================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
/ /Pre-Effective Amendment No. __ / /Post-Effective Amendment
No. __
(Check appropriate box or boxes)
PRAIRIE FUNDS
(Exact Name of Registrant as Specified in Charter)
(312) 732-4231
(Area Code and Telephone Number)
Three First National Plaza, Chicago, Illinois 60670
(Address of Principal Executive Offices: Number,
Street, City, State, Zip Code)
(Name and Address of Agent for Service)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as
practicable after this Registration Statement is declared
effective.
_____________________
Registrant has previously filed a declaration of indefinite
registration of its shares pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended; accordingly, no fee
is payable herewith. Registrant's Rule 24f-2 Notice for the
fiscal year ended December 31, 1994 was filed on
February 28, 1995.
It is proposed that this filing will become effective
on April 7, 1995 pursuant to Rule 488.
<PAGE>
PRAIRIE FUNDS
<TABLE>
<CAPTION>
Cross Reference Sheet
Pursuant to Rule 481(a) Under the Securities Act of 1933
Proxy Statement/
Form N-14 Item No. Prospectus Caption
Part A
<S> <C> <C>
Item 1. Beginning of Registration Prospectus Cover
Statement and Outside Front
Cover Page of Prospectus
Item 2. Beginning and Outside Back Cover Page
Cover Page of Prospectus
Item 3. Synopsis Information and Risk Not Applicable
Factors
Item 4. Information About the Letter to Shareholders;
Transaction Proposal No. 1; Certain
Differences Between the
Existing Fund and the Series
Item 5. Information About the Letter to Shareholders; Certain
Registrant Differences Between the
Existing Fund and the Series
Item 6. Information About the Company Letter to Shareholders; Certain
being Acquired Differences Between the
Existing Fund and the Series
Item 7. Voting Information Letter to Shareholders; Voting
Information
Item 8. Interest of Certain Persons Not Applicable
and Experts
Item 9. Additional Information Not Applicable
Required for Reoffering by
Persons Deemed to be Under-
writers
Statement of Additional
Part B Information Caption
Item 10. Cover Page Cover Page
Item 11. Table of Contents Not Applicable
Item 12. Additional Information about Statement of Additional
the Registrant Information of Prairie Funds
dated December 13, 1994<F1>
Item 13. Additional Information about Statement of Additional
the Company being Acquired Information of First Prairie
Money Market Fund dated
April 11, 1994<F2>
Item 14. Financial Statements Statement of Additional
Information of Prairie Funds
dated December 13, 1994<F1>
Part C
Item 15. Indemnification
Item 16. Exhibits
Item 17. Undertakings
</TABLE>
<F1> Incorporated herein by reference to the Registration
Statement of the Registrant on Form N-1A dated October 28,
1994 (File No. 33-56217).
<F2> Incorporated herein by reference to the Registration
Statement on Form N-1A of First Prairie Money Market Fund
dated April 11, 1994 (File No. 2-95546).
<PAGE>
FIRST PRAIRIE MONEY MARKET FUND
Three First National Plaza
Chicago, Illinois 60670
Dear Shareholder:
As a shareholder of the Government Series of First
Prairie Money Market Fund (the "Existing Fund"), you are
entitled to vote on the proposal described below and in the
enclosed materials.
Currently, the Existing Fund is organized as a
Massachusetts business trust. Because the Existing Fund is part
of the Prairie Family of Funds and is designed for individual
investors, management of the Existing Fund has determined that
certain operational efficiencies might be achievable if the
Existing Fund--while continuing as a separate entity for
purposes of the Investment Company Act of 1940--were to
reorganize as a separate series of a single Massachusetts
business trust. The transaction will not result in the
imposition of Federal income tax on you.
The proposal provides that the Existing Fund exchange
all of its assets, subject to its liabilities, for shares of a
separate new series of Prairie Funds, a newly formed investment
company organized as a Massachusetts business trust (the
"Trust"). The Trust is comprised of twelve series, including
the U.S. Government Money Market Series (the "Series") into
which the Existing Fund is proposed to be reorganized. Under
the proposal, the Existing Fund would receive, in exchange for
its assets, Class A shares of beneficial interest of the Series,
par value $.001 per share ("Series Shares"). Upon consummation
of this transaction (the "Exchange"), the Series Shares received
by the Existing Fund will be distributed by the Existing Fund to
its shareholders (the "Shareholders"), with each Shareholder
receiving the same number of Series Shares (or fractions
thereof) as Existing Fund shares held immediately prior to the
Exchange. The Existing Fund then will be liquidated and
dissolved.
The Series will have the same investment objective as
the Existing Fund with which it is to be reorganized. The
Existing Fund and the Series differ in certain respects:
(i) the investment adviser of the Existing Fund is The First
National Bank of Chicago ("FNBC"), acting through its Investment
Management Department; the investment adviser of the Series will
be a newly formed subsidiary of FNBC which will employ
substantially all the investment personnel who currently provide
advisory services to the Existing Fund; (ii) the aggregate
management fee will remain the same, but its structure will be
different; and (iii) certain management policies will differ
somewhat as a result of standardizing the policies of the funds
in the Prairie Family. These differences are described in the
enclosed Proxy Statement/Prospectus.
Further information about the transaction is contained
in the enclosed materials, which you should review carefully.
Please take the time to consider the enclosed
materials and then vote by completing, dating and signing the
enclosed proxy card. A self-addressed, postage-paid envelope
has been enclosed for your convenience.
THE EXISTING FUND'S BOARD MEMBERS RECOMMEND THAT YOU
VOTE IN FAVOR OF THE PROPOSED TRANSACTION. If you have any
questions after considering the enclosed materials, please feel
free to call (312)732-3237 between the hours of 9:00 a.m. and 5:30
p.m. (New York time), Monday through Friday.
Sincerely,
Domenick Pugliese,
Secretary
April __, 1995
<PAGE>
PRELIMINARY COPY
FIRST PRAIRIE MONEY MARKET FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders:
A Special Meeting of Shareholders of the Government
Series of First Prairie Money Market Fund (the "Existing Fund")
will be held at the offices of Concord Holding Corporation, 125
West 55th Street, 11th Floor, New York, New York 10019, on
Thursday, April 20, 1995 at 10:00 a.m. for the following
purposes:
1. To consider an Agreement and Plan of Exchange (the
"Plan") for the Existing Fund providing for the transfer of
all or substantially all of its assets, subject to its
liabilities, to a new series (the "Series") of Prairie
Funds, a newly created Massachusetts business trust (the
"Trust"). Under the Plan, the Existing Fund would receive,
in exchange (the "Exchange") for its assets, Class A shares
of beneficial interest of the Series, par value $.001 per
share ("Series Shares"). Series Shares received in the
Exchange will be distributed by the Existing Fund to its
shareholders in liquidation of the Existing Fund, after
which the Existing Fund will be dissolved; 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
March 27, 1995, will be entitled to receive notice of and to
vote at the meeting.
By Order of the Board of Trustees
Domenick Pugliese,
Secretary
New York, New York
April __, 1995
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 EXISTING 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 EXISTING 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 EXISTING
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 MONEY MARKET FUND
PROXY STATEMENT/PROSPECTUS
April __, 1995
Special Meeting of Shareholders
to be held on April 20, 1995
This Proxy Statement/Prospectus is furnished in
connection with a solicitation of proxies by the Board of First
Prairie Money Market Fund on behalf of its Government Series
(the "Existing Fund") to be used at the Special Meeting of
Shareholders (the "Meeting") to be held on Thursday, April 20,
1995 at 10:00 a.m., at the offices of Concord Holding
Corporation, 125 West 55th Street, 11th Floor, New York, New
York 10019, for the purposes set forth in the accompanying
Notice of Special Meeting of Shareholders. Shareholders of
record at the close of business on March 27, 1995 (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 Existing Fund, par value $.01 per
share ("Existing Fund Share"), held and fractional votes for
each fractional Existing Fund Share held. Existing Fund 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 Existing 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 the Meeting, thereby canceling any proxy previously given.
As of __________, 1995, __________ Existing Fund Shares were
issued and outstanding.
It is proposed that the Existing Fund transfer all or
substantially all of its assets, subject to its liabilities, to
a separate new series of Prairie Funds, a newly created
Massachusetts business trust (the "Trust"). The Trust is
comprised of twelve series, including the U.S. Government Money
Market Series (the "Series") into which the Existing Fund is
proposed to be reorganized. The Series is an open-end,
diversified management investment company.
This Proxy Statement/Prospectus, which should be
retained for future reference, sets forth concisely information
about the Series that Shareholders should know before voting on
the proposal or investing in the Series. Additional
information, contained in a Statement of Additional Information
dated April __, 1995 forming a part of the Trust's
Registration Statement on Form N-14 (File No. 33-_____), has
been filed with the Securities and Exchange Commission (the
"SEC") and is available without charge by calling 1-800-370-9446
or writing to the principal executive offices of the Series at
125 West 55th Street, New York, New York 10019. The Statement
of Additional Information is incorporated herein by reference in
its entirety.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
PROPOSAL 1. APPROVAL OF AN AGREEMENT AND PLAN OF
EXCHANGE PROVIDING FOR THE TRANSFER OF ALL
OR SUBSTANTIALLY ALL OF THE ASSETS OF THE
EXISTING FUND TO THE SERIES
INTRODUCTION
At a meeting of the Existing Fund's Board held on
January 31, 1995, The First National Bank of Chicago ("FNBC"),
the Existing Fund's investment adviser, recommended that the
Board consider, and the Board approved, an Agreement and Plan of
Exchange (the "Plan"), a form of which is attached hereto as
Exhibit A. The Plan provides for the transfer of all or
substantially all of the assets of the Existing Fund, subject to
stated liabilities, to the Series. Under the Plan, the Existing
Fund would receive, in exchange (the "Exchange") for its assets,
Class A shares of beneficial interest of the Series, par value
$.001 per share ("Series Shares"), all as more fully described
herein. Upon consummation of the Exchange, Series Shares
received by the Existing Fund will be distributed to its
Shareholders, with each Shareholder receiving a distribution of
an identical number of Series Shares (or fractions thereof) for
Existing Fund Shares held immediately prior to the Exchange.
The Existing Fund then will be dissolved.
The Existing Fund and the Series differ in certain
respects: (i) the investment adviser of the Existing Fund is
FNBC, acting through its Investment Management Department; the
investment adviser of the Series will be a newly formed
subsidiary of FNBC which will employ substantially all the
investment personnel who currently provide advisory services to
the Existing Fund; (ii) the aggregate management fee will remain
the same, but its structure will be different; and (iii) certain
management policies will differ somewhat as a result of
standardizing the policies of the funds in the Prairie Family.
These differences are described below under "Certain Differences
between the Existing Fund and the Series."
THE PLAN
The following summary of the important terms and
conditions of the Plan is qualified in its entirety by reference
to the Plan. The Plan provides that, subject to the requisite
approval of the Shareholders, on the date of the Exchange the
Existing Fund shall assign, transfer and convey to the Series
all of the assets (subject to liabilities) of the Existing Fund,
including all securities and cash, in exchange for Series Shares
having an aggregate net asset value equal to the value of the
net assets of the Existing Fund acquired. The Existing Fund
will distribute all Series Shares received by it among its
Shareholders so that each Shareholder will receive Series Shares
identical in number to the number of Existing Fund Shares held
by such Shareholder immediately before the Exchange.
Thereafter, the Existing Fund will dissolve. The dissolution of
the Existing Fund is expected to occur as soon as practicable
after the Exchange. Immediately following the Exchange, the
former Shareholders of the Existing Fund will hold the only
outstanding Series Shares (other than one Series Share which
will be held by Concord Financial Group, Inc., the Series'
distributor, for regulatory purposes). After the Exchange has
been completed, the Series will operate as an open-end,
diversified management investment company.
Unless postponed by the Existing Fund and the Series,
the Exchange is expected to occur on April 28, 1995, on the
basis of the net assets of the Existing Fund as of 12:00 Noon,
New York time, on that day. The Exchange will not be effected
until certain conditions are satisfied, including approval of
the Plan by the Shareholders.
The Plan may be amended at any time prior to the
Exchange.
The total expenses of the Exchange are expected to be
approximately $________.
If the Exchange is not approved by the Shareholders,
the Existing Fund's Board will consider other appropriate
courses of action, including continuing operation of the
Existing Fund in its present form.
REASONS FOR THE EXCHANGE
The Exchange will establish the Series as the
successor investment vehicle to the Existing Fund. It is
believed that reorganization of the Existing Fund as a new
series of a newly created Massachusetts business trust will
prove beneficial in that the Series will be less expensive to
operate than the Existing Fund individually.
TAX CONSEQUENCES
The exchange of Existing Fund assets for Series Shares
is intended to qualify for Federal income tax purposes as a tax-
free reorganization under Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). As a condition to the
closing of the Exchange, the Series and Existing Fund will
receive the opinion of Stroock & Stroock & Lavan, counsel to
both the Series and the Existing Fund, to the effect that, on
the basis of the existing provisions of the Code, Treasury
regulations issued thereunder, current administrative
regulations and pronouncements and court decisions, and certain
facts, assumptions and representations, for Federal income tax
purposes: (1) the transfer of all or substantially all of the
Existing Fund's assets in exchange for Series Shares and the
assumption by the Series of Existing Fund liabilities will
constitute a "reorganization" within the meaning of Section
368(a)(1)(F) of the Code; (2) no gain or loss will be recognized
by the Series upon the receipt of Existing Fund assets solely in
exchange for Series Shares and the assumption by the Series of
liabilities of the Existing Fund; (3) no gain or loss will be
recognized by the Existing Fund upon the transfer of its assets
to the Series in exchange for Series Shares and the assumption
by the Series of the Existing Fund's liabilities or upon the
distribution (whether actual or constructive) of Series Shares
to Shareholders in exchange for their Existing Fund Shares; (4)
no gain or loss will be recognized by the Existing Fund
Shareholders upon the exchange of Existing Fund Shares for
Series Shares; (5) the aggregate tax basis for Series Shares
received by each Existing Fund Shareholder pursuant to the
Exchange will be the same as the aggregate tax basis for
Existing Fund Shares held by such Shareholder immediately prior
to the Exchange, and the holding period of Series Shares to be
received by each Existing Fund Shareholder will include the
period during which Existing Fund Shares surrendered in exchange
therefor were held by such Shareholder (provided Existing Fund
Shares were held as capital assets on the date of the Exchange);
and (6) the tax basis of Existing Fund assets acquired by the
Series will be the same as the tax basis of such assets to the
Existing Fund immediately prior to the Exchange, and the holding
period of Existing Fund assets in the hands of the Series will
include the period during which those assets were held by the
Existing Fund.
NEITHER THE EXISTING FUND NOR THE SERIES HAS SOUGHT A
TAX RULING FROM THE INTERNAL REVENUE SERVICE ("IRS"). THE
OPINION OF COUNSEL IS NOT BINDING ON THE IRS NOR DOES IT
PRECLUDE THE IRS FROM ADOPTING A CONTRARY POSITION. Existing
Fund Shareholders should consult their tax advisers regarding
the effect, if any, of the proposed Exchange in light of their
individual circumstances. Since the foregoing discussion
relates only to the Federal income tax consequences of the
Exchange, Existing Fund Shareholders also should consult their
tax advisers as to state and local tax consequences, if any, of
the Exchange.
SECURITIES TO BE ISSUED
The Series will issue Series Shares in exchange for
the transfer of the Existing Fund's assets. Series Shares have
no preemptive or subscription rights and are freely
transferable. Series Shares issued in the Exchange will be
fully paid, legally binding and non-assessable by the Series.
The Series has authorized an indefinite number of shares of
beneficial interest and has classified its shares as Class A.
REQUIRED VOTE AND BOARD'S RECOMMENDATION
The Existing Fund's Board has approved the Plan and
the Exchange and has determined that (i) participation in the
Exchange is in the Existing Fund's best interests and (ii) the
interests of the Existing Fund's Shareholders will not be
diluted as a result of the Exchange. Pursuant to the Existing
Fund's charter documents, an affirmative vote of a majority of
its Shareholders is required to approve the Plan and the
Exchange.
THE EXISTING FUND'S BOARD, INCLUDING THE "NON-
INTERESTED" BOARD MEMBERS, RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" APPROVAL OF THE PLAN AND THE EXCHANGE.
CERTAIN DIFFERENCES BETWEEN THE EXISTING FUND AND THE SERIES
INVESTMENT ADVISER AND MANAGEMENT FEE STRUCTURE. The investment
adviser of the Existing Fund is FNBC, acting through its
Investment Management Department. The investment adviser of the
Series will be First Chicago Investment Management Company
("FCIMCO"), a newly formed subsidiary of FNBC, which will employ
substantially all the investment personnel who currently provide
advisory services to the Existing Fund.
The Existing Fund has entered into a Management
Agreement with FNBC, pursuant to which the Existing Fund has
agreed to pay FNBC a monthly fee at the annual rate of .55 of 1%
of the value of the Existing Fund's average daily net assets.
In addition, FNBC has entered into a Master Administration
Agreement with The Dreyfus Corporation (the "Administrator"),
pursuant to which FNBC, from its own funds, has agreed to pay
the Administrator for administrative services provided to the
Existing Fund.
The Trust has entered into an Investment Advisory
Agreement with FCIMCO, pursuant to which the Trust has agreed to
pay FCIMCO a monthly advisory fee at the annual rate of .40 of
1% of the value of the Series' average daily net assets. In
addition, the Trust has entered into an Administration Agreement
with FCIMCO, pursuant to which the Trust has agreed to pay
FCIMCO a monthly administration fee at the annual rate of .15 of
1% of the value of the Series' average daily net assets. The
Investment Advisory Agreement is substantially identical to the
Management Agreement, except that: (i) under the Management
Agreement, FNBC is responsible for providing administrative
services to the Existing Fund--services that currently are
provided to the Existing Fund by the Administrator pursuant to
the Master Administration Agreement between FNBC and the
Administrator--which services will be provided to the Series
pursuant to FCIMCO's Administration Agreement with the Trust,
and FCIMCO will have the right to engage other entities to
assist it in performing such services--and it has engaged
Concord Holding Corporation to provide such services; (ii) the
fees payable by the Trust on behalf of the Series to FCIMCO
under the Investment Advisory Agreement will be lower than the
fees payable by the Existing Fund to FNBC under the Management
Agreement in recognition of the fact that FCIMCO will be
responsible for the cost of providing administrative services to
the Series pursuant to a separate agreement--but the contractual
rate payable by the Series for management services (consisting
of investment advisory and administrative services) will be
identical to the aggregate contractual rate payable by the
Existing Fund for these services; and (iii) the Investment
Advisory Agreement will be dated currently.
SERVICE PLAN AND SHAREHOLDER SERVICES PLAN. The Existing Fund
has adopted a Service Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act"),
pursuant to which the Existing Fund bears the costs and expenses
in connection with advertising and marketing its shares and pays
the fees of certain Service Agents (as defined in the Existing
Fund's Prospectus) for servicing shareholders and shareholder
accounts at a rate not exceeding .25 of 1% per annum of the
value of the Existing Fund's average daily net assets.
The Trust has not adopted a Service Plan pursuant to
Rule 12b-1 with respect to Series Shares. The Trust has adopted
with respect to Series Shares a Shareholder Services Plan
pursuant to which the Trust pays its distributor for the
provision of certain services to the holders of Series Shares a
fee at the annual rate of .25 of 1% of the value of the average
daily net assets of Series Shares. The services provided may
include personal services relating to shareholder accounts, such
as answering shareholder inquiries regarding the Series and
providing reports and other information, and services related to
the maintenance of shareholder accounts. Under the Shareholder
Services Plan, the Trust's distributor may make payments to
Service Agents in respect of these services. The Shareholder
Services Plan will be adopted and operated generally in
accordance with the procedures set forth in Rule 12b-1 under the
1940 Act, except that Shareholders will not have the voting
rights provided in Rule 12b-1. See "Distribution Plan and
Shareholder Services Plan" in the Trust's Prospectus.
FEES AND EXPENSES. The following infomation concerning fees
and expenses has been derived from the Existing Fund's financial
information for its fiscal year ended December 31, 1994 and, in
the case of the Series, is based on estimated amounts for the
Series' current fiscal year.
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Existing
Fund Series
Management Fees .55% .40%
12b-1 Fees .25% none
Other Expenses .08% .48%
Total Fund Operating Expenses .88% .88%
Example
An investor would pay the following
expenses on a $1,000 investment,
assuming (1) 5% annual return and
(2) except where noted, redemption
at the end of each time period:
Existing
Fund Series
1 YEAR $ 9 $ 9
3 YEARS $ 28 $ 28
5 YEARS $ 49 $ 49
10 YEARS $108 $108
The information in the foregoing table does not reflect any fee
waivers or expense reimbursments that may be in effect. For the
fiscal year ended December 31, 1994, expenses totalling .02% of
the value of the Existing Fund's average daily net assets were
waived. FCIMCO has undertaken until such time as it gives
investors at least 60 days' notice to the contrary that if, in
any fiscal year, certain expenses of the Series, including the
investment advisory fee, exceed .86% of the value of the Series'
average daily net assets, FCIMCO may waive a portion of its
investment advisory fee or bear certain other expenses to the
extend of such excess expense.
INVESTMENT RESTRICTIONS. The Existing Fund has adopted
investment restrictions as fundamental policies that cannot be
changed without Shareholder approval. These investment
restrictions are set forth in the Existing Fund's Statement of
Additional Information under "Investment Objective and
Management Policies--Investment Restrictions."
The 1940 Act requires that a relatively limited number
of investment policies and restrictions be designated as
fundamental policies. These policies relate to (a) the
classification and subclassification under the 1940 Act within
which the Existing Fund may operate, (b) borrowing money, (c)
issuing senior securities, (d) engaging in the business of
underwriting securities issued by other persons, (e)
concentrating investments in a particular industry or group of
industries, (f) purchasing and selling real estate or
commodities and (g) making loans to other persons. When the
Existing Fund was formed, its Board designated a number of other
policies as fundamental, in large part in response to certain
regulatory, business or industry conditions that are no longer
believed to be in effect.
When determining each Series' investment restrictions,
the Trust's Board considered the foregoing and adopted for the
Series investment restrictions which offer somewhat broader
investment opportunities than those of the Existing Fund. In
addition, because the Series will be part of a single
Massachusetts business trust, its investment restrictions have
been designed to provide uniformity of language among the
Trust's series. For example, although certain investment
restrictions permit the Trusts' series to engage in futures and
options transactions, certain of the Trusts' series, including
the Series, are prohibited by their management policies from
engaging in such transactions. In addition, although the
substance of many of the Series' investment restrictions is the
same as those of the Existing Fund, certain semantic differences
exist. The differences reflect language changes believed more
appropriate for an investment company with multiple series that
have different objectives and policies. If the Exchange is
consummated, the Shareholders of the Existing Fund will become
shareholders of the Series with these different investment
restrictions.
The investment restrictions described below are
fundamental policies of the Existing Fund but, for the reasons
discussed above, are non-fundamental policies of the Series and
may be changed by vote of the Trustees without further
shareholder approval. Investment restriction number 1 prohibits
the purchase of common stocks, preferred stocks, warrants or
other equity securities, or corporate, state or municipal bonds.
Investment restriction number 3 prohibits pledging,
hypothecating, mortgaging or otherwise encumbering of assets,
except in an amount up to 10% of total assets to secure
borrowings for temporary or emergency purposes. For specific
changes with respect to this investment restriction, see
"Pledging Assets" below. Investment restriction number 4
prohibits among other things, the selling of securities short.
Investment restriction number 5 prohibits the writing or
purchasing of put or call options or combinations thereof.
Investment restriction number 9 prohibits the investment in
companies for the purpose of exercising control. Investment
restriction number 10 prohibits, with certain exceptions, the
purchase of securities of any investment companies.
The investment restrictions of the Series are set
forth on Exhibit B hereto and may be found in the Trust's
Statement of Additional Information, under "Investment Objective
and Management Policies--Investment Restrictions." The
investment restrictions of the Existing Fund are set forth on
Exhibit C hereto and may be found in the Existing Fund's
Statement of Additional Information, under "Investment Objective
and Management Policies--Investment Restrictions." Shareholders
are urged to review the complete text of the investment
restrictions of the Series and the Existing Fund. Specific
changes to the investment restrictions, other than the change
from a fundamental to a non-fundamental policy, are discussed
below.
BORROWING MONEY--The Existing Fund's investment restriction
number 2 generally limits its ability to borrow money.
Currently, the Existing Fund may borrow money only from banks
for temporary or emergency (not leveraging) purposes in an
amount up to 10% of the value of its total assets (including the
amount borrowed) based on the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time the
borrowing is made. The Series is permitted to borrow to the
extent permitted under the 1940 Act. Currently, under the 1940
Act, total borrowings of an investment company may not exceed
33-1/3% of the value of such company's total assets. However,
the Series intends to borrow money for temporary or emergency
(not leveraging) purposes only in an amount up to 15% of the
value of its total assets.
PLEDGING ASSETS--The Existing Fund's investment restriction
number 3 prohibits the Existing Fund from pledging,
hypothecating, mortgaging or otherwise encumbering its assets
except in an amount up to 10% of the value of its total assets
to secure borrowings for temporary or emergency purposes. The
Series is permitted to pledge, mortgage or hypothecate its
assets to the extent necessary to secure permitted borrowings,
which are discussed above.
ACTING AS AN UNDERWRITER AND INVESTING IN ILLIQUID SECURITIES--
The Existing Fund's investment restriction number 6, among other
things, prohibits the Existing Fund from underwriting the
securities of other issuers. The Series may not act as
underwriter of securities of other issuers, except to the extent
it may be deemed an underwriter under the Securities Act of
1933, as amended (the "1933 Act"), by virtue of disposing of
portfolio securities. Without this exception, the Series could
be unnecessarily restricted in its ability to dispose of
portfolio securities.
The Existing Fund's investment restriction number 6
also provides that the Existing Fund may not purchase securities
subject to restrictions on disposition under the 1933 Act (so-
called "restricted securities"), or invest more than 10% of the
value of its net assets in repurchase agreements providing for
settlement in more than seven days after notice and securities
that are not readily marketable. The Series may not invest more
than 10% of its net assets in such repurchase agreements and in
securities which are illiquid. In general, illiquid securities
have included restricted securities. However, the securities
markets are evolving and new types of instruments have developed
which make the Existing Fund's restriction with respect to
restricted securities overbroad and unnecessarily restrictive.
The markets for certain types of securities are almost
exclusively institutional. Such securities often are either
exempt from registration or sold in transactions not requiring
registration. Institutional investors, therefore, will often
depend on an efficient institutional market in which such
securities can be readily resold. The fact that there may be
legal or contractual restrictions on resale to the general
public, therefore, will not be dispositive of the liquidity of
such investments. To be able to take advantage of the
increasingly liquid institutional trading markets, the Series is
not subject to the Existing Fund's restriction on purchasing
restricted securities; restricted securities that are
nonetheless liquid may be purchased by the Series.
The Existing Fund's investment restriction number 6
further provides that the Existing Fund may not invest in time
deposits maturing in more than seven days but may invest up to
10% of its total assets in time deposits maturing from two
business days through seven calendar days. The Series is not
subject to these time deposit restrictions.
SECURITIES LENDING--The Existing Fund's investment restriction
number 8 prohibits the Existing Fund from making loans to
others, except through the purchase of certain debt obligations,
and thus it cannot lend its portfolio securities. The Series is
permitted to lend its portfolio securities in an amount not to
exceed 33-1/3% of the value of its total assets. As a result,
the Series is able to lend securities from its portfolio to
brokers, dealers and other financial institutions wishing to
borrow securities from the Series. In connection with such
loans, the Series will receive collateral consisting of cash,
U.S. Government securities or irrevocable letters of credit
which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities.
The Series can increase its income through the investment of
such collateral. In addition, the Series might experience risk
of loss if an institution with which the Series engaged in a
portfolio loan transaction breached its agreement with the
Series.
INVESTING IN OTHER INVESTMENT COMPANIES--The Existing Fund's
investment restriction number 10 prohibits the Existing Fund
from purchasing securities of other investment companies except
purchases limited to a maximum of (i) 3% of the total voting
stock of any one investment company and (ii) 5% of the Existing
Fund's net assets with respect to any one investment company, or
those received as part of a merger, consolidation or acquisition
of assets. The Series may purchase securities of other
investment companies to the extent permitted under the 1940 Act.
Currently, under the 1940 Act, purchases of the securities of
other investment companies, subject to certain exceptions, are
limited to a maximum of (i) 3% of the total voting stock of any
one investment company, (ii) 5% of the Series' net assets with
respect to any one investment company and (iii) 10% of the
Series' net assets in the aggregate.
SHAREHOLDER SERVICES. Both the Existing Fund and the Series
offer the following shareholder services: Exchange Privilege--
allows you to exchange your shares for shares of another
eligible fund; and Automatic Investment Plan (or Automatic Asset
Builder)--allows you to purchase shares automatically at regular
intervals which you select.
The following shareholder services are offered by the
Existing Fund but not by the Series: Auto-Exchange Privilege--
allows you to automatically exchange Existing Fund shares for
shares of certain other First Prairie mutual funds at regular
intervals which you select; Government Direct Deposit Privilege-
- -enables you to purchase Existing Fund shares by having Federal
salary, Social Security or certain veterans', military or other
payments from the Federal government automatically deposited
into your Existing Fund account; Automatic Withdrawal Plan--
allows you to withdraw a specified dollar amount from your
Existing Fund account every month or quarter; and Dividend
Options--allows you to "sweep" your dividends and capital gain
distributions into certain other First Prairie mutual funds.
ADDITIONAL INFORMATION ABOUT THE SERIES AND EXISTING FUND
Information about the Series is included in the
Trust's current Prospectus and Statement of Additional
Information for the Series, each dated December 13, 1994.
Information about the Existing Fund is included in the Existing
Fund's current Prospectus and Statement of Additional
Information for the Existing Fund, each dated April 11, 1994.
Copies of each of the Series' and the Existing Fund's
Prospectuses are being furnished with this Prospectus/Proxy
Statement and, together with each of the Series' and Existing
Fund's Statements of Additional Information, are incorporated
herein by reference.
FINANCIAL STATEMENTS AND EXPERTS
The audited financial statements of the Existing Fund
for the fiscal year ended December 31, 1993, which are included
in the Existing Fund's Statement of Additional Information,
dated April 11, 1994, have been examined by Ernst & Young LLP,
independent auditors, whose reports thereon are included
therein. The financial statements examined by Ernst & Young LLP
have been incorporated herein by reference in reliance upon
their report given on their authority as experts in accounting
and auditing.
OTHER MATTERS
The Existing Fund's Trustees 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 Existing 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
Existing Fund may pay persons holding Existing Fund 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 Existing Fund 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 Existing Fund 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.
If a quorum is not present at the Meeting, or if a
quorum is present but sufficient votes to approve the proposal
are not received, the persons named as proxies may propose one
or more adjournments of the Meeting to permit further
solicitation of proxies. In determining whether to adjourn the
Meeting, the following factors may be considered: the nature of
the proposal that is the subject of the Meeting, the percentage
of votes actually cast, the percentage of negative votes
actually cast, the nature of any further solicitation and the
information to be provided to Shareholders with respect to the
reasons for the solicitation. Any adjournment will require the
affirmative vote of a majority of those Shares represented at
the Meeting in person or by proxy.
[List beneficial holders of 5% or more of Existing
Fund's voting securities]
NOTICE TO BANKS, BROKER/DEALERS AND VOTING TRUSTEES
AND THEIR NOMINEES
Please advise the Existing Fund, in care of The First
National Bank of Chicago, Three First National Plaza, Chicago,
Illinois 60670, Attention: Laurel Carignan, whether other
persons are the beneficial owners of Existing Fund Shares for
which proxies are being solicited from you, and, if so, the
number of copies of the Proxy Statement/Prospectus and other
soliciting material you wish to receive in order to supply
copies to the beneficial owners of Existing Fund 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: April __, 1995
<PAGE>
EXHIBIT A
FORM OF
AGREEMENT AND PLAN OF EXCHANGE
AGREEMENT AND PLAN OF EXCHANGE dated April __,
1995 (the "Agreement"), between the GOVERNMENT SERIES (the
"Existing Fund") of FIRST PRAIRIE MONEY MARKET FUND, a
Massachusetts business trust (the "Existing Trust"), and the
U.S. GOVERNMENT MONEY MARKET SERIES (the "Series") of PRAIRIE
FUNDS, a Massachusetts business trust (the "Trust").
WHEREAS, the Boards of the Existing Trust and the
Trust have determined that it is in the best interests of the
Existing Fund and Series, respectively, that the assets of the
Existing Fund be acquired by the Series pursuant to this
Agreement and in accordance with the applicable statutes of The
Commonwealth of Massachusetts; and
WHEREAS, the parties desire to enter into a plan of
exchange pursuant to Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
NOW THEREFORE, in consideration of the premises and of
the covenants and agreements hereinafter set forth, the parties
agree as follows:
1. PLAN OF EXCHANGE.
(a) Subject to the requisite approval of the
shareholders of the Existing Fund (the "Shareholders"), and to
the terms and conditions contained herein, on the Exchange Date
(as defined herein) the Existing Fund shall assign, transfer and
convey to the Series, and the Series shall acquire, all of the
assets of the Existing Fund, including all securities and cash
(subject to liabilities), for full Class A shares of beneficial
interest of the Series, par value $.001 per share (the "Series
Shares"), and, to the extent necessary, a fractional Series
Share, all to be issued by the Series and all having an
aggregate net asset value equal to the value of the net assets
of the Existing Fund acquired. The value of the Existing Fund's
assets to be acquired by the Series and the net asset value per
share of the Series Shares shall be determined, as of the
Exchange Date, in accordance with the procedures for determining
the value of the Series' assets set forth in the Trust's
Agreement and Declaration of Trust and in the then-current
prospectus and statement of additional information that forms
part of the Trust's Registration Statement on Form N-1A. In
lieu of delivering certificates for the Series Shares, the
Series shall credit the Series Shares to the Existing Fund's
account on the share record books of the Series and shall
deliver a confirmation thereof to the Existing Fund. The
Existing Fund shall then deliver written instructions to the
Trust's transfer agent to establish accounts for the
Shareholders on the share record books of the Series.
(b) Delivery of the assets of the Existing Fund to be
transferred shall be made not later than the next business day
following the Exchange Date. Assets transferred shall be
delivered to The Bank of New York, 110 Washington Street, New
York, New York, the Trust's custodian (the "Custodian"), for the
account of the Series, with all securities not in book entry or
bearer form duly endorsed, or accompanied by duly executed
separate assignments or stock powers, in proper form for
transfer, with signatures guaranteed, and with all necessary
stock transfer stamps, sufficient to transfer good and
marketable title thereto (including all accrued interest and
dividends and rights pertaining thereto) to the Custodian for
the account of the Series free and clear of all liens,
encumbrances, rights, restrictions and claims. All cash
delivered shall be in the form of immediately available funds
payable to the order of the Custodian for the account of the
Series.
(c) The Existing Fund will pay or cause to be paid to
the Series any interest received on or after the Exchange Date
with respect to assets transferred to the Series hereunder. The
Existing Fund will transfer to the Series any distributions,
rights or other assets received by the Existing Fund after the
Exchange Date as distributions on or with respect to the
securities transferred. Such assets shall be deemed included in
assets transferred to the Series on the Exchange Date and shall
not be separately valued.
(d) The Exchange Date shall be April 28, 1995, or
such earlier or later date as may be mutually agreed upon by the
parties.
(e) As soon as practicable after the Exchange Date
the Existing Fund shall distribute all Series Shares received by
it among the Shareholders in proportion to the number of shares
each Shareholder holds in the Existing Fund (the "Existing Fund
Shares"), and thereafter will dissolve.
2. THE EXISTING FUND'S REPRESENTATIONS AND WARRANTIES.
2.1. The Existing Fund represents and warrants to and
agrees with the Series as follows:
(a) The Existing Fund (i) is a series of the
Existing Trust, a business trust duly organized, validly
existing and in good standing under the laws of The Commonwealth
of Massachusetts, and (ii) has power to own all of its
properties and assets and, subject to the approval of the
Shareholders, to carry out this Agreement.
(b) The Existing Fund is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as
an open-end, diversified, management investment company, and
such registration has not been revoked or rescinded and is in
full force and effect.
(c) Except as shown on the financial statements
of the Existing Fund for the period ended December 31, 1993 and
as incurred in the ordinary course of the Existing Fund's
business since December 31, 1993, the Existing Fund has no known
liabilities of a material amount, contingent or otherwise, and
there are no material legal, administrative or other proceedings
pending or threatened against the Existing Fund.
(d) For each fiscal year of its operation, the
Existing Fund has met the requirements of Subchapter M of the
Code for qualification and treatment as a regulated investment
company.
(e) On the Exchange Date, the Existing Fund will
have full right, power and authority to sell, assign, transfer
and deliver the assets to be transferred by it hereunder.
3. THE SERIES' REPRESENTATIONS AND WARRANTIES.
The Series represents and warrants to and agrees with
the Existing Fund as follows:
(a) The Series (i) is a series of the Trust, a
business trust duly organized, validly existing and in good
standing under the laws of The Commonwealth of Massachusetts,
and (ii) has power to carry on its business as it is now being
conducted and to carry out this Agreement.
(b) The Series is registered under the 1940 Act
as an open-end, diversified, management investment company, and
such registration has not been revoked or rescinded and is in
full force and effect.
(c) The Series has no known liabilities of a
material amount, contingent or otherwise, and there are no
material legal, administrative or other proceedings pending or
threatened against the Series.
(d) For its fiscal year in which the exchange
contemplated hereby occurs and for each taxable year thereafter,
the Series intends to meet the requirements of Subchapter M of
the Code for qualification and treatment as a regulated
investment company.
(e) At the Exchange Date, the Series Shares to
be issued to the Existing Fund (the only Series Shares to be
issued as of the Exchange Date, except for the initial capital
of the Series) will have been duly authorized and, when issued
and delivered pursuant to this Agreement, will be legally and
validly issued and will be fully paid and non-assessable by the
Series. No Series shareholder will have any preemptive right of
subscription or purchase in respect thereof.
4. THE SERIES' CONDITIONS PRECEDENT.
The obligations of the Series hereunder shall be
subject to the following conditions:
(a) The Existing Fund shall have furnished to
the Series a statement of the Existing Fund's assets, including
a list of securities owned by the Existing Fund with their
respective tax costs and values determined as provided in
Section 1 hereof, all as of the Exchange Date.
(b) As of the Exchange Date, all representations
and warranties of the Existing Fund made in this Agreement shall
be true and correct as if made at and as of such date, and the
Existing Fund shall have complied with all the agreements and
satisfied all the conditions on its part to be performed or
satisfied at or prior to such date.
(c) A vote approving this Agreement and the
transactions and exchange contemplated hereby shall have been
adopted by the holders of at least a majority of the outstanding
Existing Fund Shares entitled to vote.
5. THE EXISTING FUND'S CONDITIONS PRECEDENT.
The obligations of the Existing Fund hereunder shall
be subject to the condition that as of the Exchange Date all
representations and warranties of the Series made in this
Agreement shall be true and correct as if made at and as of such
date, and that the Series shall have complied with all of the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such date.
6. THE SERIES' AND THE EXISTING FUND'S CONDITIONS
PRECEDENT.
The obligations of both the Series and the Existing
Fund hereunder shall be subject to the following conditions:
(a) This Agreement and the transactions
contemplated hereby shall have been approved by the affirmative
vote of at least a majority of the Existing Fund Shares as of
the close of business on April 20, 1995, or such earlier or
later date as may be mutually agreed upon by the parties.
(b) There shall not be any material litigation
pending with respect to the matters contemplated by this
Agreement.
7. TERMINATION OF AGREEMENT.
This Agreement and the transactions contemplated
hereby may be terminated and abandoned by resolution of the
Board of either the Existing Trust or the Trust, at any time
prior to the Exchange Date (and notwithstanding any vote of the
Shareholders) if circumstances should develop that, in the
opinion of either of the Boards, make proceeding with this
Agreement inadvisable.
If this Agreement is terminated and the exchange
contemplated hereby is abandoned pursuant to the provisions of
this Section 7, this Agreement shall become void and have no
effect, without any liability on the part of any party hereto or
the Trustees, officers or shareholders of the Series, the Trust,
the Existing Fund or the Existing Trust, in respect of this
Agreement.
8. WAIVER.
At any time prior to the Exchange Date, any of the
foregoing conditions may be waived by the Board of either the
Existing Trust or the Trust, if, in the judgment of the waiving
party, such waiver will not have a material adverse effect on
the benefits intended under this Agreement to the Shareholders.
9. NO SURVIVAL OF REPRESENTATIONS.
None of the representations and warranties included or
provided for herein shall survive consummation of the
transactions contemplated hereby.
10. GOVERNING LAW.
This Agreement shall be governed and construed in
accordance with the internal laws of the State of New York,
without giving effect to principles of conflict of laws;
provided, however, that the due authorization, execution and
delivery of this Agreement shall be governed and construed in
accordance with the internal laws of The Commonwealth of
Massachusetts, without giving effect to principles of conflict
of laws.
11. COUNTERPARTS.
This Agreement may be executed in counterparts, each
of which, when executed and delivered, shall be deemed to be an
original.
12. LIMITATION OF LIABILITY.
(a) The names "U.S. Government Money Market Series of
Prairie Funds" and "Trustees of the Trust" refer, respectively,
to the Series and the Trustees of the Trust, as trustees but not
individually or personally, acting from time to time under the
Trust's Agreement and Declaration of Trust, a copy of which is
on file at the office of the Secretary of State of The
Commonwealth of Massachusetts and at the principal office of the
Trust. The obligations of the Series entered into in the name
or on behalf thereof by any of the Trustees of the Trust, or its
representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees,
shareholders, representatives or agents of the Series or Trust
personally, but bind only the Series' property, and all persons
dealing with any class or series of shares of the Series must
look solely to the Series' property belonging to such class or
series for the enforcement of any claims against the Series.
(b) The names "Government Series of First Prairie Money
Market Fund" and "Trustees of the Existing Trust" refer,
respectively, to the Existing Fund and the Trustees of the
Existing Trust, as trustees but not individually or personally,
acting from time to time under the Existing Trust's Agreement
and Declaration of Trust, a copy of which is on file at the
office of the Secretary of State of The Commonwealth of
Massachusetts and at the principal office of the Existing Trust.
The obligations of the Existing Fund entered into in the name or
on behalf thereof by any of the Existing Trust's Trustees,
representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees,
shareholders, representatives or agents of the Existing Trust or
the Existing Fund personally, but bind only the Existing Fund's
property, and all persons dealing with any class or series of
shares of the Existing Fund must look solely to the Existing
Fund's property belonging to such class or series for the
enforcement of any claims against the Existing Fund.
<PAGE>
IN WITNESS WHEREOF, each of the Series and Existing
Fund has caused this Agreement and Plan of Exchange to be
executed and attested on its behalf by its duly authorized
representatives as of the date first above written.
PRAIRIE FUNDS,
on behalf of its
U.S. GOVERNMENT MONEY MARKET
SERIES
ATTEST: By:
[Name, Title] [Name, Title]
FIRST PRAIRIE MONEY MARKET
FUND,
on behalf of its
GOVERNMENT SERIES
ATTEST: By:
[Name, Title] [Name, Title]
<PAGE>
EXHIBIT B
Series' Investment Restrictions
The Series has adopted investment restrictions
numbered 1 through 7 as fundamental policies. These
restrictions cannot be changed without approval by the holders
of a majority (as defined in the 1940 Act) of such Series'
outstanding voting shares. Investment restrictions numbered 8
through 15 are not fundamental policies and may be changed by
vote of a majority of the Trust's Trustees at any time.
The Series may not:
1. Invest in commodities, except that each Fund may
purchase and sell options, forward contracts, futures contracts,
including those relating to indexes, and options on futures
contracts or indexes.
2. Purchase, hold or deal in real estate, or oil, gas
or other mineral leases or exploration or development programs,
but each Fund may purchase and sell securities that are secured
by real estate or issued by companies that invest or deal in
real estate.
3. Borrow money, except to the extent permitted under
the 1940 Act. For purposes of this investment restriction, a
Fund's entry into options, forward contracts, futures contracts,
including those relating to indexes, and options on futures
contracts or indexes shall not constitute borrowing.
4. Make loans to others, except through the purchase
of debt obligations and the entry into repurchase agreements.
However, each Fund may lend its securities in an amount not to
exceed 33-1/3% of the value of its total assets. Any loans of
portfolio securities will be made according to guidelines
established by the Securities and Exchange Commission and the
Trust's Board of Trustees.
5. Act as an underwriter of securities of other
issuers, except to the extent a Fund may be deemed an under-
writer under the Securities Act of 1933, as amended, by virtue
of disposing of portfolio securities, and except that the Fund
may bid separately or as part of a group for the purchase of
Municipal Obligations directly from an issuer for its own
portfolio to take advantage of the lower purchase price
available.
6. Issue any senior security (as such term is defined
in Section 18(f) of the 1940 Act), except to the extent the
activities permitted under Investment Restriction Nos. 1, 3, 9
and 10 may be deemed to give rise to senior securities.
7. Purchase securities on margin, but each Fund may
make margin deposits in connection with transactions in options,
forward contracts, futures contracts, including those relating
to indexes, and options on futures contracts or indexes.
8. Invest in the securities of a company for the
purpose of exercising management or control, but each Fund will
vote the securities it owns in its portfolio as a shareholder in
accordance with its views.
9. Pledge, mortgage or hypothecate its assets, except
to the extent necessary to secure permitted borrowing and to the
extent related to the deposit of assets in escrow in connection
with writing covered put and call options and the purchase of
securities on a when-issued or forward commitment basis and
collateral and initial or variation margin arrangements with
respect to options, forward contracts, futures contracts,
including those relating to indexes, and options on futures
contracts or indexes.
10. Purchase, sell or write puts, calls or
combinations thereof, except as described in the Trust's
Prospectus and this Statement of Additional Information.
11. Enter into repurchase agreements providing for
settlement in more than seven days after notice or purchase
securities which are illiquid, if, in the aggregate, more than
15% (10% in the case of a Money Market Fund) of the value of the
Fund's net assets would be so invested.
12. Invest in securities of other investment
companies, except to the extent permitted under the Act.
13. Purchase securities of any company having less
than three years' continuous operations (including operations of
any predecessors) if such purchase would cause the value of the
Fund's investments in all such companies to exceed 10% of the
value of its total assets.
14. Sell securities short.
15. Purchase common stocks, preferred stocks,
warrants or other equity securities, or purchase corporate bonds
(except as set forth in the Prospectus) or debentures, state
bonds, municipal bonds or industrial revenue bonds.
<PAGE>
EXHIBIT C
Existing Fund's Investment Restrictions
Government Series. The Government Series has adopted
the following restrictions as fundamental policies. These
restrictions cannot be changed without approval by the holders
of a majority (as defined in the 1940 Act) of such Series'
outstanding voting shares.
The Government Series may not:
1. Purchase common stocks, preferred stocks, warrants
or other equity securities, or purchase corporate bonds (except
as set forth in the Prospectus) or debentures, state bonds,
municipal bonds or industrial revenue bonds.
2. Borrow money except from banks (other than FNBC or
its affiliates) for temporary or emergency (not leveraging)
purposes in an amount up to 10% of the value of the Government
Series' total assets (including the amount borrowed) based on
the lesser of cost or market, less liabilities (not including
the amount borrowed) at the time the borrowing is made. While
borrowings exceed 5% of the value of the Government Series'
total assets, such Series will not make any additional
investments.
3. Pledge, hypothecate, mortgage or otherwise
encumber its assets, except in an amount up to 10% of the value
of its total assets, but only to secure borrowings for temporary
or emergency purposes.
4. Sell securities short or purchase securities on
margin.
5. Write or purchase put or call options or
combinations thereof.
6. Underwrite the securities of other issuers or
purchase securities subject to restrictions on disposition under
the Securities Act of 1933 (so called "restricted securities").
The Government Series may not enter into repurchase agreements
providing for settlement in more than seven days after notice or
purchase securities which are not readily marketable (which
securities could include participation interests that are not
subject to the demand feature described in the Prospectus), if,
in the aggregate, more than 10% of its net assets would be so
invested. The Government Series may not invest in time deposits
maturing in more than seven days and time deposits maturing from
two business days through seven calendar days may not exceed 10%
of such Series' total assets.
7. Purchase or sell real estate investment trust
securities, commodities or commodities contracts, or oil and gas
interests.
8. Make loans to others except through the purchase
of debt obligations referred to in the Fund's Prospectus.
9. Invest in companies for the purpose of exercising
control.
10. Purchase securities of any investment companies,
except (a) purchases limited to a maximum of (i) 3% of the total
voting stock of any one investment company and (ii) 5% of the
Government Series' net assets with respect to any one investment
company or (b) those received as part of a merger, consideration
or acquisition of substantially all of the assets or
reorganization of another investment company.
<PAGE>
PRELIMINARY COPY
FIRST PRAIRIE MONEY MARKET FUND
(GOVERNMENT SERIES)
The undersigned shareholder of the Government Series of
First Prairie Money Market 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 March 27, 1995,
at a Special Meeting of Shareholders to be held at the offices
of Concord Holding Corporation, 125 West 55th Street, New York,
New York 10019, at 10:00 a.m. on Thursday, April 20, 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/Prospectus for the
meeting.
Please mark boxes in blue or black ink.
1. To approve an Agreement and Plan of Exchange between
the Fund and the U.S. Government Money Market Series of Prairie
Funds providing for the transfer of substantially all of the
assets of the Fund, subject to its liabilities, and for its
subsequent dissolution.
/ / 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) 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: , 1995
Signature(s)
Signature(s)
Sign, Date and Return the Proxy
Card Promptly Using the
Enclosed Envelope
PRAIRIE FUNDS
PART B
STATEMENT OF ADDITIONAL INFORMATION
April __, 1995
Acquisition of the Assets of
GOVERNMENT SERIES OF
FIRST PRAIRIE MONEY MARKET FUND
By and in Exchange for Class A Shares of
U.S. GOVERNMENT MONEY MARKET SERIES
OF PRAIRIE FUNDS
This Statement of Additional Information, which is not
a prospectus, supplements and should be read in conjunction with
the Proxy Statement/Prospectus dated April __, 1995, relating
specificaly to the proposed transfer of all or substantially all
of the assets and liabilities of the Government Series of First
Prairie Money Market Fund in exchange for Class A shares of U.S.
Government Money Market Series of Prairie Funds. The transfer is
to occur pursuant to an Agreement and Plan of Exchange. This
Statement of Additional Information consists of this cover page
and the following described documents, each
of which is attached hereto and incorporated herein by reference:
1. The Statement of Additional Information of Prairie
Funds dated December 13, 1994.
2. The Statement of Additional Information of First
Prairie Money Market Fund dated April 11, 1994.
The Proxy Statement/Prospectus dated April __, 1995 may
be obtained by writing to Prairie Funds, Three First National
Plaza, Chicago, Illinois 60670.
<PAGE>
PROSPECTUS
DECEMBER 13, 1994
REVISED, JANUARY 17, 1995
The Prairie Funds are open-end, management investment companies.
Through this Prospectus, investors may invest in any of 14
separate funds (the "Funds"), divided into five general fund
types: Asset Allocation; Equity; Bond; Municipal
Bond; and Money Market.
First Chicago Investment Management Company ("FCIMCO" or the
"Investment Adviser") will serve as each Fund's investment
adviser and administrator. The Investment Adviser has engaged ANB
Investment Management and Trust Company
("ANB- IMC") to serve as sub-investment adviser to the
International Equity Fund and to provide day-to-day management of
that Fund's investments.
Concord Financial Group, Inc. (the "Distributor") will serve
as each Fund's distributor.
By this Prospectus, Class A shares of each Fund, Class B
shares of each Fund other than the U.S. Government Money Market
and Municipal Money Market Funds, and Class I shares of each Fund
other than the Money Market Funds, are being offered.
Class A shares of each Fund, other than the Money Market
Funds, are subject to a sales charge imposed at the time of
purchase and Class B shares of each
such Fund are subject to a contingent deferred sales charge
imposed on redemptions made within up to six years of purchase.
Class A and Class B shares
are offered to any investor. Each Fund offers these alternatives
to permit an investor to choose the method of purchasing shares
that is most beneficial given
the amount of the purchase, the length of time the investor
expects to hold the shares and other circumstances. Class B
shares of the Money Market Fund may be acquired only through the
exchange of Class B shares of the other Funds.
Class I shares are offered without a sales charge and are sold
only to qualified trust, custody and/or agency account clients of
The First National Bank of Chicago ("FNBC"), American National
Bank and Trust Company ("ANB") or their affiliates and to certain
qualified employee benefit plans or other programs.
Other differences between the Classes include the services
offered to and expenses borne by each Class and certain voting
rights, as described herein.
Fund shares are not deposits or obligations of, or guaranteed by,
any bank, and are not federally insured by the Federal Deposit
Insurance Corporation ("FDIC"),
the Federal Reserve Board, or any other agency. Fund shares
involve certain investment risks, including the possible loss of
principal. For all Funds other than the Money Market Funds,
investors should recognize that the share price,
yield and investment return of each Fund fluctuate and are not
guaranteed.
For the Money Market Funds, investors should recognize that an
investment in a Money Market Fund is neither insured nor
guaranteed by the U.S. Government. There can be no assurance that
the Money Market Funds will be able to maintain a
stable net asset value of $1.00 per share.
This Prospectus sets forth concisely information about the Funds
that an investor should know before investing. It should be read
and retained for future reference.
Part B (also known as the Statement of Additional
Information), dated December 13, 1994, which may be revised from
time to time, provides a further discussion of certain areas in
this Prospectus and other matters which may be of
interest to some investors. It has been filed with the Securities
and Exchange Commission and is incorporated herein by reference.
For a free copy, write to the Prairie Funds at Three First
National Plaza, Chicago, Illinois 60670, or call 1-800-370-9446.
ASSET ALLOCATION FUNDS
The Managed
Assets Income Fund
The Managed
Assets Fund
EQUITY FUNDS
The Equity Income Fund
The Growth Fund
The Special Opportunities Fund
The International Equity Fund
BOND FUNDS
The Bond Fund
The Intermediate Bond Fund
The International Bond Fund
MUNICIPAL BOND FUNDS
The Municipal Bond Fund
The Intermediate Municipal
Bond Fund
MONEY MARKET FUNDS
The Municipal Bond Fund
The U.S. Government
Money Market Fund
The Money Market Fund
The Municipal
Money Market Fund
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION
OR ANY STATE SECURITIES
COMMISSION NOR HAS THE
SECURITIES AND
EXCHANGE COMMISSION
OR ANY STATE SECURITIES
COMMISSION PASSED
UPON THE ACCURACY OR
ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
Table of Contents
4 Fee Table
7 Condensed Financial Information
7 Highlights
9 Description of the Funds
14 Risk Factors
18 Alternative Purchase Methods
19 How to Buy Shares
22 Shareholder Services
23 How to Redeem Shares
25 Management of the Funds
27 Distribution Plans and Shareholder
Services Plans
27 Dividends, Distributions and Taxes
28 Performance Information
29 General Information
A-1 Appendix
The Prairie Funds
ASSET ALLOCATION FUNDS
These Funds will follow an asset allocation strategy by investing
in equity securities, fixed-income securities and short-term
instruments of domestic and foreign issuers:
The Managed Assets Income Fund
seeks to maximize current income; capital
appreciation is a secondary, but nonetheless important, goal.
The Managed Assets Fund
seeks to maximize total return, consisting of
capital appreciation and current income, without assuming undue
risk.
EQUITY FUNDS
These Funds will invest principally in equity securities:
The Equity Income Fund
seeks to provide income; capital appreciation and growth of
earnings are secondary, but nonetheless important, goals. This
Fund will invest primarily in income-producing equity securities
of domestic issuers.
The Growth Fund
seeks long-term capital appreciation. This Fund will invest
primarily in equity securities of domestic issuers believed by
the Fund's investment adviser to have above-average growth
characteristics.
The Special Opportunities Fund
seeks long-term capital appreciation. This Fund will invest
primarily in equity securities of small- to medium-sized emerging
growth domestic issuers that the Fund's investment adviser
believes are undervalued in the marketplace.
The International Equity Fund
seeks long-term capital appreciation. This Fund will invest
primarily in equity securities of foreign issuers.
BOND FUNDS
These Funds will invest principally in fixed-income securities:
The Bond Fund
seeks to provide as high a level of current income as is
consistent with the preservation of capital. This Fund will
invest in a portfolio of U.S. dollar denominated investment grade
fixed-income securities of domestic and foreign issuers, without
regard to maturity.
The Intermediate Bond Fund
seeks to provide as high a level of current income as is
consistent with the preservation of capital. This Fund will
invest in a portfolio of U.S. dollar denominated investment grade
fixed-income securities of domestic and foreign
issuers which, under normal market conditions, will have a
dollar-weighted average maturity expected to range between three
and ten years.
The International Bond Fund
seeks to provide both long-term capital appreciation and current
income. This Fund will invest primarily in investment grade debt
securities of foreign issuers.
MUNICIPAL BOND FUNDS
These Funds will invest principally in Municipal Obligations:
The Municipal Bond Fund
seeks to provide as high a level of current income exempt from
Federal income tax as is consistent with the preservation of
capital. This Fund will invest primarily in a portfolio of
investment grade Municipal Obligations without regard to
maturity.
The Intermediate Municipal Bond Fund
seeks to provide as high a level of current income exempt from
Federal income tax as is consistent with the preservation of
capital. This Fund will invest primarily in a portfolio of
investment grade Municipal Obligations which, under
normal conditions, will have a dollar-weighted average maturity
expected to range between three and ten years.
MONEY MARKET FUNDS
These Funds will invest in various kinds of money market
instruments and will seek a stable net asset value of $1.00 per
share:
The U.S. Government Money Market Fund
seeks to provide as high a level of current income as is
consistent with the preservation of capital and the maintenance
of liquidity. This Fund will invest only in short-term securities
issued or guaranteed as to principal or interest
by the U.S. Government, its agencies and instrumentalities, and
repurchase agreements in respect of such securities.
The Money Market Fund
seeks to provide as high a level of current income as is
consistent with the preservation of capital and the maintenance
of liquidity. This Fund will invest in short-term money market
instruments.
The Municipal Money Market Fund
seeks to provide as high a level of current income exempt from
Federal income tax as is consistent with the preservation of
capital and the maintenance of liquidity. This Fund will invest
in short-term Municipal Obligations.
<TABLE>
<CAPTION>
Fee Table
CLASS A CLASS B CLASS I
============================================================================================================
Money All All Other All Funds
SHAREHOLDER Market Intermediate Other Intermediate Funds Offering Offering
TRANSACTION EXPENSES Funds Bond Funds Funds Bond Funds Class B Class I
=============================================================================================================
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge
Imposed On Purchases
(as a percentage of offering price) None 3.00% 4.50% None None None
- -------------------------------------------------------------------------------------------------------------
Sales Charge On
Reinvested Dividends None None None None None None
- -------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales
Charge Imposed On Redemptions
(as a percentage of the amount
subject to charge) None None* None* 3.00% 5.00% None
- -------------------------------------------------------------------------------------------------------------
Redemption Fees None None None None None None
- -------------------------------------------------------------------------------------------------------------
Exchange Fees None None None None None None
=============================================================================================================
* A contingent deferred sales charge of up to 1.00% may be assessed on certain
redemptions of Class A shares purchased without an initial sales charge as
part of an investment of $1 million or more.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
</TABLE>
<TABLE>
Class A Shares EXAMPLE
An investor would
<CAPTION> pay the following expenses
on a $1,000 investment,
assuming (1) 5% annual
return and (2) redemption at
TOTAL the end of each time period:
MANAGEMENT 12B-1 OTHER OPERATING
FEES FEES EXPENSES* EXPENSES* 1 YEAR 3 YEARS
============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
ASSET ALLOCATION FUNDS:
Managed Assets Income Fund .65% none .66% 1.31% $58 $85
Managed Assets Fund .65% none .68% 1.33% $58 $85
- ------------------------------------------------------------------------------------------------------------
EQUITY FUNDS:
Equity Income Fund .50% none .68% 1.18% $56 $81
Growth Fund .65% none .68% 1.33% $58 $85
Special Opportunities Fund .70% none .68% 1.38% $58 $87
International Equity Fund .80% none .78% 1.58% $60 $93
- ------------------------------------------------------------------------------------------------------------
BOND FUNDS:
Bond Fund .55% none .68% 1.23% $57 $82
Intermediate Bond Fund .40% none .__% __% $ $
International Bond Fund .70% none .78% 1.48% $59 $90
- ------------------------------------------------------------------------------------------------------------
MUNICIPAL BOND FUNDS:
Municipal Bond Fund .40% none .68% 1.08% $51 $78
Intermediate Municipal Bond Fund .40% none .50% .90% $39 $58
- ------------------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS:
U.S. Government Money Market Fund .40% none .48% .88% $9 $28
Money Market Fund .40% none .59% .99% $10 $32
Municipal Money Market Fund .40% none .55% .95% $10 $30
============================================================================================================
* After expense reimbursements or fee waivers.
</TABLE>
<TABLE>
Class B Shares EXAMPLE
<CAPTION> An investor would
pay the following expenses
on a $1,000 investment,
assuming (1) 5% annual
return and (2) except where
noted, redemption at
TOTAL the end of each time period:
MANAGEMENT 12B-1 OTHER OPERATING
FEES FEES EXPENSES* EXPENSES* 1 YEAR 3 YEARS
===============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
ASSET ALLOCATION FUNDS:
Managed Assets Income Fund .65% .75% .66% 2.06% $72 $97/$64**
Managed Assets Fund .65% .75% .68% 2.08% $73 $98/$65**
- ---------------------------------------------------------------------------------------------------------------
EQUITY FUNDS:
Equity Income Fund .50% .75% .68% 1.93% $71 $93/$61**
Growth Fund .65% .75% .68% 2.08% $73 $98/$65**
Special Opportunities Fund .70% .75% .68% 2.13% $73 $99/$67**
International Equity Fund .80% .75% .78% 2.33% $75 $105/$73**
- ---------------------------------------------------------------------------------------------------------------
BOND FUNDS:
Bond Fund .55% .75% .68% 1.98% $72 $95/$62**
Intermediate Bond Fund .40% .75% __% __% $ $__/$ **
International Bond Fund .70% .75% .78% 2.23% $74 $102/$70**
- ---------------------------------------------------------------------------------------------------------------
MUNICIPAL BOND FUNDS:
Municipal Bond Fund .40% .75% .68% 1.83% $70 $90/$57**
Intermediate Municipal Bond Fund .40% .75% .68% 1.83% $69 $92/$59**
- ---------------------------------------------------------------------------------------------------------------
MONEY MARKET FUNDS:
Money Market Fund .40% .75% .59% 1.74% $18 $56
===============================================================================================================
* After expense reimbursements or fee waivers.
** Assuming no redemption of Class B shares.
</TABLE>
<TABLE>
Class I Shares EXAMPLE
An investor would
<CAPTION> pay the following expenses
on a $1,000 investment,
assuming (1) 5% annual
return and (2) redemption at
TOTAL the end of each time period:
MANAGEMENT 12B-1 OTHER OPERATING
FEES FEES EXPENSES* EXPENSES* 1 YEAR 3 YEARS
===============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
ASSET ALLOCATION FUNDS:
Managed Assets Income Fund .65% none .15% .80% $8 $26
Managed Assets Fund .65% none .15% .80% $8 $26
- ---------------------------------------------------------------------------------------------------------------
EQUITY FUNDS:
Equity Income Fund .50% none .15% .65% $7 $21
Growth Fund .65% none .15% .80% $8 $26
Special Opportunities Fund .70% none .15% .85% $9 $27
International Equity Fund .80% none .25% 1.05% $11 $33
- ---------------------------------------------------------------------------------------------------------------
BOND FUNDS:
Bond Fund .55% none .15% .70% $7 $22
Intermediate Bond Fund .40%` none .__% __% $ $
International Bond Fund .70% none .25% .95% $10 $30
- ---------------------------------------------------------------------------------------------------------------
MUNICIPAL BOND FUNDS:
Municipal Bond Fund .40% none .15% .55% $6 $18
Intermediate Municipal Bond Fund .40% none .15% .55% $6 $18
===============================================================================================================
* After expense reimbursements or fee waivers.
</TABLE>
The amounts listed in the examples should not be considered as
representative of past or future expenses and actual expenses may
be greater or less than those
indicated. Moreover, while each example assumes a 5% annual
return, a fund's actual performance will vary and may result in
an actual return greater or less than 5%.
The purpose of the foregoing table is to assist investors in
understanding the various costs and expenses that investors in a
Fund will bear, directly or
indirectly, the payment of which will reduce investors' return on
an annual basis. Long-term investors in Class B shares of a Fund
could pay more in 12b-1 fees than the economic equivalent of
paying a front-end sales charge. Other Expenses and Total
Operating Expenses are based on estimated amounts for the
current fiscal year. Other Expenses and Total Operating Expenses
noted above, without expense reimbursements or fee waivers, would
be increased, with respect to Class A, Class B and Class I, by
.31% for the Managed Assets Income Fund,
.45% for the Managed Assets Fund, .09% for the Equity Income
Fund, .08% for the Growth Fund, .17% for the Special
Opportunities Fund, .11% for the International
Equity Fund, .15% for the Bond Fund, .__% for the Intermediate
Bond Fund, .45% for the International Bond Fund, and .__% for the
Municipal Bond Fund, by .08% with respect to Class A and Class I
and .07% with respect to Class B for the
Intermediate Municipal Bond Fund, by .31% with respect to Class A
and Class B for the Money Market Fund, by .14% with respect to
Class A for the U.S. Government Money Market Fund, and by .18%
for the Municipal Money Market Fund.
With respect to each Fund, the Investment Adviser has undertaken
until such time as it gives investors at least 60 days' notice to
the contrary that if, in any fiscal year, certain expenses of the
Fund, including the investment advisory fee, exceed the Total
Operating Expenses noted above in the table for such Fund,
the Investment Adviser may waive a portion of its investment
advisory fee or bear certain other expenses to the extent of such
excess expense. FCIMCO, FNBC, ANB and their affiliates and
certain Service Agents (as defined below) may
charge their clients direct fees for effecting transactions in
Fund shares; such fees are not reflected in the foregoing table.
See "How to Buy Shares," "Management of the Funds" and
"Distribution Plans and Shareholder Services Plans."
Condensed Financial Information
(Intermediate Bond Fund and Municipal Bond Fund only) The
information in the following tables has been audited (except
where noted) by Ernst & Young LLP, each Fund's independent
auditors, whose reports thereon appear in the Statement
of Additional Information. Further financial data and related
notes for the Intermediate Bond Fund and Municipal Bond Fund are
included in the Statement of Additional Information, available
upon request. As of the date of this Prospectus, none of the
other Funds had commenced operations and, accordingly, no
financial data are available for such Funds.
Financial Highlights
Contained below is per share operating performance data, total
investment return, ratios to average net assets and other
supplemental data for Class A and Class I of the Intermediate
Bond Fund. As of the date of the financial
statements, Class B shares of the Intermediate Bond Fund had not
been offered and, accordingly, no financial data are available
for such Class.
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND(1):
CLASS A CLASS I (2)
--------------------------------------- ----------------------------------------
Six Month Period Six Month Period
Fiscal Period Ended Ended July 31, 1994 Fiscal Period Ended Ended July 31, 1994
January 31, 1994(3) (Unaudited) January 31,1994(2) (Unaudited)
<S> <C> <C> <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: (.47) (.47)
Dividends from investment income-net (.02) (.02)
Total Distributions (.49) (.49)
Net asset value, end of period $8.25 $8.25
Total Investment Return: (4) 5.16%(5) 5.16%(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets -- --
Ratio of net investment income to average net assets 5.96%(5) 6.21%(5)
Decrease reflected in above expense ratios due to undertakings 3.67%(5) 2.64%
Portfolio Turnover Rate 26.54%(6) 26.54%(6)
Net Assets, end of period (000's omitted) $65 $5,128
(1) On January 17, 1995, the management policies of the Intermediate Bond Fund
were changed as described under "General Information."
(2) Formerly, Class F shares.
(3) From March 5, 1993 (commencement of operations) to January 31, 1994.
(4) Exclusive of sales charge.
(5) Annualized.
(6) Not annualized.
</TABLE>
<TABLE>
<CAPTION>
MUNICIPAL BOND FUND(1):
CLASS A CLASS I (2)
------------------------------------------------------------------ ----------------------
Six Month Six Month
Period Fiscal Period
Ended Year Ended
August Ended August
31, 1994 February 31, 1994
Fiscal Year Ended February 28/29 (Unaudited) 28,1994(3) (Unaudited)
------------------------------------------------------ ---------- ------------ -----------
1989(2) 1990 1991 1992 1993 1994
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value, beginning of year $11.94 $11.82 $11.77 $12.10 $ 12.49 $13.25 $ $12.37 $
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS:
Investment income-net .89 .81 .81 .76 .70 .63 .03
Net realized and unrealized gain (loss)
on investments (.12) .28 .33 .47 1.01 (.15) (.23)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations: .77 1.09 1.14 1.23 1.71 .48 (.20)
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS:
Dividends from investment income-net (.89) (.81) (.81) (.76) (.70) (.63) (.03)
Dividends from net realized gain
on investments -- (.33) -- (.08) (.25) (.96) --
Dividends from excess net realized
gain on investments -- -- -- -- -- .01 --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (.89) (1.14) (.81) (.84) (.95) (1.60) (.03)
Net asset value, end of year $11.82 $11.77 $12.10 $12.49 $ 13.25 $12.13 $12.14
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investment Return: (4) 6.82%(5) 9.39% 10.13% 10.50% 14.37% 3.70% (1.64%)(6)
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets -- -- -- -- -- -- .50%(5)
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets 7.46%(5) 6.60% 6.87% 5.99% 5.49% 4.85% 4.10%(5)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease reflected in above expense
ratios due to undertakings 2.25%(5) 2.75% 2.75% 2.75% 1.59% 1.44% 2.41%(5)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 36.19%(6) 85.07% 32.40% 66.28% 88.53% 175.06% 175.06%
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of year (000's omitted) $ 673 $1,192 $2,244 $6,591 $11,290 $9,234 $ 2
- -----------------------------------------------------------------------------------------------------------------------------------
(1) On September 12, 1989 and on January 17, 1995, the management policies of
the Municipal Bond Fund were changed as described under "General
Information."
(2) From March 1, 1988 (commencement of operations) to February 28, 1989.
(3) From February 8, 1994 (commencement of initial offering) to February 28,
1994.
(4) Exclusive of sales charges.
(5) Annualized.
(6) Not annualized.
</TABLE>
Further information about the performance of the Intermediate
Bond Fund and Municipal Bond Fund is contained in each such
Fund's annual report, which may be obtained without charge by
writing to the address or calling the number set forth on the
cover page of this Prospectus.
Highlights The following summary is qualified in its entirety by
the more detailed information appearing elsewhere in this
Prospectus.
THE FUNDS
Each of the Intermediate Bond Fund and Municipal Bond Fund is a
separate open-end, management investment company organized under
the name Prairie Intermediate Bond Fund and Prairie Municipal
Bond Fund, respectively. The remaining Funds are series of
Prairie Funds, an open-end, management investment company.
INVESTMENT OBJECTIVES AND
MANAGEMENT POLICIES
Each Fund's investment objective is set forth on the cover page
of this Prospectus. The differences in objectives and policies
among the Funds determine the types of portfolio securities in
which each Fund invests and can be expected
to affect the degree of risk to which each Fund is subject and
each Fund's yield or return. The Funds' management policies are
described on the page of this Prospectus indicated below.
NAME OF FUND PAGE
Managed Assets Income Fund 10
Managed Assets Fund 10
Equity Income Fund 11
Growth Fund 11
Special Opportunities Fund 11
International Equity Fund 11
Bond Fund 12
Intermediate Bond Fund __
International Bond Fund 12
Municipal Bond Fund __
Intermediate Municipal Bond Fund 13
U.S. Government Money Market Fund 13
Money Market Fund 13
Municipal Money Market Fund 14
INVESTMENT ADVISER AND
ADMINISTRATOR
First Chicago Investment Management Company is each Fund's
investment adviser and administrator. Each Fund has agreed to pay
the Investment Adviser an annual fee as set forth under
"Management of the Funds." The Investment Adviser has engaged
ANB-IMC to serve as sub-investment adviser to the International
Equity Fund.
ALTERNATIVE PURCHASE METHODS
Each Fund offers Class A shares; each Fund, other than the U.S.
Government Money Market and Municipal Money Market Funds, offers
Class B shares; and each Fund, other than the Money Market Funds,
offers Class I shares.
Each Class A, Class B and Class I share represents an identical
pro rata interest in the relevant Fund's investment portfolio.
Class A shares are sold at net asset value per share plus, for
each Fund, other than the Money Market Funds, an initial sales
charge imposed at the time of purchase. The initial sales charge
may be reduced or waived for certain purchases. See "How to Buy
Shares--Class A Shares." Class A shares of each Fund
are subject to an annual service fee. Class A shares held by
investors who after purchasing Class A shares establish a
Fiduciary Account (as defined below) automatically will convert
to Class I shares, based on the relative net asset values for
shares of each such Class.
Class B shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the
entire purchase price is immediately invested in the Fund. Class
B shares are subject to a contingent deferred sales charge
("CDSC"), which is assessed only if the Class B shares are
redeemed within six years (five years in the case of the
Intermediate Bond Fund and Intermediate Municipal Bond Fund) of
purchase. Class B shares of the Money Market Fund may be acquired
only through the exchange of Class B shares of the
other Funds and are subject to the CDSC, if any, of the shares
with which the exchange is made. See "How to Redeem
Shares--Contingent Deferred Sales Charge--
Class B Shares." Class B shares are subject to an annual
distribution fee and service fee. The distribution fee paid by
Class B will cause Class B to have a higher expense ratio and to
pay lower dividends than Class A.
Approximately eight years (seven years in the case of the
Intermediate Bond Fund and Intermediate Municipal Bond Fund)
after the date of purchase, Class B shares automatically will
convert to Class A shares, based on the relative net asset
values for shares of each such Class, and will no longer be
subject to a distribution fee.
Class I shares are sold at net asset value with no sales
charge. Class I shares are offered exclusively to qualified
trust, custody and/or agency account clients of FNBC, ANB or
their affiliates ("Fiduciary Accounts") and qualified
benefit plans or other programs with assets in excess of $100
million ("Eligible Retirement Plans"). Class I shares held by
investors who after purchasing Class I shares withdraw from their
Fiduciary Accounts automatically will convert to
Class A shares, based on the relative net asset values for shares
of each such Class, and will be subject to the annual service fee
charged Class A.
See "Alternative Purchase Methods."
HISTORICAL PERFORMANCE INFORMATION
Composite Performance for the Funds or predecessor funds, as the
case may be, for Various Periods Ended December 31, 1994
<TABLE>
<CAPTION>
Class A Shares
Average Annual Total Return
1 Year 3 Years 5 Years 10 Years
=======================================================================
<S> <C> <C> <C> <C>
ASSET ALLOCATION FUNDS:
Managed Assets Fund (1) N/A N/A N/A N/A
Managed Assets Income Fund (2) -6.35% 4.07% 7.70% 9.59%(3)
- -----------------------------------------------------------------------
EQUITY FUNDS:
Equity Income Fund (4) -2.99% 5.73% 7.27% 11.21%
Growth Fund (4) -1.81% 6.28% 9.36% 12.42%
Special Opportunities Fund (4) -5.52% 7.09% 12.26% 12.50%
International Equity Fund (1) N/A N/A N/A N/A
- -----------------------------------------------------------------------
BOND FUNDS:
Bond Fund (4) -3.02% 3.69% 5.79% 8.75%
Intermediate Bond Fund (5) -3.87% -0.18%(6) N/A N/A
- -----------------------------------------------------------------------
International Bond Fund (4) 5.67% 7.56% 9.59% N/A
- -----------------------------------------------------------------------
MUNICIPAL BOND FUNDS:
Municipal Bond Fund (5) -6.36% 4.30% 6.46% 7.11%(7)
- -----------------------------------------------------------------------
Intermediate Municipal
Bond Fund (2) -5.31% 3.78% 6.11% 6.75%(7)
- -----------------------------------------------------------------------
MONEY MARKET FUNDS:
U.S. Government
Money Market Fund (2) 3.86% 3.08% 4.33% 5.39%(9)
Money Market Fund (2) 3.62% 3.19% 4.53% 5.62%(10)
Municipal Money Market Fund (2) 2.36% 2.17% 3.21% 3.93%(10)
=======================================================================
Class B Shares
1 Year 3 Years 5 Years 10 Years
=======================================================================
ASSET ALLOCATION FUNDS:
Managed Assets Fund (1) N/A N/A N/A N/A
Managed Assets Income Fund (8) N/A N/A N/A N/A
- -----------------------------------------------------------------------
EQUITY FUNDS:
Equity Income Fund (4) -3.72 4.94% 6.47% 10.38%
Growth Fund (4) -2.55% 5.49% 8.54% 11.58%
Special Opportunities Fund (4) -6.22% 6.30% 11.42% 11.66%
International Equity Fund (1) N/A N/A N/A N/A
- -----------------------------------------------------------------------
BOND FUNDS:
Bond Fund (4) -3.74% 2.92% 5.00% 7.94%
Intermediate Bond Fund (8) N/A N/A N/A N/A
- -----------------------------------------------------------------------
International Bond Fund (4) 4.88% 6.76% 8.77% N/A
- -----------------------------------------------------------------------
MUNICIPAL BOND FUNDS:
Municipal Bond Fund (8) N/A N/A N/A N/A
- -----------------------------------------------------------------------
Intermediate Municipal
Bond Fund (8) N/A N/A N/A N/A
- -----------------------------------------------------------------------
MONEY MARKET FUND:
Money Market Fund (8) N/A N/A N/A N/A
=======================================================================
Class I Shares
1 Year 3 Years 5 Years 10 Years
=========================================================================
ASSET ALLOCATION FUNDS: N/A N/A N/A N/A
Managed Assets Fund (1)
Managed Assets Income Fund (8) N/A N/A N/A N/A
- -------------------------------------------------------------------------
EQUITY FUNDS:
Equity Income Fund (4) -2.47% 6.29% 7.84% 11.79%
Growth Fund (4) -1.29% 6.84% 9.93% 13.01%
Special Opportunities Fund (4) -5.01% 7.66% 12.85% 13.09%
International Equity Fund (1) N/A N/A N/A N/A
- -------------------------------------------------------------------------
BOND FUNDS:
Bond Fund (4) -2.50% 4.24% 6.35% 9.32%
Intermediate Bond Fund (5) -1.01% 1.47%(6) N/A N/A
- -------------------------------------------------------------------------
International Bond Fund (4) 6.23% 8.13% 10.17% N/A
- -------------------------------------------------------------------------
MUNICIPAL BOND FUNDS:
Municipal Bond Fund (8) N/A N/A N/A N/A
Intermediate Municipal Bond Fund (8) N/A N/A N/A N/A
=========================================================================
(1) No predecessor fund exists; thus, no prior performance information for the
Fund is available.
(2) The Fund will commence operations through a transfer of assets from an
investment company advised by FNBC, using substantially the same investment
objective, policies, restrictions and methodologies as the Fund. The predecessor
funds are: for Managed Assets Income Fund, First Prairie Diversified Asset Fund;
for Intermediate Municipal Bond Fund, the Intermediate Series of First Prairie
Municipal Bond Fund; for U.S. Government Money Market Fund, the Government
Series of First Prairie Money Market Fund; for Money Market Fund, the Money
Market Series of First Prairie Money Market Fund; and for Municipal Money Market
Fund, First Prairie Municipal Money Market Fund. The performance shown is that
of the predecessor fund.
(3) From commencement of operations on January 23, 1986.
(4) The Fund will commence operations through a transfer of assets from a common
trust fund managed by FNBC, using substantially the same investment objective,
policies, restrictions and methodologies as the Fund. The common trust fund did
not charge any expenses. The performance information reflects the operating
expenses that are expected to be charged as more fully set forth in the Fee
Table above.
(5) The Fund is currently operational.
(6) From commencement of operations on March 5, 1993.
(7) From commencement of operations on March 1, 1988.
(8) No predecessor class exists; thus, no prior performance information for the
Class is available.
(9) From commencement of operations on May 1, 1987.
(10) From commencement of operations on February 5, 1986.
</TABLE>
The historical pro-forma performance information presented above
for each Fund listed is deemed relevant because the predecessor
was advised by FNBC which
reorganized the personnel responsible for advising the
predecessor into FCIMCO, its wholly-owned subsidiary, which will
manage the Fund, using substantially the
same investment objective, policies, restrictions and
methodologies as those used by the Fund. However, this
performance information is not necessarily
indicative of the future performance of any Fund. Because each
Fund will be actively managed, its investments will vary from
time to time and will not be
identical to the past portfolio investments of the predecessor.
Each Fund's performance will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their
original cost.
HOW TO BUY SHARES
Orders for the purchase of Class A and Class B shares may be
placed through a number of institutions including FCIMCO, FNBC,
ANB and their affiliates, including First Chicago Investment
Services, Inc. ("FCIS"), a registered broker-dealer, the
Distributor and certain banks, securities dealers and other
industry professionals such as investment advisers, accountants
and estate planning firms (collectively, "Service Agents").
Investors purchasing Class I shares through their Fiduciary
Accounts at FNBC, ANB or their affiliates should contact such
entity directly for appropriate instructions, as well as for
information about conditions pertaining to the
account and any related fees. Class I shares may be purchased for
a Fiduciary Account or Eligible Retirement Plan only by a
custodian, trustee, investment
manager or other entity authorized to act on behalf of such
Account or Plan.
The minimum initial investment is $1,000. All subsequent
investments must be at least $100.
See "How to Buy Shares."
SHAREHOLDER SERVICES
The Trust offers Fund shareholders certain services and
privileges including:
Exchange Privilege, Letter of Intent and Automatic Investment
Plan. Certain services and privileges may not be available
through all Service Agents.
HOW TO REDEEM SHARES
Generally, investors should contact their representatives at
FCIMCO, FNBC, ANB or appropriate Service Agent for redemption
instructions.
Investors who are not clients of FCIMCO, FNBC, ANB or a Service
Agent may redeem Fund shares by written request to the Trust's
transfer agent.
See "How to Redeem Shares."
Description of the Funds
GENERAL
Each of the Intermediate Bond Fund and Municipal Bond Fund is a
separately organized mutual fund. Each of the remaining Funds is
a separate portfolio of
Prairie Funds (the "Trust"), which is a mutual fund divided into
separate portfolios known as a "series fund." Each portfolio is
treated as a separate entity for certain matters under the
Investment Company Act of 1940, as amended (the "1940 Act"), and
for other purposes, and a shareholder of one portfolio is
not deemed to be a shareholder of any other portfolio. As
described below, for certain matters Trust shareholders vote
together as a group; as to others they vote separately by
portfolio. By this Prospectus, shares of 12 of
the Trust's portfolios and shares of the Intermediate Bond Fund
and Municipal Bond Fund are being offered: five of the Funds are
diversified investment companies (the "Diversified
Funds")--Managed Assets Income Fund,
Managed Assets Fund, U.S. Government Money Market Fund, Money
Market Fund and Municipal Money Market
Fund--and nine of the Funds are non-diversified investment
companies (the "Non-Diversified Funds")--Equity Income Fund,
Special Opportunities Fund, Growth Fund, International Equity
Fund, Bond Fund, Intermediate Bond Fund,
International Bond Fund, Municipal Bond Fund and Intermediate
Municipal Bond Fund.
INVESTMENT OBJECTIVES Each Fund's investment objective is
set forth on the cover page of this Prospectus. The differences
in objectives and policies among the Funds determine the types of
portfolio securities in which each Fund invests and can be
expected to affect the degree of risk to which each Fund is
subject
and each Fund's yield or return. See "Management Policies" below,
and "Appendix." Each Fund's investment objective cannot be
changed without approval by the holders of a majority (as defined
in the 1940 Act) of such Fund's outstanding voting securities.
There can be no assurance that each Fund's investment objective
will be achieved.
MANAGEMENT POLICIES
The following section should be read in conjunction with "Certain
Portfolio Securities" and "Investment Techniques" in the
Appendix.
Asset Allocation Funds
Each of the Managed Assets Income Fund and Managed Assets Fund
will follow an asset allocation strategy by investing in equity,
fixed-income and short-term
securities of domestic and foreign issuers. For each Asset
Allocation Fund, the asset classes, market sectors, securities
and portfolio strategies selected will
be those that the Investment Adviser believes prudent and offer
the greatest potential for achieving the relevant Asset
Allocation Fund's investment objective. The Investment Adviser
has broad latitude in selecting investments
and portfolio strategies. See "Risk Factors--Investing in Foreign
Securities" below.
The equity securities in which each Asset Allocation Fund may
invest consist of common stocks, preferred stocks and convertible
securities, including those in the form of depositary receipts,
as well as warrants to purchase such
securities (collectively, "Equity Securities"). The fixed-income
securities in which each Asset Allocation Fund may invest include
bonds and debentures (including those that are convertible),
notes, mortgage-related securities,
asset-backed securities, municipal obligations and convertible
debt obligations (collectively, "Fixed-Income Securities"), with
maturities of more than three years. The short-term securities
which may be purchased by an Asset Allocation
Fund include fixed-income securities with maturities of less than
three years at the time of purchase, and money market instruments
of the type in which the Money Market Fund invests (collectively,
"Money Market Instruments"), as described below.
Each Asset Allocation Fund's portfolio of debt securities will
consist primarily of those which are rated no lower than Baa by
Moody's Investors Service, Inc. ("Moody's") or BBB by Standard &
Poor's Corporation ("S&P"), Fitch Investors Service, Inc.
("Fitch") or Duff & Phelps Credit Rating Co. ("Duff"),
or, if unrated, deemed to be of comparable quality by the
Investment Adviser.
Debt securities rated Baa by Moody's or BBB by S&P, Fitch or Duff
are considered investment grade obligations which lack
outstanding investment characteristics and may have speculative
characteristics as well. The Managed Assets Fund may
invest up to 20% of its net assets in debt securities rated below
investment grade and the Managed Assets Income Fund may invest up
to 5% of its net assets in convertible bonds rated below
investment grade. See "Risk Factors--Lower Rated Securities"
below.
The following table sets forth for each Asset Allocation Fund
the asset classes, benchmark percentages and asset class strategy
ranges within which the Investment Adviser intends to manage the
Fund's assets:
MANAGED ASSETS INCOME FUND MANAGED ASSETS FUND
-------------------------------------------------
ASSET Benchmark Strategy Benchmark Strategy
CLASS Percentage Range Percentage Range
=================================================================
Equity 25% 5-45% 50% 30-70%
Fixed-Income 55% 35-75% 40% 20-60%
Short-Term 20% 0-40% 10% 0-30%
=================================================================
"Benchmark percentage" represents the asset mix the Investment
Adviser would expect to maintain when its assessment of economic
conditions and investment opportunities indicate that the
financial markets are fairly valued relative to
each other. The asset class "strategy range" indicates ordinarily
expected variations from this benchmark and reflects the fact
that the Investment Adviser expects to make policy weight shifts
within specific asset classes. Under normal conditions, the
Investment Adviser expects to adhere to the asset class strategy
ranges set forth above; however, the Investment Adviser reserves
the right to vary the asset class mix and the percentage of
securities invested in any asset class or market from the
benchmark percentages and asset class strategy ranges
set forth above as the risk/return characteristics of either
markets or asset classes, as assessed by the Investment Adviser,
vary over time.
When the Investment Adviser determines that adverse market
conditions exist, each Asset Allocation Fund may adopt a
temporary defensive posture and invest its entire
portfolio in Money Market Instruments. Each Asset Allocation Fund
will invest in substantially the same securities within an
investment class. The amount of each Asset Allocation Fund's
aggregate assets invested in a particular investment
class, and thus in particular securities, will differ, but the
relative percentage that a particular security comprises within
an investment class ordinarily will remain substantially the
same. The asset allocation mix selected will be a primary
determinant in the respective Asset Allocation
Fund's investment performance. Under certain market conditions,
limiting the Asset Allocation Fund's asset allocation among these
asset classes may inhibit their ability to achieve their
respective investment objectives.
Each Asset Allocation Fund also may engage in futures and
options transactions and other derivative securities
transactions, such as interest rate and equity index swaps,
leveraging, short-selling, foreign exchange transactions
and lending portfolio securities, each of which involves risk.
See "Risk Factors" below and "Appendix--Investment Techniques."
Equity Funds
Each of the Equity Income Fund, Growth Fund, Special
Opportunities Fund and International Equity Fund (the "Equity
Funds") will invest at least 65% of the value of its total assets
(except when maintaining a temporary defensive position) in
Equity Securities, as defined under "Asset Allocation Funds"
above.
Each Equity Fund may invest, in anticipation of otherwise
investing cash positions, to meet asset segregation or margin
requirements or as otherwise noted below, in Money Market
Instruments. Under normal market conditions, no
Equity Fund expects to have a substantial portion of its assets
invested in Money Market Instruments. However, when the
Investment Adviser determines that
adverse market conditions exist, an Equity Fund may adopt a
temporary defensive posture and invest entirely in Money Market
Instruments.
Each Equity Fund also may invest in Fixed-Income Securities
(as defined under "Asset Allocation Funds" above) to the extent
described below. Each Equity Fund also may engage in futures
and options transactions and other derivative securities
transactions, such as equity index swaps, leveraging,
short-selling and lending portfolio securities, and,
except for the Equity Income Fund, may engage in foreign exchange
transactions, each of which involves risk. See "Risk Factors"
below and "Appendix--Investment Techniques."
The EQUITY INCOME FUND will invest primarily in
income-producing Equity Securities of domestic issuers. The
Investment Adviser will be particularly alert to companies which
pay above-average dividends, yet offer opportunities
for capital appreciation and growth of earnings. In addition, the
Fund may invest up to 35% of the value of its net assets in
convertible debt securities that generally have features similar
to both common stocks and bonds and offer the potential for
current income and capital appreciation over time.
While the Fund will invest primarily in Equity Securities of
domestic issuers, the Fund also may invest in depository receipts
of foreign issuers. See "Risk Factors--Investing in Foreign
Securities" below. The Fund also may invest in Fixed-Income
Securities and Money Market Instruments based on the Investment
Adviser's assessment of economic conditions and investment
opportunities. The Fixed-Income Securities, other than
convertible debt securities, in which the Fund may invest must be
rated investment grade, or, if unrated, deemed to be of
comparable quality by the Investment Adviser. The convertible
debt securities in which the Fund may invest may be rated lower
than investment grade. See "Risk Factors--Lower Rated Securities"
below.
The GROWTH FUND will invest primarily in Equity Securities of
domestic issuers believed by the Investment Adviser to have
above-average growth characteristics. The Investment Adviser will
consider some of the following factors in making its investment
decisions: the development of new or improved products or
services, a favorable outlook for growth in the industry,
patterns of increasing sales and earnings, the probability of
increased operating efficiencies, cyclical conditions, or other
signs that the company is expected to show greater than average
earnings growth and capital appreciation.
While the Fund will invest primarily in Equity Securities of
domestic issuers, the Fund also may invest in depository receipts
of foreign issuers and may invest up to 20% of its total assets
(valued at the time of investment) in Equity Securities of
foreign issuers. See "Risk Factors--Investing in Foreign
Securities" below. The Fund also may invest in Fixed-Income
Securities which, other than convertible debt securities, are
rated investment grade, or, if unrated, deemed to be of
comparable quality by the Investment Adviser. The Fund
may invest in convertible debt securities rated lower than
investment grade. See "Risk Factors--Lower Rated Securities"
below.
The SPECIAL OPPORTUNITIES FUND will invest primarily in Equity
Securities of small- to medium-sized emerging growth domestic
issuers that the Investment Adviser believes are undervalued in
the marketplace. The Investment Adviser will consider some of the
following factors in making its investment decisions: high
quality management, significant equity ownership positions by
management, a leading or dominant position in a major product
line, a sound financial position and a relatively high rate of
return on invested capital. The Fund also may invest in companies
that offer the possibility of accelerating earnings growth
because of management changes, new products or structural changes
in industry or the economy.
While the Fund will invest primarily in Equity Securities of
domestic issuers, the Fund also may invest in depository receipts
of foreign issuers and may invest up to 20% of its total assets
(valued at the time of investment) in Equity Securities of
foreign issuers. See "Risk Factors--Investing in Foreign
Securities" below. The Fund also may invest in Fixed-Income
Securities which, other than convertible debt securities, are
rated investment grade, or, if unrated, deemed to be of
comparable quality by the Investment Adviser. The Fund
may invest in convertible debt securities rated lower than
investment grade. See "Risk Factors--Lower Rated Securities"
below.
The INTERNATIONAL EQUITY FUND will invest in Equity Securities
of issuers located throughout the world, except the United
States. As a neutral position,
the Fund will hold Equity Securities of issuers located in the
countries which constitute the Morgan Stanley Capital
International-Europe, Australia and Far
East ("EAFE") Index. The EAFE Index is a broadly diversified
international index composed of the Equity Securities of
approximately 1,000 companies located outside the United States.
Building on this base, the Investment Adviser and
ANB-IMC will shift the Fund's holdings to emphasize or
de-emphasize regions of the international market based on such
region's relative attractiveness. In making these shifts, the
Investment Adviser and ANB-IMC will use a computer-based model
which takes into account a number of factors, including
relative economic strength, relative inflation rates, relative
valuation of equity markets, bond yield differentials, forecasts
of trade flows and financial market volatility.
The Fund will seek to identify those countries offering the
greatest relative potential investment return, rather than
selecting individual companies in each country which will
outperform the major stock index of their respective
countries. Thus, the individual stocks selected will generally be
chosen through a statistical procedure to approximate the
investment performance of the relevant country index. The Fund is
not an index fund and is neither sponsored by nor affiliated with
Morgan Stanley Capital International.
Bond Funds
Each of the Bond Fund, Intermediate Bond Fund and International
Bond Fund (the "Bond Funds") will invest at least 65% of the
value of its total assets (except
when maintaining a temporary defensive position) in bonds,
debentures and other debt instruments. Each Bond Fund will invest
in Fixed-Income Securities. When management believes it advisable
for temporary defensive purposes or in anticipation of otherwise
investing cash positions, each Bond Fund may invest in Money
Market Instruments.
Each Bond Fund also may engage in futures and options
transactions and other derivative securities transactions, such
as interest rate swaps, leveraging, short-selling and lending
portfolio securities, and the International Bond Fund
may engage in foreign exchange transactions, each of which
involves risk. See "Risk Factors" below and "Appendix--Investment
Techniques."
The BOND FUND will invest in a broad range of U.S. dollar
denominated Fixed-Income Securities of domestic and foreign
issuers, without regard to maturity. At least 65% of the value of
the Fund's net assets will consist of Fixed-Income Securities
which, at the time of purchase, are rated no lower than
investment grade by Moody's, S&P, Fitch or Duff. The remainder of
the Fund's net assets may be invested in Fixed-Income Securities
rated no lower than B by Moody's, S&P, Fitch and Duff. The Fund
also may invest in Fixed-Income Securities which, while not
rated, are determined by the Investment Adviser to
be of comparable quality to those rated securities in which the
Fund may invest.
See "Risk Factors--Investing in Foreign Securities" below.
The INTERMEDIATE BOND FUND invests in a portfolio of U.S.
dollar denominated Fixed-Income Securities of domestic and
foreign issuers which, under normal market conditions, will have
a dollar-weighted average maturity expected to range between
three and ten years. Under normal market conditions, at least 65%
of the value of the Intermediate Bond Fund's total assets will
consist of Fixed-Income Securities rated A or better by Moody's,
S&P, Fitch or Duff. The Intermediate Bond Fund will invest the
remainder of its assets in investment-grade Fixed-Income
Securities and Money Market Instruments rated
within the two highest rating categories by Moody's, S&P, Fitch
or Duff. The Fund also may invest in Fixed-Income Securities,
which, while not rated, are determined by the Investment Adviser
to be of comparable quality to those rated securities in which
the Fund may invest. The Fund is not limited in the
maturities of the securities in which it invests and the maturity
of a portfolio security may range from overnight to 40 years. See
"Risk Factors--Investing in Foreign Securities" below.
The INTERNATIONAL BOND FUND will invest in Fixed-Income
Securities of issuers located throughout the world, except the
United States. The Fund also may invest in convertible preferred
stocks. The Fund may hold foreign currency, and may
purchase debt securities or hold currencies in combination with
forward currency exchange contracts. The Fund will be alert to
opportunities to profit from fluctuations in currency exchange
rates. The Fund will be particularly alert to favorable arbitrage
opportunities (such as those resulting from favorable
interest rate differentials) arising from the relative yields of
the various types of securities in which the Fund may invest and
market conditions generally. The Fund may invest without
restriction in companies in, or governments of, developing
countries. Developing countries have economic
structures that are generally less diverse and mature, and
political systems that are less stable, than those of developed
countries. The markets of developing countries may be more
volatile than the markets of more mature
economies; however, such markets may provide higher rates of
return to investors. See "Risk Factors--Investing in Foreign
Securities" below.
At least 65% of the value of the Fund's net assets will
consist of Fixed-Income Securities which, at the time of
purchase, are rated at least investment grade, or, if unrated,
deemed to be of comparable quality by the
Investment Adviser. The Fund may invest up to 35% of the value of
its net assets in Fixed-Income Securities rated lower than
investment grade. See "Risk Factors--Lower Rated Securities"
below.
Municipal Funds
It is a fundamental policy of each of the Municipal Bond Fund and
Intermediate Municipal Bond Fund (the "Municipal Bond Funds" and,
together with the Municipal Money Market Fund, the "Municipal
Funds") that it will invest (except when maintaining a temporary
defensive position) at least 80% of the value of its net
assets in Municipal Obligations and at least 65% of the value of
its total assets in bonds, debentures and other debt instruments.
Municipal Obligations in which the Municipal Funds will invest
are debt obligations issued by states, territories and
possessions of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities,
or multi-state agencies or authorities, the interest from which
is, in the opinion of bond counsel to the issuer, exempt from
Federal income tax.
From time to time, each Municipal Fund may invest more than
25% of the value of its total assets in industrial development
bonds which, although issued by industrial development
authorities, may be backed only by the assets and
revenues of the non-governmental users. Interest on Municipal
Obligations (including certain industrial development bonds)
which are specified private activity bonds, as defined in the
Internal Revenue Code of 1986, as amended (the
"Code"), issued after August 7, 1986, while exempt from Federal
income tax, is a preference item for the purpose of the
alternative minimum tax.
Where a regulated investment company receives such interest, a
proportionate share of any exempt-interest dividend paid by the
investment company may be treated as such a preference item to
the shareholder. Each Municipal Fund may invest
without limitation in such Municipal Obligations if the
Investment Adviser determines that their purchase is consistent
with the Fund's investment objective. See "Risk
Factors--Municipal Obligations" below.
From time to time, on a temporary basis other than for
temporary defensive purposes (but not to exceed 20% of the value
of the Fund's net assets) or for temporary defensive purposes,
each Municipal Fund may invest in taxable Money Market
Instruments. Dividends paid by the Fund that are attributable to
income earned by it from these securities will be taxable to
investors.
See "Dividends, Distributions and Taxes." Under normal market
conditions, it is anticipated that not more than 5% of the value
of a Municipal Fund's total assets will be invested in any one
category of these securities.
Each Municipal Bond Fund also may engage in futures and
options transactions and lending portfolio securities, each of
which involves risk.
See "Risk Factors" below and "Appendix--Investment Techniques."
The MUNICIPAL BOND FUND will invest in a portfolio of
Municipal Obligations
without regard to maturity. The Fund will purchase Municipal
Obligations only if rated at least Baa, MIG-2/VMIG-2 or Prime-1
(P-1) by Moody's, BBB, SP-2 or A-1 by S&P, BBB or F-2 by Fitch or
BBB or Duff-2 by Duff or, if unrated, determined
by the Investment Adviser to be of comparable quality to the
rated securities in which the Fund may invest.
The INTERMEDIATE MUNICIPAL BOND FUND will invest in a
portfolio of Municipal Obligations which, under normal market
conditions, will have a dollar-weighted average maturity expected
to range between three and ten years.
The Fund will purchase Municipal Obligations only if rated
investment grade, or, if unrated, determined by the Investment
Adviser to be of comparable quality to the rated securities in
which the Fund may invest.
Money Market Funds
Each of the U.S. Government Money Market Fund, Money Market Fund
and Municipal Money Market Fund (the "Money Market Funds") seeks
to maintain a net asset value of $1.00 per share for purchases
and redemptions. To do so, each Money Market Fund uses the
amortized cost method of valuing its securities pursuant to Rule
2a-7 under the 1940 Act, certain requirements of which are
summarized below.
In accordance with Rule 2a-7, each Money Market Fund is
required to maintain a dollar-weighted average portfolio maturity
of 90 days or less, purchase only instruments having remaining
maturities of 13 months or less and invest only in
U.S. dollar denominated securities determined in accordance with
procedures established by the Board to present minimal credit
risks and, in the case of the Money Market Fund and Municipal
Money Market Fund, which are rated in one of the
two highest rating categories for debt obligations by at least
two nationally recognized statistical rating organizations (or
one rating organization if the instrument was rated by only one
such organization) or, if unrated, are of comparable quality as
determined in accordance with procedures established by
the Board. The nationally recognized statistical rating
organizations currently rating instruments of the type the Money
Market Fund and Municipal Money Market Fund may purchase are
Moody's, S&P, Duff, Fitch, IBCA Limited and IBCA Inc., and
Thomson BankWatch, Inc. and their rating criteria are described
in the Appendix to the Statement of Additional Information. For
further information regarding the amortized cost method of
valuing securities, see "Determination of Net Asset
Value" in the Statement of Additional Information. There can be
no assurance that each Money Market Fund will be able to maintain
a stable net asset value of $1.00 per share.
The U.S. GOVERNMENT MONEY MARKET FUND will invest only in
short-term securities issued or guaranteed as to principal or
interest by the U.S. Government, its agencies or
instrumentalities and may enter into repurchase
agreements. The Fund also may lend securities from its portfolio
as described under "Appendix--Investment Techniques."
The MONEY MARKET FUND will invest in short-term money market
obligations, including securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities,
certificates of deposit, time deposits, bankers'
acceptances and other short-term obligations issued by domestic
banks, foreign branches of domestic banks, foreign subsidiaries
of domestic banks, domestic and foreign branches of foreign banks
and thrift institutions, repurchase agreements, and high quality
domestic and foreign commercial paper and other short-term
corporate obligations, including those with floating
or variable rates of interest. See "Risk Factors--Investing in
Foreign Securities" below. In addition, the Money Market Fund is
permitted to lend portfolio securities and
enter into reverse repurchase agreements to the extent described
under "Appendix--Investment Techniques." During normal market
conditions, at least 25% of the Fund's total assets will be
invested in bank obligations.
The Fund will not invest more than 5% of its total assets in
the securities (including the securities collateralizing a
repurchase agreement) of, or subject to puts issued by, a single
issuer, except that (i) the Fund may invest more
than 5% of its total assets in a single issuer for a period of up
to three business days in certain limited circumstances, (ii) the
Fund may invest in obligations issued or guaranteed by the U.S.
Government without any such limitation, and (iii) the limitation
with respect to puts does not apply to
unconditional puts if no more than 10% of the Money Market Fund's
total assets is invested in securities issued or guaranteed by
the issuer of the unconditional put. Investments in rated
securities not rated in the highest
category by at least two rating organizations (or one rating
organization if the instrument was rated by only one such
organization), and unrated securities not determined by the Board
to be comparable to those rated in the highest category,
will be limited to 5% of the Money Market Fund's total assets,
with the investment in any one such issuer being limited to no
more than the greater of 1% of the Fund's total assets or
$1,000,000. As to each security, these
percentages are measured at the time the Money Market Fund
purchases the security.
The MUNICIPAL MONEY MARKET FUND will invest at least 80% of
the value of its net assets (except when maintaining a temporary
defensive position) in short-term Municipal Obligations. Subject
to the requirements of Rule 2a-7, the Fund will engage in
management policies that are substantially identical to
those of the Intermediate Municipal Bond Fund. See
"Appendix--Certain Portfolio Securities--Municipal Obligations."
The Fund also may lend securities from its portfolio as described
under "Appendix--Investment Techniques."
CERTAIN FUNDAMENTAL POLICIES
Each Fund may (i) borrow money to the extent permitted under the
1940 Act; and (ii) invest up to 25% of the value of its total
assets in the securities of issuers in a single industry,
provided there is no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities or, in the case of the Municipal
Funds, Municipal Obligations.
In addition, (i) each of the Diversified Funds may invest up to
5% of its total assets in the obligations of any one issuer,
except that up to 25% of the value of the Fund's total assets may
be invested (subject, in the case of the Money
Market Funds, to the provisions of Rule 2a-7), and obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities may be purchased, without regard to any such
limitation; and (ii) the Money Market Fund will invest, except
when it has adopted a temporary defensive position, at least
25% of its total assets in securities issued by banks, including
foreign banks and branches. This paragraph describes fundamental
policies that cannot be changed as to a Fund without approval by
the holders of a majority (as defined in the 1940 Act) of such
Fund's outstanding voting shares. See "Investment
Objectives and Management Policies--Investment Restrictions" in
the Statement of Additional Information.
CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES
Each Fund may (i) purchase securities of any company having less
than three years' continuous operation (including operations of
any predecessors) if such purchase does not cause the value of
such Fund's investments in all such companies to exceed 10% of
the value of its total assets; (ii) pledge,
hypothecate, mortgage or otherwise encumber its assets, but only
to secure permitted borrowings; and (iii) invest up to 15% (10%
in the case of the Money Market Funds) of the value of its net
assets in repurchase agreements providing
for settlement in more than seven days after notice and in other
illiquid securities. See "Investment
Objectives and Management Policies--Investment Restrictions" in
the Statement of Additional Information.
RISK FACTORS
General
Since each Fund will pursue different types of investments, the
risks of investing will vary depending on the Fund selected for
investment. Before selecting a Fund in which to invest, the
investor should assess the risks associated with the types of
investments made by the Fund. The net asset value per share of
each Fund, other than a Money Market Fund, is not fixed and
should be expected to fluctuate. Investors should consider each
Fund as a supplement to an overall investment program and should
invest only if they are willing to undertake the risks involved.
Investment Techniques
Each Fund may engage in various investment techniques to the
extent described herein. The use of investment techniques such as
short-selling, engaging in financial futures and options
transactions, leverage through borrowing,
purchasing securities on a forward commitment basis, and lending
portfolio securities--techniques that are not necessarily
employed by each Fund--involves greater risk than that incurred
by many other funds with similar objectives that
do not engage in such techniques. See "Appendix--Investment
Techniques." Using these techniques may produce higher than
normal portfolio turnover and may affect the degree to which a
Fund's net asset value fluctuates.
Higher portfolio turnover rates are likely to result in
comparatively greater brokerage commissions or transaction costs.
In addition, short-term gains realized from portfolio
transactions are taxable to shareholders as ordinary
gains.
A Fund's ability to engage in certain short-term transactions
may be limited by the requirement that, to qualify as a regulated
investment company, it must earn less than 30% of its gross
income from the disposition of securities held for less than
three months. This 30% test limits the extent to which a Fund may
sell securities held for less than three months and invest in
certain futures contracts, among other strategies. However,
portfolio turnover will not otherwise be a limiting factor in
making investment decisions.
See "Portfolio Transactions" in the Statement of Additional
Information.
Equity Securities
(Asset Allocation and Equity Funds only) Investors should be
aware that Equity Securities fluctuate in value, often based on
factors unrelated to the value of the issuer of the securities,
and that fluctuations can be pronounced. Changes
in the value of a Fund's portfolio securities will result in
changes in the value of such Fund's shares and thus the Fund's
yield and total return to investors.
The securities of the smaller companies may be subject to more
abrupt or erratic market movements than larger, more-established
companies, both because the securities typically are traded in
lower volume and because the issuers typically are subject to a
greater degree to changes in earnings and prospects.
Fixed-Income Securities
(Asset Allocation, Equity, Bond and Municipal Bond Funds and, to
a limited extent, each Money Market Fund) Investors should be
aware that 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 these Funds, 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. See "Lower Rated Securities" below
and "Appendix--Certain Portfolio Securities--Ratings" and
Appendix in the Statement of Additional Information.
Lower Rated Securities
(Asset Allocation, Equity Income, Growth, Special Opportunities,
Bond and International Bond Funds only) Investors should
carefully consider the relative risks of investing in the higher
yielding (and, therefore, higher risk) debt securities in which
each of the Managed Assets Fund, Managed Assets Income Fund
and Bond Fund and International Bond Fund may invest up to 20%,
5% and 35% of its net assets, respectively, and convertible debt
securities in which each of the Equity Income, Growth and Special
Opportunities Funds may invest up to 35% of its net assets. The
Bond Fund, International Bond Fund, Equity Income Fund, Growth
Fund and Special Opportunities Fund each intend to invest less
than 35% of the value of its net assets in such securities. These
are securities such as those rated Ba by Moody's or BB by S&P,
Fitch or Duff or, in the case of the Bond Fund, B by Moody's,
S&P, Fitch or Duff or, in the case of each of the other Funds, as
low as the lowest rating assigned by Moody's, S&P, Fitch or Duff
(commonly known as junk bonds). They generally are not meant for
short-term investing and may be subject to certain risks with
respect to the issuing entity and to greater market fluctuations
than certain lower yielding, higher rated fixed-income
securities. Securities rated Ba by Moody's are judged to have
speculative elements; their future cannot be considered as well
assured and often the protection of interest and principal
payments may be very moderate.
Securities rated BB by S&P, Fitch or Duff are regarded as having
predominantly speculative characteristics and, while such
obligations have less near-term vulnerability to default than
other speculative grade debt, they face major
ongoing uncertainties or exposure to adverse business, financial
or economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. Securities rated C
by Moody's are regarded as having extremely poor prospects of
ever attaining any real investment standing.
Securities rated D by S&P, Fitch and Duff are in default and the
payment of interest and/or repayment of principal is in arrears.
Such securities, though high yielding, are characterized by great
risk. See Appendix in the Statement of Additional Information for
a general description of securities ratings. Although these
ratings may be an initial criterion for selection of portfolio
investments, the Investment Adviser also will evaluate these
securities and the ability of the issuers of such securities to
pay interest and principal. The Fund's ability to achieve its
investment objectives may be more dependent on the
Investment Adviser's credit analysis than might be the case for a
fund that invested in higher rated securities. See
"Appendix--Certain Portfolio
Securities--Fixed-Income Securities--Ratings."
The market price and yield of securities rated Ba or lower by
Moody's and BB
or lower by S&P, Fitch or Duff are more volatile than those of
higher rated securities. Factors adversely affecting the market
price and yield of these securities will adversely affect the
Fund's net asset value. In addition, the retail secondary market
for these securities may be less liquid than that of higher rated
securities; adverse conditions could make it difficult at times
for the Fund to sell certain securities or could result in lower
prices than those used in calculating such Fund's net asset
value.
The market values of certain lower rated debt securities tend
to reflect specific developments with respect to the issuer to a
greater extent than do higher rated securities, which react
primarily to fluctuations in the general
level of interest rates, and tend to be more sensitive to
economic conditions than are higher rated securities. Issuers of
such debt securities often are highly leveraged and may not have
available to them more traditional methods of financing.
Therefore, the risk associated with acquiring the securities of
such issuers generally is greater than is the case with higher
rated securities.
Municipal Obligations
(Municipal Funds only) Certain provisions in the Code relating to
the issuance of Municipal Obligations may reduce the volume of
Municipal Obligations qualifying for Federal tax exemption. One
effect of these provisions could be to
increase the cost of the Municipal Obligations available for
purchase by the Municipal Funds and thus reduce the available
yield. Shareholders of the
Municipal Funds should consult their tax advisers concerning the
effect of these provisions on an investment in the Fund.
Proposals that may restrict or eliminate the income tax exemption
for interest on Municipal Obligations may be introduced in the
future. If any such proposal were enacted that would reduce
the availability of Municipal Obligations for investment by any
of these Funds so as to adversely affect its shareholders, the
Board would reevaluate the affected Fund's investment objective
and policies and submit possible changes in
the Fund's structure to shareholders for their consideration. If
legislation were enacted that would treat a type of Municipal
Obligation as taxable, the Municipal Funds would treat such
security as a permissible taxable investment
within the applicable limits set forth herein.
Each Municipal Fund may invest more than 25% of the value of
its total assets
in Municipal Obligations which are related in such a way that an
economic, business or political development or change affecting
one such security also would affect the other securities; for
example, securities the interest upon which is paid from revenues
of similar types of projects, or securities of
issuers that are located in the same state. As a result, each
Municipal Fund may be subject to greater risk as compared to a
fund that does not follow this practice.
Certain municipal lease/purchase obligations in which the
Municipal Funds may invest may contain "non-appropriation"
clauses which provide that the municipality has no obligation to
make lease payments in future years unless
money is appropriated for such purpose on a yearly basis.
Although "non-appropriation" lease/purchase obligations are
secured by the leased property, disposition of the leased
property in the event of foreclosure might
prove difficult. In evaluating the credit quality of a municipal
lease/purchase obligation that is unrated, the Investment Adviser
will consider, on an ongoing basis, a number of factors including
the likelihood that the issuing municipality will discontinue
appropriating funding for the leased property.
Foreign Securities
(Asset Allocation, Growth, Special Opportunities, International
Equity and International Bond Funds and, to a limited extent,
Equity Income, Bond, Intermediate Bond and Money Market Funds
only) 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. See "Appendix-- Certain Portfolio Securities--Taxable
Money Market Securities--Bank Obligations."
Because evidences of ownership of such securities usually are
held outside the United States, each of these Funds 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.
Since foreign securities often are purchased with and payable
in currencies of foreign countries, the value of these assets as
measured in U.S. dollars may
be affected favorably or unfavorably by changes in currency rates
and exchange control regulations. Some currency exchange costs
generally will be incurred when a Fund changes investments from
one country to another.
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 a 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 a Fund will reduce its net income
available for distribution to its shareholders.
Foreign Currency Exchange
(Asset Allocation, Growth, Special Opportunities, International
Equity and International Bond Funds only) Currency exchange rates
may fluctuate significantly over short periods of time. They
generally are determined by the forces of supply and demand in
the foreign exchange markets and the relative merits of
investments in different countries, actual or perceived changes
in interest rates and other complex factors, as seen from an
international perspective. Currency exchange rates also can be
affected unpredictably by intervention by U.S. or foreign
governments or central banks, or the failure to
intervene, or by currency controls or political developments in
the United States or abroad.
The foreign currency market offers less protection against
defaults in the forward trading of currencies than is available
when trading in currencies occurs on an exchange. Since a forward
currency contract is not guaranteed by an exchange or
clearinghouse, a default on the contract would deprive the Fund
of unrealized profits or force such Fund to cover its commitments
for purchase or resale, if any, at the current market price.
Foreign Commodity Transactions
(Asset Allocation, Growth, Special Opportunities, International
Equity and International Bond Funds only) Unlike trading on
domestic commodity exchanges, trading on foreign commodity
exchanges is not regulated by the Commodity Futures
Trading Commission (the "CFTC") and may be subject to greater
risks than trading on domestic exchanges. For example, some
foreign exchanges are principal markets
so that no common clearing facility exists and an investor may
look only to the broker for performance of the contract. In
addition, any profits that the Fund
might realize in trading could be eliminated by adverse changes
in the exchange rate, or such Fund could incur losses as a result
of those changes. Transactions
on foreign exchanges may include both commodities which are
traded on domestic exchanges and those which are not.
Mortgage-Related Securities
(Asset Allocation, Equity and Bond Funds only) 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
Board. In accordance with such guidelines, the Investment Adviser
will monitor
investments in such securities with particular regard to trading
activity, availability of reliable price information and other
relevant information. Each of these Funds intends to treat other
stripped mortgage-backed securities as illiquid securities. See
"Appendix--Certain Portfolio Securities--Fixed-Income
Securities--Mortgage-Related Securities" and --Illiquid
Securities."
Zero Coupon Securities
(Asset Allocation, Equity, Bond and Municipal Bond Funds only)
Federal income tax law requires the holder of a zero coupon
security or of certain pay-in-kind bonds to accrue income with
respect to these securities prior to the receipt of
cash payments. To maintain its qualification as a regulated
investment company and avoid liability for Federal income taxes,
each Fund that invests in such
securities may be required to distribute such income accrued with
respect to these securities and may have to dispose of portfolio
securities under disadvantageous circumstances in order to
generate cash to satisfy these distribution requirements.
Other Investment Considerations
The classification of each Non-Diversified Fund as a
"non-diversified" investment company means that the proportion of
such Fund's assets that may be invested in the securities of a
single issuer is not limited by 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, each Fund intends to
conduct its operations so as to qualify as a "regulated
investment company" for purposes of the Code, 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 each such 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 each 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, its
portfolio securities may be more susceptible to any single
economic, political or regulatory occurrence than the portfolio
securities of a diversified investment company.
Investment decisions for each Fund are made independently from
those of the other investment companies or investment advisory
accounts that may be advised by the Investment Adviser. However,
if such other investment companies or managed accounts are
prepared to invest in, or desire to dispose of, securities
in which a Fund invests at the same time as the Fund, available
investments or opportunities for sales will be allocated
equitably to each of them. In some cases, this procedure may
adversely affect the size of the position obtained for
or disposed of by a Fund or the price paid or received by a Fund.
Alternative Purchase Methods
This Prospectus offers investors three methods of purchasing Fund
shares. Orders for purchases of Class I shares, however, may be
placed only for certain eligible investors as described below. An
investor who is not eligible to purchase Class I shares may
choose from Class A and Class B the Class of shares
that best suits the investor's needs, given the amount of
purchase, the length of time the investor expects to hold the
shares and any other relevant
circumstances. Each Class A, Class B and Class I share represents
an identical pro rata interest in a Fund's investment portfolio.
Class A shares are sold at net asset value per share plus, for
each Fund other than a Money Market Fund, a maximum initial sales
charge of 4.50% (3.00% in the case of the Intermediate Bond Fund
and Intermediate Municipal Bond Fund)
of the public offering price imposed at the time of purchase. The
initial sales charge may be reduced or waived for certain
purchases. See "How to Buy Shares--Class A Shares." Class A
shares of each Fund are subject to an annual
service fee at the rate of up to .25% of the value of the average
daily net assets of Class A. See "Distribution Plans and
Shareholder Services Plans."
Class A shares held by investors who after purchasing Class A
shares establish a
Fiduciary Account will convert to Class I shares automatically
upon the establishment of such Account, based on the relative net
asset values for shares of each such Class.
Class B shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the
entire purchase price is immediately invested in the Fund. Class
B shares are subject to a maximum 5.00%
(3.00% in the case of the Intermediate Bond Fund and Intermediate
Municipal Bond
Fund) CDSC, which is assessed only if Class B shares are redeemed
within six years (five years in the case of the Intermediate Bond
Fund and Intermediate Municipal Bond Fund) of purchase. Class B
shares of the Money Market Fund may be acquired only through
exchanges with Class B shares of the other Funds and are
subject to the CDSC, if any, of the shares with which the
exchange is made. See "How to Buy Shares--Class B Shares" and
"How to Redeem Shares--Contingent Deferred Sales Charge--Class B
Shares." Class B shares are subject to an annual
service fee and distribution fee. See "Distribution Plans and
Shareholder Services Plans." Approximately eight years (seven
years in the case of the Intermediate Bond Fund and Intermediate
Municipal Bond Fund) after the date of purchase,
Class B shares automatically will convert to Class A shares,
based on the relative net asset values for shares of each such
Class, and will no longer be
subject to the distribution fee. Class B shares that have been
acquired through the reinvestment of dividends and distributions
will be converted on a pro rata basis together with other Class B
shares, in the proportion that a shareholder's
Class B shares converting to Class A shares bears to the total
Class B shares not acquired through the reinvestment of dividends
and distributions.
Class I shares are sold at net asset value with no sales
charge. Class I shares are sold exclusively to qualified trust,
custody and/or agency account
clients of FNBC, ANB or their affiliates ("Fiduciary Accounts")
and to qualified benefit plans or other programs with assets in
excess of $100 million ("Eligible Retirement Plans"). Class I
shares are not subject to an annual service fee or
distribution fee. Class I shares held by investors who after
purchasing Class I shares for their Fiduciary Accounts withdraw
from such Accounts will convert to
Class A shares automatically upon such withdrawal, based on the
relative net asset values for shares of each such Class, and will
be subject to the annual service fee charged Class A.
Class B shares will receive lower per share dividends and at
any given time the performance of Class B should be expected to
be lower than for shares of each other Class because of the
higher expenses borne by Class B. Similarly,
Class A shares will receive lower per share dividends and the
performance of Class A should be expected to be lower than Class
I shares because of the higher expenses borne by Class A. See
"Fee Table."
An investor who is not eligible to purchase Class I shares
should consider whether, during the anticipated life of the
investor's investment in the Fund, the accumulated distribution
fee and CDSC on Class B shares prior to conversion
would be less than the initial sales charge, if any, on Class A
shares purchased at the same time, and to what extent, if any,
such differential would be offset by the return of Class A.
Additionally, investors qualifying for reduced initial
sales charges who expect to maintain their investment for an
extended period of time might consider purchasing Class A shares
because the accumulated continuing distribution fees on Class B
shares may exceed the initial sales charge on Class
A shares during the life of the investment. Generally, Class A
shares may be more appropriate for investors who invest $500,000
or more in Fund shares.
How to Buy Shares
INFORMATION APPLICABLE TO ALL PURCHASERS
When purchasing Fund shares, an investor must specify the Class
of shares being purchased. If no Class of shares is specified,
Class A shares will be purchased.
Class A and Class B shares are offered to the general public
and may be purchased through a number of institutions, including
FCIMCO, FNBC, ANB and their affiliates, other Service Agents, and
directly through the Distributor.
Class B shares of the Money Market Fund may be acquired only
through the exchange of Class B shares of the other Funds.
Orders for purchases of Class I shares may be placed only for
clients of FNBC, ANB or their affiliates for their Fiduciary
Accounts maintained at FNBC, ANB or one of their affiliates and
Eligible Retirement Plans with assets in excess of $100 million.
Class I shares may be purchased for a Fiduciary Account
or Eligible Retirement Plan only by a custodian, trustee,
investment manager or other entity authorized to act on behalf of
such Account or Plan.
Share certificates will not be issued. It is not recommended
that any of the Municipal Funds be used as a vehicle for Keogh,
IRA or other qualified retirement plans. The Funds reserve the
right to reject any purchase order.
The minimum initial investment for each Class is $1,000.
However, for IRAs and other retirement plans, the minimum initial
purchase is $250. All subsequent investments must be at least
$100. The initial investment must be accompanied by
the Account Application. FCIMCO and Service Agents may impose
initial or subsequent investment minimums which are higher or
lower than those specified above and may impose different
minimums for different types of accounts or
purchase arrangements.
As to each Fund, net asset value per share of each Class is
computed by dividing the value of the Fund's net assets
represented by such Class (i.e., the value of its assets less
liabilities) by the total number of shares of such
Class outstanding. See "Determination of Net Asset Value" in the
Statement of Additional Information.
Each Money Market Fund's net asset value per share is
determined as of 12:00 Noon, New York time, on each business day
(which, as used herein, shall include
each day the New York Stock Exchange is open for business, except
Martin Luther King, Jr. Day, Columbus Day and Veterans Day).
Shares of each Money Market Fund are sold on a continuous
basis at the net asset value per share next determined after an
order in proper form and Federal Funds (moneys of member banks
within the Federal Reserve System which are held on deposit at a
Federal Reserve Bank) are received by the Transfer Agent. If an
investor does not remit Federal Funds, his payment
must be converted into Federal Funds. This usually occurs within
one business day of receipt of a bank wire and within two
business days of receipt of a check drawn on a member bank of the
Federal Reserve System. Checks drawn on banks
which are not members of the Federal Reserve System may take
considerably longer to convert into Federal Funds. Prior to
receipt of Federal Funds, the investor's money will not be
invested.
For each Fund, other than the Money Market Funds, shares are
sold on a continuous basis at the public offering price (i.e.,
net asset value plus the applicable sales load, if any, set forth
below). Net asset value per share of
these Funds is determined as of the close of trading on the floor
of the New York Stock Exchange (currently 4:00 p.m., New York
time), on each business day.
For purposes of determining net asset value per share, options
and futures contracts will be valued 15 minutes after the close
of trading on the New York Stock Exchange. Each of these Funds'
investments are valued each business day by
one or more independent pricing services approved by the Board
and are valued at fair value as determined by the pricing
service. Each pricing service's procedures are reviewed under the
general supervision of the Board.
For each Fund, other than the Money Market Funds, if an order
is received by the Transfer Agent by the close of trading on the
floor of the New York Stock Exchange (currently 4:00 p.m., New
York time) on any business day, shares will
be purchased at the public offering price determined as of the
close of trading on the floor of the New York Stock Exchange on
that day. Otherwise, shares will
be purchased at the public offering price determined as of the
close of trading on the floor of the New York Stock Exchange on
the next business day.
Federal regulations require that an investor provide a
certified Taxpayer Identification Number ("TIN") upon opening or
reopening an account. See "Dividends, Distributions and Taxes"
and the Account Application for further information concerning
this requirement.
Failure to furnish a certified TIN to
the Fund could subject an investor to a $50 penalty imposed by
the Internal Revenue Service (the "IRS").
Class A Shares
The public offering price for Class A shares of each Fund, other
than the Money Market Funds, is the net asset value per share of
that Class plus a sales load as shown below:
ASSET ALLOCATION FUNDS, EQUITY FUNDS, BOND FUNDS,
INTERNATIONAL BONDFUND and MUNICIPAL BONDFUND
<TABLE>
<CAPTION>
Total Sales Load
---------------- Dealers'
As a % of As a % of Reallowance
offering price net asset value as a % of
AMOUNT OF TRANSACTION per share per share offering price
==================================================================================
<S> <C> <C> <C>
Less than $50,000 4.50 4.70 4.00
$50,000 to less than $100,000 4.00 4.20 3.50
$100,000 to less than $250,000 3.00 3.10 2.50
$250,000 to less than $500,000 2.00 2.00 1.50
$500,000 to less than $1,000,000 1.50 1.50 1.25
$1,000,000 and above none none none
==================================================================================
INTERMEDIATE BOND FUND AND
INTERMEDIATE MUNICIPAL BOND FUND
Total Sales Load
---------------- Dealers'
As a % of As a % of Reallowance
offering price net asset value as a % of
AMOUNT OF TRANSACTION per share per share offering price
==================================================================================
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>
There is no initial sales charge on purchases of $1,000,000 or
more of Class A shares. However, if an investor purchases Class A
shares without an initial sales charge as part of an investment
of at least $1,000,000 and redeems those
shares within a certain period after purchase, a CDSC will be
imposed at the time of redemption as described below. The terms
set forth under "How to Redeem Fund Shares--Contingent Deferred
Sales Charge--Class B" (other than the amount
of the CDSC and its time periods) are applicable to the Class A
shares subject to a CDSC. Letter of Intent and Right of
Accumulation apply to such purchases of Class A shares. The
following table sets forth the rates of such CDSC for the
indicated time periods:
AMOUNT OF CDSC as a % of
TRANSACTIONS AT Amount Invested or Year Since Purchase
OFFERING PRICE Redemption Proceeds Payment Was Made
=================================================================
$1,000,000 to
less than $2,500,000 1.00% First or Second
$2,500,000 to
less than $5,000,000 0.50% First
$5,000,000 and above 0.25% First
=================================================================
The dealer reallowance may be changed from time to time but
will remain the same for all dealers. With respect to purchases
of $1,000,000 or more of Class A shares made through Service
Agents, the Distributor may pay such Service Agents
from its own funds a fee of up to .75% for the Intermediate Bond
Fund and Intermediate Municipal Bond Fund and 1.00% for each
other Fund of the amount invested to compensate such
Service Agents for their distribution assistance in connection
with such purchases.
Full-time employees of NASD member firms and full time
employees of other financial institutions which have entered into
an agreement with the Distributor pertaining to the sale of Fund
shares (or which otherwise have a brokerage-related or clearing
arrangement with an NASD member firm or other
financial institution with respect to sales of Fund shares),
their spouses and minor children, and accounts opened by a bank,
trust company or thrift institution, acting as a fiduciary or
custodian, may purchase Class A shares for
themselves or itself, as the case may be, at net asset value,
provided that they have furnished the Distributor appropriate
notification of such status at the
time of the investment and such other information as it may
request from time to time in order to verify eligibility for this
privilege. This privilege also applies to full-time employees of
financial institutions affiliated with NASD
member firms whose employees are eligible to purchase Class A
shares at net asset value. In addition, Class A shares may be
purchased at net asset value for accounts registered under the
Uniform Gifts to Minors Act or Uniform Transfers
to Minors Act which are opened through FCIS and 401(k) Salary
Reduction Plan accounts for which FNBC serves as administrator.
Class A shares are also offered
at net asset value to directors and full-time or part-time
employees of First Chicago Corporation, or any of its affiliates
and subsidiaries, retired employees of First Chicago Corporation,
or any of its affiliates and subsidiaries, Board members of a
fund advised by the Investment Adviser,
including members of the Funds' Board, or the spouse or minor
child of any of the foregoing.
Class A shares may be purchased at net asset value through
certain broker-dealers, registered investment advisers and other
financial institutions which have entered into an agreement with
the Distributor, which includes a
requirement that such shares be sold for the benefit of clients
participating in a "wrap account" or a similar program under
which such clients pay a fee to such broker-dealer, registered
investment adviser or other financial institution.
Class A shares also may be purchased at net asset value,
without a sales charge, with the proceeds from the redemption of
shares of an investment company sold with a sales charge or
commission and not distributed by the Distributor.
This also includes shares of an investment company that were or
would be subject to a contingent deferred sales charge upon
redemption. The purchase must be made within 60 days of the
redemption, and the Distributor must be notified in
writing by the investor, or by the investor's investment
professional, at the time the purchase is made.
Class A shares also will be offered at net asset value without
a sales load to employees participating in qualified or
nonqualified employee benefit plans
or other programs where (i) the employers or affiliated employers
maintaining such plans or programs have a minimum of 250
employees eligible for participation in such plans or programs or
(ii) such plan's or program's aggregate investment in the Funds
and certain other funds advised by the
Investment Adviser exceeds one million dollars ("Eligible Benefit
Plans").
Class B Shares
The public offering price for Class B shares is the net asset
value per share of that Class. No initial sales charge is imposed
at the time of purchase. A CDSC is imposed, however, on certain
redemptions of Class B shares, as described under "How to Redeem
Shares." The Distributor may compensate certain Service
Agents for selling Class B shares at the time of purchase from
its own assets.
Proceeds of the CDSC and distribution fees payable to the
Distributor, in part, would be used to defray these expenses.
Class I Shares
The public offering price for Class I shares is the net asset
value per share of that Class. No sales charge is imposed for
Class I shares.
Purchasing Shares Through Accounts with FCIMCO, FNBC, ANB or a
Service Agent Investors who desire to purchase shares through
their accounts at FCIMCO, FNBC, ANB or their affiliates or a
Service Agent should contact such entity directly
for appropriate instructions, as well as for information about
conditions pertaining to the account and any related fees.
Service Agents, FCIMCO, FNBC and ANB may charge clients direct
fees for effecting transactions in shares, as well
as fees for other services provided to clients in connection with
accounts through which shares are purchased. These fees, if any,
would be in addition to fees received by a Service Agent under a
Shareholder Services Plan or fees received by FCIMCO under an
Investment Advisory Agreement or Administration
Agreement. Each Service Agent has agreed to transmit to its
clients a schedule of such fees. In addition, Service Agents,
FCIMCO, FNBC and ANB may receive different levels of compensation
for selling different Classes of shares and may
impose minimum account and other conditions, including conditions
which might affect the availability of certain shareholder
privileges described in this Prospectus. Certain investor
accounts with FNBC, ANB and their affiliates and
certain Service Agents may be eligible for an automatic
investment privilege, commonly called a "sweep," under which
amounts in excess of a certain minimum held in these accounts
will be invested automatically in shares at predetermined
intervals. Each investor desiring to
use this privilege should consult FNBC, ANB or his Service Agent
for details. It is the responsibility of FNBC, ANB and Service
Agents to transmit orders on a timely basis.
Copies of the Prospectus and Statement of Additional
Information may be obtained from the Distributor, FCIMCO, certain
affiliates of FCIMCO or certain Service Agents, as well as from
the Funds.
Right of Accumulation--Class A Shares
Reduced sales loads apply to any purchase of Class A shares where
the dollar amount of shares being purchased, plus the value of
shares of such Fund, shares of other Funds, and shares of certain
other investment companies advised by the
Investment Adviser purchased with a sales load or acquired by a
previous exchange of shares purchased with a sales load
(hereinafter referred to as "Eligible Funds") held by an investor
and any related "purchaser" as defined in
the Statement of Additional Information, is $50,000 or more. If,
for example, an investor previously purchased and still holds
Class A shares of the Equity
Income Fund, or of any other Eligible Fund or combination
thereof, with an aggregate current market value of $40,000 and
subsequently purchases Class A shares of such Fund or an Eligible
Fund having a current value of $20,000, the
sales load applicable to the subsequent purchase would be reduced
to 4.00% of the offering price (4.20% of the net asset value).
All present holdings of Eligible Funds may be combined to
determine the current offering price of the
aggregate investment in ascertaining the sales load applicable to
each subsequent purchase.
To qualify for reduced sales loads, at the time of a purchase
an investor or his Service Agent must notify the Distributor if
orders are made by wire, or the Transfer Agent if orders are made
by mail. The reduced sales load is subject to
confirmation of the investor's holdings through a check of
appropriate records.
Shareholder Services
The Exchange Privilege and Automatic Investment Plan are
available to shareholders of any Class. The Letter of Intent and
Reinstatement Privilege are available only for Class A and Class
B shareholders, respectively. In addition,
such services and privileges may not be available to clients of
certain Service Agents and some Service Agents may impose certain
conditions on their clients which are different from those
described in this Prospectus. Each investor should consult his
Service Agent in this regard.
EXCHANGE PRIVILEGE
The Exchange Privilege enables an investor to purchase, in
exchange for shares of a Fund, shares of the same Class of the
other Funds. This privilege may be
expanded to permit exchanges between a Fund and other funds that,
in the future, may be advised by the Investment Adviser.
Exchanges may be made to the extent the shares being received in
the exchange are offered for sale in the shareholder's state of
residence.
Shares of the same Class of Funds purchased by exchange will
be purchased on the basis of relative net asset value per share
as follows:
A. Shares of Funds purchased with or without a sales load may
be exchanged without a sales load for shares of other Funds sold
without a sales load.
B. Shares of Funds purchased without a sales load may be
exchanged for shares of other Funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of Funds purchased with a sales load, shares of
Funds acquired by a previous exchange from shares purchased with
a sales load and additional shares acquired through reinvestment
of dividends or distributions of any such Funds
(collectively referred to herein as "Purchased Shares") may be
exchanged for shares of other Funds sold with a sales load
(referred to herein as "Offered Shares"), provided that, if the
sales load applicable to the Offered Shares
exceeds the maximum sales load that could have been imposed in
connection with the Purchased Shares (at the time the Purchased
Shares were acquired), without giving effect to any reduced
loads, the difference will be deducted.
D. Shares of Funds subject to a CDSC that are exchanged for
shares of another Fund will be subject to the higher applicable
CDSC of the two Funds, and for purposes of calculating CDSC rates
and conversion periods, if any, will be
deemed to have been held since the date the shares being
exchanged were initially purchased.
To accomplish an exchange under item C above, shareholders
must notify the Transfer Agent of their prior ownership of Fund
shares and their account number.
No fees currently are charged shareholders directly in
connection with exchanges although the Funds reserve the right,
upon not less than 60 days' written notice, to charge
shareholders a nominal fee in accordance with rules
promulgated by the Securities and Exchange Commission. The Funds
reserve the right to reject any exchange request in whole or in
part. The Exchange Privilege may be modified or terminated at any
time upon notice to shareholders.
The exchange of shares of one Fund for shares of another is
treated for Federal income tax purposes as a sale of the shares
given in exchange by the shareholder and, therefore, an
exchanging shareholder may realize a taxable gain
or loss.
LETTER OF INTENT--CLASS A SHARES
By signing a Letter of Intent form, available from the
Distributor, FCIMCO, certain affiliates of FCIMCO, or certain
Service Agents, an investor becomes eligible for the reduced
sales load applicable to the total number of Eligible
Fund shares purchased in a 13-month period (beginning up to 30
days before the date of execution of the Letter of Intent)
pursuant to the terms and conditions
set forth in the Letter of Intent. A minimum initial purchase of
$5,000 is required. To compute the applicable sales load, the
offering price of shares the
investor holds (on the date of submission of the Letter of
Intent) in any Eligible Fund that may be used toward "Right of
Accumulation" benefits described above may be used as a credit
toward completion of the Letter of Intent.
However, the reduced sales load will be applied only to new
purchases.
The Transfer Agent will hold in escrow 5% of the amount
indicated in the Letter of Intent for payment of a higher sales
load if the investor does not purchase the full amount indicated
in the Letter of Intent. The escrow will be
released when the investor fulfills the terms of the Letter of
Intent by purchasing the specified amount. Assuming completion of
the total minimum investment specified under a Letter of Intent,
an adjustment will be made to reflect any reduced sales load
applicable to shares purchased during the 30-day
period before submission of the Letter of Intent. In addition, if
the investor's purchases qualify for a further sales load
reduction, the sales load will be adjusted to reflect the
investor's total purchase at the end of 13 months. If
total purchases are less than the amount specified, the investor
will be requested to remit an amount equal to the difference
between the sales load actually paid and the sales load
applicable to the aggregate purchases actually
made. If such remittance is not received within 20 days, the
Transfer Agent, as attorney-in-fact pursuant to the terms of the
Letter of Intent, will redeem an
appropriate number of Class A shares held in escrow to realize
the difference.
Signing a Letter of Intent does not bind the investor to
purchase, or the Trust to sell, the full amount indicated at the
sales load in effect at the time of
signing, but the investor must complete the intended purchase to
obtain the reduced sales load. At the time an investor purchases
Class A shares, the investor must indicate his or her intention
to do so under a Letter of Intent.
AUTOMATIC INVESTMENT PLAN
The Automatic Investment Plan permits an investor to purchase
shares at regular intervals selected by the investor. Provided
the investor's bank or other
financial institution allows automatic withdrawals, shares may be
purchased by transferring funds from the bank account designated
by the investor. At the investor's option, the account designated
will be debited in the specified amount, and shares will be
purchased, once a month, on either the first or
fifteenth day, or twice a month, on both days. Only an account
maintained at a domestic financial institution which is an
Automated Clearing House member may
be so designated. To establish an Automatic Investment Plan
account, the investor must check the appropriate box and supply
the necessary information on the Account Application. Investors
may obtain the necessary applications from
the Distributor. An investor may cancel his or her participation
in the Plan or change the amount of purchase at any time by
mailing written notification to
Primary Funds Service Corp., P.O. Box 9743, Providence, Rhode
Island 02940-9743,
and such notification will be effective three business days
following receipt.
The Funds may modify or terminate the Automatic Investment Plan
at any time or charge a service fee. No such fee currently is
contemplated.
REINSTATEMENT PRIVILEGE
The Reinstatement Privilege enables investors who have redeemed
Class A or Class B shares to repurchase, within 30 days of such
redemption, Class A or Class B shares in an amount not to exceed
the redemption proceeds received. Class A shares so reinstated
will be offered at a purchase price equal to the then-current net
asset value of Class A determined after a reinstatement request
and payment for Class A shares are received by the Transfer
Agent. With respect to Class B shares so reinstated, the CDSC
applicable on redemption of the
acquired Class B shares will be calculated from the date of the
initial purchase of such Class B shares previously redeemed. This
privilege also enables such
investors to reinstate their account for the purpose of
exercising the Exchange Privilege. To use the Reinstatement
Privilege, an investor must submit a written
reinstatement request to the Transfer Agent. The reinstatement
request and payment must be received within 30 days of the trade
date of the redemption.
There currently are no restrictions on the number of times an
investor may use this privilege.
How to Redeem Shares
GENERAL
An investor may request redemption of his shares at any time.
Redemption
requests should be transmitted to the Transfer Agent as described
below. An investor who has purchased shares through his Fiduciary
Account or as a participant in an Eligible Retirement Plan must
redeem shares by following instructions pertaining to such
Account or Plan. It is the responsibility of the
entity authorized to act on behalf of such Account or Plan to
transmit the redemption order to the Transfer Agent and credit
the investor's account with the redemption proceeds on a timely
basis. When a request is received in proper
form, the Fund will redeem the shares at the next determined net
asset value as described below. If an investor holds Fund shares
of more than one Class, any request for redemption must specify
the Class of shares being redeemed. If an
investor fails to specify the Class of shares to be redeemed,
Class A shares will be redeemed first. If an investor owns fewer
shares of the Class than specified to be redeemed, the redemption
request may be delayed until the
Transfer Agent receives further instructions from the investor or
his Service Agent.
The Funds impose no charges when shares are redeemed. However,
the Distributor may impose a CDSC as described below. Service
Agents may charge a nominal fee for effecting redemptions of Fund
shares. The value of the shares redeemed may be more or less than
their original cost, depending upon the Fund's
then-current net asset value.
A Fund ordinarily will make payment for all shares redeemed
within seven days except as provided by the rules of the
Securities and Exchange Commission.
HOWEVER, IF AN INVESTOR HAS PURCHASED FUND SHARES BY CHECK OR
THROUGH THE AUTOMATIC INVESTMENT PLAN AND SUBSEQUENTLY SUBMITS A
WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, THE REDEMPTION
PROCEEDS WILL BE TRANSMITTED TO THE
INVESTOR PROMPTLY UPON BANK CLEARANCE OF THE INVESTOR'S PURCHASE
CHECK OR AUTOMATIC INVESTMENT PLAN ORDER, WHICH MAY TAKE UP TO
EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL NOT HONOR
REDEMPTION CHECKS FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER
RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK OR
AUTOMATIC INVESTMENT PLAN ORDER AGAINST WHICH SUCH REDEMPTION IS
REQUESTED.
THESE PROCEDURES WILL NOT APPLY IF THE INVESTOR OTHERWISE HAS A
SUFFICIENT COLLECTED BALANCE IN HIS ACCOUNT TO COVER THE
REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS
EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE
PAYABLE, AND THE INVESTOR WILL BE ENTITLED TO EXERCISE ALL OTHER
RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be redeemed
until the Transfer Agent has received the investor's Account
Application.
Each Fund reserves the right to redeem an investor's account
at the Fund's option upon not less than 45 days' written notice
if the account's net asset value is $500 or less and remains so
during the notice period.
CONTINGENT DEFERRED SALES CHARGE--
CLASS B A CDSC payable to the Distributor may be imposed on
redemptions of Class B shares depending on the number of years
such shares were held by the investor.
The following tables set forth the rates of the CDSC applied for
the indicated Funds:
ASSET ALLOCATION FUNDS, EQUITY FUNDS, BOND FUND,
INTERNATIONAL BOND FUND AND MUNICIPAL BOND FUND
====================================================
CDSC as a % of
Year Since Amount Invested or
Purchase Payment Was Made Redemption Proceeds
====================================================
First 5.00
- ----------------------------------------------------
Second 4.00
- ----------------------------------------------------
Third 3.00
- ---------------------------------------------------
Fourth 3.00
- ----------------------------------------------------
Fifth 2.00
- ----------------------------------------------------
Sixth 1.00
- ----------------------------------------------------
Seventh None
- ----------------------------------------------------
Eighth *
====================================================
* Conversion to Class A shares.
INTERMEDIATE BOND FUND AND
INTERMEDIATE MUNICIPAL BOND FUND
=======================================================
CDSC as a % of
Year Since Amount Invested or
Purchase Payment Was Made Redemption Proceeds
=======================================================
First 3.00
- -------------------------------------------------------
Second 3.00
- -------------------------------------------------------
Third 2.00
- -------------------------------------------------------
Fourth 2.00
- -------------------------------------------------------
Fifth 1.00
- -------------------------------------------------------
Sixth None
- -------------------------------------------------------
Seventh *
=======================================================
* Conversion to Class A shares.
In determining whether a CDSC is applicable to a redemption,
the calculation will be made in a manner that results in the
lowest possible rate. Class B shares redeemed will not be subject
to a CDSC to the extent that the value of
such shares represents capital appreciation or reinvestment of
dividends or distributions. It will be assumed that the
redemption is made first of Class B shares acquired pursuant to
the reinvestment of dividends and distributions or
representing any capital appreciation in the value of the Class B
shares held by the investor; then of Class B shares held for the
longest period of time.
WAIVER OF CDSC
The CDSC will be waived in connection with (a) redemptions made
within one year after the death of the shareholder, (b)
redemptions by shareholders after age 70-1/2 for purposes of the
minimum required distribution from an IRA, Keogh plan
or custodial account pursuant to Section 403(b) of the Code, (c)
distributions
from a qualified plan upon retirement, (d) redemptions of shares
acquired through a contribution in excess of permitted amounts,
(e) redemptions initiated by a Fund of accounts with net assets
of less than $500, and (f) redemptions by
such shareholders as the Securities and Exchange Commission or
its staff may permit.
CONVERSION OF CLASS B SHARES
Class B shares automatically convert to Class A shares (and thus
become subject to the lower expenses borne by Class A shares) in
the eighth year (seventh year in the case of the Intermediate
Bond Fund and Intermediate Municipal Bond Fund)
after the date of purchase, together with the pro rata portion of
all Class B shares representing dividends and other distributions
paid in additional Class B shares. The conversion will be
effected at the relative net asset values per
share of the two Classes on the first business day of the month
following the seventh anniversary (sixth anniversary in the case
of the Intermediate Bond Fund and Intermediate Municipal Bond
Fund) of the original purchase. If any exchanges
of Class B shares during the eight-year or seven-year, as the
case may be, period occurred, the holding period for the shares
exchanged will be counted
toward the eight-year or seven-year, as the case may be, period.
At the time of the conversion the net asset value per share of
the Class A shares may be higher
or lower than the net asset value per share of the Class B
shares; as a result, depending on the relative net asset values
per share, a shareholder may receive fewer or more Class A shares
than the number of Class B shares converted.
Each Fund reserves the right to cease offering Class B shares
for sale at any time or reject any order for the purchase of
Class B shares and to cease offering any services provided by
Service Agent.
PROCEDURES
An investor who has purchased shares through his account at
FCIMCO, FNBC or a Service Agent must redeem shares by following
instructions pertaining to such account. If an investor has given
his Service Agent authority to instruct the Transfer Agent to
redeem shares and to credit the proceeds of such redemption to
a designated account at the Service Agent, the investor may
redeem shares only in this manner and in accordance with a
written redemption request described below. It is the
responsibility of FCIMCO, FNBC or the Service Agent, as the
case may be, to transmit the redemption order and credit the
investor's account with the redemption proceeds on a timely
basis.
An investor may redeem or exchange shares by telephone if the
investor has checked the appropriate box on the Account
Application. By selecting a telephone redemption or exchange
privilege, an investor authorizes the Transfer Agent to
act on telephone instructions from any person representing
himself or herself to be the investor, or a representative of the
investor's Service Agent, and reasonably believed by the Transfer
Agent to be genuine. The Funds will require the Transfer Agent to
employ reasonable procedures, such as requiring a form of
personal identification, to confirm that instructions are genuine
and, if it does not follow such procedures, the Fund or the
Transfer Agent may be liable for any losses due to unauthorized
or fraudulent instructions. Neither the Fund
nor the Transfer Agent will be liable for following telephone
instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, an
investor may experience difficulty in contacting the Transfer
Agent by telephone to request a redemption or exchange of Fund
shares. In such cases, investors should consider
using the other redemption procedures described herein. Use of
these other redemption procedures may result in the investor's
redemption request being processed at a later time than it would
have been if telephone redemption had
been used. During the delay, the Fund's net asset value may
fluctuate.
WRITTEN REDEMPTION REQUESTS Investors may redeem shares by
written request
mailed to The Prairie Family of Funds, P.O. Box 9743, Providence,
Rhode Island 02940-9743. Redemption requests must be signed by
each shareholder, including each owner of a joint account, and
each signature must be guaranteed. The Transfer Agent has adopted
standards and procedures pursuant to which signature-guarantees
in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New
York Stock Exchange Medallion Signature Program, the Securities
Transfer Agents Medallion Program ("STAMP"), and the
Stock Exchanges Medallion Program.
CHECK REDEMPTION PRIVILEGE
Class A of Money Market Funds only
A Money Market Fund shareholder may request on the Account
Application or by later written request to the Fund that the
Money Market Fund provide Redemption Checks drawn on the Fund's
account. Redemption Checks may be made payable to the
order of any person in the amount of $500 or more. Redemption
Checks should not be used to close an account. Redemption Checks
are free, but the Transfer Agent
will impose a fee for stopping payment of a Redemption Check at
the investor's request or if the Transfer Agent cannot honor the
Redemption Check due to insufficient funds or other valid reason.
An investor should date his Redemption
Checks with the current date when the investor writes them.
Please do not postdate Redemption Checks. If an investor does,
the Transfer Agent will honor, upon presentment, even if
presented before the date of the check, all postdated
Redemption Checks which are dated within six months of
presentment of payment, if they are otherwise in good order. This
Privilege may be modified or terminated at any time by the Fund
or the Transfer Agent upon notice to shareholders.
Management of the Funds
INVESTMENT ADVISER AND ADMINISTRATOR
First Chicago Investment Management Company, located at Three
First National Plaza, Chicago, Illinois 60670, is each Fund's
investment adviser and administrator. FCIMCO is a newly-formed,
registered investment adviser and a
wholly-owned subsidiary of The First National Bank of Chicago
("FNBC"), which in turn is a wholly-owned subsidiary of First
Chicago Corporation, a registered
bank holding company. FNBC is a commercial bank offering a wide
range of banking and investment services to customers throughout
the United States and around the world. As of June 30, 1994, FNBC
was one of the largest commercial banks in the
United States and the largest in the mid-western United States in
terms of assets ($41.8 billion) and in terms of deposits ($23.8
billion). As of June 30, 1994, FNBC provided investment
management services to portfolios containing
approximately $9.6 billion in assets.
FCIMCO serves as investment adviser for each Fund pursuant to
an Investment Advisory Agreement. Under the relevant Investment
Advisory Agreement, FCIMCO provides the day-to-day management of
each Fund's investments, subject to the
overall authority of the Board and in conformity with applicable
state law and the stated policies of the Fund. FCIMCO is
responsible for making investment decisions for each Fund,
placing purchase and sale orders (which may be
allocated to various dealers based on their sales of Fund shares)
and providing research, statistical analysis and continuous
supervision of each Fund's investment portfolio. FCIMCO has
advised the Funds that in making its investment
decisions FCIMCO does not obtain or use material inside
information in its or any of its affiliate's possession.
FCIMCO has engaged ANB-IMC, located at 1 North LaSalle Street,
Chicago, Illinois 60690, to serve as the International Equity
Fund's sub-investment adviser. ANB-IMC, a registered investment
adviser formed in 1973, is a wholly-owned subsidiary of American
National Bank and Trust Company, which in
turn is a wholly-owned subsidiary of First Chicago Corporation.
As of March 31, 1994, ANB-IMC managed approximately $17 billion
in assets, including over $500 million in international equities,
primarily for pension funds. ANB-IMC, subject
to the supervision and approval of FCIMCO, provides investment
advisory assistance and the day-to-day management of the
International Equity Fund's investments, as well as investment
research and statistical information, under a
Sub-Investment Advisory Agreement with FCIMCO, subject to the
overall authority of the Board in accordance with Massachusetts
law.
The Funds' primary portfolio managers will be: for Managed
Assets Income Fund, Arthur P. Krill, who has been employed by
FNBC since June 1973, and Claude
B. Erb, who has been employed by FNBC since 1993 and, prior
thereto, was Deputy Chief Investment Officer and Senior Vice
President for Trust Services of America and TSA Capital
Management; for Managed Assets Fund, Claude B. Erb; for Equity
Income Fund, Growth Fund and Special Opportunities Fund, James V.
Moeller, who has been employed by FNBC since 1976; for
International Equity Fund, Peter M.
Jankovskis, who has been employed by ANB-IMC since 1992 and,
prior thereto, was a faculty member of the University of
California at Santa Barbara; for Bond
Fund, Annette Marie Cole, who has been employed by FNBC since
1984, and Mark M. Quinn, who has been employed by FNBC since
1984; for Intermediate Bond Fund, Annette Marie Cole; for
International Bond Fund, Claude B. Erb; and for
Municipal Bond Fund and Intermediate Municipal Bond Fund, John
Erickson, who has been employed by FNBC since 1979.
Under the terms of the relevant Investment Advisory Agreement,
FCIMCO receives a monthly fee at the annual rate of .65% of the
value of each Asset Allocation Fund's average daily net assets;
.50% of the value of the Equity Income Fund's average daily net
assets; .65% of the value of the Growth Fund's
average daily net assets; .70% of the value of the Special
Opportunities Fund's average daily net assets; .80% of the value
of the International Equity Fund's average daily net assets; .55%
of the value of the Bond Fund's average daily net
assets; .70% of the value of the International Bond Fund's
average daily net assets; .40% of the value of each of the
Intermediate Bond, Municipal Bond and
Intermediate Municipal Bond Fund's average daily net assets; and
.40% of the value of each Money Market Fund's average daily net
assets. Under the Sub-Investment Advisory Agreement between
FCIMCO and ANB-IMC, FCIMCO has agreed to pay ANB-IMC a monthly
fee at the annual rate of .40% of the value of the
International Equity Fund's average daily net assets. The
investment advisory
fee payable by the International Equity Fund is higher than that
paid by most other funds.
FCIMCO serves as each Fund's administrator pursuant to an
Administration Agreement. Under the Administration Agreement,
FCIMCO generally assists in all aspects of the Funds' operations,
other than providing investment advice,
subject to the overall authority of the Board in accordance with
applicable state law. Under the terms of the relevant
Administration Agreement, FCIMCO receives a monthly fee at the
annual rate of .15% of the value of each Fund's
average daily net assets. FCIMCO has engaged Concord Holding
Corporation, located at 125 West 55th Street, New York, New York
10019 (the "Sub-Administrator"), to assist it in providing
certain administrative services
for the Funds pursuant to a Master Sub-Administration Agreement
between FCIMCO and the Sub-Administrator. FCIMCO, from its own
funds, will pay the Sub-Administrator for the Sub-Administrator's
services.
DISTRIBUTOR
Concord Financial Group, Inc., located at 125 West 55th Street,
New York, New York 10019, serves as the principal underwriter and
distributor of each Fund's shares. The Distributor, a
wholly-owned subsidiary of the Sub-Administrator, was
organized to distribute shares of mutual funds to institutional
and retail investors. The Distributor distributes the shares of
other investment companies with over $21 billion in assets.
TRANSFER AND DIVIDEND DISBURSING
AGENT AND CUSTODIAN
Primary Funds Service Corp., P.O. Box 9743, Providence, Rhode
Island 02940-9743, is the Funds' Transfer and Dividend Disbursing
Agent (the "Transfer Agent"). The Transfer Agent is jointly owned
by a subsidiary of the Sub-Administrator and
Putnam Investments, Inc. The Bank of New York, 110 Washington
Street, New York, New York 10286, is the Funds' Custodian.
EXPENSES
All expenses incurred in the operation of the Trust, Prairie
Intermediate Bond Fund and Prairie Municipal Bond Fund are borne
by such company, except to the extent specifically assumed by
FCIMCO. The expenses borne by the Trust, Prairie
Intermediate Bond Fund and Prairie Municipal Bond Fund include:
organizational costs, taxes, interest, loan commitment fees,
interest and distributions paid on securities sold short,
brokerage fees and commissions, if any, fees of Board
members, Securities and Exchange Commission fees, state Blue Sky
qualification
fees, advisory fees, charges of custodians, transfer and dividend
disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of
maintaining each Fund's existence, costs
of independent pricing services, costs attributable to investor
services (including, without limitation, telephone and personnel
expenses), costs of shareholders' reports and meetings, costs of
preparing and printing prospectuses and statements of additional
information for regulatory purposes and for
distribution to existing shareholders, and any extraordinary
expenses. In addition, Class B shares are subject to an annual
distribution fee for advertising, marketing and distributing such
shares and Class A and Class B shares are subject to an annual
service fee for ongoing personal services relating to shareholder
accounts and services related to the maintenance of shareholder
accounts. See "Distribution Plans and Shareholder Services
Plans."
Expenses attributable to a particular Fund, in the case of the
Trust's series, or Class are charged against the assets of that
Fund or Class, respectively; other expenses of the Trust are
allocated among such Funds on the basis determined by the Board,
including, but not limited to, proportionately in
relation to the net assets of each such Fund.
The imposition of the advisory fee, as well as other
operating expenses, including the fees paid under any
Distribution Plan and Shareholder Services Plan, will have the
effect of reducing the yield to investors. From time to
time, FCIMCO may waive receipt of its fees and/or voluntarily
assume certain expenses of a Fund, which would have the effect of
lowering that Fund's overall expense ratio and increasing yield
to investors at the time such amounts are
waived or assumed, as the case may be. The Fund will not pay
FCIMCO at a later time for any amounts which may be waived, nor
will the Fund reimburse FCIMCO for any amounts which may be
assumed.
Distribution Plans and
Shareholder Services Plans
Class B shares of each Fund are subject to an annual distribution
fee pursuant to a Distribution Plan. Class A and Class B shares
of each Fund are subject to an annual service fee pursuant to a
Shareholder Services Plan.
DISTRIBUTION PLANS
(Class B only) Under separate Distribution Plans, adopted
pursuant to Rule 12b-1 under the 1940 Act, each of the Trust,
Prairie Intermediate Bond Fund and Prairie Municipal Bond Fund
has agreed to pay the Distributor for advertising,
marketing and distributing shares of the relevant Fund at an
aggregate annual rate of .75% of the value of the average daily
net assets of Class B. The Distributor may pay one or more
Service Agents in respect of these services. FCIMCO, FNBC, ANB
and their affiliates may act as Service Agents and receive
fees under the relevant Distribution Plan. The Distributor
determines the amounts, if any, to be paid to Service Agents
under the Distribution Plan and the basis on which such payments
are made. The fees payable under each Distribution Plan are
payable without regard to actual expenses incurred.
SHAREHOLDER SERVICES PLANS
(Class A and Class B) Under separate Shareholder Services Plan,
each of the Trust, Prairie Intermediate Bond Fund and Prairie
Municipal Bond Fund pays the Distributor for the provision of
certain services to the holders of these shares
a fee at an annual rate of .25% of the value of the average daily
net assets of Class A or Class B. The services provided may
include personal services relating to shareholder accounts, such
as answering shareholder inquiries regarding the
Fund and providing reports and other information, and services
related to the maintenance of shareholder accounts. Under each
Shareholder Services Plan, the Distributor may make payments to
Service Agents in respect of these services.
FCIMCO, FNBC, ANB and their affiliates may act as Service Agents
and receive fees under the Shareholder Services Plan. The
Distributor determines the amounts to be paid to Service Agents.
Each Service Agent is required to disclose to its
clients any compensation payable to it by the Funds pursuant to
the Shareholder Services Plan and any other compensation payable
by their clients in connection with the investment of their
assets in Fund shares.
Dividends, Distributions and Taxes
MANAGED ASSETS, GROWTH, SPECIAL OPPORTUNITIES AND INTERNATIONAL
EQUITY FUNDS--Declare and pay dividends from net investment
income quarterly.
MANAGED ASSETS INCOME AND EQUITY INCOME FUNDS--Declare and pay
dividends from net investment income monthly, usually on the last
calendar day of the month.
BOND, MUNICIPAL BOND AND MONEY MARKET FUNDS--Declare dividends
from net investment income on each day the New York Stock
Exchange is open for business, except on Martin Luther King, Jr.
Day, Columbus Day and Veterans Day. Dividends
usually are paid on the last calendar day of each month. Shares
begin accruing dividends on the next business day after the
purchase order is effective.
The earnings for Saturdays, Sundays and holidays are declared as
dividends on the preceding business day.
APPLICABLE TO ALL FUNDS--Each Fund will make distributions from
net realized securities gains, if any, once a year, but may make
distributions on a more frequent basis to comply with the
distribution requirements of the Code, in all
events in a manner consistent with the provisions of the 1940
Act. Dividends
are automatically reinvested in additional Fund shares of the
same Class from which they were paid at net asset value, unless
payment in cash is requested.
Dividends paid by each Fund, other than a Municipal Fund,
derived from net investment income and dividends paid by a
Municipal Fund derived from taxable
investments, together with distributions from any net realized
short-term securities gains, will be taxable to U.S. investors as
ordinary income whether
or not reinvested in additional Fund shares. Distributions from
net realized long-term securities gains, if any, will be taxable
to U.S. shareholders as long-term capital gains for Federal
income tax purposes, regardless of how long
investors have held shares and whether such distributions are
received in cash or reinvested in additional shares.
Except for dividends from taxable investments, it is
anticipated that substantially all dividends paid by a Municipal
Fund will not be subject to Federal income tax. Dividends and
distributions paid by a Municipal Fund may be
subject to the alternative minimum tax and to certain state and
local taxes.
Notice as to the tax status of an investor's dividends and
distributions will be mailed to such investor annually. Each
investor also will receive periodic summaries of such investor's
account which will include information as to
dividends and distributions from securities gains, if any, paid
during the year.
Participants in a Retirement Plan should receive periodic
statements from the trustee, custodian or administrator of their
Plan.
Federal regulations generally require the Funds to withhold
("backup withholding") and remit to the U.S. Treasury 31% of
dividends, distributions from net realized securities gains and
the proceeds of any redemption, regardless of the extent to which
gain or loss may be realized, paid to a shareholder if such
shareholder fails to certify either that the TIN furnished
in connection with opening an account is correct or that such
shareholder has not received notice from the IRS of being subject
to backup withholding as a result of a failure to properly report
taxable dividend or interest income on a Federal income tax
return. Furthermore, the IRS may notify the Fund to institute
backup withholding if the IRS determines a shareholder's TIN is
incorrect or if a shareholder has failed to properly report
taxable dividend and interest income on a Federal income tax
return. A TIN is either the Social Security number or
employer identification number of the record owner of the
account.
Management of the Prairie Intermediate Bond Fund and Prairie
Municipal Bond Fund believe that each such Fund has qualified as
a "regulated investment company" for the fiscal year ended
January 31, 1994 and February 28, 1994, respectively. Each such
Fund intends to continue to so qualify, if such
qualification is in the best interests of its shareholders. It is
expected that each other Fund will qualify as a "regulated
investment company" under the Code so long as such qualification
is in the best interests of its shareholders. Such
qualification relieves the Fund of any liability for Federal
income tax to the extent its earnings are distributed in
accordance with applicable provisions of
the Code. In addition, each Fund is subject to a non-deductible
4% excise tax, measured with respect to certain undistributed
amounts of taxable investment income and capital gains.
Each investor should consult his or her tax adviser regarding
specific questions as to Federal, state or local taxes.
Performance Information
SPECIAL OPPORTUNITIES, GROWTH AND INTERNATIONAL EQUITY FUNDS--For
purposes of advertising, performance of these Funds may be
calculated on the bases of average annual total return and/or
total return. Average annual total return is
calculated pursuant to a standardized formula which assumes that
an investment in such Fund was purchased with an initial payment
of $1,000 and that the investment was redeemed at the end of a
stated period of time, after giving effect to the reinvestment of
dividends and distributions during the period. The
return is expressed as a percentage rate which, if applied on a
compounded annual basis, would result in the redeemable value of
the investment at the end of the period. Advertisements of a
Fund's performance will include such Fund's average annual total
return for one, five and ten year periods, or for shorter
time periods depending upon the length of time during which the
Fund has operated. Computations of average annual total return
for periods of less than one year represent an annualization of
the Fund's actual total return for the applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return
generally is expressed as a percentage rate which is calculated
by combining the income and principal changes for a
specified period and dividing by the maximum offering price per
share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes
the application of the percentage rate of total return.
Total return also may be calculated by using the net asset value
per share at the beginning of the period instead of the maximum
offering price per share at the beginning of the period for Class
A shares or without giving effect to any applicable CDSC at the
end of the period for Class B shares.
Calculations based on the net asset value per share do not
reflect the deduction of the applicable
sales charge which, if reflected, would reduce the performance
quoted.
ASSET ALLOCATION, EQUITY INCOME, BOND AND MUNICIPAL BOND
FUNDS--For purposes of advertising, performance of these Funds
may be calculated on several bases, including current yield,
average annual total return and/or total return.
Current yield refers to the Fund's annualized net investment
income per share over a 30-day period, expressed as a percentage
of the net asset value per share at the end of the period. For
purposes of calculating current yield, the amount
of net investment income per share during that 30-day period,
computed in accordance with regulatory requirements, is
compounded by assuming that it is reinvested at a constant rate
over a six-month period. An identical result is
then assumed to have occurred during a second six-month period
which, when added to the result for the first six months,
provides an "annualized" yield for an entire one-year period.
The Municipal Bond Funds may advertise tax equivalent yield,
which is calculated by determining the pre-tax yield which, after
being taxed at a certain rate, would be equivalent to a stated
current yield calculated as described above.
Average annual total return and total return will be
calculated as described above.
MONEY MARKET FUNDS--From time to time, each Money Market Fund may
advertise its yield and effective yield. Both yield figures are
based on historical earnings and are not intended to indicate
future performance. It can be expected that these yields will
fluctuate substantially. The yield of the Fund refers to the
income generated by an investment in the Fund over a seven-day
period (which period will be stated in the advertisement). This
income is then annualized.
That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The
effective yield is calculated similarly but, when annualized, the
income earned by an investment in the Fund is assumed to be
reinvested. The effective yield will be slightly higher than the
yield because of the compounding effect of this assumed
reinvestment.
The Municipal Money Market Fund also may advertise tax
equivalent yield, which would be calculated as described above.
APPLICABLE TO ALL FUNDS--Performance will vary from time to time
and past results are not necessarily representative of future
results. Investors should remember that performance is a function
of the type and quality of portfolio securities held by the Fund
and is affected by operating expenses. Yield and performance
information, such as that described above, may not provide a
basis for comparison with other investments or other investment
companies using a different method of calculating performance.
Performance for each Class will be calculated separately.
Comparative performance information may be used from time to
time in advertising or marketing a Fund's shares, including data
from Lipper Analytical Services, Inc., Bank Rate Monitor, N. Palm
Beach, Fla. 33408, Bond 20-Bond Index, Moody's Bond Survey Bond
Index, Lehman Corporate Bond Index, IBC/Donoghue's Money Fund
Report, S&P 500 Index, Lehman Brothers Government/Corporate Bond
Index, the Dow Jones Industrial Average,
CDA/Wiesenberger Investment Companies Service, Mutual Fund
Values; Mutual Fund Forecaster, Schabacker Investment Management,
Inc., Morningstar, Inc. and other industry publications.
General Information
The Trust and Prairie Intermediate Bond Fund are organized as
unincorporated business Trusts under the laws of the Commonwealth
of Massachusetts and Prairie Municipal Bond Fund is incorporated
under Maryland law. Prairie Intermediate Bond Fund and Prairie
Municipal Bond Fund commenced operations on March 5, 1993
and March 1, 1998, respectively, and the Trust has not engaged in
active business to the date of this Prospectus. The Trust and
Prairie Intermediate Bond Fund are authorized to issue an
unlimited number of shares of beneficial interest and Prairie
Municipal Bond Fund is authorized to issue 10 billion
shares of common stock, each with a par value of $.001 per share.
Shares of each Fund are classified into three classes. Each share
has one vote and shareholders will vote in the aggregate and not
by class except as otherwise required by law or with respect to
any matter which effects only one class.
Prior to January 17, 1995, Prairie Intermediate Bond Fund's
name was First Prairie U.S. Government Income Fund and it was
required to invest at least 65% of its assets in U.S. Government
securities and was a diversified investment company. Any
reference herein and in the Statement of Additional Information
to the Prairie Intermediate Bond Fund, including any financial
information and performance data, relating to such periods
reflect the Fund's portfolio as constituted prior to such
revisions.
Prior to January 17, 1995, Prairie Municipal Bond Fund's name
was First Prairie Tax Exempt Bond Fund, Inc. and, since September
12, 1989, its shares were offered as the Insured Series and it
invested at least 65% of the value of its total assets in
Municipal Obligations insured as to timely payment of principal
and interest by recognized insurers of Municipal Obligations.
Prior to September 12, 1989, the Fund was not required to invest
such portion of its assets in insured Municipal Obligations and,
under normal market conditions, the dollar-weighted average
maturity of its portfolio exceeded ten years and it invested in
Municipal Obligations rated A or better by Moody's or S&P. Any
reference herein and in the Statement of Additional Information
to the Prairie Municipal Bond Fund, including any financial
information and performance data, relating to such periods
reflect the Fund's portfolio as constituted prior to such
revisions.
To date, the Trust's Board has authorized the creation of 12
separate portfolios of shares for the Trust. All consideration
received by the Trust for shares of one of the portfolios and all
assets in which such consideration is invested will belong to
that portfolio (subject only to the rights of creditors
of the Trust) and will be subject to the liabilities related
thereto. The income attributable to, and the expenses of, one
portfolio (and as to classes within a portfolio) are treated
separately from those of the other portfolios (and
classes). The Trust has the ability to create, from time to time,
new portfolios without shareholder approval which may be sold
pursuant to other offering documents.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of a
Massachusetts business trust. However, the Trust Agreement for
each of Prairie Intermediate Bond Fund and the Trust disclaims
shareholder liability for acts or obligations of
such entities and requires that notice of such disclaimer be
given in each agreement, obligation or instrument entered into or
executed by such entities or a Trustee.
Each Trust Agreement provides for indemnification from the Fund's
property for all losses and expenses of any shareholder held
personally liable for the obligations of the Fund. Thus, the risk
of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which
the Fund itself would be unable to meet its obligations, a
possibility which management believes is remote. Upon payment of
any liability incurred by the Fund, the shareholder paying such
liability will be entitled to reimbursement from the general
assets of the Fund. The Trustees intend to conduct the
operations of the Trust and Prairie Intermediate Bond Fund in
such a way so as to avoid, as far as possible, ultimate liability
of the shareholders for liabilities of the Trust or Prairie
Intermediate Bond Fund, as the case may be.
As described under "Management of the Fund" in the Statement
of Additional Information, the Funds ordinarily will not hold
shareholder meetings; however, shareholders under certain
circumstances have the right to call a meeting of
shareholders for the purpose of voting to remove Board members.
Although each Fund is offering only its own shares, it is
possible that a Fund might become liable for any misstatement in
this Prospectus about another Fund. The Funds' Board has
considered this factor in approving the use of this single
combined Prospectus.
The Transfer Agent maintains a record of each investor's
ownership and sends confirmations and statements of account.
Investor inquiries may be made by writing to the address shown
on page one or by calling the appropriate telephone number.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND IN THE TRUST'S OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFER OF THE FUNDS' SHARES, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO
WHOM, SUCH OFFERING MAY NOT LAWFULLY BE MADE.
<PAGE>
APPENDIX
CERTAIN PORTFOLIO SECURITIES
Equity Securities
American, European and Continental Depositary Receipts-(Asset
Allocation, Equity Income, Growth, International and Special
Opportunities Funds only) Securities
of foreign issuers may be sold in the form of American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs").
These securities may not necessarily be denominated in the same
currency as the securities into which
they may be converted. ADRs are receipts typically issued by a
United States bank or trust company which evidence ownership of
underlying securities issued by a foreign corporation. EDRs,
which are sometimes referred to as Continental
Depositary Receipts ("CDRs"), are receipts issued in Europe
typically by non-United States banks and trust companies that
evidence ownership of either foreign or domestic securities.
Generally, ADRs in registered form are designed
for use in the United States securities markets and EDRs and CDRs
in bearer form are designed for use in Europe.
Warrants-(Asset Allocation and Equity Funds only) A warrant is an
instrument issued by a corporation which gives the holder the
right to subscribe to a specified amount of the corporation's
capital stock at a set price for a
specified period of time. Each of these Funds may invest up to 5%
of its net assets in warrants, except that this limitation does
not apply to warrants acquired in units or attached to
securities.
FIXED-INCOME SECURITIES
Convertible Securities-(Asset Allocation, Equity and Bond Funds
only) 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.
U.S. Government Securities-These securities are described under
"Taxable Money Market Instruments-U.S. Government Securities"
below and may be purchased without regard to maturity.
Zero Coupon and Stripped Securities-(Asset Allocation, Equity,
Bond and Municipal Bond Funds only) Zero coupon U.S. Treasury
securities are Treasury
Notes and Bonds that have been stripped of their unmatured
interest coupons, the
coupons themselves and receipts or certificates representing
interests in such
stripped debt obligations and coupons. Zero coupon securities
also are issued by
corporations and financial institutions which constitute a
proportionate ownership of the issuer's pool of underlying U.S.
Treasury securities. A zero
coupon security pays no interest to its holder during its life
and is sold at a discount to its face value at maturity. The
amount of the discount fluctuates
with the market price of the security. The market prices of zero
coupon securities generally are more volatile than the market
prices of securities that pay interest periodically and are
likely to respond to a greater degree to
changes in interest rates than non-zero coupon securities having
similar maturities and credit qualities.
Participation Interests-(Asset Allocation, Equity, Bond and Money
Market Funds only) 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, with, in the
case of the Money Market Fund, remaining maturities of 13 months
or less. If the participation interest
is unrated, or has been given a rating below that which is
permissible for purchase by a 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 Investment Adviser
must have determined that the instrument is of comparable quality
to those instruments in which such Fund may invest.
Mortgage-Related Securities-(Asset Allocation, Equity and Bond
Funds only) 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 a
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. For further discussion concerning the investment
considerations involved, see "Description of the Funds-Risk
Factors-Fixed- Income Securities"
and "Illiquid Securities" below and "Investment Objectives and
Management Policies-Portfolio Securities-Mortgage-Related
Securities" in the Statement of Additional Information.
Asset-Backed Securities-(Asset Allocation, Equity and Bond Funds
only) The securitization techniques used for asset-backed
securities are similar to those
used for mortgage-related secur ities. 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. These Funds 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-(Asset Allocation, Equity, Bond and
Municipal Funds only) 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.
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. Dividends received by shareholders of a Fund, other
than a Municipal Fund, which are attributable to interest income
received by it 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.
Each of these Funds, other than the Municipal Funds, currently
intends to invest no more than 25% of its respective assets in
Municipal Obligations. However, this percentage may be varied
from time to time without shareholder approval.
Unregistered Notes-(Asset Allocation, Equity, Bond and Money
Market Funds only) Each of these Funds may purchase unsecured
promissory notes ("Notes") which are
not readily marketable and have not been registered under the
Securities Act of 1933, as amended, provided such investments are
consistent with such Fund's goal.
Foreign Government Obligations; Securities of Supranational
Entities-(Asset Allocation, International Equity, Growth, Special
Opportunities, Bond and Money
Market Funds only) Each of these Funds may 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 Investment Adviser to be of comparable
quality to the other obligations in which
such 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 a 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.
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. It should be emphasized, however, that 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 Investment Adviser also will evaluate
such obligations and the ability of their issuers to pay interest
and principal. Each
Fund will rely on the Investment Adviser's judgment, analysis and
experience in evaluating the creditworthiness of an issuer. In
this evaluation, the Investment
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 a Fund
has been changed, the Investment Adviser will consider all
circumstances deemed relevant
in determining whether such Fund should continue to hold the
security.
TAXABLE MONEY MARKET INSTRUMENTS
Each Fund may invest, in the circumstances described under
"Description of the
Funds-Management Policies," 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-Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities include U.S.
Treasury securities that differ in their interest rates,
maturities and times of issuance. Treasury
Bills have initial maturities of one year or less; Treasury Notes
have initial maturities of one to ten years;
and Treasury Bonds generally have initial maturities of greater
than ten years.
Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities, for example, Government National Mortgage
Association pass-through certificates, are supported by the full
faith and credit of the
U.S. Treasury; others, such as those of the Federal Home Loan
Banks, by the right of the issuer to borrow from the U.S.
Treasury; others, such as those
issued by the Federal National Mortgage Association, by
discretionary authority of the U.S. Government to purchase
certain obligations of the agency or
instrumentality; and others, such as those issued by the Student
Loan Marketing Association, only by the credit of the agency or
instrumentality. These
securities bear fixed, floating or variable rates of interest.
Principal and
interest may fluctuate based on generally recognized reference
rates or the relationship of rates. While the U.S. Government
provides financial support to
such U.S. Government-sponsored agencies or instrumentalities, no
assurance can be given that it will always do so, because it is
not so obligated by law.
Bank Obligations-(each Fund, except U.S. Government Money Market
Fund) 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, a 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 each 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.
Repurchase Agreements-Repurchase agreements involve the
acquisition by a Fund of
an underlying debt instrument, subject to an obligation of the
seller to repurchase, and such Fund to resell, the instrument at
a fixed price usually not
more than one week after its purchase. Certain costs may be
incurred by a Fund
in connection with the sale of the securities if the seller does
not repurchase them in accordance with the repurchase agreement.
In addition, if bankruptcy
proceedings are commenced with respect to the seller of the
securities, realization on the securities by a Fund may be
delayed or limited.
Certain Corporate Obligations-(each Fund, except U.S. Government
Money Market Fund) 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 a 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, a
Fund's right to redeem is
dependent on the ability of the borrower to pay principal and
interest on demand.
TAX EXEMPT MONEY MARKET INSTRUMENTS
Tax Exempt Participation Interests-(Municipal Funds only) A
participation interest in Municipal Obligations (such as
industrial development bonds and
municipal lease/purchase agreements) gives the purchaser an
undivided interest
in the Municipal Obligation in the proportion that such
purchaser's participation interest bears to the total principal
amount of the Municipal
Obligation. These instruments may have fixed, floating or
variable rates of
interest, with remaining maturities of 13 months or less. If the
participation interest is unrated, or has been given a rating
below that which otherwise is
permissible for purchase by a Fund, the participation interest
will be backed by
an irrevocable letter of credit or guarantee of a bank that the
Board of Trustees has determined meets the prescribed quality
standards for banks set
forth above, or the payment obligation otherwise will be
collateralized by U.S.
Government securities. For certain participation interests, a
Fund will have the
right to demand payment, on not more than seven days' notice, for
all or any
part of such Fund's participation interest in the Municipal
Obligation, plus
accrued interest. As to these instruments, each Fund intends to
exercise its
right to demand payment only upon a default under the terms of
the Municipal Obligation, as needed to provide liquidity to meet
redemptions, or to maintain
or improve the quality of its investment portfolio. No Fund will
invest more than 15% (10% in the case of the Municipal Money
Market Fund) of the value of
its net assets in participation interests that do not have this
demand feature, and in other illiquid securities.
Tender Option Bonds-(Municipal Funds only) A tender option bond
is a Municipal Obligation (generally held pursuant to a custodial
arrangement) having a
relatively long maturity and bearing interest at a fixed rate
substantially higher than prevailing short-term tax exempt rates,
that has been coupled with
the agreement of a third party, such as a bank, broker- dealer or
other financial institution, pursuant to which such institution
grants the security
holders the option, at periodic intervals, to tender their
securities to the
institution and receive the face value thereof. As consideration
for providing the option, the financial institution receives
periodic fees equal to the
difference between the Municipal Obligation's fixed coupon rate
and the rate, as determined by a remarketing or similar agent at
or near the commencement of such
period, that would cause the securities, coupled with the tender
option, to trade at par on the date of such determination. Thus,
after payment of this fee, the security holder effectively holds
a demand obligation that bears interest at
the prevailing short- term tax exempt rate. The Investment
Adviser, on behalf of a Fund, will consider on an ongoing basis
the creditworthiness of the issuer of the underlying Municipal
Obligation, of any custodian and of the third party
provider of the tender option. In certain instances and for
certain tender option bonds, the option may be terminable in the
event of a default in payment
of principal or interest on the underlying Municipal Obligations
and for other reasons. No Fund will invest more than 15% (10% in
the case of the Money Market
Funds) of the value of its net assets in securities that are
illiquid, which would include tender option bonds as to which it
cannot exercise the tender
feature on not more than seven days' notice if there is no
secondary market available for these obligations.
Stand-By Commitments-(Municipal Funds only) Each Municipal Fund
may acquire "stand-by commitments" with respect to Municipal
Obligations held in its portfolio. Under a stand-by commitment,
the Fund obligates a broker, dealer or
bank to repurchase, at the Fund's option, specified securities at
a specified price and, in this respect, stand-by commitments are
comparable to put options.
The exercise of a stand-by commitment therefore is subject to the
ability of the seller to make payment on demand. Each Municipal
Fund will acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to
exercise its rights thereunder for trading purposes. Each
Municipal Fund may pay for stand-by commitments if such action is
deemed necessary, thus increasing to a degree the cost of the
underlying Municipal Obligation and similarly decreasing such
security's yield to investors.
ILLIQUID SECURITIES
Each Fund may invest up to 15% (10% in the case of the Money
Market Funds) of the value of its net assets in securities as to
which a liquid trading market does not exist, provided such
investments are consistent with the Fund's
investment objective. Such securities may include securities that
are not readily marketable, such as certain securities that are
subject to legal or contractual restrictions on resale,
repurchase agreements providing for
settlement in more than seven days after notice, and certain
options traded in the over-the-counter market and securities used
to cover such options. As to these securities, a Fund is subject
to a risk that should such Fund desire to
sell them when a ready buyer is not available at a price the Fund
deems representative of their value, the value of such Fund's net
assets could be adversely affected.
INVESTMENT TECHNIQUES
Leverage Through Borrowing-(Asset Allocation, Equity,
Bond and, to a limited extent, Money Market Funds only)
Borrowing for investment purposes is known as leveraging and
generally will be unsecured, except to the extent a Fund
enters into reverse repur chase agreements described below.
The Money Market Fund may borrow for investment purposes only
through entering into reverse repurchase agreements. The 1940
Act requires each Fund that engages in such
borrowing to maintain continuous asset coverage (that is, total
assets including borrowings, less liabilities exclusive of
borrowings) of 300% of the amount
borrowed. If the 300% asset coverage should decline as a
result of market fluctuations or other reasons, the Fund may
be required to sell some of its
portfolio holdings within three days to reduce the debt and
restore the 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities
at that time. Leveraging may exaggerate the effect
on net asset value of any increase or decrease in the market
value of the Fund's portfolio. Money borrowed for leveraging
will be subject to interest costs that may or may not be
recovered by appreciation of the securities
purchased; in certain cases, interest costs may exceed the
return received on the securities purchased. The Fund also may
be required to maintain minimum average balances in
connection with such borrowing or to pay a commitment or other
fee to maintain a line of credit; either of these
requirements would increase the cost of
borrowing over the stated interest rate.
Among the forms of borrowing in which a Fund may engage is the
entry into reverse repurchase agreements with banks, brokers or
dealers. These transactions involve the transfer by the Fund of
an underlying debt instrument in return for
cash proceeds based on a percentage of the value of the security.
The Fund retains the right to receive interest and principal
payments on the security. At an agreed upon future date, the Fund
repurchases the security at principal, plus
accrued interest. In certain types of agreements, there is no
agreed upon repurchase date and interest payments are calculated
daily, often based on the prevailing overnight repurchase rate.
The Fund will maintain in a segregated custodial account cash or
U.S. Government securities or other high quality
liquid debt securities at least equal to the aggregate amount of
its reverse repurchase obligations, plus accrued interest, in
certain cases, in accordance with releases promulgated by the
Securities and Exchange Commission. The
Securities and Exchange Commission views reverse repurchase
transactions as collateralized borrowings by the Fund. These
agreements, which are treated as if reestablished each day, are
expected to provide the Fund with a flexible borrowing tool.
Short-Selling-(Asset Allocation, Equity and Bond Funds only) Each
of these Funds may make short sales, which are transactions in
which the Fund sells a security it does not own in anticipation
of a decline in the market value of that
security. To complete such a transaction, the Fund must borrow
the security to make delivery to the buyer. The Fund then is
obligated to replace the security borrowed by purchasing it at
the market price at the time of replacement. The
price at such time may be more or less than the price at which
the security was sold by the Fund. Until the security is
replaced, the Fund is required to pay to
the lender amounts equal to any dividends or interest which
accrue during the period of the loan. To borrow the security, the
Fund also may be required to pay
a premium, which would increase the cost of the security sold.
The proceeds of the short sale will be retained by the broker, to
the extent necessary to meet margin requirements, until the short
position is closed out.
Until a Fund closes its short position or replaces the
borrowed security, the Fund will: (a) maintain a segregated
account, containing cash or U.S. Government
securities, at such a level that (i) the amount deposited in the
account plus the amount deposited with the broker as collateral
will equal the current value of the security sold short and (ii)
the amount deposited in the segregated
account plus the amount deposited with the broker as collateral
will not be less than the market value of the security at the
time it was sold short; or (b) otherwise cover its short
position.
The Fund will incur a loss as a result of the short sale if
the price of the security increases between the date of the short
sale and the date on which the Fund replaces the borrowed
security. The Fund will realize a gain if the
security declines in price between those dates. This result is
the opposite of what one would expect from a cash purchase of a
long position in a security. The
amount of any gain will be decreased, and the amount of any loss
increased, by the amount of any premium or amounts in lieu of
dividends or interest a Fund may be required to pay in connection
with a short sale.
Each Fund may purchase call options to provide a hedge against
an increase in the price of a security sold short by such Fund.
When a Fund purchases a call option it has to pay a premium to
the person writing the option and a commission
to the broker selling the option. If the option is exercised by
the Fund, the premium and the commission paid may be more than
the amount of the brokerage commission charged if the security
were to be purchased directly.
See "Options Transactions" below.
It is expected that the frequency of short sales on
behalf of each Fund will vary substantially under different
market conditions, and it is not intended that any specified
portion of a Fund's assets, as a matter of practice,
will be invested in short sales. However, no securities will be
sold short if, after effect is given to any such short sale,
the total market value of all securities sold short would exceed
25% of the value of the Fund's net assets. A
Fund will not sell short the securities of any single
issuer listed on a national securities exchange to the extent
of more than 5% of the value of such Fund's net assets and will
not sell short the securities of any class of an
issuer to the extent, at the time of transaction, of more
than 5% of the outstanding securities of that class.
In addition to the short sales discussed above, each Fund may
make short sales "against the box," a transaction in which a Fund
enters into a short sale of a security which such Fund owns. The
proceeds of the short sale will be held by a broker until the
settlement date at which time the Fund delivers the
security to close the short position. The Fund receives the net
proceeds from the short sale. At no time will a Fund have more
than 15% of the value of its net assets in deposits on short
sales against the box.
Options Transactions-(Asset Allocation, Equity and Bond Funds
only) Each of these Funds is permitted to invest up to 5% of its
assets, represented by the premium paid, in the purchase of call
and put options.
Each of these Funds is permitted to purchase call and put
options in respect of specific securities (or groups or "baskets"
of specific securities) in which the Fund may invest. Each Fund
may write and sell covered call option contracts on securities
owned by the Fund not exceeding 20% of the market value of its
net assets at the time such option contracts are written. Each
Fund also may purchase call options to enter into closing
purchase transactions. Each Fund also may write covered put
option contracts to the extent of 20% of the value of
its net assets at the time such option contracts are written. A
call option gives the purchaser of the option the right to buy,
and obligates the writer to sell, the underlying security at the
exercise price at any time during the option period. Conversely,
a put option gives the purchaser of the option the
right to sell, and obligates the writer to buy, the underlying
security at the exercise price at any time during the option
period. A covered put option sold by a Fund exposes the Fund
during the term of the option to a decline in price
of the underlying security or securities. A put option sold by a
Fund is covered when, among other things, cash or liquid
securities are placed in a segregated account with the Trust's
custodian to fulfill the obligation undertaken.
Each of these Funds also may purchase and sell call and put
options on foreign currency for the purpose of hedging against
changes in future currency exchange rates. Call options convey
the right to buy the underlying currency at a price which is
expected to be lower than the spot price of the currency at the
time the option expires. Put options convey the right to sell the
underlying currency at a price which is anticipated to be higher
than the spot price of the currency at the time the option
expires.
Each of these Funds also may purchase cash-settled options on
interest rate swaps, interest rate swaps denominated in foreign
currency and equity index swaps. See "-Interest Rate and Equity
Index Swaps" below. A cash-settled option on a swap gives the
purchaser the right, but not the obligation, in return for
the premium paid, to receive an amount of cash equal to the value
of the underlying swap as of the exercise date. These options
typically are purchased in privately negotiated transactions from
financial institutions, including securities brokerage firms.
Each of these Funds may purchase and sell call and put options
on stock indexes listed on U.S. securities exchanges or traded in
the over-the-counter market. A stock index fluctuates with
changes in the market values of the stocks
included in the index. Because the value of an index option
depends upon movements in the level of the index rather than the
price of a particular stock, whether a Fund will realize a gain
or loss from the purchase or writing of options on an index
depends upon movements in the level of stock prices in the
stock market generally or, in the case of certain indexes, in an
industry or market segment, rather than movements in the price of
a particular stock.
Successful use by a Fund of options will be subject to the
Investment Adviser's ability to predict correctly movements in
the direction of individual stocks, the stock market generally,
foreign currencies or interest rates. To the extent the
Investment Adviser's predictions are incorrect, the
Fund may incur losses which could adversely affect the value of a
shareholder's investment.
Futures Contracts and Options on Futures Contracts-(Asset
Allocation, Equity, Bond and Municipal Bond Funds only) Each of
these Funds may enter into stock index futures contracts,
interest rate futures contracts and currency futures
contracts, and options with respect thereto. See "-Options
Transactions" above.
These transactions will be entered into as a substitute for
comparable market positions in the underlying securities or for
hedging purposes. Although none of these Funds would be a
commodity pool, each would be subject to rules of the
CFTC limiting the extent to which it could engage in these
transactions.
Each of these Fund's commodities transactions must
constitute bona fide hedging or other permissible transactions
pursuant to regulations promulgated by the CFTC. In addition, a
Fund may not engage in such transactions if the sum of
the amount of initial margin deposits and premiums paid for
unexpired commodity options, other than for bona fide hedging
transactions, would e exceed 5% of the liquidation value of the
Fund's assets, after taking into account unrealized
profits and unrealized losses on such contracts it has entered
into; however, that in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount
may be excluded in calculating the 5%. To the extent a Fund
engages in the use of futures and options on futures for other
than bona fide hedging purposes, the Fund may be subject to
additional risk.
Engaging in these transactions involves risk of loss to a Fund
which could adversely affect the value of a shareholder's
investment. Although each of these Funds intends to purchase or
sell futures contracts only if there is an active
market for such contracts, no assurance can be given that a
liquid market will exist for any particular contract at any
particular time. Many futures exchanges and boards of trade limit
the amount of fluctuation permitted in futures
contract prices during a single trading day. Once the daily limit
has been reached in a particular contract, no trades may be made
that day at a price beyond that limit or trading may be suspended
for specified periods during the trading day. Futures contract
prices could move to the limit for several consecutive trading
days with little or no trading, thereby preventing prompt
liquidation of futures positions and potentially subjecting the
Fund to substantial losses. In addition, engaging in futures
transactions in foreign markets may involve greater risks than
trading in domestic exchanges.
Successful use of futures by a Fund also is subject to the
Investment Adviser's ability to predict correctly movements in
the direction of the market, interest rates or foreign currencies
and, to the extent the transaction is entered into for hedging
purposes, to ascertain the appropriate correlation
between the transaction being hedged and the price movements of
the futures contract. For example, if a Fund has hedged against
the possibility of a decline in the market adversely affecting
the value of securities held in its portfolio and prices increase
instead, the Fund will lose part or all of the benefit of
the increased value of securities which it has hedged because it
will have offsetting losses in its futures positions. In
addition, in such situations, if the Fund has insufficient cash,
it may have to sell securities to meet daily
variation margin requirements. Such sales of securities may, but
will not necessarily, be at increased prices which reflect the
rising market. A Fund may have to sell securities at a time when
it may be disadvantageous to do so.
Pursuant to regulations and/or published positions of the
Securities and Exchange Commission, each of these Funds may be
required to segregate cash or high quality money market
instruments in connection with its commodities
transactions in an amount generally equal to the value of the
underlying commodity. The segregation of such assets will have
the effect of limiting the Fund's ability otherwise to invest
those assets.
Interest Rate and Equity Index Swaps-(Asset Allocation, Equity
and Bond Funds only) Each of these Funds may enter into interest
rate swaps and equity index swaps, to the extent described under
"Description of the Funds-Management Policies," in pursuit of
their respective investment objectives.
Interest rate swaps involve the exchange by a Fund with another
party of their respective commitments to pay or receive interest
(for example, an exchange of floating-rate payments for
fixed-rate payments). Equity index swaps involve the
exchange by a Fund with another party of cash flows based upon
the performance of an index or a portion of an index which
usually includes dividends. In each case, the exchange
commitments can involve payments to be made in
the same currency or in different currencies.
Each of these Funds usually will enter into 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 a Fund enters into a 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.
Each of these Funds 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 a 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 a Fund
is contractually obligated to make. If the other party to a swap
defaults, the relevant Fund's risk of loss consists of the net
amount of payments that such Fund contractually is entitled to
receive.
Foreign Currency Transactions-(Asset Allocation, Growth,
International Equity, Special Opportunities and International
Bond Funds only) Each of these Funds may engage in currency
exchange transactions either on a spot (i.e., cash)
basis at the rate prevailing in the currency exchange
market, or through entering into forward contracts to purchase or
sell currencies. A forward currency exchange contract involves
an obligation to purchase or sell a specific currency at a future
date, which must be more than two days from the date of the
contract, at a price set at the time of the contract. These
contracts are entered into in the interbank market conducted
directly between currency traders (typically commercial banks
or other financial institutions) and their customers.
Each of these Funds also may combine forward currency exchange
contracts with investments in securities denominated in other
currencies.
Each of these Funds also may maintain short positions in
forward currency exchange transactions, which would involve it
agreeing to exchange an amount of a currency it did not currently
own for another currency at a future date in anticipation of a
decline in the value of the currency sold relative to the
currency such Fund contracted to receive in the exchange.
Future Developments-(Asset Allocation, Equity, Bond and Municipal
Bond Funds only) Each of these Funds may take advantage of
opportunities in the area of options and futures contracts,
options on futures contracts and any other derivative investments
which are not presently contemplated for use by a Fund or
which are not currently available but which may be developed, to
the extent such opportunities are both consistent with a Fund's
investment objective and legally permissible for such Fund.
Before entering into such transactions or making any
such investment, the Trust will provide appropriate disclosure in
its prospectus.
Lending Portfolio Securities-From time to time, each Fund may
lend securities from its portfolio to brokers, dealers and other
financial institutions needing to borrow securities to complete
certain transactions. Such loans may not exceed
33-1/3% of the value of a Fund's total assets. In connection with
such loans, a Fund will receive collateral consisting of cash,
U.S. Government securities or, except in the case of the U.S.
Government Money Market Fund, irrevocable letters
of credit which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned
securities. Each Fund can increase its income through the
investment of such collateral. A Fund continues
to be entitled to payments in amounts equal to the interest,
dividends and other distributions payable on the loaned security
and receives interest on the amount of the loan. Such loans will
be terminable at any time upon specified notice. A
Fund might experience risk of loss if the institution with which
it has engaged in a portfolio loan transaction breaches its
agreement with such Fund.
Forward Commitments-Each Fund may purchase securities on a when-
issued or forward commitment basis, which means that the price is
fixed at the time of commitment, but delivery and payment
ordinarily take place a number of days after the date of the
commitment to purchase. A Fund will make commitments to
purchase such securities only with the intention of actually
acquiring the securities, but the Fund may sell these securities
before the settlement date if it is deemed advisable. The Fund
will not accrue income in respect of a security
purchased on a forward commitment basis prior to its stated
delivery date.
Securities purchased on a when-issued or forward commitment
basis and certain other securities held in a Fund's portfolio are
subject to changes in value (both generally changing in the same
way, i.e., appreciating when interest rates decline and
depreciating when interest rates rise) based upon the
public's perception of the creditworthiness of the issuer and
changes, real or anticipated, in the level of interest rates.
Securities purchased on a when-issued or forward commitment basis
may expose a Fund to risk because they may experience such
fluctuations prior to their actual delivery.
Purchasing securities on a when-issued or forward commitment
basis can involve the additional risk that the yield available in
the market when the delivery takes place actually may be higher
than that obtained in the transaction itself. A
segregated account of each Fund consisting of cash or U.S.
Government securities or other high quality liquid debt
securities of the type in which the Fund invests at least equal
at all times to the amount of the when-issued or forward
commitments will be established and maintained at the Trust's
custodian bank.
Purchasing securities on a forward commitment basis when a Fund
is fully or almost fully invested may result in greater potential
fluctuation in the value of such Fund's net assets and its net
asset value per share.
Borrowing Money-As a fundamental policy, each Fund is permitted
to borrow to the extent permitted under the 1940 Act. However,
Intermediate Municipal Bond Fund, the Municipal Money Market Fund
and U.S. Government Money Market Fund currently
intend to borrow money only for temporary or emergency (not
leveraging) purposes, in an amount up to 15% of the value of its
total assets (including the amount borrowed) valued at the lesser
of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing is made.
While borrowings exceed 5% of such Fund's total assets, the Fund
will not make any additional investments.
PRAIRIE FUNDS
CLASS A, CLASS B AND CLASS I SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
DECEMBER 13, 1994
AS REVISED, MARCH 3, 1995
This Statement of Additional Information, which is not a
prospectus, supplements and should be read in conjunction with
the current Prospectus for 12 separate portfolios (each, a
"Fund") of Prairie Funds (the "Trust"), dated December 13, 1994,
as it may be revised from time to time. To obtain a copy of the
Trust's Prospectus, please write to the Trust at Three First
National Plaza, Chicago, Illinois 60670, or call toll free
1-800-370-9446.
First Chicago Investment Management Company (the
"Investment Adviser" or "FCIMCO") serves as each Fund's
investment adviser and administrator.
Concord Financial Group, Inc. (the "Distributor") serves as
the distributor of the Funds' shares.
TABLE OF CONTENTS
Page
Investment Objectives and Management Policies . . . . . .B-2
Management of the Trust . . . . . . . . . . . . . . . . B-18
Management Arrangements . . . . . . . . . . . . . . . . .B-20
Purchase of Shares. . . . . . . . . . . . . . . . . . . .B-22
Distribution Plan and Shareholder Services Plan . . . . .B-23
Redemption of Shares. . . . . . . . . . . . . . . . . . .B-24
Determination of Net Asset Value. . . . . . . . . . . . .B-25
Portfolio Transactions. . . . . . . . . . . . . . . . . .B-27
Dividends, Distributions and Taxes. . . . . . . . . . . .B-29
Yield and Performance Information . . . . . . . . . . . .B-32
Information About the Trust . . . . . . . . . . . . . . .B-33
Counsel and Independent Auditors. . . . . . . . . . . . .B-35
Appendix. . . . . . . . . . . . . . . . . . . . . . . . .B-36
Financial Statements. . . . . . . . . . . . . . . . . . .B-46
Report of Independent Auditors. . . . . . . . . . . . . .B-51
<PAGE>
INVESTMENT OBJECTIVES AND MANAGEMENT POLICIES
THE FOLLOWING INFORMATION SUPPLEMENTS AND SHOULD BE
READ IN CONJUNCTION WITH THE SECTION IN THE TRUST'S PROSPECTUS
ENTITLED "DESCRIPTION OF THE FUNDS."
Portfolio Securities
Bank Obligations. (Each Fund, except the U.S.
Government Money Market Fund) Domestic commercial banks
organized under Federal law are supervised and examined by the
Comptroller of the Currency and are required to be members of
the Federal Reserve System and to have their deposits insured by
the Federal Deposit Insurance Corporation (the "FDIC").
Domestic banks organized under state law are supervised and
examined by state banking authorities but are members of the
Federal Reserve System only if they elect to join. In addition,
state banks whose certificates of deposit ("CDs") may be
purchased by each Fund are insured by the FDIC (although such
insurance may not be of material benefit to a Fund, depending on
the principal amount of the CDs of each bank held by such Fund)
and are subject to Federal examination and to a substantial body
of Federal law and regulation. As a result of Federal or state
laws and regulations, domestic branches of domestic banks whose
CDs may be purchased by the Fund generally are required, among
other things, to maintain specified levels of reserves, are
limited in the amounts which they can loan to a single borrower
and are subject to other regulation designed to promote
financial soundness. However, not all of such laws and
regulations apply to the foreign branches of domestic banks.
Obligations of foreign branches of domestic banks,
foreign subsidiaries of domestic banks and domestic and foreign
branches of foreign banks, such as CDs and time deposits
("TDs"), may be general obligations of the parent banks in
addition to the issuing branch, or may be limited by the terms
of a specific obligation and governmental regulation. Such
obligations are subject to different risks than are those of
domestic banks. These risks include foreign economic and
political developments, foreign governmental restrictions that
may adversely affect payment of principal and interest on the
obligations, foreign exchange controls and foreign withholding
and other taxes on interest income. These foreign branches and
subsidiaries are not necessarily subject to the same or similar
regulatory requirements that apply to domestic banks, such as
mandatory reserve requirements, loan limitations, and
accounting, auditing and financial record keeping requirements.
In addition, less information may be publicly available about a
foreign branch of a domestic bank or about a foreign bank than
about a domestic bank.
Obligations of United States branches of foreign banks
may be general obligations of the parent bank in addition to the
issuing branch, or may be limited by the terms of a specific
obligation or by Federal or state regulation as well as
governmental action in the country in which the foreign bank has
its head office. A domestic branch of a foreign bank with
assets in excess of $1 billion may be subject to reserve
requirements imposed by the Federal Reserve System or by the
state in which the branch is located if the branch is licensed
in that state.
In addition, Federal branches licensed by the
Comptroller of the Currency and branches licensed by certain
states ("State Branches") may be required to: (1) pledge to the
regulator, by depositing assets with a designated bank within
the state, a certain percentage of their assets as fixed from
time to time by the appropriate regulatory authority; and (2)
maintain assets within the state in an amount equal to a
specified percentage of the aggregate amount of liabilities of
the foreign bank payable at or through all of its agencies or
branches within the state. The deposits of Federal and State
Branches generally must be insured by the FDIC if such branches
take deposits of less than $100,000.
In view of the foregoing factors associated with the
purchase of CDs and TDs issued by foreign branches of domestic
banks, by foreign subsidiaries of domestic banks, by foreign
branches of foreign banks or by domestic branches of foreign
banks, the Investment Adviser carefully evaluates such
investments on a case-by-case basis.
Repurchase Agreements. The Trust's custodian or sub-
custodian will have custody of, and will hold in a segregated
account, securities acquired by a Fund under a repurchase
agreement. Repurchase agreements are considered by the staff of
the Securities and Exchange Commission to be loans by the Fund.
In an attempt to reduce the risk of incurring a loss on a
repurchase agreement, each Fund will enter into repurchase
agreements only with domestic banks with total assets in excess
of one billion dollars, or primary government securities dealers
reporting to the Federal Reserve Bank of New York, with respect
to securities of the type in which the Fund may invest, and will
require that additional securities be deposited with it if the
value of the securities purchased should decrease below the
resale price. The Investment Adviser will monitor on an ongoing
basis the value of the collateral to assure that it always
equals or exceeds the repurchase price. The Trust will consider
on an ongoing basis the creditworthiness of the institutions
with which a Fund enters into repurchase agreements.
Commercial Paper and Other Short-Term Corporate
Obligations. (Each Fund, except the U.S. Government Money
Market Fund) Variable rate demand notes include variable amount
master demand notes, which are obligations that permit a 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, a Fund's right to redeem is dependent on
the ability of the borrower to pay principal and interest on
demand. In connection with floating and variable rate demand
obligations, the Investment Adviser will consider, on an ongoing
basis, earning power, cash flow and other liquidity ratios of
the borrower, and the borrower's ability to pay principal and
interest on demand. Such obligations frequently are not rated
by credit rating agencies, and a Fund may invest in them only if
at the time of an investment the borrower meets the criteria set
forth in the Prospectus for other commercial paper issuers.
Mortgage-Related Securities (Asset Allocation, Equity and Bond
Funds only)
Government Agency Securities. Mortgage-related
securities issued by the Government National Mortgage
Association ("GNMA") include GNMA Mortgage Pass-Through
Certificates (also known as "Ginnie Maes") which are guaranteed
as to the timely payment of principal and interest by GNMA and
such guarantee is backed by the full faith and credit of the
United States. GNMA is a wholly-owned U.S. Government
corporation within the department of Housing and Urban
Development. GNMA certificates also are supported by the
authority of GNMA to borrow funds from the U.S. Treasury to make
payments under its guarantee.
Government Related Securities. Mortgage-related
securities issued by the Federal National Mortgage Association
("FNMA") include FNMA Guaranteed Mortgage Pass-Through
Certificates (also known as "Fannie Maes") which are solely the
obligations of the FNMA and are not backed by or entitled to the
full faith and credit of the United States. The FNMA is a
government-sponsored organization owned entirely by private
stockholders. Fannie Maes are guaranteed as to timely payment
of principal and interest by FNMA.
Mortgage-related securities issued by the Federal Home
Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage
Participation Certificates (also known as "Freddie Macs" or
"PCs"). The FHLMC is a corporate instrumentality of the United
States created pursuant to an Act of Congress, which is owned
entirely by Federal Home Loan Banks. Freddie Macs are not
guaranteed by the United States or by any Federal Home Loan Bank
and do not constitute a debt or obligation of the United States
or of any Federal Home Loan Bank. Freddie Macs entitle the
holder to timely payment of interest, which is guaranteed by the
FHLMC. The FHLMC guarantees either ultimate collection or
timely payment of all principal payments on the underlying
mortgage loans. When the FHLMC does not guarantee timely
payment of principal, FHLMC may remit the amount due on account
of its guarantee of ultimate payment of principal at any time
after default on an underlying mortgage, but in no event later
than one year after it becomes payable.
Municipal Obligations. (Asset Allocation, Equity,
Bond and Municipal Funds only) Municipal Obligations are
classified as general obligation bonds, revenue bonds and notes.
General obligation bonds are secured by the issuer's pledge of
its faith, credit and taxing power for the payment of principal
and interest. Revenue bonds are payable from the revenue
derived from a particular facility or class of facilities or, in
some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power.
Industrial development bonds, in most cases, are revenue bonds
and generally do not carry the pledge of the credit of the
issuing municipality, but generally are guaranteed by the
corporate entity on whose behalf they are issued. Notes are
short-term instruments which are obligations of the issuing
municipalities or agencies and are sold in anticipation of a
bond sale, collection of taxes or receipt of other revenues.
Municipal Obligations include municipal lease/purchase
agreements which are similar to installment purchase contracts
for property or equipment issued by municipalities. Certain
Municipal Obligations are subject to redemption at a date
earlier than their stated maturity pursuant to call options,
which may be separated from the related Municipal Obligation and
purchased and sold separately. Each of these Funds will invest
in Municipal Obligations, the ratings of which correspond with
the ratings of other permissible Fund investments.
For the purpose of diversification under the
Investment Company Act of 1940 (the "1940 Act"), the
identification of the issuer of Municipal Obligations depends on
the terms and conditions of the security. When the assets and
revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government
creating the subdivision and the security is backed only by the
assets and revenues of the subdivision, such subdivision would
be deemed to be the sole issuer. Similarly, in the case of an
industrial development bond, if that bond is backed only by the
assets and revenues of the non-governmental user, then such non-
governmental user would be deemed to be the sole issuer. If,
however, in either case, the creating government or some other
entity guarantees a security, such a guaranty would be
considered a separate security and will be treated as an issue
of such government or other entity.
The yields on Municipal Obligations are dependent on a
variety of factors, including general economic and monetary
conditions, money market factors, conditions in the Municipal
Obligations market, size of a particular offering, maturity of
the obligation, and rating of the issue. The imposition of the
Fund's management fee, as well as other operating expenses, will
have the effect of reducing the yield to investors.
Municipal lease obligations or installment purchase
contract obligations (collectively, "lease obligations") have
special risks not ordinarily associated with Municipal
Obligations. Although lease obligations do not constitute
general obligations of the municipality for which the
municipality's taxing power is pledged, a lease obligation
ordinarily is backed by the municipality's covenant to budget
for, appropriate and make the payments due under the lease
obligation. However, certain lease obligations contain "non-
appropriation" clauses which provide that the municipality has
no obligation to make lease or installment purchase payments in
future years unless money is appropriated for such purpose on a
yearly basis. Although "non-appropriation" lease obligations
are secured by the leased property, disposition of the property
in the event of foreclosure might prove difficult. The
Municipal Money Market Fund will seek to minimize these risks by
investing only in those lease obligations that (1) are rated in
one of the two highest categories for debt obligations by at
least two nationally recognized statistical rating organizations
(or one rating organization if the lease obligation was rated by
only one such organization); or (2) if unrated, are purchased
principally from the issuer or domestic banks or other
responsible third parties, in each case only if the seller shall
have entered into an agreement with the Municipal Money Market
Fund providing the seller or other responsible third party will
either remarket or repurchase the lease obligations within a
short period after demand by the Fund. With respect to the
Intermediate Municipal Bond Fund, the Board has established
guidelines for the Investment Adviser to determine the liquidity
and appropriate valuation of lease obligations based on factors
which include: (1) the frequency of trades and quotes for the
lease obligation or similar securities; (2) the number of
dealers willing to purchase or sell the lease obligation or
similar securities and the number of other potential buyers; (3)
the willingness of dealers to undertake to make a market in the
security or similar securities; and (4) the nature of the
marketplace trades, including the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of
transfer. Not more than 15% (10% in the case of the Municipal
Money Market Fund) of the value of the Fund's net assets will be
invested in lease obligations that are illiquid and in other
illiquid securities. See "Investment Restriction No. 11" below.
The Intermediate Municipal Bond Fund will purchase
tender option bonds only when it is satisfied that the custodial
and tender option arrangements, including the fee payment
arrangements, will not adversely affect the tax exempt status of
the underlying Municipal Obligations and that payment of any
tender fees will not have the effect of creating taxable income
for the Fund. Based on the tender option bond agreement, the
Trust expects to be able to value the tender option bond at par;
however, the value of the instrument will be monitored to assure
that is valued at fair value.
The Municipal Money Market Fund will not purchase
tender option bonds unless (a) the demand feature applicable
thereto is exercisable by the Fund within 13 months of the date
of such purchase upon no more than 30 days' notice and
thereafter is exercisable by the Fund no less frequently than
annually upon no more than 30 days' notice and (b) at the time
of such purchase, the Investment Adviser reasonably expects (i)
based upon its assessment of current and historical interest
rate trends, that prevailing short-term tax exempt rates will
not exceed the stated interest rate on the underlying Municipal
Obligations at the time of the next tender option to terminate
the tender option would not occur prior to the time of the next
tender opportunity. At the time of each tender opportunity, the
Fund will exercise the tender option with respect to any tender
option bonds unless the Investment Adviser reasonably expects,
(x) based upon its assessment of current and historical interest
rate trends, that prevailing short-term tax exempt rates will
not exceed the stated interest rate on the underlying Municipal
Obligations at the time of the next tender fee adjustment, and
(y) that the circumstances which might entitle the grantor of a
tender option to terminate the tender option would not occur
prior to the time of the next tender opportunity. The Municipal
Money Market Fund will exercise the tender feature with respect
to tender option bonds, or otherwise dispose of its tender
option bonds, prior to the time the tender option is scheduled
to expire pursuant to the terms of the agreement under which the
tender option is granted. The Municipal Money Market Fund
otherwise will comply with the provisions of Rule 2a-7 in
connection with the purchase of tender option bonds, including,
without limitation, the requisite determination by the Board of
Trustees that the tender option bonds in question meet the
quality standards described in Rule 2a-7, which, in the case of
a tender option bond subject to a conditional demand feature,
would include a determination that the security has received
both the required short-term and long-term quality rating or is
determined to be of comparable quality. In the event of a
default of the Municipal Obligation underlying a tender option
bond, or the termination of the tender option agreement, the
Municipal Money Market Fund would look to the maturity date of
the underlying security for purposes of compliance with Rule
2a-7 and, if its remaining maturity was greater than 13 months,
the Fund would sell the security as soon as would be
practicable. The Municipal Money Market Fund will purchase
tender option bonds only when it is satisfied that the custodial
and tender option arrangements, including the fee payment
arrangements, will not adversely affect the tax exempt status of
the underlying Municipal Obligations and that payment of any
tender fees will not have the effect of creating taxable income
for the Fund. Based on the tender option bond agreement, the
Municipal Money Market Fund expects to be able to value the
tender option bond at par; however, the value of the instrument
will be monitored to assure that it is valued at fair value.
If, subsequent to its purchase by the Municipal Money
Market Fund, (a) an issue of rated Municipal Obligations ceases
to be rated in the highest rating category by at least two
ratings organizations (or one rating organization if the
instrument was rated by only one such organization), or the
Trust's Board determines that it is no longer of comparable
quality; or (b) the Investment Adviser becomes aware that any
portfolio security not so highly rated or any unrated security
has been given a rating by any rating organization below the
rating organization's second highest rating category, the
Trust's Board will reassess promptly whether such security
presents minimal credit risk and will cause the Fund to take
such action as it determines is in the best interest of the Fund
and its shareholders, provided that the reassessment required by
clause (b) is not required if the portfolio security is disposed
of or matures within five business days of the Investment
Adviser becoming aware of the new rating and the Trust's Board
is subsequently notified of the Investment Adviser's actions.
To the extent that the ratings given by Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's
Corporation ("S&P") or Fitch Investors Service Inc. ("Fitch")
for Municipal Obligations may change as a result of changes in
such organizations or their rating systems, the Municipal Money
Market Fund will attempt to use comparable ratings as standards
for its investments in accordance with the investment policies
contained in the Trust's Prospectus and this Statement of
Additional Information. The ratings of Moody's, S&P and Fitch
represent their opinions as to the quality of the Municipal
Obligations which they undertake to rate. It should be
emphasized, however, that ratings are relative and subjective
and are not absolute standards of quality. Although these
ratings may be an initial criterion for selection of portfolio
investments, the Investment Adviser will also evaluate these
securities and the creditworthiness of the issuers of such
securities.
Convertible Securities. (Asset Allocation, Equity and
Bond Funds only) In general, the market value of a convertible
security is the higher of its "investment value" (i.e., its
value as a fixed-income security) or its "conversion value"
(i.e., the value of the underlying shares of common stock if the
security is converted). As a fixed-income security, the market
value of a convertible security generally increases when
interest rates decline and generally decreases when interest
rates rise. However, the price of a convertible security also
is influenced by the market value of the security's underlying
common stock. Thus, the price of a convertible security
generally increases as the market value of the underlying stock
increases, and generally decreases as the market value of the
underlying stock declines. Investments in convertible
securities generally entail less risk than investments in the
common stock of the same issuer.
Illiquid Securities. When purchasing securities that
have not been registered under the Securities Act of 1933, as
amended, and are not readily marketable, the Trust will endeavor
to obtain the right to registration at the expense of the
issuer. Generally, there will be a lapse of time between a
Fund's decision to sell any such security and the registration
of the security permitting sale. During any such period, the
price of the securities will be subject to market fluctuations.
However, if a substantial market of qualified institutional
buyers develops pursuant to Rule 144A under the Securities Act
of 1933, as amended, for certain unregistered securities held by
a Fund, such Fund intends to treat them as liquid securities in
accordance with procedures approved by the Trust's Board of
Trustees. Because it is not possible to predict with assurance
how the market for restricted securities pursuant to Rule 144A
will develop, the Trust's Board of Trustees has directed the
Investment Adviser to monitor carefully each Fund's investments
in such securities with particular regard to trading activity,
availability of reliable price information and other relevant
information. To the extent that, for a period of time,
qualified institutional buyers cease purchasing restricted
securities pursuant to Rule 144A, a Fund's investing in such
securities may have the effect of increasing the level of
illiquidity in such Fund during such period.
Management Policies
Options Transactions. (Asset Allocation, Equity and
Bond Funds only) Each of these Funds may engage in options
transactions, such as purchasing or writing covered call or put
options. The principal reason for writing covered call options
is to realize, through the receipt of premiums, a greater return
than would be realized on a Fund's securities alone. In return
for a premium, the writer of a covered call option forfeits the
right to any appreciation in the value of the underlying
security above the strike price for the life of the option (or
until a closing purchase transaction can be effected).
Nevertheless, the call writer retains the risk of a decline in
the price of the underlying security. Similarly, the principal
reason for writing covered put options is to realize income in
the form of premiums. The writer of a covered put option
accepts the risk of a decline in the price of the underlying
security. The size of the premiums that a Fund may receive may
be adversely affected as new or existing institutions, including
other investment companies, engage in or increase their option-
writing activities.
Options written ordinarily will have expiration dates
between one and nine months from the date written. The exercise
price of the options may be below, equal to or above the market
values of the underlying securities at the time the options are
written. In the case of call options, these exercise prices are
referred to as "in-the-money," "at-the-money" and "out-of-the-
money," respectively. Each Fund may write (a) in-the-money call
options when the Investment Adviser expects that the price of
the underlying security will remain stable or decline moderately
during the option period, (b) at-the-money call options when the
Investment Adviser expects that the price of the underlying
security will remain stable or advance moderately during the
option period and (c) out-of-the-money call options when the
Investment Adviser expects that the premiums received from
writing the call option plus the appreciation in market price of
the underlying security up to the exercise price will be greater
than the appreciation in the price of the underlying security
alone. In these circumstances, if the market price of the
underlying security declines and the security is sold at this
lower price, the amount of any realized loss will be offset
wholly or in part by the premium received. Out-of-the-money,
at-the-money and in-the-money put options (the reverse of call
options as to the relation of exercise price to market price)
may be utilized in the same market environments that such call
options are used in equivalent transactions.
So long as a Fund's obligation as the writer of an
option continues, such Fund may be assigned an exercise notice
by the broker-dealer through which the option was sold,
requiring the Fund to deliver, in the case of a call, or take
delivery of, in the case of a put, the underlying security
against payment of the exercise price. This obligation
terminates when the option expires or a Fund effects a closing
purchase transaction. A Fund can no longer effect a closing
purchase transaction with respect to an option once it has been
assigned an exercise notice.
While it may choose to do otherwise, each Fund
generally will purchase or write only those options for which
the Investment Adviser believes there is an active secondary
market so as to facilitate closing transactions. There is no
assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some
options no such secondary market may exist. A liquid secondary
market in an option may cease to exist for a variety of reasons.
In the past, for example, higher than anticipated trading
activity or order flow, or other unforeseen events, at times
have rendered certain clearing facilities inadequate and
resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or
trading halts or suspensions in one or more options. There can
be no assurance that similar events, or events that otherwise
may interfere with the timely execution of customers' orders,
will not recur. In such event, it might not be possible to
effect closing transactions in particular options. If as a
covered call option writer a Fund is unable to effect a closing
purchase transaction in a secondary market, it will not be able
to sell the underlying security until the option expires or it
delivers the underlying security upon exercise or it otherwise
covers its position.
Stock Index Options. (Asset Allocation and Equity
Funds only) Each of these Funds may purchase and write put and
call options on stock indexes listed on a securities exchange or
traded in the over-the-counter market. A stock index fluctuates
with changes in the market values of the stocks included in the
index.
Options on stock indexes are similar to options on
stock except that (a) the expiration cycles of stock index
options are generally monthly, while those of stock options are
currently quarterly, and (b) the delivery requirements are
different. Instead of giving the right to take or make delivery
of a stock at a specified price, an option on a stock index
gives the holder the right to receive a cash "exercise
settlement amount" equal to (i) the amount, if any, by which the
fixed exercise price of the option exceeds (in the case of a
put) or is less than (in the case of a call) the closing value
of the underlying index on the date of exercise, multiplied by
(ii) a fixed "index multiplier." Receipt of this cash amount
will depend upon the closing level of the stock index upon which
the option is based being greater than, in the case of a call,
or less than, in the case of a put, the exercise price of the
option. The amount of cash received will be equal to such
difference between the closing price of the index and the
exercise price of the option expressed in dollars times a
specified multiple. The writer of the option is obligated, in
return for the premium received, to make delivery of this
amount. The writer may offset its position in stock index
options prior to expiration by entering into a closing
transaction on an exchange or it may let the option expire
unexercised.
Futures Contracts and Options on Futures Contracts.
(Asset Allocation, Equity, Bond and Municipal Bond Funds Only)
Each of these Funds may trade futures contracts and options on
futures contracts in U.S. domestic markets, such as the Chicago
Board of Trade and the International Monetary Market of the
Chicago Mercantile Exchange, or, to the extent permitted under
applicable law, on exchanges located outside the United States,
such as the London International Financial Futures Exchange and
the Sydney Futures Exchange Limited. Foreign markets may offer
advantages such as trading in commodities that are not currently
traded in the United States or arbitrage possibilities not
available in the United States.
Initially, when purchasing or selling futures
contracts a Fund will be required to deposit with the Trust's
custodian in the broker's name an amount of cash or cash
equivalents up to approximately 10% of the contract amount.
This amount is subject to change by the exchange or board of
trade on which the contract is traded and members of such
exchange or board of trade may impose their own higher
requirements. This amount is known as "initial margin" and is
in the nature of a performance bond or good faith deposit on the
contract which is returned to the Fund upon termination of the
futures position, assuming all contractual obligations have been
satisfied. Subsequent payments, known as "variation margin," to
and from the broker will be made daily as the price of the index
or securities underlying the futures contract fluctuates, making
the long and short positions in the futures contract more or
less valuable, a process known as "marking-to-market." At any
time prior to the expiration of a futures contract, the Fund may
elect to close the position by taking an opposite position, at
the then prevailing price, which will operate to terminate the
Fund's existing position in the contract.
Although each of these Funds intends to purchase or
sell futures contracts only if there is an active market for
such contracts, no assurance can be given that a liquid market
will exist for any particular contract at any particular time.
Many futures exchanges and boards of trade limit the amount of
fluctuation permitted in futures contract prices during a single
trading day. Once the daily limit has been reached in a
particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified
periods during the trading day. Futures contract prices could
move to the limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of
futures positions and potentially subjecting a Fund to
substantial losses. If it is not possible, or the Fund
determines not, to close a futures position in anticipation of
adverse price movements, the Fund will be required to make daily
cash payments of variation margin. In such circumstances, an
increase in the value of the portion of the portfolio being
hedged, if any, may offset partially or completely losses on the
futures contract. However, no assurance can be given that the
price of the securities being hedged will correlate with the
price movements in a futures contract and thus provide an offset
to losses on the futures contract.
In addition, to the extent a Fund is engaging in a
futures transaction as a hedging device, due to the risk of an
imperfect correlation between securities owned by the Fund that
are the subject of a hedging transaction and the futures
contract used as a hedging device, it is possible that the hedge
will not be fully effective in that, for example, losses on the
portfolio securities may be in excess of gains on the futures
contract or losses on the futures contract may be in excess of
gains on the portfolio securities that were the subject of the
hedge. In futures contracts based on indexes, the risk of
imperfect correlation increases as the composition of a Fund's
investments varies from the composition of the index. In an
effort to compensate for the imperfect correlation of movements
in the price of the securities being hedged and movements in the
price of futures contracts, the Fund may buy or sell futures
contracts in a greater or lesser dollar amount than the dollar
amount of the securities being hedged if the historical
volatility of the futures contract has been less or greater than
that of the securities. Such "over hedging" or "under hedging"
may adversely affect a Fund's net investment results if market
movements are not as anticipated when the hedge is established.
Upon exercise of an option, the writer of the option
will deliver to the holder of the option the futures position
and the accumulated balance in the writer's futures margin
account, which represents the amount by which the market price
of the futures contract exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the
option on the futures contract. The potential loss related to
the purchase of options on futures contracts is limited to the
premium paid for the option (plus transaction costs). Because
the value of the option is fixed at the time of sale, there are
no daily cash payments to reflect changes in the value of the
underlying contract; however, the value of the option does
change daily and that change would be reflected in the net asset
value of each Fund.
Foreign Currency Transactions. (Asset Allocation,
Growth, International Equity, Special Opportunities and
International Bond Funds only) If a Fund enters into a currency
transaction, it will deposit, if so required by applicable
regulations, with its custodian cash or readily marketable
securities in a segregated account of the Fund in an amount at
least equal to the value of the Fund's total assets committed to
the consummation of the forward contract. If the value of the
securities placed in the segregated account declines, additional
cash or securities will be placed in the account so that the
value of the account will equal the amount of the Fund's
commitment with respect to the contract.
At or before the maturity of a forward contract, the
Fund either may sell a security and make delivery of the
currency, or retain the security and offset its contractual
obligation to deliver the currency by purchasing a second
contract pursuant to which the Fund will obtain, on the same
maturity date, the same amount of the currency which it is
obligated to deliver. If the Fund retains the portfolio
security and engages in an offsetting transaction, such Fund, at
the time of execution of the offsetting transaction, will incur
a gain or loss to the extent movement has occurred in forward
contract prices. Should forward prices decline during the
period between the Fund's entering into a forward contract for
the sale of a currency and the date it enters into an offsetting
contract for the purchase of the currency, the Fund will realize
a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to
purchase. Should forward prices increase, the Fund will suffer
a loss to the extent the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to
sell.
The cost to each of these Funds of engaging in
currency transactions varies with factors such as the currency
involved, the length of the contract period and the market
conditions then prevailing. Because transactions in currency
exchange usually are conducted on a principal basis, no fees or
commissions are involved. The use of forward currency exchange
contracts does not eliminate fluctuations in the underlying
prices of the securities, but it does establish a rate of
exchange that can be achieved in the future. If a devaluation
generally is anticipated, a Fund may not be able to contract to
sell the currency at a price above the devaluation level it
anticipates. The requirements for qualification as a regulated
investment company under the Internal Revenue Code of 1986, as
amended (the "Code"), may cause the Fund to restrict the degree
to which each Fund engages in currency transactions. See
"Dividends, Distributions and Taxes."
Lending Portfolio Securities. To a limited extent,
each Fund may lend its portfolio securities to brokers, dealers
and other financial institutions, provided it receives cash
collateral which at all times is maintained in an amount equal
to at least 100% of the current market value of the securities
loaned. By lending its portfolio securities, a Fund can
increase its income through the investment of the cash
collateral. For purposes of this policy, a Fund considers
collateral consisting of U.S. Government securities or, except
in the case of the U.S. Government Money Market Fund,
irrevocable letters of credit issued by banks whose securities
meet the standards for investment by such Fund to be the
equivalent of cash. From time to time, a Fund may return to the
borrower or a third party which is unaffiliated with such Fund,
and which is acting as a "placing broker," a part of the
interest earned from the investment of collateral received for
securities loaned.
The Securities and Exchange Commission currently
requires that the following conditions must be met whenever
portfolio securities are loaned: (1) the Fund must receive at
least 100% cash collateral from the borrower; (2) the borrower
must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the
Fund must be able to terminate the loan at any time; (4) the
Fund must receive reasonable interest on the loan, as well as
any dividends, interest or other distributions payable on the
loaned securities, and any increase in market value; (5) the
Fund may pay only reasonable custodian fees in connection with
the loan; and (6) while voting rights on the loaned securities
may pass to the borrower, the Trust's Board of Trustees must
terminate the loan and regain the right to vote the securities
if a material event adversely affecting the investment occurs.
These conditions may be subject to future modification.
Investment Restrictions
Each Fund has adopted investment restrictions numbered
1 through 7 as fundamental policies. In addition, the Money
Market Fund has adopted investment restrictions numbered 14 and
15, the Municipal Funds have adopted investment restriction
number 16, the Diversified Funds, other than the Money Market
Fund and Intermediate Municipal Bond Fund, have adopted
investment restriction number 17, and the Diversified Funds,
other than the Money Market and Municipal Funds, have adopted
investment restrictions numbered 18 and 19 as additional
fundamental policies. These restrictions cannot be changed, as
to a Fund, without approval by the holders of a majority (as
defined in the 1940 Act) of such Fund's outstanding voting
shares. Investment restrictions numbered 8 through 13 and 20
through 22 are not fundamental policies and may be changed by
vote of a majority of the Trust's Trustees at any time. No Fund
may:
1. Invest in commodities, except that each Fund may
purchase and sell options, forward contracts, futures
contracts, including those relating to indexes, and options
on futures contracts or indexes.
2. Purchase, hold or deal in real estate, including
real estate limited partnership interests, or oil, gas or
other mineral leases or exploration or development
programs, but each Fund may purchase and sell securities
that are secured by real estate or issued by companies that
invest or deal in real estate.
3. Borrow money, except to the extent permitted
under the 1940 Act. For purposes of this investment
restriction, a Fund's entry into options, forward
contracts, futures contracts, including those relating to
indexes, and options on futures contracts or indexes shall
not constitute borrowing.
4. Make loans to others, except through the purchase
of debt obligations and the entry into repurchase
agreements. However, each Fund may lend its securities in
an amount not to exceed 33-1/3% of the value of its total
assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and
Exchange Commission and the Trust's Board of Trustees.
5. Act as an underwriter of securities of other
issuers, except to the extent a Fund may be deemed an
underwriter under the Securities Act of 1933, as amended,
by virtue of disposing of portfolio securities, and except
that the Fund may bid separately or as part of a group for
the purchase of Municipal Obligations directly from an
issuer for its own portfolio to take advantage of the lower
purchase price available.
6. Issue any senior security (as such term is
defined in Section 18(f) of the 1940 Act), except to the
extent the activities permitted under Investment
Restriction Nos. 1, 3, 9 and 10 may be deemed to give rise
to senior securities.
7. Purchase securities on margin, but each Fund may
make margin deposits in connection with transactions in
options, forward contracts, futures contracts, including
those relating to indexes, and options on futures contracts
or indexes.
8. Invest in the securities of a company for the
purpose of exercising management or control, but each Fund
will vote the securities it owns in its portfolio as a
shareholder in accordance with its views.
9. Pledge, mortgage or hypothecate its assets,
except to the extent necessary to secure permitted
borrowings and to the extent related to the deposit of
assets in escrow in connection with writing covered put and
call options and the purchase of securities on a when-
issued or forward commitment basis and collateral and
initial or variation margin arrangements with respect to
options, forward contracts, futures contracts, including
those relating to indexes, and options on futures contracts
or indexes.
10. Purchase, sell or write puts, calls or
combinations thereof, except as described in the Trust's
Prospectus and this Statement of Additional Information.
11. Enter into repurchase agreements providing for
settlement in more than seven days after notice or purchase
securities which are illiquid, if, in the aggregate, more
than 15% (10% in the case of a Money Market Fund) of the
value of the Fund's net assets would be so invested.
12. Invest in securities of other investment
companies, except to the extent permitted under the Act.
13. Purchase securities of any company having less
than three years' continuous operations (including
operations of any predecessors) if such purchase would
cause the value of the Fund's investments in all such
companies to exceed 10% of the value of its total assets.
The following investment restrictions numbered 14 and
15 apply only to the Money Market Fund. The Money Market Fund
may not:
14. Invest more than 5% of its assets in the
obligations of any one issuer, except that up to 25% of the
value of the Money Market Fund's total assets may be
invested (subject to Rule 2a-7 under the 1940 Act) without
regard to any such limitation.
15. Invest less than 25% of its total assets in
securities issued by banks or invest more than 25% of its
assets in the securities of issuers in any other industry,
provided that there shall be no limitation on the purchase
of obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities. Notwithstanding the
foregoing, for temporary defensive purposes, the Money
Market Fund may invest less than 25% of its total assets in
bank obligations.
The following investment restriction number 16 applies
only to the Municipal Funds. None of these Funds may:
16. Invest more than 25% of its total assets in the
securities of issuers in any single industry, provided that
there shall be no such limitation on the purchase of
Municipal Obligations and, for temporary defensive
purposes, obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
The following investment restriction number 17 applies
only to the Diversified Funds, other than the Money Market Fund
and Intermediate Municipal Bond Fund. None of these Funds may:
17. Invest more than 5% of its assets in the
obligations of any single issuer, except that up to 25% of
the value of the Fund's total assets may be invested, and
securities issued or guaranteed by the U.S. Government, or
its agencies or instrumentalities may be purchased, without
regard to any such limitation.
The following investment restriction numbers 18 and 19
apply only to the Diversified Funds, other than the Money Market
and Municipal Funds. None of these Funds may:
18. Hold more than 10% of the outstanding voting
securities of any single issuer. This Investment
Restriction applies only with respect to 75% of the Fund's
total assets.
19. Invest more than 25% of its assets in the
securities of issuers in any single industry, except that,
there shall be no limitation on the purchase of obligations
issued or guaranteed by the U.S. Government, its agencies
or instrumentalities.
The following investment restriction number 20, which
is not a fundamental policy, applies only to the Money Market
Funds. Neither of these Funds may:
20. Sell securities short.
The following investment restriction number 21, which
is not a fundamental policy, applies only to the Municipal Money
Market Fund. The Municipal Money Market Fund may not:
21. Purchase securities other than municipal
obligations and taxable Money Market Instruments.
The following investment restriction number 22, which
is not a fundamental policy, applies only to the U.S. Government
Money Market Fund. The U.S. Government Money Market Fund may
not:
22. Purchase common stocks, preferred stocks,
warrants or other equity securities, or purchase corporate
bonds (except as set forth in the Prospectus) or
debentures, state bonds, municipal bonds or industrial
revenue bonds.
For purposes of Investment Restriction No. 16,
industrial development bonds, where the payment of principal and
interest is the ultimate responsibility of companies within the
same industry, are grouped together as an "industry."
If a percentage restriction is adhered to at the time
of investment, a later increase or decrease in percentage
resulting from a change in values or assets will not constitute
a violation of such restriction.
The Trust may make commitments more restrictive than
the restrictions listed above so as to permit the sale of Fund
shares in certain states. Should the Trust determine that a
commitment is no longer in the best interests of a Fund and its
shareholders, the Trust reserves the right to revoke the
commitment by terminating the sale of such Fund's shares in the
state involved.
MANAGEMENT OF THE TRUST
Trustees and officers of the Trust, together with
information as to their principal business occupations during at
least the last five years, are shown below. Each Trustee who is
deemed to be an "interested person" of the Trust, as defined in
the 1940 Act, is indicated by an asterisk.
Trustees of the Trust
JOHN P. GOULD, Trustee. Distinguished Service Professor of
Economics of the University of Chicago Graduate School of
Business. From 1983 to 1993, Dean of the University of
Chicago Graduate School of Business. Dean Gould also
serves as Director of Harpor Capital Advisors. Mr. Gould
is also a Board member of five other funds in the Prairie
Family of Funds. He is 55 years old and his address is
1101 East 58th Street, Chicago, Illinois 60637.
MARILYN McCOY, Trustee. Vice President of Administration
and Planning of Northwestern University. From 1981 to
1985, she was the Director of Planning and Policy
Development for the University of Colorado. She also
serves on the Board of Directors of Evanston Hospital,
the Chicago Metropolitan YMCA, the Chicago Network and
United Charities. Mrs. McCoy is a member of the
Chicago Economics Club. Mrs. McCoy is also a Board
member of five other funds in the Prairie Family of
Funds. She is 46 years old and her address is 1100
North Lake Shore Drive, Chicago, Illinois 60611.
RAYMOND D. ODDI, Trustee. Private consultant. A Director of
Caremark International, Inc. and Medisense, Inc., companies
in the health care industry, and Baxter Credit Union. From
1978 to 1986, Senior Vice President of Baxter Inter-
national, Inc., a company engaged in the production of
medical care products. He also is a member of the Illinois
Society of Certified Public Accountants. Mr. Oddi is also
a Board member of five other funds in the Prairie Family of
Funds. He is 66 years old and his address is 1181 Loch
Lane, Lake Forest, Illinois 60045.
For so long as a plan described in the section
captioned "Distribution, Shareholder Services and Service Plans"
remains in effect, the Trustees of the Trust who are not
"interested persons" of the Trust, as defined in the 1940 Act,
will be selected and nominated by the Trustees who are not
"interested persons" of the Trust.
Officers of the Trust
JOSEPH F. KISSEL, President. Executive Vice President of
Concord Holding Corporation, the Trust's sub-administrator
(the "Sub-Administrator"), and an officer of other
investment companies administered by the Sub-Administrator.
His address is 125 West 55th Street, New York, New York
10019.
ANN E. BERGIN, Vice President. Senior Vice President of the
Sub-Administrator and an officer of other investment
companies administered by the Sub-Administrator. Her
address is 125 West 55th Street, New York, New York 10019.
STEPHEN A. SMITH, Vice President. Senior Vice President of the
Distributor and an officer of other investment companies
distributed by the Distributor. His address is 125 West
55th Street, New York, New York 10019.
RICHARD A. FABIETTI, Treasurer. Senior Vice President and
Treasurer of the Sub-Administrator and the Distributor and
an officer of other investment companies administered by
the Sub-Administrator. His address is 125 West 55th
Street, New York, New York 10019.
MARTIN G. FLANIGAN, Assistant Treasurer. Mutual Funds
Accounting Manager of the Sub-Administrator and an officer
of other investment companies administered by the Sub-
Administrator. His address is 125 West 55th Street, New
York, New York 10019.
DOMENICK PUGLIESE, Secretary. Vice President and Counsel--
Mutual Funds of the Sub-Administrator and Distributor,
since November 1994, and an officer of other investment
companies administered by the Sub-Administrator. He was
Vice President and Associate General Counsel of Prudential
Mutual Funds, from July 1992 to November 1994, and of
Prudential Securities, from March 1992 to July 1992. For
more than five years prior thereto, he was an associate
with the law firm of Battle Fowler. His address is 125
West 55th Street, New York, New York 10019.
LINDA MAHON, Assistant Secretary. Vice President of the Sub-
Administrator and Distributor, since January 1994, and an
officer of other investment companies administered by the
Sub-Administrator. From 1991 to 1994, she was Corporate
Secretary of J.&W. Seligman & Co. Incorporated. From 1989
to 1991, she was Vice President of Paribas Asset
Management, Inc. Her address is 125 West 55th Street, New
York, New York 10019.
The Trust pays its Trustees its allocable share of the
aggregate of a fixed fee of $25,000 per annum and a per meeting
fee of $1,000 for all funds in the Prairie Family of Funds. The
estimated aggregate amount of compensation payable to each
Trustee by the Trust and all other funds in the Prairie Family
of Funds for which such person is a Board member for the fiscal
year ending December 31, 1995 are as follows:
<TABLE>
<CAPTION>
(5)
(2) (3) Total Compensation
(1) Aggregate Pension or (4) From Fund and
Name of Board Compensation from Retirement Benefits Estimated Annual Fund Complex Paid
Member Fund<F1> Accrued as Part of Benefits Upon to Board Member
Fund's Expenses Retirement
<S> <C> <C> <C> <C>
John P. Gould $18,000 None None $30,000
Marilyn McCoy $18,000 None None $30,000
Raymond D. Oddi $18,000 None None $30,000
______________________________
<FN> Amount does not include reimbursed expenses for
attending Board meeting, which are estimated to be
approximately $350 for all Trustees as a group.
</TABLE>
MANAGEMENT ARRANGEMENTS
THE FOLLOWING INFORMATION SUPPLEMENTS AND
SHOULD BE READ IN CONJUNCTION WITH THE SECTION IN THE PROSPECTUS
ENTITLED "MANAGEMENT OF THE TRUST."
Investment Advisory Agreement. FCIMCO provides
investment advisory services pursuant to the Investment Advisory
Agreement (the "Agreement") dated November 18, 1994, with the
Trust. As to each Fund, the Agreement is subject to annual
approval by (i) the Trust's Board of Trustees or (ii) vote of a
majority (as defined in the 1940 Act) of the outstanding voting
securities of such Fund, provided that in either event the
continuance also is approved by a majority of the Trustees who
are not "interested persons" (as defined in the 1940 Act) of the
Trust or FCIMCO, by vote cast in person at a meeting called for
the purpose of voting on such approval. As to each Fund, the
Agreement is terminable without penalty, on 60 days' notice, by
the Trust's Board of Trustees or by vote of the holders of a
majority of such Fund's shares, or, on not less than 90 days'
notice, by FCIMCO. The Agreement will terminate automatically,
as to the relevant Fund, in the event of its assignment (as
defined in the 1940 Act).
FCIMCO is responsible for investment decisions
for each Fund in accordance with the stated policies of such
Fund, subject to the approval of the Trust's Board of Trustees.
All purchases and sales are reported for the Trustees' review at
the meeting subsequent to such transactions.
The following persons are officers and/or
directors of FCIMCO: J. Stephen Baine, Chairman of the Board of
Directors, Chief Executive Officer and President; Alan F. Delp,
William G. Jurgensen, Joseph M. Thomas and David J. Vitale,
Directors; Terrall J. Janeway, Treasurer, Chief Financial and
Accounting Officer and Managing Director; Bradford M. Markham,
Secretary and Chief Legal Officer; and Richard A. Davies,
Deborah L. Edwards, Marco Hanig, David R. Kling and Stephen P.
Manus, Managing Directors.
Sub-Investment Advisory Agreement. ANB
Investment Management and Trust Company ("ANB-IMC") provides
investment advisory assistance and day-to-day management of the
International Equity Fund's investments pursuant to the Sub-
Investment Advisory Agreement dated November 18, 1994 between
ANB-IMC and FCIMCO. The Sub-Investment Advisory Agreement is
subject to annual approval by (i) the Trust's Board or (ii) vote
of a majority (as defined in the Act) of the International
Equity Fund's outstanding voting securities, provided that in
either event the continuance also is approved by a majority of
Trustees who are not "interested persons" (as defined in the
Act) of the Trust or ANB-IMC, by vote cast in person at a
meeting called for the purpose of voting on such approval. The
Sub-Investment Advisory Agreement is terminable without penalty,
(i) by FCIMCO on 60 days' notice, (ii) by the Trust's Board or
by vote of the holders of a majority of the Fund's outstanding
voting securities on 60 days' notice, or (iii) upon not less
than 90 days' notice, by ANB-IMC. The Sub-Investment Advisory
Agreement will terminate automatically in the event of its
assignment (as defined in the Act).
ANB-IMC provides day-to-day management of the
International Equity Fund's investments, subject to the
supervision of FCIMCO and the Trust's Board. The fees payable
to ANB-IMC for its services are paid by FCIMCO.
The following persons are officers and/or
directors of ANB-IMC: Peter J. Kartalia, Neil R. Wright,
Stephen P. Manus, Alan F. Delp, David P. Bolger, Thomas P.
Michaels and J. Stephen Baine.
Administration and Sub-Administration
Agreements. Pursuant to an Administration Agreement dated
November 18, 1994 with the Trust, FCIMCO assists in all aspects
of the Trust's operations, other than providing investment
advice, subject to the overall authority of the Trust's Board in
accordance with Massachusetts law. FCIMCO has engaged Concord
Holding Corporation (the "Sub-Administrator") to assist it in
providing certain administrative services to the Trust.
Pursuant to its agreement with FCIMCO (the "Sub-Administration
Agreement"), the Sub-Administrator assists FCIMCO in furnishing
the Trust clerical help and accounting, data processing,
bookkeeping, internal auditing and legal services and certain
other services required by the Trust, preparing reports to the
funds' shareholders, tax returns, reports to and filings with
the Securities and Exchange Commission and state Blue Sky
authorities, calculating the net asset value of each Fund's
shares and generally in providing for all aspects of the Trust's
operation, other than providing investment advice. The fees
payable to the Sub-Administrator for its services are paid by
FCIMCO.
The Fund has agreed that FCIMCO, ANB-IMC and
the Sub-Administrator will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust
in connection with the matters to which respective agreements
relate, except for a loss resulting from wilful misfeasance, bad
faith or gross negligence on the part of FCIMCO in the
performance of its obligations or from reckless disregard by it
of its obligations and duties under its Agreements or on the
part of ANB-IMC or the Sub-Administrator in the performance of
their respective obligations or from reckless disregard by
either of its obligations and duties under its agreement.
Expenses and Expense Information. All expenses
incurred in the operation of the Trust are borne by the Trust,
except to the extent specifically assumed by FCIMCO. The
expenses borne by the Trust include: organizational costs,
taxes, interest, brokerage fees and commissions, if any, fees of
Board members, Securities and Exchange Commission fees, state
Blue Sky qualification fees, advisory fees, charges of
custodians, transfer and dividend disbursing agents' fees,
certain insurance premiums, industry association fees, outside
auditing and legal expenses, costs of maintaining the Trust's
existence, costs of independent pricing services, costs
attributable to investor services (including, without
limitation, telephone and personnel expenses), costs of
shareholders' reports and meetings, costs of preparing and
printing prospectuses and statements of additional information
for regulatory purposes and for distribution to existing
shareholders, and any extraordinary expenses. In addition,
Class A and Class B are subject to an annual distribution and/or
service fee. Expenses attributable to a particular Fund or
Class are charged against the assets of that Fund or Class,
respectively; other expenses of the Trust are allocated among
the Funds on the basis determined by the Board of Trustees,
including, but not limited to, proportionately in relation to
the net assets of each Fund.
The Agreement provides that if, in any fiscal
year, the aggregate expenses of a Fund, exclusive of taxes,
brokerage, interest on borrowings and (with the prior written
consent of the necessary state securities commissions)
extraordinary expenses, but including the advisory fee, exceed
the expense limitation of any state having jurisdiction over the
Fund, the Trust may deduct from the payment to be made to FCIMCO
under the Agreement, or FCIMCO will bear, such excess expense to
the extent required by state law. Such deduction or payment, if
any, will be estimated daily, and reconciled and effected or
paid, as the case may be, on a monthly basis.
The aggregate of the fees payable to FCIMCO is
not subject to reduction as the value of a Fund's net assets
increases.
PURCHASE OF SHARES
THE FOLLOWING INFORMATION SUPPLEMENTS AND
SHOULD BE READ IN CONJUNCTION WITH THE SECTION IN THE TRUST'S
PROSPECTUS ENTITLED "HOW TO BUY SHARES."
The Distributor. The Distributor serves as the
Trust's distributor pursuant to an agreement which is renewable
annually.
Using Federal Funds. Primary Funds Service
Corp., the Fund's transfer and dividend disbursing agent (the
"Transfer Agent"), or the Trust may attempt to notify the
investor upon receipt of checks drawn on banks that are not
members of the Federal Reserve System as to the possible delay
in conversion into Federal Funds and may attempt to arrange for
a better means of transmitting the money. If the investor is a
customer of a securities dealer, bank or other financial
institution and his order to purchase Fund shares is paid for
other than in Federal Funds, the securities dealer, bank or
other financial institution, acting on behalf of its customer,
generally will complete the conversion into, or itself advance,
Federal Funds on the business day following receipt of the
customer order. The order is effective only when so converted
and received by the Transfer Agent. An order for the purchase
of Fund shares placed by an investor with a sufficient Federal
Funds or cash balance in his brokerage account with a securities
dealer, bank or other financial institution will become
effective on the day that the order, including Federal Funds, is
received by the Transfer Agent. In some states, banks or other
institutions effecting transactions in Fund shares may be
required to register as dealers pursuant to state law.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
The following information supplements and
should be read in conjunction with the section in the Trust's
Prospectus entitled "Distribution Plan and Shareholder Services
Plan."
Distribution Plan. Rule 12b-1 (the "Rule")
adopted by the Securities and Exchange Commission under the 1940
Act provides, among other things, that an investment company may
bear expenses of distributing its shares only pursuant to a plan
adopted in accordance with the Rule. The Trust's Board has
adopted such a plan with respect to Class B shares of each Fund
(the "Plan"). The Trust's Board believes that there is a
reasonable likelihood that the Plan will benefit each Fund and
the holders of its Class B shares.
A quarterly report of the amounts expended
under each Plan, and the purposes for which such expenditures
were incurred, must be made to the Trustees for their review.
In addition, the Plan provides that it may not be amended to
increase materially the cost which holders of Class B shares of
the Fund may bear pursuant to the Plan without the approval of
the shareholders of such Class and that other material
amendments of the Plan must be approved by the Board of Trustees
and by the Trustees who are not "interested persons" (as defined
in the 1940 Act) of the Trust and have no direct or indirect
financial interest in the operation of the Plan or in any
agreements entered into in connection with the Plan, by vote
cast in person at a meeting called for the purpose of
considering such amendments. The Plan is subject to annual
approval by such vote of the Trustees cast in person at a
meeting called for the purpose of voting on the Plan. The Plan
was so approved by the Trustees at a meeting held on November
18, 1994. The Plan may be terminated at any time by vote of a
majority of the Trustees who are not "interested persons" and
have no direct or indirect financial interest in the operation
of the Plan or in any agreements entered into in connection with
the Plan or by vote of the holders of a majority of Class B
shares of the Fund.
Shareholder Services Plan. The Trust has
adopted a Shareholder Services Plan, pursuant to which the Trust
pays the Distributor for the provision of certain services to
the holders of Class A and Class B shares of each Fund.
A quarterly report of the amounts expended
under the Shareholder Services Plan, and the purposes for which
such expenditures were incurred, must be made to the Trustees
for their review. In addition, the Shareholder Services Plan
provides that it may not be amended without approval of the
Trustees, and by the Trustees who are neither "interested
persons" (as defined in the 1940 Act) of the Trust nor have any
direct or indirect financial interest in the operation of the
Shareholder Services Plan or in any agreements entered into in
connection with the Shareholder Services Plan, by vote cast in
person at a meeting called for the purpose of considering such
amendments. The Shareholder Services Plan is subject to annual
approval by such vote of the Trustees cast in person at a
meeting called for the purpose of voting on the Shareholder
Services Plan. The Shareholder Services Plan was so approved on
November 18, 1994. The Shareholder Services Plan is terminable
at any time by vote of a majority of the Trustees who are not
"interested persons" and who have no direct or indirect
financial interest in the operation of the Shareholder Services
Plan or in any agreements entered into in connection with the
Shareholder Services Plan.
REDEMPTION OF SHARES
The following information supplements and
should be read in conjunction with the section in the Trust's
Prospectus entitled "How to Redeem Fund Shares."
Redemption Commitment. The Trust has committed
itself to pay in cash all redemption requests by any shareholder
of record of a Fund, limited in amount during any 90-day period
to the lesser of $250,000 or 1% of the value of such Fund's net
assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and
Exchange Commission. In the case of requests for redemption in
excess of such amount, the Board of Trustees reserves the right
to make payments in whole or in part in securities or other
assets in case of an emergency or any time a cash distribution
would impair the liquidity of the Fund to the detriment of the
existing shareholders. In such event, the securities would be
valued in the same manner as the Fund's securities are valued.
If the recipient sold such securities, brokerage charges would
be incurred.
Suspension of Redemptions. The right of
redemption may be suspended or the date of payment postponed (a)
during any period when the New York Stock Exchange is closed
(other than customary weekend and holiday closing), (b) when
trading in the markets the Fund ordinarily utilizes is
restricted, or when an emergency exists as determined by the
Securities and Exchange Commission so that disposal of the
Fund's investments or determination of its net asset value is
not reasonably practicable, or (c) for such other periods as the
Securities and Exchange Commission by order may permit to
protect the Fund's shareholders.
DETERMINATION OF NET ASSET VALUE
The following information supplements and
should be read in conjunction with the section in the Trust's
Prospectus entitled "How to Buy Shares."
Applicable to each Fund, other than the Money
Market Funds--Equity Securities and covered call options written
by a Fund are valued at the last sale price on the securities
exchange or national securities market on which such securities
primarily are traded. Equity Securities not listed on an
exchange or national securities market, or securities in which
there were no transactions, are valued at the most recent bid
prices. Any securities or other assets for which recent market
quotations are not readily available are valued at fair value as
determined in good faith by the Trust's Board of Trustees.
Fixed-Income Securities are valued each
business day using available market quotations or at fair value
as determined by one or more independent pricing services
(collectively, the "Service") approved by the Trust's Board of
Trustees. The Service may use available market quotations,
employ electronic data processing techniques and/or a matrix
system to determine valuations. The Service's procedures are
reviewed by the Trust's officers under the general supervision
of the Trust's Board of Trustees.
Municipal Obligations are carried at fair value
as determined by the Service, based on methods which include
consideration of: yields or prices of municipal bonds of
comparable quality, coupon, maturity and type; indications as to
values from dealers; and general market conditions. The Service
also may employ electronic data processing techniques and/or a
matrix system to determine valuations. When, in the judgment of
the Service, quoted bid prices for investments are readily
available and are representative of the bid side of the market,
these investments 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).
Short-term investments are carried at amortized
cost, which approximates value.
Restricted securities, as well as securities or
other assets for which market quotations are not readily
available, or are not valued by a pricing service approved by
the Trust's Board of Trustees, are valued at fair value as
determined in good faith by the Trust's Board of Trustees. The
Trust's Board of Trustees will review the method of valuation on
a current basis. In making its good faith valuation of
restricted securities, the Board of Trustees generally will take
the following factors into consideration: restricted securities
which are, or are convertible into, securities of the same class
of securities for which a public market exists usually will be
valued at market value less the same percentage discount at
which purchased. This discount will be revised periodically by
the Trust's Board of Trustees if its members believe that the
discount no longer reflects the value of the restricted
securities. Restricted securities not of the same class as
securities for which a public market exists usually will be
valued initially at cost. Any subsequent adjustment from cost
will be based upon considerations deemed relevant by the Trust's
Board of Trustees.
Any assets or liabilities initially expressed
in terms of foreign currency will be translated into dollars at
the midpoint of the New York interbank market spot exchange rate
as quoted on the day of such translation by the Federal Reserve
Bank of New York or if no such rate is quoted on such date, at
the exchange rate previously quoted by the Federal Reserve Bank
of New York or at such other quoted market exchange rate as may
be determined to be appropriate by the Investment Adviser.
Forward currency contracts will be valued at the current cost of
offsetting the contract. Because of the need to obtain prices
as of the close of trading on various exchanges throughout the
world, the calculation of net asset value for the International
Equity and International Bond Funds does not take place
contemporaneously with the determination of prices of such
securities. In addition, portfolio securities held by such
Funds may be traded actively in securities markets which are
open for trading on days when the Fund will not be determining
its net asset value. Accordingly, there may be occasions when
these Funds will not calculate it net asset value but when the
value of the Fund's portfolio securities will be affected by
such trading activity.
Expenses and fees of a Fund, including the
advisory fee, are accrued daily and taken into account for the
purpose of determining the net asset value of that Fund's
shares.
Money Market Funds. The valuation of each
Money Market Fund's investment securities is based upon their
amortized cost which does not take into account unrealized
capital gains or losses. This involves valuing an instrument at
its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the
instrument. While this method provides certainty in valuation,
it may result in periods during which value, as determined by
amortized cost, is higher or lower than the price the Fund would
receive if it sold the instrument.
The Board of Trustees has established
procedures, as a particular responsibility within the overall
duty of care owed to the Money Market Fund's investors,
reasonably designed to stabilize the Money Market Fund's price
per share as computed for purposes of purchases and redemptions
at $1.00. Such procedures include review of each Money Market
Fund's portfolio holdings by the Board of Trustees, at such
intervals as it deems appropriate, to determine whether the
Money Market Fund's net asset value calculated by using
available market quotations or market equivalents deviates from
$1.00 per share based on amortized cost. In such review of the
portfolio of the Money Market Fund and U.S. Government Money
Market Fund, investments for which market quotations are readily
available will be valued at the most recent bid price or yield
equivalent for such securities or for securities of comparable
maturity, quality and type, as obtained from one or more of the
major market makers for the securities to be valued. Other
investments and assets of these Money Market Funds will be
valued at fair value as determined in good faith by the Board of
Trustees. Market quotations and market equivalents used in such
review of the Municipal Money Market Fund are obtained from an
independent pricing service (the "Service") approved by the
Board of Trustees. The Service will value the Municipal Money
Market Fund's investments based on methods which include
consideration of: yields or prices of municipal obligations of
comparable quality, coupon, maturity and type; indications of
values from dealers; and general market conditions. The Service
also may employ electronic data processing techniques and/or a
matrix system to determine valuations.
The extent of any deviation between a Money
Market Fund's net asset value based upon available market
quotations or market equivalents and $1.00 per share based on
amortized cost will be examined by the Board of Trustees. If
such deviation exceeds 1/2 of 1%, the Board of Trustees will
consider what actions, if any, will be initiated. In the event
the Board of Trustees determines that a deviation exists which
may result in material dilution or other unfair results to
investors or existing shareholders, it has agreed to take such
corrective action as it regards as necessary and appropriate,
including: selling portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends or paying distributions from
capital or capital gains; redeeming shares in kind; or estab-
lishing a net asset value per share by using available market
quotations or market equivalents.
New York Stock Exchange Closings. The holidays
(as observed) on which the New York Stock Exchange is closed
currently are: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
PORTFOLIO TRANSACTIONS
Transactions are allocated to various dealers
by the Trust's investment personnel in their best judgment. The
primary consideration is prompt and effective execution of
orders at the most favorable price. Subject to that primary
consideration, dealers may be selected to act on an agency basis
for research, statistical or other services to enable the
Investment Adviser to supplement its own research and analysis
with the views and information of other securities firms.
Research services furnished by brokers through
which the Funds effect securities transactions may be used by
the Investment Adviser in advising other funds or accounts it
advises and, conversely, research services furnished to the
Investment Adviser by brokers in connection with other funds or
accounts the Investment Adviser advises may be used by the
Investment Adviser in advising the Funds. Although it is not
possible to place a dollar value on these services, it is the
opinion of the Investment Adviser that the receipt and study of
such services should not reduce the overall expenses of its
research department.
Brokers also are selected because of their
ability to handle special executions such as are involved in
large block trades or broad distributions, provided the primary
consideration is met. Large block trades may, in certain cases,
result from two or more clients the Investment Adviser might
advise being engaged simultaneously in the purchase or sale of
the same security.
When transactions are executed in the over-the-
counter market, the Investment Adviser will deal with the
primary market makers unless a more favorable price or execution
otherwise is obtainable.
Portfolio turnover may vary from year to year,
as well as within a year. Higher turnover rates are likely to
result in comparatively greater brokerage expenses. The overall
reasonableness of brokerage commissions paid is evaluated by the
Investment Adviser based upon its knowledge of available
information as to the general level of commissions paid by other
institutional investors for comparable services.
Under normal market conditions, the portfolio
turnover rate of each Fund, other than the Money Market Funds,
generally will not exceed 100%.
Purchases and sales of Fixed-Income Securities
and Money Market Instruments usually are principal transactions.
These portfolio securities ordinarily are purchased directly
from the issuer or from an underwriter or market maker. Usually
no brokerage commissions are paid by the Fund for such purchases
and sales. The prices paid to the underwriters of newly-issued
securities usually include a concession paid by the issuer to
the underwriter, and purchases of securities from market makers
may include the spread between the bid and asked price.
DIVIDENDS, DISTRIBUTION AND TAXES
The following information supplements and
should be read in conjunction with the section in the Trust's
Prospectus entitled "Dividends, Distributions and Taxes."
Each Fund intends to qualify as a "regulated
investment company" under the Code, so long as such
qualification is in the best interests of its shareholders. To
qualify as a regulated investment company, a Fund must pay out
to its shareholders at least 90% of its net income (consisting
of net investment income from tax exempt obligations and net
short-term capital gain), must derive less than 30% of its
annual gross income from gain on the sale of securities held for
less than three months, and must meet certain asset
diversification and other requirements. Accordingly, the Fund
may be restricted in the selling of securities held for less
than three months, and in the utilization of certain of the
investment techniques described in the Prospectus. The Code,
however, allows the Fund to net certain offsetting positions
making it easier for the Fund to satisfy the 30% test.
Qualification as a regulated investment company relieves the
Fund from any liability for Federal income taxes to the extent
its earnings are distributed in accordance with the applicable
provisions of the Code. The term "regulated investment company"
does not imply the supervision of management or investment
practices or policies by any government agency.
Any dividend or distribution paid shortly after
an investor's purchase may have the effect of reducing the
aggregate net asset value of his shares below the cost of his
investment. Such a distribution would be a return on investment
in an economic sense although taxable as stated in "Dividends,
Distributions and Taxes" in the Prospectus. In addition, the
Code provides that if a shareholder holds shares for six months
or less and has received a capital gain dividend with respect to
such shares, any loss incurred on the sale of such shares will
be treated as a long-term capital loss to the extent of the
capital gain dividend received.
Except for dividends from taxable investments,
the Fund anticipates that substantially all dividends paid by a
Municipal Fund will not be subject to Federal income tax.
Dividends and distributions paid by a Municipal Fund may be
subject to certain state and local taxes. Although all or a
substantial portion of the dividends paid by a Municipal Fund
may be excluded by shareholders of the Fund from their gross
income for Federal income tax purposes, each Municipal Fund may
purchase specified private activity bonds, the interest from
which may be (i) a preference item for purposes of the
alternative minimum tax, (ii) a component of the "adjusted
current earnings" preference item for purposes of the corporate
alternative minimum tax as well as a component in computing the
corporate environmental tax or (iii) a factor in determining the
extent to which a shareholder's Social Security benefits are
taxable. If a Municipal Fund purchases such securities, the
portion of its dividends related thereto will not necessarily be
tax exempt to shareholders subject to the alternative minimum
tax and/or tax on Social Security benefits and may cause such
shareholders to be subject to such taxes.
Dividends paid by a Fund to qualified
Retirement Plans or certain non-qualified deferred compensation
plans ordinarily will not be subject to taxation until the
proceeds are distributed from the Retirement Plan. The Trust
will not report dividends paid by a Fund to such Plans to the
IRS. Generally, distributions from such Retirement Plans,
except those representing returns of non-deductible
contributions thereto, will be taxable as ordinary income and,
if made prior to the time the participant reaches age 59-1/2,
generally will be subject to an additional tax equal to 10% of
the taxable portion of the distribution. If the distribution
from such a Retirement Plan (other than certain governmental or
church plans) for any taxable year following the year in which
the participant reaches age 70-1/2 is less than the "minimum
required distribution" for that taxable year, an excise tax
equal to 50% of the deficiency may be imposed by the IRS. The
administrator, trustee or custodian of such a Retirement Plan
will be responsible for reporting distributions from such Plans
to the IRS. Participants in qualified Retirement Plans will
receive a disclosure statement describing the consequences of a
distribution from such a Plan from the administrator, trustee or
custodian of the Plan prior to receiving the distribution.
Moreover, certain contributions to a qualified Retirement Plan
in excess of the amounts permitted by law may be subject to an
excise tax.
Taxable dividends derived from net investment
income and distributions from net realized short-term securities
gains paid by a Fund to a foreign investor generally are subject
to U.S. nonresident withholding taxes at the rate of 30%, unless
the foreign investor claims the benefits of a lower rate
specified in a tax treaty. Distributions from net realized
long-term securities gains paid by a Fund to a foreign investor,
as well as the proceeds of any redemptions from a foreign
investor's account, regardless of the extent to which gain or
loss may be realized, will not be subject to U.S. nonresident
withholding tax. However, such distributions may be subject to
backup withholding, as described below, unless the foreign
investor certifies his non-U.S. residency status.
Ordinarily, gains and losses realized from
portfolio transactions will be treated as capital gains and
losses. However, a portion of the gain or loss realized from
the disposition of non-U.S. dollar denominated securities
(including debt instruments, certain financial futures and
options, and certain preferred stock) may be treated as ordinary
income or loss under Section 988 of the Code.
Under Section 1256 of the Code, gain or loss
realized by a Fund from certain financial futures and options
transactions (other than those taxed under Section 988 of the
Code) will be treated as 60% long-term capital gain or loss and
40% short-term capital gain or loss. Gain or loss will arise
upon the exercise or lapse of such futures and options as well
as from closing transactions. In addition, any such futures or
options remaining unexercised at the end of the Fund's taxable
year will be treated as sold for their then fair market value,
resulting in additional gain or loss to the Fund characterized
in the manner described above.
Offsetting positions held by a Fund involving
certain contracts or options may constitute "straddles."
"Straddles" are defined to include "offsetting positions" in
actively traded personal property. The tax treatment of
"straddles" is governed by Sections 1092 and 1258 of the Code,
which, in certain circumstances, overrides or modifies the
provisions of Sections 1256 and 988. As such, all or a portion
of any short-term or long-term capital gain from certain
"straddle" transactions may be recharacterized to ordinary
income. If the Fund were treated as entering into "straddles"
by reason of its engaging in certain forward contracts or
options transactions, such "straddles" would be characterized as
"mixed straddles" if the forward contracts or options
transactions comprising a part of such "straddles" were governed
by Section 1256 of the Code. A Fund may make one or more
elections with respect to "mixed straddles." Depending on which
election is made, if any, the results to the Fund may differ.
If no election is made to the extent the "straddle" and
conversion transactions rules apply to positions established by
the Fund, losses realized by the Fund will be deferred to the
extent of unrealized gain in the offsetting position. Moreover,
as a result of the "straddle" rules, short-term capital loss on
"straddle" positions may be recharacterized as long-term capital
loss, and long-term capital gains may be treated as short-term
capital gains or ordinary income.
Investment by a Fund in securities issued or
acquired at a discount, or providing for deferred interest or
for payment of interest in the form of additional obligations
could under special tax rules affect the amount, timing and
character of distributions to shareholders by causing the Fund
to recognize income prior to the receipt of cash payments. For
example, the Fund could be required to accrue a portion of the
discount (or deemed discount) at which the securities were
issued and to distribute such income in order to maintain its
qualification as a regulated investment company. In such case,
the Fund may have to dispose of securities which it might
otherwise have continued to hold in order to generate cash to
satisfy these distribution requirements.
If a Fund invests in an entity that is
classified as a "passive foreign investment company" ("PFIC")
for federal income tax purposes, the operation of certain
provisions of the Code applying to PFICs could result in the
imposition of certain federal income taxes on the Fund. In
addition, gain realized from the sale or other disposition of
PFIC securities may be treated as ordinary income under Section
1291 of the Code.
YIELD AND PERFORMANCE INFORMATION
THE FOLLOWING INFORMATION SUPPLEMENTS AND
SHOULD BE READ IN CONJUNCTION WITH THE SECTION IN THE TRUST'S
PROSPECTUS ENTITLED "PERFORMANCE INFORMATION."
Special Opportunities, Growth and International
Equity Funds. Average annual total return is calculated by
determining the ending redeemable value of an investment
purchased with a hypothetical $1,000 payment made at the
beginning of the period (assuming the reinvestment of dividends
and distributions), dividing by the amount of the initial
investment, taking the "n"the root of the quotient (where "n" is
the number of years in the period) and subtracting 1 from the
result.
Total return is calculated by subtracting the
amount of the net asset value per share at the beginning of a
stated period from the net asset value per share at the end of
the period (after giving effect to the reinvestment of dividends
and distributions during the period), and dividing the result by
the net asset value per share at the beginning of the period.
Asset Allocation, Equity Income, Bond and
Intermediate Municipal Bond Funds. Current yield is computed
pursuant to a formula which operates as follows: The amount of
the Fund's expenses accrued for the 30-day period (net of
reimbursements) is subtracted from the amount of the dividends
and interest earned by the Fund during the period. That result
is then divided by the product of: (a) the average daily number
of shares outstanding during the period that were entitled to
receive dividends, and (b) the net asset value per share on the
last day of the period less any undistributed earned income per
share reasonably expected to be declared as a dividend shortly
thereafter. The quotient is then added to 1, and that sum is
raised to the 6th power, after which 1 is subtracted. The
current yield is then arrived at by multiplying the result by 2.
Average annual total return and total return is
calculated as described above.
Money Market Funds. Yield will be computed in
accordance with a standardized method which involves determining
the net change in the value of a hypothetical pre-existing Fund
account having a balance of one share at the beginning of a
seven calendar day period for which yield is to be quoted,
dividing the net change by the value of the account at the
beginning of the period to obtain the base period return, and
annualizing the results (i.e., multiplying the base period
return by 365/7). The net change in the value of the account
reflects the value of additional shares purchased with dividends
declared on the original share and any such additional shares
and fees that may be charged to shareholder accounts, in
proportion to the length of the base period and the Fund's
average account size, but does not include realized gains and
losses or unrealized appreciation and depreciation. Effective
annualized yield is computed by adding 1 to the base period
return (calculated as described above), raising that sum to a
power equal to 365 divided by 7, and subtracting 1 from the
result.
Yields will fluctuate and are not necessarily
representative of future results. Investors should remember
that yield is a function of the type and quality of the
instruments held, their maturity and operating expenses. An
investor's principal in a Money Market Fund is not guaranteed.
See "Determination of Net Asset Value" for a discussion of the
manner in which the Money Market Fund's price per share is
determined.
INFORMATION ABOUT THE TRUST
The following information supplements and
should be read in conjunction with the section in the Trust's
Prospectus entitled "General Information."
Each Fund share has one vote and, when issued
and paid for in accordance with the terms of the offering, is
fully paid and non-assessable. Shares have no preemptive or
subscription rights and are freely transferable.
For certain trust and investment agency account
clients of The First National Bank of Chicago ("FNBC") whose
assets are invested in common trust funds, the Trust will be
used as a pooled investment alternative for such investments.
Beginning in January 1995, FNBC will use the Funds as an
investment vehicle in place of common trust funds for FNBC's
Private Banking and Trust clients. FNBC's decision to replace
the common trust funds is based on its belief that mutual funds
provide, among other benefits, greater flexibility and more
investment opportunities for its clients.
Certain of the Funds have been designed with
similar investment objectives and management policies and will
invest in many of the securities as the common trust funds which
they are intended to replace. The name of each common trust
fund to be replaced initially and its corresponding Fund are as
follows:
Common Trust Fund Corresponding Fund
Personal Trust Equity Fund Equity Income Fund
Personal Trust Growth Equity Fund
and
Personal Trust Endowment Equity Fund Growth Fund
Personal Trust Special Equity Fund Special Opportunities
Fund
Personal Trust International Equity International Equity
Fund Fund
Personal Trust Taxable Bond Fund
and
Personal Trust Endowment Bond Fund Bond Fund
Personal Trust Intermediate Taxable
Bond Fund
and
Personal Trust Fixed Income
Fund (Lake Shore Funds) Intermediate Bond Fund<F2>
Personal Trust Tax Exempt Bond Fund Municipal Bond Fund<F3>
Personal Trust Intermediate Tax
Exempt Bond Fund
and
Personal Trust Municipal Bond Fund Intermediate Municipal
(Lake Shore Fund) Bond Fund
Personal Trust International Bond
Fund International Bond Fund
____________________
[FN]
<F2> Currently offered as First Prairie U.S. Government Income
Fund--Intermediate Series. This fund is not a series of the
Trust.
<F3> Currently offered as First Prairie Municipal Bond Fund--
Insured Series. This fund is not a series of the Trust.
<PAGE>
Each Fund will send annual and semi-annual financial
statements to all its shareholders.
COUNSEL AND INDEPENDENT AUDITORS
Stroock & Stroock & Lavan, 7 Hanover Square, New York,
New York 10004-2594, as counsel for the Fund, has rendered its
opinion as to certain legal matters regarding the due
authorization and valid issuance of the shares of beneficial
interest being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New
York 10019, independent auditors, have been selected as auditors
of the Fund.
<PAGE>
APPENDIX
Description of certain ratings assigned by
Standard & Poor's Corporation ("S&P"), Moody's Investors
Service, Inc. ("Moody's"), Fitch Investors Service, Inc.
("Fitch"), Duff & Phelps Credit Rating Co. ("Duff"), IBCA Inc.
and IBCA Limited ("IBCA") and Thomson BankWatch, Inc.
("BankWatch"):
S&P
Bond Ratings
AAA
Bonds rated AAA have the highest rating assigned
by S&P. Capacity to pay interest and repay principal is
extremely strong.
AA
Bonds rated AA have a very strong capacity to
pay interest and repay principal and differ from the highest
rated issues only in small degree.
A
Bonds rated A have a strong capacity to pay
interest and repay principal although they are somewhat more
susceptible to the adverse effects of changes in circumstances
and economic conditions than obligations in higher rated
categories.
BBB
Bonds rated BBB are regarded as having an
adequate capacity to pay interest and repay principal. Whereas
they normally 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 bonds in this category than for bonds in higher rated
categories.
BB, B, CCC, CC, C
Debt rated BB, B, CCC, CC and C is regarded as
having predominantly speculative characteristics with respect to
capacity to pay interest and repay principal. BB indicates the
least degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability
to default than other speculative grade debt. However, it faces
major ongoing uncertainties or exposure to adverse business,
financial or economic conditions which could lead to inadequate
capacity to meet timely interest and principal payment.
B
Debt rated B has a greater vulnerability to
default but presently has the capacity to meet interest payments
and principal repayments. Adverse business, financial or
economic conditions would likely impair capacity or willingness
to pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable
vulnerability to default, and is dependent upon favorable
business, financial and economic conditions to meet timely
payments of principal. In the event of adverse business,
financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
CC
The rating CC is typically applied to debt
subordinated to senior debt which is assigned an actual or
implied CCC rating.
C
The rating C is typically applied to debt
subordinated to senior debt which is assigned an actual or
implied CCC- debt rating.
D
Bonds rated D are in default, and payment of
interest and/or repayment of principal is in arrears.
Plus (+) or minus (-): The ratings from AA to
CCC may be modified by the addition of a plus or minus sign to
show relative standing within the major ratings categories.
Commercial Paper Rating
The designation A-1 by S&P indicates that the
degree of safety regarding timely payment is either overwhelming
or very strong. Those issues determined to possess overwhelming
safety characteristics are denoted with a plus sign (+)
designation. Capacity for timely payment on issues with an A-2
designation is strong. However, the relative degree of safety
is not as high as for issues designated A-1.
Moody's
Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of
the best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of
such issues.
Aa
Bonds which are rated Aa are judged to be of
high quality by all standards. Together with the Aaa group they
comprise what generally are known as high grade bonds. They are
rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A
Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper medium
grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Baa
Bonds which are rated Baa are considered as
medium grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative
characteristics as well.
Ba
Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal
payments may be very moderate, and therefore not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B
Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms
of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing.
Such issues may be in default or there may be present elements
of danger with respect to principal or interest.
Caa
Bonds which are rated Caa are of poor standing.
Such issues may be in default or there may be present elements
of danger with respect to principal or interest.
Ca
Bonds which are rated Ca present obligations
which are speculative in a high degree. Such issues are often
in default or have other marked shortcomings.
C
Bonds which are rated C are the lowest rated
class of bonds, and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment
standing.
Moody's applies the numerical modifiers 1, 2 and
3 to show relative standing within the major rating categories,
except in the Aaa category and in categories below B. The
modifier 1 indicates a ranking for the security in the higher
end of a rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates a ranking in the lower end
of a rating category.
Commercial Paper Rating
The rating Prime-1 (P-1) is the highest
commercial paper rating assigned by Moody's. Issuers of P-1
paper must have a superior capacity for repayment of short-term
promissory obligations, and ordinarily will be evidenced by
leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization
structures with moderate reliance on debt and ample asset
protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well
established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers (or relating supporting institutions)
rated Prime-2 (P-2) have a strong capacity for repayment of
short-term promissory obligations. This ordinarily will be
evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected
by external conditions. Ample alternate liquidity is
maintained.
Fitch
Bond Ratings
The ratings represent Fitch's assessment of the
issuer's ability to meet the obligations of a specific debt
issue or class of debt. The ratings take into consideration
special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and
operative performance of the issuer and of any guarantor, as
well as the political and economic environment that might affect
the issuer's future financial strength and credit quality.
AAA
Bonds rated AAA are considered to be investment
grade and of the highest credit quality. The obligor has an
exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably
foreseeable events.
AA
Bonds rated AA are considered to be investment
grade and of very high credit quality. The obligor's ability to
pay interest and repay principal is very strong, although not
quite as strong as bonds rated AAA. Because bonds rated in the
AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these
issuers is generally rated F-1+.
A
Bonds rated A are considered to be investment
grade and of high credit quality. The obligor's ability to pay
interest and repay principal is considered to be strong, but may
be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment
grade and of satisfactory credit quality. The obligor's ability
to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse
impact on these bonds and, therefore, impair timely payment.
The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB
Bonds rated BB are considered speculative. The
obligor's ability to pay interest and repay principal may be
affected over time by adverse economic changes. However,
business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service
requirements.
B
Bonds rated B are considered highly speculative.
While bonds in this class are currently meeting debt service
requirements, the probability of continued timely payment of
principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC
Bonds rated CCC have certain identifiable
characteristics, which, if not remedied, may lead to default.
The ability to meet obligations requires an advantageous
business and economic environment.
CC
Bonds rated CC are minimally protected. Default
payment of interest and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment
of interest or principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual or
imminent default of interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the
basis of their ultimate recovery value in liquidation or
reorganization of the obligor. DDD represents the highest
potential for recovery on these bonds and D represents the
lowest potential for recovery.
Plus (+) and minus (-) signs are used with a
rating symbol to indicate the relative position of a credit
within the rating category. Plus and minus signs, however, are
not used in the AAA category covering 12-36 months or the DDD,
DD or D categories.
Short-Term Ratings
Fitch's short-term ratings apply to debt
obligations that are payable on demand or have original
maturities of up to three years, including commercial paper,
certificates of deposit, medium-term notes, and municipal and
investment notes.
Although the credit analysis is similar to
Fitch's bond rating analysis, the short-term rating places
greater emphasis than bond ratings on the existence of liquidity
necessary to meet the issuer's obligations in a timely manner.
F-1+
Exceptionally Strong Credit Quality. Issues
assigned this rating are regarded as having the strongest degree
of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned
this rating reflect an assurance of timely payment only slightly
less in degree than issues rated F-1+.
F-2
Good Credit Quality. Issues carrying this
rating have a satisfactory degree of assurance for timely
payments, but the margin of safety is not as great as the F-1+
and F-1 categories.
Duff
Bond Ratings
AAA
Bonds rated AAA are considered highest credit
quality. The risk factors are negligible, being only slightly
more than for risk-free U.S. Treasury debt.
AA
Bonds rated AA are considered high credit
quality. Protection factors are strong. Risk is modest but may
vary slightly from time to time because of economic conditions.
A
Bonds rated A have protection factors which are
average but adequate. However, risk factors are more variable
and greater in periods of economic stress.
BBB
Bonds rated BBB are considered to have below
average protection factors but still considered sufficient for
prudent investment. Considerable variability in risk during
economic cycles.
BB
Bonds rated BB are below investment grade but
are deemed by Duff as likely to meet obligations when due.
Present or prospective financial protection factors fluctuate
according to industry conditions or company fortunes. Overall
quality may move up or down frequently within the category.
B
Bonds rated B are below investment grade and
possess the risk that obligations will not be met when due.
Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in quality rating within
this category or into a higher or lower quality rating grade.
CCC
Bonds rated CCC are well below investment grade
securities. Such bonds may be in default or have considerable
uncertainty as to timely payment of interest, preferred
dividends and/or principal. Protection factors are narrow and
risk can be substantial with unfavorable economic or industry
conditions and/or with unfavorable company developments.
DD
Defaulted debt obligations. Issuer has failed
to meet scheduled principal and/or interest payments.
Plus (+) and minus (-) signs are used with a
rating symbol (except AAA) to indicate the relative position of
a credit within the rating category.
Commercial Paper Rating
The rating Duff-1 is the highest commercial
paper rating assigned by Duff. Paper rated Duff-1 is regarded
as having very high certainty of timely payment with excellent
liquidity factors which are supported by ample asset protection.
Risk factors are minor. Paper rated Duff-2 is regarded as
having good certainty of timely payment, good access to capital
markets and sound liquidity factors and company fundamentals.
Risk factors are small.
IBCA
Bond and Long-Term Ratings
Obligations rated AAA by IBCA have the lowest
expectation of investment risk. Capacity for timely repayment
of principal and interest is substantial, such that adverse
changes in business, economic or financial conditions are
unlikely to increase investment risk significantly. Obligations
for which there is a very low expectation of investment risk are
rated AA by IBCA. Capacity for timely repayment of principal
and interest is substantial. Adverse changes in business,
economic or financial conditions may increase investment risk
albeit not very significantly.
Commercial Paper and Short-Term Ratings
The designation A1 by IBCA indicates that the
obligation is supported by a very strong capacity for timely
repayment. Those obligations rated A1+ are supported by the
highest capacity for timely repayment. Obligations rated A2 are
supported by a strong capacity for timely repayment, although
such capacity may be susceptible to adverse changes in business,
economic or financial conditions.
International and U.S. Bank Ratings
An IBCA bank rating represents IBCA's current
assessment of the strength of the bank and whether such bank
would receive support should it experience difficulties. In its
assessment of a bank, IBCA uses a dual rating system comprised
of Legal Ratings and Individual Ratings. In addition, IBCA
assigns banks Long- and Short-Term Ratings as used in the
corporate ratings discussed above. Legal Ratings, which range
in gradation from 1 through 5, address the question of whether
the bank would receive support provided by central banks or
shareholders if it experienced difficulties, and such ratings
are considered by IBCA to be a prime factor in its assessment of
credit risk. Individual Ratings, which range in gradations from
A through E, represent IBCA's assessment of a bank's economic
merits and address the question of how the bank would be viewed
if it were entirely independent and could not rely on support
from state authorities or its owners.
BankWatch
Commercial Paper and Short-Term Ratings
The rating TBW-1 is the highest short-term
rating assigned by BankWatch; the rating indicates that the
degree of safety regarding timely repayment of principal and
interest is very strong.
In addition to ratings of short-term
obligations, BankWatch assigns a rating to each issuer it rates,
in gradations of A through E. BankWatch examines all segments
of the organization including, where applicable, the holding
company, member banks or associations, and other subsidiaries.
In those instances where financial disclosure is incomplete or
untimely, a qualified rating (QR) is assigned to the
institution. BankWatch also assigns, in the case of foreign
banks, a country rating which represents an assessment of the
overall political and economic stability of the country in which
the bank is domiciled.
<PAGE>
<TABLE>
<CAPTION>
PRAIRIE FUNDS
__________________________________________________________________
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 9, 1994
__________________________________________________________________
Managed
Assets Managed Equity Special International
Income Assets Income Growth Opportunities Equity
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
Assets
Cash . . . . . . . . . . . . . $ 11,110 $ 11,110 $ 11,111 $ 11,111 $ 11,111 $ 11,111
Deferred organization costs . 102,917 102,917 102,917 102,917 102,917 102,917
Total Assets . . . . . . . . 114,027 114,027 114,028 114,028 114,028 114,028
Liabilities
Organization costs payable . . 102,917 102,917 102,917 102,917 102,917 102,917
Net Assets . . . . . . . . . . . . $ 11,110 $ 11,110 $ 11,111 $ 11,111 $ 11,111 $ 11,111
Net Asset Value, Offering Price and
Redemption Price per Share:
Class A Shares:
Net assets . . . . . . . . . . $ 10 $ 3,703 $ 3,703 $ 3,703 $ 3,703 $ 3,703
Shares outstanding
($0.001 par value) . . . . . . 1 370 370 370 370 370
Net asset value . . . . . . . 10.00 10.00 10.00 10.00 10.00 10.00
Sales charge - 4.50% of public
offering price . . . . . . . . 0.47 0.47 0.47 0.47 0.47 0.47
Maximum Offering Price . . . . $ 10.47 $ 10.47 $ 10.47 $ 10.47 $ 10.47 $ 10.47
Class B Shares:
Net assets . . . . . . . . . . $ 5,550 $ 3,703 $ 3,704 $ 3,704 $ 3,704 $ 3,704
Shares outstanding
($0.001 par value) . . . . . . 555 370 370 370 370 370
Net asset value . . . . . . . $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Class I Shares:
Net assets: . . . . . . . . . $ 5,550 $ 3,704 $ 3,704 $ 3,704 $ 3,704 $ 3,704
Shares outstanding
($0.001 par value) . . . . . . 555 370 370 370 370 370
Net asset value . . . . . . . $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00
Composition of Net Assets:
Shares of beneficial interest,
at par . . . . . . . . . . . . $ 1 $ 1 $ 1 $ 1 $ 1 $ 1
Additional paid-in capital . . 11,108 11,109 11,110 11,110 11,110 11,110
Net Assets, December 9, 1994 . . . $ 11,110 $ 11,110 $ 11,111 $ 11,111 $ 11,111 $ 11,111
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
U.S.
International Intermediate Government Money Municipal
Bond Bond Municipal Money Market Market Money
Fund Fund Bond Fund Fund Fund Market Fund
<S> <C> <C> <C> <C> <C> <C>
Assets
Cash . . . . . . . . . . . . . $ 11,111 $ 11,111 $ 11,110 $ 1 $ 2 $ 1
Deferred organization costs . 102,917 102,917 102,917 62,917 87,917 52,917
Total Assets . . . . . . . . 114,028 114,028 114,027 52,818 87,919 52,918
Liabilities
Organization costs payable . . 102,917 102,917 102,917 52,917 87,917 62,917
Net Assets . . . . . . . . . . . . $ 11,111 $ 11,111 $ 11,110 $ 1 $ 2 $ 1
Net Asset Value, Offering Price and
Redemption Price per Share:
Class A Shares:
Net assets . . . . . . . . . . $ 3,703 $ 3,703 $ 10 $ 1 $ 1 $ 1
Shares outstanding
($0.001 par value): . . . . . 370 370 1 1 1 1
Net asset value . . . . . . . 10.00 10.00 10.00 1.00 1.00 1.00
Sales charge - 4.50% for The
Bond Fund and The International
Bond Fund, 3.00% for the
Intermediate Municipal Bond
Fund and 0.00% for the Money
Market Funds) . . . . . . . . 0.47 0.47 0.31 - - -
Maximum Offering Price . . . . $ 10.47 $ 10.47 $ 10.31 $ 1.00 $ 1.00 $ 1.00
Class B Shares:
Net assets . . . . . . . . . . $ 3,704 $ 3,704 $ 5,550 $ - $ 1 $ -
Shares outstanding
($0.001 par value) . . . . . . 370 370 555 - 1 -
Net asset value . . . . . . . $ 10.00 $ 10.00 $ 10.00 $ - $ 1.00 $ -
Class I Shares:
Net assets: . . . . . . . . . $ 3,704 $ 3,704 $ 5,550 $ - $ - $ -
Shares outstanding
($0.001 par value) . . . . . . 370 370 555 - - -
Net asset value . . . . . . . $ 10.00 $ 10.00 $ 10.00 $ - $ - $ -
Composition of Net Assets:
Shares of beneficial interest,
at par . . . . . . . . . . . . $ 1 $ 1 $ 0 $ 0 $ 0 $ 0
Additional paid-in capital . . 11,110 11,110 11,109 1 2 1
Net Assets, December 9, 1994 . . . $ 11,111 $ 11,111 $ 11,110 $ 1 $ 2 $ 1
See Notes to Financial Statements.
</TABLE>
<PAGE>
PRAIRIE FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 9, 1994
NOTE 1-GENERAL
Prairie Funds (the "Trust") was organized as a Massachusetts
Business Trust on October 19, 1994. The Trust is registered
under the Investment Company Act of 1940 (the "Act") as an open-
end management investment company consisting of twelve
portfolios (collectively, the "Funds").
First Chicago Investment Advisers, Inc.("First Chicago") serves
as investment adviser and administrator to the Trust. ANB
Investment Management and Trust Company ("ANB") serves as
investment sub-advisor to the International Equity Fund.
Concord Financial Group, Inc. (the "Distributor"), as wholly-
owned subsidiary of Concord Holding Corp. ("Concord"), serves as
each Fund's distributor.
The Funds each offer three classes of shares - Class A Shares,
Class B Shares and Class I Shares. Class A Shares, Class B
Shares and Class I Shares are essentially the same except that
Class A Shares and Class B Shares bear the fees that are payable
under a Shareholder Services Plan (the "Service Plan"), at an
annual rate of 0.25% of the average daily net assets of the
outstanding Class A Shares and Class B Shares, respectively. In
addition, Class B Shares bear the fees that are payable under a
Distribution Plan, adopted pursuant to Rule 12b-1 under the Act,
at an annual rate of 0.75% (0.50% in the case of The
Intermediate Tax-Exempt Fund) of the average daily act assets of
the outstanding Class B Shares.
The Funds have had no operations other than the sale to Concord
of the following shares:
<TABLE>
Shares Net Asset Value of
Fund Purchased Shares Purchased
<S> <C> <C>
The Managed Assets Income Fund 1,111 $11,110
The Managed Assets Fund 1,110 11,110
The Equity Income Fund 1,110 11,111
The Growth Fund 1,110 11,111
The Special Opportunities Fund 1,110 11,111
The International Equity Fund 1,110 11,111
The Bond Fund 1,110 11,111
The International Bond Fund 1,110 11,111
The Intermediate Municipal Bond Fund 1,111 11,110
The U.S. Government Money Market Fund 1 1
The Money Market Fund 2 2
The Municipal Money Market Fund 1 1
</TABLE>
Organization costs incurred in connection with the organization
and initial registration of the Funds will be paid initially by
Concord and reimbursed by the Funds. Such organizational costs
have been deferred and will be amortized ratably over a period
of sixty months from the commencement of operations.
NOTE 2-AGREEMENTS
The Trust has a Management Agreement with First Chicago.
Pursuant to the terms of the management agreement, First Chicago
manages the investments of each Fund and is responsible for the
purchases and sales of each Fund's portfolio securities. For
its services, First Chicago is entitled to the following fees
(annualized), accrued daily and paid monthly:
The Managed Assets Income Fund 0.65%
The Managed Assets Fund 0.65%
The Equity Income Fund 0.50%
The Growth Fund 0.65%
The Special Opportunities Fund 0.70%
The International Equity Fund 0.80%
The Bond Fund 0.55%
The International Bond Fund 0.70%
The Intermediate Municipal Bond Fund 0.40%
The U.S. Government Money Market Fund 0.40%
The Money Market Fund 0.40%
The Municipal Money Market Fund 0.40%
First Chicago has entered into a Sub-Investment Advisory
Agreement with ANB. Pursuant to the terms of the sub-investment
advisory agreement, ANB provides investment assistance and the
day-to-day management of the investments of The International
Equity Fund. For its services, First Chicago has agreed to pay
ANB a fee, accrued daily and paid monthly, at an annual rate of
0.40%.
The Trust has an Administration Agreement with First Chicago.
Pursuant to the terms of the agreement, First Chicago has agreed
to assist in all aspects of the Trust's operations. For its
services, First Chicago is entitled to a fee, accrued daily and
paid monthly at an annual rate of 0.15% of each Fund's average
daily net assets.
First Chicago has entered into a Master Sub-Administration
Agreement with Concord. Pursuant to the terms of this
agreement, Concord has agreed to assist in providing certain
administrative services for the Trust. For its services,
Concord will receive a fee from First Chicago.
The Distributor has entered into a Distribution Agreement with
the Trust. The Distributor does not receive a fee under the
Distribution Agreement.
Under the Service Plan with respect to the Funds' Class A Shares
and Class B Shares, each Fund pays the Distributor for certain
personal services relating to shareholder accounts and certain
services related to the maintenance of shareholder accounts at
an annual rate of 0.25% of the average net assets of the
outstanding Class A Shares and Class B Shares. Under the
Service Plan, the Distributor may make payments to other service
organizations in respect of the provision of these services to
their clients who are the beneficial owners of Class A Shares
and Class B Shares.
Under the Distribution Plan with respect to the Funds' Class B
Shares, each Fund pays the Distributor for advertising,
marketing and distributing Class B Shares at an annual rate of
0.75% of the average net assets of the outstanding Class B
Shares. Under the Service Plan, the Distributor may make
payments to other service organizations in respect of the
provision of these services to their clients who are the
beneficial owners of Class A Shares and Class B Shares. The
fees payable under the Distribution Plan are payable without
regard to actual expenses incurred.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholder and Board of Trustees
Prairie Funds
We have audited the accompanying statements of assets and
liabilities of Prairie Funds (comprising, The Managed Assets
Income Fund, The Managed Assets Fund, The Equity Income Fund,
The Growth Fund, The Special Opportunities Fund, The
International Equity Fund, The Bond Fund, The International Bond
Fund, The Intermediate Municipal Bond Fund, The U.S. Government
Money Market Fund, The Money Market Fund, The Municipal Money
Market Fund) (the "Trust") as of December 9, 1994. These
statements of assets and liabilities are the responsibility of
the Trust's management. Our responsibility is to express an
opinion on these statements of assets and liabilities based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statements of assets and liabilities are free of material
misstatement. An audit includes examining, on a text basis,
evidence supporting the amounts and disclosures in the
statements of assets and liabilities. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
statements of assets and liabilities presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the statements of assets and liabilities
referred to above present fairly, in all material respects, the
financial position of each of the Funds comprising the Prairie
Funds at December 9, 1994, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
New York, New York
December 9, 1994
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(1) Statement of Assets and Liabilities as
of December 9, 1994
(2) Report of Ernst & Young LLP, Indepen-
dent Auditors, dated December 9, 1994
(b) Exhibits:
(1) Amended and Restated Agreement and
Declaration of Trust*
(2) By-Laws*
(5) (a) Investment Advisory Agreement*
(b) Sub-Investment Advisory Agreement*
(6) Distribution Agreement*
(8) Custody Agreement*
(9) (a) Administration Agreement*
(9) (b) Master Sub-Administration Agreement*
(9) (c) Shareholder Services Plan*
(10) Opinion (including consent) of
Stroock & Stroock & Lavan
(11) Consent of Independent Auditors
(15) Distribution Plan*
Other Exhibit:
Secretary's Certificate
* Previously filed.
Item 25. Persons Controlled by or Under Common Control
with Registrant
Not applicable.
Item 26. Number of Holders of Securities
(1) (2)
Number of Record
Title of Class Holders
Shares of beneficial interest,
par value $.001 per share
Managed Assets Fund 1
Managed Assets Income Fund 1
Equity Income Fund 1
Growth Fund 1
International Equity Fund 1
Special Opportunities Fund 1
International Bond Fund 1
Bond Fund 1
Intermediate Municipal Bond Fund 1
U.S. Government Money Market Fund 1
Money Market Fund 1
Municipal Money Market Fund 1
Item 27. Indemnification
Reference is made to Article EIGHTH of the
Registrant's Declaration of Trust filed as Exhibit 1 hereto. The
application of these provisions is limited by Article 10 of the
Registrant's By-Laws filed as Exhibit 2 hereto and by the
following undertaking set forth in the rules promulgated by the
Securities and Exchange Commission:
Insofar as indemnification for
liabilities arising under the
Securities Act of 1933 may be
permitted to trustees, officers
and controlling persons of the
registrant pursuant to the
foregoing provisions, or
otherwise, the registrant has
been advised that in the opinion
of the Securities and Exchange
Commission such indemnification
is against public policy as
expressed in such Act and is,
therefore, unenforceable. In the
event that a claim for
indemnification against such
liabilities (other than the
payment by the registrant of
expenses incurred or paid by a
trustee, officer or controlling
person of the registrant in the
successful defense of any action,
suit or proceeding) is asserted
by such trustee, officer or
controlling person in connection
with the securities being
registered, the registrant will,
unless in the opinion of its
counsel the matter has been
settled by controlling precedent,
submit to a court of appropriate
jurisdiction the question whether
such indemnification by it is
against public policy as
expressed in such Act and will be
governed by the final
adjudication of such issue.
Reference also is made to the Distribution
Agreement filed as Exhibit 6 hereto.
Item 28. Business and Other Connections of Investment Adviser
(a) Investment Adviser
Registrant is fulfilling the requirement of this
Item 28 to provide a list of the officers and directors of First
Chicago Investment Management Company (the "Investment Adviser"),
together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by the
Investment Adviser or those of its officers and directors during
the past two years, by incorporating by reference the information
contained in the Form ADV filed with the SEC pursuant to the
Investment Advisers Act of 1940 by the Investment Adviser (SEC
File No. 801-47947).
(b) Sub-Investment Adviser
Registrant is fulfilling the requirement of this
Item 28 to provide a list of the officers and directors of ANB
Investment Management and Trust Company (the "Sub-Adviser"),
together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by the
Sub-Adviser or those of its officers and directors during the
past two years, by incorporating by reference the information
contained in the Form ADV filed with the SEC pursuant to the
Investment Advisers Act of 1940 by the Sub-Adviser (SEC File
No. 801-33358).
Item 29. Principal Underwriters
(a) Other investment companies for which
Registrant's principal underwriter (exclusive distributor) acts
as principal underwriter or exclusive distributor:
The Infinity Mutual Funds, Inc.
Emerald Funds, Inc.
Pacific Horizon Funds, Inc.
(b) The information required by this Item 29(b)
regarding each director or officer of Concord Financial Group,
Inc. is incorporated by reference to Schedule A of Form BD filed
by Concord Financial Group, Inc. pursuant to the Securities
Exchange Act of 1934 (SEC File No. 8-37601).
Item 30. Location of Accounts and Records
1. First Chicago Investment Management Company
Three First National Plaza
Chicago, Illinois 60670
2. Concord Financial Group, Inc.
125 West 55th Street
11th Floor
New York, New York 10019
3. Primary Funds Service Corp.
P.O. Box 9743
Providence, Rhode Island 02940-9743
4. The Bank of New York
110 Washington Street
New York, New York 10286
Item 31. Management Services
Not Applicable
Item 32. Undertakings
Registrant hereby undertakes
(1) to file a post-effective amendment, using
financial statements which need not be
certified, within four to six months from
the effective date of Registrant's 1933 Act
Registration Statement.
(2) to call a meeting of shareholders for the
purpose of voting upon the question of
removal of a trustee or trustees when
requested in writing to do so by the
holders of at least 10% of the Registrant's
outstanding shares of beneficial interest
and in connection with such meeting to
comply with the provisions of Section 16(c)
of the Investment Company Act of 1940
relating to shareholder communications.
(3) To furnish each person to whom a prospectus
is delivered with a copy of the
Registrant's latest Annual Report to
Shareholders, upon request and without
charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the
Registrant has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of
New York on the
9th day of December, 1994.
PRAIRIE FUNDS
BY: /s/Joseph F. Kissel*
Joseph F. Kissel, President
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, this
Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates
indicated.
Signatures Title Date
/s/Joseph F. Kissel* President (Principal December 9, 1994
Joseph F. Kissel Executive Officer)
/s/ Richard A. Fabietti* Treasurer (Principal December 9, 1994
Richard A. Fabietti Financial and
Accounting Officer)
/s/John P. Gould* Trustee December 9, 1994
John P. Gould
/s/Marilyn McCoy* Trustee December 9, 1994
Marilyn McCoy
/s/Raymond D. Oddi* Trustee December 9, 1994
Raymond D. Oddi
*BY:/s/Martin G. Flanigan December 9, 1994
Martin G. Flanigan,
Attorney-in-Fact
<PAGE>
FIRST [LOGO]
PRAIRIE
FUNDS
First Prairie
Money Market Fund
MONEY MARKET SERIES AND GOVERNMENT SERIES
- ---------------------------------------------------
PROSPECTUS--April 11, 1994
First Prairie Money Market Fund (the "Fund") is an open-end,
diversified, management investment company, known as a money
market mutual fund. Its goal is to provide investors with as high
a level of current income as is consistent with the preservation
of capital and the maintenance of liquidity.
The Fund permits investors to invest in two separate
portfolios, the Money Market Series and the Government Series.
The Money Market Series invests in short-term money market
instruments consisting of securities issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities, bank obligations, repurchase agreements,
commercial paper and other corporate obligations. The Government
Series invests only in short-term securities issued or guaranteed
as to principal and interest by the U.S. Government and
repurchase agreements in respect thereof.
Investors can invest, reinvest or redeem shares at any
time without charge or penalty imposed by the Fund.
The First National Bank of Chicago (the "Manager") serves
as the Fund's investment adviser. Dreyfus Service Corporation
(the "Distributor"), a wholly-owned subsidiary of The Dreyfus
Corporation, serves as the Fund's distributor.
The Fund bears certain costs of advertising, administration
and/or distribution pursuant to a plan adopted in accordance with
Rule 12b-1 under the Investment Company Act of 1940.
An investment in the Fund is neither insured nor guaranteed by
the U.S. Government. There can be no assurance that the Series
will be able to maintain a stable net asset value of $1.00 per
share. The Fund's shares are not deposits or obligations of, or
guaranteed by, the Manager or any of its affiliates or any
bank, and are not insured by the Federal Deposit Insurance
Corporation ("FDIC"), the Federal Reserve Board or any other
agency. The Fund's shares involve certain investment risks,
including the possible loss of principal. The Fund's yield
fluctuates and is not guaranteed.
This Prospectus sets forth concisely information about the Fund
that an investor should know before investing. It should be read
and retained for future reference.
Part B (also known as the Statement of Additional Information),
dated April 11, 1994, which may be revised from time to time,
provides a further discussion of certain areas in this Prospectus
and other matters which may be of interest to some investors. It
has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. For a free copy, write to
the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144, or call toll free 1-800-346-3621. When telephoning,
ask for Operator 666.
- ------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PAGE 1
<PAGE>
Table of Contents
Annual Fund Operating Expenses................ 3
Condensed Financial Information............... 4
Highlights.................................... 6
Yield Information............................. 9
Description of the Fund....................... 9
Management of the Fund........................ 21
How to Buy Fund Shares........................ 24
Shareholder Services.......................... 28
How to Redeem Fund Shares..................... 33
Service Plan.................................. 38
Dividends, Distributions and Taxes............ 40
General Information........................... 42
<PAGE>
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
MONEY MARKET GOVERNMENT
SERIES SERIES
- ---------------------------------------------------------------
<S> <C> <C>
Management Fees .55% .55%
12b-1 Fees (distribution and servicing) .25% .25%
Other Expenses .19% .08%
Total Series Operating Expenses .99% .88%
</TABLE>
---------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
EXAMPLE
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end
of each time period: 1 YEAR $ 10 $ 9
3 YEARS $ 32 $ 28
5 YEARS $ 55 $ 49
10 YEARS $121 $108
</TABLE>
- --------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE
THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE SERIES' ACTUAL
PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESS THAN 5%.
- --------------------------------------------------------------
The purpose of the foregoing table is to assist investors in
understanding the various costs and expenses borne by each
Series, and therefore indirectly by investors, the payment of
which will reduce investors' return on an annual basis.
Long-term investors could pay more in 12b-1 fees than the
economic equivalent of paying a front-end sales charge. The
information in the foregoing table does not reflect any fee
waiver or expense reimbursement arrangements that may be in
effect. The Manager, affiliates of the Manager and certain
Service Agents (as defined below) may charge their clients
direct fees for effecting transactions in Series shares; such
fees are not reflected in the foregoing table. See
"Management of the Fund," "How to Buy Fund Shares" and
"Service Plan."
<PAGE>
Condensed Financial
Information
The information in the following tables has been audited by Ernst
& Young, the Fund's independent auditors, whose report thereon
appears in the Statement of Additional Information.
Further financial data and related notes are included in
the Statement of Additional Information, available
upon request.
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 Money Market Series for each year
indicated. This information has been derived from information
provided in the Fund's financial statements.
<TABLE>
<CAPTION>
Money Market Series
Year Ended December 31,
- -------------------------------------------------------------------------------------------------
1986(1) 1987 1988 1989 1990 1991 1992 1993
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of year $1.0000 $1.0000 $ .9999 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- ------- ------- ------- -------
INVESTMENT
OPERATIONS:
Investment
income--net .0552 .0585 .0679 .0842 .0734 .0543 .0313 .0274
Net realized gain
(loss) on
investments -- (.0001) .0001 -- -- -- -- .0001
------- ------- ------- ------- ------- ------- ------- -------
TOTAL FROM
INVESTMENT
OPERATIONS .0552 .0584 .0680 .0842 .0734 .0543 .0313 .0275
------- ------- ------- ------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from
investment
income--net (.0552) (.0585) (.0679) (.0842) (.0734) (.0543) (.0313) (.0274)
Dividends from net
realized gain on
investments -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
TOTAL
DISTRIBUTIONS (.0552) (.0585) (.0679) (.0842) (.0734) (.0543) (.0313) (.0274)
------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end
of year $1.0000 $ .9999 $1.0000 $1.0000 $1.0000 $1.0000 $1.0000 $1.0001
------- ------- ------- ------- ------- ------- ------- -------
TOTAL INVESTMENT
RETURN 6.26%(2) 6.01% 7.01% 8.75% 7.59% 5.57% 3.18% 2.77%
RATIOS/SUPPLEMENTAL
DATA:
Ratio of expenses to
average net assets .88%(2) .96% .98% .95% .96% .97% .98% .94%
Ratio of net
investment income
to average net
assets 5.73%(2) 5.82% 6.82% 8.34% 7.33% 5.42% 3.17% 2.73%
Decrease reflected
in above expense
ratios due to
expense
reimbursements .23%(2) .03% .01% -- -- -- -- .05%
Net Assets, end of
year (000's
omitted) $174,024 $128,485 $159,814 $355,260 $414,258 $456,791 $260,865 $162,623
<FN>
- ------------------------
(1) From February 5, 1986 (commencement of operations) to December 31, 1986.
(2) Annualized.
</TABLE>
<PAGE>
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 Government Series for each year
indicated. This information has been derived from information
provided in the Fund's financial statements.
<TABLE>
<CAPTION>
Government Series
Year Ended December 31,
- -------------------------------------------------------------------------------
1987(1) 1988 1989 1990 1991 1992 1993
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net asset value,
beginning of year $1.0000 $1.0004 $1.0001 $1.0000 $1.0000 $1.0000 $1.0000
------- ------- ------- ------- ------- ------- -------
INVESTMENT OPERATIONS:
Investment income--net .0409 .0652 .0811 .0715 .0498 .0283 .0249
Net realized gain
(loss)
on investments .0004 -- -- -- -- -- (.0001)
------- ------- ------- ------- ------- ------- -------
TOTAL FROM
INVESTMENT
OPERATIONS .0413 .0652 .0811 .0715 .0498 .0283 .0248
------- ------- ------- ------- ------- ------- -------
DISTRIBUTIONS:
Dividends from
investment
income--net (.0409) (.0652) (.0811) (.0715) (.0498) (.0283) (.0249)
Dividends from net
realized gain on
investments -- (.0003) (.0001) -- -- -- --
------- ------- ------- ------- ------- ------- -------
TOTAL
DISTRIBUTIONS (.0409) (.0655) (.0812) (.0715) (.0498) (.0283) (.0249)
------- ------- ------- ------- ------- ------- -------
Net asset value, end
of year $1.0004 $1.0001 $1.0000 $1.0000 $1.0000 $1.0000 $ .9999
------- ------- ------- ------- ------- ------- -------
TOTAL INVESTMENT
RETURN 6.21%(2) 6.75% 8.43% 7.39% 5.10% 2.87% 2.52%
RATIOS/SUPPLEMENTAL
DATA:
Ratio of expenses to
average net assets .56%(2) .80% .93% .93% .90% .91% .74%
Ratio of net
investment income to
average net assets 6.11%(2) 6.56% 8.05% 7.09% 4.97% 2.87% 2.48%
Decrease reflected in
above expense ratios
due to expense
reimbursements .42%(2) .17% .02% -- -- -- .14%
Net Assets, end of
year (000's omitted) $99,904 $141,348 $272,578 $777,257 $990,897 $548,733 $154,613
<FN>
- ------------------------
(1) From May 1, 1987 (commencement of operations) to December 31, 1987.
(2) Annualized.
</TABLE>
<PAGE>
Highlights
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus.
THE FUND The Fund is an open-end, management investment company,
known as a money market mutual fund.
INVESTMENT OBJECTIVE The Fund's goal is to provide investors
with as high a level of current income as is consistent with the
preservation of capital and the maintenance of liquidity.
THE SERIES The Fund permits investors to invest in two separate
portfolios: the Money Market Series and the Government Series.
MANAGEMENT POLICIES Each Series seeks to maintain a stable net
asset value of $1.00 per share for purchases and redemptions.
There can be no assurance that it will be able to do so.
In accordance with Rule 2a-7 under the Investment Company
Act of 1940, each Series will maintain a dollar-weighted average
portfolio maturity of 90 days or less, and purchase only
instruments with remaining maturities of 13 months or less.
MONEY MARKET SERIES The Money Market Series invests in
short-term money market instruments, including securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, bank obligations, repurchase agreements,
commercial paper and other corporate obligations. During normal
market conditions, at least 25% of the Money Market Series'
assets will be invested in bank obligations.
The Series will purchase only instruments which are rated
in one of the two highest rating categories by at least two
nationally recognized independent rating agencies, or of
comparable quality, in accordance with Rule 2a-7.
GOVERNMENT SERIES The Government Series invests only in
short-term securities issued or guaranteed as to principal and
interest by the U.S. Government, and repurchase agreements in
respect of such securities.
<PAGE>
MANAGER AND MANAGEMENT FEE The First National Bank of Chicago
("Manager") is the Fund's investment adviser.
The Fund has agreed to pay the Manager a monthly fee at the
annual rate of .55 of 1% of the value of each Series' average
daily net assets.
SALES CHARGES AND EXPENSES Investors may invest, reinvest or
redeem shares at any time without charge or penalty imposed by
the Fund.
All expenses incurred in the operation of the Fund are
borne by the Fund, including taxes, interest, brokerage fees and
investment advisory fees. Shareholders also bear certain costs of
administration and/or distribution pursuant to a plan adopted in
accordance with Rule 12b-1 under the Investment Company Act of
1940, as more fully described under "Service Plan."
HOW TO BUY FUND SHARES Orders for the purchase of shares may be
placed through a number of institutions including the Manager,
the Distributor and affiliates of the Manager including First
Chicago Investment Services, Inc., a registered broker-dealer,
and certain other banks, securities dealers and other industry
professionals, such as investment advisers, accountants and
estate planning firms (collectively, "Service Agents").
The minimum initial investment is $1,000 ($250 for IRAs and other
personal retirement plans). All subsequent investments must be
at least $100.
See "How to Buy Fund Shares."
SHAREHOLDER SERVICES The Fund offers its shareholders certain
services and privileges including: Exchange Privilege,
Auto-Exchange Privilege, Automatic Asset Builder, Government
Direct Deposit Privilege, Dividend Sweep Privilege, Automatic
Withdrawal Plan and TeleTransfer Privilege. (Certain services and
privileges may not be available through all Service Agents.)
FREE CHECKWRITING Investors may request on the Account
Application that the Fund provide Redemption Checks drawn on the
Fund's account. Redemption Checks may be made payable to any
person in the amount of $500 or more. There is no charge for
this service.
<PAGE>
MONTHLY DIVIDENDS The Fund ordinarily declares dividends from
each Series' net investment income daily. Dividends are usually
paid on the last calendar day of each month, and are
automatically reinvested in additional shares unless the
investor elects payment in cash.
HOW TO REDEEM FUND SHARES Generally, investors should contact
their representatives at the Manager or appropriate Service Agent
for redemption instructions.
Investors who are not clients of the Manager or a Service Agent
may redeem Fund shares by written request, through the Wire
Redemption Privilege, through the Telephone Redemption Privilege
or through the TeleTransfer privilege.
See "How to Redeem Fund Shares."
RISKS AND SPECIAL CONSIDERATIONS Moneys invested in the Fund are
not bank deposits or obligations of, or guaranteed by, the
Manager or any of its affiliates and are not insured by the FDIC
or any other governmental agency.
There can be no assurance the Series will be able to
maintain a stable net asset value of $1.00 per share.
Since the Money Market Series' portfolio may contain
securities issued by foreign banks, the Series may be subject to
additional investment risks that are different from those
incurred by a fund which invests only in U.S. domestic
securities.
See "Descriptions of the Fund--Risk Factors Relating to
the Money Market Series."
Yield Information
From time to time, each Series advertises its yield. Both yield
figures are basedon historical earnings and are not intended to
indicate future performance. It can be expected that these
yields will fluctuate substantially. The yield of a Series
refers to the income generated by an investment in such Series
over a seven-day period (which period will be stated in the
advertisement). This income is then annualized. That is, the
amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The effective yield is
calculated similarly, but, when annualized, the income earned by
an investment in the Series is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of
the compounding effect of this assumed reinvestment. Each Series'
yield and effective yield may reflect absorbed expenses pursuant
to any undertaking that may be in effect. See "Management of the
Fund."
"Yield" refers to the Series' income over a 7-day period, which
is then annualized.
"Effective yield" assumes that income is reinvested; it will be
slightly higher than "yield" because of the effect of compounding
reinvested income.
Yield information is useful in reviewing a Series' performance,
but because yields will fluctuate, under certain conditions such
information may not provide a basis for comparison with domestic
bank deposits, other investments which pay a fixed yield for a
stated period of time, or other investment companies which may
use a different method of computing yield.
Yields fluctuate, so this information may not be directly
comparable to bank deposits or other investments which
pay a fixed yield for a stated period of time.
Comparative performance information may be used from time to
time in advertising or marketing the Fund's shares, including
data from Lipper Analytical Services, Inc., Bank Rate MonitorTM,
N. Palm Beach, Fla. 33408, IBC/Donoghue's Money Fund Report,
Morningstar, Inc. and other industry publications.
Description of the Fund
GENERAL The Fund is a "series fund," which is a mutual fund
divided into separate portfolios. Each portfolio is treated as a
separate entity for certain matters under the Investment Company
Act of 1940 and for other purposes, and a shareholder of one
Series is not deemed to be a shareholder of any other
The Fund is a "series fund" currently offering two portfolios the
Money Market Series and the Government Series.
Series. As described below, for certain matters Fund
shareholders vote together as a group: as to others they vote
separately by Series.
INVESTMENT OBJECTIVE The Fund's goal is to provide investors
with as high a level of current income as is consistent with the
preservation of capital and the maintenance of liquidity. The
Fund's investment objective cannot be changed without approval by
the holders of a majority (as defined in the Investment Company
Act of 1940) of the Fund's outstanding voting shares. There can
be no assurance that the Fund's investment objective will be
achieved. Securities in which the Series invest may not earn as
high a level of current income as long-term or lower quality
securities which generally have less liquidity, greater market
risk and more fluctuation in market value.
The Fund's goal is to provide as high a level of current income
as is consistent with preservation of capital and maintenance of
liquidity.
MANAGEMENT POLICIES Each Series seeks to maintain a net asset
value of $1.00 per share for purchases and redemptions. To do so,
the Fund uses the amortized cost method of valuing each Series'
securities pursuant to Rule 2a-7 under the Investment Company Act
of 1940, certain requirements of which are summarized below.
There can be no assurance that the Series will be able to
maintain a stable net asset value of $1.00 per share.
Each Series seeks to maintain a net asset value of $1.00 per
share for purchases and redemptions. There can be no assurance it
will be able to do so.
In accordance with Rule 2a-7, each Series will maintain a
dollar-weighted average portfolio maturity of 90 days or less,
purchase only instruments having remaining maturities of 13
months or less and invest only in U.S. dollar denominated
securities determined in accordance with procedures
established by the Board of Trustees to present minimal credit
risks and, with respect to the Money Market Series only, which
are rated in one of the two highest rating categories for debt
obligations by at least two nationally recognized statistical
rating organizations (or one rating organization if the
instrument was rated by only one such organization) or, if
unrated, are of comparable quality as determined in accordance
with procedures established by the Board of Trustees. The
nationally recognized statistical rating organizations currently
rating instruments of the type the Money Market Series may
purchase are Moody's Investors Service, Inc., Standard & Poor's
Corporation, Duff & Phelps, Inc., Fitch Investors Service, Inc.,
IBCA Limited and IBCA Inc. and Thomson BankWatch, Inc. and their
rating criteria are described in the Appendix to the Fund's
Statement of
Additional Information. This discussion concerning investment
ratings and rating organizations does not apply to the
Government Series because it invests exclusively in securities
issued or guaranteed by the U.S. Government and repurchase
agreements in respect thereof.
For further information regarding the amortized cost method of
valuing securities, see "Determination of Net Asset Value" in the
Fund's Statement of Additional Information.
MONEY MARKET SERIES The Money Market Series invests in
short-term money market obligations, including securities issued
or guaranteed by the U.S. Government or its agencies or
instrumentalities, certificates of deposit, time deposits,
bankers' acceptances and other short-term obligations issued by
domestic banks, foreign branches of domestic banks, foreign
subsidiaries of domestic banks and domestic and foreign branches
of foreign banks, repurchase agreements, and high quality
commercial paper and other short-term corporate obligations,
including those with floating or variable rates of interest. In
addition, the Money Market Series is permitted to lend portfolio
securities and enter into reverse repurchase agreements to the
extent described below. During normal market conditions, at least
25% of the Money Market Series' assets will be invested in bank
obligations, including obligations of foreign banks and branches
described above.
The Money Market Series invests in short-term money market
obligations.
The Money Market Series will not invest more than 5% of
its total assets in the securities (including the securities
collateralizing a repurchase agreement) of, or subject to puts
issued by, a single issuer, except that (i) the Series may invest
more than 5% of its total assets in a single issuer for a period
of up to three business days in certain limited circumstances,
(ii) the Series may invest in obligations issued or guaranteed by
the U.S. Government without any such limitation, and (iii) the
limitation with respect to puts does not apply to unconditional
puts if no more than 10% of the Series' total assets is invested
in securities issued or guaranteed by the issuer of the
unconditional put. Investments in rated securities not rated in
the highest category by at least two rating organizations (or one
rating organization if the instrument was rated by only one such
organization), and unrated securities not determined by
the Board of Trustees to be comparable to those rated in the
highest category, will be limited to 5% of the Money Market
Series' total assets, with the investment in any one such issuer
being limited to no more than the greater of 1% of the Series'
total assets or $1,000,000. As to each security, these
percentages are measured at the time the Money Market Series
purchases the security.
THE GOVERNMENT SERIES The Government Series invests only in
short-term securities issue or guaranteed as to principal and
interest by the U.S. Government and repurchase agreements in
respect to such securities.
The Government Series invests only in short-term securities
issued or guaranteed by the U.S. Government and repurchase
agreements in respect of such securities.
PORTFOLIO SECURITIES Securities issued or guaranteed by the
U.S. Government include U.S. Treasury securities, which differ
only in their interest rates, maturities and times of issuance.
The Money Market Series and the Government Series may
invest in Treasury Bills, Treasury Notes and Treasury Bonds,
Treasury Bills have initial maturities of one year or less;
Treasury Notes have have initial maturities of one to ten years;
and Treasury Bonds generally have initial maturities of greater
than ten years. The Government Series and the Money Market
Series also may invest in other securities issued or guaranteed
by the U.S. Government, examples of which are Government
National Mortgage Association or Small Business Administration
pass-through certificates and instruments issued by the
United States Maritime Administration. Such securities are
supported by the full faith and credit of the U.S. Treasury.
The Money Market Series and the Government Series may invest in
Treasury Bills, Treasury Notes and Treasury Bonds.
In addition, the Money Market Series may invest in obligations
issued or guaranteed by U.S. Government agencies and
instrumentalities. Some of these obligations, such as those of
the Federal Home Loan Banks, are supported by the right of the
issuer to borrow from the U.S. Treasury; others, such as those
issued by the Federal National Mortgage Association, by
discretionary authority of the U.S. Government to purchase
certain obligations of the agency or instrumentality; and others,
such as those issued by the Student Loan Marketing Association,
only by the credit of the agency or instrumentality. These
securities bear fixed, floating or variable rates of interest.
Interest may fluctuate based on generally recognized reference
rates or the relationship of rates. While the U.S. Government
provides financial support to such U.S. Government-sponsored
The Money Market Series also may invest in securities of U.S.
Government agencies and instrumentalities such as FHLB, FNMA and
SLMA.
agencies and instrumentalities, no assurance can be given that
it will always do so, since it is not so obligated by law. The
Money Market Series will invest in such securities only when it
is satisfied that the credit risk with respect to the issuer is
minimal. 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. The Fund will invest in time deposits of banks
that have total assets in excess of one billion dollars. 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 FDIC.
The Money Market Series also invests in various bank deposit
products such as CDs, time deposits and bankers' acceptances.
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 short-term obligations may include uninsured,
direct obligations bearing fixed, floating or variable interest
rates.
Repurchase agreements involve the acquisition by a Series
of an underlying debt instrument, subject to an obligation of the
seller to repurchase, and the Series to resell, the instrument at
a fixed price, usually not more than one week after its purchase.
The Fund's custodian or sub-custodian will have custody of, and
will hold in a segregated account, securities acquired by a
Series under a repurchase agreement. Repurchase agreements
are considered by the staff of the Securities and Exchange
Commission to be loans by the Series which enters into them. In
an attempt to reduce the risk of incurring a loss on a repurchase
agreement, the Government Series will enter into repurchase
agreements only with selected registered or unregistered
securities dealers or banks with total assets in excess of one
billion dollars, with respect to securities of the type in which
the Government Series may invest; and the Money Market Series
will enter into repurchase agreements only with domestic banks
with total assets in excess of one billion dollars or primary
government securities dealers reporting to the Federal Reserve
Bank of New York, with respect to securities of the type in which
the Money Market Series may Each Series may only enter into
repurchase agreements when the Fund's custodian or sub-custodian
has custody of the underlying collateral.
invest. Each Series will require that additional securities be
deposited with it if the value of the securities purchased should
decrease below resale price. The Manager will monitor on an
ongoing basis the value of the collateral to assure that it
always equals or exceeds the repurchase price. Certain costs may
be incurred in connection with the sale of the securities if the
seller does not repurchase them in accordance with the repurchase
agreement. In addition, if bankruptcy proceedings are commenced
with respect to the seller of the securities, realization on the
securities by a Series may be delayed or limited. Each Series
will consider on an ongoing basis the creditworthiness of the
institutions with which it enters into repurchase agreements.
Commercial paper consists of short-term, unsecured promissory
notes issued to finance short-term credit needs. The commercial
paper purchased by the Money Market Series will consist only of
direct obligations. The other corporate obligations in which the
Money Market Series may invest consist of high quality,
short-term fixed, floating and variable rate notes and bonds
issued by corporations.
The Money Market Series also may purchase floating and
variable rate demand notes and bonds, which are obligations
ordinarily having stated maturities in excess of 13 months, but
which permit the holder to demand payment of principal at any
time, or at specified intervals not exceeding 13 months, in
each case upon not more than 30 days' notice. Variable rate
demand notes include master demand notes which are obligations
that permit the Series to invest fluctuating amounts, which may
change daily without penalty, pursuant to direct arrangements
between the Series, as lender, and the borrower. The interest
rates on these notes fluctuate from time to time. The issuer
of such obligations ordinarily has a corresponding right, after a
given period, to prepay in its discretion the outstanding
principal amount of the obligations plus accrued interest upon a
specified number of days' notice to the holders of such
obligations. The interest rate on a floating rate demand
obligation is based on a known lending rate, such as a bank's
prime rate, and is adjusted automatically each time such rate is
adjusted. The interest rate on a variable rate demand
obligation is adjusted automatically at specified intervals.
Frequently, such obligations are secured by letters of credit or
other credit support arrangements provided by banks.
Because these obligations are direct lending arrangements
between the lender and the borrower, it is not contemplated that
such instrument generally will be traded, and there generally is
no established secondary market for these obligations, although
they are redeemable at face value.
Accordingly, where these obligations are not secured by letters
of credit or other credit support arrangements, the Money Market
Series' right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand.
Such obligations frequently are not rated by credit rating
agencies and the Money Market Series may invest in obligations
which are not so rated only if the Manager determines at the time
of investment that the obligations are of comparable quality to
the other obligations in which the Money Market Series may
invest. The Manager, on behalf of the Money Market Series, will
consider on an ongoing basis the creditworthiness of the issuers
of the floating and variable rate demand obligations in the Money
Market Series' portfolio. The Money Market Series will not invest
more than 10% of the value of its net assets in floating
or variable rate demand obligations as to which the Series
cannot exercise the demand feature on not more than seven days'
notice if there is no secondary market available for these
obligations, and in other illiquid securities.
The Money Market Series may purchase from financial institutions
participation interests in securities in which such Series may
invest. A participation interest gives the Money Market Series an
undivided interest in the security in the proportion that the
Money Market Series' participation interest bears to the total
principal amount of the security. These instruments may have
fixed, floating or variable rates of interest, with remaining
maturities of 13 months or less. If the participation interest
is unrated, or has been given a rating below that which is
permissible for purchase by the Money Market Series, the
participation interest will be backed by an irrevocable
letter of credit or guarantee by a bank that the Board of
Trustees has determined meets the prescribed quality standards
for banks set forth below, or the payment obligation otherwise
will be collateralized by U.S. Government securities, or, in the
case of unrated participation interests, the Manager must
have determined that the instrument is of comparable quality to
those instruments in which the Money Market Series
may invest. For certain participation interests, the Money
Market Series will have the right to demand payment, on not more
than seven days' notice, for all or any part of the Money Market
Series' participation interest in the security, plus accrued
interest. As to these instruments, the Money Market Series
intends to exercise its right to demand payment only upon a
default under the terms of the security, as needed to provide
liquidity to meet redemptions, or to maintain or improve the
quality of its investment portfolio. The Money Market Series will
not invest more than 10% of its net assets in participation
interests that do not have this demand feature, and in other
illiquid securities.
The Money Market Series may invest up to 10% of the value
of its net assets in securities as to which a liquid trading
market does not exist, provided such investments are consistent
with such Series' investment objective. Such securities may
include securities that are not readily marketable, such as
certain securities that are subject to legal or contractual
restrictions on resale and repurchase agreements providing for
settlement in more than seven days after notice. As to these
securities, the Money Market Series is subject to a risk that
should the Series desire to sell them when a ready buyer is not
available at a price that the Fund deems representative of their
value, the value of the Money Market Series' net assets could be
adversely affected. However, if a substantial market of
qualified institutional buyers develops pursuant to Rule 144A
under the Securities Act of 1933, as amended, for certain of
these securities held by the Money Market Series, such Series
intends to treat such securities as liquid securities in
accordance with procedures approved by the Fund's Board of
Trustees. Because it is not possible to predict with assurance
how the market for restricted securities pursuant to Rule 144A
will develop, the Fund's Board of Trustees has directed the
Manager to monitor carefully the Money Market Series' investments
in such securities with particular regard to trading activity,
availability of reliable price information and other relevant
information. To the extent that for a period of time qualified
institutional buyers cease purchasing restricted securities
pursuant to Rule 144A, the Money Market Series' investing in
such securities may have the effect of increasing the level of
illiquidity in such Series' portfolio during such period.
The Money Market Series may borrow for temporary or emergency
purposes and for investment purposes, on a secured basis through
entering into reverse repurchase agreements with banks, brokers
or dealers. Reverse repurchase agreements involve the transfer by
the Money Market Series of an underlying debt instrument in
return for cash proceeds based on a percentage of the value of
the security. The Money Market Series retains the right to
receive interest and principal payments on the security. The
Money Market Series will use the proceeds of reverse repurchase
agreements only to make investments which generally either mature
or have a demand feature to resell to the issuer at a date
simultaneous with or prior to the expiration of the reverse
repurchase agreement. At an agreed upon future date, the Money
Market Series repurchases the security, at principal, plus
accrued interest. In certain types of agreements, there is no
agreed upon repurchase date and interest payments are
calculated daily, often based on the prevailing overnight
repurchase rate. The Money Market Series will maintain in a
segregated custodial account cash, cash equivalents, U.S.
Government securities or other high quality liquid debt
securities equal to the aggregate amount of its reverse
repurchase obligations, plus accrued interest, in certain cases,
in accordance with releases promulgated by the Securities and
Exchange Commission. The Securities and Exchange Commission views
reverse repurchase agreement transactions as collateralized
borrowings, and, pursuant to the Investment Company Act of 1940,
the Money Market Series must maintain continuous asset coverage
(that is, total assets including borrowings, less liabilities
exclusive of borrowings) of 300% of the amount borrowed. If the
300% asset coverage with respect to the Money Market Series
should decline as a result of market fluctuations or other
reasons, such Series may be required to sell some of its
portfolio holdings within three days to reduce the debt and
restore 300% asset coverage, even though it may be
disadvantageous from an investment standpoint to sell securities
at that time. As a result of these transactions, the Money
Market Series is exposed to greater potential fluctuations in the
value of its assets and its net asset value per share. Interest
costs on the money borrowed may exceed the return received on
the securities purchased. The Fund's Trustees have considered
the risks to the Money Market Series and its shareholders which
may result from the entry into reverse repurchase agreements
and have determined that the entry into such agreements is
consistent with the Money Market Series' investment objective and
management policies.
From time to time, the Money Market Series may lend
securities from its portfolio to brokers, dealers and other
financial institutions needing to borrow securities to complete
certain transactions. Such loans may not exceed 33 1/3%
of the value of the Money Market Series' total assets. In
connection with such loans, the Money Market Series will receive
collateral consisting of cash, U.S. Government securities or
irrevocable letters of credit. Such collateral will be
maintained at all times in an amount equal to at least 100% of
the current market value of the loaned securities. The Money
Market Series can increase its income through the investment of
such collateral. The Money Market Series continues to be entitled
to the payments in amounts equal to the interest or other
distributions payable on the loaned security and receives
interest on the amount of the loan. Such loans will be terminable
at any time upon specified notice. The Money Market Series might
experience risk of loss if the institution with which it has
engaged in a portfolio loan transaction breaches its agreement
with such Series. The Money Market Series will limit the
entities with which it will enter into securities lending
transactions to those whose securities are eligible for purchase
by the Money Market Series.
CERTAIN FUNDAMENTAL POLICIES The Money Market Series: (i) may
borrow money, to the extent permitted under the Investment
Company Act of 1940; (ii) may invest up to 5% of its total assets
in the obligations of any single issuer, except that up to 25% of
the value of its total assets may be invested (subject to the
provisions of Rule 2a-7), and obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities may be
purchased, without regard to any such limitation; and (iii) will
invest, under normal market conditions, at least 25% of its total
assets in securities issued by banks, including foreign banks and
branches, and may invest up to 25% of its total assets in the
securities of issuers in any other industry, provided that there
is no limitation on investments in obligations issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities. The Government Series may: (i) borrow money
from banks (other than the Manager or The Fund has adopted
certain fundamental policies intended to limit the risk of
each Series' investment portfolio. These policies cannot be
changed, as to either Series, without approval by a majority of
such Series' shareholders.
its affiliates), but only for temporary or emergency (not
leveraging) purposes, in an amount up to 10% of the value of such
Series' total assets (including the amount borrowed) valued at
the lesser of cost or market, less liabilities (not including the
amount borrowed) at the time the borrowing is made. While
borrowings exceed 5% of the Government Series' total assets, such
Series will not make any additional investments: and (ii) pledge,
hypothecate, mortgage or otherwise encumber its assets, but only
in an amount up to 10% of the value of its total assets to secure
borrowings for temporary or emergency purposes. This
paragraph describes fundamental policies that cannot be changed,
as to either Series, without approval by the holders of a
majority (as defined in the Investment Company Act of 1940) of
the outstanding voting shares of such Series.
See "Investment Objective and Management Policies--Investment
Restrictions" in the Statement of Additional Information.
CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES OF THE MONEY MARKET
SERIES The Money Market Series may (i) pledge, hypothecate,
mortgage or otherwise encumber its assets, but only to secure
permitted borrowings; and (ii) invest up to 10% of its net assets
in repurchase agreements providing for settlement in more than
seven days after notice and in other illiquid securities (which
securities could include participation interests that are not
subject to the demand feature described above and floating and
variable rate demand obligations as to which the Money Market
Series cannot exercise the related demand feature described
above and as to which there is no secondary market). See
"Investment Objective and Management Policies--Investment
Restrictions" in the Statement of Additional Information.
RISK FACTORS RELATING TO THE MONEY MARKET SERIES Since the Money
Market Series' portfolio may contain securities issued by foreign
branches of domestic banks, foreign subsidiaries of domestic
banks, and domestic and foreign branches of foreign banks, the
Money Market Series may be subject to additional investment
risks with respect to such securities that are different in some
respects from those incurred by a fund which invests only in debt
obligations of U.S. domestic issuers, although such obligations
may be higher yielding when compared to the securities of U.S.
domestic The Money Market Series may be subject to risks
that are different from those incurred by a fund which invests
only in U.S. debt securities.
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.
OTHER INVESTMENT CONSIDERATIONS Each Series attempts to increase
yields by trading to take advantage of short-term market
variations. This policy is expected to result in high portfolio
turnover but should not adversely affect the Series since they
usually do not pay brokerage commissions when they purchase
short-term debt obligations. The value of the portfolio
securities held by the Series will vary inversely to changes in
prevailing interest rates. Thus, if interest rates have increased
from the time a security was purchased, such security, if sold,
might be sold at a price less than its purchase cost.
Similarly, if interest rates have declined from the time a
security was purchased, such security, if sold, might be sold at
a price greater than its purchase cost. In either instance, if
the security was purchased at face value and held to maturity, no
gain or loss would be realized.
Investment decisions for each Series are made independently from
those of other investment companies, investment advisory
accounts, custodial accounts, individual trust accounts and
commingled funds that may be advised by the
Manager. However, if such other investment companies or managed
accounts are prepared to invest in, or desire to dispose of,
securities of the type in which a Series invests at the same time
as such Series, available investments or opportunities for sales
will be allocated equitably to each of them. In some cases, this
procedure may adversely affect the size of the position obtained
for or disposed of by a Series or the price paid or received by a
Series.
Management of the Fund
MANAGER The Manager, located at Three First National Plaza,
Chicago, Illinois 60670, is the Fund's investment adviser. The
Manager, a wholly-owned subsidiary of First Chicago Corporation,
a registered bank holding company, is a commercial bank offering
a wide range of banking and investment services to customers
throughout the United States and around the world. As of
December 31, 1993, it was one of the largest commercial banks in
the United States and the largest in the mid-Western United
States in terms of assets ($52.5 billion) and in terms of
deposits ($28.1 billion). As of December 31, 1993, the Manager
provided personal investment management services to portfolios
containing approximately $11.8 billion in assets. The Manager
serves as investment adviser for the Fund pursuant to a
Management Agreement dated April 30, 1993. Prior thereto, the
Manager provided investment advisory services to the Fund
pursuant to an Investment Advisory Agreement (the "Prior Advisory
Agreement"). Under the Management Agreement, the Manager, subject
to the supervision of the Fund's Board of Trustees and in
conformity with Massachusetts law and the stated
policies of the Fund, manages the investment of the assets of
each Series. The Manager is responsible for making investment
decisions for the Fund, placing purchase and sale orders and
providing research, statistical analysis and continuous
supervision of the investment portfolio. The Manager provides
these services through its Investment Management Department. The
investment advisory services of the Manager are not exclusive
under the terms of the Management Agreement. The Manager is free
to, and does, render investment advisory services to others,
including other investment companies as well as commingled trust
funds and a broad spectrum of individual trust and investment
management portfolios, which have varying investment objectives.
The Manager has advised the Fund that in making its investment
decisions the Manager does not obtain or use material inside
information in the possession of any other division or department
of the Manager or in the possession of any affiliate of the
Manager. The investment adviser, The First National Bank of
Chicago, is one of the argest commercial banks in the United
States and the largest in the mid-Western United States and
manages $11.8 billion of investment assets.
The Manager and its affiliates presently intend to continue to
charge and collect customary account and account transaction fees
with respect to accounts through which or for
which shares of a Series are purchased or redeemed. This will
result in the receipt by the Manager and its affiliates of
customer account fees in addition to management and Service Agent
fees from the Fund with respect to assets in certain accounts.
See "Service Plan."
The Manager has engaged The Dreyfus Corporation ("Dreyfus"),
located at 200 Park Avenue, New York, New York 10166, to assist
it in providing certain administrative services for the Fund
pursuant to a Master Administration Agreement between the Manager
and Dreyfus effective April 30, 1993. Prior thereto, Dreyfus
provided administrative services to the Fund pursuant to an
Administration Agreement with the Fund (the "Prior
Administration Agreement"). Dreyfus was formed in 1947 and, as of
February 28, 1994, managed or administered approximately $77
billion in assets for more than 1.9 million investor accounts
nationwide.
The Dreyfus Corporation, which manages or administers
approximately $77 billion in mutual fund assets, will assist the
Manager in providing certain administrative services for the
Fund.
Under the terms of the Prior Advisory Agreement and Prior
Administration Agreement, which were terminated on April 30,
1993, the Fund agreed to pay the Manager and Dreyfus monthly fees
at the annual rate of .40 and .20, respectively, of 1% of the
value of each Series' average daily net assets. Under the terms
of the Management Agreement, the Fund has agreed to pay the
Manager a monthly management fee at the annual rate of .55 of 1%
of the value of each Series' average daily net assets, which is
.05 of 1% less than the combined fees payable by the Fund to the
Manager and Dreyfus under the Prior Advisory Agreement and Prior
Administration Agreement. Pursuant to its agreement with Dreyfus,
the Manager, from its own funds, will pay Dreyfus for Dreyfus'
services. For the fiscal year ended December 31, 1993, the Fund
paid the Manager pursuant to the Management Agreement and Prior
Advisory Agreement a monthly fee at the effective aggregate
annual rate of .37 of 1% of the value of the Government Series'
average daily net assets and .45 of 1% of the value of the
Money Market Series' average daily net assets, pursuant to
undertakings in effect. For the period January 1, 1993 to April
29, 1993, the Fund paid Dreyfus pursuant to the Prior
Administration Agreement a monthly administration fee at
the effective annual rate of .14 of 1% of the value of the
Government Series' average daily net assets and .16 of 1% of the
value of the Money Market Series' average daily net assets
pursuant to undertakings in effect.
GLASS-STEAGALL ACT The Glass-Steagall Act and other applicable
laws prohibit Federally chartered or supervised banks from
engaging in certain aspects of the business of issuing,
underwriting, selling and/or distributing securities, although
banks such as the Manager are permitted to purchase and
sell securities upon the order and for the account of their
customers. The Manager has advised the Fund of its belief that it
may perform the services for the Fund contemplated by the
Management Agreement and this Prospectus without violating
the Glass-Steagall Act or other applicable banking laws or
regulations. The Manager has pointed out, however, that there are
no cases deciding whether a bank such as the Manager may perform
services comparable to those to be performed by the Manager and
that future changes in either Federal or state statutes and
regulations relating to permissible activities of banks and their
subsidiaries and affiliates, as well as future judicial or
administrative decisions or interpretations of present and future
statutes and regulations, could prevent the Manager from
continuing to perform such services for the Fund.
If the Manager were to be prevented from providing such services
to the Fund, the Fund's Board of Trustees would review the Fund's
relationship with the Manager and consider taking all actions
necessary in the circumstances. For a discussion of the
Glass-Steagall Act in connection with the Fund's Service Plan,
see "Service Plan."
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN The
Shareholder Services Group, Inc., a subsidiary of First Data
Corporation, P.O. Box 9671, Providence, Rhode Island 02940-9671,
is the Fund's Transfer and Dividend Disbursing Agent (the
"Transfer Agent"). The Bank of New York, 110 Washington Street,
New York, New York 10286, is the Fund's Custodian.
The Shareholder Services Group, Inc. is the Fund's transfer
agent.
EXPENSES All expenses incurred in the operation of the Fund are
borne by the Fund, except to the extent specifically assumed by
the Manager. The expenses borne by the Fund include the
following: taxes, interest, brokerage fees and commissions, if
any, fees of Trustees who are not officers, directors, employees
or holders, directly or indirectly, of 5% or more of the
outstanding voting securities of the Manager or Dreyfus.
Securities and Exchange Commission fees, state Blue Sky
qualification
fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums,
industry association fees, outside auditing and legal expenses,
costs of independent pricing services, costs of maintaining the
Fund's existence, costs attributable to investor services
(including, without limitation, telephone and personnel
expenses), costs of shareholders' reports and meetings and any
extraordinary expenses. Expenses attributable to a particular
Series are charged against the assets of that Series; other
expenses of the Fund are allocated between the Series on the
basis determined by the Board of Trustees, including, but not
limited to, proportionately in relation to the net assets of each
Series. In addition, each Series bears certain costs of
distributing Fund shares in accordance with a plan (the "Service
Plan") adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940. See "Annual Fund Operating Expenses"
and "Service Plan".
The imposition of the management fee, as well as other
operating expenses, including the fees paid under the Service
Plan, will have the effect of reducing the yield to investors.
How to Buy Fund Shares
INFORMATION APPLICABLE TO ALL PURCHASERS The Fund's distributor
is Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus, located at 200 Park Avenue, New York, New York 10166.
The shares it distributes are not deposits or obligations of The
Dreyfus Security Savings Bank, F.S.B. or the Manager and
therefore are not insured by the FDIC. The Fund offers a number
of convenient ways to purchase shares.
Shares may be purchased by all clients of the Manager and
its affiliates, including qualified custody, agency and trust
accounts, through their accounts with the Manager and its
affiliates, or by clients of certain Service Agents
through their accounts with the Service Agent. Shares also may
be purchased directly through the Distributor. Share certificates
will not be issued. The Fund reserves the right to reject any
purchase order.
You can open an account with as little as $1,000 ($250 for IRAs
or other retirement plans). Subsequent investments can be as
little as $100.
The minimum initial investment is $1,000. However, for
IRAs and other personal retirement plans, the minimum initial
purchase is $250. All subsequent investments must be at least
$100. The initial investment must be accompanied by the
Fund's Account Application. The Manager and Service Agents may
impose initial or subsequent investment minimums which are higher
or lower than those specified above and may impose different
minimums for different types of accounts or purchase
arrangements. Shares of each Series are sold on a continuous
basis at the net asset value per share next determined after an
order in proper form and Federal Funds (moneys of member banks
within the Federal Reserve System which are held on
deposit at a Federal Reserve Bank) are received by the Transfer
Agent. If an investor does not remit Federal Funds, his payment
must be converted into Federal Funds. This usually occurs within
one business day of receipt of a bank wire and within two
business days of receipt of a check drawn on a member bank
of the Federal Reserve System. Checks drawn on banks which are
not members of the Federal Reserve System may take considerably
longer to convert into Federal Funds. Prior to receipt of Federal
Funds, the investor's money will not be invested. Each Series'
net asset value per share is determined as of 12:00 Noon,
New York time, on each day the New York Stock Exchange is open
for business, except on Martin Luther King, Jr. Day, Columbus Day
and Veterans Day. Net asset value per share is computed by
dividing the value of each Series' net assets
(i.e., the value of its assets less liabilities) by the total
number of its shares outstanding. See "Determination of Net Asset
Value" in the Fund's Statement of Additional Information.
Federal regulations require that an investor provide a
certified Taxpayer Identification Number ("TIN") upon opening or
reopening an account. See "Dividends, Distributions and Taxes"
and the Fund's Account Application for further information
concerning this requirement. Failure to furnish a certified
TIN to the Fund could subject an investor to a $50 penalty
imposed by the Internal Revenue Service (the "IRS").
PURCHASING SHARES THROUGH ACCOUNTS WITH THE MANAGER OR A SERVICE
AGENT Investors who desire to purchase shares through their
accounts at the Manager or its affiliates or a Service Agent
should contact such entity directly for appropriate instructions,
as well as for information about conditions pertaining
to the account and any related fees. Service Agents and the
Manager may charge clients direct fees for effecting
Contact your investment representative or Service Agent to learn
how to purchase shares.
transactions in shares, as well as fees for other services
provided to clients in connection with accounts through which
shares are purchased. These fees, if any, would be in addition to
fees received by a Service Agent under the Service Plan or
management fees received by the Manager under the Management
Agreement. Each Service Agent has agreed to transmit to its
clients a schedule of such fees. In addition, Service Agents and
the Manager may impose minimum account and other conditions,
including conditions which might affect the availability of
certain shareholder privileges described in this Prospectus.
Certain investor accounts with the Manager and its affiliates and
certain Service Agents may be eligible for an automatic
investment privilege, commonly called a "sweep," under
which amounts in excess of a certain minimum held in these
accounts will be invested automatically in shares at
predetermined intervals. Each investor desiring to use this
privilege should consult the Manager or his Service Agent
for details. It is the responsibility of the Manager and Service
Agents to transmit client orders on a timely basis.
Copies of the Fund's Prospectus and Statement of
Additional Information may be obtained from the Distributor, the
Manager, certain affiliates of the Manager or certain Service
Agents, as well as from the Fund.
PURCHASING SHARES THROUGH THE DISTRIBUTOR Shares also may be
purchased directly through the Distributor by check or wire, or
through the TeleTransfer Privilege described below. The initial
investment must be accompanied by the Fund's Account Application
which can be obtained from the Distributor and certain Service
Agents. Checks should be made payable to "The First Prairie
Family of Funds." Payments to open new accounts which are mailed
should be sent to The First Prairie Family of Funds, P.O. Box
9387, Providence, Rhode Island 02940-9387, together with the
investor's Account Application indicating the name of the Series
being purchased. For subsequent investments, the investor's Fund
account number should appear on the check and an investment slip
should be enclosed and sent to The First Prairie Family of Funds,
P.O. Box 105, Newark, New Jersey 07101-0105. Neither initial nor
subsequent investments should be made by third party check. A
charge will be imposed if any check used for investment
in an investor's account does not clear. All payments should be
in U.S. dollars and, to avoid fees and delays, should be drawn
only on U.S. banks.
Wire payments may be made if the investor's bank account
is in a commercial bank that is a member of the Federal Reserve
System or any other bank having a correspondent bank in New York
City or Chicago. Immediately available funds may be transmitted
by wire to The Bank of New York, DDA#8900052066/First Prairie
Money Market Fund--Money Market Series or DDA#8900052244/First
Prairie Money Market Fund--Government Series, as the case may be,
for purchase of Fund shares in the investor's name. The wire must
include the name of the Series being purchased, the investor's
account number (for new accounts, the investor's TIN should be
included instead), account registration and dealer number, if
applicable. If the investor's initial purchase of Fund shares is
by wire, the investor should call 1-800-645-6561 after completing
his wire payment to obtain a Fund account number. An investor
must include his Fund account number on the Fund's Account
Application and promptly mail the Account Application to the
Fund, as no redemptions will be permitted until the Account
Application is received. Further information about remitting
funds in this manner is provided in "Payment and Mailing
Instructions" on the Fund's Account Application.
Subsequent investments also may be made by electronic
transfer of funds from an account maintained in a bank or other
domestic financial institution that is an Automated Clearing
House member. The investor must direct the institution to
transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to
credit the investor's Fund account. The instructions must specify
the investor's Fund account registration and the investor's Fund
account number preceded by the digits "1111."
TELETRANSFER PRIVILEGE Investors may purchase Fund shares
(minimum $500, maximum $150,000 per day) by telephone if they
have checked the appropriate box and supplied the necessary
information on the Fund's Account Application or have filed a
Shareholder Services Form with the Transfer Agent. The proceeds
will be transferred between the bank account designated in one of
these documents and the investor's Fund Call 1-800-227-0072 for
TeleTransfer transactions
account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so
designated. The Fund may modify or terminate this Privilege at
any time or charge a service fee upon notice to shareholders. No
such fee currently is contemplated. Investors who have selected
the TeleTransfer Privilege may request a TeleTransfer purchase of
Fund shares by calling 1-800-227-0072 or, if calling from
overseas, 1-401-455-3309.
Shareholder Services
The services and privileges described under this heading may not
be available to clients of certain Service Agents and some
Service Agents may impose certain conditions on their clients
which are different from those described in this Prospectus. Each
investor should consult his Service Agent in this regard.
EXCHANGE PRIVILEGE The Exchange Privilege enables an investor to
purchase, in exchange for shares of a Series, shares of the other
Series or shares of certain other funds advised by the Manager or
shares of certain funds advised by Dreyfus, to the extent such
shares are offered for sale in the investor's state of residence.
These funds have different investment objectives that may be of
interest to investors. The Exchange Privilege may be expanded to
permit exchanges between a Series and other funds that, in the
future, may be advised by the Manager. Investors will be notified
of any such change. If an investor desires to use this Privilege,
he should consult his Service Agent or the Distributor to
determine if it is available and whether any conditions are
imposed on its use.
You can exchange your shares for shares of other eligible First
Prairie funds.
To use this Privilege, an investor or his Service Agent
acting on his behalf must give exchange instructions to the
Transfer Agent in writing, by wire or by telephone. If an
investor previously has established the Telephone Exchange
Privilege, the investor may telephone exchange instructions by
calling 1-800-227-0072 or, if calling from overseas,
1-401-455-3309. See "How to Redeem Fund Shares-- Procedures."
Before any exchange, an investor must obtain and should review a
copy of the current prospectus of the fund into which the
exchange is being made. Prospectuses may be obtained from the
Distributor, the Manager, certain affiliates of
the Manager or certain Service Agents. The shares being
exchanged must have a current value of at least $500;
furthermore, when establishing a new account by exchange, the
shares being exchanged must have a value of at least the minimum
initial investment required for the fund into which the exchange
is being made.
Telephone exchanges may be made only if the appropriate "YES"
box has been checked on the Account Application, or a separate
signed and signature-guaranteed Shareholder Services Form is on
file with the Transfer Agent. Upon an exchange into a new
account, the following shareholder services and privileges, as
applicable and where available, will be automatically carried
over to the fund in which the exchange is made: Exchange
Privilege, Check Redemption Privilege, Wire Redemption Privilege,
Telephone Redemption Privilege, TeleTransfer Privilege and the
dividend/ capital gain distribution option (except for the
Dividend Sweep Privilege) selected by the investor.
Shares will be exchanged at the next determined net asset
value; however, a sales load may be charged with respect to
exchanges into funds sold with a sales load. If an investor is
exchanging into a fund that charges a sales load, the investor
may qualify for share prices which do not include the sales load
or which reflect a reduced sales load, if the shares of the
Series from which the investor is exchanging were: (a) purchased
with a sales load, (b) acquired by a previous exchange from
shares purchased with a sales load, or (c) acquired through
reinvestment of dividends or distributions paid with
respect to the foregoing categories of shares. To qualify, at the
time of an exchange, the investor must notify the Transfer Agent
or the investor's Service Agent must notify the Distributor. Any
such qualification is subject to confirmation of the investor's
holdings through a check of appropriate records. See "Shareholder
Services" in the Statement of Additional Information. No fees
currently are charged shareholders directly in connection with
exchanges, although the Fund reserves the right, upon not less
than 60 days' written notice, to charge shareholders a nominal
fee in accordance with rules promulgated by the Securities and
Exchange Commission. The Fund reserves the right to reject any
exchange request in whole or in part. The Exchange Privilege may
be modified or terminated at any time upon notice to
shareholders.
The exchange of shares of one fund or Series for shares
of another is treated for Federal income tax purposes as a sale
of the shares given in exchange by the shareholder and,
therefore, an exchanging shareholder may realize a taxable gain
or loss.
AUTO-EXCHANGE PRIVILEGE The Auto-Exchange Privilege enables an
investor to invest regularly (on a semi-monthly, monthly,
quarterly or annual basis), in exchange for shares of a Series,
in shares of the other Series, certain other funds in the First
Prairie Family of Funds or certain funds advised by Dreyfus
of which he is currently an investor. The amount an investor
designates, which can be expressed either in terms of a specific
dollar or share amount ($100 minimum), will be exchanged
automatically on the first and/or fifteenth of the month
according to the exchange schedule that the investor has
selected. Shares will be exchanged at the then-current net asset
value; however, a sales load may be charged with respect to
exchanges into funds sold with a sales load. See "Shareholder
Services" in the Statement of Additional Information. The right
to exercise this Privilege may be modified or canceled by the
Fund or the Transfer Agent. The investor or the investor's
Service Agent may modify or cancel this Privilege at any time by
writing to The First Prairie Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671. The Fund may charge a
service fee for the use of this Privilege. No such fee currently
is contemplated. The exchange of shares of one fund or Series for
shares of another is treated for Federal income tax purposes as a
sale of the shares given in exchange by the shareholder and,
therefore, an exchanging shareholder may realize a taxable
gain or loss. For more information concerning this Privilege and
the funds eligible to participate in this Privilege, or to obtain
an Auto-Exchange Authorization Form, please call toll free in
Illinois 1-800-621-6592, or, outside Illinois 1-800-537-4938 if
Fund shares were purchased through First Chicago Investment
Services, Inc. or 1-800-645-6561 if Fund shares were purchased
through the Distributor.
You can exchange Fund shares automatically at regular intervals
which you select.
AUTOMATIC ASSET BUILDER Automatic Asset Builder permits an
investor to purchase shares of a Series (minimum of $100 and
maximum of $150,000 per transaction) at regular intervals
selected by the investor. Shares are purchased by transferring
funds from the bank account designated by an investor. At the
investor's option, the bank account designated by the investor
will be debited in the specified amount, and shares will be
You can purchase shares automatically at regular intervals which
you select.
purchased, once a month, on either the first or fifteenth day,
or twice a month, on both days. Only an account maintained at a
domestic financial institution which is an Automated Clearing
House member may be so designated. To establish an Automatic
Asset Builder account, the investor must file an authorization
form with the Transfer Agent. The necessary authorization form
may be obtained from the Distributor, the Manager, certain
affiliates of the Manager or certain Service Agents. An investor
may cancel his participation in this Privilege or change the
amount of purchase at any time by mailing written notification to
The First Prairie Family of Funds, P.O. Box 9671, Providence,
Rhode Island 02940-9671, and the notification will be effective
three business days following receipt. The Fund may modify or
terminate this Privilege at any time or charge a service fee. No
such fee currently is contemplated.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE Government Direct Deposit
Privilege enables an investor to purchase shares (minimum of $100
and maximum of $50,000 per transaction) by having Federal salary,
Social Security or certain veterans', military or other payments
from the Federal government automatically deposited into the
investor's Fund account. An investor may deposit as much of such
payments as he elects. To enroll in Government Direct Deposit,
the investor must file with the Transfer Agent a completed Direct
Deposit Sign-Up Form for each type of payment that the investor
desires to include in this Privilege. The appropriate form may be
obtained from the Distributor, the Manager, certain affiliates of
the Manager or certain Service Agents. Death or legal incapacity
will terminate an investor's participation in this Privilege. An
investor may elect at any time to terminate his participation by
notifying in writing the appropriate Federal agency. Further, the
Fund may terminate an investor's participation upon 30 days'
notice to the investor.
Many Federal payments are eligible for full or partial direct
deposit into your account to purchase shares.
DIVIDEND OPTIONS The Dividend Sweep enables an investor to
invest automatically dividends or dividends and capital gain
distributions, if any, paid by the Series in shares of another
fund or series in the First Prairie Family of Funds or certain
other funds advised or administered by the Dreyfus of which the
investor is a shareholder. Shares of the other fund will be
purchased at the then-current net asset value; however, a sales
load may be charged with respect to investments in shares of a
fund sold with a sales load. If an investor is investing in a
fund You can "sweep" your dividends and capital gain
distributions into certain other First Prairie funds.
that charges a sales load, the investor may qualify for share
prices which do not include the sales load or which reflect a
reduced sales load. If an investor is investing in a fund that
charges a contingent deferred sales charge, the shares purchased
will be subject to the contingent deferred sales charge, if
any, applicable to the purchased shares. See "Shareholder
Services" in the Statement of Additional Information.
Dividend ACH permits a shareholder to transfer
electronically on the payment date their dividends or dividends
and capital gains, if any, from the Fund to a designated bank
account. Only an account maintained at a domestic financial
institution which is an Automated Clearing House member may be so
designated. Banks may charge a fee for this service.
For more information concerning these privileges, or to request
a Dividend Options Authorization Form, investors should call toll
free in Illinois 1-800-621-6592, or, outside Illinois,
1-800-537-4938 if Fund shares were purchased through First
Chicago Investment Services, Inc., or 1-800-645-6561 if
Fund shares were purchased through the Distributor. To cancel
these privileges, the investor or the investor's Service Agent
must mail written notification to The First Prairie Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671.
Enrollment in or cancellation of these privileges is effective
three business days following receipt by the Transfer Agent.
These privileges are available only for existing accounts and may
not be used to open new accounts. Minimum subsequent investments
do not apply for Dividend Sweep. The Fund may modify or terminate
these privileges at any time or charge a service fee. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs or
other retirement plans are not eligible for these privileges.
AUTOMATIC WITHDRAWAL PLAN The Automatic Withdrawal Plan permits
an investor to request withdrawal of a specified dollar amount
(minimum of $50) on either a monthly or quarterly basis if the
investor has a $5,000 minimum account. An application for the
Automatic Withdrawal Plan can be obtained from the Distributor,
the Manager, certain affiliates of the Manager or certain Service
Agents. The Automatic Withdrawal Plan may be ended at any time
by the investor, the Fund or the Transfer Agent.
You can withdraw a specified dollar amount from your account
every month or quarter.
How to Redeem Fund Shares
GENERAL An investor may request redemption of his shares at any
time. Redemption requests should be transmitted to the Transfer
Agent as described below. When a request is received in proper
form, the Fund will redeem the shares at the next determined net
asset value.
You can redeem Fund shares at any time.
The Fund imposes no charges when shares are redeemed.
Service Agents may charge a nominal fee for effecting redemptions
of Fund shares. The value of the shares redeemed may be more or
less than their original cost, depending upon the Series'
then-current net asset value. As described in "Determination of
Net Asset Value" in the Statement of Additional Information, each
Series seeks to maintain a net asset value of $1.00 per share for
purchases and redemptions.
The Fund ordinarily will make payment for all shares
redeemed within seven days after receipt by the Transfer Agent of
a redemption request in proper form, except as provided by the
rules of the Securities and Exchange Commission.
HOWEVER, IF AN INVESTOR HAS PURCHASED FUND SHARES BY CHECK, BY
TELETRANSFER PRIVILEGE OR THROUGH AUTOMATIC ASSET BUILDER AND
SUBSEQUENTLY SUBMITS A WRITTEN REDEMPTION REQUEST TO THE TRANSFER
AGENT, THE REDEMPTION WILL BE EFFECTIVE AND THE REDEMPTION
PROCEEDS WILL BE TRANSMITTED TO THE INVESTOR PROMPTLY UPON BANK
CLEARANCE OF THE INVESTOR'S PURCHASE CHECK, TELETRANSFER
PURCHASE OR AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO
EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL NOT HONOR
REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE, AND WILL
REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR
PURSUANT TO THE TELETRANSFER PRIVILEGE, FOR A PERIOD OF EIGHT
BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE
CHECK, THE TELETRANSFER PURCHASE OR THE AUTOMATIC ASSET BUILDER
ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE
PROCEDURES WILL NOT APPLY IF THE INVESTOR'S SHARES WERE
PURCHASED BY WIRE PAYMENT, OR IF THE INVESTOR OTHERWISE HAS A
SUFFICIENT COLLECTED BALANCE IN HIS ACCOUNT TO COVER THE
REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS
EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE
PAYABLE, AND THE
INVESTOR WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF
BENEFICIAL OWNERSHIP.
Fund shares will not be redeemed until the Transfer Agent has
received the investor's Account Application.
The Fund reserves the right to redeem an investor's
account at the Fund's option upon not less than 30 days' written
notice if the account's net asset value is $500 or less and
remains so during the notice period.
PROCEDURES An investor who has purchased shares through his
account at the Manager or a Service Agent must redeem shares by
following instructions pertaining to such account. If an investor
has given his Service Agent authority to instruct the Transfer
Agent to redeem shares and to credit the proceeds of such
redemptions to a designated account at the Service Agent,
the investor may redeem shares only in this manner and in
accordance with a written redemption request pursuant to the
regular redemption procedure described below. Investors
who wish to use the other redemption methods described below
must arrange with their Service Agents for delivery of the
required application(s) to the Transfer Agent. It is the
responsibility of the Manager or the Service Agent, as the case
may be, to transmit the redemption order and credit the
investor's account with the redemption proceeds on a timely
basis. Investors are urged to consult their Service Agents for
instructions concerning redemption of Fund shares held in
IRAs or other personal retirement accounts. Other investors may
redeem shares by using the regular redemption procedure through
the Transfer Agent, using the Check Redemption Privilege, through
the Wire Redemption Privilege, through the Telephone Redemption
Privilege, or through the TeleTransfer Privilege, as described
below.
The Fund offers a number of convenient ways to access your
investment.
An investor may redeem or exchange shares by telephone if the
investor has checked the appropriate box on the Fund's Account
Application or has filed a Shareholder Services Form with the
Transfer Agent. By selecting a telephone redemption or exchange
privilege, an investor authorizes the Transfer Agent to
act on telephone instructions from any person representing
himself or herself to be the investor, or a representative of the
investor's Service Agent, and reasonably believed by the Transfer
Agent to be genuine. The Fund will require the Transfer Agent to
employ reasonable procedures, such as requiring a form of
identification, to confirm that
instructions are genuine and, if it does not follow such
procedures, the Fund or the Transfer Agent may be liable for any
losses due to unauthorized or fraudulent instructions. Neither
the Fund nor the Transfer Agent will be liable for following
telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, an
investor may experience difficulty in contacting the Transfer
Agent by telephone to request a redemption or exchange of shares
of a Series. In such cases, investors should consider using the
other redemption procedures described herein.
Use of these other redemption procedures may result in the
investor's redemption request being processed at a later time
than it would have been if telephone redemption had been used.
REGULAR REDEMPTION Under the regular redemption procedure, an
investor may redeem shares by written request, indicating the
Series from which shares are to be redeemed, mailed to The First
Prairie Family of Funds, P.O. Box 9671, Providence, Rhode Island
02940-9671. Redemption requests must be signed by the individual
shareholder, including each owner of a joint account,
and each signature must be guaranteed. The Transfer Agent has
adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will
be accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations, as well
as from participants in the New York Stock Exchange Medallion
Signature Program, the Securities Transfer Agents Medallion
Program ("STAMP") and the Stock Exchanges Medallion Program. For
more information with respect to signature-guarantees, please
call the telephone number shown on the front cover. Redemption
proceeds of at least $1,000 will be wired to any member bank of
the Federal Reserve System in accordance with a written
signature-guaranteed request.
Shares may be redeemed by written request.
CHECK REDEMPTION PRIVILEGE An investor may request on the
Account Application, Shareholder Services Form or by later
written request to the Fund that the Fund provide Redemption
Checks drawn on the Fund's account. Redemption Checks may be
made payable to the order of any person in the amount of $500 or
more. Redemption Checks should not be used to close an account.
Redemption Checks are free, but the Transfer
You can write checks of $500 or more using a
special checkbook provided by the Fund, if
you request it on your Account Application.
Agent will impose a fee for stopping payment of a Redemption
Check at the investor's request or if the Transfer Agent cannot
honor the Redemption Check due to insufficient funds or other
valid reason. An investor should date his Redemption Checks with
the current date when the investor writes them. Investors
should not postdate Redemption Checks. If an investor does, the
Transfer Agent will honor, upon presentment, even if presented
before the date of the check, all postdated Redemption Checks
which are dated within six months of presentment for payment, if
they are otherwise in good order. This Privilege may be modified
or terminated at any time by the Fund or the Transfer Agent upon
notice to shareholders.
WIRE REDEMPTION PRIVILEGE An investor may request by wire or
telephone that redemption proceeds (minimum $1,000) be wired to
his account at a bank which is a member of the Federal Reserve
System, or a correspondent bank if the investor's bank is not a
member. To establish the Wire Redemption Privilege, an investor
must check the appropriate box and supply the necessary
information on the Fund's Account Application or file a
Shareholder Services Form with the Transfer Agent. An investor
may direct that redemption proceeds be paid by check
(maximum $150,000 per day) made out to the owners of record and
mailed to the investor's address. Redemption proceeds of less
than $1,000 will be paid automatically by check. Holders of
jointly registered Fund or bank accounts may have redemption
proceeds of only up to $250,000 wired within any 30-day period.
An investor may telephone redemption requests by calling
1-800-227-0072 or, if calling from overseas, 1-401-455-3309. The
Fund reserves the right to refuse any redemption request,
including requests made shortly after a change of address,
and may limit the amount involved or the number of such
requests. This Privilege may be modified or terminated at any
time by the Transfer Agent or the Fund. The
Fund's Statement of Additional Information sets forth
instructions for transmitting redemption requests by wire. Shares
held under Keogh Plans, IRAs or other retirement plans are not
eligible for this Privilege.
You can redeem shares by wire if you check the appropriate box on
your Account Application.
TELEPHONE REDEMPTION PRIVILEGE An investor may redeem Fund
shares (maximum $150,000 per day) by telephone if he has checked
the appropriate box on the Fund's
Account Application or has filed a Shareholder Services Form
with the Transfer Agent. The redemption proceeds will be paid by
check and mailed to the investor's address. An investor may
telephone redemption instructions by calling 1-800-227-0072 or,
if calling from overseas, 1-401-455-3309. The Fund reserves
the right to refuse any request made by telephone, including
requests made shortly after a change of address, and may limit
the amount involved or the number of telephone redemption
requests. This Privilege may be modified or terminated at any
time by the Transfer Agent or the Fund. Shares held under
Keogh Plans, IRAs or other retirement plans are not eligible for
this Privilege.
TELETRANSFER PRIVILEGE An investor may redeem Fund shares
(minimum $500 per day) by telephone if he has checked the
appropriate box and supplied the necessary information on the
Fund's Account Application or has filed a Shareholder
Services Form with the Transfer Agent. The proceeds will be
transferred between the investor's Fund account and the bank
account designated in one of these documents. Only such an
account maintained in a domestic financial institution
which is an Automated Clearing House member may be so
designated. Redemption proceeds will be on deposit in the
investor's account at an Automated Clearing House member bank
ordinarily two days after receipt of the redemption request
or, at the investor's request, paid by check (maximum $150,000
per day) and mailed to his address. Holders of jointly registered
Fund or bank accounts may redeem through the TeleTransfer
Privilege for transfer to their bank account
only up to $250,000 within any 30-day period. The Fund reserves
the right to refuse any request made by telephone, including
requests made shortly after a change of address, and may limit
the amount involved or the number of such
requests. The Fund may modify or terminate this Privilege at any
time or charge a service fee upon notice to shareholders. No such
fee is currently contemplated. Call 1-800-227-0072 for
TeleTransfer transactions.
Investors who have selected the TeleTransfer Privilege
may request a TeleTransfer redemption of Fund shares by
telephoning 1-800-227-0072 or, if calling from overseas,
1-401-455-3309. Shares held under Keogh Plans, IRAs or
other retirement plans are not eligible for this Privilege.
Service Plan
Under the Service Plan, adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, each Series bears the costs and
expenses in connection with advertising and marketing its shares
and pays the fees of certain Service Agents for Servicing, as
defined below, at a rate not exceeding .25 of
1% per annum of the value of each Series' average daily net
assets. Service Agents receive fees based upon the average daily
value of the Series' shares owned by shareholders for which the
Service Agent is the dealer or holder of record or
for which the Service Agent has a servicing relationship. The
Service Plan provides that the Manager, Dreyfus and the
Distributor may act as Service Agents and receive fees
under the Service Plan. From time to time, the Manager, Dreyfus
and/or the Distributor may waive as to either or both Series
receipt of fees under the Service Plan while retaining the
ability to be paid by the Fund under the Service Plan thereafter.
The fees payable to the Manager, Dreyfus and/or the
Distributor for Servicing are payable without regard to actual
expenses incurred.
The Fund has adopted a plan so that it can pay
for advertising and marketing and compensate
others for providing services to you.
Each Series also bears the costs of preparing and
printing prospectuses and statements of additional information
used for regulatory purposes and for distribution to existing
shareholders. Under the Service Plan,
each Series bears (a) the costs of preparing, printing and
distributing prospectuses and statements of additional
information used for other purposes and (b) the costs
associated with implementing and operating the Service Plan
(such as costs of printing and mailing service agreements), the
aggregate of such amounts not to exceed in any fiscal year of the
Fund the greater of $100,000 or .005 of 1% of
the value of such Series average daily net assets for such
fiscal year. Each item for which a payment may be made under the
Service Plan may constitute an expense of distributing Fund
shares as the Securities and Exchange Commission
construes such term under Rule 12b-1.
Expenses under the Service Plan may be carried forward
from one year to another to the extent they remain unpaid. All or
part of any such amount will be paid at such time, if ever, as
the Board of Trustees determines to pay it. The
Series will not
be charged for interest, carrying or other finance charges on
any unreimbursed
distribution or other expense incurred and not paid in a prior
year.
Servicing may include, among other things, one or more of
the following:
answering client inquiries regarding the Fund; assisting clients
in changing dividend options, account designations and addresses;
performing sub-accounting; establishing and maintaining
shareholder accounts and records; processing
purchase and redemption transactions; investing client cash
account balances automatically in shares of a Series; providing
periodic statements showing a client's account balance and
integrating such statements with those of other
transactions and balances in the client's other accounts
serviced by the Service Agent; arranging for bank wires; and such
other services as the Fund may request, to the extent the Service
Agent is permitted by applicable statute,
rule or regulation.
The Glass-Steagall Act and other applicable laws prohibit
Federally chartered or supervised banks from engaging in certain
aspects of the business of issuing, underwriting, selling and/or
distributing securities. Accordingly, banks will be engaged to
act as Service Agents only to perform administrative
and shareholder servicing functions. While the matter is not
free from doubt, the Fund's Board of Trustees believes that such
laws should not preclude a bank from acting as a Service Agent.
However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either
Federal or state statutes or regulations relating to the
permissible activities of banks or their subsidiaries or
affiliates, could prevent a bank from continuing
to perform all or a part of its Servicing activities. If a bank
were prohibited from so acting, its shareholder clients would be
permitted to remain Fund shareholders and alternative means for
continuing the Servicing of such shareholders would be
sought. In such event, changes in the operation of the Fund
might occur and shareholders serviced by such bank might no
longer be able to avail themselves of any automatic investment or
other services then being provided by such bank.
The Fund does not expect that shareholders would suffer any
adverse financial consequences as a result of any of these
occurrences.
Dividends, Distributions and Taxes
The Fund ordinarily declares dividends from each Series' net
investment income on each day the New York Stock Exchange is open
for business, except on Martin Luther King, Jr. Day, Columbus Day
and Veterans Day. Dividends usually are paid
on the last calendar day of each month, and are automatically
reinvested in additional shares of the Series from which they
were paid unless the investor elects payment in cash, or the
investor's customer arrangement with the Manager
or a Service Agent provides for payment in cash. Shares of each
Series begin earning income dividends on the day the purchase
order is effective. Each Series' earnings for Saturdays, Sundays
and holidays are declared as dividends
on the preceding business day. If an investor redeems all shares
in his account at any time during the month, all dividends to
which the investor is entitled are paid along with the proceeds
of the redemption. Distributions from net realized securities
gains, if any, generally are declared and paid once a year
by each Series, but each Series may make distributions on a more
frequent basis to comply with the distribution requirements of
the Internal Revenue Code of 1986, as amended (the "Code"), in
all events in a manner consistent with the
provisions of the Investment Company Act of 1940. The Fund will
not make distributions from net realized securities gains unless
capital loss carryovers, if any, have been utilized or have
expired. Investors may choose whether to
receive distributions in cash or to reinvest in additional
shares of the Series from which distributions were paid at net
asset value. All expenses are accrued
daily and deducted before declaration of dividends to investors.
Each Series declares dividends from net investment income on each
business day. Dividends are usually paid on the last day of each
month.
Dividends derived from net investment income, together
with distributions from any net realized short-term securities
gains, all or a portion of any gains
realized from the sale or other disposition of certain market
discount bonds, paid by a Series will be taxable to U.S.
investors as ordinary income, whether
received in cash or reinvested in shares of the Series. No
dividend paid by a Series will qualify for the dividends received
deduction allowable to certain U.S. corporations. Distributions
from net realized long-term securities gains,
if any, of a Series will be taxable to U.S. investors as
long-term capital Dividends and distributions will
be taxable to U.S. investors as ordinary income.
gains regardless of how long investors have held such Series'
shares and whether such distributions are received in cash or
reinvested in shares of the Series.
The Code provides that the net capital gains of an individual
generally will not be subject to Federal income tax at a rate in
excess of 28%. Dividends and distributions may be subject to
certain state and local taxes.
Dividends derived from net investment income, together
with distributions from net realized short-term securities gains
and all or a portion of any gains realized from the sale or other
disposition of certain market discount bounds,
paid by the Fund to a foreign investor generally are subject to
U.S. nonresident withholding taxes at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in
a tax treaty. Distributions from net
realized long-term securities gains paid by the Fund to a
foreign investor generally will not be subject to U.S.
nonresident withholding tax. However, such
distributions may be subject to backup withholding, as described
below, unless the foreign investor certifies his non-U.S.
residency status.
Notice as to the tax status of an investor's dividends
and distributions will be mailed to such investor annually. Each
investor also will receive
periodic summaries of his account which will include information
as to dividends and distributions from securities gains, if any,
paid during the year. The Fund
intends to provide shareholders with a statement which sets
forth the percentage of dividends and distributions paid by a
Series that is attributable to interest
income from direct obligations of the United States.
Federal regulations generally require the Fund to
withhold ("backup withholding") and remit to the U.S. Treasury
31% of taxable dividends, distributions from net realized
securities gains of the Fund paid to a
shareholder if such shareholder fails to certify either that the
TIN furnished in connection with opening an account is correct or
that such shareholder has not received notice from the IRS of
being subject to backup withholding as a
result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the
IRS may notify the Fund to institute
backup withholding if the IRS determines a shareholder's TIN is
incorrect or if a shareholder has failed to properly report
taxable dividend and interest income
on a Federal income tax return.
If you have not furnished us with a correct Taxpayer
Identification Number, you may be subject to tax withholding of
31% of all taxable dividends and distributions.
The Money Market Series also may invest in
securities of U.S. Government agencies and
instrumentalities such as FHLB, FNMA and SLMA.
A TIN is either the Social Security number or employer
identification number of the record owner of the account. Any tax
withheld as a result of
backup withholding does not constitute an additional tax imposed
on the record owner of the account, and may be claimed as a
credit on the record owner's Federal income tax return.
Management of the Fund believes that each Series has
qualified for the fiscal year ended December 31, 1993 as a
"regulated investment company" under
the Code. The Fund intends to continue to have each series so
qualify if such qualification is in the best interests of its
shareholders. Such qualification
relieves the Series of any liability for Federal income tax to
the extent its earnings are distributed in accordance with
applicable provisions of the Code.
The Fund is subject to a non-deductible 4% excise tax, measured
with respect to certain undistributed amounts of taxable
investment income and capital gains.
Each investor should consult his tax adviser regarding
specific questions as to Federal, state or local taxes.
General Information
The Fund was organized as an unincorporated business trust under
the laws of the Commonwealth of Massachusetts pursuant to an
Agreement and Declaration of Trust
(the "Trust Agreement") dated October 8, 1985. The Money Market
Series commenced operations on February 5, 1986 and the
Government Series on May 1, 1987. The Fund is authorized to issue
an unlimited number of shares of beneficial interest, par value
$.01 per share. Each share has one vote.
In February, 1993, the shareholders of the Money Market
Series and in March, 1993, the shareholders of the Government
Series voted to approve the
Management Agreement between the Fund and the Manager and
terminate the Prior Advisory Agreement and the Prior
Administration Agreement. In addition,
shareholders of the Money Market Series voted to change certain
of such Series' fundamental policies and investment restrictions,
among other things, to (i) increase the amount such Series may
borrow to the extent permitted under the
Investment Company Act of 1940, (ii) increase the amount of such
Series' assets which it may pledge to the extent
necessary to secure such borrowings and make such policy
non-fundamental, (iii) permit such Series to invest up to 10% of
the value of its net assets in illiquid securities and make such
policy non-fundamental and (iv) permit such
Series to lend its portfolio securities in an amount not to
exceed 33 1/3% of the value of its total assets.
To date, the Trustees have authorized the creation of two
series of shares. All consideration received by the Fund for
shares of one of the Series and all assets in which such
consideration is invested will belong to that
Series (subject only to the rights of creditors of the Fund) and
will be subject to the liabilities related thereto. The income
attributable to, and the expenses of, one Series will be treated
separately from those of the other Series. The Fund has the
ability to create, from time to time, new series without
shareholder approval.
Rule 18f-2 under the Investment Company Act of 1940
provides that any matter required to be submitted under the
provisions of the Investment Company
Act of 1940 or applicable state law or otherwise to the holders
of the outstanding voting securities of an investment company,
such as the Fund, will not be deemed to have been effectively
acted upon unless approved by the holders
of a majority of the outstanding shares of each Series affected
by such matter.
Rule 18f-2 further provides that a Series shall be deemed to be
affected by a matter unless it is clear that the interests of
such Series in the matter are identical or that the matter does
not affect any interest of such Series.
However, the Rule exempts the selection of independent
accountants and the election of trustees from the separate voting
requirements of the Rule.
Under Massachusetts law, shareholders could, under
certain circumstances, be held personally liable for the
obligations of the Fund.
However, the Trust Agreement disclaims shareholder liability for
acts or obligations of the Fund and requires that notice of such
disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Fund or
a Trustee. The Trust Agreement provides for indemnification from
the Fund's property for all losses and expenses of any
shareholder held personally liable
for the obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable
to meet its obligations, a
possibility which management believes is remote. Upon payment of
any liability incurred by the Fund, the shareholder paying such
liability will be entitled to reimbursement from the general
assets of the Fund. The Trustees intend to
conduct the operations of the Fund in such a way so as to avoid,
as far as possible, ultimate liability of the shareholders for
liabilities of the Fund. As discussed under "Management of the
Fund" in the Statement of Additional
Information, the Fund ordinarily will not hold shareholder
meetings; however, shareholders under certain circumstances may
have the right to call a meeting of
shareholders for the purpose of voting to remove Trustees.
The Transfer Agent maintains a record of each investor's
ownership and sends confirmations and statements of account.
Investor inquiries may be made to the investor's Service
Agent, including the Manager, or by writing to the Fund at the
address shown on the front cover or by calling the appropriate
telephone number.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR
TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND IN THE FUND'S
OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE
FUND'S SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR
TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT LAWFULLY BE MADE.
FIRST PRAIRIE MONEY MARKET FUND
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
APRIL 11, 1994
This Statement of Additional Information, which is not a
prospectus, supplements and should be read in conjunction with
the current Prospectus of First Prairie Money Market Fund (the
"Fund"), dated April 11, 1994, as it may be revised from time to
time. To obtain a copy of the Fund's Prospectus, please write to
the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144, or call toll free 1-800-346-3621.
The First National Bank of Chicago (the "Manager") serves as
the Fund's investment adviser.
Dreyfus Service Corporation (the "Distributor"), a wholly-
owned subsidiary of The Dreyfus Corporation ("Dreyfus"), is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies . . . . . . .B-2
Management of the Fund . . . . . . . . . . . . . . . . . .B-7
Management Agreement . . . . . . . . . . . . . . . . . . .B-10
Purchase of Fund Shares. . . . . . . . . . . . . . . . . .B-14
Service Plan . . . . . . . . . . . . . . . . . . . . . . .B-15
Redemption of Fund Shares. . . . . . . . . . . . . . . . .B-16
Shareholder Services . . . . . . . . . . . . . . . . . .B-19
Determination of Net Asset Value .. . . . . . . . . . . .B-21
Dividends, Distributions and Taxes . . . . . . . . . . . .B-23
Yield Information. . . . . . . . . . . . . . . . . . . . .B-23
Portfolio Transactions . . . . . . . . . . . . . . . . . .B-24
Information About the Fund . . . . . . . . . . . . . . . .B-24
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors. . . . . . . . . . . .B-25
Appendix . . . . . . . . . . . . . . . . . . . . . . . . .B-26
Financial Statements . . . . . . . . . . . . . . . . . . .B-30
Report of Independent Auditors . . . . . . . . . . . . . .B-__
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Description of the Fund."
Portfolio Securities
Bank Obligations. Domestic commercial banks organized under
Federal law are supervised and examined by the Comptroller of the
Currency and are required to be members of the Federal Reserve
System and to have their deposits insured by the Federal Deposit
Insurance Corporation (the "FDIC"). Domestic banks organized
under state law are supervised and examined by state banking
authorities but are members of the Federal Reserve System only if
they elect to join. In addition, state banks whose certificates
of deposit ("CDs") may be purchased by the Money Market Series
are insured by the Bank Insurance Fund administered by the FDIC
(although such insurance may not be of material benefit to the
Money Market Series, depending on the principal amount of the CDs
of each bank held by the Money Market Series) and are subject to
Federal examination and to a substantial body of Federal law and
regulation. As a result of Federal or state laws and
regulations, domestic branches of domestic banks whose CDs may be
purchased by the Money Market Series, among other things,
generally are required to maintain specified levels of reserves,
are limited in the amounts which they can loan to a single
borrower and are subject to other regulations designed to promote
financial soundness. However, not all of such laws and
regulations apply to foreign branches of domestic banks.
Obligations of foreign branches of domestic banks, foreign
subsidiaries of domestic banks and domestic and foreign branches
of foreign banks, such as CDs and time deposits ("TDs"), may be
general obligations of the parent banks in addition to the
issuing branches, or may be limited by the terms of a specific
obligation and governmental regulation. Such obligations are
subject to different risks than are those of domestic banks.
These risks include foreign economic and political developments,
foreign governmental restrictions that may adversely affect
payment of principal and interest on the obligations, foreign
exchange controls and foreign withholding and other taxes on
interest income. Foreign branches and subsidiaries are not
necessarily subject to the same or similar regulatory
requirements that apply to domestic banks, such as mandatory
reserve requirements, loan limitations, and accounting, auditing
and financial recordkeeping requirements. In addition, less
information may be publicly available about a foreign branch of a
domestic bank or about a foreign bank than about a domestic bank.
Obligations of United States branches of foreign banks may
be general obligations of the parent banks in addition to the
issuing branches, or may be limited by the terms of a specific
obligation or by Federal or state regulation as well as
governmental action in the country in which the foreign bank has
its head office. A domestic branch of a foreign bank with assets
in excess of $1 billion may be subject to reserve requirements
imposed by the Federal Reserve System or by the state in which
the branch is located if the branch is licensed in that state.
In addition, Federal branches licensed by the Comptroller of
the Currency and branches licensed by certain states ("State
Branches") may be required to: (1) pledge to the regulator, by
depositing assets with a designated bank within the state, a
certain percentage of their assets as fixed from time to time by
the appropriate regulatory authority; and (2) maintain assets
within the state in an amount equal to a specified percentage of
the aggregate amount of liabilities of the foreign bank payable
at or through all of its agencies or branches within the state.
The deposits of Federal and State Branches generally must be
insured by the FDIC if such branches take deposits of less than
$100,000.
In view of the foregoing factors associated with the
purchase of CDs and TDs issued by foreign branches of domestic
banks, by foreign subsidiaries of domestic banks, by foreign
branches of foreign banks or by domestic branches of foreign
banks, the Manager carefully evaluates such investments on a
case-by-case basis.
The Money Market Series may purchase CDs issued by banks,
savings and loan associations and similar thrift institutions
with less than $1 billion in assets, the deposits of which are
insured by the FDIC, provided the Money Market Series purchases
any such CD in a principal amount of not more than $100,000,
which amount would be fully insured by the Bank Insurance Fund or
the Savings Association Insurance Fund administered by the FDIC.
Interest payments on such a CD are not insured by the FDIC. The
Money Market Series will not own more than one such CD per such
issuer.
Lending Portfolio Securities. To a limited extent, the
Money Market Series may lend its portfolio securities to brokers,
dealers and other financial institutions, provided it receives
cash collateral which at all times is maintained in an amount
equal to at least 100% of the current market value of the
securities loaned. By lending its portfolio securities, the
Money Market Series can increase its income through the
investment of the cash collateral. For purposes of this policy,
the Money Market Series considers collateral consisting of U.S.
Government securities or irrevocable letters of credit issued by
banks whose securities meet the standards for investment by such
Series to be the equivalent of cash. Such loans may not exceed
33/% of the value of the Money Market Series' total assets. From
time to time, the Money Market Series may return to the borrower
or a third party which is unaffiliated with the Fund, and which
is acting as a "placing broker," a part of the interest earned
from the investment of collateral received for securities loaned.
The Securities and Exchange Commission currently requires
that the following conditions must be met whenever portfolio
securities are loaned: (1) the Money Market Series must receive
at least 100% cash collateral from the borrower; (2) the borrower
must increase such collateral whenever the market value of the
securities rises above the level of such collateral; (3) the
Money Market Series must be able to terminate the loan at any
time; (4) the Money Market Series must receive reasonable
interest on the loan, as well as any interest or other
distributions payable on the loaned securities, and any increase
in market value; and (5) the Money Market Series may pay only
reasonable custodian fees in connection with the loan. These
conditions may be subject to future modification.
Investment Restrictions
Money Market Series. The Money Market Series has adopted
investment restrictions numbered 1 through 8 as fundamental
policies. These restrictions cannot be changed without approval
by the holders of a majority (as defined in the Investment
Company Act of 1940, as amended (the "Act")) of such Series'
outstanding voting shares. Investment restrictions numbered 9
through 14 are not fundamental policies and may be changed by a
vote of a majority of the Trustees at any time.
The Money Market Series may not:
1. Invest more than 5% of its assets in the
obligations of any single issuer, except that up to 25% of the
value of the Money Market Series' total assets may be invested
(subject to the provisions of Rule 2a-7 under the Act) without
regard to such limitation.
2. Invest less than 25% of its assets in securities
issued by banks, including foreign banks and branches, or invest
more than 25% of its assets in the securities of issuers in any
other industry, provided that there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. Notwithstanding
the foregoing, for temporary defensive purposes the Money Market
Series may invest less than 25% of its assets in bank
obligations.
3. Borrow money, except to the extent permitted
under the Act.
4. Purchase or sell real estate, commodities or
commodities contracts, or oil and gas interests.
5. Underwrite the securities of other issuers,
except to the extent the Money Market Series may be deemed an
underwriter under the Securities Act of 1933, as amended, by
virtue of disposing of portfolio securities.
6. Make loans to others except through the purchase
of debt obligations or the entry into repurchase agreements;
however, the Money Market Series may lend its portfolio
securities in an amount not to exceed 33/% of the value of its
total assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and
Exchange Commission and the Fund's Board of Trustees.
7. Issue any senior security (as such term is
defined in Section 18(f) of the Act), except to the extent that
the activities permitted in Investment Restriction Nos. 3 and 12
may be deemed to give rise to a senior security.
8. Sell securities short or purchase securities on
margin.
9. Write or purchase put or call options or
combinations thereof.
10. Purchase common stocks, preferred stocks,
warrants or other equity securities, or purchase corporate bonds
(except as set forth in the Prospectus) or debentures, state
bonds, municipal bonds or industrial revenue bonds.
11. Invest in securities of other investment
companies, except to the extent permitted under the Act.
12. Pledge, hypothecate, mortgage or otherwise
encumber its assets, except to the extent necessary to secure
permitted borrowings and to the extent related to the deposit of
assets in escrow in connection with the purchase of securities on
a when-issued or delayed-delivery basis.
13. Enter into repurchase agreements providing for
settlement in more than seven days after notice or purchase
securities which are illiquid (which securities could include
participation interests that are not subject to the demand
feature described in the Fund's Prospectus), if, in the
aggregate, more than 10% of its net assets would be so invested.
14. Invest in companies for the purpose of
exercising control.
Government Series. The Government Series has adopted the
following restrictions as fundamental policies. These
restrictions cannot be changed without approval by the holders of
a majority (as defined in the Act) of such Series' outstanding
voting shares.
The Government Series may not:
1. Purchase common stocks, preferred stocks,
warrants or other equity securities, or purchase corporate bonds
(except as set forth in the Prospectus) or debentures, state
bonds, municipal bonds or industrial revenue bonds.
2. Borrow money except from banks (other than the
Manager or its affiliates) for temporary or emergency (not
leveraging) purposes in an amount up to 10% of the value of the
Government Series' total assets (including the amount borrowed)
based on the lesser of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing is made.
While borrowings exceed 5% of the value of the Government Series'
total assets, such Series will not make any additional
investments.
3. Pledge, hypothecate, mortgage or otherwise
encumber its assets, except in an amount up to 10% of the value
of its total assets, but only to secure borrowings for temporary
or emergency purposes.
4. Sell securities short or purchase securities on
margin.
5. Write or purchase put or call options or
combinations thereof.
6. Underwrite the securities of other issuers or purchase
securities subject to restrictions on disposition under the
Securities Act of 1933 (so called "restricted securities"). The
Government Series may not enter into repurchase agreements
providing for settlement in more than seven days after notice or
purchase securities which are not readily marketable (which
securities could include participation interests that are not
subject to the demand feature described in the Prospectus), if,
in the aggregate, more than 10% of its net assets would be so
invested. The Government Series may not invest in time deposits
maturing in more than seven days and time deposits maturing from
two business days through seven calendar days may not exceed 10%
of such Series' total assets.
7. Purchase or sell real estate, real estate
investment trust securities, commodities or commodities
contracts, or oil and gas interests.
8. Make loans to others except through the purchase
of debt obligations referred to in the Fund's Prospectus.
9. Invest in companies for the purpose of
exercising control.
10. Purchase securities of any investment companies,
except (a) purchases limited to a maximum of (i) 3% of the total
voting stock of any one investment company and (ii) 5% of the
Government Series' net assets with respect to any one investment
company or (b) those received as part of a merger, consolidation
or acquisition of substantially all of the assets or
reorganization of another investment company.
While not a fundamental policy, the Fund will not invest in
oil, gas and other mineral leases, or real estate limited
partnerships.
If a percentage restriction is adhered to at the time of
investment, a later increase or decrease in percentage resulting
from a change in values or assets will not constitute a violation
of that restriction.
The Fund may make commitments on behalf of a Series more
restrictive than the restrictions listed above so as to permit
the sale of Series shares in certain states. Should the Fund
determine that a commitment is no longer in the best interests of
the Series and its shareholders, the Fund reserves the right to
revoke the commitment by terminating the sale of such Series'
shares in the state involved.
MANAGEMENT OF THE FUND
Trustees and officers of the Fund, together with information
as to their principal business occupations during at least the
last five years, are shown below. The Trustee who is deemed to
be an "interested person" of the Fund, as defined in the Act, is
indicated by an asterisk.
Trustees and Officers of the Fund
*JOSEPH S. DiMARTINO, President and Trustee. President, Chief
Operating Officer and a Director of Dreyfus, Executive Vice
President and a Director of the Distributor and an officer,
director or trustee of other investment companies advised or
administered by Dreyfus. He is also a Director of Noel
Group, Inc., Director and Corporate Member of The Muscular
Dystrophy Association and a Trustee of Bucknell University.
His address is 200 Park Avenue, New York, New York 10166.
JOHN P. GOULD, Trustee. Distinguished Service Professor of
Economics of the University of Chicago Graduate School of
Business. From 1983 to 1993, Dean of the University of
Chicago Graduate School of Business. Since 1988, a Director
of Vulcan Materials Company, a chemicals manufacturer and
producer of construction aggregates. Since 1986, Director
of Argonne-Chicago Development Corporation, an affiliate of,
and the entity responsible for commercializing the
technology of, both the University of Chicago and Argonne
National Laboratory. Since 1986, he also has served as a
Director of DFA Investment Dimensions Group, a series mutual
fund. His address is 1101 East 58th Street, Chicago,
Illinois 60637.
MARILYN McCOY, Trustee. Vice President of Administration and
Planning of Northwestern University. From 1981 to 1985, she
was a Director of Planning and Policy Development for the
University of Colorado. She is also a member of the Higher
Education Colloquim, Association for Institutional Research,
American Association for Higher Education and Society for
College and University Planning. Her address is 1100 North
Lake Shore Drive, Chicago, Illinois 60611.
RAYMOND D. ODDI, Trustee. Private Consultant. A Director of
Caremark International, Inc. and Medisense, Inc., companies
in the health care industry and Baxter Credit Union. From
1978 to 1986, Senior Vice President of Baxter International,
Inc., a company engaged in the production of medical care
products. He also is a member of the Illinois Society of
Certified Public Accountants. His address is 1181 Loch
Lane, Lake Forest, Illinois 60045.
Each of the "non-interested" Trustees also is a trustee of
First Prairie Cash Management, First Prairie Diversified Asset
Fund, First Prairie Municipal Money Market Fund, First Prairie
U.S. Government Income Fund and First Prairie U.S. Treasury
Securities Cash Management and a director of First Prairie
Municipal Bond Fund.
The Fund does not pay any remuneration to its officers and
Trustees other than fees and expenses to Trustees who are not
officers, directors, employees or holders of 5% or more of the
outstanding voting securities of the Manager or Dreyfus or any
affiliate of either of them. With respect to the Money Market
Series and the Government Series, such fees and expenses totalled
$2,979 and $6,768, respectively, for the fiscal year ended
December 31, 1993, for all such Trustees as a group.
Trustees were elected at the meeting of shareholders held on
September 28, 1987. No further shareholder meetings will be held
for the purpose of electing Trustees unless and until such time
as less than a majority of the Trustees holding office have been
elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of
Trustees. Under the Act, shareholders of record of not less than
two-thirds of the outstanding shares of the Fund may remove a
Trustee through a declaration in writing or by vote cast in
person or by proxy at a meeting called for that purpose. Under
the Fund's Agreement and Declaration of Trust, the Trustees are
required to call a meeting of shareholders for the purpose of
voting upon the question of removal of any such Trustee when
requested in writing to do so by the shareholders of record of
not less than 10% of the Fund's outstanding shares.
For so long as the Fund's plan described in the section
captioned "Service Plan" remains in effect, the Trustees of the
Fund who are not "interested persons" of the Fund, as defined in
the Act, will be selected and nominated by the Trustees who are
not "interested persons" of the Fund.
Officers of the Fund Not Listed Above
DANIEL C. MACLEAN, Vice President. Vice President and General
Counsel of Dreyfus, Secretary of the Distributor and an
officer of other investment companies advised or
administered by Dreyfus.
JEFFREY N. NACHMAN, Vice President-Financial. Vice President-
Mutual Fund Accounting of Dreyfus and an officer of other
investment companies advised or administered by Dreyfus.
JOHN J. PYBURN, Treasurer. Assistant Vice President of Dreyfus
and an officer of other investment companies advised or
administered by Dreyfus.
PAUL R. CASTI, JR., Controller. Senior Accounting Manager of the
Fund Accounting Department of Dreyfus and an officer of
other investment companies advised or administered by
Dreyfus.
MARK N. JACOBS, Secretary. Secretary and Deputy General Counsel
of Dreyfus and an officer of other investment companies
advised or administered by Dreyfus.
ROBERT I. FRENKEL, Assistant Secretary. Senior Assistant General
Counsel to Dreyfus and an officer of other investment
companies advised or administered by Dreyfus.
CHRISTINE PAVALOS, Assistant Secretary. Assistant Secretary of
Dreyfus and other investment companies advised or
administered by Dreyfus.
The address of each officer of the Fund is 200 Park Avenue,
New York, New York 10166.
Trustees and officers of the Fund, as a group, owned less
than 1% of each Series' shares of beneficial interest outstanding
on March 23, 1994.
MANAGEMENT AGREEMENT
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Management of the Fund."
Management Agreement. The Manager provides management
services pursuant to the Management Agreement (the "Agreement")
dated April 30, 1993 with the Fund. As to each Series, the
Agreement is subject to annual approval by (i) the Fund's Board
of Trustees or (ii) vote of a majority (as defined in the Act) of
such Series' outstanding voting securities, provided that in
either event the continuance also is approved by a majority of
the Trustees who are not "interested persons" (as defined in the
Act) of the Fund or the Manager, by vote cast in person at a
meeting called for the purpose of voting on such approval.
Shareholders of the Money Market and Government Series last
approved the Agreement in February 1993 and March 1993,
respectively, and the Board of Trustees, including a majority of
the Trustees who are not "interested persons" of any party to the
Agreement, last voted to renew the Agreement on December 10,
1993. The Agreement is terminable without penalty, as to each
Series, on not more than 60 days' notice, by the Fund's Board of
Trustees or by vote of the holders of a majority of such Series'
shares or, upon not less than 90 days' notice, by the Manager.
The Agreement will terminate automatically, as to the relevant
Series, in the event of its assignment (as defined in the Act).
The Manager is responsible for each Series' investment
decisions and manages each Series' portfolio of investments in
accordance with the stated policies of the Series, subject to the
approval of the Fund's Board of Trustees. All purchases and
sales are reported for the Trustees' review at the meeting
subsequent to such transactions.
The Manager pays the salaries of all officers and employees
employed by both it and the Fund. The Manager also may make such
advertising and promotional expenditures, using its own
resources, as it from time to time deems appropriate.
The Manager has engaged Dreyfus to assist it in providing
certain administrative services to the Fund. Pursuant to its
agreement with the Manager, Dreyfus furnishes the Fund clerical
help and accounting, data processing, bookkeeping, internal
auditing and legal services and certain other services required
by the Fund, prepares reports to the Fund's shareholders, tax
returns, reports to and filings with the Securities and Exchange
Commission and state Blue Sky authorities, calculates the net
asset value of each Series' shares and generally assists the
Manager in providing for all aspects of the Fund's operation,
other than providing investment advice. The fees payable to
Dreyfus for its services are paid by the Manager.
The Fund has agreed that the Manager will not be liable for
any error of judgment or mistake of law or for any loss suffered
by the Fund in connection with the matters to which the Manager's
agreement with the Fund relates, except for a loss resulting from
wilful misfeasance, bad faith or gross negligence on the part of
the Manager in the performance of its obligations or from
reckless disregard by it of its obligations and duties under its
agreement with the Fund.
As compensation for the Manager's services to the Fund, the
Fund has agreed to pay the Manager a fee, computed daily and paid
monthly, at an annual rate of .55 of 1% of the value of each
Series' average daily net assets. Prior to April 30, 1993, the
Manager provided investment advisory services to the Fund
pursuant to an Investment Advisory Agreement (the "Prior Advisory
Agreement") with the Fund dated December 16, 1985 and Dreyfus
provided administration services to the Fund pursuant to an
Administration Agreement (the "Prior Administration Agreement")
with the Fund dated December 16, 1985. Pursuant to the Prior
Advisory Agreement, the Fund agreed to pay the Manager an
advisory fee at the annual rate of .40 of 1% of the value of each
Series' average daily net assets. Pursuant to the Prior
Administration Agreement, the Fund agreed to pay Dreyfus an
administration fee at the annual rate of .20 of 1% of the value
of each Series' average daily net assets.
The fees paid to the Manager pursuant to the Prior Advisory
Agreement with respect to the Money Market Series for the fiscal
years ended December 31, 1991 and 1992 were $1,752,647 and
$1,565,674, respectively. For the period January 1, 1993 through
April 29, 1993, the fee payable to the Manager pursuant to the
Prior Advisory Agreement was $345,615. For the period from April
30, 1993 (effective date of Management Agreement) to the fiscal
year ended December 31, 1993 the fee payable to the Manager was
$649,937. For the fiscal year ended December 31, 1993, the fee
payable to the Manager was reduced by $70,345, pursuant to an
undertaking in effect resulting in net fees paid of $925,207.
The fees paid to the Manager pursuant to the Prior Advisory
Agreement with respect to the Government Series for the fiscal
years ended December 31, 1991 and 1992 were $3,221,691 and
$2,661,832, respectively. For the period January 1, 1993 through
April 29, 1993, the fee payable to the Manager pursuant to the
Prior Advisory Agreement was $730,686. For the period from April
30, 1993 (effective date of Management Agreement) to the fiscal
year ended December 31, 1993, the fee payable to the Manager was
$1,635,057. For the fiscal year ended December 31, 1993, the fee
payable to the Manager was reduced by $567,879, pursuant to an
undertaking in effect resulting in net fees paid of $1,797,864.
The fees paid to Dreyfus pursuant to the Prior
Administration Agreement with respect to the Money Market Series
for the fiscal years ended December 31, 1991 and 1992 were
$876,324 and $782,837, respectively. For the period January 1,
1993 through April 29, 1993, the fee payable to Dreyfus pursuant
to the Prior Administration Agreement was $172,808; however,
pursuant to an undertaking in effect, Dreyfus reduced its fee by
$32,272, resulting in a net fee of $140,536.
The fees paid to Dreyfus pursuant to the Prior
Administration Agreement with respect to the Government Series
for the fiscal years ended December 31, 1991 and 1992 were
$1,610,845 and $1,330,916, respectively. For the period January
1, 1993 through April 29, 1993, the fee payable to Dreyfus
pursuant to the Prior Administration Agreement was $365,343;
however, pursuant to an undertaking in effect, Dreyfus reduced
its fee by $103,746, resulting in a net fee of $261,597.
Expenses and Expense Information. All expenses incurred in
the operation of the Fund are borne by the Fund, except to the
extent specifically assumed by the Manager. The expenses borne
by the Fund include the following: taxes, interest, brokerage
fees and commissions, if any, fees of Trustees who are not
officers, directors, employees or holders of 5% or more of the
outstanding voting securities of the Manager or Dreyfus,
Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance
premiums, industry association fees, outside auditing and legal
expenses, costs of maintaining the Fund's existence, costs of
independent pricing services, costs attributable to investor
services (including, without limitation, telephone and personnel
expenses), costs of shareholders' reports and meetings, and any
extraordinary expenses. The Fund bears certain advertising,
marketing and Servicing expenses in accordance with the Fund's
Service Plan and also bears costs of preparing, printing and
distributing certain prospectuses and statements of additional
information and costs associated with implementing and operating
such plan. Expenses attributed to a particular Series are
charged against the assets of that Series; other expenses of the
Fund are allocated between the Series on the basis determined by
the Board of Trustees, including, but not limited to,
proportionately in relation to the net assets of each Series.
See "Service Plan."
The Manager has agreed that, as to each Series, if in any
fiscal year the aggregate expenses of a Series (including
management fees, but excluding taxes, brokerage, interest on
borrowings and, with the prior written consent of the necessary
state securities commissions, extraordinary expenses) exceed the
expense limitation of any state having jurisdiction over such
Series, the Series may deduct from the fees to be paid to the
Manager, or the Manager will bear, such excess expense, to the
extent required by state law. Such deduction or payment, if any,
will be estimated daily and reconciled and effected or paid, as
the case may be, on a monthly basis.
The aggregate of the fees payable to the Manager is not
subject to reduction as the value of the Series' net assets
increases.
Glass-Steagall Act. For an additional discussion of the
Glass-Steagall Act in connection with the Fund's operations, see
the Fund's Prospectus.
From time to time, legislation has been introduced and may
be reintroduced in Congress, which would permit a bank, a bank
holding company or a subsidiary thereof to organize, sponsor,
control and distribute shares of an investment company such as
the Fund, notwithstanding present restrictions under the
Glass-Steagall Act and the Federal Bank Holding Company Act of
1956. As described herein, the Fund is currently distributed by
the Distributor, and Dreyfus, its parent, sponsors the Fund and
provides it with administrative services. If current
restrictions preventing a bank from legally sponsoring,
organizing, controlling or distributing shares of an investment
company were relaxed, the Fund expects that the Manager would
consider the possibility of offering to perform some or all of
the services now provided by Dreyfus or the Distributor. It is
not possible, of course, to predict whether or in what form such
legislation might be enacted or the terms upon which the Manager
might offer to provide services.
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"How to Buy Fund Shares."
The Distributor. The Distributor serves as the Fund's
distributor pursuant to an agreement which is renewable annually.
The Distributor also acts as distributor for the other funds in
the First Prairie Family of Funds, the funds in the Dreyfus
Family of Funds and certain other investment companies.
Using Federal Funds. The Shareholder Services Group, Inc.,
the Fund's transfer and dividend disbursing agent (the "Transfer
Agent"), or the Fund may attempt to notify the investor upon
receipt of checks drawn on banks that are not members of the
Federal Reserve System as to the possible delay in conversion
into Federal Funds and may attempt to arrange for a better means
of transmitting the money. If the investor is a customer of a
securities dealer, bank or other financial institution and his
order to purchase Fund shares is paid for other than in Federal
Funds, the securities dealer, bank or other financial
institution, acting on behalf of its customer, will complete the
conversion into, or itself advance, Federal Funds generally on
the business day following receipt of the customer order. The
order is effective only when so converted and received by the
Transfer Agent. An order for the purchase of Fund shares placed
by an investor with sufficient Federal Funds or cash balance in
his brokerage account with a securities dealer, bank or other
financial institution will become effective on the day that the
order, including Federal Funds, is received by the Transfer
Agent.
TeleTransfer Privilege. TeleTransfer purchase orders may be
made between the hours of 8:00 a.m. and 4:00 p.m., New York time,
on any business day that the Transfer Agent and the New York
Stock Exchange are open, except Martin Luther King, Jr. Day,
Columbus Day and Veterans Day. Such purchases will be credited
to the shareholder's Fund account on the next bank business day.
To qualify to use the TeleTransfer Privilege, the initial payment
for purchase of Fund shares must be drawn on, and redemption
proceeds paid to, the same bank and account as are designated on
the Account Application or Shareholder Services Form on file. If
the proceeds of a particular redemption are to be wired to an
account at any other bank, the request must be in writing and
signature-guaranteed. See "Redemption of Fund
Shares--TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account
with a minimum investment of $100 without filing a new Account
Application during the calendar year the account is closed or
during the following calendar year, provided the information on
the old Account Application is still applicable.
SERVICE PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Service Plan."
Rule 12b-1 (the "Rule") adopted by the Securities and
Exchange Commission under the Act provides, among other things,
that an investment company may bear expenses of distributing its
shares only pursuant to a plan adopted in accordance with the
Rule. Because some or all of the fees paid for advertising or
marketing the Fund's shares and the fees paid to certain
financial institutions (which may include banks), securities
dealers and other financial industry professionals (collectively,
"Service Agents") could be deemed to be payment of distribution
expenses, the Fund's Board of Trustees has adopted such a plan
(the "Plan"). The Fund's Board of Trustees believes that there
is a reasonable likelihood that the Plan will benefit the Fund
and its shareholders. In some states, banks or other financial
institutions effecting transactions in Fund shares may be
required to register as dealers pursuant to state law.
A quarterly report of the amounts expended under the Plan
and the purposes for which such expenditures were incurred, must
be made to the Board of Trustees for its review. In addition,
the Plan provides that it may not be amended to increase
materially the costs which a Series may bear for distribution
pursuant to the Plan without shareholder approval and that other
material amendments of the Plan must be approved by the Board of
Trustees, and by the Trustees who are not "interested persons"
(as defined in the Act) of the Fund and have no direct or
indirect financial interest in the operation of the Plan or in
the related service agreements, by vote of the Trustees cast in
person at a meeting called for the purpose of considering such
amendments. As to each Series, the Plan and the related service
agreements are subject to annual approval by such vote of the
Trustees cast in person at a meeting called for the purpose of
voting on the Plan. The Plan was so approved by the Board of
Trustees at a meeting held on December 10, 1993. The Plan may be
terminated, as to each Series, at any time by vote of a majority
of the Trustees who are not "interested persons" and have no
direct or indirect financial interest in the operation of the
Plan or in any of the related service agreements or by vote of a
majority of such Series' shares. As to each Series, any service
agreement may be terminated without penalty, at any time, by such
vote of the Trustees or, upon not more than 60 days' written
notice to the Service Agent, by vote of the holders of a majority
of the shares of such Series. Each service agreement will
terminate automatically, as to the relevant Series, in the event
of its assignment (as defined in the Act).
During the fiscal year ended December 31, 1993, $519,700 was
charged to the Money Market Series under the Plan, of which
$409,148 was paid to the Manager and its affiliates, $8,265 was
paid for preparing, printing and distributing prospectuses and
operating the Plan, and $102,287 was charged for advertising,
marketing and Servicing the Money Market Series' shares. During
the fiscal year ended December 31, 1993, $1,204,982 was charged
to the Government Series under the Plan, of which $959,910 was
paid to the Manager and its affiliates, $5,095 was paid for
preparing, printing and distributing prospectuses and operating
the Plan, and $239,977 was paid for advertising, marketing and
Servicing the Government Series' shares.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"How to Redeem Fund Shares."
Check Redemption Privilege. An investor may indicate on the
Account Application or by later written request that the Fund
provide Redemption Checks ("Checks") drawn on the Fund's account.
Checks will be sent only to the registered owner(s) of the
account and only to the address of record. The Account
Application or later written request must be manually signed by
the registered owner(s). Checks may be made payable to the order
of any person in an amount of $500 or more. When a Check is
presented to the Transfer Agent for payment, the Transfer Agent,
as the investor's agent, will cause the Fund to redeem a
sufficient number of full or fractional shares in the investor's
account to cover the amount of the Check. Dividends are earned
until the Check clears. After clearance, a copy of the Check
will be returned to the investor. Investors generally will be
subject to the same rules and regulations that apply to checking
accounts, although election of this Privilege creates only a
shareholder-transfer agent relationship with the Transfer Agent.
If the amount of the Check is greater than the value of the
shares in an investor's account, the Check will be returned
marked insufficient funds. Checks should not be used to close an
account.
Wire Redemption Privilege. By using this Privilege, the
investor authorizes the Transfer Agent to act on wire or
telephone redemption instructions from any person representing
himself or herself to be the investor, or a representative of the
investor's Service Agent, and believed by the Transfer Agent to
be genuine. The Transfer Agent's records of such instructions
are binding. Ordinarily, the Fund will initiate payment for
shares redeemed pursuant to this Privilege on the same business
day if the Transfer Agent receives the redemption request in
proper form prior to noon on such day; otherwise the Fund will
initiate payment on the next business day. Redemption proceeds
will be transferred by Federal Reserve wire only to the
commercial bank account specified by the investor on the Account
Application or Shareholder Services Form. Redemption proceeds,
if wired, must be in the amount of $1,000 or more and will be
wired to the investor's account at the bank of record designated
in the investor's file at the Transfer Agent, if the investor's
bank is a member of the Federal Reserve System, or to a
correspondent bank if the investor's bank is not a member. Fees
ordinarily are imposed by such bank and usually are borne by the
investor. Immediate notification by the correspondent bank to
the investor's bank is necessary to avoid a delay in crediting
the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire
redemption requests to the Transfer Agent by employing the
following transmittal code which may be used for domestic or
overseas transmission:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic
equipment may have the wire transmitted by contacting a TRT
Cables operator toll free at 1-800-654-7171. Investors should
advise the operator that the above transmittal code must be used
and should also inform the operator of the Transfer Agent's
answer back sign.
To change the commercial bank or account designated to
receive redemption proceeds, a written request must be sent to
the Transfer Agent. This request must be signed by each
shareholder, with each signature guaranteed as described below
under "Signatures."
TeleTransfer Privilege. Investors should be aware that if
they have selected the TeleTransfer Privilege, any request for a
wire redemption will be effected as a TeleTransfer transaction
through the Automated Clearing House ("ACH") system unless more
prompt transmittal specifically is requested. Redemption
proceeds will be on deposit in the investor's account at an ACH
member bank ordinarily two business days after receipt of the
redemption request. See "Purchase of Fund Shares--TeleTransfer
Privilege."
Signatures. Written redemption requests for redemption of
Fund shares must be signed by the individual shareholder,
including each owner of a joint account, and each signature must
be guaranteed. The Transfer Agent has adopted standards and
procedures pursuant to which signature-guarantees in proper form
generally will be accepted from domestic banks, brokers, dealers,
credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings
associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer
Agents Medallion Program ("STAMP") and the Stock Exchanges
Medallion Program. Guarantees must be signed by an authorized
signatory of the guarantor and "Signature-Guaranteed" must appear
with the signature. The Transfer Agent may request additional
documentation from corporations, executors, administrators,
trustees or guardians and may accept other suitable verification
arrangements from foreign investors, such as consular
verification. For more information with respect to signature-
guarantees, please call the telephone number listed on the cover.
Redemption Commitment. For each Series, the Fund has
committed itself to pay in cash all redemption requests by any
shareholder of record, limited in amount during any 90-day period
to the lesser of $250,000 or 1% of the value of such Series' net
assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and
Exchange Commission. In the case of requests for redemption in
excess of such amount, the Board of Trustees reserves the right
to make payments in whole or in part in securities or other
assets of the relevant Series in case of an emergency or any time
a cash distribution would impair the liquidity of the Series to
the detriment of the existing shareholders. In this event, the
securities would be valued in the same manner as the Series'
portfolio is valued. If the recipient sold such securities,
brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be
suspended or the date of payment postponed (a) during any period
when the New York Stock Exchange is closed (other than customary
weekend and holiday closings), (b) when trading in the markets
the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the Securities and Exchange Commission so
that disposal of the Fund's investments or determination of its
net asset value is not reasonably practicable, or (c) for such
other periods as the Securities and Exchange Commission by order
may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Shareholder Services."
Exchange Privilege. The Exchange Privilege permits
investors to purchase, in exchange for all or part of their
shares of a Series, shares of the other Series or shares of
certain other funds advised by the Manager, or shares of certain
funds advised by Dreyfus, on the basis of relative net asset
value per share at the time of the exchange, as follows:
A. Exchanges for shares of any funds that are offered
without a sales load will be made without a sales
load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales
load, and the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be
exchanged without a sales load for shares of other
funds sold without a sales load.
D. Shares of funds purchased with a sales load, shares of
funds acquired by a previous exchange from shares
purchased with a sales load, and additional shares
acquired through reinvestment of dividends or
distributions of any such funds (collectively referred
to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred
to herein as "Offered Shares"), provided that, if the
sales load applicable to the Offered Shares exceeds
the
maximum sales load that could have been imposed in
connection with the Purchased Shares (at the time the
Purchased Shares were acquired), without giving effect
to any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, an investor
must notify the Transfer Agent of his prior ownership of fund
shares and his account number.
To use this Privilege, an investor or the investor's Service
Agent acting on the investor's behalf must give exchange
instructions to the Transfer Agent in writing, by wire or by
telephone. Telephone exchanges may be made only if the
appropriate "YES" box has been checked on the Account
Application, or a separate signed Shareholder Services Form is on
file with the Transfer Agent. By using this Privilege, the
investor authorizes the Transfer Agent to act on telephonic,
telegraphic or written exchange instructions from any person
representing himself or herself to be the investor or a
representative of the investor's Service Agent, and reasonably
believed by the Transfer Agent to be genuine. Telephone
exchanges may be subject to limitations as to the amount involved
or the number of telephone exchanges permitted.
Auto-Exchange Privilege. Auto-Exchange permits an investor
to purchase, in exchange for shares of the Series, shares of the
other Series or certain other funds in the First Prairie Family
of Funds or certain other funds advised by Dreyfus. This
Privilege is available only for existing accounts. Shares will
be exchanged on the basis of relative net asset value as
described above under "Exchange Privilege." Enrollment in or
modification or cancellation of this Privilege is effective three
business days following notification by the investor. An
investor will be notified if his account falls below the amount
designated to be exchanged under this Privilege. In this case,
an investor's account will fall to zero unless additional
investments are made in excess of the designated amount prior to
the next Auto-Exchange transaction. Shares held under IRA and
other retirement plans are eligible for this Privilege.
Exchanges of IRA shares may be made between IRA accounts and from
regular accounts to IRA accounts, but not from IRA accounts to
regular accounts. With respect to all other retirement accounts,
exchanges may be made only among those accounts.
The Exchange Privilege and Auto-Exchange Privilege are
available to shareholders resident in any state in which shares
of the fund being acquired may legally be sold. Shares may be
exchanged only between accounts having identical names and other
identifying designations.
Shareholder Services Forms and prospectuses of the other
funds may be obtained from the Distributor, 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144. The Fund reserves the
right to reject any exchange request in whole or in part. The
Exchange Privilege or Auto-Exchange Privilege may be modified or
terminated at any time upon notice to shareholders.
Dividend Sweep Privilege. The Dividend Sweep Privilege
enables investors to invest automatically dividends or dividends
and capital gain distributions, if any, paid by the Series in
shares of another fund or series in the First Prairie Family of
Funds or certain other funds advised or administered by Dreyfus
of which the investor is a shareholder. Shares of other funds
purchased pursuant to this Privilege will be purchased on the
basis of relative net asset value per share as follows:
A. Dividends and distributions paid by a fund may be
invested without imposition of a sales load in shares
of other funds that are offered without a sales load.
B. Dividends and distributions paid by a fund which does
not charge a sales load may be invested in shares of
other funds sold with a sales load, and the applicable
sales load will be deducted.
C. Dividends and distributions paid by a fund which
charges a sales load may be invested in shares of
other
funds sold with a sales load (referred to herein as
"Offered Shares"), provided that, if the sales load
applicable to the Offered Shares exceeds the maximum
sales load charged by the fund from which dividends or
distributions are being swept, without giving effect
to
any reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be
invested in shares of other funds that impose a
contingent deferred sales charge and the applicable
contingent deferred sales charge, if any, will be
imposed upon redemption of such shares.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan
permits an investor with a $5,000 minimum account to request
withdrawal of a specified dollar amount (minimum of $50) on
either a monthly or quarterly basis. Withdrawal payments are the
proceeds from sales of Fund shares, not the yield on the shares.
If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and
eventually may
be depleted. An Automatic Withdrawal Plan may be established by
completing the appropriate application available from the
Distributor, the Manager, certain affiliates of the Manager or
certain Service Agents. Automatic Withdrawal may be terminated
at any time by the investor, the Fund or the Transfer Agent.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"How to Buy Fund Shares."
Amortized Cost Pricing. The valuation of each Series'
portfolio securities is based upon their amortized cost which
does not take into account unrealized capital gains or losses.
This involves valuing an instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates
on the market value of the instrument. While this method
provides certainty in valuation, it may result in periods during
which value, as determined by amortized cost, is higher or lower
than the price the Fund would receive if it sold the instrument.
The Board of Trustees has established, as a particular
responsibility within the overall duty of care owed to the Fund's
investors, procedures reasonably designed to stabilize each
Series' price per share as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of the
Series' portfolio holdings by the Board of Trustees, at such
intervals as it deems appropriate, to determine whether a Series'
net asset value calculated by using available market quotations
or market equivalents deviates from $1.00 per share based on
amortized cost. In such review, investments for which market
quotations are readily available will be valued at the most
recent bid price or yield equivalent for such securities or for
securities of comparable maturity, quality and type, as obtained
from one or more of the major market makers for the securities to
be valued. Other investments and assets will be valued at fair
value as determined in good faith by the Board of Trustees.
The extent of any deviation between a Series' net asset
value based upon available market quotations or market
equivalents and $1.00 per share based on amortized cost will be
examined by the Board of Trustees. If such deviation exceeds 1/2
of 1%, the Board of Trustees promptly will consider what action,
if any, will be initiated. In the event the Board of Trustees
determines that a deviation exists which may result in material
dilution or other unfair results to investors or existing
shareholders, it has agreed to take such corrective action as it
deems necessary and appropriate, including: selling portfolio
instruments prior to maturity to realize capital gains or losses
or to shorten average portfolio maturity; withholding dividends
or paying distributions from capital or capital gains; redeeming
shares in kind; or establishing a net asset value per share by
using available market quotations or market equivalents.
New York Stock Exchange Closings. The holidays (as
observed) on which the New York Stock Exchange is closed
currently are: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Dividends, Distributions and Taxes."
Ordinarily, gains and losses realized from portfolio
transactions will be treated as capital gain or loss. However,
all or a portion of any gains realized from the sale or other
disposition of certain market discount bonds will be treated as
ordinary income under Section 1276 of the Internal Revenue Code
of 1986, as amended.
YIELD INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Yield Information."
For the seven-day period ended December 31, 1993, the Money
Market Series' yield was 2.68%, and its effective yield was
2.72%. The Government Series' yield for such period was 2.63%,
and its effective yield was 2.67%. Yield is computed in
accordance with a standardized method which involves determining
the net change in the value of a hypothetical pre-existing Series
account having a balance of one share at the beginning of a seven
calendar day period for which yield is to be quoted, dividing the
net change by the value of the account at the beginning of the
period to obtain the base period return, and annualizing the
results (i.e., multiplying the base period return by 365/7). The
net change in the value of the account reflects the value of
additional shares purchased with dividends declared on the
original share and any such additional shares and fees that may
be charged to shareholder accounts, in proportion to the length
of the base period and the Series' average account size, but does
not include realized gains and losses or unrealized appreciation
and depreciation. Effective yield is computed by adding 1 to the
base period return (calculated as described above), raising that
sum to a power equal to 365 divided by 7, and subtracting 1 from
the result.
Yields will fluctuate and are not necessarily representative
of future results. Each investor should remember that yield is a
function of the type and quality of the instruments in the
portfolio, portfolio maturity and operating expenses. An
investor's principal in the Fund is not guaranteed. See
"Determination of Net Asset Value" for a discussion of the manner
in which each Series' price per share is determined.
From time to time, advertising for the Fund may describe the
costs of a college education at public or private institutions;
how such costs may increase over time, based on an assumed rate
of growth; and how investments in the Series can be used to help
pay for such costs. Advertisements for the Fund also may refer
to how an investment in the Fund may be used as a savings vehicle
for various purposes such as a down payment on the purchase price
of a home or to fund retirement or medical costs. Advertisements
for the Fund also may refer to comparisons of the Fund's
performance with historical rates of inflation.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased directly from
the issuer or an underwriter or a market maker for the
securities. Ordinarily, no brokerage commissions are paid by the
Fund for such purchases. Purchases from underwriters of port-
folio securities include a concession paid by the issuer to the
underwriter and the purchase price paid to, and sales price
received from, market makers for the securities may reflect the
spread between the bid and asked price. No brokerage commissions
have been paid by either Series to date.
Transactions are allocated to various dealers by the Fund's
investment personnel in their best judgment. The primary
consideration is prompt and effective execution of orders at the
most favorable price. Subject to that primary consideration,
dealers may be selected for research, statistical or other
services to enable the Manager to supplement its own research and
analysis with the views and information of other securities firms
and may be selected based upon their sales of Fund shares.
Research services furnished by brokers through which the
Fund effects securities transactions may be used by the Manager
in advising other funds or accounts it may advise and,
conversely, research services furnished to the Manager by brokers
in connection with other funds or accounts the Manager may advise
may be used by the Manager in advising the Fund. Although it is
not possible to place a dollar value on these services, it is the
opinion of the Manager that the receipt and study of such
services should not reduce its overall research expenses.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"General Information."
Each Series share has one vote and, when issued and paid for
in accordance with the terms of the offering, is fully paid and
non-assessable. Series' shares have no preemptive, subscription
or conversion rights and are freely transferable.
The Fund sends annual and semi-annual financial statements
to all its shareholders and sends statements concerning
shareholder accounts monthly.
On March 15, 1989, the Fund's name was changed from First
Lakeshore Money Market Fund to First Prairie Money Market Fund.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT,
COUNSEL AND INDEPENDENT AUDITORS
The Bank of New York, 110 Washington Street, New York, New
York 10286, is the Fund's custodian. The Shareholder Services
Group, Inc., a subsidiary of First Data Corporation, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Fund's transfer
and dividend disbursing agent. Neither The Bank of New York nor
The Shareholder Services Group, Inc. has any part in determining
the investment policies of the Fund or which portfolio securities
are to be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New
York 10004-2696, as counsel for the Fund, has rendered its
opinion as to certain legal matters regarding the due
authorization and valid issuance of the shares of beneficial
interest being sold pursuant to the Fund's Prospectus.
Ernst & Young, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
APPENDIX
Description of the two highest commercial paper, bond and
other short- and long-term rating categories assigned by Standard
& Poor's Corporation ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Fitch Investors Service, Inc. ("Fitch"), Duff &
Phelps, Inc. ("Duff"), IBCA Limited and IBCA Inc. ("IBCA") and
Thomson BankWatch, Inc. ("BankWatch"):
Commercial Paper and Short-Term Ratings
The designation A-1 by S&P indicates that the degree of
safety regarding timely payment is either overwhelming or very
strong. Those issues determined to possess overwhelming safety
characteristics are denoted with a plus sign (+) designation.
Capacity for timely payment on issues with an A-2 designation is
strong. However, the relative degree of safety is not as high as
for issues designated A-1.
The rating Prime-1 (P-1) is the highest commercial paper
rating assigned by Moody's. Issuers of P-1 paper must have a
superior capacity for repayment of short-term promissory
obligations and ordinarily will be evidenced by leading market
positions in well established industries, high rates of return on
funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad
margins in earnings coverage of fixed financial charges and high
internal cash generation, and well established access to a range
of financial markets and assured sources of alternate liquidity.
Issues (or related supporting institutions) rated Prime-2 (P-2)
have a strong capacity for repayment of senior short-term
promissory obligations. This ordinarily will be evidenced by
many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions.
Ample alternate liquidity is maintained.
The rating Fitch-1 (Highest Grade) is the highest commercial
paper rating assigned by Fitch. Paper rated Fitch-1 is regarded
as having the strongest degree of assurance for timely payment.
The rating Fitch-2 (Very Good Grade) is the second highest
commercial paper rating assigned by Fitch which reflects an
assurance of timely payment only slightly less in degree than the
strongest issues.
The rating Duff-1 is the highest commercial paper rating
assigned by Duff. Paper rated Duff-1 is regarded as having very
high certainty of timely payment with excellent liquidity factors
which are supported by ample asset protection. Risk factors are
minor. Paper rated Duff-2 is regarded as having good certainty
of timely payment, good access to capital markets and sound
liquidity factors and company fundamentals. Risk factors are
small.
The designation A1 by IBCA indicates that the obligation is
supported by a very strong capacity for timely repayment. Those
obligations rated A1+ are supported by the highest capacity for
timely repayment. Obligations rated A2 are supported by a strong
capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial
conditions.
The rating TBW-1 is the highest short-term obligation rating
assigned by BankWatch. Obligations rated TBW-1 are regarded as
having the strongest capacity for timely repayment. Obligations
rated TBW-2 are supported by a strong capacity for timely
repayment, although the degree of safety is not as high as for
issues rated TBW-1.
Bond and Long-Term Ratings
Bonds rated AAA are considered by S&P to be the highest
grade obligations and possess an extremely strong capacity to pay
principal and interest. Bonds rated AA by S&P are judged by S&P
to have a very strong capacity to pay principal and interest, and
in the majority of instances, differ only in small degree from
issues rated AAA. The rating AA may be modified by the addition
of a plus or minus sign to show relative standing within the
rating category.
Bonds rated Aaa are judged by Moody's to be of the best
quality. Bonds rated Aa by Moody's are judged by Moody's to be
of high quality by all standards. Together with the Aaa group,
they comprise what are generally known as high-grade bonds.
Bonds rated Aa are rated lower than Aaa bonds because margins of
protection may not be as large or fluctuations of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat
larger. Moody's applies the numerical modifiers 1, 2 and 3 in
the Aa rating category. The modifier 1 indicates a ranking for
the security in the higher end of this rating category, the
modifier 2 indicates a mid-range ranking and the modifier 3
indicates a ranking in the lower end of the rating category.
Bonds rated AAA by Fitch are judged by Fitch to be strictly
high-grade, broadly marketable and suitable for investment by
trustees and fiduciary institutions and liable to but slight
market fluctuation other than through changes in the money rate.
The prime feature of an AAA bond is a showing of earnings several
times or many times interest requirements, with such stability of
applicable earnings that safety is beyond reasonable question
whatever changes occur in conditions. Bonds rated AA by Fitch
are judged by Fitch to be of safety virtually beyond question and
are readily salable, whose merits are not unlike those of the AAA
class, but whose margin of safety is less strikingly broad. The
issue may be the obligation of a small company, strongly secured
but influenced as to rating by the lesser financial power of the
enterprise and more local type of market.
Bonds rated AAA by Duff are considered to be of the highest
credit quality. The risk factors are negligible, being only
slightly more than U.S. Treasury debt. Bonds rated AA are
considered by Duff to be of high credit quality with strong
protection factors. Risk is modest but may vary slightly from
time to time because of economic conditions.
Obligations rated AAA by IBCA have the lowest expectation of
investment risk. Capacity for timely repayment of principal and
interest is substantial, such that adverse changes in business,
economic or financial conditions are unlikely to increase
investment risk significantly. Obligations rated AA by IBCA have
a very low expectation of investment risk. Capacity for timely
repayment of principal and interest is substantial. Adverse
changes in business, economic or financial conditions may
increase investment risk, albeit not very significantly.
IBCA also assigns a rating to certain international and U.S.
banks. An IBCA bank rating represents IBCA's current assessment
of the strength of the bank and whether such bank would receive
support should it experience difficulties. In its assessment of
a bank, IBCA uses a dual rating system comprised of Legal Ratings
and Individual Ratings. In addition, IBCA assigns banks long-
and short-term ratings as used in the corporate ratings discussed
above. Legal Ratings, which range in gradations from 1 through
5, address the question of whether the bank would receive support
provided by central banks or shareholders if it experienced
difficulties, and such ratings are considered by IBCA to be a
prime factor in its assessment of credit risk. Individual
Ratings, which range in gradations from A through E, represent
IBCA's assessment of a bank's economic merits and address the
question of how the bank would be viewed if it were entirely
independent and could not rely on support from state authorities
or its owners.
In addition to its ratings of short-term obligations,
BankWatch assigns a rating to each issuer it rates, in gradations
of A through E. BankWatch examines all segments of the
organization, including, where applicable, the holding company,
member banks or associations, and other subsidiaries. In those
instances where financial disclosure is incomplete or untimely, a
qualified rating (QR) is assigned to the institution. BankWatch
also assigns, in the case of foreign banks, a country rating
which represents an assessment of the overall political and
economic stability of the country in which the bank is domiciled.
<PAGE>
<TABLE>
FIRST PRAIRIE MONEY MARKET FUND, MONEY MARKET SERIES
STATEMENT OF INVESTMENTS
<CAPTION>
DECEMBER 31, 1993
PRINCIPAL
NEGOTIABLE BANK CERTIFICATES OF DEPOSIT-3.1% AMOUNT VALUE
------------ ------------
<S> <C> <C>
Sanwa Bank Ltd. (Yankee)
3.31%, 1/7/1994 (cost $5,000,000).................... $ 5,000,000 $ 5,000,000
COMMERCIAL PAPER-34.9%
Bridgestone/Firestone Inc.
3.36%, 1/21/1994 (a).......................................... $ 7,925,000 $ 7,910,251
Cogentrix of Richmond Inc.
3.35%, 1/12/1994 (a)......................................... 6,202,000 6,195,652
Goldman Sachs Group L.P.
3.31%, 1/21/1994............................................. 7,000,000 6,987,167
Morgan Stanley Group Inc.
3.35%, 1/27/1994............................................. 6,000,000 5,985,527
N.S. Finance Inc.
.36%, 1/10/1994(a)........................................... 5,700,000 5,695,226
New Center Asset Trust
3.39%, 2/7/1994.............................................. 7,000,000 7,000,000
Nichimen America Inc.
3.36%, 1/18/1994 (a)......................................... 6,000,000 5,990,508
Pepsico Inc.
3.19%, 1/28/1994............................................. 3,000,000 2,992,845
Pitney Bowes Credit Corp.
3.35%, 1/11/1994............................................. 3,000,000 2,997,208
SRD Finance Inc.
3.35%, 2/1/1994 (a).......................................... 5,000,000 4,985,663
------------
TOTAL COMMERCIAL PAPER (cost $56,740,047)........................ $ 56,740,047
============
CORPORATE NOTES-1.5%
Merrill Lynch & Co. Inc. (b)
3.27%, 6/7/1994
(cost $2,500,000)............................................ $ 2,500,000 $ 2,500,000
SHORT-TERM BANK NOTES-3.1%
NationsBank of North Carolina NA
3.52%, 8/18/1994
(cost $4,999,375)............................................ $ 5,000,000 $ 4,999,375
U.S. TREASURY BILLS-4.7%
3.57%, 12/15/1994
(cost $7,733,587)...... .................................... $ 8,000,000 $ 7,733,587
U.S. GOVERNMENT AGENCIES-44.4%
Federal Home Loan Banks
Floating Rate Notes
3.55%, 7/6/1995(c)...............................................$ 25,000,000 $ 25,000,000
4.29%, 4/7/2000(b).............................................. 10,000,000 10,000,000
Federal Home Loan Mortgage Corp.
Floating Rate Notes (b)
5.00%, 3/22/2000................................................ 5,000,000 5,000,000
Small Business Administration
Individual Loan Certificates (b)
4.67%, 5/15/1997............................................... 57,052 57,052
4.67%, 7/15/1997............................................... 67,114 67,114
4.66%, 6/15/2000............................................... 74,398 74,398
</TABLE>
<PAGE>
<TABLE>
FIRST PRAIRIE MONEY MARKET FUND, MONEY MARKET SERIES
STATEMENT OF INVESTMENTS (CONTINUED)
<CAPTION>
DECEMBER 31, 1993
PRINCIPAL
U.S. GOVERNMENT AGENCIES (CONTINUED) AMOUNT VALUE
------------- ------------
<S> <C> <C>
Small Business Administration (continued)
Individual Loan Certificates (b) (continued)
4.65%, 7/15/2000..................................................... $ 199,460 $ 199,460
4.59%, 11/15/2000.................................................... 176,915 176,915
4.68%, 12/15/2001.................................................... 93,801 93,801
4.54%, 6/15/2002..................................................... 92,151 92,151
4.68%, 6/15/2003..................................................... 131,306 131,306
4.64%, 10/15/2004................................................... 360,667 360,667
4.67%, 11/15/2004................................................... 216,337 216,337
4.72%, 4/15/2009................................................... 420,528 420,528
4.67%, 7/15/2010................................................... 434,420 434,420
4.66%, 10/15/2010.................................................. 688,906 688,906
4.75%, 8/15/2012................................................... 459,573 459,573
4.76%, 1/15/2013................................................... 452,128 452,128
4.65%, 8/15/2013................................................... 280,830 280,830
4.68%, 1/15/2014................................................... 512,421 512,421
4.76%, 4/15/2014.................................................... 232,165 232,165
4.80%, 4/15/2014.................................................... 296,052 296,052
4.66%, 12/15/2014................................................... 38,524 38,524
4.80%, 12/15/2014................................................... 133,377 133,377
4.65%, 7/15/2015.................................................... 586,883 586,883
4.64%, 9/15/2015.................................................... 125,566 125,566
Small Business Administration
Pool Certificates (b)
4.72%, 9/25/1995.................................................... 65,676 65,676
4.49%, 4/25/1996.................................................... 91,208 91,208
4.80%, 5/25/1999.................................................... 178,047 178,047
4.67%, 3/25/2000.................................................... 497,799 497,799
4.67%, 1/25/2001.................................................... 607,863 607,863
4.53%, 12/25/2001................................................... 436,155 436,155
4.68%, 9/25/2003................................................... 50,878 50,878
4.84%, 9/25/2003................................................... 420,018 420,018
3.26%, 10/25/2005.................................................. 1,512,299 1,512,299
4.55%, 1/25/2007................................................... 269,177 269,177
4.44%, 4/25/2007................................................... 2,335,703 2,335,703
4.79%, 6/25/2008................................................... 835,303 835,303
4.63%, 12/25/2008.................................................. 407,895 407,895
4.67%, 1/25/2009................................................... 929,581 929,581
4.87%, 4/25/2013................................................... 2,261,030 2,261,030
4.80%, 5/25/2013................................................... 1,678,744 1,678,744
4.64%, 7/25/2013................................................... 105,637 105,637
4.81%, 8/25/2013................................................... 1,836,400 1,836,400
4.69%, 12/25/2013.................................................. 2,057,961 2,057,961
4.69%, 12/25/2013.................................................. 265,793 265,793
4.80%, 1/25/2014................................................... 1,026,549 1,026,549
4.56%, 2/25/2014................................................... 397,475 397,475
4.69%, 2/25/2014................................................... 1,617,360 1,617,360
4.38%, 5/25/2014................................................... 960,843 960,843
4.87%, 7/25/2014................................................... 1,478,698 1,478,698
4.57%,12/25/2015................................................... 3,713,989 3,713,989
-----------
TOTAL U.S. GOVERNMENT AGENCIES (cost $72,168,655)...................... $72,168,655
===========
FIRST PRAIRIE MONEY MARKET FUND, MONEY MARKET SERIES
STATEMENT OF INVESTMENTS (CONTINUED)
<S> <C> <C>
REPURCHASE AGREEMENT-8.6%
National Westminster Bank USA, 3.25%
dated 12/31/1993, due 1/3/1994 in the amount of $14,003,792
(fully collateralized by $14,020,000 U.S. Treasury Notes
4.625%, due 12/31/1994, value $14,471,795)
(cost $14,000,000).................................................. $ 14,000,000 $ 14,000,000
============ ============
TOTAL INVESTMENTS (cost $163,141,664)...................... 100.3% $163,141,664
============
LIABILITIES, LESS CASH AND RECEIVABLES.................... (.3%) $ (518,187)
============
NET ASSETS................................................ 100.0% $162,623,477
====== ============
NOTES TO STATEMENT OF INVESTMENTS:
(a) Backed by an irrevocable letter of credit.
(b) Variable interest rate - subject to change approximately every 7 to 90 days
(c) Variable interest rate - subject to change daily.
</TABLE>
See notes to financial statements.
<PAGE>
FIRST PRAIRIE MONEY MARKET FUND, GOVERNMENT SERIES
STATEMENT OF INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1993
ANNUALIZED
YIELD ON
DATE OF PRINCIPAL
U.S. TREASURY BILLS-33.5% PURCHASE AMOUNT VALUE
---------- ------------ ------------
<S> <C> <C> <C>
4/14/1994..................................................... 3.17% $ 25,000,000 $ 24,775,404
5/5/1994...................................................... 3.27 17,500,000 17,308,919
10/20/1994.................................................... 3.52 10,000,000 9,723,006
------------
TOTAL U.S. TREASURY BILLS (cost $51,807,329).................. $ 51,807,329
============
U.S. GOVERNMENT AGENCIES-63.8%
Agency for International Development
Floating Rate Notes (a)
6/1/2005................................................... 3.58% $ 23,690,000 $ 23,690,000
9/15/2018.................................................. 3.81 10,000,000 10,231,217
1/1/2021................................................... 3.50 25,000,000 25,000,000
11/1/2021.................................................. 3.39 15,000,000 15,000,000
Small Business Administration
Pool Certificates (a)
6/25/2013.................................................. 4.69 963,875 963,875
9/25/2014.................................................. 4.58 920,905 920,905
7/25/2016.................................................. 4.18 14,133,814 14,182,121
9/25/2016.................................................. 4.18 8,668,941 8,698,589
------------
TOTAL U.S. GOVERNMENT AGENCIES (cost $98,686,707)............. $98,686,707
============
REPURCHASE AGREEMENT-2.6%
National Westminster Bank USA
dated 12/31/1993, due 1/3/1994 in the amount of $4,001,083
(fully collateralized by $4,005,000
U.S. Treasury Notes 4.625%, due 12/31/1994,
value $4,133,911)
(cost $4,000,000)......................................... 3.25% $ 4,000,000 $ 4,000,000
============
TOTAL INVESTMENTS (cost $154,494,036).................. 99.9% $154,494,036
====== ============
CASH AND RECEIVABLES (NET)............................. .1% $ 119,227
====== ============
NET ASSETS.............................................100.0% $154,613,263
============
</TABLE>
NOTE TO STATEMENT OF INVESTMENTS;
(a) Variable interest rate-subject to periodic change.
See notes to financial statements.
<PAGE>
<TABLE>
FIRST PRAIRIE MONEY MARKET FUND
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1993
MONEY MARKET GOVERNMENT
SERIES SERIES
------------ ------------
<S> <C> <C>
ASSETS:
Investments in securities, at value-Note 2(a,b)............................ $163,141,664 $154,494,036
Interest receivable........................................................ 773,526 1,037,531
Receivable for investment securities sold.................................. 114,818 54,007
Prepaid expenses........................................................... 33,232 12,599
------------ ------------
164,063,240 155,598,173
------------ ------------
LIABILITIES:
Due to The First National Bank of Chicago.................................. 103,884 107,619
Due to The Dreyfus Corporation............................................. 102,287 239,977
Due to Custodian........................................................... 1,164,365 566,747
Accrued expenses........................................................... 69,227 70,567
------------ ------------
1,439,763 984,910
------------ ------------
NET ASSETS..................................................................... $162,623,477 $154,613,263
============ ============
REPRESENTED BY:
Paid-in capital............................................................ $162,600,116 $154,633,611
Accumulated net realized gain (loss) on investments........................ 23,361 (20,348)
------------ ------------
NET ASSETS at value applicable to 162,600,116 and 154,633,611 shares outstanding
(unlimited number of $.01 par value shares of
Beneficial Interest authorized)............................................ $162,623,477 $154,613,263
============ ============
NET ASSET VALUE, offering and redemption price per share:
Money Market Series
($162,623,477 divided by $162,600,116 shares).............................. $1.00
=====
Government Series
($154,613,263 divided by 154,633,611 shares)............................... $1.00
=====
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1993
MONEY MARKET GOVERNMENT
SERIES SERIES
------------ ------------
INVESTMENT INCOME:
INTEREST INCOME............................................................ $ 7,507,525 $ 15,470,122
------------ ------------
EXPENSES-Note 2(c):
Management fee-Note 3(a)............................................... $ 995,552 $ 2,365,743
Administration fee-Note 3(a)........................................... 172,808 365,343
Shareholder servicing costs-Note 3(b).................................. 715,035 1,241,878
Custodian fees......................................................... 62,357 118,324
Professional fees...................................................... 28,562 72,681
Prospectus and shareholders' reports-Note 3(b)......................... 20,484 15,693
Registration fees...................................................... 13,125 14,770
Trustees' fees and expenses-Note 3(c).................................. 2,979 6,768
Miscellaneous.......................................................... 14,114 40,202
------------ ------------
2,025,016 4,241,402
Less-reduction in management fee and administration
fee due to undertakings-Note 3(a).................................. 102,617 671,626
------------ ------------
TOTAL EXPENSES................................................. 1,922,399 3,569,776
------------ ------------
INVESTMENT INCOME-NET.......................................................... 5,585,126 11,900,346
NET REALIZED GAIN (LOSS) ON INVESTMENTS-Note 2(b).............................. 23,361 (13,557)
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................... $ 5,608,487 $ 11,886,789
============ ============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FIRST PRAIRIE MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
MONEY MARKET SERIES GOVERNMENT SERIES
----------------------------- ---------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------------- ---------------------------
1992 1993 1992 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Investment income-net....................................... $ 12,399,605 $ 5,585,126 $ 19,082,767 $ 11,900,346
Net realized gain (loss) on investments..................... 4,319 23,361 (5,649) (13,557)
------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS........................... 12,403,924 5,608,487 19,077,118 11,886,789
------------ ------------ ------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net....................................... (12,399,605) (5,585,126) (19,082,767) (11,900,346)
Net realized gain on investments............................ (5,410) (4,319) __ __
------------ ------------ ------------ ------------
TOTAL DIVIDENDS......................................... (12,405,015) (5,589,445) (19,082,767) (11,900,346)
------------ ------------ ------------ ------------
BENEFICIAL INTEREST TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold............................... 2,907,881,568 1,739,129,690 2,812,319,864 1,491,641,119
Dividends reinvested........................................ 3,510,328 2,244,715 847,877 564,832
Cost of shares redeemed.....................................(3,107,316,541)(1,839,635,459)(3,255,326,710)(1,886,311,644)
------------- ------------ ------------ ------------
(DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS.................... (195,924,645) (98,261,054) (442,158,969) (394,105,693)
------------- ------------ ------------ ------------
TOTAL (DECREASE) IN NET ASSETS.................. (195,925,736) (98,242,012) (442,164,618) (394,119,250)
NET ASSETS:
Beginning of year........................................... 456,791,225 260,865,489 990,897,131 548,732,513
------------ ------------ ------------ ------------
End of year................................................. $260,865,489 $162,623,477 $548,732,513 $154,613,263
============ ============ ============ ============
See notes to financial statements.
</TABLE>
<PAGE>
FIRST PRAIRIE MONEY MARKET FUND, MONEY MARKET SERIES
CONDENSED FINFNCIAL INFORMATION
Reference is made to page 4 of the Prospectus Dated April
11, 1994.
See notes to financial statements.
<PAGE>
FIRST PRAIRIE MONEY MARKET FUND, GOVERNMENT SERIES
CONDENSED FINFNCIAL INFORMATION
Reference is made to page 5 of the Prospectus Dated April
11, 1994.
See notes to financial statements.
<PAGE>
FIRST PRAIRIE MONEY MARKET FUND NOTES TO FINANCIAL STATEMENTS
NOTE 1-GENERAL:
The Fund is registered under the Investment Company Act of
1940 ("Act") as a diversified open-end management investment
company and operates as a series company issuing two classes of
Beneficial Interest: the Money Market Series and the Government
Series. The Fund accounts separately for the assets, liabilities
and operations of each series. The First National Bank of Chicago
("Manager") serves as the Fund's investment adviser. The Dreyfus
Corporation ("Dreyfus") provides certain administrative services
to the Fund-see Note 3(a). Dreyfus Service Corporation
("Distributor"), a wholly-owned subsidiary of Dreyfus, acts as
the distributor of the Fund's shares, which are sold without
a sales load.
It is the Fund's policy to maintain a continuous net asset
value per share of $1.00 for each series; the Fund has adopted
certain investment, portfolio valuation and dividend and
distribution policies to enable it to do so.
NOTE 2-SIGNIFICANT ACCOUNTING POLICIES:
(A) PORTFOLIO VALUATION: Investments are valued at amortized
cost, which has been determined by the Fund's Board of Trustees
to represent the fair value of the Fund's investments.
(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 is recognized on
the accrual basis. Cost of investments represents amortized cost.
The Fund may enter into repurchase agreements with financial
institutions, deemed to be creditworthy by the Fund's Adviser,
subject to the seller's agreement to repurchase and the Fund's
agreement to resell such securities at a mutually agreed upon
price. Securities purchased subject to repurchase agreements are
deposited with the Fund's custodian and, pursuant to the terms of
the repurchase agreement, must have an aggregate market value
greater than or equal to the repurchase price plus accrued
interest at all times. If the value of the underlying
securities falls below the value of the repurchase price plus
accrued interest, the Fund will require the seller to deposit
additional collateral by the next business day. If the request
for additional collateral is not met, or the seller defaults on
its repurchase obligation, the Fund maintains the right
to sell the underlying securities at market value and may claim
any resulting loss against the seller.
(C) EXPENSES: Expenses directly attributable to each series
are charged to that series' operations; expenses which are
applicable to both series are allocated between them.
(D) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund,
with respect to both series, to declare dividends daily from
investment income-net. Such dividends are paid monthly. Dividends
from net realized capital gain, with respect to both series, are
normally declared and paid annually, but each 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 of either series can
be reduced by capital loss carryovers of that series, such gain
will not be distributed.
(E) FEDERAL INCOME TAXES: It is the policy of each 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.
The Government Series has an unused capital loss carryover
of approximately $3,100 available for Federal income tax purposes
to be applied against future net securities profits, if any,
realized subsequent to December 31, 1993. The carryover does not
include net realized securities losses from November 1, 1993
through December 31, 1993 which are treated for Federal income
tax purposes as arising in 1994. If not applied, the carryover
expires in 2000.
At December 31, 1993, the cost of investments of each series
for Federal income tax purposes was substantially the same as the
cost for financial reporting purposes (see the Statement of
Investments).
FIRST PRAIRIE MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3-INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER
TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with
the Manager, the management fee for each series is computed at
the annual rate of .55 of 1% of the average daily value of the
net assets of each series and is payable monthly. The agreement
further provides that if in any full year the aggregate expenses
of either series, excluding interest on borrowings, taxes,
brokerage, and extraordinary expenses, exceed the expense
limitation of any state having jurisdiction over the Fund, that
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 most stringent state expense limitation applicable
to the Fund presently requires reimbursement of expenses in any
full year that such expenses (exclusive of distribution expenses
and certain expenses as described above) exceed 2 1/2% of the
first $30 million, 2% of the next $70 million and 1 1/2% of the
excess over $100 million of the average value of either
series' net assets in accordance with California "blue sky"
regulations.
However, the Manager and Dreyfus had undertaken from January 4,
1993 through April 29, 1993 and the Manager from April 30, 1993
through May 27, 1993 with respect to the Money Market Series and
through November 30, 1993 with respect to the Government Series,
to reduce the management fee and administration fee paid by
either series, to the extent that such series' aggregate expenses
(excluding certain expenses as described above) exceeded
specified annual percentages of that series'
average daily net assets. The reductions in management fee and
the administration fee for the year ended December 31, 1993,
pursuant to the undertakings for the Money Market Series and the
Government Series amounted to $102,617 and $671,626,
respectively.
Effective April 30, 1993, the Manager has engaged Dreyfus to
assist it in providing certain administrative services for each
series pursuant to a Master Administration Agreement between the
Manager and Dreyfus.
Pursuant to its agreement with Dreyfus, the Manager has agreed
to pay Dreyfus for Dreyfus' services.
Prior to April 30, 1993, pursuant to an Investment Advisory
Agreement with the Manager and an Administration Agreement with
Dreyfus, the Investment Advisory Fee and the Administration Fee
were computed at annual rates of .40 of 1% and .20 of 1%,
respectively, of the average daily value of each series net
assets. The agreements provided that if in any full year the
aggregate expenses of either series (excluding certain
expenses as described above), exceeded the expense limitation of
any state having jurisdiction over the series, that series could
deduct from the payments to be made to the Manager and Dreyfus,
or the Manager and Dreyfus would bear their proportionate share
of such excess to the extent required by state law.
(B) The Fund has adopted a Service Plan (the "Plan")
pursuant to which each series has agreed to pay costs and
expenses in connection with advertising and marketing shares of
the Fund and payments made to one or more Service Agents (which
may include the Manager, Dreyfus and the Distributor) based on
the value of the Fund's 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 each series' average daily net assets. The Plan also
separately provides for the Fund to bear the costs of preparing,
printing and distributing certain of the Fund's 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 each series' average daily net assets
for any full year. For the year ended December 31, 1993, the
Money Market Series and the Government Series were charged
$519,700 and $1,204,982, respectively, pursuant to the Plan,
substantially all of which was retained by the Manager and
Dreyfus.
(C) Certain officers and trustees of the Fund are
"affiliated persons," as defined in the Act, of the Manager or
the Dreyfus. Each trustee who is not an "affiliated person"
receives an annual fee of $2,500 and an attendance fee of $500
per meeting.
<PAGE>
FIRST PRAIRIE MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(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").
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 significantly later.
FIRST PRAIRIE MONEY MARKET FUND
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF TRUSTEES
FIRST PRAIRIE MONEY MARKET FUND
We have audited the accompanying statement of assets and
liabilities of First Prairie Money Market Fund (comprising,
respectively, the Money Market Series and the Government Series),
including the statements of investments, as of December 31, 1993,
and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years
in the period then ended, and financial highlights for each of
the years indicated therein. 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
audits.
We conducted our audits 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 December 31, 1993 by
correspondence with the custodian and others. 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 audits
provide 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 Money Market
Fund, at December 31, 1993, the results of their operations for
the year then ended, the changes in their net assets for each of
the two years in the period then ended, and the financial
highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
New York, New York
February 4, 1994
<PAGE>
PRAIRIE FUNDS
PART C
OTHER INFORMATION
Item 15. Indemnification.
The response to this item is incorporated by reference
to Item 27 of Part C of the Registrant's Registration Statement
on Form N-1A as filed on October 28, 1994.
Item 16. Exhibits - All references are to the Registrant's
Registration Statement on Form N-1A, filed on October
28, 1994 (File No. 33-56217) (the "Registration
Statement") unless otherwise noted.
(1) Registrant's Agreement and Declaration of
Trust is incorporated by reference to
Exhibit (1) to the Registration Statement.
(2) Registrant's Bylaws are incorporated by
reference to Exhibit (2) to the Registration
Statement.
(3) Not Applicable.
*(4) Form of Agreement and Plan of Exchange.
(5) Not Applicable.
(6) Registrant's Investment Advisory Agreement is
incorporated by reference to Exhibit (5) to
the Registration Statement.
(7) Registrant's Distribution Agreement is
incorporated by reference to Exhibit (6) to
the Registration Statement.
* Filed herewith as Exhibit A to the Proxy
Statement/Prospectus.
(8) Not Applicable.
(9) Registrant's Custody Agreement is incorporated
by reference to Exhibit (8) to the
Registration Statement.
(10) Registrant's Distribution Plan, entered into
pursuant to Rule 12b-1 under the Investment
Company Act of 1940, as amended, is
incorporated by reference to Exhibit 15 to the
Registration Statement.
(11) Opinion and consent of Stroock & Stroock &
Lavan regarding legality of issuance of
shares and other matters is incorporated by
reference to Exhibit (11) to the Registration Statement.
(12) Opinion and consent of Stroock & Stroock &
Lavan regarding tax matters.
(13) Not Applicable.
(14) Consents of Independent Accountants.
(15) Not Applicable.
**(16) Powers of Attorney.
(17) Form of Proxy.
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any
public reoffering of the securities registered
through the use of a prospectus which is a part of
this registration statement by any person or party
who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act of
** Incorporated by reference to the signature page hereto.
1933, as amended, the reoffering prospectus will
contain the information called for by the
applicable registration form for reofferings by
persons who may be deemed underwriters, in addition
to the information called for by the other items of
the applicable form.
(2) The undersigned registrant agrees that every
prospectus that is filed under paragraph (1) above
will be filed as a part of an amendment to the
registration statement and will not be used until
the amendment is effective, and that, in
determining any liability under the Securities Act
of 1933, as amended, each post-effective amendment
shall be deemed to be a new registration statement
for the securities offered therein, and the
offering of the securities at that time shall be
deemed to be the initial bona fide offering of
them.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this
Registration Statement has been signed on behalf of the
Registrant, in the City of Chicago, State of Illinois, on the
8th day of March, 1995.
PRAIRIE FUNDS
(Registrant)
By:/s/Joseph F. Kissel
Joseph F. Kissel, President
Each person whose signature appears below on this
Registration Statement hereby constitutes and appoints Joseph F.
Kissel, Richard A. Fabietti, Martin G. Flanigan, Ann E. Bergin
and Steven A. Smith, and each of them, with full power to act
without the other, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for
him and in his name, place and stead, in any and all capacities
(until revoked in writing) to sign any and all amendments to
this Registration Statement (including post-effective amendments
and amendments thereto), and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing
ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act
of 1933, this Registration Statement has been signed below by
the following persons in the capacities and on the dates
indicated.
<PAGE>
<TABLE>
<S> <C> <C>
/s/Joseph F. Kissel President (Principal March 8, 1995
Joseph F. Kissel Executive Officer
/s/Richard A. Fabietti Treasurer (Principal March 8, 1995
Richard A. Fabietti Financial and
Accounting Officer)
/s/John P. Gould Trustee March 8, 1995
John P. Gould
/s/Marilyn McCoy Trustee March 8, 1995
Marilyn McCoy
/s/Raymond D. Oddi Trustee March 8, 1995
Raymond D. Oddi
</TABLE>
PRAIRIE FUNDS
Registration Statement on Form N-14 under
the Securities Act of 1933
EXHIBITS
-----------------
INDEX TO EXHIBITS
-----------------
Page
----
(11) Opinion (including consent) of
Stroock & Stroock & Lavan . . . . . . .
(12) Tax Opinions (including consents) of
Stroock & Stroock & Lavan . . . . . . .
<PAGE>
STROOCK & STROOCK & LAVAN
EXHIBIT 11
March 8, 1995
Prairie Funds
Three First National Plaza
Chicago, Illinois 60670
Gentlemen:
We have acted as counsel to Prairie Funds (the "Fund") in
connection with the transfer of all or substantially all of the
assets of the Government Series of First Prairie Money Market
Fund, a Massachusetts business trust, to the Fund's U.S.
Government Money Market Series, the related issuance of shares
of beneficial interest of the Fund's U.S. Government Money
Market Series, par value $.001 per share, and the assumption of
stated liabilities of the Government Series of First Prairie
Money Market Fund by the Fund's U.S. Government Money Market
Series, pursuant to an Agreement and Plan of Reorganization (the
"Agreement"), all as more fully described in the Fund's
Registration Statement on Form N-14, Registration No. 33-_____
(the "Registration Statement").
We have examined copies of the Amended and Restated Agreement
and Declaration of Trust and By-Laws of the Fund, the
Registration Statement, the Agreement and such other documents,
records, papers, statutes and authorities as we deemed necessary
to form a basis for the opinion hereinafter expressed. In our
examination of such material, we have assumed the genuineness of
all signatures and the conformity to original documents of all
copies submitted to us. As to various questions of fact
material to such opinion, we have relied upon statements and
certificates of officers and representatives of the Fund and
others.
Attorneys involved in the preparation of this opinion are
admitted only to the bar of the State of New York. As to
various questions arising under the laws of the Commonwealth of
Massachusetts, we have relied on the opinion of Messrs. Ropes &
Gray, a copy of which is attached hereto. Qualifications set
forth in their opinion are deemed incorporated herein.
Based upon the foregoing, we are of the opinion that the shares
to be issued in accordance with the terms of the Agreement, when
so issued, will constitute validly issued shares, fully paid and
nonassessable, under the laws of the Commonwealth of
Massachusetts.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the reference to us in the
Proxy Statement/Prospectus included in the Registration
Statement, and to the filing of this opinion as an exhibit to
any application made by or on behalf of the Fund or any
distributor or dealer in connection with the registration and
qualification of the Fund or shares of its U.S. Government Money
Market Series under the securities laws of any state or
jurisdiction. In giving such permission, we do not admit hereby
that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the
rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
STROOCK & STROOCK & LAVAN
<PAGE>
EXHIBIT 12
March 8, 1995
First Prairie Money Market Fund
Three First National Plaza
Chicago, Illinois 60670
Prairie Funds
Three First National Plaza
Chicago, Illinois 60670
Re: Registration Statement on Form N-14
(Registration No. 33- )
Ladies and Gentlemen:
You have requested our opinion as to certain Federal income tax
consequences of the reorganization contemplated by the Agreement
and Plan of Exchange, substantially in the form included as
Exhibit A to the Registration Statement on Form N-14 of Prairie
Funds (Reg. No. 33-_____) (the "Registration Statement"),
between the Government Series of First Prairie Money Market
Fund, a Massachusetts business trust (the "Existing Fund"), and
the U.S. Government Money Market Series (the "Series"), a series
of Prairie Funds, a Massachusetts business trust (the "Trust").
You have advised us that the Existing Fund has qualified and
will qualify as a "regulated investment company" within the
meaning of Subchapter M of Chapter 1 of the Internal Revenue
Code of 1986, as amended (the "Code"), for each of its taxable
years ending on or before or including the Closing Date. You
have further advised us that the Series intends to meet the
requirements for qualification and treatment as a regulated
investment company within the meaning of Subchapter M of Chapter
1 of the Code for the taxable year in which the Exchange will
occur and for each of its taxable years thereafter.
In rendering this opinion, we have examined the Agreement and
Plan of Exchange, Registration Statement, the Agreement and
Declaration of Trust of the Existing Fund, the Agreement and
Declaration of Trust of the Trust, the Prospectus and Statement
of Additional Information of each of the Existing Fund and the
Series, incorporated by reference in the Registration Statement,
and such other documents as we have deemed necessary or relevant
for the purpose of this opinion. In issuing our opinion, we
have relied upon the representation of the Existing Fund that
its Agreement and Declaration of Trust is the document pursuant
to which it has operated to date and that it has operated in
accordance with all laws applicable to such entity and the
statements and representations made herein and in the
Registration Statement. We also have relied upon the
representation of the Trust that its Agreement and Declaration
of Trust is the document pursuant to which it has operated to
date and will operate following the reorganization and that it
has operated and will operate following the reorganization in
accordance with all laws applicable to such entity and the
statements and representations made herein and in the
Registration Statement. As to various questions of fact
material to this opinion, where relevant facts were not
independently established by us, we have relied upon statements
of, and written information provided by, representatives of both
the Existing Fund and the Trust. We have also examined such
matters of law as we have deemed necessary or appropriate for
the purpose of this opinion. We note that our opinion is based
on our examination of such law, our review of the documents
described above, the statements and representations referred to
above and in the Registration Statement and the Agreement and
Plan of Exchange, the provisions of the Code, the regulations,
published rulings and announcements thereunder, and the judicial
interpretations thereof currently in effect. Any change in
applicable law or any of the facts and circumstances described
in the Registration Statement, or inaccuracy of any statements
or representations on which we have relied, may affect the
continuing validity of our opinion.
Capitalized terms not defined herein have the respective
meanings given such terms in the Agreement and Plan of Exchange.
Based on the foregoing, it is our opinion that for Federal
income tax purposes:
(a) The transfer of all or substantially all of
the Existing Fund's assets in exchange for Series Shares and the
assumption by the Series of certain identified liabilities of
the Existing Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(F) of the Code;
(b) No gain or loss will be recognized by the
Series upon the receipt of the assets of the Existing Fund
solely in exchange for Series Shares and the assumption by the
Series of certain identified liabilities of the Existing Fund;
(c) No gain or loss will be recognized by the
Existing Fund upon the transfer of the Existing Fund's assets to
the Series in exchange for Series Shares and the assumption by
the Series of certain identified liabilities of the Existing
Fund or upon the distribution of the Series Shares to Existing
Fund Shareholders in exchange for their shares of the Existing
Fund;
(d) No gain or loss will be recognized by the
Existing Fund Shareholders upon the exchange of their Existing
Fund shares for Series Shares;
(e) The aggregate tax basis for the Series Shares
received by each of the Existing Fund Shareholders pursuant to
the reorganization will be the same as the aggregate tax basis
of the Existing Fund shares held by such shareholder immediately
prior to the reorganization, and the holding period of the
Series Shares to be received by each Existing Fund Shareholder
will include the period during which the Existing Fund shares
exchanged therefor were held by such shareholder (provided the
Existing Fund shares were held as capital assets on the date of
the reorganization); and
(f) The tax basis of the Existing Fund assets
acquired by the Series will be the same as the tax basis of such
assets to the Existing Fund immediately prior to the
reorganization, and the holding period of the assets of the
Existing Fund in the hands of the Series will include the period
during which those assets were held by the Existing Fund.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the reference to us in the
Proxy Statement/Prospectus included in the Registration
Statement, and to the filing of this opinion as an exhibit to
any Registration Statement, and to the filing of this opinion as
an exhibit to any application made by or on behalf of the Trust
or any distributor or dealer in connection with the registration
and qualification of the Trust or its Shares under the
securities laws of any state or jurisdiction. In giving such
permission, we do not admit hereby that we come within the
category of persons whose consent is required under Section 7 of
the Securities Act of 1933 or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
STROOCK & STROOCK & LAVAN
