, 1995.
b) Trustee Fees. Independent Trustees receive an annual fee of $2,500 and an
additional $250 for each meeting of the Board of Trustees attended. In
addition, the Trust reimburses unaffiliated Trustees for reasonable expenses
incurred in relation to attendance at the meetings. For the year ended
December 31, 1995, the Fund incurred Trustee fees and expenses of $8,088.
c) Transfer Agent and Fund Accounting Fees. The Trust has entered into an
Agency Agreement with BCZ to act as transfer and dividend disbursement agent
for the Fund. For the year ended December 31, 1995, the fee for this service
amounted to $5,926. In addition, the Trust has entered into an agreement with
BCZ to provide Accounting/Pricing services. For these services, the Fund
currently pays BCZ an annual fee of $3,000.
NOTE 4 - INVESTMENT TRANSACTIONS
For the year ended December 31, 1995, additions and reductions in the Fund's
investment in the Portfolio aggregated $280,227,000 and $285,706,807,
respectively.
NOTE 5 - CAPITAL CONTRIBUTIONS
During the year ended December 31, 1995, BCZ contributed capital to the Fund to
offset current year realized losses of $9,289 and prior year realized losses of
$32,043. Neither BCZ or any of its affiliates received shares of common stock or
any other consideration in exchange for the contributions, which increased the
total net assets of the Portfolio.
Additionally, on December 29, 1995, BCZ made a capital contribution to the Fund
totalling $46,981 to equalize the net asset value between the Fund and Principal
Preservation Portfolios, Inc. Cash Reserve Portfolio ("Cash Reserve").
Further, the Fund received the benefit of capital contributions made to the
Portfolio during the twelve months ended December 31, 1994 to offset the decline
of certain of the Portfolio securities. A discussion of the 1994 capital
contributions is contained in the notes to the financial statements of the
Portfolio. Such financial statements are attached to this report.
NOTE 6 - SUBSEQUENT EVENT
Effective after the close of business on December 31, 1995, and pursuant to the
terms of an Agreement and Plan of Reorganization and Liquidation by and between
Prospect Hill Trust (on behalf of the Fund) and Principal Preservation
Portfolios, Inc. ("Principal Preservation") (on behalf of Cash Reserve), the
Fund was reorganized in a tax-free reorganization into a newly-designated class
of institutional shares of Cash Reserve. In anticipation of this transaction and
pursuant to action taken by the Board of Directors of Principal Preservation,
immediately prior to the reorganization of the Fund, the capitalization of Cash
Reserve was restructured to increase from 300 million to 400 million the number
of shares of Principal Preservation's authorized common stock allocated to Cash
Reserve, and those 400 million shares were subdivided into two separate classes
of 200 million shares each: Class X Common Stock (Retail Class) and Class Y
Common Stock (Institutional Class). All outstanding shares of Cash Reserve were
designated (without otherwise affecting their rights and preferences) as shares
of the Retail Class. Immediately prior to the the reorganization, Prospect Hill
and Cash Reserve each withdrew all of their net assets from the Portfolio.
The Fund then transferred its net assets to Cash Reserve in exchange for shares
of Cash Reserve's Institutional Class. The Fund distributed the shares of Cash
Reserve's Institutional Class so received to the Fund's shareholders on a pro
rata basis in exchange for their Fund shares. The affairs of Prospect Hill Trust
and the Portfolio are being wound up, and those two investment companies will be
dissolved in accordance with the provisions of their respective Declarations of
Trust and applicable laws.
(PRICE WATERHOUSE LLP LOGO)
100 East Wisconsin Avenue
Suite 1500
Milwaukee, WI 53202
Telephone 414 276 9500
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of Prospect Hill
Prime Money Market Fund
In our opinion, the accompanying statement of assets and liabilities
and the related statements of operations and of changes in net assets
and the financial highlights present fairly, in all material respects,
the financial position of Prospect Hill Prime Money Market Fund (the
"Fund") (a series of Prospect Hill Trust) at December 31, 1995, the
results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended and the
financial highlights for each of the two years in the period ended
December 31, 1995 and for the period April 5, 1993 (commencement of
operations) through December 31, 1993, in conformity with generally
accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements")
are the responsibility of the Fund's management; our responsibility is
to express an opinion on these financial statements based on our
audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ Price Waterhouse LLP
February 26, 1996
PRIME MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 1995
Principal Maturity Interest Value
Amount Date Rate (Note 2a)
- --------- --------- -------- ---------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 40.4%
U.S. Treasury Bills
2,000,000 U.S. Treasury Bill 01/25/96 5.40% $1,993,106
2,000,000 U.S. Treasury Bill 05/30/96 5.85% 1,954,353
2,000,000 U.S. Treasury Bill 07/25/96 5.35% 1,939,126
1,000,000 U.S. Treasury Bill 07/25/96 5.46% 968,909
2,000,000 U.S. Treasury Bill 08/22/96 5.47% 1,929,194
---------
Total Treasury Bills 8,784,688
---------
Agency for International Development
2,315,020 Agency for International Development 01/01/06 5.47% 2,315,020
(Isreal)(b)<F6>
455,000 Agency for International Development 08/01/11 6.18% 455,459
(Panama)(a)<F5> ---------
Total Agency for International Development 2,770,479
---------
Farmers Home Administration ("FmHA")
115,372 FmHA (c)<F7> 07/26/96 9.75% 115,372
56,848 FmHA (c)<F7> 07/08/99 8.75% 57,134
72,901 FmHA (c)<F7> 06/15/00 7.00% 72,901
73,645 FmHA (c)<F7> 11/01/00 7.50% 73,645
164,397 FmHA (c)<F7> 12/12/11 7.25% 164,954
73,312 FmHA (c)<F7> 03/04/14 7.75% 73,565
7,902 FmHA (c)<F7> 07/01/22 7.13% 7,910
267,480 FmHA (c)<F7> 10/05/22 7.13% 268,338
90,867 FmHA (c)<F7> 06/15/23 6.85% 90,867
225,951 FmHA (c)<F7> 08/24/23 6.85% 225,951
---------
Total Farmers Home Administration 1,150,637
---------
Federal Farm Credit Bank ("FFCB")
4,005,000 FFCB Discount Note 01/24/96 5.53% 3,991,465
---------
Total Federal Farm Credit Bank 3,991,465
---------
Federal Home Loan Bank ("FHLB")
5,000,000 FHLB Discount Note 01/10/96 5.53% 4,993,856
1,000,000 FHLB Discount Note 01/26/96 5.03% 999,519
5,000,000 FHLB Discount Note 01/31/96 5.50% 4,977,847
1,000,000 FHLB Floating Rate Note (a)<F5> 03/08/96 5.51% 999,812
----------
Total Federal Home Loan Bank 11,971,034
----------
Federal Home Loan Mortgage Corporation ("FHLMC")
2,000,000 FHLMC Discount Note 02/01/96 5.59% 1,990,684
2,068,000 FHLMC Discount Note 06/03/96 5.27% 2,021,682
---------
Total Federal Home Mortgage Association 4,012,366
---------
Federal National Mortgage Association ("FNMA")
2,000,000 FNMA Discount Note 03/15/96 5.57% 1,977,410
2,500,000 FNMA Discount Note 04/16/96 5.37% 2,460,844
3,000,000 FNMA 09/20/96 5.60% 2,996,025
2,000,000 FNMA 09/23/96 5.50% 1,995,465
2,000,000 FNMA 12/10/96 7.70% 2,039,575
----------
Total Federal National Mortgage Association. 11,469,319
----------
Student Loan Marketing Association ("SLMA")
2,000,000 SLMA (a)<F5> 12/20/96 5.26% 2,000,000
---------
Total Student Loan Marketing Association 2,000,000
---------
Small Business Administration ("SBA")
613,982 SBA Pool #500981 (c)<F7> 07/25/05 7.50% 620,198
117,197 SBA Pool #501140 (c)<F7> 09/25/06 7.13% 117,690
665,589 SBA Pool #501934 (c)<F7> 07/25/09 6.88% 669,441
25,913 SBA Pool #501471 (c)<F7> 02/25/11 10.38% 28,739
167,721 SBA Pool #500263 (c)<F7> 04/25/12 8.00% 172,179
1,381,656 SBA Pool #502348 (c)<F7> 09/25/13 6.63% 1,381,656
439,688 SBA Pool #501218 (c)<F7> 07/25/15 7.25% 447,349
755,685 SBA Pool #502122 (c)<F7> 01/25/18 6.75% 762,826
429,342 SBA Loan (c)<F7> 01/15/04 8.23% 440,475
87,708 SBA Loan (c)<F7> 06/15/05 7.63% 89,389
352,776 SBA Loan (c)<F7> 07/15/05 7.63% 359,740
279,575 SBA Loan (c)<F7> 12/15/06 7.73% 286,395
--------
Total Small Business Administration 5,376,077
----------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS 51,526,065
----------
SHORT TERM - 59.4%
Commerical Paper
3,000,000 American General Corporation 01/11/96 5.58% 2,995,815
1,000,000 American General Corporation 04/04/96 5.50% 985,792
2,000,000 American General Corporation 04/11/96 5.48% 1,969,556
3,000,000 American Express Credit Corporation 01/09/96 5.62% 2,996,721
2,000,000 American Express Credit Corporation 04/25/96 5.39% 1,965,863
1,000,000 American Express Credit Corporation 06/18/96 5.46% 974,520
3,000,000 Associates Corporation 02/21/96 5.67% 2,976,375
1,000,000 Associates Corporation 03/04/96 5.52% 990,493
2,000,000 Associates Corporation 03/29/96 5.53% 1,973,272
2,000,000 The CIT Group Holdings Corporation 01/31/96 5.67% 1,990,865
2,000,000 The CIT Group Holdings Corporation 03/28/96 5.55% 1,973,483
2,000,000 The CIT Group Holdings Corporation 04/10/96 5.52% 1,969,640
2,000,000 Commercial Credit Corporation 01/19/96 5.74% 1,994,579
1,000,000 Commercial Credit Corporation 01/25/96 5.68% 996,371
3,000,000 Commercial Credit Corporation 01/25/96 5.60% 2,989,267
2,000,000 Ford Motor Credit Corporation 01/04/96 5.60% 1,999,378
2,000,000 Ford Motor Credit Corporation 02/12/96 5.69% 1,987,039
1,000,000 Ford Motor Credit Corporation 04/01/96 5.58% 986,050
1,000,000 Ford Motor Credit Corporation 04/01/96 5.47% 986,325
2,000,000 General Electric Capital Corporation 01/22/96 5.62% 1,993,755
2,000,000 General Electric Capital Corporation 01/25/96 5.61% 1,992,832
1,000,000 General Electric Capital Corporation 01/30/96 5.55% 995,715
1,000,000 General Electric Capital Corporation 04/11/96 5.49% 984,750
3,000,000 Household Finance Corporation 01/03/96 5.63% 2,999,531
2,000,000 Household Finance Corporation 02/09/96 5.50% 1,988,389
1,000,000 Household Finance Corporation 04/15/96 5.40% 984,400
2,000,000 Norwest Financial 02/07/96 5.70% 1,988,600
1,000,000 Norwest Financial 02/23/96 5.50% 992,056
2,000,000 Norwest Financial 03/04/96 5.58% 1,980,780
1,000,000 Norwest Financial 06/10/96 5.45% 975,778
---------
Total Commercial Paper 53,577,990
----------
Repurchase Agreements
2,206,627 First Boston Corp 01/02/96 5.70% $22,066,279
(Agreement dated 12/29/95, collateralized by
$20,395,000 par value in U.S. Treasury Notes due
08/15/04, $22,622,516 market value)
-----------
Total Repurchase Agreements 22,066,279
-----------
TOTAL SHORT TERM 75,644,269
-----------
Total Investments, at Amortized Cost - 99.8% 127,170,334
Other Assets, less Liabilities - 0.2% 193,449
-----------
Net Assets - 100% $127,363,783
-----------
-----------
Notes to Schedule of Investments
(a)<F5>The security has a floating/variable rate coupon payment tied to the
Treasury Bill lending rate. The coupon payment adjusts weekly or quarterly
thereby reducing the effective maturity to one year or less.
(b)<F6>The security has a floating/variable rate coupon payment tied to the six
month Libor lending rate. The coupon payment adjusts weekly thereby reducing
the effective maturity to one year or less.
(c)<F7>The security has a floating/variable rate coupon payment tied to the
Prime lending rate. The coupon payment adjusts daily, monthly, quarterly,
semi-annually or annually thereby reducing the effective maturity to one
year or less.
PRIME MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
ASSETS:
Investments in securities, at amortized
cost and value (Note 2a):
U.S. Government and agency obligations $51,526,065
Short-term investments 75,644,269
Interest receivable 381,383
Receivable from affiliate 61,247
-----------
Total Assets 127,612,964
LIABILITIES:
Advisory fee payable (Note 3b) 50,668
Administration fee payable (Note 3a) 28,122
Depository fee payable (Note 3d) 41,661
Fund accounting fee payable (Note 3e) 32,723
Other accrued expenses 96,007
-------
Total Liabilities 249,181
----------
NET ASSETS $127,363,783
-----------
REPRESENTED BY:
Paid-in capital $127,363,783
-----------
-----------
See notes to financial statements.
PRIME MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
INTEREST INCOME (Note 2b) $6,936,078
----------
EXPENSES:
Investment advisory fees (Note 3b) 232,297
Administrative fees (Note 3a) 114,635
Depository fees (Note 3d) 54,956
Professional fees 64,289
Fund accounting fees (Note 3e) 42,142
Compensation of trustees (Note 3c) 26,565
Insurance fees 8,050
Printing 2,460
-------
Total expenses 545,394
Less: Waiver of advisory fees (Note 3b) (174,070)
Waiver of administrative fees (Note 3a) (18,811)
---------
Net expenses 352,513
---------
NET INVESTMENT INCOME 6,583,565
Net realized loss from investments (23,778)
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $6,559,787
----------
----------
See notes to financial statements.
PRIME MONEY MARKET PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
For the year For the year
ended December 31, ended December 31,
1995 1994
INCREASE IN NET ASSETS: ----------------- -----------------
Operations:
Net investment income $6,583,565 $4,851,575
Net realized loss from investments (23,778) (2,173,642)
Net increase in net assets resulting ---------- ----------
from operations 6,559,787 2,677,933
Capital transactions:
Contributions 373,372,253 418,360,333
Withdrawals (349,027,857) (407,820,077)
----------- -----------
Net increase in net assets resulting
from capital transactions 24,344,396 10,540,256
Capital contributions (Note 5): 128,005 1,921,146
---------- ----------
Total increase in net assets 31,032,188 15,139,335
NET ASSETS:
Beginning of year 96,331,595 81,192,260
---------- ----------
End of year $127,363,783 $96,331,595
----------- ----------
----------- ----------
See notes to financial statements.
PRIME MONEY MARKET PORTFOLIO
SUPPLEMENTARY DATA
For the period
April 5, 1993
(commencement
For the year For the year 0f operations)
ended December ended December to December 31,
31, 31,
1995 1994 1993
--------------- -------------- ----------------
Ratios:
Net investment income to
average net assets (b)<F9> 5.70% 4.35% 3.49%(a)<F8>
Expenses to average net 0.31% 0.39% 0.41%(a)<F8>
assets (b)<F9>
Total realized losses to
average net assets (Note 5) -0.02% -1.95% ----
Capital contributions to
average net assets (Note 5) 0.11% 1.73% ----
(a)<F8>Annualized.
(b)<F9>Reflects a waiver of fees by the advisor, and an expense reimbursement
by the advisor. If the voluntary waivers and reimbursement of expenses had
not been in place, the ratio of net investment income to average net assets
and expenses to average net assets would have been 5.53% and 0.47%,
respectively, for the year ended December 31, 1995, 4.19% and 0.54%,
respectively, for the year ended December 31, 1994, and 3.28%
and 0.62%, respectively, for the period ended December 31, 1993.
See notes to financial statements.
PRIME MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1 - ORGANIZATION
Prime Money Market Portfolio (the "Portfolio"), a series of the Prime
Portfolios, is registered under the Investment Company Act of 1940, as amended,
as a no-load, diversified, open-end management investment company which is
organized as a trust under the laws of the State of New York. The Portfolio
commenced operations April 5, 1993.
As discussed in Note 6, pursuant to the Agreement and Plan of Reorganization and
Liquidation, the two investors in the Portfolio withdrew their respective
investments following the close of business December 31, 1995.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies of the
Portfolio:
a) Valuation of Investments. Money market instruments are valued at
amortized cost, which the Trustees have determined in good faith
constitutes fair value. The Portfolio's use of amortized cost is subject to
the Portfolio's compliance with certain conditions as specified under Rule
2a-7 of the Investment Company Act of 1940.
b) Interest Income. Interest income consists of interest accrued and
discount earned (including both original issue and market discount) on the
investments of the Portfolio, accrued ratably to the date of expected
maturity. Premiums are amortized on the investments of the Portfolio,
accrued ratably to the date of expected maturity.
c) Federal Income Taxes. The Portfolio's policy is to comply with the
applicable provisions of the Internal Revenue Code of 1986, as amended.
Accordingly, no provision for federal income tax is necessary. The
Portfolio will be treated as a partnership for federal income tax purposes.
As such, each investor in the Portfolio will be taxed on its share of the
Portfolio's ordinary income and capital gains. It is intended that the
Portfolio's assets will be managed in such a way that an investor in the
Portfolio will be able to satisfy the requirements of Subchapter M of the
Internal Revenue Code. The tax cost basis is substantially similar to the
book cost basis of investment securities.
d) Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
e) Other. Investment transactions are accounted for on the date the
security is purchased or sold. The Portfolio has investments in repurchase
agreements, which are securities purchased from another party who agrees to
repurchase the security within a specified time period at a specified
price. It is the policy of the Portfolio to require the custodian bank to
have legally segregated within the Federal Reserve/Treasury book-entry
system, all securities held as collateral in support of the repurchase
agreements. Procedures have been established by the Portfolio to monitor
the market value of the collateral to ensure the existence of a proper
level of collateral.
NOTE 3 - TRANSACTIONS WITH AFFILIATES
a) Administrative Fees. On May 1, 1995, B.C. Ziegler and Company ("BCZ")
was hired to serve as administrator and exclusive placement agent to the
Portfolio. BCZ provides management and administrative services necessary
for the operations of the Portfolio, furnishes office space and facilities
required for conducting the business of the Portfolio and pays the
compensation of the Portfolio's officers affiliated with BCZ. Prior
thereto, Signature Broker Dealer Services ("Signature") served as
administrator.
For these services, BCZ receives from the Portfolio a fee accrued daily and
paid monthly at an annual rate equal to 0.10% of the average daily net
assets of the Portfolio, up to $200 million of net assets, and 0.05% of
such assets over $200 million. For the year ended December 31, 1995, the
Portfolio incurred total Administrative fees of $114,635 of which $31,940
was paid to Signature and $82,695 was paid to BCZ, of which $18,811 was
voluntarily waived by BCZ during 1995.
b) Investment Advisory Fees. Ziegler Asset Management, Inc. ("ZAMI"), a
wholly-owned subsidiary of The Ziegler Companies, Inc., is the Investment
Advisor to the Portfolio. For its services under the Investment Advisory
Agreement, the advisor receives from the Portfolio a fee accrued daily and
paid monthly at an annual rate equal to 0.20% of the Portfolio's average
daily net assets. For the year ended December 31, 1995, the Portfolio
incurred total Advisory fees of $232,297 of which $174,070 was voluntarily
waived by the advisor.
c) Trustee Fees. Independent Trustees of the Portfolio receive an annual
fee of $10,000 and $500 for each meeting of the Board of Trustees attended.
In addition, the Portfolio reimburses unaffiliated Trustees for reasonable
expenses incurred in relation to attendance at the meetings. For the year
ended December 31, 1995, the Portfolio incurred Trustee fees and expenses
of $26,565.
d) Depository Fees. The Portfolio has entered into an agreement with BCZ
to provide the Portfolio with depository services. For these services, the
Portfolio currently pays BCZ a fee based on average daily net assets,
computed monthly, at an annual rate of 0.055% on the first $50 million of
net assets, 0.035% on the next $150 million of such assets, 0.030% on
the next $300 million and 0.025% on amounts over $500 million of such
assets. For the year ended December 31, 1995, the Portfolio incurred total
Depository fees of $54,956.
e) Fund Accounting Fees. The Portfolio has entered into an agreement with
BCZ to provide the Portfolio with Accounting/Pricing services. For these
services, the Portfolio currently pays BCZ a base fee of $15,000 and a fee
based on average daily net assets, computed monthly at an annual rate of
0.04% on net assets between $50 million and $100 million, 0.03% on the next
$100 million of such assets and 0.01% on amounts over $200 million of such
assets. For the year ended December 31, 1995, the Portfolio incurred total
Fund Accounting fees of $42,142.
NOTE 4 - INVESTMENT TRANSACTIONS
Purchases and sales (including maturities) of U.S. Government securities
aggregated $7,954,682,855 and $7,925,252,445, respectively.
NOTE 5 - CAPITAL CONTRIBUTION
On December 29, 1995, BCZ made a capital contribution to Prospect Hill Prime
Money Market Portfolio ("Prospect Hill") totalling $46,981 to equalize the net
asset value between Prospect Hill and Principal Preservation Portfolios, Inc.
Cash Reserve Portfolio ("Cash Reserve"). Additionally, BCZ contributed capital
to Prospect Hill to offset current year losses of $9,289 and prior year realized
losses of $32,043. Neither BCZ or any of its affiliates received any shares of
common stock or any other consideration in exchange for the contributions, which
increased assets of the Portfolio.
During the year ended December 31, 1995, BCZ contributed capital to Cash Reserve
to offset realized losses of $14,488 and prior year realized losses of $25,204.
Neither BCZ or any of its affiliates received any shares of common stock or any
other consideration in exchange for the contributions, which further increased
the assets of the Portfolio.
During the year ended December 31, 1994, certain of the Portfolio's U.S.
Government adjustable rate securities declined in value as interest rates rose.
These securities were U.S. Government floating or variable rate securities such
as dual index floaters or securities whose indicies lagged short term interest
rates. On July 13, 1994 the Portfolio sold three U.S. Government adjustable rate
securities for $3,239,792 (amortized cost $3,389,490). Prospect Hill Advisors,
Inc., the Portfolio's former advisor, contributed capital in the aggregate
amount of $149,698, offsetting the loss on the sale of the securities.
Prospect Hill received no shares of common stock or any other consideration in
exchange for the contribution, which increased total net assets of the
Portfolio.
During the period from July 28, 1994 through October 4, 1994, the Portfolio sold
similar securities with book values aggregating $23,374,806 to persons who may
be deemed affiliates of ZAMI. The fair value of the securities totalled
$21,655,712. The sale has been treated as a realized loss to the Portfolio with
an offsetting capital contribution of $1,719,094. The persons who may be deemed
affiliates of ZAMI received no shares of common stock or other consideration in
exchange for the contributions, which further increased total net assets of the
Portfolio.
Additionally, an affiliate of ZAMI made cash contributions to offset capital
losses totalling $52,354 during 1994. The affiliate of ZAMI received no shares
of common stock or other consideration in exchange for the contributions, which
further increased total net assets of the Portfolio.
NOTE 6 - SUBSEQUENT EVENT
Effective after the close of business on December 31, 1995, and pursuant to the
terms of an Agreement and Plan of Reorganization and Liquidation by and between
Prospect Hill Trust (on behalf of Prospect Hill), and Principal Preservation
Portfolios, Inc. ("Principal Preservation") (on behalf of Cash Reserve),
Prospect Hill was reorganized in a tax-free reorganization into a newly-
designated class of institutional shares of Cash Reserve. In anticipation of
this transaction and pursuant to action taken by the Board of Directors of
Principal Preservation, immediately prior to the reorganization of Prospect
Hill, the capitalization of Cash Reserve was restructured to increase from 300
to 400 million the number of shares of Principal Preservation's authorized
common stock allocated to Cash Reserve, and those 400 million shares were
subdivided into two separate classes of 200 million each: Class X Common Stock
(Retail Class) and Class Y Common Stock (Institutional Class). All outstanding
shares of Cash Reserve were designated (without otherwise affecting their rights
and preferences) as shares of the Retail Class. Immediately prior to the
reorganization, Prospect Hill and Cash Reserve each withdrew all of their net
assets from the Portfolio. The affairs of Prospect Hill and the Portfolio are
being wound up, and those two investment companies will be dissolved in
accordance with the provisions of their respective Declarations of Trust and
applicable laws.
(PRICE WATERHOUSE LLP LOGO)
100 East Wisconsin Avenue
Suite 1500
Milwaukee, WI 53202
Telephone 414 276 9500
REPORT OF INDEPENDENT ACCOUNTANTS
To the Investors and Trustees of
Prime Money Market Portfolio
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and the related
statements of operations and of changes in net assets and the
supplementary data present fairly, in all material respects, the
financial position of Prime Money Market Portfolio (the "Portfolio")
(a series of the Prime Portfolios) at December 31, 1995, the results
of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and its
supplementary data for each of the two years in the period ended
December 31, 1995 and for the period April 5, 1993 (commencement of
operations) through December 31, 1993, in conformity with generally
accepted accounting principles. These financial statements and
supplementary data (hereafter referred to as "financial statements")
are the responsibility of the Portfolio's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of securities at December 31, 1995 by
correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
/s/ Price Waterhouse LLP
February 26, 1996
INVESTMENT ADVISOR OF THE TRUST
Ziegler Asset Management
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ADMINISTRATOR AND DISTRIBUTOR
B.C. Ziegler and Company
215 North Main Street
West Bend, Wisconsin 53095
TRANSFER AGENT AND DEPOSITORY
B.C. Ziegler and Company
215 North Main Street
West Bend, Wisconsin 53095
LEGAL COUNSEL
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
INDEPENDANT ACCOUNTANTS
Price Waterhouse LLP
100 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
