File No. 33-18954
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 10 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 10 [X]
(Check appropriate box or boxes.)
FIRST PRAIRIE TAX EXEMPT BOND, INC.
(Operating under the Assumed Name First Prairie Municipal Bond Fund)
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Daniel C. Maclean III, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box)
X immediately upon filing pursuant to paragraph (b) of Rule 485
on (date) 1994 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a) of Rule 485
on (date) pursuant to paragraph (a) of Rule 485
Registrant has registered an indefinite number of shares of its Common
Stock under the Securities Act of 1933 pursuant to Section 24(f) of the
Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for the
fiscal year ended February 28, 1994 was filed on April 27, 1994.
FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in
Part A of
Form N-1A Caption Page
1 Cover Page Cover
2 Synopsis 3
3 Condensed Financial Information 4
4 General Description of Registrant 11, 65
5 Management of the Fund 33
5 (a) Management's Discussion of Fund's *
Performance
6 Capital Stock and Other Securities 65
7 Purchase of Securities Being Offered 36
8 Redemption or Repurchase 50
9 Pending Legal Proceedings *
Items in
Part B of
Form N-1A
10 Cover Page Cover
11 Table of Contents Cover
12 General Information and History B-28
13 Investment Objectives and Policies B-2
14 Management of the Fund B-8
15 Control Persons and Principal B-10
Holders of Securities
16 Investment Advisory and Other B-11
Services
NOTE: * Omitted since answer is negative or inapplicable.
FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.
Cross-Reference Sheet Pursuant to Rule 495(a) (continued)
Items in
Part B of
Form N-1A Caption Page
17 Brokerage Allocation B-23
18 Capital Stock and Other Securities B-28
19 Purchase, Redemption and Pricing B-14, 18 & 23
of Securities Being Offered
20 Tax Status *
21 Underwriters B-14
22 Calculations of Performance Data B-25
23 Financial Statements B-36
Items in
Part C of
Form N-1A
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under C-3
Common Control with Registrant
26 Number of Holders of Securities C-4
27 Indemnification C-4
28 Business and Other Connections of C-5
the Manager
29 Principal Underwriters C-32
30 Location of Accounts and Records C-40
31 Management Services C-40
32 Undertakings C-40
NOTE: * Omitted since answer is negative or inapplicable.
June 27, 1994
FIRST PRAIRIE MUNICIPAL BOND FUND
Supplement to Prospectus
Dated June 27, 1994
The following information supplements and should be read in
conjunction with the section of the Fund's Prospectus entitled "Management
of the Fund".
The Dreyfus Corporation ("Dreyfus") has 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 certain regulatory approvals and
approvals of the stockholders of Dreyfus and of Mellon. The merger is
expected to occur in August 1994, but could occur significantly later.
First Prairie (First Prairie Logo)
Municipal Bond Fund First Prairie Funds
INTERMEDIATE SERIES AND INSURED SERIES
- ----------------------------------------------------------------------
Prospectus-June 27, 1994
First Prairie Municipal Bond Fund (the "Fund") is an open-end,
non-diversified, management investment company, known as a
municipal bond fund. Its goal is to provide investors with as high a level of
current income exempt from Federal income tax as is consistent with the
preservation of capital.
The Fund permits investors to invest in two separate portfolios,
the Insured Series and the Intermediate Series. Each Series invests primarily
in a portfolio of Municipal Obligations (as defined below). Under normal
market conditions, the Insured Series invests primarily in a portfolio of
Municipal Obligations, without regard to maturity, that are insured as to the
timely payment of principal and interest by recognized insurers of Municipal
Obligations. The market value of the Insured Series' shares is not insured.
Under normal market conditions, the Intermediate Series invests in a
portfolio of Municipal Obligations which has a dollar-weighted average
maturity ranging between three and ten years.
By this Prospectus, Class A and Class B shares of each Series are
being offered. Class A shares are subject to a sales charge imposed at the
time of purchase and Class B shares are subject to a contingent deferred
sales charge imposed on redemptions made within five years of purchase. Other
differences between the two Classes include the services offered to and the
expenses borne by each Class and certain voting rights, as described herein.
The 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.
Mutual fund shares are not deposits or obligations of, or
guaranteed or endorsed by, any bank, and are not federally insured by the
Federal Deposit Insurance Corporation ("FDIC"), the Federal Reserve Board, or
any other agency. Mutual fund shares involve certain investment risks,
including the possible loss of principal.
(continued on next page.)
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 June 27, 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 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
(continued from page 1).
The Fund provides free redemption checks with respect to Class A, which
investors can use in amounts of $500 or more for cash or to pay bills.
Investors continue to earn income on the amount of the check until it clears.
Investors can purchase or redeem shares by telephone using the TeleTransfer
Privilege.
The First National Bank of Chicago (the "Adviser") serves as the
Fund's investment adviser.
The Dreyfus Corporation (the "Administrator") serves as the Fund's
administrator. Dreyfus Service Corporation (the "Distributor"), a
wholly-owned subsidiary of the Administrator, serves as the Fund's
distributor.
Table of Contents
Fee Table............................................ 3
Condensed Financial Information...................... 4
Highlights........................................... 6
Alternative Purchase Methods......................... 9
Description of the Fund.............................. 11
Management of the Fund............................... 33
How to Buy Fund Shares............................... 36
Shareholder Services................................. 44
How to Redeem Fund Shares............................ 50
Distribution Plan and Shareholder Services Plan...... 58
Dividends, Distributions and Taxes................... 59
Performance Information.............................. 63
General Information.................................. 65
Page 2
<TABLE>
<CAPTION>
Fee Table
INTERMEDIATE INSURED
SERIES SERIES
----------------- -----------------
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B CLASS A CLASS B
------- ------- -------- -------
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 3.00% none 4.50% none
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge) none 3.00% none 3.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees .40% .40% .40% .40%
12b-1 Fees none .50% none .50%
Other Expenses .87% .87% 1.04% 1.04%
Total Fund Operating Expenses 1.27% 1.77% 1.44% 1.94%
EXAMPLE
</TABLE>
<TABLE>
<CAPTION>
An investor would pay the following expenses on a $1,000 invest-
ment, assuming (1) 5% annual return and (2) except where
noted, redemption at the end of each time period:
INTERMEDIATE INSURED
SERIES SERIES
------------------------------ --------------------------------
CLASS A CLASS B CLASS B* CLASS A CLASS B CLASS B*
------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
1 Year $ 43 $ 48 $ 18 $ 59 $ 50 $ 20
3 Years $ 69 $ 76 $ 56 $ 89 $ 81 $ 61
5 Years $ 98 $106 $ 96 $120 $115 $105
10 Years** $179 $183 $183 $210 $202 $202
</TABLE>
*Assuming no redemption of Class B shares
**Ten-year figures assume conversion of Class B shares to Class A shares at
end of sixth year following the date of purchase.
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, each
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 that investors in a Series will
bear, directly or indirectly, the payment of which will reduce investors'
return on an annual basis. Long-term investors in Class B shares could pay
more in 12b-1 fees than the economic equivalent of paying a front-end sales
charge. For Class A shares, Other Expenses are based on data for the Fund's
fiscal year ended February 28, 1994. For Class B shares, Other Expenses and
Total Fund Operating Expenses are estimated based on expenses incurred by the
Class A shares. Prior to February 8, 1994, Class A shares were subject to
12b-1 fees, but no service fees. The information in the foregoing table does
not reflect any fee waivers or expense reimbursement arrangements that may be
in effect. The Adviser, affiliates of the Adviser and certain Service Agents
(as defined below) may charge their clients direct fees for effecting
transactions in shares of a Series; such fees are not reflected in the
foregoing table. See "Management of the Fund," "How to Buy Fund Shares" and
"Distribution Plan and Shareholder Services Plan."
Page 3
CONDENSED FINANCIAL INFORMATION
The information in the following table 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 common stock outstanding, total investment return, ratios to
average net assets and other supplemental data for the Intermediate Series for
each year indicated. This information has been derived from information
provided in the Fund's financial statements.
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------------------------- -------------
Intermediate Series --Fiscal Year Ended February 28/29, Year Ended
------------------------------------------------------
PER SHARE DATA: 1989(1) 1990 1991 1992 1993 1994 February 28, 1994(2)
----- ----- ----- ----- ----- ----- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year... $11.46 $11.43 $11.65 $11.95 $12.25 $12.79 $12.32
------ ------- ------ ------ ------ ------- -------
INVESTMENT OPERATIONS:
Investment income-net...... .79 .78 .80 .76 .64 .61 .03
Net realized and unrealized gain (loss)
on investments......... (.03) .22 .31 .37 .68 .01 (.14)
------- ----- ------ ------ ----- ------- --------
TOTAL FROM INVESTMENT OPERATIONS... .76 1.00 1.11 1.13 1.32 .62 (.11)
------- ------ ------ ------ ----- ------ -------
DISTRIBUTIONS:
Dividends from investment income-net... (.79) (.78) (.80) (.76) (.64) (.61) (.03)
Dividends from net realized gain
on investments........ -_ -_ (.01) (.07) (.14) (.62) -_
------- ------ ------ ------ ----- -------- -------
TOTAL DISTRIBUTIONS... (.79) (.78) (.81) (.83) (.78) (1.23) (.03)
------- ------- ------ ------ ----- ------- -------
Net asset value, end of year.... $11.43 $11.65 $11.95 $12.25 $12.79 $12.18 $12.18
====== ====== ======= ======= ====== ======= =======
TOTAL INVESTMENT RETURN(3).... 6.82%(4) 9.00% 9.94% 9.78% 11.26% 4.94% (.93%)(5)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.. -- -- -_ -_ -- .06% .75%(4)
Ratio of net investment income to
average net assets.... 6.83%(4) 6.62% 6.76% 6.15% 5.16% 4.78% 1.68%(4)
Decrease reflected in above expense ratios due
to undertakings by the Adviser and Administrator
(limited to the expense limitation provision
of the Investment Advisory and
Administration Agreements)...... 2.25%(4) 2.75% 2.75% 1.72% 1.31% 1.21% 2.25%(4)
Portfolio Turnover Rate......... 101.17%(5) 46.68% 12.22% 86.91% 63.67% 167.95% 167.95%
Net Assets, end of year
(000's omitted)... $2,593 $4,582 $7,251 $18,310 $27,885 $28,826 $12
- -----------------------
(1) From March 1, 1988 (commencement of operations) to February 28, 1989.
(2) From February 8, 1994 (commencement of initial offering) to February 28, 1994.
(3) Exclusive of sales charges.
(4) Annualized.
(5) Not annualized.
</TABLE>
Page 4
FINANCIAL HIGHLIGHTS Contained below is per share operating performance data
for a share of common stock outstanding, total investment return, ratios to
average net assets and other supplemental data for the Insured Series(1) for
each year indicated. This information has been derived from information provided
in the Fund's financial statements.
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------------------------ -------------
Insured Series --Fiscal Year Ended February 28/29, Year Ended
------------------------------------------------
PER SHARE DATA: 1989(2) 1990 1991 1992 1993 1994 February 28, 1994(3)
----- ----- ------- -------- ------ ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
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 by the Adviser and Administrator
(limited to the expense limitation provision
of the Investment Advisory and
Administration Agreements)....... 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
- ---------------------------
</TABLE>
(1) Formerly, the Long-Term Series. On September 12, 1989, the investment and
management policies of the Insured Series were changed as described
herein. See "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.
Further information about each Series' performance is contained in the Fund's
annual report for the fiscal year ended February 28,1994, which may be obtained
without charge by writing to the address or calling the number set forth on the
cover page of this Prospectus.
Page 5
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, non-diversified, management investment
company, known as a municipal bond fund.
INVESTMENT OBJECTIVE The Fund's
goal is to provide investors with as high a level of
current income exempt from Federal income tax as is
consistent with the preservation of capital.
THE SERIES The Fund is a "series fund" which permits investors to invest in
two separate portfolios: the Intermediate Series and the Insured Series.
MANAGEMENT POLICIES Each Series will invest at least 80% of its net assets
in Municipal Obligations, under normal circumstances. At least 65% of each
Series' net assets will be invested in bonds and debentures.
Each Series will purchase Municipal Obligations only if they are rated
at least: Baa, MIG-2/VMIG-2 or Prime-1 (P-1) by Moody's Investors
Service, Inc. ("Moody's"); BBB, SP-2 or A-1 by
Standard & Poor's Corporation ("S&P"); BBB or F-2 by
Fitch Investors Service, Inc. ("Fitch"); BBB or Duff-2
by Duff & Phelps, Inc. ("Duff"); or, if not rated, of
comparable quality as determined by the Adviser.
Each Series may engage in certain investment
techniques, such as futures and options transactions
and lending portfolio securities, each of which
involves risk and the gains from which may give rise
to taxable income.
INTERMEDIATE SERIES The Intermediate Series invests primarily in a portfolio
of Municipal Obligations which has a dollar-weighted average maturity ranging
between three and ten years.
INSURED SERIES The Insured Series invests primarily in a port-folio of
Municipal Obligations, without regard to maturity, that are
insured as to timely payment of principal and interest by rec-
Page 6
ognized insurers of Municipal Obligations. The value of the Insured Series'
shares is not insured.
The insurance feature is intended to reduce financial risk. However,
the cost of insurance premiums and restrictions on investments imposed by
guidelines in the insurance policy will result in a reduction in yield.
MUNICIPAL OBLIGATIONS Municipal Obligations are debt obligations issued by
states, territories and possessions of the United States, by
the District of Columbia, and their political
subdivisions, agencies and instrumentalities, or
multistate agencies or authorities, the interest from
which is, in the opinion of bond counsel to the
issuer, exempt from Federal income tax. Municipal
Obligations are generally issued to obtain funds for
various public purposes. They also include certain
industrial development bonds issued by or on behalf of
public authorities. Municipal Obligations are
classified as general obligation bonds, revenue bonds and notes.
INVESTMENT ADVISER The First National Bank of Chicago is the Fund's
investment adviser. The Fund has agreed to pay the Adviser a
monthly fee at the annual rate of .40 of 1% of the
value of each Series' average daily net assets.
ADMINISTRATOR The Dreyfus Corporation assists in all aspects of the Fund's
operations other than providing investment advice. The
Fund has agreed to pay the Administrator a monthly fee
of .20 of 1% of the value of each Series' average
daily net assets.
ALTERNATIVE PURCHASE METHODS The Fund offers investors two methods of
purchasing Fund shares; an investor may choose 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 and
Class B share represents an identical pro rata
interest in the Series' investment portfolio.
Class A shares are sold at net asset value
per share plus a maximum initial sales charge of 3.00%
for the Intermediate Series and 4.50% for the Insured
Series of the public offering price imposed at the
time of purchase. The initial sales charge
Page 7
may be reduced or waived for certain purchases. See "How to Buy Fund
Shares_Class A Shares." Class A shares are subject to an annual
service fee at the rate of up to .25 of 1% of the
value of the average daily net assets of Class A.
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 3% contingent deferred sales charge ("CDSC"), which is
assessed only if the Class B shares are redeemed within
five years of purchase. See "How to Redeem Fund
Shares_Contingent Deferred Sales Charge_Class B
Shares." Class B shares also are subject to an annual
service fee at the rate of up to .25 of 1% of the
value of the average daily net assets of Class B. In
addition, Class B shares are subject to an annual
distribution fee at the rate of up to .50 of 1% of the
value of the average daily net assets of Class B. The
distribution fee paid by Class B will cause such Class
to have a higher expense ratio and to pay lower
dividends than Class A. Approximately six years 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 Class, and will no
longer be subject to the distribution fee.
See "Alternative Purchase Methods."
HOW TO BUY FUND SHARES Orders for the purchase of shares may be placed
through a number of institutions including the Adviser and
affiliates of the Adviser, including First Chicago
Investment Services, Inc. ("FCIS"), a registered
broker-dealer, the Distributor 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. 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, AUTOMATIC Asset Builder,
Government Direct Deposit Privilege, Automatic Withdrawal Plan,
Dividend Options privileges and TELETRANSFER Privilege. (Certain services
and privileges may not be available through all Service Agents.)
Page 8
FREE CHECKWRITING -- CLASS A SHARES Investors in Class A shares 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.
HOW TO REDEEM FUND SHARES Generally, investors should contact their
representatives at the Adviser or appropriate Service Agent for redemption
instructions. Investors who are not clients of the Adviser or a
Service Agent may redeem Fund shares by written
request, or through the Wire Redemption Privilege, the
Telephone Redemption Privilege or the TELETRANSFER Privilege.
See "How to Redeem Fund Shares."
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.
Distributions from net realized securities
gains, if any, generally are declared and paid once a
year. Investors may choose whether to receive
distributions in cash or to reinvest in additional
shares at net asset value.
RISKS AND SPECIAL CONSIDERATIONS The value of the Fund's shares is not
fixed and can be expected to fluctuate.
Even though interest-bearing securities
promise a stable stream of income, the prices of such
securities are affected by changes in interest rates
and, therefore, are subject to the risk of market
price fluctuations.
Certain securities purchased by the Fund,
including those rated Baa by Moody's and BBB by S&P,
Fitch and Duff, are subject to greater market
fluctuation than certain lower yielding, higher rated
fixed-income securities.
ALTERNATIVE PURCHASE METHODS
The Fund offers investors two methods of purchasing Fund shares;
an investor may choose the Class of shares that best suits the
investor's needs, given the amount of purchase, the length of
PAGE 9
time the investor expects to hold the shares
and any other relevant circumstances. Each Class A and
Class B share represents an identical pro rata
interest in the Fund's investment portfolio.
Class A shares are sold at net asset value
per share plus a maximum initial sales charge of 3.00%
for the Intermediate Series and 4.50% for the Insured
Series of the public offering price imposed at the
time of purchase. The initial sales charge may be reduc
ed or waived for certain purchases. See "How to Buy Fund Shares_Class A
Shares." These shares are subject to an annual service
fee at the rate of up to .25 of 1% of the value of the
average daily net assets of Class A. See "Distribution
Plan and Shareholder Services Plan_Shareholder
Services Plan."
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 3% CDSC, which is assessed only
if Class B shares are redeemed within five years of
purchase. See "How to Buy Fund Shares_Class B Shares"
and "How to Redeem Fund Shares_Contingent Deferred
Sales Charge_Class B Shares." These shares also are
subject to an annual service fee at the rate of up to
.25 of 1% of the value of the average daily net assets
of Class B. In addition, Class B shares are subject to
an annual distribution fee at the rate of up to .50 of
1% of the value of the average daily net assets of
Class B. See "Distribution Plan and Shareholder
Services Plan." The distribution fee paid by Class B
will cause such Class to have a higher expense ratio
and to pay lower dividends than Class A. Approximately
six years 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
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.
An investor 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 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.
In this
Page 10
regard, generally, Class B shares may be more
appropriate for investors who invest less than
$100,000 in Fund shares. 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 $100,000 or more
in the Intermediate Series or $250,000 or more in the
Insured Series.
DESCRIPTION OF THE FUND
THE FUND IS A SERIES FUND, CURRENTLY OFFERING TWO PORTFOLIOS: THE INSURED
SERIES AND THE INTERMEDIATE SERIES.
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 Series. As
described below, for certain matters Fund shareholders vote together as a
group; as to others they vote separately by Series.
THE FUND'S GOAL IS TO PROVIDE INVESTORS WITH AS HIGH A
LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAX AS IS CONSISTENT
WITH THE PRESERVATION OF CAPITAL.
INVESTMENT OBJECTIVE The Fund's goal is to provide investors with as high a
level of current income
exempt from Federal income tax as is consistent with the preservation of
capital. The Fund permits investors to invest in two separate portfolios, the
Insured Series and the Intermediate Series. Each Series invests primarily in
a portfolio of Municipal Obligations. Under normal conditions, the Insured
Series invests primarily in a portfolio of Municipal Obligations, without
regard to maturity, that are insured as to timely payment of principal and
interest by recognized insurers of Municipal
Obligations. Under normal market conditions, the Intermediate Series invests
primarily in a portfolio of Municipal
Obligations which has a dollar-weighted average maturity ranging between
three and ten years. Each Series' investment objective
cannot be changed without approval by the holders of a majority (as defined
in the Investment Company Act of 1940) of such Series' outstanding voting
shares. There can be no assurance that the Series' investment objective will
be achieved.
Page 11
EACH SERIES INVESTS PRIMARILY IN A PORTFOLIO OF MUNICIPAL OBLIGATIONS,
THE INTEREST FROM WHICH IS EXEMPT FROM FEDERAL INCOME TAX.
MUNICIPAL OBLIGATIONS Municipal Obligations are debt obligations issued by
states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, or multi-state
agencies or authorities, the interest from which is, in the opinion of bond
counsel to the issuer, exempt from Federal income tax. 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. 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
thepayment 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. Tax
exempt industrial development bonds, in most cases, are revenue bonds that
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.
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. 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.
Page 12
MUNICIPAL OBLIGATIONS PURCHASED BY A SERIES MUST BE RATED AT
LEAST INVESTMENT GRADE BY A NATIONALLY RECOG-NIZED INDEPENDENT
RATING AGENCY.
MANAGEMENT POLICIES It is a fundamental policy of each Series that it will
invest at least 80% of the
value of its net assets (except when maintaining a temporary defensive
position) in Municipal Obligations. At least 65% of the value of each Series'
net assets (except when maintaining a temporary defensive position) will be
invested in bonds and debentures. Under normal circumstances, at least 65% of
the value of the Insured Series' total assets will be invested in Municipal
Obligations that are insured as to the timely payment of principal and
interest by recognized insurers of Municipal Obligations. See "Insurance
Feature" below.
Each Series 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. See
"Appendix" in the Statement of Additional Information.
Municipal Obligations rated Baa by Moody's or BBB by
S&P, Fitch or Duff are considered investment grade
obligations; those rated BBB by S&P, Fitch and Duff
are regarded as having an adequate capacity to pay
principal and interest, while those rated Baa by Moody'
s are considered medium grade obligations and have speculative
characteristics. Each Series also may invest in
securities which, while not rated, are determined by
the Adviser to be of comparable quality to the rated
securities in which the Fund may invest. Each Series
also may invest in Taxable Investments of the quality
described below.
Each Series 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 securitie
s; 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
Series may be subject to greater risk as compared to a
fund that does not follow this practice.
From time to time, a Series 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 user
s. Interest on Municipal Obligations (including certain industrial
development bonds) which are specified private
activity bonds, as defined in the Internal Revenue
Code of 1986,
Page 13
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 Series may invest without
limitation in such Municipal Obligations if the
Adviser determines that their purchase is consistent
with such Series' investment objective. See "Other
Investment Considerations" below.
Each Series may purchase floating and
variable rate demand notes and bonds, which are tax
exempt 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 specifie
d intervals. Variable rate demand notes include master demand notes which are
obligations that permit the Fund to invest fluctuating
amounts, which may change daily without penalty,
pursuant to direct arrangements between the Fund, as
lender, and the borrower. The interest rates on these
obligations fluctuate from time to time. Frequently,
such obligations are secured by letters of credit or
other credit support arrangements provided by banks.
Use of letters of credit or other credit support
arrangements will not adversely affect the tax exempt
status of these obligations. 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.
Accordingly, where these obligations are not secured
by letters of credit or other credit support
arrangements, a Series' right to redeem is dependent on
the ability of the borrower to pay principal and interest on demand. Each
obligation purchased will meet the quality criteria
established for the purchase of Municipal Obligations.
The Adviser, on behalf of the Fund, will consider on
an ongoing basis the creditworthiness of the issuers
of the floating and variable rate demand obligations
in each Series' portfolio. Neither Series will invest
more than 15% of the value of its net assets in
floating or variable rate demand obligations as to which it
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.
Page 14
Each Series may purchase from financial
institutions participation interests in Municipal
Obligations (such as industrial development bonds and
municipal lease/purchase agreements). A participation
interest gives the Series an undivided interest in the
Municipal Obligation in the proportion that such
Series' participation interest bears to the total
principal amount of the Municipal Obligation. These
instruments may have fixed, floating or variable rates
of interest. If the participation interest is unrated,
or has been given a rating below that which otherwise
is permissible for purchase by the Fund, the
participation interest will be backed by an
irrevocable letter of credit or guarantee of a bank
that the Board of Directors 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. For
certain participation interests, the Series will have
the right to demand payment, on not more than seven
days' notice, for all or any part of such Series'
participation interest in the Municipal Obligation,
plus accrued interest. As to these instruments, each
Series 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. Neither Series will invest
more than 15% of the value of its net assets in
participation interests that do not have this demand
feature, and in other illiquid securities.
Each Series may purchase tender option
bonds. 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 Adviser, on behalf of the 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. Neither Series will invest more than 15% of
the value of its net assets in illiquid securities,
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.
Each Series may purchase custodial receipts
representing the right to receive certain future
principal and interest payments on Municipal
Obligations which underlie the custodial receipts. A
number of different arrangements are possible. In a
typical custodial receipt arrangement, an issuer or a
third party owner of Municipal Obligations deposits
such obligations with a custodian in exchange for two
classes of custodial receipts. The two classes have
different characteristics, but, in each case, payments
on the two classes are based on payments received on
the underlying Municipal Obligations. One class has
the characteristics of a typical auction rate
security, where at specified intervals its interest
rate is adjusted, and ownership changes, based on an
auction mechanism. This class's interest rate
generally is expected to be below the coupon rate of
the underlying Municipal Obligations and generally is
at a level comparable to that of a Municipal
Obligation of similar quality and having a maturity
equal to the period between interest rate adjustments.
The second class bears interest at a rate that exceeds
the interest rate typically borne by a security of
comparable quality and maturity; this rate also is
adjusted, but in this case inversely to changes in the
rate of interest of the first class. If the interest
rate on the first class exceeds the coupon rate of the
underlying Municipal Obligations, its interest rate
will exceed the rate paid on the second class. In no
event will the aggregate interest paid with respect to
the two classes exceed the interest paid by the
underlying Municipal Obligations. The value of the
second class and similar securities should be expected
to fluctuate more than the value of
Page 16
a Municipal Obligation of comparable quality and maturity and
their purchase by the Series should increase the
volatility of its net asset value and, thus, its price
per share. These custodial receipts are sold in
private placements. Each Series also may purchase
directly from issuers, and not in a private placement,
Municipal Obligations having characteristics similar
to custodial receipts. These securities may be issued
as part of a multi-class offering and the interest
rate on certain classes may be subject to a cap or
floor.
Each Series may invest up to 15% 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 and repurchase agreements providing for
settlement in more than seven days after notice. As to
these securities, the Series are subject to a risk
that should the 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 the
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 Fund, the Fund
intends to treat such securities as liquid securities
in accordance with procedures approved by the Fund's
Board of Directors. 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 Directors has directed the Adviser to
monitor carefully the 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, the Series' investing in such securities may
have the effect of increasing the level of illiquidity
in that Series' portfolio during such period.
Each Series may acquire "stand-by
commitments" with respect to Municipal Obligations
held in its portfolio. Under a stand-by commitment,
the Series obligates a broker, dealer or bank to
repurchase at such Series' option specified securities
at a
Page 17
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 Series will acquire stand-by
commitments solely to facilitate its portfolio
liquidity and does not intend to exercise its rights
thereunder for trading purposes. Each Series 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. The
Fund also may acquire call options on specific
Municipal Obligations. The Fund generally would
purchase these call options to protect the Fund from
the issuer of the related Municipal Obligation
redeeming, or other holder of the call option from
calling away, the Municipal Obligation before
maturity. The sale by the Fund of a call option that
it owns on a specific Municipal Obligation could
result in the receipt of taxable income by the Fund.
From time to time, on a temporary basis
other than for temporary defensive purposes (but not
to exceed 20% of the value of the Series' net assets)
or for temporary defensive purposes, each Series may
invest in taxable short-term investments ("Taxable Investments")
consisting of: notes of issuers having, at the time of purchase, a
quality rating within the two highest grades of
Moody's, S&P, Fitch or Duff; obligations of the U.S.
Government, its agencies or instrumentalities;
commercial paper rated not lower than P-1 by Moody's,
A-1 by S&P, F-1 by Fitch or Duff-1 by Duff;
certificates of deposit of U.S. domestic banks,
including foreign branches of domestic banks, with
assets of one billion dollars or more; time deposits;
bankers' acceptances and other short-term bank
obligations; and repurchase agreements in respect of
any of the foregoing. Dividends paid by each Series
that are attributable to income earned by the Series
from Taxable Investments will be taxable to investors.
See "Dividends, Distributions and Taxes." Except for
than 20% of the value of a Series' net assets be
invested in Taxable Investments. Under normal market
conditions, the Fund anticipates that not more than 5%
of the value of a Series' total assets will be
invested in any one category of Taxable Investments.
Taxable Investments are more fully described in the
Statement of Additional Information, to which
reference hereby is made.
page 18
THE SERIES MAY USE
VARIOUS INVESTMENT TECHNIQUES WHICH INVOLVE CERTAIN RISKS.
INVESTMENT TECHNIQUES Each Series may employ, among others, the investment
techniques described below.
Use of these techniques may give rise to taxable income. Options and futures
transactions involve so-called "derivative securities."
WHEN-ISSUED SECURITIES New issues of Municipal
Obligations usually are offered on a when-issued basis, which means that
delivery and payment for such Municipal Obligations ordinarily take place
within 45 days after the date of the commitment to purchase. The payment
obligation and the interest rate that will be received on the Municipal
Obligations are fixed at the time the Series enters into the commitment. Each
Series will make commitments to purchase such Municipal Obligations only with
the intention of actually acquiring the securities, but the Series may sell
these securities before the settlement date if it is deemed advisable,
although any gain realized on such sale would be tax-able. Neither Series
will accrue income in respect of a when-issued security prior to its stated
delivery date. No additional when-issued commitments will be made for a
Series if more than 20% of the value of such Series' net assets would be so co
mmitted.
Municipal Obligations purchased on a
when-issued basis and the securities held in a Series'
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. Municipal Obligations purchased on a
when-issued basis may expose a Series to risk because
they may experience such fluctuations prior to their
actual delivery. Purchasing Municipal Obligations on a
when-issued 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
consisting of cash, cash equivalents or U.S.
Government securities or other high quality liquid
debt securities at least equal at all times to the
amount of the when-issued commitments will be
established and maintained at the Fund's custodian
bank. Purchasing securities on a when-issued basis
when a Series is fully or almost fully invested may
result in greater potential fluctuation in the value
of such Series' net assets and its net asset value per
share.
Page 19
THE FUND MAY ENGAGE IN FUTURES AND OPTIONS TRANSACTIONS, SUBJECT TO
APPLICABLE REGULATIONS.
FUTURES TRANSACTIONS--IN GENERAL The Fund is not a commodity pool. However,
as a substitute for a comparable market position in the underlying securities
and for hedging purposes, each Series may engage in futures and options on
futures transactions as described below.
Each Series' commodities transactions must
constitute bona fide hedging or other permissible transactions pursuant to
regulations promulgated by the Commodity Futures Trading Commission. In
addition, a Series 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 exceed 5% of
the liquidation value of the Series' assets, after taking into account
unrealized profits and unrealized losses on such contracts it has entered
into; provided, 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%. Pursuant to regulations and/or published positions of the
Securities and Exchange Commission, each Series 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.
Initially, when purchasing or selling
futures contracts the Series will be required to
deposit with the Fund'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
Series 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 Series may elect to close the position
by taking an opposite position at the then prevailing
price,
Page 20
which will operate to terminate the Series'
existing position in the contract.
Although each Series 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 the 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 subjec
ting a Series to substantial losses. If it is not possible or the Series
determines not to close a futures position in
anticipation of adverse price movements, the Series
will be required to make daily cash payments of
variation margin. In such circumstances, an increase
in the value of the portion of a Series' 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 the Series is
engaging in a futures transaction as a hedging device,
due to the risk of an imperfect correlation between
securities in the Series' portfolio 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 Series' portfolio 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 Series 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
Page 21
less or greater than that of the securities. Such
"over hedging" or "under hedging" may adversely affect
a Series' net investment results if market movements
are not as anticipated when the hedge is established.
Successful use of futures by a Series also
is subject to the Adviser's ability to predict
correctly movements in the direction of the market or
interest rates. For example, if a Series 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 Series
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 Series 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. The
Series may have to sell securities at a time when it
may be disadvantageous to do so.
An option on a futures contract gives the
purchaser the right, in return for the premium paid,
to assume a position in a futures contract (a long
position if the option is a call and a short position
if the option is a put) at a specified exercise price
at any time during the option exercise period. The
writer of the option is required upon exercise to
assume an offsetting futures position
(a short position if the option
is a call and a long position if the option is a put).
Upon exercise of the option, the assumption of
offsetting futures positions by the writer and holder
of the option will be accompanied by delivery of the
accumulated cash balance in the writer's futures
margin account which represents the amount by which
the market price of the futures contract, at exercise,
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.
Call options sold by a Series with respect
to futures contracts will be covered by, among other
things, entering into a long position in the same
contract at a price no higher than the strike price of
the call option, or by ownership of the instruments und
erlying, or instruments the prices of which are expected to move relatively
consistently with the instruments underlying, the
futures contract. Put options sold by a Series with
respect to futures contracts will be covered when,
among other things, cash or liquid securities are
placed in a segregated account to fulfill the
obligation undertaken.
Page 22
Each Series may utilize municipal bond index
futures to protect against changes in the market value
of the Municipal Obligations in its portfolio or which
it intends to acquire. Municipal bond index futures
contracts are based on an index of long-term Municipal
Obligations. The index assigns relative values to the
Municipal Obligations included in the index, and
fluctuates with changes in the market value of such
Municipal Obligations. The contract is an agreement
pursuant to which two parties agree to take or make
delivery of an amount of cash based upon the
difference between the value of the index at the close
of the last trading day of the contract and the price
at which the index contract was originally written.
The acquisition or sale of a municipal bond index
futures contract enables the Series to protect its
assets from fluctuations in rates on tax exempt
securities without actually buying or selling such
securities.
THE FUND MAY HEDGE AGAINST RISING OR FALLING INTEREST RATES BY PURCHASING
OR SELLING INTEREST RATE FUTURES CONTRACTS.
INTEREST RATE FUTURES CONTRACTS AND OPTIONS ON
INTEREST RATE FUTURES CONTRACTS Each Series may purchase and sell interest
rate futures contracts and
options on interest rate futures contracts as a substitute for a comparable
market position and to hedge against adverse movements in interest rates. To
the extent a Series has invested in interest rate futures contracts or
options on interest rate futures contracts as a substitute for a comparable
market position, such Series will be subject to the investment risks of
having purchased the securities underlying the contract.
Each Series may purchase call options on
interest rate futures contracts to hedge against a decline in interest rates
and may purchase put options on interest rate futures contracts to hedge its
portfolio securities against the risk of rising interest rates.
If a Series has hedged against the
possibility of an increase in interest rates adversely
affecting the value of securities held in such Series'
portfolio and rates decrease instead, the Series will
lose part or all of the benefit of the increased value
of the securities which it has hedged because it will
have offsetting losses in its futures positions. In
addition, in such situations, if the Series has
insufficient cash, it may have to sell securities to
meet daily variation margin requirements at a time
when it may be disadvantageous to do so. These sales
of securities may, but will
Page 23
not necessarily, be at
increased prices which reflect the decline in interest
rates.
Each Series may sell call options on
interest rate futures contracts to partially hedge
against declining prices of its portfolio securities.
If the futures price at expiration of the option is
below the exercise price, the Series will retain the
full amount of the option premium which provides a
partial hedge against any decline that may have
occurred in such Series' portfolio holdings. Each
Series may sell put options on interest rate futures
contracts to hedge against increasing prices of the
securities which are deliverable upon exercise of the
futures contract. If the futures price at expiration
of the option is higher than the exercise price, the
Series will retain the full amount of the option
premium which provides a partial hedge against any incr
ease in the price of securities which the Series intends to purchase. If a
put or call option sold by a Series is exercised, the
Series will incur a loss which will be reduced by the
amount of the premium it receives. Depending on the
degree of correlation between changes in the value of
its portfolio securities and changes in the value of
its futures positions, a Series' losses from existing
options on futures may to some extent be reduced or
increased by changes in the value of its portfolio
securities.
Each Series also may sell options on
interest rate futures contracts as part of closing
purchase transactions to terminate its options
positions. No assurance can be given that such closing
transactions can be effected or that there will be a
correlation between price movements in the options on
interest rate futures and price movements in a Series'
portfolio securities which are the subject of the
hedge. In addition, a Series' purchase of such options
will be based upon predictions as to anticipated intere
st rate trends, which could prove to be inaccurate.
LENDING PORTFOLIO SECURITIES
From time to time, each 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 331/3% of the value of such Series' total
assets. 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 lea
st 100% of the current market value of the loaned securities. Each Series
Page 24
can increase its income through the investment of such
collateral. A Series engaging in the portfolio loan
transaction continues to be entitled to 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. A Series
might experience risk of loss if the institution with which it has engaged in
a portfolio loan
transaction breaches its agreement with the Series.
BORROWING MONEY As a
fundamental policy, each Series is permitted to borrow
money to the extent permitted under the Investment
Company Act of 1940. However, each Series currently
intends to borrow money only for temporary or
emergency (not leveraging) purposes, in an amount up
to 15% 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 a Series' total assets,
such Series will not make any additional investments.
THE FUND HAS ADOPTED CERTAIN FUNDAMENTAL POLICIES INTENDED TO LIMIT THE
RISK OF ITS INVESTMENT PORTFOLIO. THESE POLICIES CANNOT BE CHANGED WITHOUT
APPROVAL BY A MAJORITY OF SHAREHOLDERS.
CERTAIN FUNDAMENTAL POLICIES Each Series may (i) borrow money to the extent
permitted under the Investment Company Act of 1940; and (ii) invest up to 25%
of its total assets in the securities of issuers in any industry, provided
that there is no such
limitation on investments in Municipal Obligations and, for temporary
defensive purposes, obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities (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"). This
paragraph describes fundamental policies that cannot be changed, as to a
Series, without approval by the holders of a majority (as defined in the
Investment Company Act of 1940) of such Series' outstanding voting shares.
See "Investment Objective and Management Policies_Investment Restrictions" in
the Statement of Additional Information.
CERTAIN ADDITIONAL
NON-FUNDAMENTAL POLICIES Each Series may (i) pledge,
hypothecate, mortgage or otherwise encumber its
assets, but only to secure permitted borrowings; and
(ii) invest up to 15% of its net assets in repurchase
agreements providing for
Page 25
settlement in more than seven
days after notice and in other illiquid securities
(which securities could include participation
interests (including municipal lease/purchase
agreements) that are not subject to the demand feature
described above, and floating and variable rate demand
obligations as to which the Fund 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.
MUNICIPAL OBLIGATIONS HELD BY THE INSURED SERIES THAT ARE SUBJECT
TO INSURANCE WILL BE INSURED AS TO TIMELY PAYMENT OF INTEREST AND
PRINCIPAL.THE VALUE OF THE INSURED SERIES' SHARES IS NOT INSURED.
INSURANCE FEATURE (APPLICABLE TO THE INSURED SERIES ONLY) The Municipal
Obligations held in the Insured
Series' portfolio that are subject to insurance will be insured as to timely
payment of principal and interest under an insurance policy (i) purchased by
the Insured Series or by a previous owner of the Municipal Obligation
("Mutual Fund Insurance") or (ii) obtained by the issuer or underwriter of
the Municipal Obligation ("New Issue Insurance"). The insurance of principal
refers to the face or par value of the Municipal Obligation and is not
affected by nor does it insure the price paid therefor by the Insured Series
or the market value thereof. The value of the Insured Series' shares is not
insured.
New Issue Insurance is obtained by the
issuer of the Municipal Obligations and all premiums
respecting such securities are paid in advance by such
issuer. Such policies are noncancellable and continue
in force so long as the Municipal Obligations are outst
anding and the insurer remains in business.
Certain types of Mutual Fund Insurance which
may be obtained by the Insured Series are effective
only so long as the Insured Series is in existence,
the insurer remains in business and the Municipal
Obligations described in the policy continue to be held
by the Insured Series. The Insured Series will pay the premiums with respect
to such insurance. Depending upon the terms of the
policy, in the event of a sale of any Municipal
Obligation so insured by the Insured Series, the
Mutual Fund Insurance
may terminate as to such
Municipal Obligation on the date of sale and in such
event the insurer may be liable only for those
payments of principal and interest which then are due
and owing. Other types of Mutual Fund Insurance may
not have this termination feature. The Insured Series
may purchase Municipal
Page 26
Obligations with this type of insurance from parties
other than the issuer and
the insurance would continue for the Insured Series'
benefit.
Typically, the insurer may not withdraw
coverage on insured securities held by the Insured
Series, nor may the insurer cancel the policy for any
reason except failure to pay premiums when due. The
insurer may reserve the right at any time upon 90
days' written notice to the Insured Series to refuse
to insure any additional Municipal Obligations
purchased by the Insured Series after the effective
date of such notice. The Fund's Board of Directors has
reserved the right to terminate the Mutual Fund Insuran
ce policy if it determines that the benefits to the Insured Series of having
its portfolio insured are not justified by the expense
involved. See "Special Investment Considerations
Relating to the Insured Series" below.
INSURANCE FOR MUNICIPAL OBLIGATIONS IS OBTAINED FROM RECOGNIZED MUNICIPAL
BOND INSURERS.
Mutual Fund Insurance and New Issue Insurance can be obtained from
Municipal Bond Investors
Assurance Corporation ("MBIA"), Financial Guaranty Insurance Company
("Financial Guaranty"), AMBAC Indemnity Corporation ("AMBAC Indemnity") and
Capital Guaranty Insurance Company ("Capital Guaranty"), although the Insured
Series may purchase insurance from, or Municipal Obligations insured by,
other insurers.
The following information regarding these
insurers has been derived from information furnished
by the insurers. The Fund has not independently
verified any of the information, but the Fund is not
aware of facts which would render such information
inaccurate.
MBIA is the principal operating subsidiary
of MBIA Inc., a New York Stock Exchange listed
company. Neither MBIA Inc. nor its shareholders are
obligated to pay the debts of or claims against MBIA.
MBIA is a limited liability corporation domiciled in
New York and licensed to do business in 50 states, the
District of Columbia and the Commonwealth of Puerto
Rico. As of December 31, 1993, MBIA had admitted
assets of approximately $3.1 billion, total
liabilities of approximately $2.1 billion and total
capital and surplus of approximately $978 million. The
claims-paying ability of MBIA is rated "AAA" by S&P
and "Aaa" by Moody's.
Financial Guaranty is a monoline financial
guaranty insurance company regulated by the New York
State Department
Page 27
of Insurance and authorized to
provide insurance in 50 states and the District of
Columbia. Financial Guaranty is a wholly-owned
subsidiary of FGIC Corporation, a Delaware holding
company, which is (99% owned by FGIC Holdings, Inc. a
Delaware Corporation and wholly-owned subsidiary of
General Electric Capital Corporation) and 1% owned by
Suimitomo Marine and Fire Insurance Company Limited. Fi
nancial Guaranty, in addition to providing insurance for the payment of
interest on and principal of Municipal Obligations
held in unit investment trust and mutual fund
portfolios, provides New Issue Insurance and insurance
for secondary market issues of Municipal Obligations
and for portions of new and secondary market issues of
Municipal Obligations. As of December 31, 1993,
Financial Guaranty had $1.03 billion of qualified
statutory capital, with $777.1 million in
policyholders' surplus and $252.5 million in
contingency reserves. The claims-paying ability of
Financial Guaranty is rated "AAA" by S&P, "Aaa" by
Moody's and "AAA" by Fitch.
AMBAC Indemnity is a Wisconsin-domiciled
stock insurance corporation, regulated by the Office
of The Commissioner of Insurance of the State of
Wisconsin and licensed to do business in 50 states,
the District of Columbia and the Commonwealth of
Puerto Rico. AMBAC Indemnity is a wholly-owned
subsidiary of AMBAC Inc., a publicly-held company.
AMBAC Indemnity had admitted assets of approximately
$1.9 billion and statutory capital of approximately
$1.1 billion as of December 31, 1993. Statutory
capital consists of AMBAC Indemnity's statutory
contingency reserve and policyholders' surplus. The
claims-paying ability of AMBAC Indemnity is rated
"AAA" by S&P and "Aaa" by Moody's.
Capital Guaranty is an "Aaa/AAA" rated
monoline stock insurance company incorporated in the
State of Maryland, and is a wholly-owned subsidiary of
Capital Guaranty Corporation, a Maryland insurance
holding company. Capital Guaranty Corporation is a
publicly-owned company whose shares are traded on the
New York Stock Exchange. Capital Guaranty is
authorized to provide insurance in 49 states, the
District of Columbia and three U.S. territories. As of
December 31, 1993, the total statutory policyholders' s
urplus and contingency reserve of Capital Guaranty was approximately $191
million and the total admitted assets were
approximately $285 million.
Page 28
Additional information concerning the
insurance feature appears in the Statement of
Additional Information to which your attention is
directed.
WHILE THE INSURANCE IS INTENDED TO REDUCE FINANCIAL RISK, IT WILL RESULT
IN A REDUCTION IN THE INSURED SERIES' YIELD.
SPECIAL INVESTMENT CONSIDERATIONS RELATING TO THE INSURED SERIES The insurance
feature is intended to
reduce financial risk, but the cost thereof and the restrictions on
investments imposed by the guidelines in the insurance policy will result in
a reduction in the yield on the Municipal Obligations purchased by the Insured
Series. Because coverage under certain Mutual Fund
Insurance policies may terminate upon sale of a security from the Insured
Series' portfolio, insurance with this termination feature should not be
viewed as assisting the marketability of securities in the Insured Series'
portfolio, whether or not the securities are in default or subject to a
serious risk of default. The Adviser intends to retain any Municipal
Obligations subject to such insurance which are in default or, in the view of
the Adviser, in significant risk of default and to recommend to the Fund's
Board of Directors that the Insured Series place a value on the insurance
which will be equal to the difference between the market value of the
defaulted security and the market value of similar securities of minimum
investment grade (i.e., rated Baa by Moody's or BBB by S&P, Fitch or Duff)
which are not in default. To the extent that the Insured Series holds
defaulted securities subject to Mutual Fund Insurance with this termination
feature, it might be limited in its ability in certain circumstances to
purchase other Municipal Obligations. While a defaulted Municipal Obligation
is held in the Insured Series' portfolio, the Insured Series would continue
to pay the insurance premium thereon but also would be entitled to collect
interest payments from the insurer and would retain the right to collect the
full amount of principal from the insurer when the security comes due.
Unlike certain Mutual Fund Insurance
policies, New Issue Insurance does not terminate with
respect to a Municipal Obligation once it is sold by
the Insured Series. Therefore, the Insured Series
expects that the market value, and thus the
marketability, of a defaulted security covered by New
Issue Insurance generally will be greater than the
market value of an otherwise comparable defaulted
security covered by Mutual Fund Insurance with the
termination feature. The Insured Series, at its
option, may purchase from Financial Guaranty secondary market insurance
("Secondary Market Insurance") on any Municipal Obligation purchased by the
Series. By
purchasing Secondary Market Insurance, the Insured
Series would obtain, upon pay-ment of a single premium, insurance against
nonpayment of scheduled
principal and interest for the remaining term of the
Municipal Obligation, regardless of whether the
Insured Series then owned such security. Such
insurance coverage would be noncancellable and would
continue in force so long as the security so insured
is outstanding and the insurer remains in business.
The purpose of acquiring Secondary Market Insurance
would be to enable the Insured Series to sell a
Municipal Obligation to a third party as a high rated
insured Municipal Obligation at a market price greater
than what otherwise might be obtainable if the
security were sold without the insurance coverage.
SECURITIES IN WHICH THE SERIES INVEST ARE SUBJECT TO THE RISK OF MARKET
PRICE FLUCTUATIONS AND CHANGES IN THE CREDIT RATING OR FINANCIAL CONDITION
OF THE ISSUERS.
OTHER INVESTMENT CONSIDERATIONS 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. Certain securities that may be purchased by a
Series, such as those with interest rates that fluctuate directly or
indirectly based on multiples of a stated index, are designed to be highly
sensitive to changes in interest rates and can subject the holders thereof to
extreme reductions of yield and possibly loss of principal. The values of
fixed-income securities also may be affected by changes in the credit rating
or financial condition of the issuing entities. Once the rating of a
portfolio security has been changed, the Fund will consider all circumstances
deemed relevant in determining whether to continue to hold the security.
Certain securities purchased by the Series, 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. Obligations which are
rated Baa by Moody's are considered medium grade obligations; they are
neither highly protected nor poorly secured, and are considered by Moody's to
have speculative characteristics. Bonds rated BBB by S&P are regarded as
having adequate capacity to pay interest and repay principal, and while such
bonds 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
in higher rated
categories. Fitch considers the obligor's ability to pay interest and repay
principal on bonds rated BBB 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. Bonds rated BBB
by Duff are considered to have below average protection factors but still cons
idered sufficient for prudent investment. See "Appendix" in the Statement of
Additional Information. Each Series' net asset value generally will not be
stable and should fluctuate based upon changes in the value of the Series'
portfolio securities. Securities in which each Series will invest may earn a
higher level of current income than certain shorter-term or higher quality
securities which generally have greater liquidity, less market risk and less
fluctuation in market value.
Certain municipal lease/purchase obligations
in which the Fund 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 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.
CHANGES IN THE FEDERAL INCOME TAX CODE COULD AFFECT THE PERFORMANCE OF
THE FUND. CONSULT YOUR TAX ADVISER CONCERNING THE AFFECT OF ANY
SUCH PROVISIONS.
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 Fund and thus reduce
the available yield. Investors 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 the Fund so as to adversely affect Fund
shareholders, the Fund would reevaluate its investment objective and poli-
Page 31
cies 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 Fund would treat such security as a permissible Taxable
Investment within the applicable limits set forth herein.
The Fund's classification as a
"non-diversified" investment company means that the
proportion of each Series' assets that may be invested
in the securities of a single issuer is not limited by
the Investment Company Act of 1940. A "diversified"
investment company is required by the Investment
Company Act of 1940 generally to invest, with respect
to 75% of its total assets, not more than 5% of such
assets in the securities of a single issuer. However,
the Fund intends to conduct its operations so as to qua
lify each Series as a "regulated investment company" for purposes of the
Code, which requires that, with respect to each
Series' assets, at the end of each quarter of its
taxable year, (i) at least 50% of the market value of
such Series' 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 such total assets and
(ii) not more than 25% of the value of such Series'
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 Series'
assets may be invested in the securities of a limited
number of issuers, each Series' 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 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 Adviser. However, if
such other investment companies or managed accounts
are prepared to invest in, or desire to dispose of,
Municipal Obligations or Taxable Investments at the
same time as a 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.
Page 32
MANAGEMENT OF THE FUND
THE ADVISER, THE FIRST NATIONAL BANK OF CHICAGO, IS ONE OF THE LARGEST
COMMERCIAL BANKS IN THE UNITED STATES AND THE LARGEST
IN THE MID-WESTERN UNITED STATES. THE ADVISER MANAGES APPROXIMATELY
$15.5 BILLION OF INVESTMENT ASSETS.
INVESTMENT ADVISER The Adviser, located at Three
First National Plaza, Chicago, Illinois 60670, is the Fund's investment
adviser. The Adviser, 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 March 31, 1994, 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
($59.8 billion) and in terms of deposits ($28.8 billion). As of March 31,
1994, the Adviser provided personal investment management services to
portfolios containing approximately $15.5 billion in assets. The Adviser
serves as investment adviser for the Fund pursuant to an Investment Advisory
Agreement dated as of December 16, 1987 (as revised October 1, 1993). Under
the Investment Advisory Agreement, the Adviser, subject to the supervision of
the Fund's Board of Directors and in conformity with Maryland law and the
stated policies of the Fund, manages the investment of the assets of each
Series. The Adviser 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 Adviser
provides these services through its Investment Management Department. The
investment advisory services of the Adviser are not exclusive under the terms
of the Investment Advisory Agreement. The Adviser 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 Adviser and its affiliates deal, trade
and invest for their own accounts in the types of
securities in which the Series may invest and may have
deposit, loan and commercial banking relationships
with the issuers of securities purchased by a Series. The Adviser and its
affiliates sell and purchase securities of the type in
which the Series may invest to and from other
investment companies sponsored by the Administrator.
The Adviser will not invest any assets of the Series
in any of these securities purchased
Page 33
directly or
indirectly from itself or any affiliate. The Adviser
has advised the Fund that in making its investment
decisions the Adviser does not obtain or use material
inside information in the possession of any other
division or department of the Adviser or in the
possession of any affiliate of the Adviser.
The Adviser 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 rece
ipt by the Adviser and its affiliates of customer account fees in addition to
advisory and Service Agent fees from the Fund with
respect to assets in certain accounts. See
"Distribution Plan and Shareholder Services Plan."
Under the terms of the Investment Advisory
Agreement, the Fund has agreed to pay the Adviser a
monthly fee at the annual rate of .40 of 1% of the
value of each Series' average daily net assets. No
fees were paid by the Fund for the fiscal year ended
February 28, 1994, pursuant to various undertakings by
the Adviser.
The Fund's primary portfolio manager is John H. Erickson. He has held
that position since the Fund's inception, and has been employed by the Adviser
since August 1, 1979. The Adviser also provides
research services for the Fund as well as for other
funds it advises through a professional staff of
portfolio managers and security analysts.
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 Adviser are permitted to
purchase and sell securities upon the order and for
the account of their customers. The Adviser has
advised the Fund of its belief that it may perform the
services for the Fund contemplated by the Investment
Advisory Agreement and this Prospectus without
violating the Glass-Steagall Act or other applicable
banking laws or regulations. The Adviser has pointed
out, however, that there are no cases deciding whether
a bank such as the Adviser may perform services
comparable to those performed by the Adviser 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
Page 34
future judicial or administrative decisions or
interpretations of present and future statutes and
regulations, could prevent the Adviser from continuing
to perform such services for the Fund. If the Adviser
were to be prevented from providing such services to
the Fund, the Fund's Board of Directors would review
the Fund's relationship with the Adviser and consider
taking all actions necessary in the circumstances.
THE DREYFUS CORPORATION, WHICH MANAGES OR ADMINISTERS APPROXIMATELY $72
BILLION IN MUTUAL FUND ASSETS, WILL ASSIST THE ADVISER IN PROVIDING
CERTAIN ADMINISTRATIVE SERVICES FOR THE FUND.
ADMINISTRATOR The Administrator, located at 200 Park Avenue, New York,
New York 10166, serves as the Fund's administrator pursuant to an
Administration Agreement with the Fund.
Under the Administration Agreement, the Administrator generally assists in
all aspects of the Fund's operations, other than providing investment advice,
subject to the overall authority of the Fund's Board of Directors in
accordance with Maryland law. The Administrator was formed in 1947 and, as of
May 31, 1994, managed or administered approximately $72 billion in assets for
more than 1.9 million investor accounts nationwide.
Under the terms of the Administration
Agreement, the Fund has agreed to pay the
Administrator a monthly fee at the annual rate of .20
of 1% of the value of each Series' average daily net
assets. No fees were paid by the Fund for the fiscal
year ended February 28, 1994, pursuant to various
undertakings by the Administrator.
THE SHAREHOLDER SERVICES GROUP, INC.
IS THE FUND'S TRANSFER AGENT .
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.
EXPENSES All expenses incurred
in the operation of the Fund are borne by the Fund,
except to the extent specifically assumed by the
Adviser and/or Administrator. The expenses borne by
the Fund include the following: taxes, interest,
brokerage fees and commissions, if any, fees of
Directors who are not officers, directors, employees
or holders, directly or indirectly, of 5% or more of
the outstanding voting securities of the Adviser or
the Administrator, Securities and Exchange Commission
fees, state
Page 35
Blue Sky qualification fees, advisory and
administration 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 corporate
existence, costs attributable to investor services
(including, without limitation, telephone and
personnel expenses), costs of shareholders' reports
and corporate meetings and any extraordinary expenses.
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. In addition,
Class B shares are subject to an annual distribution
fee for advertising, marketing and distributing Class
B shares pursuant to a distribution plan adopted in
accordance with Rule 12b-1 under the Investment
Company Act of 1940. See "Distribution Plan and
Shareholder Services Plan." 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 Directors, including, but not limited to,
proportionately in relation to the net assets of each
Series.
The imposition of the investment advisory
and administration fees, as well as other operating
expenses, including the fees paid under the
Distribution Plan and Shareholder Services Plan, will
have the effect of reducing the yield to investors.
From time to time, the Adviser and/or the
Administrator may waive receipt of their fees and/or
voluntarily assume certain expenses of the Fund, which
would have the effect of lowering a Series'
overall expense ratio and increasing yield to
investors at the time such amounts were waived or
assumed, as the case may be. The Fund will not pay the
Adviser and/or the Administrator at a later time for
any amounts which may be waived, nor will the Fund
reimburse the Adviser and/or the Administrator for any
amounts which may be assumed.
HOW TO BUY FUND SHARES
THE FUND OFFERS A NUMBER OF CONVENIENT WAYS TO PURCHASE SHARES.
INFORMATION APPLICABLE TO ALL PURCHASERS The Fund's distributor is Dreyfus
Service Corporation, a
wholly-owned subsidiary of the Administrator, located at 200 Park Avenue, New
Page 36
York, New York 10166. The shares it distributes are not
deposits or obligations of The Dreyfus Security Savings Bank, F. S. B. or the
Adviser and therefore are not insured by the FDIC.
When purchasing Fund shares, an investor must specify whether the
purchase is for Class A or
Class B shares. Shares may be purchased by all clients of the Adviser and
its affiliates, including
qualified custody, agency and trust accounts, through
their accounts with the Adviser and its affiliates, or
by clients of certain other Service Agents through
their accounts with the Service Agent. Shares also may
be purchased directly through the Distributor. Stock
certificates are issued only upon request. No
certificates are issued for fractional shares. It is
not recommended that the Fund be used as a vehicle for
Keogh, IRA or other qualified retirement plans. 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 for each Class is $1,000. All subsequent
investments must be at
least $100. The initial investment must be accompanied by the Fund's Account
Application. The Adviser 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.
ORDERS RECEIVED BY THE CLOSE OF TRADING ON THE FLOOR OF THE NEW YORK
STOCK EXCHANGE (CURRENTLY 4:00 P.M., NEW YORK TIME) WILL BE EXECUTED
AT THAT DAY'S PUBLIC OFFERING PRICE. ORDERS RECEIVED LATER WILL BE
EXECUTED AT THE NEXT BUSINESS DAY'S PRICE.
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
(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), Fund 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, Fund 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, except
where shares are purchased through a dealer as provided below.
Page 37
NET ASSET VALUE IS DETERMINED AT 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.
Shares of each Series are sold on a continuous basis. Net asset value per
share of each Class 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. Net asset value per share of each Class is computed by
dividing the value of each Series' net assets represented by such Class
(i.e., the value of its assets less liabilities) by the total number of its
shares of such Class outstanding. Each Series' investments are valued each
business day by an independent pricing service approved by the Board of Direct
ors and are valued at fair value as determined by the pricing service. The
pricing service's procedures are reviewed under the general supervision of
the Board of Directors. For further information regarding the methods
employed in valuing each Series' investments, 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").
Orders for the purchase of Fund shares
received by deal-ers by the close of trading on the
floor of the New York Stock Exchange on any business
day and transmitted to the Distributor by the close of
its business day (normally 5:15 p.m., New York time) wi
ll be based on the public offering price per share determined as of the close
of trading on the floor of the New York Stock Exchange
on that day. Otherwise, the orders will be based on
the next determined public offering price. It is the
dealers' responsibility to transmit orders so that
they will be received by the Distributor before the
close of its business day.
Page 38
CLASS A SHARES OF THE INTERMEDIATE SERIES ARE SOLD WITH A MAXIMUM SALES
LOAD OF 3.00% AND CLASS A SHARES OF THE INSURED SERIES ARE SOLD WITH
A MAXIMUM SALES LOAD OF 4.50%. THERE ARE SEVERAL WAYS TO REDUCE OR
ELIMINATE THE SALES LOAD.
CLASS A SHARES The public offering price for Class A shares is the net asset
value per share of that
Class plus a sales load as shown below:
<TABLE>
<CAPTION>
INTERMEDIATE SERIES
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 $100,000 3.00 3.10 2.75
$100,000 to less than $500,000 2.50 2.55 2.25
$500,000 to less than $1,000,000 2.00 2.00 1.75
$1,000,000 and above 1.00 1.00 1.00
INSURED SERIES
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 4.50 4.70 4.25
$50,000 to less than $100,000 4.00 4.20 3.75
$100,000 to less than $250,000 3.00 3.10 2.75
$250,000 to less than $500,000 2.50 2.60 2.25
$500,000 to less than $1,000,000 2.00 2.00 1.75
$1,000,000 to less than $3,000,000 1.00 1.00 1.00
$3,000,000 to less than $5,000,000 0.50 0.50 0.50
$5,000,000 and above 0.25 0.25 0.25
</TABLE>
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 Series' shares
(or which otherwise have a brokerage-related or
clearing arrangement with an NASD member firm or other
financial institution with respect to the sale of Series' shares),
Page 39
their spouses and minor
children, and accounts opened by a bank, trust company
or thrift institution, acting as a fiduciary, may
purchase Class A shares 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 the
Distributor 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 Series' shares at
net asset value. In addition, Class A shares of each
Series may be purchased at net asset value for Fund
accounts registered under the Uniform Gifts to Minors
Act or Uniform Transfers to Minors Act which are
opened through FCIS. Each Series' Class A shares also
are offered at net asset value to directors, employees
and retired employees of First Chicago Corporation, or
any of its affiliates and subsidiaries, Board members
of a fund advised by the Adviser, including members of
the Fund's Board, or the spouse or minor child of any
of the foregoing.
In fiscal 1994, FCIS, an affiliate of the
Adviser, retained $124,945 with respect to the
Intermediate Series, and $34,389 with respect to the
Insured Series, from sales loads on Class A shares.
The dealer reallowance may be changed from time to
time but will remain the same for all dealers.
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 Fund Shares." FCIS 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
FCIS, in part, are used to defray these expenses. In
fiscal 1994, no amount was retained by FCIS from the
CDSC on Class B shares.
CONTACT YOUR INVESTMENT REPRESENTATIVE OR SERVICE AGENT TO LEARN HOW TO
PURCHASE SHARES.
PURCHASING SHARES THROUGH ACCOUNTS WITH THE ADVISER
OR A SERVICE AGENT Investors who desire to purchase shares through their
accounts at the Adviser or its affiliates or a Service Agent should contact
such entity directly for appropriate instructions, as well as for information
about conditions pertaining to
Page 40
the account and any related fees. Service Agents and the Adviser 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 the Shareholder Services Plan or advisory
fees received by the Adviser under the Investment Advisory Agreement. Each
Service Agent has agreed to transmit to its clients a schedule of such fees.
In addition, Service Agents and the Adviser 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.
Each investor desiring to use this privilege should consult the Adviser or his
Service Agent for details. It is the responsibility of the Adviser and Service
Agents to transmit orders on a timely basis.
Copies of the Fund's Prospectus and
Statement of Additional Information may be obtained
from the Distributor, the Adviser, certain affiliates
of the Adviser 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 and Class of shares
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 made in U.S. dollars
and, to avoid fees and delays, should be drawn only on
U.S. banks.
Page 41
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#8900052333/First Prairie
Municipal Bond Fund, Intermediate Series_Class A
shares, or DDA#8900115394/First Prairie Municipal Bond
Fund, Intermediate Series_Class B shares or DDA#8900052
279/First Prairie Municipal Bond Fund, Insured Series_Class A shares, or
DDA#8900115408/First Prairie Municipal Bond Fund,
Insured Series_Class B shares, as the case may be, for
purchase of shares in the investor's name. The wire
must include the name of the Series being purchased, th
e investor's account number (for new accounts, the investor's TIN should be
included instead), account registration and dealer
number, if applicable. If an investor's initial
purchase of shares of the Series is by wire, the
investor should call 1-800-645-6561 after completing
his wire payment to obtain his 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."
REDUCED SALES LOADS FOR CLASS A SHARES APPLY TO CERTAIN PURCHASES OF
SHARES OF THE FUND AND OTHER ELIGIBLE FIRST PRAIRIE FUNDS.
RIGHT OF ACCUMULATION--CLASS A SHARES Reduced sales loads apply to any
purchase of Class A shares of a
Series where the dollar amount of shares being purchased, plus the value of
shares of such Series, the other Series of the Fund, shares of certain other
funds advised by the Adviser purchased with a sales load or acquired by a
previous exchange of shares purchased with a sales load, and shares of
certain other funds advised by the Administrator which are sold with a sales
load (hereinafter referred to as "Eligible Funds") held by an investor and
any relat
Page 42
- -ed "purchaser" as defined in the
Statement of Additional Information, is $50,000 or more with respect to the
Insured Series or $100,000 or more with respect to the Intermediate Series.
If, for example, an investor previously purchased and still holds Class A
shares of the Insured Series, 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 Series 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.
YOU CAN PURCHASE
ADDITIONAL SHARES BY TELEPHONE AFTER YOU
SUPPLY THE NECESSARY INFORMATION ON YOUR ACCOUNT APPLICATION.
TELETRANSFER PRIVILEGE An investor may purchase Fund shares
(minimum $500, maximum $150,000 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 bank account designated in one of these documents and the
investor's Fund 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
TeleTransfer purchases of Fund shares by calling 1-800-227-0072 or, if
calling from overseas, 1-401-455-3309.
Page 43
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.
THERE IS NO CHARGE
FOR EXCHANGES WITH
CERTAIN OTHER FIRST PRAIRIE FUNDS.
EXCHANGE PRIVILEGE The Exchange Privilege enables an investor to purchase,
in exchange for Class A or
Class B shares of a Series, shares of the same Class of the other Series,
shares of certain other funds advised by the Adviser, or shares of the same
Class of certain funds advised by the Administrator, 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 Adviser. 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.
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 Adviser, certain affiliates of the
Adviser 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 or Series 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 Shareholder
Services Form is on file with the Transfer Agent.
Page 44
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 or Series into which the exchange is made:
Exchange Privilege, Wire Redemption Privilege,
Telephone Redemption Privilege, TeleTransfer Privilege
and the dividend/capital gain distribution option
(except for Dividend Sweep) 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 of Class A shares
into funds sold with a sales load. No CDSC will be
imposed on Class B shares at the time of an exchange;
however, Class B shares acquired through an exchange
will be subject on redemption to the higher CDSC
applicable to the exchanged or acquired shares. The
CDSC applicable on redemption of the acquired Class B
shares will be calculated from the date of the initial
purchase of the Class B shares exchanged. If an
investor is exchanging Class A shares 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 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.
Page 45
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 Class A or Class B
shares of a Series, in shares of the same class of the
other Series, certain other funds in the First Prairie
Family of Funds or certain funds advised by the
Administrator 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 of Class A
shares into funds sold with a sales load. No CDSC will
be imposed on Class B shares at the time of an
exchange; however, Class B shares acquired through an
exchange will be subject on redemption to the higher
CDSC applicable to the exchanged or acquired shares.
The CDSC applicable on redemption of the acquired
Class B shares will be calculated from the date of the
initial purchase of the Class B shares exchanged. See
"Shareholder Services" in the Statement of Additional
Information. The right to exercise this Privilege may
be modified or cancelled 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 FCIS, or 1-800-645-6561 if Fund shares were
purchased through the Distributor.
Page 46
YOU CAN PURCHASE
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
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 Housemember 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
Adviser, certain affiliates of the Adviser or certain Service Agents. An
investor may cancel 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.
MANY FEDERAL PAYMENTS ARE ELIGIBLE FOR FULL OR PARTIAL DIRECT DEPOSIT INTO
YOUR ACCOUNT TO PURCHASE SHARES.
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
the investor 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 Adviser,
certain affiliates of the Adviser 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.
Page 47
YOU CAN WITHDRAW A SPECIFIED DOLLAR AMOUNT FROM YOUR ACCOUNT EVERY MONTH
OR QUARTER.
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 Adviser,
certain affiliates of the Adviser or certain Service Agents. The Automatic
Withdrawal Plan may be ended at any time by the investor, the Fund or the
Transfer Agent. Shares for which certificates have been issued may not be
redeemed through the Automatic Withdrawal Plan.
Class B shares withdrawn pursuant to the
Automatic Withdrawal Plan will be subject to any
applicable CDSC. Purchases of additional Class A
shares where a sales load is imposed concurrently with
withdrawals of Class A shares generally are
undesirable.
YOU CAN "SWEEP" YOUR DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS INTO CERTAIN
OTHER FIRST PRAIRIE FUNDS.
DIVIDEND OPTIONS 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 Administrator 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 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 CDSC, the
shares purchased will be subject to the CDSC, if any, applicable to the
purchased shares. See "Shareholder Services" in the Statement of Additional
Information. Dividend ACHpermits an investor to transfer electronically
dividends or dividends and capital gain distributions, 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 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 FCIS, or
1-800-645-6561
Page 48
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. These privileges will be cancelled with
respect to Fund shares exchanged for shares of another
fund through the Exchange Privilege or Auto-Exchange
Privilege. 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.
BY SIGNING A LETTER OF INTENT TO PURCHASE ADDITIONAL CLASS A SHARES
WITHIN 13 MONTHS, YOU BECOME ELIGIBLE FOR ANY REDUCED SALES CHARGES
APPLYING TO THE TOTAL PURCHASE.
LETTER OF INTENT--CLASS A SHARES By signing a Letter of Intent form,
available from the Distributor,
the Adviser, certain affiliates of the Adviser 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 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. 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
Page 49
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 Fund 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 shares, he must indicate his
intention to do so under a Letter of Intent. Purchases
pursuant to a Letter of Intent will be made at the
then-current net asset value, plus the lower of the app
licable sales load in effect at the time such Letter of Intent was executed
or the current applicable sales load.
HOW TO REDEEM FUND SHARES
YOU CAN REDEEM FUND SHARES AT ANY TIME.
GENERAL An investor may request redemption of his Class A or Class B
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 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 or 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 Fund imposes no charges (other than any
applicable CDSC with respect to Class B shares) when
shares are redeemed. Service Agents may charge a
nominal fee for effecting redemptions of Fund shares.
Any certificates representing a Series' shares being re
deemed must be submitted with the redemption request. The value of the shares
redeemed may be more or less than their original cost,
depending upon the Series' then-current net asset
value.
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
Page 50
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 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 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 SHARES A CDSC payable to FCIS and
other Service Agents is imposed on any redemption of
Class B shares which reduces the current net asset
value of an investor's Class B shares to an amount
which is lower than the dollar amount of all payments
by the investor for the purchase of Class B shares of
the Fund held by the investor at the time of
redemption. No CDSC will be imposed to the extent that
the net asset value of the Class B shares redeemed
does not exceed (i) the current net asset value of
Class B shares acquired through reinvestment of
dividends or capital gain distributions, plus (ii)
increases in the net asset value of an investor's
Class B shares above the dollar amount of all the
investor's payments for the purchase of Class B shares
of the Fund held by the investor at the time of
redemption.
Page 51
If the aggregate value of Class B shares
redeemed has declined below their original cost as a
result of the Series' performance, a CDSC may be
applied to the then-current net asset value rather
than the purchase price.
In circumstances where the CDSC is imposed,
the amount of the charge will depend on the number of
years from the time the investor purchased the Class B
shares until the time of redemption of such shares.
Solely for purposes of determining the number of years
from the time of any payment for the purchase of Class
B shares, all payments during a month will be
aggregated and deemed to have been made on the first
day of the month. The following table sets forth the
rates of the CDSC:
CDSC AS A % OF
YEAR SINCE PURCHASE AMOUNT INVESTED OR
PAYMENT WAS MADE REDEMPTION PROCEEDS
First 3.00
Second 3.00
Third 2.00
Fourth 2.00
Fifth 1.00
Sixth 0.00
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. It will be assumed that the redemption is made first of
amounts representing shares acquired pursuant to the re
investment of dividends and distributions; then of amounts representing the
increase in net asset value of Class B shares above
the total amount of payments for the purchase of Class
B shares made during the preceding five years; then of
amounts representing the cost of shares purchased five
years prior to the redemption; and finally, of amounts
representing the cost of shares held for the longest
period of time within the applicable five-year period.
For example, assume an investor purchased
100 shares at $10 a share for a cost of $1,000.
Subsequently, the shareholder acquired five additional
shares through dividend reinvestment. During the
second year after the purchase the investor decided to
redeem $500 of his or her investment. Assuming at the
time of the redemption the net asset value had
appreciated to $12 per share, the value of the
investor's shares would be $1,260 (105
Page 52
shares at $12
per share). The CDSC would not be applied to the value
of the reinvested dividend shares and the amount which
represents appreciation ($260). Therefore, $240 of the
$500 redemption proceeds ($500 minus $260) would be
charged at a rate of 3% (the applicable rate in the
second year after purchase) for a total CDSC of $7.20.
WAIVER OF CDSC The CDSC will be
waived in connection with (a) redemptions made within
one year after the death or disability, as defined in
Section 72(m)(7) of the Code, of the shareholder, (b)
redemptions by 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 Fund, certain other funds advised by
the Adviser and certain other funds advised by the
Administrator exceeds one million dollars, (c)
redemptions as a result of a combination of any
investment company with the Fund by merger,
acquisition of assets or otherwise, (d) a distribution
following retirement under a tax-deferred retirement
plan or upon attaining age 701/2 in the case of an IRA
or Keogh plan or custodial account pursuant to Section
403(b) of the Code, and (e) redemptions by such
shareholders as the Securities and Exchange Commission
or its staff may permit. If the Fund's Directors
determine to discontinue the waiver of the CDSC, the
disclosure in the Fund's prospectus will be revised
appropriately. Any Fund shares subject to a CDSC which
were purchased prior to the termination of such waiver
will have the CDSC waived as provided in the Fund's
prospectus at the time of the purchase of such shares.
To qualify for a waiver of the CDSC, at the
time of redemption the investor must notify the
Transfer Agent or the investor's Service Agent must
notify the Distributor or FCIS. Any such qualification
is subject to confirmation of the investor's entitlement.
Page 53
THE FUND OFFERS A
NUMBER OF CONVENIENT WAYS TO ACCESS YOUR INVESTMENT.
PROCEDURES An investor who has purchased shares through his account at
the Adviser 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 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 Adviser or the Service Agent to
transmit the redemption order and credit the investor's account with the
redemption proceeds on a timely basis. Other investors may redeem shares by
using the regular redemption procedure through the Transfer Agent, the Check
Redemption Privilege, the Wire Redemption Privilege, the Telephone Redemption
Privilege or the TeleTransfer Privilege, as described below.
An investor's redemption request may direct
that the redemption proceeds be used to purchase
shares of other funds advised by the Adviser or
advised or administered by the Administrator that are
not available through the Exchange Privilege. The
applicable CDSC will be charged upon the redemption of
Class B shares. The investor's redemption proceeds
will be invested in shares of the other fund on the
next business day. Before making such a request, the
investor must obtain and should review a copy of the
current prospectus of the fund being purchased.
Prospectuses may be obtained from the Adviser, the
Distributor or certain Service Agents. The prospectus
will contain information concerning minimum investment
requirements and other conditions that may apply to
the investor's purchase.
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 him-self or herself to be
the investor, or a representative of the investor's
Service Agent, and reasonably believed by the Transfer
page 54
Agent to be genuine. The Fund 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 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. During the delay, the Series'
net asset value may fluctuate.
SHARES MAY BE REDEEMED BY WRITTEN REQUEST.
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 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. 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.
Page 55
THE FUND PROVIDES FREE REDEMPTION CHECKS FOR CLASS A WHICH YOU CAN USE IN
AMOUNTS OF $500
OR MORE.
CHECK REDEMPTION PRIVILEGE--CLASS A SHARES 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.
Potential fluctuations in the net asset value of the Series' Class A shares
should be considered in determining the amount of the check. 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. Shares
for which certificates have been issued may not be redeemed by Redemption
Check. This Privilege may be modified or terminated at any time by the Fund
or the Transfer Agent upon notice to holders of Class A shares.
YOU CAN REDEEM SHARES BY WIRE IF YOU CHECK THE APPROPRIATE BOX ON YOUR
ACCOUNT APPLICATION.
WIRE REDEMPTION PRIVILEGE An investor may request by wire or telephone that
redemption proceeds
(minimum $1,000) be wired to the investor's 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, 1-401-0455-3309. The
Fund reserves the right to refuse any redemption request, including requests
made
Page 56
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 for which
certificates have been issued are not eligible for this Privilege.
YOU CAN REDEEM SHARES BY TELEPHONE IF YOU HAVE CHECKED THE APPROPRIATE
BOX ON YOUR ACCOUNT APPLICATION.
TELEPHONE REDEMPTION PRIVILEGE An investor may redeem Fund shares
(maximum $150,000 per day) 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. The redemption proceeds will be paid by check and mailed to
the investor's address. An investor may telephone redemption instructions by
calling 1-800-221-0072 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 for which certificates have been issued are not eligible for this
Privilege.
CALL 1-800-227-0072 FOR TELETRANSFER
TRANSACTIONS.
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 me
mber 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 the investor's 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,
Page 57
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 currently is contemplated.
Investors who have selected the TeleTransfer
Privilege may request a TeleTransfer redemption of
Fund shares by calling 1-800-227-0072 or, if calling
from overseas, 1-401-455-3309. Shares issued in
certificate form are not eligible for this Privilege.
DISTRIBUTION PLAN AND
SHAREHOLDER SERVICES PLAN
Class A and Class B shares are
subject to a Shareholder Services Plan and Class B
shares only are subject to a Distribution Plan.
DISTRIBUTION PLAN Under the
Distribution Plan, adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940, the Fund
pays for advertising, marketing and distributing Class
B shares at an annual rate of up to .50 of 1% of the
value of the average daily net assets of Class B.
Under the Distribution Plan, the Fund may make
payments to Service Agents, including FCIS and the
Distributor, in respect of these services. The Fund
determines the amounts to be paid to Service Agents.
Service Agents receive such fees in respect of the
average daily value of Class B shares owned by their
clients. From time to time, Service Agents may defer
or waive receipt of fees under the Distribution Plan
while retaining the ability to be paid by the Fund
under the Distribution Plan thereafter. The fees
payable to Service Agents under the Distribution Plan
for advertising, marketing and distributing Class B
shares are payable without regard to actual expenses
incurred.
SHAREHOLDER SERVICES PLAN Under
the Shareholder Services Plan, the Fund pays Service
Agents, including FCIS and the Distributor, for the
provision of certain services to the holders of Class
A and Class B shares a fee at the annual rate of up to
.25 of 1% of the value of the average daily net assets
of Class A and Class B. The services provided may
include personal services relating to shareholder
accounts, such as answering shareholder
Page 58
inquiries regarding the Fund and providing reports and other
information, and services related to the maintenance
of shareholder accounts. The Fund 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 Fund pursuant to the
Shareholder Services Plan and any other compensation
payable by their clients in connection with the
investment of their assets in Class A or Class B
shares.
THE FUND ORDINARILY DECLARES DIVIDENDS FROM EACH SERIES' NET INVESTMENT
INCOME ON EACH BUSINESS DAY.
DIVIDENDS, DISTRIBUTIONS
AND TAXES
The Fund ordinarily declares dividends from each Series' net investment
income on each business day.
Shares of each Series begin earning dividends on the day immediately
available funds ("Federal Funds" (monies of member banks within the Federal
Reserve System which are held on deposit at a Federal Reserve Bank)) are
received by the Transfer Agent in written or telegraphic form. If a purchase
order is not accompanied by remittance in Federal Funds, there may be a delay
between the time the purchase order becomes effective and the time the shares
purchased start earning dividends. If an investor's payment is not made in
Federal Funds, it 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.
DIVIDENDS ARE USUALLY PAID ON THE LAST CALENDAR DAY OF EACH MONTH AND
AUTOMATICALLY
REINVESTED IN ADDITIONAL SHARES WITH NO SALES CHARGE, OR PAID IN CASH
IF YOU SO REQUEST.
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 at
net asset value without a sales load or, at the investor's option, paid in
cash. 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 such
investor is entitled are paid to the investor along with the proceeds of the
redemption. Distributions from net realized
securities gains, if any, generally are declared and paid by each Series once
a year, but each Series may make distributions
Page 59
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 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 same Class of the Series from which distributions
were paid at net asset value without a sales load. All expenses are accrued
daily and deducted before declaration of dividends to investors. Dividends
paid by each Class will be calculated at the same time and in the same manner
and will be of the same amount, except that the expenses attributable solely
to Class A or Class B will be borne exclusively by such Class. Class B shares
will receive lower per share dividends than Class A shares because of the
higher expenses borne by Class B. See "Fee Table."
DIVIDENDS FROM CERTAIN INVESTMENTS AND CAPITAL GAIN DISTRIBUTIONS ARE
NOT TAX EXEMPT.
Except for dividends from Taxable Investments, the Fund anticipates
that a substantial portion of
the dividends paid by a Series will not be subject to Federal income tax.
Dividends derived from Taxable Investments, together with distributions from
any net realized short-term securities gains and all or a portion of any
gains realized from the sale of other disposition of certain market discount
bonds, paid by a Series are taxable as ordinary income whether received in
cash or reinvested in additional Fund shares. 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 of a
Series generally are taxable as long-term capital gains for Federal income
tax purposes if an investor is a citizen or resident of the United States.
Dividends and distributions attributable to gains derived from securities
transactions and from the use of certain of the investment techniques
described under "Description of the Fund_Investment Techniques," will be
subject to Federal income tax. The Code provides that the net capital gain of
an individual generally will not be subject to Federal income tax at a rate
in excess of 28%. Under the Code, interest on indebtedness incurred or
continued to purchase or carry Series' shares which is deemed to relate to
exempt-interest dividends is not deductible.
The Code provides for the "carryover" of
some or all of the sales load imposed on a Series'
Class A shares if an investor exchanges his Series'
Class A shares for shares of another Series or
page 60
fund advised by the Adviser or the Administrator within 91
days of purchase and such other Series or fund reduces
or eliminates its otherwise applicable sales load
charge for the purpose of the exchange. In this case,
the amount of the sales load charge for the Series'
Class A shares, up to the amount of the reduction of
the sales load charge on the exchange, is not included
in the basis of such Series' shares for purposes of
computing gain or loss on the exchange, and instead is
added to the basis of the other Series or fund shares
received in the exchange.
Although all or a substantial portion of the
dividends paid by a Series may be excluded by
shareholders of the Series from their gross income for
Federal income tax purposes, the Series may purchase
specified private activity bonds, the interest from whi
ch 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 an
investor's Social Security benefits are taxable. If a
Series purchases such securities, the portion of such
Series' dividends related thereto will not necessarily
be tax exempt to an investor who is subject to the
alternative minimum tax and/or tax on Social Security
benefits and may cause an investor to be subject to
such taxes.
Taxable dividends derived from net
investment income and distributions from net realized
short-term securities gains paid by a Series 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 a
Series 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, 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.
Page 61
NOTICE AS TO THE TAX STATUS OF YOUR DIVIDENDS AND DISTRIBUTIONS WILL BE
MAILED TO YOU EACH YEAR. YOU WILL ALSO RECEIVE REGULAR SUMMARIES OF YOUR
ACCOUNT.
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 distribu
tions from net securities gains, if any, paid during the year. These
statements set forth the dollar amount of income exempt from Federal tax and
the dollar amount, if any, subject to Federal tax, the amount, if any, of
interest which gives rise to a preference item for the purpose of the
alternative minimum tax and the percentage of tax exempt
income attributable to the respective states. These dollar amounts will vary
depending on the size and length of time the investor has invested in a
Series. If a Series pays dividends derived from
taxable income, it intends to designate as taxable the same percentage of the
day's dividends as the actual taxable income earned on that day bears to
total income earned on that day. Thus, the percentage of the dividend
designated as taxable, if any, may vary from day to day.
AN INVESTOR WHO DOES NOT FURNISH THE FUND WITH A CORRECT TAXPAYER
IDENTIFICATION NUMBER, MAY BE SUBJECT TO 31% WITHHOLDING TAX ON
ALL TAXABLE DIVIDENDS,
DISTRIBUTIONS AND REDEMPTION PROCEEDS.
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 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. 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
February 28, 1994 as a "regulated investment company"
under Subchapter M of the Code
Page 62
and has satisfied
conditions which will enable interest from Municipal
Obligations, which is exempt from Federal income tax
with respect to the Series, to retain such tax exempt
status when distributed to the shareholders of the
Series. As a regulated investment company, the Series
will not pay Federal income taxes on net investment
income and net realized capital gains otherwise
taxable to it that is distributed to investors. Each
Series is subject to a non-deductible 4% excise tax,
measured with respect to certain undistributed amounts
of taxable investment income and capital gains, if
any.
The foregoing is a general summary of the
applicable provisions of the Code and Treasury
regulations presently in effect, and does not address
state or local taxes. It does not discuss all of the
aspects of Federal income taxation that may be
relevant to investors who are subject to special
treatment under the Federal income tax laws (for
example, foreign corporations or persons). In
addition, dividends and distributions from the Series
or Series shares themselves may be subject to state
and local taxes. Investors should consult their tax
advisers regarding specific questions as to Federal,
state and local tax law.
PERFORMANCE INFORMATION
For purposes of advertising,
performance is calculated on several bases, including
current yield, tax equivalent yield, average annual
total return and/or total return. These total return
figures reflect changes in the price of the shares and
assume that any income dividends and/or capital gains
distributions made by the Fund during the measuring
period were reinvested in shares of the same Class.
Class A total return figures include the maximum
initial sales charge and Class B total return figures
include any applicable CDSC. These figures also take
into account any applicable service and distribution
fees. As a result, at any given time, the performance
of Class B should be expected to be lower than that of
Class A. Performance for each Class will be calculated
separately.
Page 63
"CURRENT YIELD" IS THE SERIES' NET INVESTMENT INCOME OVER A 30-DAY
PERIOD, EXPRESSED AS AN ANNUAL PERCENTAGE AND ASSUMING ALL INCOME IS
REINVESTED.
Current yield refers to the applicable Series' annualized net investment
income per share over a
30-day period, expressed as a percentage of the maximum offering price per
share in the case of Class A or the net asset value per share in the case of
Class B 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. Calculations of each
Series' current yield may reflect absorbed expenses pursuant to any
undertaking that may be in effect. See "Management of the Fund."
Tax equivalent yield is calculated by
determining the pretax yield which, after being taxed
at a stated rate, would be equivalent to a stated
current yield calculated as described above.
Average annual total return is calculated
pursuant to a standardized formula which assumes that
an investment in the applicable Series 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 each Series' performance
will include the Series' average annual total return
of Class A and Class B for one, five and ten year
periods, or for shorter time periods depending upon
the length of time during which the Series has
operated. Computations of average annual total return
for periods of less than one year represent an
annualization of the Series' actual return for the
applicable period.
"TOTAL RETURN" COMBINES THE INCOME AND PRINCIPAL CHANGES FOR A
SPECIFIED PERIOD,
ASSUMING ALL DIVIDENDS AND DISTRIBUTIONS ARE REINVESTED.
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 in the case of
Class A or the net asset value per share in the case
of Class B 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 sales load which, if reflected,
would reduce the performance quoted.
PERFORMANCE VARIES FROM TIME TO TIME AND PAST RESULTS ARE NOT NECESSARILY
REPRESENTATIVE OF FUTURE RESULTS.
Performance will vary from time to time and past results are not
necessarily representative of
future results. Each investor should remember that performance is a function
of portfolio management in selecting the type and quality of portfolio
securities and is affected by operating expenses. 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.
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., Morningstar, Inc., Moody's Bond Survey
Bond Index, Lehman Brothers Municipal Bond Index and
other industry publications. The yield of the
Intermediate Series should generally be higher than
comparable money market funds (the Series, however,
does not seek to maintain a stabilized price per share
and may not be able to return an investor's principal)
and its price per share should fluctuate less than
comparable long-term bond funds (which generally have
somewhat higher yields).
GENERAL INFORMATION
The Fund was incorporated under
Maryland law on December 8, 1987, and each Series
commenced operations on March 1, 1988. On February 8,
1994, the Fund, which is incorporated under the name
First Prairie Tax Exempt Bond Fund, Inc., began
operating under the name First Prairie Municipal Bond
Fund.The Fund is authorized to issue 10 billion shares
of Common Stock (5 billion in the Intermediate Series
and 5 billion in the Insured Series), par value $.001
per share. Each Series'
Page 65
shares are classified into two
classes_Class A and Class B. Each share has one vote
and shareholders will vote in the aggregate and not by
class except as otherwise required by law. However,
holders of Class A and Class B shares will be entitled
to vote on matters submitted to shareholders
pertaining to the Shareholder Services Plan and only
holders of Class B shares will be entitled to vote on
matters submitted to shareholders pertaining to the
Distribution Plan.
On December 29, 1993, shareholders approved
a proposal to change certain of each Series'
fundamental policies and investment restrictions,
among other things, to increase (i) the amount the
Series may borrow from banks for temporary or
emergency purposes, (ii) the amount of assets that it
may pledge to secure such borrowings, (iii) the
percentage of assets which may be invested in illiquid
securities and make such policy non-fundamental and
(iv) the amount of portfolio securities which it may
lend.
To date, the Board of Directors has
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 (and as to classes within a Series) are
treated separately from those of the other Series (and
classes). The Fund has the ability to create, from
time to time, new series without shareholder approval.
Effective September 12, 1989, the Insured
Series (then the "Long-Term Series") adopted its
current management policy and changed its name from
Long-Term Series to Insured Series. Prior to the
revision in management policies, the Insured Series
was not required to invest 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 and,
under normal market conditions, the dollar-weighted
average maturity of such Series' 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 Insured Series, including any financial informat
ion and performance data, relating to such Series prior to September 12, 1989
reflects such Series' portfolio as constituted prior
to the revision to its management policy.
Page 66
Unless otherwise required by the Investment
Company Act of 1940, ordinarily it will not be
necessary for the Fund to hold annual meetings of
shareholders. As a result, Fund shareholders may not
consider each year the election of Directors or the
appointment of auditors. However, pursuant to the
Fund's By-Laws, the holders of at least 10% of the
shares outstanding and entitled to vote may require
the Fund to hold a special meeting of shareholders for
purposes of removing a Director from office and for any
other purpose. Fund shareholders may remove a Director by the affirmative
vote of a majority of the Fund's outstanding voting
shares. In addition, the Board of Directors will call
a meeting of shareholders for the purpose of electing
Directors if, at any time, less than a majority of the
Directors then holding office had been elected by
shareholders.
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
Directors from the separate voting requirements of the Rule.
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 Adviser, or by
writing to the Fund at the address shown on the front
cover or by calling the telephone number shown on the
front cover.
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.
Page 67
First Prairie Funds
Prospectus
The First National Bank of Chicago
INVESTMENT ADVISER
The Dreyfus Corporation
ADMINISTRATOR
Dreyfus Service Corporation
DISTRIBUTOR
Prospectus begins on page one.
729/770p11062794
FIRST PRAIRIE MUNICIPAL BOND FUND
CLASS A AND CLASS B SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
JUNE 27, 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 Municipal Bond Fund (the "Fund"), dated June 27, 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 "Adviser") serves as the
Fund's investment adviser.
The Dreyfus Corporation (the "Administrator") serves as the Fund's
administrator.
Dreyfus Service Corporation (the "Distributor"), a wholly-owned
subsidiary of the Administrator, is the distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . B-2
Management of the Fund. . . . . . . . . . . . . . . B-8
Investment Advisory and Administration Agreements . B-11
Purchase of Fund Shares . . . . . . . . . . . . . . B-14
Distribution Plan and Shareholder Services Plan . . B-16
Redemption of Fund Shares . . . . . . . . . . . . . B-18
Shareholder Services. . . . . . . . . . . . . . . . B-20
Determination of Net Asset Value. . . . . . . . . . B-23
Portfolio Transactions. . . . . . . . . . . . . . . B-23
Dividends, Distributions and Taxes. . . . . . . . . B-24
Performance Information . . . . . . . . . . . . . . B-25
Information About the Fund. . . . . . . . . . . . . B-28
Custodian, Transfer and Dividend Disbursing Agent, Counsel
and Independent Auditors. . . . . . . . . . . . B-28
Appendix. . . . . . . . . . . . . . . . . . . . . . B-29
Financial Statements. . . . . . . . . . . . . . . . B-36
Report of Independent Auditors. . . . . . . . . . . B-49
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."
The average distribution of investments (at value) in Municipal
Obligations by ratings for the fiscal year ended February 28, 1994,
computed on a monthly basis, was as follows:
<TABLE>
<CAPTION>
Percentage of Value
Fitch Investors Moody's Investors Standard & Poor's
Service, Inc. Service, Inc. Corporation Intermediate Insured
("Fitch") or ("Moody's") or ("S&P") Series Series
<S> <C> <S> <C> <C>
AAA Aaa AAA 42.2% 84.7%
AA Aa AA 21.6 1.1
A A A 26.3 .3
BBB Baa BBB 1.0 1.5
F1 MIG 1/VMIG 1 SP1 8.1 8.8
F1 P1 A1 .8 3.6
100.0% 100.0%
</TABLE>
Municipal Obligations. The term "Municipal Obligations" generally
includes debt obligations issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities
such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which Municipal Obligations may be issued include refunding
outstanding obligations, obtaining funds for general operating expenses and
lending such funds to other public institutions and facilities. In
addition, certain types of industrial development bonds are issued by or on
behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated
housing facilities, sports facilities, convention or trade show facilities,
airport, mass transit, industrial, port or parking facilities, air or water
pollution control facilities and certain local facilities for water supply,
gas, electricity, or sewage or solid waste disposal; the interest paid on
such obligations may be exempt from Federal income tax, although current
tax laws place substantial limitations on the size of such issues. Such
obligations are considered to be Municipal Obligations if the interest paid
thereon qualifies as exempt from Federal income tax in the opinion of bond
counsel to the issuer. There are, of course, variations in the security of
Municipal Obligations, both within a particular classification and between
classifications.
Floating and variable rate demand notes and bonds are tax exempt
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. 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 obligation plus accrued interest upon a
specified number of days' notice to the holders thereof. 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.
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 advisory and administration fees, as well as
other operating expenses, including fees paid under the Fund's Shareholder
Services Plan with respect to each Class and the Distribution Plan with
respect to Class B only, 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 Fund will seek to minimize
these risks by not investing more than 15% of a Series' total assets in
lease obligations that contain "non-appropriation" clauses, and by
investing only in those "non-appropriation" lease obligations where (1) the
nature of the leased equipment or property is such that its ownership or
use is essential to a governmental function of the municipality, (2) the
lease payments will commence amortization of principal at an early date
resulting in an average life of seven years or less for the lease
obligation, (3) appropriate covenants will be obtained from the municipal
obligor prohibiting the substitution or purchase of similar equipment if
lease payments are not appropriated, (4) the lease obligor has maintained
good market acceptability in the past, (5) the investment is of a size that
will be attractive to institutional investors, and (6) the underlying
leased equipment has elements of portability and/or use that enhance its
marketability in the event foreclosure on the underlying equipment is ever
required. The staff of the Securities and Exchange Commission currently
considers certain lease obligations to be illiquid. Accordingly, not more
than 15% of the value of a Series' net assets will be invested in lease
obligations that are illiquid and in other illiquid securities. See
"Investment Restriction No. 11" below.
The 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 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 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.
Insurance Feature (Applicable to Insured Series only). A Mutual Fund
Insurance policy provides for a policy period of one year which the insurer
typically renews for successive annual periods at the request of the
Insured Series for so long as the Insured Series is in compliance with the
terms of the policy. The insurance premiums are payable monthly by the
Insured Series and are adjusted for purchases and sales of covered
Municipal Obligations during the month on a daily basis. Premium rates for
each issue of Municipal Obligations covered by Mutual Fund Insurance are
fixed for as long as the Insured Series owns the security, although similar
Municipal Obligations purchased at different times may have different
premiums. In addition to the payment of premiums, a Mutual Fund Insurance
policy requires that the Insured Series notify the insurer on a daily basis
as to all Municipal Obligations in the insured portfolio and permit the
insurer to audit its records. The insurer cannot cancel coverage already
in force with respect to Municipal Obligations owned by the Insured Series
and covered by the Mutual Fund Insurance policy, except for non-payment of
premiums.
Municipal Obligations are eligible for Mutual Fund Insurance if, at
the time of purchase by the Insured Series, they are identified separately
or by category in qualitative guidelines furnished by the insurer and are
in compliance with the aggregate limitations set forth in such guidelines.
Premium variations are based in part on the rating of the security being
insured at the time the Insured Series purchases such security. The
insurer may prospectively withdraw particular securities from the
classifications of securities eligible for insurance or change the
aggregate amount limitation of each issue or category of eligible Municipal
Obligations but must continue to insure the full amount of such securities
previously acquired so long as they remain in the Insured Series'
portfolio. The qualitative guidelines and aggregate amount limitations
established by the insurer from time to time will not necessarily be the
same as the Insured Series or the Adviser would use to govern selection of
securities for the Insured Series' portfolio. Therefore, from time to time
such guidelines and limitations may affect portfolio decisions.
New Issue Insurance provides that in the event of a municipality's
failure to make payment of principal or interest on an insured Municipal
Obligation, the payment will be made promptly by the insurer. There are no
deductible clauses or cancellation provisions, and the tax exempt status of
the securities is not affected. The premiums, whether paid by the issuing
municipality or the municipal bond dealer underwriting the issue, are paid
in full for the life of the Municipal Obligation. The statement of
insurance is attached to or printed on the instrument evidencing the
Municipal Obligation purchased by the Insured Series and becomes part of
the Municipal Obligation. The benefits of the insurance accompany the
Municipal Obligations in any resale.
Ratings of Municipal Obligations. Subsequent to its purchase by the
Fund, an issue of rated Municipal Obligations may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require the sale of such Municipal Obligations by the
Fund, but the Adviser will consider such event in determining whether the
Fund should continue to hold the Municipal Obligations. To the extent that
the ratings given by Moody's, S&P, Fitch or Duff for Municipal Obligations
may change as a result of changes in such organizations or their rating
systems, the Fund will attempt to use comparable ratings as standards for
its investments in accordance with the investment policies contained in the
Fund's Prospectus and this Statement of Additional Information. The
ratings of Moody's, S&P, Fitch and Duff 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 Adviser also
will evaluate these securities and the creditworthiness of the issuers of
such securities based upon financial and other available information.
Futures Contracts and Options on Futures Contracts. Upon exercise of
an option, the writer of the option delivers 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 an option on a
futures contract 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 the
Series.
Lending Portfolio Securities. To a limited extent, each 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, a Series
can increase its income through the investment of the cash collateral. For
purposes of this policy, the Fund considers collateral consisting of U.S.
Government securities or irrevocable letters of credit issued by banks
whose securities meet the standards for investment by the Series to be the
equivalent of cash. Such loans may not exceed 33-1/3% of a Series' total
assets. From time to time, the Series may return to the borrower or a
third party which is unaffiliated with the Series, 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 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 Series must be able to terminate the loan at any time; (4) the
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 Series may pay only reasonable
custodian fees in connection with the loan. These conditions may be
subject to future modification.
Taxable Investments. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury
securities, which 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, since it is not so obligated by law. The Fund will invest in
such securities only when it is satisfied that the credit risk with respect
to the issuer is minimal.
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs.
Certificates of deposit are negotiable certificates representing 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 (in no event longer than seven
days) at a stated interest rate. Investments in time deposits generally
are limited to London branches of domestic banks that have total assets in
excess of $1 billion. Time deposits which may be held by the Fund will not
benefit from insurance from the Bank Insurance Fund or the Savings
Association Insurance Fund administered by the Federal Deposit Insurance
Corporation.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face
amount of the instrument upon maturity. Other short-term bank 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
subcustodian will have custody of, and will hold in a segregated account,
securities acquired by the Fund 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
Series will enter into repurchase agreements only with domestic banks with
total assets in excess of $1 billion or primary government securities
dealers reporting to the Federal Reserve Bank of New York, with respect to
securities of the type in which the Series may invest, and will require
that additional securities be deposited with it if the value of the
securities purchased should decrease below resale price. The Adviser 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.
Investment Restrictions. Each Series has adopted investment
restrictions numbered 1 through 8 as fundamental policies. These
restrictions cannot be changed, as to a Series, 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 13 are not fundamental policies and may be
changed by vote of a majority of the Directors at any time. Neither Series
may:
1. Invest more than 25% of its 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.
2. Borrow money, except to the extent permitted under the Act.
For purposes of this investment restriction, the entry into options,
forward contracts, futures contracts, including those relating to
indexes, and options on futures contracts or indexes shall not
constitute borrowing.
3. Purchase or sell real estate, or oil and gas interests, but
each Series may invest in Municipal Obligations secured by real estate
or interests therein.
4. Underwrite the securities of other issuers, except that the
Series 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, and except to
the extent the Series may be deemed an underwriter under the
Securities Act of 1933, as amended, by virtue of disposing of
portfolio securities.
5. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements; however, each
Series may lend its portfolio 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 Fund's Board of Directors.
6. 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. 2, 7, 8 and 11 may be deemed to give
rise to a senior security.
7. Purchase securities on margin, but the Series 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 commodities, except that each Series may purchase
and sell forward contracts, futures contracts, including those
relating to indexes, and options on futures contracts or indexes.
9. Purchase securities other than Municipal Obligations and
Taxable Investments and those arising out of transactions in futures
and options or as otherwise provided in the Fund's Prospectus.
10. Invest in securities of other investment companies, except
to the extent permitted under the Act.
11. 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 and collateral and initial or variation margin
arrangements with respect to options, forward contracts, futures
contracts, including those related to indexes and options on futures
contracts, or indexes.
12. 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
(including municipal lease/purchase agreements) that are not subject
to the demand feature described in the Fund's Prospectus and floating
and variable rate demand notes and bonds as to which each Series
cannot exercise the demand feature described in the Fund's Prospectus
on less than seven day's notice and as to which there is no secondary
market), if, in the aggregate, more than 15% of its net assets would
be so invested.
13. Invest in companies for the purpose of exercising control.
For purposes of Investment Restriction No. 1, 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 Fund may make commitments 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 a 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
Directors 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 Director who is deemed to be an "interested person"
of the Fund, as defined in the Act, is indicated by an asterisk.
Directors and Officers of the Fund
*JOSEPH S. DiMARTINO, President and Director. President, Chief Operating
Officer and a Director of the Administrator, Executive Vice President
and a Director of the Distributor and an officer, director or trustee
of other investment companies advised or administered by the
Administrator. He is also a Director of Noel Group, Inc., Vice
President and former Treasurer and Director of the National Muscular
Dystrophy Association and a Trustee of Bucknell University. His
address is 200 Park Avenue, New York, New York 10166.
JOHN P. GOULD, Director. 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. His
address is 1101 East 58th Street, Chicago, Illinois 60637.
MARILYN McCOY, Director. 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. Her address is 1100 North Lake Shore Drive, Chicago, Illinois
60611.
RAYMOND D. ODDI, Director. 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" Directors also is a trustee of First
Prairie Cash Management, First Prairie Diversified Asset Fund, First
Prairie Money Market Fund, First Prairie Municipal Money Market Fund, First
Prairie U.S. Government Income Fund and First Prairie U.S. Treasury
Securities Cash Management.
The Fund does not pay any remuneration to its officers and Directors
other than fees and expenses to Directors who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of
the Adviser or the Administrator or any affiliate of either of them. With
respect to the Intermediate Series and the Insured Series, such fees and
expenses totalled $4,414 and $1,443, respectively, for the fiscal year
ended February 28, 1994, for all such Directors as a group.
For so long as the Fund's plans described in the section captioned
"Distribution Plan and Shareholder Services Plan" remain in effect, the
Directors of the Fund who are not "interested persons" of the Fund, as
defined in the Act, will be selected and nominated by the Directors 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
the Administrator, Secretary of the Distributor and an officer or
director of other investment companies advised or administered by the
Administrator.
JEFFREY N. NACHMAN, Vice President-Financial. Vice President--Mutual Fund
Accounting of the Administrator and an officer of other investment
companies advised or administered by the Administrator.
JOHN J. PYBURN, Treasurer. Assistant Vice President of the Administrator
and an officer of other investment companies advised or administered
by the Administrator.
JEAN FARLEY, Controller. Senior Accounting Manager of the Fund Accounting
Department of the Administrator and an officer of other investment
companies advised or administered by the Administrator.
MARK N. JACOBS, Secretary. Secretary and Deputy General Counsel of the
Administrator and an officer of other investment companies advised or
administered by the Administrator.
CHRISTINE PAVALOS, Assistant Secretary. Assistant Secretary of the
Administrator, the Distributor and other investment companies advised
or administered by the Administrator.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
Directors and officers of the Fund, as a group, owned less than 1% of
each Series' shares of common stock outstanding on June 14, 1994.
As of June 14, 1994, The Dreyfus Corporation, a New York corporation
located at 200 Park Avenue, 7th Floor, New York, New York 10166-0799, owned
100% of the Insured Series' Class B shares outstanding and Donaldson Lufkin
Jenrette Securities Corporation, Inc., a New York corporation having an
address at P.O. Box 2052, Jersey City, New Jersey, owned 95% of the
Intermediate Series' Class B shares outstanding.
A stockholder who beneficially owns, directly or indirectly, more than
25% of the Fund's voting securities may be deemed a "control person" (as
defined in the Act) of the Fund.
The following stockholder is known by the Fund to have owned 5% or
more of the Insured Series' Class A shares outstanding on June 14, 1994:
Jane M. Cook, Mesquite, Texas 75149-5844 - 5.1%.
INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
Investment Advisory Agreement. The Adviser provides management
services pursuant to the Investment Advisory Agreement (the "Advisory
Agreement") dated December 16, 1987 (as revised October 1, 1993) with the
Fund. As to each Series, the Advisory Agreement is subject to annual
approval by (i) the Fund's Board of Directors 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 Directors who are not "interested persons" (as defined in
the Act) of the Fund or the Adviser, by vote cast in person at a meeting
called for the purpose of voting on such approval. Shareholders of each
Series last approved the Advisory Agreement on June 14, 1989, and the Board
of Directors, including a majority of the Directors who are not "interested
persons" of any party to the Advisory Agreement, last voted to renew the
Advisory Agreement at a meeting held on December 10, 1993. The Advisory
Agreement is terminable without penalty, as to each Series, on 60 days'
notice, by the Fund's Board of Directors or by vote of the holders of a
majority of such Series' shares or, upon not less than 90 days' notice, by
the Adviser. The Advisory Agreement will terminate automatically, as to
the relevant Series, in the event of its assignment (as defined in the
Act).
As compensation for the Adviser's services to the Fund, the Fund has
agreed to pay the Adviser a fee, computed daily and paid monthly, at an
annual rate of .40 of 1% of the value of each Series' average daily net
assets. For the fiscal years ended February 28/29, 1992, 1993 and 1994, no
fees were paid by the Fund pursuant to various undertakings by the Adviser.
The Fund has agreed that neither the Adviser nor the Administrator
will 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 Adviser's
or the Administrator's respective agreement with the Fund relates, except
for a loss resulting from wilful misfeasance, bad faith or gross negligence
on the part of the Adviser or the Administrator, as the case may be, in the
performance of its obligations or from reckless disregard by it of its
obligations and duties under its respective agreement with the Fund.
Administration Agreement. Pursuant to the Administration Agreement
(the "Administration Agreement") dated December 16, 1987 (as revised
October 1, 1993) with the Fund, the Administrator 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 in all aspects of the Fund's operation, other than
providing investment advice. The Administrator bears all expenses in
connection with the performance of its services and pays the salaries of
all officers and employees who are employed by both it and the Fund.
As to each Series, the Administration Agreement is subject to annual
approval by (i) the Fund's Board of Directors 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 Directors who are not "interested persons" (as defined in
the Act) of the Fund or the Administrator, by vote cast in person at a
meeting called for the purpose of voting on such approval. Shareholders of
each Series last approved the Administration Agreement on June 14, 1989,
and the Board of Directors, including a majority of the Directors who are
not "interested persons" of any party to the Administration Agreement, last
voted to renew the Administration Agreement at a meeting held on December
10, 1993. The Administration Agreement is terminable without penalty, as
to each Series, on not more than 60 days' notice, by the Fund's Board of
Directors or by vote of the holders of a majority of such Series' shares
or, upon not less than 90 days' notice, by the Administrator. The
Administration Agreement will terminate automatically, as to the relevant
Series, in the event of its assignment (as defined in the Act).
As compensation for the Administrator's services to the Fund, the Fund
has agreed to pay the Administrator a fee, computed daily and paid monthly,
at an annual rate of .20 of 1% of the value of each Series' average daily
net assets. For the fiscal years ended February 28/29, 1992, 1993 and
1994, no fees were paid by the Fund pursuant to various undertakings by the
Administrator.
In addition to the persons named as such in the section entitled
"Management of the Fund," the following persons are officers and/or
directors of the Administrator: Howard Stein, Chairman of the Board and
Chief Executive Officer; Julian M. Smerling, Vice Chairman of the Board of
Directors; Alan M. Eisner, Vice President and Chief Financial Officer;
David W. Burke, Vice President and Chief Administrative Officer; Robert F.
Dubuss, Vice President; Elie M. Genadry, Vice President--Institutional
Sales; Peter A. Santoriello, Vice President; Robert H. Schmidt, Vice
President; Kirk V. Stumpp, Vice President--New Product Development; Philip
L. Toia, Vice President; Katherine C. Wickham, Assistant Vice President;
Maurice Bendrihem, Controller; and Mandell L. Berman, Alvin E. Friedman,
Lawrence M. Greene, Abigail Q. McCarthy and David B. Truman, directors.
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 Adviser and/or the Administrator. The expenses
borne by the Fund include the following: organizational costs, taxes,
interest, brokerage fees and commissions, if any, fees of Directors who are
not officers, directors, employees or holders of 5% or more of the
outstanding voting securities of the Adviser or the Administrator,
Securities and Exchange Commission fees, state Blue Sky qualification fees,
advisory and administration fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of maintaining
corporate existence, costs of independent pricing services, costs
attributable to investor services (including, without limitation, telephone
and personnel expenses), costs of shareholders' reports and corporate
meetings, and any extraordinary expenses. 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. In addition, Class B shares are subject to an annual
distribution fee for advertising, marketing and distributing Class B shares
pursuant to a distribution plan adopted in accordance with Rule 12b-1 under
the Act. See "Distribution Plan and Shareholder Services Plan." 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 Directors, including, but not limited to,
proportionately in relation to the net assets of each Series.
The Adviser and the Administrator have agreed that, as to each Series,
if in any fiscal year the aggregate expenses of the Series (including fees
pursuant to the Advisory Agreement and the Administration Agreement, but
excluding interest, taxes, brokerage and, with the prior written consent of
the necessary state securities commissions, extraordinary expenses) exceed
the expense limitation of any state having jurisdiction over the Series,
the Series may deduct from the fees to be paid to each of the Adviser and
the Administrator, or the Adviser and the Administrator will bear,
approximately 2/3 and 1/3, respectively, of 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 Adviser and the Administrator
is not subject to reduction as the value of the Series' net assets
increases.
Glass-Steagall Act. For a 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 the Administrator, 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 Adviser would consider the possibility of
offering to perform some or all of the services now provided by the
Administrator 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 Adviser 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 Series 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 Series 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.
Sales Loads--Class A. The scale of sales loads applies to purchases
of Class A shares made by any "purchaser," which term includes an
individual and/or spouse purchasing securities for his, her or their own
account or for the account of any minor children, or a trustee or other
fiduciary purchasing securities for a single trust estate or a single
fiduciary account (including a pension, profit-sharing or other employee
benefit trust created pursuant to a plan qualified under Section 401 of the
Internal Revenue Code of 1986, as amended (the "Code")) although more than
one beneficiary is involved; or a group of accounts established by or on
behalf of the employees of an employer or affiliated employers pursuant to
an employee benefit plan or other program (including accounts established
pursuant to Sections 403(b), 408(k), and 457 of the Code); or an organized
group which has been in existence for more than six months, provided that
it is not organized for the purpose of buying redeemable securities of a
registered investment company and provided that the purchases are made
through a central administration or a single dealer, or by other means
which result in economy of sales effort or expense.
Offering Prices. Based upon the Fund's net asset value at the close of
business on February 28, 1994, the maximum offering price of the
Intermediate Series' shares would have been as follows:
Class A shares:
NET ASSET VALUE per share . . . . . . . . . . . . . . . . . $12.18
Sales Load for individual sales of shares aggregating
less than $100,000 - 3.0% of offering price
(approximately 3.1% of net asset value per share) . . . . .38
Offering price to public. . . . . . . . . . . . . . . . . . $12.56
Class B shares:
NET ASSET VALUE, redemption price and offering
price to public*. . . . . . . . . . . . . . . . . . . . . $12.18
Based upon the Fund's net asset value at the close of business on February
28, 1994 the maximum offering price of the Insured Series' shares would
have been as follows:
Class A shares:
NET ASSET VALUE per share . . . . . . . . . . . . . . . . . $12.13
Sales Load for individual sales of shares aggregating
less than $50,000 - 4.5% of offering price
(approximately 4.7% of net asset value per share) . . . . .57
Offering price to public. . . . . . . . . . . . . . . . . . $12.70
Class B shares:
NET ASSET VALUE, redemption price and offering
price to public*. . . . . . . . . . . . . . . . . . . . . $12.14
______________
* Class B shares are subject to a contingent deferred sales charge on
certain redemptions, see "How to Redeem Fund Shares" in the Fund's
Prospectus.
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.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Distribution Plan and Shareholder Services Plan."
Class A and Class B shares are subject to a Shareholder Services Plan
and Class B shares only are subject to a Distribution Plan.
Distribution Plan. Rule l2b-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. The Fund's Board
of Directors has adopted such a plan (the "Distribution Plan") with respect
to Class B shares pursuant to which the Fund pays for advertising,
marketing and distributing Class B shares. Under the Distribution Plan,
the Fund may make payments to the Adviser, its affiliates, including First
Chicago Investment Services, Inc., the Distributor or certain securities
dealers, financial institutions and other financial industry professionals
(collectively, "Service Agents") in respect of these services. The Fund's
Board of Directors believes that there is a reasonable likelihood that the
Distribution Plan will benefit each Series and holders of its Class B
shares. In some states, certain 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 Distribution
Plan, and the purposes for which such expenditures were incurred, must be
made to the Directors for their review. In addition, the Distribution Plan
provides that it may not be amended to increase materially the costs which
holders of Class B shares may bear for distribution pursuant to the
Distribution Plan without the approval of the holders of Class B shares and
that other material amendments of the Distribution Plan must be approved by
the Board of Directors, and by the Directors who are neither "interested
persons" (as defined in the Act) of the Fund or the Adviser nor have any
direct or indirect financial interest in the operation of the Distribution
Plan or in any agreements entered into in connection with the Distribution
Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. The Distribution Plan is subject to annual
approval by such vote of the Directors cast in person at a meeting called
for the purpose of voting on the Distribution Plan. The Distribution Plan
was approved by the Fund's Board of Directors, including a majority of the
Directors who are not "interested persons," at a meeting held on October 1,
1993. The Distribution Plan is terminable at any time by vote of a
majority of the Directors who are not "interested persons" and have no
direct or indirect financial interest in the operation of the Distribution
Plan or in any agreements entered into in connection with the Distribution
Plan, or by vote of the holders of a majority of Class B shares.
For the period from February 8, 1994 (effective date of the
Distribution Plan) through February 28, 1994, $1.00 was charged to the
Intermediate Series, with respect to Class B shares, and $1.00 was charged
to the Insured Series, with respect to Class B shares, under the
Distribution Plan.
Shareholder Services Plan. The Fund has adopted a Shareholder
Services Plan, pursuant to which the Fund pays Service Agents for the
provision of certain services to the holders of Class A and Class B shares.
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 Directors for their review. In addition, the
Shareholder Services Plan provides that it may not be amended without
approval of the Board of Directors, and by the Directors who are neither
"interested persons" (as defined in the Act) of the Fund 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 Directors 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 October 1, 1993.
The Shareholder Services Plan is terminable at any time by vote of a
majority of the Directors 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.
For the period from February 8, 1994 (effective date of the
Shareholder Services Plan) through February 28, 1994, $4,122 was charged to
the Intermediate Series, with respect to Class A shares, and approximately
$1,272 was charged to the Insured Series, with respect to Class A shares,
under the Shareholder Services Plan, but these amounts were not paid
pursuant to various undertakings in effect. No amounts were charged to the
Intermediate and Insured Series, with respect to Class B shares.
Prior Rule 12b-1 Plan. As of February 8, 1994, the Fund terminated
its then existing Rule 12b-1 plan, which provided for payments to be made
to Service Agents for advertising, marketing and/or distributing Class A
shares and servicing holders of Class A shares. For the period from March
1, 1993 through February 8, 1994, no payments were made under the prior
Rule 12b-1 plan by either Series pursuant to various undertakings in
effect.
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--Class A. 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 Class A 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
reasonably believed by the Transfer Agent to be genuine. Ordinarily, the
Fund will initiate payment for shares redeemed pursuant to this Privilege
on the next business day after receipt by the Transfer Agent of a
redemption request in proper form. 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 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 transmissions:
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 "Stock Certificates; 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."
Stock Certificates; Signatures. Any certificate representing Series'
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also 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. 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
the 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 Directors 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 Series to the
detriment of the existing shareholders. In such 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 Class A or Class B
of a Series, shares of the same Class of the other Series, shares of the
same Class of certain other funds advised by the Adviser or shares of the
same Class of certain funds advised by the Administrator, on the basis of
relative net asset value per share at the time of the exchange as follows:
A. Class A shares of funds purchased without a sales load may be
exchanged for Class A shares of other funds sold with a sales
load, and the applicable sales load will be deducted.
B. Class A shares of funds purchased with or without a sales load
may be exchanged without a sales load for Class A shares of other
funds sold without a sales load.
C. Class A shares of funds purchased with a sales load, Class A
shares of funds acquired by a previous exchange from Class A
shares purchased with a sales load, and additional Class A shares
acquired through reinvestment of dividends or distributions of
any such funds (collectively referred to herein as "Purchased
Shares") may be exchanged for Class A 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. Class B shares of any fund may be exchanged for Class B shares of
other funds without a sales load. Class B shares of any fund
exchanged for Class B shares of another fund will be subject to
the higher applicable contingent deferred sales charge ("CDSC")
of the two funds and, for purposes of calculating CDSC rates and
conversion periods, will be deemed to have been held since the
date the Class B shares being exchanged were initially purchased.
To accomplish an exchange under item C above, an investor's Service
Agent must notify the Transfer Agent of the investor's prior ownership of
such Class A shares and the investor's 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. Shares issued in certificate form
are not eligible for telephone exchanges.
Auto-Exchange Privilege. The Auto-Exchange Privilege permits an
investor to purchase, in exchange for Class A or Class B shares of the
Series, shares of the same Class of the other Series or certain other funds
in the First Prairie Family of Funds or certain funds advised by the
Administrator. 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 legally may 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.
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 Adviser,
certain affiliates of the Adviser or certain Service Agents. Automatic
Withdrawal may be terminated at any time by the investor, the Fund or the
Transfer Agent. Shares for which stock certificates have been issued may
not be redeemed through the Automatic Withdrawal Plan. Class B shares
withdrawn pursuant to the Automatic Withdrawal Plan will be subject to any
applicable CDSC.
Dividend Sweep. Dividend Sweep allows investors to invest on the
payment date their dividends or dividends and capital gains distributions,
if any, from a Series in shares of the same Class of the other Series or
another fund in the First Prairie Family of Funds or certain funds advised
or administered by the Administrator of which the investor is a
shareholder. Shares of the same Class 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 with respect to Class A shares
by a fund may be invested without imposition of a sales load in
Class A shares of other funds that are offered without a sales
load.
B. Dividends and distributions paid with respect to Class A shares
by a fund which does not charge a sales load may be invested in
Class A shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Dividends and distributions paid with respect to Class A shares
by a fund which charges a sales load may be invested in Class A
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 with respect to Class B shares
by a fund may be invested without imposition of any applicable
CDSC in Class B shares of other funds and the Class B shares of
such other funds will be subject on redemption to any applicable
CDSC.
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."
Valuation of Portfolio Securities. Each Series' investments are
valued by an independent pricing service (the "Service") approved by the
Board of Directors. 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). Other investments (which
constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service, based on methods which include
consideration of: yields or prices of municipal bonds of comparable
quality, coupon, maturity and type; indications as to values from dealers;
and general market conditions. The Service may employ electronic data
processing techniques and/or a matrix system to determine valuations. The
Service's procedures are reviewed by the Fund's officers under the general
supervision of the Board of Directors. Expenses and fees of each Series,
including the investment advisory and administration fees (reduced by the
expense limitation, if any) and expenses under the Shareholder Services
Plan with respect to Class A and Class B shares, and fees pursuant to the
Distribution Plan, with respect to Class B shares only, are accrued daily
and taken into account for the purpose of determining the net asset value
of each Series' shares. Because of the difference in operating expenses
incurred by each Class, the per share net asset value of each Class will
differ.
Subject to guidelines established by the Fund's Board of Directors,
the Adviser intends to retain in the Insured Series' portfolio Municipal
Obligations which are insured under the Mutual Fund Insurance policy and
which are in default or in significant risk of default in the payment of
principal or interest until the default has been cured or the principal and
interest are paid by the issuer or the insurer. In establishing fair value
for these securities the Board of Directors will give recognition to the
value of the insurance feature as well as the market value of the
securities. Absent any unusual or unforeseen circumstances, the Adviser
will recommend valuing these securities at the same price as similar
securities of a minimum investment grade (i.e., rated Baa by Moody's or BBB
by S&P, Fitch or Duff).
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
Portfolio securities ordinarily are purchased from and sold to parties
acting as either principal or agent. Newly-issued securities are purchased
directly from the issuer or from an underwriter; other purchases and sales
usually are placed with those dealers from which it appears that the best
price or execution will be obtained. Ordinarily, no brokerage commissions,
as such, are paid by the Fund for such purchases and sales, although the
price paid usually includes an undisclosed compensation to the dealer
acting as agent. The prices paid to underwriters of newly-issued
securities usually include a concession paid by the issuer to the
underwriter, and purchases of after-market securities from dealers
ordinarily are executed at a price 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 Adviser 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 Adviser in advising other funds
or accounts it may advise and, conversely, research services furnished to
the Adviser by brokers in connection with other funds or accounts the
Adviser may advise may be used by the Adviser in advising the Fund.
Although it is not possible to place a dollar value on these services, it
is the opinion of the Adviser that the receipt and study of such services
should not reduce its overall research expenses.
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."
The Code provides that if a shareholder has not held his shares of a
Series for more than six months (or such shorter period as the Internal
Revenue Service may prescribe by regulation) and has received an
exempt-interest dividend with respect to such shares, any loss incurred on
the sale of such shares will be disallowed to the extent of the
exempt-interest dividend received. In addition, any dividend or
distribution paid shortly after an investor's purchase may have the effect
of reducing the net asset value of his shares below the cost of his
investment. Such a distribution would be a return on the investment in an
economic sense although taxable as stated in "Dividends, Distributions and
Taxes" in the Prospectus.
Under Section 1256 of the Code, gain or loss a Series realizes from
certain futures and options transactions 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 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 a Series' taxable year will be treated
as sold for their then fair market value, resulting in additional gain or
loss to the Series characterized in the manner described above.
Ordinarily, gains and losses realized from portfolio transactions will
be headed 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. In addition,
all or a portion of the gain realized from engaging in "conversion
transactions" may be treated as ordinary income under Section 1258.
"Conversion transactions" are defined to include certain option and
straddle transactions, transactions marketed or sold to produce capital
gains, or transactions described in Treasury regulations to be issued in
the future.
Offsetting positions held by a Series involving certain futures and
options transactions 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 Section 1256. As such, all or a portion of any short or
long-term capital gain from certain "straddle" and/or conversion
transactions may be recharacterized to ordinary income.
If a Series were treated as entering into "straddles" by reason of its
futures and options transactions, such "straddles" would be characterized
as "mixed straddles" if the futures or options transactions comprising a
part of such "straddles" were governed by Section 1256 of the Code. A
Series may make one or more elections with respect to "mixed straddles."
If no election is made, to the extent the "straddle" and conversion
transaction rules apply to positions established by the Series, losses
realized by the Series will be deferred to the extent of unrealized gain in
the offsetting position. Moreover, as a result of the "straddle" rules,
short-term capital losses on "straddle" positions may be recharacterized as
long-term capital loss, and long-term capital gain may be treated as
short-term capital gain or ordinary income.
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Performance
Information."
The offering of Class B shares commenced on February 8, 1994 and,
accordingly, only limited performance data are available for Class B.
The Intermediate Series' current yield for Class A for the 30-day
period ended February 28, 1994 was 3.98%, which reflects the absorption of
certain expenses by the Adviser and Administrator and/or a waiver of the
advisory and administration fees, without which the Intermediate Series'
yield for the 30-day period ended February 28, 1994 would have been 3.10%.
The Insured Series' current yield for Class A for such period was 4.40%,
which reflects the absorption of certain expenses by the Adviser and
Administrator and/or a waiver of the advisory and administration fees,
without which the Insured Series' yield for the 30-day period ended
February 28, 1994 would have been 3.03%. Current yield is computed
pursuant to a formula which operates as follows: The amount of the Series'
expenses accrued for the 30-day period (net of reimbursements) is
subtracted from the amount of the dividends and interest earned (computed
in accordance with regulatory requirements) by the Series 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 maximum offering price per share in the case
of Class A or the net asset value per share in the case of Class B 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.
Based upon a 1994 Federal income tax rate of 39.6%, the Intermediate
Series' tax equivalent yield for Class A for the 30-day period ended
February 28, 1994 was 6.59%, which reflects the absorption of certain
expenses by the Adviser and Administrator and/or a waiver of the advisory
and administration fees, without which the Intermediate Series' yield for
the 30-day period ended February 28, 1994 would have been 5.13%. Based
upon such tax rate, the Insured Series' tax equivalent yield for Class A
for such period was 7.28%, which reflects the absorption of certain
expenses by the Adviser and Administrator and/or a waiver of the advisory
and administration fees, without which the Insured Series' tax equivalent
yield for Class A for the 30-day period ended February 28, 1994 would have
been 5.02%. See "Management of the Fund" in the Prospectus. Tax
equivalent yield is computed by dividing that portion of the current yield
(calculated as described above) which is tax exempt by 1 minus a stated tax
rate and adding the quotient to that portion, if any, of the yield of the
Series that is not tax exempt.
The tax equivalent yields noted above represent the application of the
highest Federal marginal personal income tax rate presently in effect. The
tax equivalent yield figures, however, do not reflect the potential effect
of any state or local (including, but not limited to, county, district or
city) taxes, including applicable surcharges. In addition, there may be
pending legislation which could affect such stated tax rate or yields.
Each investor should consult its tax adviser, and consider its own factual
circumstances and applicable tax laws, in order to ascertain the relevant
tax equivalent yield.
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"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result. A Class's
average annual total return figures calculated in accordance with such
formula assume that in the case of Class A the maximum sales load had been
deducted from the hypothetical initial investment at the time of purchase
or in the case of Class B the maximum applicable CDSC has been paid upon
redemption at the end of the period. The Intermediate Series' average
annual total return for Class A for the 1, 5 and 6 year periods ended
February 28, 1994 was 1.76%, 8.31% and 8.06%, respectively. Average annual
total return of the Insured Series (which operated as the Long-Term Series
until September 12, 1989) for Class A for such periods was -.94%, 8.55% and
8.27%, respectively. Class B shares were first offered for sale on
February 8, 1994 and, therefore, no relevant average annual total return
data for the fiscal year ended February 28, 1994 was available for Class B.
Total return is calculated by subtracting the amount of the applicable
Series' maximum offering price per share in the case of Class A or the net
asset value per share in the case of Class B 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 maximum offering price per share in
the case of Class A or the net asset value per share in the case of Class B
at the beginning of the period. Total return also may be calculated based
on 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. In such cases, the calculation would not
reflect the deduction of the sales load with respect to Class A shares or
any applicable CDSC with respect to Class B shares, which, if reflected,
would reduce the performance quoted.
The Intermediate Series' total return for Class A for the period March
1, 1988 (commencement of operations) to February 28, 1994, based on maximum
offering price per share, was 59.23%. Based on net asset value per share,
the Intermediate Series' total return for Class A was 64.09% for this
period. The total return for the period February 8, 1994 (commencement of
initial offering of Class B shares) through February 28, 1994 for Class B
of the Intermediate Series, after giving effect to the maximum applicable
CDSC, was -3.90%, without giving effect to the maximum applicable CDSC the
total return for Class B was -.93% for this period. Total return of the
Insured Series (which operated as the Long-Term Series until September 12,
1989) for Class A for the period March 1, 1988 (commencement of operations)
to February 28, 1994, based upon maximum offering price per share, was
61.08%. Based on net asset value per share, the Insured Series' total
return for Class A was 68.63% for this period. The total return for the
period February 8, 1994 (commencement of initial offering of Class B
shares) through February 28, 1994 for Class B of the Insured Series, after
giving effect to the maximum applicable CDSC, was -4.58% without giving
effect to the maximum applicable CDSC the total return for Class B was
- -1.64% for this period.
The performance figures set forth above for the Intermediate Series
for periods prior to July 1, 1992 reflect such Series' management policy at
the time to invest in Municipal Obligations rated A or better by Moody's or
S&P. The Intermediate Series currently must invest in Municipal
Obligations rated at least Baa by Moody's or BBB by S&P, Fitch or Duff.
From time to time, the Fund may use hypothetical tax equivalent yields
or charts in its advertising. These hypothetical yields or charts will be
used for illustrative purposes only and are not indicative of a Series'
past or future performance.
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 Fund can be used to help pay for such costs. Advertisements for the
Fund also may refer to comparisons of a Series' performance with historical
rates of inflation or may describe how an investment in the Fund may be
used to fund retirement costs or other economic goals. From time to time
advertising materials for the Fund also may refer to Morningstar ratings
and related analyses supporting the rating.
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 or subscription 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 June 14, 1989, shareholders of the Fund approved a proposal to
change the Fund's name from First Lakeshore Tax Exempt Bond Fund, Inc. to
First Prairie Tax Exempt Bond Fund, Inc. On August 1, 1989, shareholders
of the Insured Series (then the Long-Term Series) approved a proposal to
change such Series' name to the Insured Series. Effective February 8,
1994, the Fund began operating under the assumed name First Prairie
Municipal Bond 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
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 Common Stock 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 S&P, Moody's, Fitch and Duff ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the
issuer or obtained by S&P from other sources it considers reliable, and
will include: (1) likelihood of default-capacity and willingness of the
obligor as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation; (2) nature and provisions of
the obligation; and (3) protection afforded by, and relative position of,
the obligation in the event of bankruptcy, reorganization or other
arrangement under the laws of bankruptcy and other laws affecting
creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in a small
degree.
A
Principal and interest payments on bonds in this category are
regarded as safe. This rating describes the third strongest capacity for
payment of debt service. It differs from the two higher ratings because:
General Obligation Bonds -- There is some weakness in the local
economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse
circumstances, any one such weakness might impair the ability of the issuer
to meet debt obligations at some future date.
Revenue Bonds -- Debt service coverage is good, but not
exceptional. Stability of the pledged revenues could show some variations
because of increased competition or economic influences on revenues. Basic
security provisions, while satisfactory, are less stringent. Management
performance appears adequate.
BBB
Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse conditions,
several of the above factors could contribute to a lesser capacity for
payment of debt service. The difference between "A" and "BBB" rating is
that the latter shows more than one fundamental weakness, or one very
substantial fundamental weakness, whereas the former shows only one
deficiency among the factors considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the
pledged revenues could show substantial variations, with the revenue flow
possibly being subject to erosion over time. Basic security provisions are
no more than adequate. Management performance could be stronger.
Plus (+) or minus (-): The ratings from AA to BBB may be
modified by the addition of a plus or minus designation to show relative
standing within the major ratings categories.
Municipal Note Ratings
SP-1
The issuers of these municipal notes exhibit very strong or
strong capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given a plus sign (+)
designation.
SP-2
The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest.
Commercial Paper Ratings
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. Issues assigned an A rating are regarded as having the
greatest capacity for timely payment. Issues in this category are
delineated with the numbers 1, 2 and 3 to indicate the relative degree of
safety.
A-1
This designation 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.
A-2
Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for
issues designated A-1.
Moody's
Municipal 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
some time 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.
Moody's applies the numerical modifiers 1, 2 and 3 to show
relative standing within the major rating categories, except in the Aaa
category. 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.
Municipal Note Ratings
Moody's ratings for state and municipal notes and other
short-term loans are designated Moody's Investment Grade (MIG). Such
ratings recognize the differences between short-term credit risk and
long-term risk. Factors affecting the liquidity of the borrower and
short-term cyclical elements are critical in short-term ratings, while
other factors of major importance in bond risk, long-term secular trends
for example, may be less important over the short run.
A short-term rating may also be assigned on an issue having a
demand feature. Such ratings will be designated as VMIG or, if the demand
feature is not rated, as NR.
Short-term ratings on issues with demand features are
differentiated by the use of the VMIG symbol to reflect such
characteristics as payment upon periodic demand rather than fixed maturity
dates and payment relying on external liquidity. Additionally, investors
should be alert to the fact that the source of payment may be limited to
the external liquidity with no or limited legal recourse to the issuer in
the event the demand is not met.
Moody's short-term ratings are designated Moody's Investment
Grade as MIG 1 or VMIG 1 through MIG 4 or VMIG 4. As the name implies,
when Moody's assigns a MIG or VMIG rating, all categories define an
investment grade situation.
MIG 1/VMIG 1
This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2
This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
Commercial Paper Ratings
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.
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 affect 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.
Plus (+) and minus (-) signs are used with a rating symbol to
indicate the relative position of a credit within the rating category.
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+.
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.
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.
FIRST PRAIRIE MUNICIPAL BOND FUND, INTERMEDIATE SERIES
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS FEBRUARY 28, 1994
PRINCIPAL
MUNICIPAL BONDS-78.0% AMOUNT VALUE
----------- -----------
<S> <C> <C>
ALASKA-3.3%
Alaska Student Loan Corp., Student Loan Revenue
5.50%, 7/1/2004 (Insured; AMBAC).................................................... $ 1,000,000 $ 1,013,030
ARIZONA-.9%
University of Arizona, University Revenues 6.75%, 6/1/2001.............................. 250,000 280,370
CALIFORNIA-4.0%
Fresno, Health Facility Revenue, Refunding (Holy Cross Health System Corp.):
4.875%, 12/1/2001................................................................... 575,000 582,182
5.10%, 12/1/2003.................................................................... 635,000 647,668
COLORADO-1.7%
Denver City and County, Airport Systems Subordinated Revenue
6.35%, 12/1/1994 (LOC; Sumitomo Trust and Banking Co., Ltd.) (a).................... 500,000 512,625
ILLINOIS-14.4%
Chicago O'Hare International Airport, Revenue, Refunding (General Second Lien)
5.20%, 1/1/2002 (Insured; MBIA)..................................................... 1,000,000 1,014,710
Illinois Health Facilities Authority, Improvement Revenue, Refunding:
(Illinois Masonic Medical Center) 4.90%, 10/1/2000.................................. 825,000 823,119
(Swedish Covenant) 6.10%, 8/1/2008.................................................. 1,000,000 1,021,220
Metropolitan Pier and Exposition Authority, Dedicated State Tax Revenue:
6.125%, 6/1/2000.................................................................... 500,000 534,565
6.50%, 6/15/2027.................................................................... 1,000,000 1,047,170
INDIANA-5.1%
Indiana Bond Bank, Revenue (Revolving Fund Program) 5.80%, 2/1/2002..................... 500,000 523,305
Indiana Health Facility Financing Authority, HR, Refunding
(Floyd Memorial Hospital Project) 6.625%, 2/15/2022................................. 1,000,000 1,064,010
IOWA-.3%
Iowa School Corps., Warrants Certificates 3.60%, 12/30/1994 (Insured; CGIC)............. 100,000 100,490
MICHIGAN-3.0%
Michigan Hospital Finance Authority, Revenue, Refunding (McLaren Obligation Group)
2.75%, 10/15/1994................................................................... 925,000 920,616
MINNESOTA-4.1%
Minneapolis and Saint Paul Metropolitan Airports Commission 5%, 1/1/1996................ 1,250,000 1,274,363
NEVADA-2.4%
City of Las Vegas, Refunding 6.20%, 10/1/2001........................................... 500,000 540,110
Nevada Housing Division (Single Family Program) 7.20%, 10/1/1998........................ 200,000 212,254
NEW MEXICO-.7%
New Mexico Educational Assistance Foundation, Student Loan Revenue 3.20%, 12/1/1994..... 200,000 200,246
NORTH DAKOTA-.3%
State of North Dakota, Student Loan Revenue 7.40%, 1/1/1998 (Insured; AMBAC)............ 70,000 76,901
OHIO-8.0%
Franklin County, HR, Refunding (Riverside United Methodist):
5.10%, 5/15/2000.................................................................... 780,000 795,740
5.20%, 5/15/2001.................................................................... 435,000 445,736
Ohio Public Facilities Commission (Higher Education Capital Facilities) 5.30%, 12/1/1997 1,180,000 1,229,194
FIRST PRAIRIE MUNICIPAL BOND FUND, INTERMEDIATE SERIES
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1994
PRINCIPAL
MUNICIPAL BONDS (CONTINUED) AMOUNT VALUE
----------- -----------
PENNSYLVANIA-7.0%
Philadelphia, Gas Works Revenue:
4.90%, 8/1/2002..................................................................... $ 1,200,000 $ 1,172,256
5.10%, 8/1/2004..................................................................... 1,000,000 971,020
TEXAS-3.6%
Brazos River Authority, PCR (Texas Utilities-Electric) 8.25%, 12/1/2016 (Insured; FGIC). 500,000 556,500
Texas Housing Agency, SFMR 7.35%, 3/1/1998.............................................. 50,000 52,318
Weslaco Health Facilities Development Corp., HR (Knapp Medical Center Project)
4.70%, 6/1/2002..................................................................... 500,000 492,650
UTAH-6.8%
Intermountain Power Agency, Special Obligation (5th Crossover) 7%, 7/1/2015 (Insured; FGIC) 1,775,000 1,958,038
Utah Building Ownership Authority, LR (Department Employment Security Project)
7.50%, 8/15/2003 (Prerefunded 8/15/1998)(b)......................................... 100,000 112,869
Utah Housing Finance Agency, Single Family Mortgage 7.70%, 1/1/1998..................... 25,000 25,894
WASHINGTON-3.4%
Snohomish County Public Utility District No. 001, Electric Revenue (Generation System)
5.25%, 1/1/2004..................................................................... 1,050,000 1,044,341
WISCONSIN-9.0%
State of Wisconsin, Transportation Revenue 5.30%, 7/1/1995.............................. 500,000 513,325
Wisconsin Health and Educational Facilities Authority, Revenue
(Milwaukee Regional Medical Center, Inc. Project) 6.50%, 8/1/2013 (Insured; AMBAC) 2,000,000 2,132,020
Wisconsin Housing and Economic Development Authority, Homeownership Revenue:
7.50%, 9/1/1997..................................................................... 50,000 51,545
7.70%, 9/1/1998..................................................................... 75,000 77,057
-----------
TOTAL MUNICIPAL BONDS (cost $23,806,385)................................................ $24,019,457
===========
SHORT-TERM MUNICIPAL INVESTMENTS-22.0%
ARKANSAS-.8%
Magnolia, IDR, VRDN (American Fuel Cell) 2.55% (LOC; Barclays Bank)(a,c)................ $ 250,000 $ 250,000
MINNESOTA-13.0%
Osseo Independent School District No. 279, Revenue:
2.90%, 5/1/1994..................................................................... 1,000,000 1,000,000
2.93%, 5/1/1994..................................................................... 3,000,000 3,000,000
NEW YORK-.3%
New York City, GO, VRDN 2.30% (Line of Credit; FGIC)(c)................................. 100,000 100,000
NORTH CAROLINA-4.2%
Person County Industrial Facilities and Pollution Control Financing Authority, SWDR, VRDN
(Carolina P&L) 2.30% (LOC; Fuji Bank)(a,c).......................................... 1,300,000 1,300,000
TEXAS-3.4%
Panhandle-Plains Higher Education Authority, Student Loan Revenue, Refunding 2.90%, 9/1/1994 1,040,000 1,038,419
WASHINGTON-.3%
Pierce County Economic Development Corp., Industrial Revenue, VRDN
(Northwest Banking Project) 2.55% (LOC; Barclays Bank)(a,b)......................... 100,000 100,000
-----------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $6,790,000)................................ $ 6,788,419
===========
TOTAL INVESTMENTS-100.0% (cost $30,596,385)............................................. $30,807,876
===========
FIRST PRAIRIE MUNICIPAL BOND FUND, INSURED SERIES
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1994
PRINCIPAL
MUNICIPAL BONDS-90.7% AMOUNT VALUE
----------- -----------
DISTRICT OF COLUMBIA-2.4%
District of Columbia 7.25%, 6/1/2002 (Prerefunded 6/1/1999) (Insured; AMBAC)(b)......... $ 200,000 $ 228,644
FLORIDA-3.3%
Jacksonville, Guaranteed Entitlement Revenue, Refunding 5.60%, 10/1/2003 (Insured; AMBAC) 300,000 316,491
ILLINOIS-7.1%
Hoffman Estates, Refunding 5.30%, 12/1/2004 (Insured; MBIA)............................. 250,000 253,785
Northern Cook County Solid Waste Agency, Contract Revenue
6.40%, 5/1/2006 (Insured; MBIA)..................................................... 400,000 433,116
IOWA-4.8%
Iowa School Corp., Warrants Certificates 3.60%, 12/30/1994 (Insured; CGIC).............. 150,000 150,735
Muscatine, Electric Revenue, Refunding 5.50%, 1/1/2001 (Insured; AMBAC)................. 300,000 312,279
KENTUCKY-3.7%
Jefferson County Health Facilities, Revenue (Jewish Hospital Healthcare Services, Inc.)
6.55%, 5/1/2022 (Insured; AMBAC).................................................... 325,000 352,485
LOUISIANA-4.2%
Louisiana Public Facilities Authority, Special Insured Assessment Revenue, Refunding
3.45%, 4/1/1995 (Insured; FSA)...................................................... 400,000 400,416
MINNESOTA-3.2%
Minneapolis and Saint Paul Metropolitan Airports Commission 5%, 1/1/1996................ 300,000 305,847
NEVADA-7.1%
Clark County, Passenger Facility Charge Revenue (Las Vegas McCarran International Airport)
5.80%, 7/1/2003 (Insured; AMBAC).................................................... 300,000 318,405
Henderson Sewer 7.20%, 1/1/2007 (Insured; MBIA)......................................... 325,000 361,686
OHIO-4.3%
Ohio Public Facilities Commission, Higher Education Capital Facilities
5.30%, 12/1/1997 (Insured; FSA)..................................................... 400,000 416,676
PENNSYLVANIA-15.3%
Philadelphia, Gas Works Revenue:
5%, 8/1/2003........................................................................ 315,000 307,242
5.10%, 8/1/2004..................................................................... 1,200,000 1,165,224
SOUTH CAROLINA-21.7%
Piedmont Municipal Power Agency, Electric Revenue, Refunding 6.30%, 1/1/2022 (Insured; MBIA) 1,000,000 1,040,540
South Carolina Public Service Authority, Electric System Expansion Revenue, Refunding
7%, 7/1/2022 (Insured; AMBAC)....................................................... 1,000,000 1,045,990
TEXAS-2.7%
Houston, Water and Sewer System Revenue, Refunding 5.75%, 12/1/2003 (Insured; MBIA)..... 250,000 264,317
WASHINGTON-10.9%
Seattle Municipality Metropolitan, Sewer Revenue 6.30%, 1/1/2033 (Insured; MBIA)........ 1,000,000 1,048,750
-----------
TOTAL MUNICIPAL BONDS (cost $8,715,167)................................................. $ 8,722,628
===========
SHORT-TERM MUNICIPAL INVESTMENTS-9.3%
IOWA-1.1%
Des Moines Methodist System, Inc., Hospital Facility Revenue, VRDN
(Iowa Methodist Medical Center Project) 2.40% (LOC; Fuji Bank)(a,c)................. $ 100,000 $ 100,000
FIRST PRAIRIE MUNICIPAL BOND FUND, INSURED SERIES
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1994
PRINCIPAL
SHORT-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
----------- -----------
NEW YORK-3.1%
New York State Energy Research and Development Authority, PCR, VRDN
(Niagara Mohawk Power) 2.35% (LOC; Toronto-Dominion Bank)(a,c)...................... $ 300,000 $ 300,000
WASHINGTON-5.1%
Pierce County Economic Development Corp., Industrial Revenue, VRDN (Northwest Banking Project)
2.55% (LOC; Toronto Dominion Bank)(a,c)............................................. 160,000 160,000
Washington Community Economic Revitalization Board, Economic Revenue, VRDN
2.55% (LOC; Industrial Bank of Japan)(a,c).......................................... 330,000 330,000
-----------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $890,000).................................. $ 890,000
===========
TOTAL INVESTMENTS-100.0% (cost $9,605,167).............................................. $ 9,612,628
===========
</TABLE>
<TABLE>
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation LOC Letter of Credit
CGIC Capital Guaranty Insurance Company LR Lease Revenue
FGIC Financial Guaranty Insurance Corporation MBIA Municipal Bond Insurance Association
FSA Financial Security Assurance PCR Pollution Control Revenue
GO General Obligation SFMR Single Family Mortgage Revenue
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
IDR Industrial Development Revenue VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
PERCENTAGE OF VALUE
--------------------
STANDARD INTERMEDIATE INSURED
FITCH(D) OR MOODY'S OR & POOR'S SERIES SERIES
- -------- ------- -------- ------------ -------
<S> <C> <C> <C> <C>
AAA Aaa AAA 33.1% 75.4%
AA Aa AA 24.9 -
A A A 29.4 -
BBB Baa BBB 6.9 15.3
F1 MIG1 & VMIG1 SP1 .7 2.7
F1(e) P1(e) A1(e) 5.0 6.6
------ ------
100.0% 100.0%
====== ======
</TABLE>
NOTES TO STATEMENTS OF INVESTMENTS:
(a) Secured by bank letters of credit.
(b) Bonds which are prerefunded are collateralized by U.S. Government securities
which are held in escrow and are used to pay principal and interest on the
tax-exempt issue and to retire the bonds in full at the earliest refunding
date.
(c) Securities payable on demand. The interest rate, which is subject to change
is based upon bank prime rates or an index of market interest rates.
(d) Fitch currently provides creditworthiness information for a limited amount
of investments.
(e) The ratings F1, P1, and A1 are the highest ratings assigned tax exempt
commercial paper by Fitch, Moody's and Standard & Poor's, respectively.
(f) At February 28, 1994, 35.4% of the Insured Series' investments are insured
by MBIA and 26.8% are insured by AMBAC.
See notes to financial statements.
FIRST PRAIRIE MUNICIPAL BOND FUND
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1994
INTERMEDIATE INSURED
ASSETS: SERIES SERIES
----------- -----------
<S> <C> <C>
Investments in securities, at value
(cost $30,596,385 and $9,605,167, respectively)-see statement................... $30,807,876 $ 9,612,628
Cash................................................................................ -- 34,655
Receivable for investment securities sold........................................... 991,427 1,022,427
Interest receivable................................................................. 287,640 103,713
Receivable for subscriptions to Common Stock........................................ 10,000 -
Prepaid expenses.................................................................... 10,101 6,257
Due from Administrator.............................................................. 104,059 60,398
----------- -----------
32,211,103 10,840,078
----------- -----------
LIABILITIES:
Payable for investment securities purchased......................................... 2,208,788 1,584,160
Payable for Common Stock redeemed................................................... 1,113,453 -
Accrued expenses and other liabilities.............................................. 50,503 19,783
----------- -----------
3,372,744 1,603,943
----------- -----------
NET ASSETS.............................................................................. $28,838,359 $ 9,236,135
=========== ===========
REPRESENTED BY:
Paid-in capital..................................................................... $28,564,872 $ 9,235,292
Accumulated undistributed net realized gain on investments.......................... 61,996 -
Accumulated distributions in excess of net realized gain on investments-Note 1(d)... - (6,618)
Accumulated net unrealized appreciation on investments-Note 3....................... 211,491 7,461
----------- -----------
NET ASSETS at value..................................................................... $28,838,359 $ 9,236,135
=========== ===========
Shares of Common Stock outstanding:
Class A Shares:
(2.5 billion shares of $.001 par value authorized).............................. 2,365,884
===========
(2.5 billion shares of $.001 par value authorized).............................. 761,127
===========
Class B Shares:
(2.5 billion shares of $.001 par value authorized).............................. 981
===========
(2.5 billion shares of $.001 par value authorized).............................. 162
===========
NET ASSET VALUE per share:
Class A Shares:
($28,826,406 / 2,365,884 shares)................................................ $12.18
======
($9,234,168 / 761,127 shares)................................................... $12.13
======
Class B Shares:
($11,953 / 981 shares).......................................................... $12.18
======
($1,967 / 162 shares)........................................................... $12.14
======
See notes to financial statements.
</TABLE>
<TABLE>
FIRST PRAIRIE MUNICIPAL BOND FUND
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
S0TATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1994
INTERMEDIATE INSURED
SERIES SERIES
----------- -----------
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME..................................................................... $ 1,411,868 $ 497,242
----------- -----------
EXPENSES-Note 1(c):
Investment advisory fee-Note 2(a)............................................... $ 116,711 $ 40,987
Administration fee-Note 2(a).................................................... 58,356 20,494
Shareholder servicing costs-Note 2(b,c)......................................... 89,165 35,683
Auditing fees................................................................... 25,765 6,932
Legal fees...................................................................... 25,719 8,335
Prospectus and shareholders' reports-Note 2(b).................................. 13,664 7,974
Registration fees............................................................... 12,239 12,769
Custodian fees.................................................................. 9,701 4,436
Directors' fees and expenses-Note 2(d).......................................... 4,414 1,443
Distribution fees (Class B Shares)-Note 2(b).................................... 1 1
Miscellaneous................................................................... 13,353 8,444
----------- -----------
369,088 147,498
Less-expense reimbursement from Adviser and
Administrator due to undertakings-Note 2(a)................................. 352,071 147,497
----------- -----------
TOTAL EXPENSES.......................................................... 17,017 1
----------- -----------
INVESTMENT INCOME-NET................................................... 1,394,851 497,241
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments-Note 3............................................. $ 1,275,347 $ 607,250
Net unrealized (depreciation) on investments........................................ (1,243,092) (728,931)
----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.................. 32,255 (121,681)
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................................... $ 1,427,106 $ 375,560
=========== ===========
</TABLE>
See notes to financial statements.
FIRST PRAIRIE MUNICIPAL BOND FUND
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
INTERMEDIATE SERIES
--------------------------
YEAR ENDED FEBRUARY 28,
--------------------------
1993 1994
----------- -----------
<S> <C> <C>
OPERATIONS:
Investment income-net............................................................... $ 1,174,284 $ 1,394,851
Net realized gain on investments.................................................... 302,855 1,275,347
Net unrealized appreciation (depreciation) on investments for the year.............. 1,086,267 (1,243,092)
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ 2,563,406 1,427,106
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares.................................................................. (1,174,284) (1,394,847)
Class B shares.................................................................. - (4)
----------- -----------
Net realized gain on investments:
Class A shares.................................................................. (251,807) (1,471,722)
Class B shares.................................................................. - -
----------- -----------
TOTAL DIVIDENDS............................................................. (1,426,091) (2,866,573)
----------- -----------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold:
Class A shares.................................................................. 12,024,536 6,634,160
Class B shares.................................................................. - 12,000
Dividends reinvested:
Class A shares.................................................................. 952,307 1,972,927
Class B shares.................................................................. - 4
Cost of shares redeemed:
Class A shares.................................................................. (4,539,502) (6,226,132)
Class B shares.................................................................. - -
----------- -----------
INCREASE IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS...................... 8,437,341 2,392,959
----------- -----------
TOTAL INCREASE IN NET ASSETS............................................ 9,574,656 953,492
NET ASSETS:
Beginning of year................................................................... 18,310,211 27,884,867
----------- -----------
End of year......................................................................... $27,884,867 $28,838,359
=========== ===========
</TABLE>
<TABLE>
SHARES
----------------------------------------
CLASS A CLASS B
----------------------- ------------
YEAR ENDED FEBRUARY 28, YEAR ENDED
----------------------- FEBRUARY 28,
1993 1994 1994*
--------- --------- ---------
<S> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold........................................................ 976,152 523,996 980
Shares issued for dividends reinvested............................. 77,235 158,309 1
Shares redeemed.................................................... (367,959) (496,647) -
--------- --------- ---------
NET INCREASE IN SHARES OUTSTANDING......................... 685,428 185,658 981
========= ========= =========
</TABLE>
- ----------------------------
* From February 8, 1994 (commencement of initial offering) to February 28, 1994.
See notes to financial statements.
FIRST PRAIRIE MUNICIPAL BOND FUND
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE> INSURED SERIES
--------------------------
YEAR ENDED FEBRUARY 28,
--------------------------
1993 1994
----------- -----------
<S> <C> <C>
OPERATIONS:
Investment income-net............................................................... $ 474,329 $ 497,241
Net realized gain on investments.................................................... 249,775 607,250
Net unrealized appreciation (depreciation) on investments for the year.............. 556,530 (728,931)
----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ 1,280,634 375,560
----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Class A shares.................................................................. (474,329) (497,237)
Class B shares.................................................................. - (4)
----------- -----------
Net realized gain on investments:
Class A shares.................................................................. (172,263) (717,815)
Class B shares.................................................................. - -
----------- -----------
Excess net realized gain on investments:
Class A shares.................................................................. - (6,618)
Class B shares.................................................................. - -
----------- -----------
TOTAL DIVIDENDS............................................................. (646,592) (1,221,674)
----------- -----------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold:
Class A shares.................................................................. 6,253,771 3,586,206
Class B shares.................................................................. - 2,000
Dividends reinvested:
Class A shares.................................................................. 515,334 956,593
Class B shares.................................................................. - 4
Cost of shares redeemed:
Class A shares.................................................................. (2,704,291) (5,752,746)
Class B shares.................................................................. - -
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS........... 4,064,814 (1,207,943)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS................................. 4,698,856 (2,054,057)
NET ASSETS:
Beginning of year................................................................... 6,591,336 11,290,192
----------- -----------
End of year......................................................................... $11,290,192 $ 9,236,135
=========== ===========
SHARES
--------------
CLASS A CLASS B
------------------------ -----------
YEAR ENDED FEBRUARY 28, YEAR ENDED
------------------------ FEBRUARY 28,
1993 1994 1994*
--------- ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................ 496,701 275,363 161
Shares issued for dividends reinvested................................. 40,732 75,829 1
Shares redeemed........................................................ (213,167) (441,865) -
--------- ----------- -----------
NET INCREASE (DECREASE) IN SHARES OUTSTANDING.................. 324,266 (90,673) 162
============= =========== ===========
- --------------------------
* From February 8, 1994 (commencement of initial offering) to February 28, 1994.
</TABLE>
See notes to financial statements.
FIRST PRAIRIE MUNICIPAL BOND FUND, INTERMEDIATE SERIES
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
FINANCIAL HIGHLIGHTS
Reference is made to page 4 of the Prospectus dated June 27, 1994.
See notes to financial statements.
FIRST PRAIRIE MUNICIPAL BOND FUND, INSURED SERIES
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
FINANCIAL HIGHLIGHTS (CONTINUED)
Reference is made to page 5 of the Prospectus dated June 27, 1994.
See notes to financial statements.
FIRST PRAIRIE MUNICIPAL BOND FUND
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
The Fund is registered under the Investment Company Act of 1940
("Act") as a non-diversified open-end management investment company
and operates as a series company issuing two classes of Common Stock:
the Intermediate Series and the Insured Series. The Fund accounts
separately for the assets, liabilities and operations of each series. The
First National Bank of Chicago ("Adviser") serves as the Fund's
investment adviser. The Dreyfus Corporation ("Administrator") serves as
the Fund's administrator. Dreyfus Service Corporation ("Distributor"), a
wholly-owned subsidiary of the Administrator, acts as the distributor of
the Fund's shares.
Effective February 8, 1994, your Fund began operating under the name
First Prairie Municipal Bond Fund.
On December 29, 1993, shareholders approved an amendment to the Fund's
Articles of Incorporation to provide for the issuance of additional classes
of shares. On October 1, 1993, the Fund's Board of Directors classified the
Fund's existing shares as Class A shares and authorized the issuance of 5
billion shares of $.001 par value Class B shares for the Intermediate
Series and the Insured Series. The Fund began offering both Class A and
Class B shares on February 8, 1994 for the Intermediate Series and the
Insured Series. Class A shares are subject to a sales charge imposed at
the time of purchase and Class B shares are subject to a contingent
deferred sales charge imposed at the time of redemption on redemptions
made within five years of purchase. Other differences between the two
classes include the services offered to and the expenses borne by each
Class and certain voting rights.
(A) PORTFOLIO VALUATION: Each series' investments are valued each
business day by an independent pricing service ("Service") approved by the
Board of Directors. Investments for which quoted bid prices in the
judgment of the Service are readily available and are representative of
the bid side of the market are valued at the mean between the quoted bid
prices (as obtained by the Service from dealers in such securities) and
asked prices (as calculated by the Service based upon its evaluation of the
market for such securities). Other investments (which constitute a
majority of the portfolio securities) are carried at fair value as
determined by the Service, based on methods which include consideration
of: yields or prices of municipal securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general
market conditions.
(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, adjusted for amortization of premiums and, when
appropriate, discounts on investments, is earned from settlement date and
recognized on the accrual basis. Securities purchased or sold on a when-
issued or delayed-delivery basis may be settled a month or more after the
trade date.
(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 a net realized capital gain of either
series can be reduced by capital loss carryovers, if any, of that series,
such gain will not be distributed.
FIRST PRAIRIE MUNICIPAL BOND FUND
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Dividends in excess of net realized gains on investment for financial
statement purposes result primarily from losses from securities
transactions during the year ended February 28, 1994 which are treated
for Federal income tax purposes as arising in Fiscal 1995.
(E) FEDERAL INCOME TAXES: It is the policy of each series to continue to
qualify as a regulated investment company, which can distribute tax
exempt dividends, 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 income and net realized capital
gain sufficient to relieve it from all, or substantially all, Federal income
taxes. For Federal income tax purposes, each series is treated as a single
entity for the purpose of determining such qualification.
NOTE 2-INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER
TRANSACTIONS WITH AFFILIATES:
(A) Fees payable by the Fund pursuant to the provisions of an
Investment Advisory Agreement with the Adviser and an Administration
Agreement with the Administrator are payable monthly based on annual
rates of .40 of 1% and .20 of 1%, respectively, of the average daily value
of each series' net assets. The agreements further provide that if in any
full fiscal 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 Adviser and the
Administrator, or the Adviser and the Administrator will bear their
proportionate share of 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 fiscal 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 the California "blue
sky" regulations.
With respect to the Insured Series, the Adviser and the Administrator
had undertaken to reimburse all fees and expenses (excluding 12b-1 fee).
During the year ended February 28, 1994, the Adviser and the
Administrator reimbursed the series $40,987 and $106,510, respectively.
Pursuant to the undertakings, with respect to the Intermediate Series, the
adviser and the administrator had undertaken through November 21, 1993
to reimburse all fees and expenses of the series and thereafter, had
undertaken, from November 22, 1993 through December 29, 1993 to reduce
the advisory and the administration fee paid by, or reimburse such excess
expenses of the Series to the extent that the Series' aggregate expenses
(excluding certain expenses as described above) exceeded specified annual
percentages of the Series' average daily net assets. The Adviser and the
Administrator have currently undertaken from December 30, 1993 to
waive receipt of the Advisory fee and the Administration fee paid by the
Series in excess of an annual rate of .25 of 1% (excluding 12b-1 fee) of
the Series' average daily net assets. The Adviser and the Administrator
reimbursed the series $116,711 and $235,360, respectively.
First Chicago Investment Services, Inc. an affiliate of the Adviser,
retained $124,945 and $34,389 during the year ended February 28, 1994
from commissions earned on sales of Intermediate Series shares and
Insured Series shares, respectively.
The Distributor retained $10,274 and $2,251 during the year ended
February 28, 1994 from commissions earned on sales of Intermediate
Series shares and Insured Series shares, respectively.
FIRST PRAIRIE MUNICIPAL BOND FUND
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
No amounts were retained by the Distributor during the period ended
February 28, 1994 from contingent deferred sales charges imposed upon
redemptions of the Fund's Class B Shares for the Intermediate Series and
Insured Series.
(B) Under the Distribution Plan ("Class B Distribution Plan") adopted
pursuant to Rule 12b-1 under the Act, effective February 8, 1994, each
Series pays the Service Agents (which may include the Adviser, the
Administrator and the Distributor) at an annual rate of .50 of 1% of the
value of each Series' Class B shares average daily net assets, for the
costs and expenses in connection with advertising, marketing and
distributing each Series' Class B shares. Each Series may make payments
to one or more Service Agents (a securities dealer, financial institution,
or other industry professional) based on the value of each Series' Class B
shares owned by clients of the Service Agent.
Prior to February 8, 1994, each Series' Service Plan ("prior Service
Plan") provided that each Series pay the Service Agents (which may
include the Adviser, the Administrator and the Distributor), at an annual
rate of .25 of 1% of the value of each Series' average daily net assets, for
costs and expenses in connection with advertising, marketing and
distribution of each Series' shares and for servicing shareholder accounts.
Each Series made payments to one or more Service Agents based on the
value of each Series' shares owned by clients of the Service Agent. The
prior Service Plan also provided for each Series 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 fiscal year.
During the period ended February 28, 1994 $75,139 and $28,654 was
charged to the Intermediate Series and the Insured Series pursuant to the
prior Service plan and $1 and $1 was charged to the Intermediate Series
and the Insured Series pursuant to the Class B Distribution Plan.
(C) Under the Shareholder Services Plan, effective February 8, 1994,
each Series pays the Service Agents (which may include the Adviser, the
Administrator and the Distributor) an annual rate of .25 of 1% of the value
of the Series' average daily net assets of Class A and Class B shares for
servicing shareholder accounts. The services provided may include
personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding each Series and providing reports and
other information, and services related to the maintenance of shareholder
accounts. For the period ended February 28, 1994, $4,122 and $1,272 were
chargeable to the Intermediate Series and the Insured Series Class A and
Class B shares, respectively, pursuant to the Shareholder Services Plan,
but these amounts were not paid pursuant to the undertakings in effect
(see Note 2(a)).
(D) Certain officers and directors of the Fund are "affiliated persons,"
as defined in the Act, of the Adviser or the Administrator. Each director
who is not an "affiliated person" receives from the Fund an annual fee of
$1,500 and an attendance fee of $250 per meeting.
(E) On December 5, 1993, Dreyfus entered into an agreement and Plan of
Merger (the "Merger Agreement") 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 receipt of certain regulatory approvals
and approvals of the stockholders of Dreyfus and of Mellon. The merger is
expected to occur in mid-1994, but could occur later.
FIRST PRAIRIE MUNICIPAL BOND FUND
(INCORPORATED AS FIRST PRAIRIE TAX EXEMPT BOND FUND, INC.)-SEE NOTE 1
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3-SECURITIES TRANSACTIONS:
The following summarizes the securities transactions by the Fund,
which consisted entirely of municipal bonds and short-term tax exempt
investments, for the year ended February 28, 1994:
PURCHASES SALES
----------- -----------
Intermediate Series............ $88,155,866 $85,466,890
Insured Series................. $31,384,159 $32,589,954
At February 28, 1994, accumulated net unrealized appreciation on
investments was $211,491, consisting of $331,530 gross unrealized
appreciation and $120,039 gross unrealized depreciation for the
Intermediate Series.
At February 28, 1994, accumulated net unrealized appreciation on
investments was $7,461, consisting of $97,713 gross unrealized
appreciation and $90,252 gross unrealized depreciation for the Insured
Series.
At February 28, 1994, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
FIRST PRAIRIE MUNICIPAL BOND FUND
We have audited the accompanying statement of assets and liabilities,
including the statements of investments, of First Prairie Municipal Bond
Fund (comprising, respectively, the Intermediate Series and the Insured
Series) (formerly First Prairie Tax Exempt Bond Fund, Inc.) as of February
28, 1994, 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 February 28, 1994 by
correspondence with the custodian and brokers. 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 each of the respective series constituting First Prairie
Municipal Bond Fund at February 28, 1994, 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.
(Ernst & Young Signature Logo)
New York, New York
April 6, 1994
FIRST PRAIRIE MUNICIPAL BOND FUND
PART C. OTHER INFORMATION
_________________________
Item 24. Financial Statements and Exhibits. - List
_______ _________________________________________
(a) Financial Statements:
Included in Part A of the Registration Statement
Condensed Financial Information for the period from March
1, 1988 (commencement of operations) to February 28, 1989
and for each of the five years ended February 28, 1994.
Included in Part B of the Registration Statement:
Statement of Investments-- February 28, 1994
Statement of Assets and Liabilities-- February 28,
1994
Statement of Operations--year ended February 28, 1994
Statement of Changes in Net Assets--for each of the
years ended February 28, 1993 and 1994
Notes to Financial Statements
Report of Ernst & Young, Independent Auditors, dated
April 6, 1994
Schedules No. I through VII and other financial statement information, for
which provision is made in the applicable accounting regulations of the
Securities and Exchange Commission, are either omitted because they are
not required under the related instructions, they are inapplicable, or the
required information is presented in the financial statements or notes
thereto which are included in Part B of the Registration Statement.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
(b) Exhibits:
(1)(a) Registrant's Articles of Incorporation and Articles of Amendment
are incorporated by reference to Exhibit (1) of the Registration
Statement on Form N-1A, filed on December 9, 1987, and Amendment
dated June 14, 1989 to the Registrant's Articles of
Incorporation is incorporated by reference to Exhibit (1)(b) of
Post-Effective Amendment No. 2 to the Registration Statement on
Form N-1A, filed on June 28, 1989.
(1)(b) Amendment dated September 12, 1989 to the Registrant's Articles
of Incorporation is incorporated by reference to Exhibit to
(1)(b) of Post-Effective Amendment No. 4 to the Registration
Statement on Form N-1A, filed on June 29, 1990.
(1)(c) Amendment dated January 26, 1994 to the Registrant's Articles of
Incorporation is incorporated by reference to Exhibit to (1)(c)
of Post-Effective Amendment No. 9 to the Registration Statement
on Form N-1A, filed on February 4, 1994.
(2) Registrant's By-Laws, as amended, are incorporated by reference
to Exhibit (2) of Post-Effective Amendment No. 5 to the
Registration Statement on Form N-1A, filed on May 14, 1991.
(4) Specimen certificate for the Registrant's securities is
incorporated by reference to Exhibit (4) of the Registration
Statement on Form N-1A, filed on December 9, 1987.
(5)(a) The Investment Advisory Agreement, as revised, is incorporated
by reference to Exhibit (5)(a) of Post-Effective Amendment No. 2
to the Registration Statement on Form N-1A, filed on June 28,
1989.
(5)(b) The Investment Advisory Agreement, as revised, is incorporated
by reference to Exhibit (5)(b) of Post-Effective Amendment No. 9
to the Registration Statement on From N-1A, filed on February 4,
1994.
(5)(c) The Administration Agreement, as revised, is incorporated by
reference to Exhibit (5)(c) of Post-Effective Amendment No. 4 to
the Registration Statement on Form N-1A, filed on June 29, 1990.
(5)(d) The Administration Agreement, as revised, is incorporated by
reference to Exhibit (5)(d) of Post-Effective Amendment No. 9 to
the Registration statement on Form N-1A, filed on February 4,
1994.
(6)(a) The Distribution Agreement, as revised, is incorporated by
reference to Exhibit (6)(a) of Post-Effective Amendment No. 4 to
the Registration Statement on Form N-1A, filed on June 29, 1990.
(6)(b) Forms of Service Agreement are incorporated by reference to
Exhibit 6(b) of the Registration Statement on Form N-1A, filed
on December 9, 1987.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
(8)(a) Amended and Restated Custody Agreement is incorporated by
reference to Exhibit 8(a) of Post-Effective Amendment No. 4 to
the Registration Statement on Form N-1A, filed on June 29, 1990.
(8)(b) Sub-Custodian Agreements are incorporated by reference to
Exhibit 8(b) of Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A, filed on June 21, 1988,
except with respect to the Chemical Bank Sub-Custodian
Agreement, which is incorporated by reference to Exhibit (8)(b)
of Post-Effective Amendment No. 2 to the Registration Statement
on Form N-1A, filed on June 28, 1989.
(9) The Shareholder Services Plan is incorporated by reference to
Exhibit (9) of Post-Effective Amendment No. 9 to the
Registration Statement on Form N-1A, filed on February 4, 1994.
(10) Opinion and consent of Registrant's counsel is incorporated by
reference to Exhibit (10) of Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-1A, filed on December 21,
1987.
(11) Consent of Independent Auditors.
(15)(a) The Registrant's Service Plan, as revised, is incorporated by
reference to Exhibit (15)(a) of Pre-Effective Amendment No. 4 to
the Registration Statement on Form N-1A, filed on June 29, 1990.
(15)(b) Form of Distribution Plan.
(16) Schedules of Computation of Performance Data.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
Other Exhibits
______________
(a) Powers of Attorney.
(b) Certificate of Secretary is incorporated by reference
to Other Exhibits (b) of Post-Effective Amendment
No. 2 to the Registration Statement on Form N-1A,
filed on June 28, 1989.
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 as of June 14, 1994
______________ _____________________________
Intermediate Series-
Class A shares of
Common Stock,
Par value $.001 per share 453
Intermediate Series-
Class B shares of
Common Stock,
Par value $.001 per share 5
Insured Series-
Class A shares of
Common Stock,
Par value $.001 per share 222
Insured Series-
Class B shares of
Common Stock,
Par value $.001 per share 1
Item 27. Indemnification
_______ _______________
Reference is made to Article Seventh, as amended, of the
Registrant's Articles of Incorporation, and incorporated by
reference to Exhibit (1)(b) of Post-Effective Amendment No. 2 to
the Registration Statement filed under the Securities Act of 1933
on June 28, 1989. The application of these provisions is limited
by Article VIII of the Registrant's By-Laws incorporated by
reference to Exhibit (2) of Post-Effective Amendment No. 5 to the
Registration Statement on Form N-1A filed on May 14, 1991, and
the following undertaking set forth in the rule promulgated by
the Securities and Exchange Commission:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, 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 director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, 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 is also made to the Distribution Agreement, as revised.
Item 28. Business and Other Connections of the Adviser.
_______ _____________________________________________
Officers and Directors of the Adviser;
The Adviser is a commercial bank providing a wide range of banking and
investment services.
To the knowledge of the Registrant, none of the directors or executive
officers of the Adviser, except those described below, are or have been,
at any time during the past two years, engaged in any other business,
profession, vocation or employment of a substantial nature, except that
certain directors and executive officers of the Adviser also hold or have
held various positions with bank and non-bank affiliates of the Adviser,
including its parent, First Chicago Corporation.
Item 28. Business and Other Connections of the Adviser.
_______ __________________________________________________________
Principal Occupation or Other
Position with the Employment of a Substantial
Name Adviser Nature
____ _________________ _____________________________
Richard L. Thomas Chairman of the Serves as Chairman of the
Board, Chief Board, Chief Executive
Officer Executive Officerand President of
First Chicago
and President Corporation*
John H. Bryan Director Chairman of the Board and
Chief Executive Officer, Sara
Lee Corporation*
Dean L. Buntrock Director Chairman of the Board and
Chief Executive Officer,
Waste Management, Inc.*
Frank W. Considine Director Honorary Chairman of the
Board and Chairman of the
Executive Committee, American
National Can Company*
James S. Crown Director General Partner, Henry Crown
and Company (Not
Incorporated)*
Donald P. Jacobs Director Dean of the J.L. Kellogg
Graduate School of
Management, Northwestern
University*
Charles S. Locke Director Chairman of the Board and
Chief Executive Officer,
Morton International, Inc.*
Richard M. Morrow Director Retired Chairman and Chief
Executive Officer, Amoco
Corporation*
Leo F. Mullin Director, President President and Chief Operating
and Chief Operating Officer Of First Chicago
Officer Corporation and Chairman,
American National Corporation
Earl L. Neal Director Principal, Earl L. Neal &
Associates, a Law firm
James J. O'Connor Director Chairman and Chief Executive
Officer, Commonwealth Edison
Company*
Jerry K. Pearlman Director Chairman, President and Chief
Executive Officer, Zenith
Electronics Corporation*
Ernestine M. Raclin Director Chairman of the Board, 1st
Source Corporation*
Jack F. Reichert Director Chairman of the Board,
President and Chief Executive
Officer, Brunswick
Corporation
Patrick G. Ryan Director President and Chief Executive
Officer, Aon Corporation*
George A. Shaefer Director Chairman of the Board,
Retired, and Director,
Caterpillar Inc.*
Adele Simmons Director President, John D. and
Catherine T. MacArthur
Foundation
Roger W. Stone Director Chairman of the Board,
President and Chief Executive
Officer, Stone Container
Corporation*
David J. Vitale Director and Vice Chairman of First
Vice Chairman Chicago Corporation*
Name Position with the Adviser
____ _________________________
Marvin J. Alef, Jr. Executive Vice President
John W. Ballantine Executive Vice President
Jerry C. Bradshaw Executive Vice President
Sherman I. Goldberg Executive Vice President,
General Counsel and Secretary
Donald R. Hollis Executive Vice President
W. G. Jurgensen Executive Vice President and
Chief Financial Officer
Scott P. Marks, Jr. Executive Vice President
Robert A. Rosholt Executive Vice President
and Chief Financial Officer
J. Mikesell Thomas Executive Vice President
_____________________________
* Serves as a Director of First Chicago Corporation.
Item 28. Business and Other Connections of Administrator (continued)
________ ___________________________________________________________
Officers and Directors of Administrator
_______________________________________
Name and Position
with Dreyfus Other Businesses
_________________ ________________
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees of
Skillman Foundation.
Member of The Board of Vintners Intl.
ALVIN E. FRIEDMAN Senior Adviser to Dillon, Read & Co. Inc.
Director 535 Madison Avenue
New York, New York 10022;
Director and member of the Executive
Committee of Avnet, Inc.**
ABIGAIL Q. McCARTHY Author, lecturer, columnist and educational
Director consultant
2126 Connecticut Avenue
Washington, D.C. 20008
DAVID B. TRUMAN Educational consultant;
Director Past President of the Russell Sage
Foundation
230 Park Avenue
New York, New York 10017;
Past President of Mount Holyoke College
South Hadley, Massachusetts 01075;
Former Director:
Student Loan Marketing Association
1055 Thomas Jefferson Street, N.W.
Washington, D.C. 20006;
Former Trustee:
College Retirement Equities Fund
730 Third Avenue
New York, New York 10017
HOWARD STEIN Chairman of the Board, President and
Chairman of the Board and Officer:
Chief Executive Officer Dreyfus Capital Growth Fund (A Premier
Fund)++;
Chairman of the Board and Investment
Officer:
The Dreyfus Fund Incorporated++;
Dreyfus New Leaders Fund, Inc.++;
The Dreyfus Socially Responsible Growth
Fund, Inc. ++;
The Dreyfus Third Century Fund, Inc.++;
Chairman of the Board:
Dreyfus Acquisition Corporation*;
Dreyfus America Fund++++;
The Dreyfus Consumer Credit
Corporation*;
Dreyfus Land Development Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Service Corporation*;
Chairman of the Board and Chief Executive
Officer:
Major Trading Corporation*;
President, Managing General Partner and
Investment Officer:
Dreyfus Global Growth, L.P. (A
Strategic Fund)++;
Dreyfus Strategic Growth, L.P. ++;
Director, President and Investment Officer:
Dreyfus Appreciation Fund, Inc.++;
Dreyfus Asset Allocation Fund, Inc.++;
Dreyfus Capital Value Fund (A Premier
Fund)++;
Dreyfus Focus Funds, Inc.++;
Dreyfus Global Investing++;
Dreyfus Growth Opportunity Fund,
Inc.++;
Premier Growth Fund, Inc.++;
Dreyfus Growth Allocation Fund, Inc.++
Director and Investment Officer:
Dreyfus Growth and Income Fund, Inc.++;
President:
Dreyfus Consumer Life Insurance
Company*;
Director:
Avnet, Inc.**;
Comstock Partners Strategy Fund,
Inc.***;
Dreyfus A Bonds Plus, Inc.++;
Dreyfus BASIC Money Market Fund,
Inc.++;
The Dreyfus Fund International
Limited++++++;
Dreyfus Global Bond Fund, Inc.++;
Dreyfus Insured Municipal Bond Fund,
Inc.++;
Dreyfus Liquid Assets, Inc.++;
Dreyfus Money Market Instruments,
Inc.++;
Dreyfus Municipal Bond Fund, Inc.++;
Dreyfus Municipal Money Market Fund,
Inc.++;
Dreyfus New Jersey Municipal Bond Fund,
Inc.++;
Dreyfus Partnership Management,
Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Realty Advisors, Inc.+++;
Dreyfus Service Organization, Inc.*;
Dreyfus Strategic Governments Income,
Inc.++;
The Dreyfus Trust Company++;
General Government Securities Money
Market Fund, Inc.++;
General Money Market Fund, Inc.++;
General Municipal Money Market Fund,
Inc.++;
FN Network Tax Free Money Market Fund,
Inc.++;
Seven Six Seven Agency, Inc.*;
World Balanced Fund++++;
Trustee and Investment Officer:
Dreyfus Short-Intermediate Government
Fund++;
Dreyfus Strategic Investing++;
Dreyfus Variable Investment Fund++;
Trustee:
Corporate Property Investors
New York, New York;
Dreyfus BASIC U.S. Government Money
Market Fund++;
Dreyfus California Tax Exempt Money
Market Fund++;
Dreyfus Institutional Money Market
Fund++;
Dreyfus Institutional Short Term
Treasury Fund++;
Dreyfus Investors GNMA Fund++;
Dreyfus 100% U.S. Treasury Intermediate
Term Fund++;
Dreyfus 100% U.S. Treasury Long Term
Fund++;
Dreyfus 100% U.S. Treasury Money Market
Fund++;
Dreyfus 100% U.S. Treasury Short Term
Fund++;
Dreyfus Strategic Income++
JULIAN M. SMERLING Director and Executive Vice President:
Vice Chairman of the Dreyfus Service Corporation*;
Board of Directors Director and Vice President:
Dreyfus Consumer Life Insurance
Company*;
Dreyfus Service Organization, Inc.*;
Vice Chairman and Director:
The Dreyfus Trust Company++;
The Dreyfus Trust Company (N.J.)++;
Director:
The Dreyfus Consumer Credit
Corporation*;
Dreyfus Partnership Management, Inc.*;
Seven Six Seven Agency, Inc.*
JOSEPH S. DiMARTINO Director and Chairman of the Board:
President, Chief Operating The Dreyfus Trust Company++;
Officer and Director Director, President and Investment Officer:
Dreyfus Cash Management Plus, Inc.++;
Dreyfus Global Bond Fund, Inc.++;
Dreyfus International Equity Fund,
Inc.++;
Dreyfus Liquid Assets, Inc.++;
Dreyfus Money Market Instruments,
Inc.++;
Dreyfus Worldwide Dollar Money Market
Fund, Inc.++;
General Government Securities Money
Market Fund, Inc.++;
General Money Market Fund, Inc.++;
Director and President:
Dreyfus Acquisition Corporation*;
The Dreyfus Consumer Credit
Corporation*;
Dreyfus Edison Electric Index Fund,
Inc.++;
Dreyfus Life and Annuity Index Fund,
Inc.++;
Dreyfus Partnership Management, Inc.*;
The Dreyfus Trust Company (N.J.)++;
Dreyfus-Wilshire Target Funds, Inc.++;
First Prairie Tax Exempt Bond Fund,
Inc. ++;
Peoples Index Fund, Inc.++;
Peoples S&P MidCap Index Fund, Inc.++;
Trustee, President and Investment Officer:
Dreyfus Cash Management++;
Dreyfus Government Cash Management++;
Dreyfus Institutional Money Market
Fund++;
Dreyfus Short-Intermediate Government
Fund++;
Dreyfus Treasury Cash Management++;
Dreyfus Treasury Prime Cash
Management++;
Dreyfus Variable Investment Fund++;
Premier GNMA Fund++;
Trustee and President:
First Prairie Cash Management++;
First Prairie Diversified Asset Fund++;
First Prairie Money Market Fund++;
First Prairie Municipal Money Market
Fund++;
First Prairie U.S. Government Income
Fund++;
First Prairie U.S. Treasury Securities
Cash Management++;
Trustee, Vice President and Investment
Officer:
Dreyfus Institutional Short Term
Treasury Fund++;
Trustee and Investment Officer:
Premier GNMA Fund++;
Director and Executive Vice President:
Dreyfus Service Corporation*;
Director, Vice President and Investment
Officer:
Dreyfus Balanced Fund, Inc.++;
Director and Vice President:
Dreyfus Service Organization, Inc.*;
General Municipal Bond Fund, Inc.++;
General Municipal Money Market Fund,
Inc.++;
Director and Investment Officer:
Dreyfus A Bonds Plus, Inc.++;
Dreyfus Appreciation Fund, Inc.++;
Dreyfus Short-Term Income Fund, Inc.++;
Premier Growth Fund, Inc.++;
Director and Corporate Member:
Muscular Dystrophy Association
810 Seventh Avenue
New York, New York 10019;
Director:
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Noel Group, Inc.
667 Madison Avenue
New York, New York 10021;
Trustee:
Bucknell University
Lewisburg, Pennsylvania 17837;
President and Investment Officer:
Dreyfus BASIC Money Market Fund,
Inc.++;
Dreyfus BASIC U.S. Government Money
Market Fund++;
Vice President:
Dreyfus Consumer Life Insurance
Company*;
Investment Officer:
The Dreyfus Fund Incorporated++;
Dreyfus Investors GNMA Fund++;
Dreyfus 100% U.S. Treasury Intermediate
Term Fund++;
Dreyfus 100% U.S. Treasury Long Term
Fund++;
Dreyfus 100% U.S. Treasury Money Market
Fund++;
Dreyfus 100% U.S. Treasury Short Term
Fund++;
President, Chief Operating Officer and
Director:
Major Trading Corporation*
LAWRENCE M. GREENE Chairman of the Board:
Legal Consultant and The Dreyfus Security Savings
Director Bank, F.S.B.+;
Director and Executive Vice President:
Dreyfus Service Corporation*;
Director and Vice President:
Dreyfus Acquisition Corporation*;
Dreyfus Consumer Life Insurance
Company*;
Dreyfus Service Organization, Inc.*;
Director:
Dreyfus America Fund++++;
Dreyfus BASIC Municipal Fund ++;
Dreyfus California Tax Exempt Bond
Fund, Inc.++;
Dreyfus Capital Value Fund (A Premier
Fund)++;
Dreyfus Connecticut Municipal Money
Market Fund, Inc.++;
Dreyfus GNMA Fund, Inc.++;
Dreyfus Intermediate Municipal Bond
Fund, Inc.++;
Dreyfus-Lincoln, Inc.*;
Dreyfus Management, Inc.*;
Dreyfus Michigan Municipal Money Market
Fund, Inc.++;
Dreyfus New Jersey Municipal Money
Market Fund, Inc.++;
Dreyfus New Leaders Fund, Inc.++;
Dreyfus New York Tax Exempt Bond Fund,
Inc.++;
Dreyfus Ohio Municipal Money Market
Fund, Inc.++;
Dreyfus Precious Metals, Inc.*;
Dreyfus Thrift & Commerce+++;
The Dreyfus Trust Company (N.J.)++;
Seven Six Seven Agency, Inc.*;
Vice President:
Dreyfus Growth Opportunity Fund,
Inc.++;
Trustee:
Dreyfus Massachusetts Municipal Money
Market Fund++;
Dreyfus Massachusetts Tax Exempt Bond
Fund++;
Dreyfus New York Tax Exempt
Intermediate Bond Fund++;
Dreyfus New York Tax Exempt Money
Market Fund++;
Dreyfus Pennsylvania Municipal Money
Market Fund++;
Investment Officer:
The Dreyfus Fund Incorporated++
ROBERT F. DUBUSS Director and Treasurer:
Vice President Major Trading Corporation*;
Director and Vice President:
The Dreyfus Consumer Credit
Corporation*;
The Truepenny Corporation*;
Vice President:
Dreyfus Consumer Life Insurance
Company*;
Treasurer:
Dreyfus Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Corporation*;
Assistant Treasurer:
The Dreyfus Fund Incorporated++;
Director:
The Dreyfus Trust Company++;
The Dreyfus Trust Company (N.J.)++;
Dreyfus Thrift & Commerce****
ALAN M. EISNER Director and President:
Vice President and Chief The Truepenny Corporation*;
Financial Officer Vice President and Chief Financial Officer:
Dreyfus Acquisition Corporation*;
Dreyfus Consumer Life Insurance
Company*;
Treasurer:
Dreyfus Realty Advisors, Inc.+++;
Treasurer, Financial Officer and Director:
The Dreyfus Trust Company++;
The Dreyfus Trust Company (N.J.)++;
Director:
Dreyfus Thrift & Commerce****;
Vice President and Director:
The Dreyfus Consumer Credit
Corporation*
DAVID W. BURKE Vice President and Director:
Vice President and Chief The Dreyfus Trust Company++;
Administrative Officer Formerly, President:
CBS News, a division of CBS, Inc.
524 West 57th Street
New York, New York 10019
Director:
Dreyfus BASIC Municipal Fund++;
Dreyfus California Tax Exempt Bond
Fund, Inc.++;
Dreyfus Connecticut Municipal Money
Market Fund, Inc.++;
Dreyfus Intermediate Municipal Bond
Fund, Inc.++;
Dreyfus Michigan Municipal Money Market
Fund, Inc.++;
Dreyfus New Jersey Municipal Money
Market Fund, Inc.++;
Dreyfus New York Tax Exempt Bond
Fund, Inc.++;
Dreyfus Ohio Municipal Money Market
Fund, Inc.++;
Trustee:
Dreyfus BASIC U.S. Government Money
Market Fund++;
Dreyfus California Intermediate
Municipal Bond Fund++;
Dreyfus California Tax Exempt Money
Market Fund++;
Dreyfus Cash Management++;
Dreyfus Connecticut Intermediate
Municipal Bond Fund++;
Dreyfus Government Cash Management++;
Dreyfus Institutional Short Term
Treasury Fund++;
Dreyfus Massachusetts Intermediate
Municipal Bond Fund++;
Dreyfus Massachusetts Municipal Money
Market Fund++;
Dreyfus Massachusetts Tax Exempt
Bond Fund++;
Dreyfus Municipal Cash Management
Plus++;
Dreyfus New Jersey Intermediate
Municipal Bond Fund++;
Dreyfus New York Municipal Cash
Management++;
Dreyfus New York Tax Exempt
Intermediate Bond Fund++;
Dreyfus Pennsylvania Intermediate
Municipal Bond Fund++;
Dreyfus Pennsylvania Municipal Money
Market Fund++;
Dreyfus Short-Intermediate Government
Fund++
Dreyfus Strategic Income++;
Dreyfus Strategic Investing++;
Dreyfus Tax Exempt Cash Management++;
Dreyfus Treasury Cash Management++;
Dreyfus Treasury Prime Cash
Management++
ELIE M. GENADRY President:
Vice President - Institutional Services Division of
Dreyfus Institutional Sales
Service Corporation*;
Broker-Dealer Division of Dreyfus
Service Corporation*;
Group Retirement Plans Division of
Dreyfus Service Corporation;
Executive Vice President:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.*;
Senior Vice President:
Dreyfus Cash Management++;
Dreyfus Cash Management Plus, Inc.++;
Dreyfus Edison Electric Index Fund,
Inc.++;
Dreyfus Government Cash Management++;
Dreyfus Institutional Short Term
Treasury Fund++;
Dreyfus Life and Annuity Index Fund,
Inc.++;
Dreyfus Municipal Cash Management
Plus++;
Dreyfus New York Municipal Cash
Management++;
Dreyfus Tax Exempt Cash Management++;
Dreyfus Treasury Cash Management++;
Dreyfus Treasury Prime Cash
Management++;
Dreyfus-Wilshire Target Funds, Inc.++;
Peoples Index Fund, Inc.++;
Peoples S&P MidCap Index Fund, Inc.++;
Vice President:
The Dreyfus Trust Company++;
Premier Insured Municipal Bond Fund++;
Premier California Municipal Bond
Fund++;
Premier Municipal Bond Fund++;
Premier New York Municipal Bond Fund++;
Vice President-Sales:
The Dreyfus Trust Company (N.J.)++;
Treasurer:
Pacific American Fund+++++
DANIEL C. MACLEAN Director, Vice President and Secretary:
Vice President and General Dreyfus Precious Metals, Inc.*;
Counsel Director and Vice President:
The Dreyfus Consumer Credit
Corporation*;
The Dreyfus Trust Company (N.J.)++;
Director and Secretary:
Dreyfus Partnership Management, Inc.*;
Major Trading Corporation*;
The Truepenny Corporation+;
Director:
Dreyfus America Fund++++;
Dreyfus Consumer Life Insurance
Company*;
The Dreyfus Trust Company++;
Vice President:
Dreyfus Appreciation Fund, Inc.++;
Dreyfus BASIC Municipal Fund++;
Dreyfus California Tax Exempt Bond
Fund, Inc.++;
Dreyfus California Tax Exempt Money
Market Fund++;
Dreyfus Capital Value Fund (A Premier
Fund)++;
Dreyfus Cash Management++;
Dreyfus Cash Management Plus, Inc.++;
Dreyfus Connecticut Municipal Money
Market Fund, Inc.++;
Dreyfus Edison Electric Index Fund,
Inc.++;
Dreyfus Florida Intermediate Municipal
Bond Fund++;
Dreyfus Focus Funds, Inc.++;
Dreyfus GNMA Fund, Inc.++;
Dreyfus Government Cash Management++;
Dreyfus Growth and Income Fund, Inc.++;
Dreyfus Growth Opportunity Fund,
Inc.++;
Dreyfus Institutional Short Term
Treasury Fund++;
Dreyfus Insured Municipal Bond Fund,
Inc.++;
Dreyfus Intermediate Municipal Bond
Fund, Inc.++;
Dreyfus Investors GNMA Fund++;
Dreyfus Life and Annuity Index Fund,
Inc.++;
Dreyfus Massachusetts Municipal Money
Market Fund++;
Dreyfus Massachusetts Tax Exempt Bond
Fund++;
Dreyfus Michigan Municipal Money Market
Fund, Inc.++;
Dreyfus Municipal Cash Management
Plus++;
Dreyfus New Jersey Municipal Money
Market Fund, Inc.++;
Dreyfus New Leaders Fund, Inc.++;
Dreyfus New York Insured Tax Exempt
Fund++;
Dreyfus New York Municipal Cash
Management++;
Dreyfus New York Tax Exempt Bond Fund,
Inc.++;
Dreyfus New York Tax Exempt
Intermediate Bond Fund++;
Dreyfus New York Tax Exempt Money
Market Fund++;
Dreyfus Ohio Municipal Money Market
Fund, Inc.++;
Dreyfus Pennsylvania Municipal Money
Market Fund++;
Dreyfus Short-Intermediate Government
Fund++;
Dreyfus Short-Intermediate Municipal
Bond Fund++;
The Dreyfus Socially Responsible Growth
Fund, Inc.++;
Dreyfus Tax Exempt Cash Management++;
The Dreyfus Third Century Fund, Inc.++;
Dreyfus Treasury Cash Management++;
Dreyfus Treasury Prime Cash
Management++;
Dreyfus-Wilshire Target Funds, Inc.++;
First Prairie Cash Management++;
First Prairie Diversified Asset Fund++;
First Prairie Money Market Fund++;
First Prairie Municipal Money Market
Fund++;
First Prairie Tax Exempt Bond Fund,
Inc. ++;
First Prairie U.S. Government Income
Fund++;
First Prairie U.S. Treasury Securities
Cash Management++;
FN Network Tax Free Money Market Fund,
Inc.++;
General California Municipal Money
Market Fund++;
General Government Securities Money
Market Fund, Inc.++;
General Money Market Fund, Inc.++;
General Municipal Bond Fund, Inc.++;
General Municipal Money Market Fund,
Inc.++;
General New York Municipal Bond Fund,
Inc.++;
General New York Municipal Money Market
Fund++;
Peoples Index Fund, Inc.++;
Peoples S&P MidCap Index Fund, Inc.++;
Premier Insured Municipal Bond Fund++;
Premier California Municipal Bond
Fund++;
Premier GNMA Fund++;
Premier Growth Fund, Inc.++;
Premier Municipal Bond Fund++;
Premier New York Municipal Bond Fund++;
Premier State Municipal Bond Fund++;
Secretary:
Dreyfus A Bonds Plus, Inc.++;
Dreyfus Acquisition Corporation*;
Dreyfus Asset Allocation Fund, Inc.++;
Dreyfus Balanced Fund, Inc.++;
Dreyfus BASIC Money Market Fund,
Inc.++;
Dreyfus BASIC U.S. Government Money
Market Fund++;
Dreyfus California Intermediate
Municipal Bond Fund++;
Dreyfus California Municipal Income,
Inc.++;
Dreyfus Capital Growth Fund (A Premier
Fund)++;
Dreyfus Connecticut Intermediate
Municipal Bond Fund++;
Dreyfus Florida Municipal Money Market
Fund++;
The Dreyfus Fund Incorporated++;
Dreyfus Global Bond Fund, Inc.++;
Dreyfus Global Growth, L.P. (A
Strategic Fund)++;
Dreyfus Global Investing++;
Dreyfus Growth Allocation Fund, Inc.++;
Dreyfus Institutional Money Market
Fund++;
Dreyfus International Equity Fund,
Inc.++;
Dreyfus Massachusetts Intermediate
Municipal Bond Fund++;
Dreyfus Money Market Instruments,
Inc.++;
Dreyfus Municipal Bond Fund, Inc.++;
Dreyfus Municipal Income, Inc.++;
Dreyfus Municipal Money Market Fund,
Inc.++;
Dreyfus New Jersey Intermediate
Municipal Bond Fund++;
Dreyfus New Jersey Municipal Bond Fund,
Inc.++;
Dreyfus New York Municipal Income,
Inc.++;
Dreyfus 100% U.S. Treasury Intermediate
Term Fund++;
Dreyfus 100% U.S. Treasury Long Term
Fund++;
Dreyfus 100% U.S. Treasury Money Market
Fund++;
Dreyfus 100% U.S. Treasury Short Term
Fund++;
Dreyfus Pennsylvania Intermediate
Municipal Bond Fund++;
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.*;
Dreyfus Short-Term Income Fund, Inc.++;
Dreyfus Strategic Governments Income,
Inc.++;
Dreyfus Strategic Growth, L.P.++;
Dreyfus Strategic Income++;
Dreyfus Strategic Investing++;
Dreyfus Strategic Municipal Bond Fund,
Inc.++;
Dreyfus Strategic Municipals, Inc.++;
Dreyfus Variable Investment Fund++;
Dreyfus Worldwide Dollar Money Market
Fund, Inc.++;
General California Municipal Bond Fund,
Inc.++;
Seven Six Seven Agency, Inc.*;
Director and Assistant Secretary:
The Dreyfus Fund International
Limited++++++
JEFFREY N. NACHMAN Vice President-Financial:
Vice President - Mutual Dreyfus A Bonds Plus, Inc.++;
Fund Accounting Dreyfus Appreciation Fund, Inc.++;
Dreyfus California Municipal Income,
Inc.++;
Dreyfus California Tax Exempt Bond
Fund, Inc.++;
Dreyfus California Tax Exempt Money
Market Fund++;
Dreyfus Capital Growth Fund (A Premier
Fund)++;
Dreyfus Capital Value Fund (A Premier
Fund)++;
Dreyfus Cash Management++;
Dreyfus Cash Management Plus, Inc.++;
Dreyfus Connecticut Municipal Money
Market Fund, Inc.++;
The Dreyfus Fund Incorporated++;
Dreyfus Global Growth, L.P. (A
Strategic Fund)++;
Dreyfus GNMA Fund, Inc.++;
Dreyfus Government Cash Management++;
Dreyfus Growth Opportunity Fund,
Inc.++;
Dreyfus Institutional Money Market
Fund++;
Dreyfus Insured Municipal Bond Fund,
Inc.++;
Dreyfus Intermediate Municipal Bond
Fund, Inc.++;
Dreyfus Investors GNMA Fund++;
Dreyfus Life and Annuity Index Fund,
Inc.++;
Dreyfus Liquid Assets, Inc.++;
Dreyfus Massachusetts Municipal Money
Market Fund++;
Dreyfus Massachusetts Tax Exempt Bond
Fund++;
Dreyfus Michigan Municipal Money Market
Fund, Inc.++;
Dreyfus Money Market Instruments,
Inc.++;
Dreyfus Municipal Bond Fund, Inc.++;
Dreyfus Municipal Cash Management
Plus++;
Dreyfus Municipal Income, Inc.++;
Dreyfus Municipal Money Market Fund,
Inc.++;
Dreyfus New Jersey Municipal Bond Fund,
Inc.++;
Dreyfus New Jersey Municipal Money
Market Fund, Inc.++;
Dreyfus New Leaders Fund, Inc.++;
Dreyfus New York Insured Tax Exempt
Bond Fund++;
Dreyfus New York Municipal Income,
Inc.++;
Dreyfus New York Tax Exempt Bond Fund,
Inc.++;
Dreyfus New York Tax Exempt
Intermediate Bond Fund++;
Dreyfus New York Tax Exempt Money
Market Fund++;
Dreyfus Ohio Municipal Money Market
Fund, Inc.++;
Dreyfus 100% U.S. Treasury Intermediate
Term Fund++;
Dreyfus 100% U.S. Treasury Long Term
Fund++;
Dreyfus 100% U.S. Treasury Money Market
Fund++;
Dreyfus 100% U.S. Treasury Short Term
Fund++;
Dreyfus Pennsylvania Municipal Money
Market Fund++;
Dreyfus Short-Intermediate Government
Fund++;
Dreyfus Short-Intermediate Municipal
Bond Fund++;
Dreyfus Strategic Governments Income,
Inc.++;
Dreyfus Strategic Growth, L.P.++;
Dreyfus Strategic Income++;
Dreyfus Strategic Investing++;
Dreyfus Strategic Municipal Bond Fund,
Inc.++;
Dreyfus Strategic Municipals, Inc.++;
Dreyfus Tax Exempt Cash Management++;
The Dreyfus Third Century Fund, Inc.++;
Dreyfus Treasury Cash Management++;
Dreyfus Treasury Prime Cash
Management++;
Dreyfus Variable Investment Fund++;
Dreyfus Worldwide Dollar Money Market
Fund, Inc.++;
First Prairie Diversified Asset Fund++;
First Prairie Money Market Fund++;
First Prairie Municipal Money Market
Fund++;
First Prairie Tax Exempt Bond Fund,
Inc.++;
FN Network Tax Free Money Market Fund,
Inc.++;
General California Municipal Bond Fund,
Inc.++;
General California Municipal Money
Market Fund++;
JEFFREY N. NACHMAN General Government Securities Money
Market Fund, Inc.++;
General Money Market Fund, Inc.++;
General Municipal Bond Fund, Inc.++;
General Municipal Money Market Fund,
Inc.++;
General New York Municipal Bond Fund,
Inc.++;
General New York Municipal Money Market
Fund++;
Peoples Index Fund, Inc.++;
Premier California Municipal Bond
Fund++;
Premier GNMA Fund++;
Premier Municipal Bond Fund++;
Premier New York Municipal Bond Fund++;
Premier State Municipal Bond Fund++;
Vice President and Treasurer:
Dreyfus Asset Allocation Fund, Inc.++;
Dreyfus Balanced Fund, Inc.++;
Dreyfus BASIC Money Market Fund,
Inc.++;
Dreyfus BASIC Municipal Fund++;
Dreyfus BASIC U.S. Government Money
Market Fund++;
Dreyfus California Intermediate
Municipal Bond Fund++;
Dreyfus Connecticut Intermediate
Municipal Bond Fund++;
Dreyfus Edison Electric Index Fund,
Inc.++;
Dreyfus Florida Intermediate Municipal
Bond Fund++;
Dreyfus Florida Municipal Money Market
Fund++;
Dreyfus Focus Funds, Inc.++;
Dreyfus Global Bond Fund, Inc.++;
Dreyfus Global Investing++;
Dreyfus Growth Allocation Fund,
Inc.++;
Dreyfus Growth and Income Fund, Inc.++;
Dreyfus Institutional Short Term
Treasury Fund++;
Dreyfus International Equity Fund,
Inc.++;
Dreyfus Massachusetts Intermediate
Municipal Bond Fund++;
Dreyfus New Jersey Intermediate
Municipal Bond Fund++;
Dreyfus New York Municipal Cash
Management++;
Dreyfus Pennsylvania Intermediate
Municipal Bond Fund++;
Dreyfus Short-Term Income Fund, Inc.++;
The Dreyfus Socially Responsible Growth
Fund, Inc.++;
Dreyfus-Wilshire Target Funds, Inc.++;
First Prairie Cash Management++;
First Prairie U.S. Government Income
Fund++;
First Prairie U.S. Treasury Securities
Cash Management++;
Peoples S&P MidCap Index Fund, Inc.++;
Premier Growth Fund, Inc.++;
Premier Insured Municipal Bond Fund++;
Assistant Treasurer:
Pacific American Fund+++++
PETER A. SANTORIELLO Director, President and Investment
Vice President Officer:
Dreyfus Balanced Fund, Inc.++;
Director and President:
Dreyfus Management, Inc.*;
Vice President:
Dreyfus Personal Management, Inc.*
ROBERT H. SCHMIDT President and Director:
Vice President Dreyfus Service Corporation*;
Seven Six Seven Agency, Inc.*;
Formerly, Chairman and Chief Executive
Officer:
Levine, Huntley, Schmidt & Beaver
250 Park Avenue
New York, New York 10017
KIRK V. STUMPP Senior Vice President and
Vice President - Director of Marketing:
New Product Development Dreyfus Service Corporation*
PHILIP L. TOIA Chairman of the Board and Vice President:
Vice President and Dreyfus Thrift & Commerce****;
Director of Fixed- Director:
Income Research The Dreyfus Security Savings Bank
F.S.B.+;
Senior Loan Officer and Director:
The Dreyfus Trust Company++;
Vice President:
The Dreyfus Consumer Credit
Corporation*;
President and Director:
Dreyfus Personal Management, Inc.*;
Director:
Dreyfus Realty Advisors, Inc.+++;
Formerly, Senior Vice President:
The Chase Manhattan Bank, N.A. and
The Chase Manhattan Capital Markets
Corporation
One Chase Manhattan Plaza
New York, New York 10081
KATHERINE C. WICKHAM Vice President:
Assistant Vice President - Dreyfus Consumer Life Insurance
Human Resources Company++;
Formerly, Assistant Commissioner:
Department of Parks and Recreation of
the City of New York
830 Fifth Avenue
New York, New York 10022
JOHN J. PYBURN Treasurer and Assistant Secretary:
Assistant Vice President The Dreyfus Fund International
Limited++++++;
Treasurer:
Dreyfus A Bonds Plus, Inc.++;
Dreyfus Appreciation Fund, Inc.++;
Dreyfus California Municipal Income,
Inc.++;
Dreyfus California Tax Exempt Bond
Fund, Inc.++;
Dreyfus California Tax Exempt Money
Market Fund++;
Dreyfus Capital Growth Fund (A Premier
Fund)++;
Dreyfus Capital Value Fund (A Premier
Fund)++;
Dreyfus Cash Management++;
Dreyfus Cash Management Plus, Inc.++;
Dreyfus Connecticut Municipal Money
Market Fund, Inc.++;
The Dreyfus Fund Incorporated++;
Dreyfus Global Growth, L.P. (A
Strategic Fund)++;
Dreyfus GNMA Fund, Inc.++;
Dreyfus Government Cash Management++;
Dreyfus Growth Opportunity Fund,
Inc.++;
Dreyfus Institutional Money Market
Fund++;
Dreyfus Insured Municipal Bond Fund,
Inc.++;
Dreyfus Intermediate Municipal Bond
Fund, Inc.++;
Dreyfus Investors GNMA Fund++;
Dreyfus Life and Annuity Index Fund,
Inc.++;
Dreyfus Liquid Assets, Inc.++;
Dreyfus Massachusetts Municipal Money
Market Fund++;
Dreyfus Massachusetts Tax Exempt Bond
Fund++;
Dreyfus Michigan Municipal Money Market
Fund, Inc.++;
Dreyfus Money Market Instruments,
Inc.++;
Dreyfus Municipal Bond Fund, Inc.++;
Dreyfus Municipal Cash Management
Plus++;
Dreyfus Municipal Income, Inc.++;
Dreyfus Municipal Money Market Fund,
Inc.++;
Dreyfus New Jersey Municipal Bond Fund,
Inc.++;
Dreyfus New Jersey Municipal Money
Market Fund, Inc.++;
Dreyfus New Leaders Fund, Inc.++;
Dreyfus New York Insured Tax Exempt
Bond Fund++;
Dreyfus New York Municipal Income,
Inc.++;
Dreyfus New York Tax Exempt Bond Fund,
Inc.++;
JOHN J. PYBURN Dreyfus New York Tax Exempt
Intermediate Bond Fund++;
Dreyfus New York Tax Exempt Money
Market Fund++;
Dreyfus Ohio Municipal Money Market
Fund, Inc.++;
Dreyfus 100% U.S. Treasury Intermediate
Term Fund++;
Dreyfus 100% U.S. Treasury Long Term
Fund++;
Dreyfus 100% U.S. Treasury Money Market
Fund++;
Dreyfus 100% U.S. Treasury Short Term
Fund++;
Dreyfus Pennsylvania Municipal Money
Market Fund++;
Dreyfus Short-Intermediate Government
Fund++;
Dreyfus Short-Intermediate Municipal
Bond Fund++;
Dreyfus Strategic Governments
Income, Inc.++;
Dreyfus Strategic Growth, L.P.++;
Dreyfus Strategic Income++;
Dreyfus Strategic Investing++;
Dreyfus Strategic Municipal Bond Fund,
Inc.++;
Dreyfus Strategic Municipals, Inc.++;
Dreyfus Tax Exempt Cash Management++;
The Dreyfus Third Century Fund, Inc.++;
Dreyfus Treasury Cash Management++;
Dreyfus Treasury Prime Cash
Management++;
Dreyfus Variable Investment Fund++;
Dreyfus Worldwide Dollar Money Market
Fund, Inc.++;
First Prairie Diversified Asset Fund++;
First Prairie Money Market Fund++;
First Prairie Municipal Money Market
Fund++;
First Prairie Tax Exempt Bond Fund,
Inc. ++;
FN Network Tax Free Money Market Fund,
Inc.++;
General California Municipal Bond Fund,
Inc.++;
General California Municipal Money
Market Fund++;
General Government Securities Money
Market Fund, Inc.++;
General Money Market Fund, Inc.++;
General Municipal Bond Fund, Inc.++;
General Municipal Money Market Fund,
Inc.++;
General New York Municipal Bond Fund,
Inc.++;
General New York Municipal Money Market
Fund++;
Peoples Index Fund, Inc.++;
JOHN J. PYBURN Premier California Municipal Bond
Fund++;
Premier GNMA Fund++;
Premier Municipal Bond Fund++;
Premier New York Municipal Bond Fund++;
Premier State Municipal Bond Fund++
MAURICE BENDRIHEM Treasurer:
Controller Dreyfus Consumer Life Insurance
Company*;
Dreyfus Partnership Management, Inc.*;
Dreyfus Service Organization, Inc.*;
Seven Six Seven Agency, Inc.*;
The Truepenny Corporation*;
Controller:
Dreyfus Acquisition Corporation*;
The Dreyfus Trust Company++;
The Dreyfus Trust Company (N.J.)++;
The Dreyfus Consumer Credit
Corporation*;
Assistant Treasurer:
Dreyfus Precious Metals*
Formerly, Vice President-Financial Planning,
Administration and Tax:
Showtime/The Movie Channel, Inc.
1633 Broadway
New York, New York 10019
MARK N. JACOBS Vice President:
Secretary and Deputy Dreyfus A Bonds Plus, Inc.++;
General Counsel Dreyfus Asset Allocation Fund, Inc.++;
Dreyfus Balanced Fund, Inc.++;
Dreyfus BASIC Money Market Fund,
Inc.++;
Dreyfus BASIC U.S. Government Money
Market Fund++;
Dreyfus California Intermediate
Municipal Bond Fund++;
Dreyfus Capital Growth Fund (A Premier
Fund)++;
Dreyfus Connecticut Intermediate
Municipal Bond Fund++;
Dreyfus Edison Electric Index Fund,
Inc.++;
Dreyfus Florida Municipal Money Market
Fund++;
Dreyfus Focus Funds, Inc.++;
The Dreyfus Fund Incorporated++;
Dreyfus Global Bond Fund, Inc.++;
Dreyfus Global Growth, L.P. (A
Strategic Fund)++;
Dreyfus Global Investing++;
Dreyfus Growth Allocation Fund,
Inc.++;
Dreyfus Institutional Money Market
Fund++;
Dreyfus International Equity Fund,
Inc.++;
Dreyfus Life and Annuity Index Fund,
Inc.++;
Dreyfus Liquid Assets, Inc.++;
Dreyfus Massachusetts Intermediate
Municipal Bond Fund++;
Dreyfus Money Market Instruments,
Inc.++;
Dreyfus Municipal Bond Fund, Inc.++;
Dreyfus Municipal Money Market Fund,
Inc.++;
Dreyfus New Jersey Intermediate
Municipal Bond Fund++;
Dreyfus New Jersey Municipal Bond Fund,
Inc.++;
Dreyfus 100% U.S. Treasury Intermediate
Term Fund++;
Dreyfus 100% U.S. Treasury Long Term
Fund++;
Dreyfus 100% U.S. Treasury Money Market
Fund++;
Dreyfus 100% U.S. Treasury Short Term
Fund++;
Dreyfus Pennsylvania Intermediate
Municipal Bond Fund++;
Dreyfus Short-Term Income Fund, Inc.++;
Dreyfus Strategic Growth, L.P.++;
Dreyfus Strategic Income++;
Dreyfus Strategic Investing++;
Dreyfus Strategic Municipal Bond Fund,
Inc.++;
Dreyfus Strategic Municipals, Inc.++;
Dreyfus Variable Investment Fund++;
Dreyfus-Wilshire Target Funds, Inc.++;
Dreyfus Worldwide Dollar Money Market
Fund, Inc.++;
General California Municipal Bond Fund,
Inc.++;
Peoples Index Fund, Inc.++;
Peoples S&P MidCap Index Fund, Inc.++;
Director:
World Balanced Fund++++;
Secretary:
Dreyfus Appreciation Fund, Inc.++;
Dreyfus BASIC Municipal Fund++;
Dreyfus California Tax Exempt Bond
Fund, Inc.++;
Dreyfus California Tax Exempt Money
Market Fund++;
Dreyfus Capital Value Fund (A Premier
Fund)++;
Dreyfus Cash Management++;
Dreyfus Cash Management Plus, Inc.++;
Dreyfus Connecticut Municipal Money
Market Fund, Inc.++;
The Dreyfus Consumer Credit
Corporation*;
Dreyfus Consumer Life Insurance
Company*;
Dreyfus Florida Intermediate Municipal
Bond Fund++;
Dreyfus GNMA Fund, Inc.++;
Dreyfus Government Cash Management++;
Dreyfus Growth and Income Fund, Inc.++;
Dreyfus Growth Opportunity Fund,
Inc.++;
Dreyfus Institutional Short Term
Treasury Fund++;
Dreyfus Insured Municipal Bond Fund,
Inc.++;
Dreyfus Intermediate Municipal Bond
Fund, Inc.++;
Dreyfus Investors GNMA Fund++;
Dreyfus Management, Inc.*;
Dreyfus Massachusetts Municipal Money
Market Fund++;
Dreyfus Massachusetts Tax Exempt Bond
Fund++;
Dreyfus Michigan Municipal Money Market
Fund, Inc.++;
Dreyfus Municipal Cash Management
Plus++;
Dreyfus New Jersey Municipal Money
Market Fund, Inc.++;
Dreyfus New Leaders Fund, Inc.++;
Dreyfus New York Insured Tax Exempt
Bond Fund++;
Dreyfus New York Municipal Cash
Management++;
Dreyfus New York Tax Exempt Bond Fund,
Inc.++;
Dreyfus New York Tax Exempt
Intermediate Bond Fund++;
Dreyfus New York Tax Exempt Money
Market Fund++;
Dreyfus Ohio Municipal Money Market
Fund, Inc.++;
Dreyfus Pennsylvania Municipal Money
Market Fund++;
Dreyfus Short-Intermediate Government
Fund++;
Dreyfus Short-Intermediate Municipal
Bond Fund++;
The Dreyfus Socially Responsible Growth
Fund, Inc.++;
Dreyfus Tax Exempt Cash Management++;
The Dreyfus Third Century Fund, Inc.++;
Dreyfus Treasury Cash Management++;
Dreyfus Treasury Prime Cash
Management++;
First Prairie Cash Management++;
First Prairie Diversified Asset Fund++;
First Prairie Money Market Fund++;
First Prairie Municipal Money Market
Fund++;
First Prairie Tax Exempt Bond Fund,
Inc. ++;
First Prairie U.S. Government Income
Fund++;
First Prairie U.S. Treasury Securities
Cash Management++;
FN Network Tax Free Money Market Fund,
Inc.++;
General California Municipal Money
Market Fund++;
General Government Securities Money
Market Fund, Inc.++;
General Money Market Fund, Inc.++;
General Municipal Bond Fund, Inc.++;
General Municipal Money Market Fund,
Inc.++;
General New York Municipal Bond Fund,
Inc.++;
General New York Municipal Money Market
Fund++;
Pacific American Fund+++++;
Premier Insured Municipal Bond Fund++;
Premier California Municipal Bond
Fund++;
Premier GNMA Fund++;
Premier Growth Fund, Inc.++;
Premier Municipal Bond Fund++;
Premier New York Municipal Bond Fund++;
Premier State Municipal Bond Fund++;
Assistant Secretary:
Dreyfus Service Organization, Inc.*;
Major Trading Corporation*;
The Truepenny Corporation*
CHRISTINE PAVALOS Assistant Secretary:
Assistant Secretary Dreyfus A Bonds Plus, Inc.++;
Dreyfus Acquisition Corporation*;
Dreyfus Appreciation Fund, Inc.++;
Dreyfus Asset Allocation Fund, Inc.++;
Dreyfus Balanced Fund, Inc.++;
Dreyfus BASIC Money Market Fund,
Inc.++;
Dreyfus BASIC Municipal Fund++;
Dreyfus BASIC U.S. Government Money
Market Fund++;
Dreyfus California Intermediate
Municipal Bond Fund++;
Dreyfus California Municipal Income,
Inc.++;
Dreyfus California Tax Exempt Bond
Fund, Inc.++;
Dreyfus California Tax Exempt Money
Market Fund++;
Dreyfus Capital Growth Fund (A Premier
Fund)++;
Dreyfus Capital Value Fund, (A Premier
Fund)++;
Dreyfus Cash Management++;
Dreyfus Cash Management Plus, Inc.++;
Dreyfus Connecticut Intermediate
Municipal Bond Fund++;
Dreyfus Connecticut Municipal Money
Market Fund, Inc.++;
Dreyfus Edison Electric Index Fund,
Inc.++;
Dreyfus Florida Intermediate Municipal
Bond Fund++;
Dreyfus Florida Municipal Money Market
Fund++;
Dreyfus Focus Funds, Inc.++;
The Dreyfus Fund Incorporated++;
CHRISTINE PAVALOS Dreyfus Global Bond Fund, Inc.++;
Dreyfus Global Growth, L.P. (A
Strategic Fund)++;
Dreyfus Global Investing++;
Dreyfus GNMA Fund, Inc.++;
Dreyfus Government Cash Management++;
Dreyfus Growth Allocation Fund,
Inc.++;
Dreyfus Growth and Income, Inc.++;
Dreyfus Growth Opportunity Fund,
Inc.++;
Dreyfus Institutional Money Market
Fund++;
Dreyfus Institutional Short Term
Treasury Fund++;
Dreyfus Insured Municipal Bond Fund,
Inc.++;
Dreyfus Intermediate Municipal Bond
Fund, Inc.++;
Dreyfus International Equity Fund,
Inc.++;
Dreyfus Investors GNMA Fund++;
Dreyfus Life and Annuity Index Fund,
Inc.++;
Dreyfus Liquid Assets, Inc.++;
Dreyfus Management, Inc.*;
Dreyfus Massachusetts Intermediate
Municipal Bond Fund++;
Dreyfus Massachusetts Municipal Money
Market Fund++;
Dreyfus Massachusetts Tax Exempt Bond
Fund++;
Dreyfus Michigan Municipal Money Market
Fund, Inc.++;
Dreyfus Money Market Instruments,
Inc.++;
Dreyfus Municipal Bond Fund, Inc.++;
Dreyfus Municipal Cash Management
Plus++;
Dreyfus Municipal Income, Inc.++;
Dreyfus Municipal Money Market Fund,
Inc.++;
Dreyfus New Jersey Intermediate
Municipal Bond Fund++;
Dreyfus New Jersey Municipal Bond Fund,
Inc.++;
Dreyfus New Jersey Municipal Money
Market Fund, Inc.++;
Dreyfus New Leaders Fund, Inc.++;
Dreyfus New York Insured Tax Exempt
Bond Fund++;
Dreyfus New York Municipal Cash
Management++;
Dreyfus New York Municipal Income,
Inc.++;
Dreyfus New York Tax Exempt Bond Fund,
Inc.++;
Dreyfus New York Tax Exempt
Intermediate Bond Fund++;
Dreyfus New York Tax Exempt Money
Market Fund++;
Dreyfus Ohio Municipal Money Market
Fund, Inc.++;
Dreyfus 100% U.S. Treasury Intermediate
Term Fund++;
Dreyfus 100% U.S. Treasury Long Term
Fund++;
Dreyfus 100% U.S. Treasury Money Market
Fund++;
Dreyfus 100% U.S. Treasury Short Term
Fund++;
Dreyfus Pennsylvania Intermediate
Municipal Bond Fund++;
Dreyfus Pennsylvania Municipal Money
Market Fund++;
Dreyfus Service Corporation*;
Dreyfus Short-Intermediate Government
Fund++;
Dreyfus Short-Intermediate Municipal
Bond Fund++;
Dreyfus Short-Term Income Fund, Inc.++;
The Dreyfus Socially Responsible Growth
Fund, Inc.++;
Dreyfus Strategic Governments Income,
Inc.++;
Dreyfus Strategic Growth, L.P.++;
Dreyfus Strategic Income++;
Dreyfus Strategic Investing++;
Dreyfus Strategic Municipal Bond Fund,
Inc.++;
Dreyfus Strategic Municipals, Inc.++;
Dreyfus Tax Exempt Cash Management++;
The Dreyfus Third Century Fund, Inc.++;
Dreyfus Treasury Cash Management++;
Dreyfus Treasury Prime Cash
Management++;
Dreyfus Variable Investment Fund++;
Dreyfus-Wilshire Target Funds, Inc.++;
Dreyfus Worldwide Dollar Money Market
Fund, Inc.++;
First Prairie Cash Management++;
First Prairie Diversified Asset Fund++;
First Prairie Money Market Fund++;
First Prairie Tax Exempt Bond Fund,
Inc. ++;
First Prairie Municipal Money Market
Fund++;
First Prairie U.S. Government Income
Fund++;
First Prairie U.S. Treasury Securities
Cash Management++;
FN Network Tax Free Money Market Fund,
Inc.++;
General California Municipal Bond Fund,
Inc.++;
General California Municipal Money
Market Fund++;
General Government Securities Money
Market Fund, Inc.++;
General Money Market Fund, Inc.++;
General Municipal Bond Fund, Inc.++;
General Municipal Money Market Fund,
Inc.++;
General New York Municipal Bond Fund,
Inc.++;
General New York Municipal Money Market
Fund++;
Peoples Index Fund, Inc.++;
Peoples S&P MidCap Index Fund, Inc.++;
Premier Insured Municipal Bond Fund++;
Premier California Municipal Bond
Fund++;
Premier GNMA Fund++;
Premier Growth Fund, Inc.++;
Premier Municipal Bond Fund++;
Premier New York Municipal Bond Fund++;
Premier State Municipal Bond Fund++;
The Truepenny Corporation*
______________________________________
* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 80 Cutter Mill Road,
Great Neck, New York 11021.
*** The address of the business so indicated is 45 Broadway, New York,
New York 10006.
**** The address of the business so indicated is Five Triad Center,
Salt Lake City, Utah 84180.
+ The address of the business so indicated is Atrium Building, 80
Route 4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
+++ The address of the business so indicated is One Rockefeller Plaza,
New York, New York 10020.
++++ The address of the business so indicated is 2 Boulevard Royal,
Luxembourg.
+++++ The address of the business so indicated is 800 West Sixth Street,
Suite 1000, Los Angeles, California 90017.
++++++ The address of the business so indicated is Nassau, Bahama
Islands.
Item 29. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) Comstock Partners Strategy Fund, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC Money Market Fund, Inc.
7) Dreyfus BASIC Municipal Fund
8) Dreyfus BASIC U.S. Government Money Market Fund
9) Dreyfus California Intermediate Municipal Bond Fund
10) Dreyfus California Tax Exempt Bond Fund, Inc.
11) Dreyfus California Tax Exempt Money Market Fund
12) Dreyfus Capital Value Fund, Inc.
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) The Dreyfus Convertible Securities Fund, Inc.
18) Dreyfus Edison Electric Index Fund, Inc.
19) Dreyfus Florida Intermediate Municipal Bond Fund
20) Dreyfus Florida Municipal Money Market Fund
21) Dreyfus Focus Funds, Inc.
22) The Dreyfus Fund Incorporated
23) Dreyfus Global Bond Fund, Inc.
24) Dreyfus Global Growth, L.P. (A Strategic Fund)
25) Dreyfus Global Investing, Inc.
26) Dreyfus GNMA Fund, Inc.
27) Dreyfus Government Cash Management
28) Dreyfus Growth and Income Fund, Inc.
29) Dreyfus Growth Opportunity Fund, Inc.
30) Dreyfus Institutional Money Market Fund
31) Dreyfus Institutional Short Term Treasury Fund
32) Dreyfus Insured Municipal Bond Fund, Inc.
33) Dreyfus Intermediate Municipal Bond Fund, Inc.
34) Dreyfus International Equity Fund, Inc.
35) Dreyfus Investors GNMA Fund
36) The Dreyfus Leverage Fund, Inc.
37) Dreyfus Life and Annuity Index Fund, Inc.
38) Dreyfus Liquid Assets, Inc.
39) Dreyfus Massachusetts Intermediate Municipal Bond Fund
40) Dreyfus Massachusetts Municipal Money Market Fund
41) Dreyfus Massachusetts Tax Exempt Bond Fund
42) Dreyfus Michigan Municipal Money Market Fund, Inc.
43) Dreyfus Money Market Instruments, Inc.
44) Dreyfus Municipal Bond Fund, Inc.
45) Dreyfus Municipal Cash Management Plus
46) Dreyfus Municipal Money Market Fund, Inc.
47) Dreyfus New Jersey Intermediate Municipal Bond Fund
48) Dreyfus New Jersey Municipal Bond Fund, Inc.
49) Dreyfus New Jersey Municipal Money Market Fund, Inc.
50) Dreyfus New Leaders Fund, Inc.
51) Dreyfus New York Insured Tax Exempt Bond Fund
52) Dreyfus New York Municipal Cash Management
53) Dreyfus New York Tax Exempt Bond Fund, Inc.
54) Dreyfus New York Tax Exempt Intermediate Bond Fund
55) Dreyfus New York Tax Exempt Money Market Fund
56) Dreyfus Ohio Municipal Money Market Fund, Inc.
57) Dreyfus 100% U.S. Treasury Intermediate Term Fund
58) Dreyfus 100% U.S. Treasury Long Term Fund
59) Dreyfus 100% U.S. Treasury Money Market Fund
60) Dreyfus 100% U.S. Treasury Short Term Fund
61) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
62) Dreyfus Pennsylvania Municipal Money Market Fund
63) Dreyfus Short-Intermediate Government Fund
64) Dreyfus Short-Intermediate Municipal Bond Fund
65) Dreyfus Short-Term Income Fund, Inc.
66) The Dreyfus Socially Responsible Growth Fund, Inc.
67) Dreyfus Strategic Growth, L.P.
68) Dreyfus Strategic Income
69) Dreyfus Strategic Investing
70) Dreyfus Tax Exempt Cash Management
71) The Dreyfus Third Century Fund, Inc.
72) Dreyfus Treasury Cash Management
73) Dreyfus Treasury Prime Cash Management
74) Dreyfus Variable Investment Fund
75) Dreyfus-Wilshire Target Funds, Inc.
76) Dreyfus Worldwide Dollar Money Market Fund, Inc.
77) First Prairie Cash Management
78) First Prairie Diversified Asset Fund
79) First Prairie Money Market Fund
80) First Prairie Municipal Money Market Fund
81) First Prairie U.S. Government Income Fund
82) First Prairie U.S. Treasury Securities Cash Management
83) FN Network Tax Free Money Market Fund, Inc.
84) General California Municipal Bond Fund, Inc.
85) General California Municipal Money Market Fund
86) General Government Securities Money Market Fund, Inc.
87) General Money Market Fund, Inc.
88) General Municipal Bond Fund, Inc.
89) General Municipal Money Market Fund, Inc.
90) General New York Municipal Bond Fund, Inc.
91) General New York Municipal Money Market Fund
92) Pacific American Fund
93) Peoples Index Fund, Inc.
94) Peoples S&P MidCap Index Fund, Inc.
95) Premier Insured Municipal Bond Fund
96) Premier California Municipal Bond Fund
97) Premier GNMA Fund
98) Premier Growth Fund, Inc.
99) Premier Municipal Bond Fund
100) Premier New York Municipal Bond Fund
101) Premier State Municipal Bond Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address Dreyfus Service Corporation Registrant
__________________ ___________________________ _____________
Howard Stein* Chairman of the Board None
Robert H. Schmidt* President and Director None
Joseph S. DiMartino* Executive Vice President and Director President
and
Director
Lawrence M. Greene* Executive Vice President and Director None
Julian M. Smerling* Executive Vice President and Director None
Elie M. Genadry* Executive Vice President None
Henry D. Gottmann* Executive Vice President None
Donald A. Nanfeldt* Executive Vice President None
Kevin Flood* Senior Vice President None
Roy Gross* Senior Vice President None
Irene Papadoulis** Senior Vice President None
Kirk Stumpp* Senior Vice President and None
Director of Marketing
Diane M. Coffey* Vice President None
Walter T. Harris* Vice President None
William Harvey* Vice President None
Adwick Pinnock** Vice President None
George Pirrone* Vice President/Trading None
Karen Rubin Waldmann* Vice President None
Peter D. Schwab* Vice President/New Products None
Michael Anderson* Assistant Vice President None
Carolyn Sobering* Assistant Vice President-Trading None
Daniel C. Maclean* Secretary Vice
President
Robert F. Dubuss* Treasurer None
Maurice Bendrihem* Controller None
Michael J. Dolitsky* Assistant Controller None
Susan Verbil Goldgraben* Assistant Treasurer None
Christine Pavalos* Assistant Secretary Assistant
Secretary
Broker-Dealer Division of Dreyfus Service Corporation
=====================================================
Positions and offices with Positions and
Name and principal Broker-Dealer Division of offices with
business address Dreyfus Service Corporation Registrant
__________________ ___________________________ _____________
Elie M. Genadry* President None
Craig E. Smith* Executive Vice President None
Peter Moeller* Vice President and Sales Manager None
Kristina Williams
Pomano Beach, FL Vice President-Administration None
James Barr
Newton, MA Regional Vice President None
Mary B. Brundage
Pasadena, CA Regional Vice President None
Edward Donley
Latham, NY Regional Vice President None
Thomas Ellis
Ranchero Murietta, CA Regional Vice President None
Glenn Farinacci* Regional Vice President None
Peter S. Ferrentino
San Francisco, CA Regional Vice President None
William Frey
Hoffman Estates, IL Regional Vice President None
Suzanne Haley
Tampa, FL Regional Vice President None
Philip Jochem
Warrington, PA Regional Vice President None
Richard P. Kundracik
Waterford, MI Regional Vice President None
Michael Lane
Beaver Falls, PA Regional Vice President None
Fred Lanier
Atlanta, GA Regional Vice President None
Beth Presson
Colchester, VT Regional Vice President None
Joseph Reaves
New Orleans, LA Regional Vice President None
Christian Renninger
Germantown, MD Regional Vice President None
Robert J. Richardson
Houston, TX Regional Vice President None
Kurt Wiessner
Minneapolis, MN Regional Vice President None
Institutional Services Division of Dreyfus Service Corporation
==============================================================
Positions and offices with Positions and
Name and principal Institutional Services Division offices with
business address of Dreyfus Service Corporation Registrant
__________________ _______________________________ _____________
Elie M. Genadry* President None
Donald A. Nanfeldt* Executive Vice President None
Kathleen M. Lewis++ Vice President-Institutional None
Sales Manager
Charles Cardona** Senior Vice President- None
Institutional Services
Stacy Alexander* Vice President-Bank Wholesale None
Eric Almquist* Vice President-Eastern Regional None
Sales Manager
James E. Baskin+++++++ Vice President-Institutional Sales None
Kenneth Bernstein
Boca Raton, FL Vice President-Bank Wholesale None
Stephen Burke* Vice President-Bank Wholesaler None
Sales Manager
Laurel A. Diedrick
Burrows*** Vice President-Bank Wholesale None
Gary F. Callahan
Somerville, NJ Vice President-Bank Wholesale None
Daniel L. Clawson++++ Vice President-Institutional Sales None
Anthony T. Corallo
San Francisco, CA Vice President-Institutional Sales None
Bonnie M. Cymbryla
Brewerton, NY Vice President-Bank Wholesale None
William Davis
Bellevue, WA Vice President None
William E. Findley**** Vice President None
Mary Genet***** Vice President None
Melinda Miller Gordon* Vice President None
Christina Haydt++ Vice President-Institutional Sales None
Carol Anne Kelty* Vice President-Institutional Sales None
Gwenn Kessler***** Vice President-Bank Wholesale None
Nancy Knee++++ Vice President-Bank Wholesale None
Bradford Lange* Vice President-Bank Wholesale None
Eva Machek***** Vice President-Institutional Sales None
Bradley R. Maybury
Seattle, WA Vice President-Bank Wholesale None
Mary McCabe*** Vice President-Bank Wholesale None
James McNamara***** Vice President-Institutional Sales None
James Neiland* Vice President-Bank Wholesale- None
National Accounts Manager
Susan M. O'Connor* Vice President-Institutional
Seminars None
Andrew Pearson+++ Vice President-Institutional Sales None
Jean Heitzman Penny***** Vice President-Institutional Sales None
Dwight Pierce+ Vice President-Bank Wholesale None
Lorianne Pinto* Vice President-Bank Wholesale None
Douglas Rentschler
Grosse Point Park, MI Vice President-Bank Wholesale None
Leah Ryan**** Vice President-Institutional Sales None
Edward Sands* Vice President-Institutional
Administration None
William Schalda* Vice President-Institutional None
Administration
Sue Ann Seefeld++++ Vice President-Institutional Sales None
Brant Snavely
Charlotte, NC Vice President-Bank Wholesale None
Thomas Stallings
Richmond, VA Vice President-Institutional Sales None
Elizabeth Biordi Vice President-Institutional
Wieland* Administration None
Thomas Winnick
Malverne, PA Vice President-Bank Wholesale None
Jeanne Butler* Assistant Vice President-
Institutional Operations None
Roberta Hall***** Assistant Vice President-
Institutional Servicing None
Tracy Hopkins** Assistant Vice President-
Institutional Operations None
Lois Paterson* Assistant Vice President-
Institutional Operations None
Mary Rogers** Assistant Vice President-
Institutional Servicing None
Karen Markovic
Shpall++++++ Assistant Vice President None
Patrick Synan** Assistant Vice President-
Institutional Support None
Emilie Tongalson** Assistant Vice President-
Institutional Servicing None
Tonda Watson**** Assistant Vice President-
Institutional Sales None
Group Retirement Plans Division of Dreyfus Service Corporation
==============================================================
Positions and offices with Positions and
Name and principal Group Retirement Plans Division offices with
business address of Dreyfus Service Corporation Registrant
__________________ _______________________________ _____________
Elie M. Genadry* President None
Robert W. Stone* Executive Vice President None
Leonard Larrabee* Vice President and Senior Counsel None
George Anastasakos* Vice President None
Bart Ballinger++ Vice President-Sales None
Paula Cleary* Vice President-Marketing None
Ellen S. Dinas* Vice President-Marketing/Communications None
William Gallagher* Vice President-Sales None
Jeffrey Lejune
Dallas, TX Vice President-Sales None
Samuel Mancino** Vice President-Installation None
Joanna Morris* Vice President-Sales None
Joseph Pickert++ Vice President-Sales None
Alison Saunders** Vice President-Enrollment None
Scott Zeleznik* Vice President-Sales None
Alana Zion* Vice President-Sales None
Jeffrey Blake* Assistant Vice President-Sales None
_____________________________________________________
* The address of the offices so indicated is 200 Park Avenue, New
York, New York 10166
** The address of the offices so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
*** The address of the offices so indicated is 580 California
Street, San Francisco, California 94104.
**** The address of the offices so indicated is 3384 Peachtree Road,
Suite 100, Atlanta, Georgia 30326-1106.
***** The address of the offices so indicated is 190 South LaSalle
Street, Suite 2850, Chicago, Illinois 60603.
+ The address of the offices so indicated is P.O. Box 1657, Duxbury,
Massachusetts 02331.
++ The address of the offices so indicated is 800 West Sixth
Street, Suite 1000, Los Angeles, California 90017.
+++ The address of the offices so indicated is 11 Berwick Lane,
Edgewood, Rhode Island 02905.
++++ The address of the offices so indicated is 1700 Lincoln Street,
Suite 3940, Denver, Colorado 80203.
+++++ The address of the offices so indicated is 6767 Forest Hill
Avenue, Richmond, Virginia 23225.
++++++ The address of the offices so indicated is 2117 Diamond Street,
San Diego, California 92109.
+++++++ The address of the offices so indicated is P.O. Box 757,
Holliston, Massachusetts 01746.
Item 30. Location of Accounts and Records
________________________________
1. The Shareholder Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. The Bank of New York
110 Washington Street
New York, New York 10286
3. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
_______ ___________________
Not Applicable
Item 32. Undertakings
________ ____________
(1) To call a meeting of stockholders for the purpose of voting upon
the question of removal of a director or directors when
requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares of common stock 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.
(2) To furnish each person to whom a prospectus is delivered with a
copy of its latest annual report to stockholders, 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 certifies that it meets all
of the requirements for effectiveness of this Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and 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 twenty-seventh day of
June, 1994.
First Prairie Tax Exempt Bond Fund, Inc.
BY: /s/Joseph S. DiMartino*
___________________________________________
Joseph S. DiMartino, 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 S. DiMartino* President (Principal Executive 06/27/94
____________________________ Officer) and Director
Joseph S. DiMartino
/s/John J. Pyburn* Treasurer (Principal Financial 06/27/94
____________________________ Officer)
John J. Pyburn
/s/Gregory S. Gruber* Controller (Principal Accounting 06/27/94
____________________________ Officer)
Gregory S. Gruber
/s/John P. Gould* Director 06/27/94
____________________________
John P. Gould
/s/Marilyn McCoy* Director 06/27/94
____________________________
Marilyn McCoy
/s/Raymond D. Oddi* Director 06/27/94
____________________________
Raymond D. Oddi
/s/Mark N. Jacobs*
*BY: _____________________
Mark N. Jacobs,
Attorney-in-Fact
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed
Financial Information" and "Custodian, Transfer and Dividend Disbursing
Agent, Counsel and Independent Auditors" and to the use of our report
dated April 6, 1994, in this Registration Statement (Form N-1A 33-18954)
of First Prairie Municipal Bond Fund.
ERNST & YOUNG
New York, New York
June 24, 1994
Exhibit 15(b)
FIRST PRAIRIE MUNICIPAL BOND FUND
DISTRIBUTION PLAN
Introduction: It has been proposed that the above-
captioned investment company (the "Fund") adopt a Distribution
Plan (the "Plan") relating to its Class B shares in accordance
with Rule 12b-1 promulgated under the Investment Company Act of
1940, as amended (the "Act"). Under the Plan, the Fund would
pay certain financial institutions, securities dealers and other
industry professionals (collectively, "Service Agents") for
advertising, marketing and distributing the Fund's Class B
shares. If the proposal is to be implemented, the Act and
Rule 12b-1 require that a written plan describing all material
aspects of the proposed financing be adopted by the Fund.
The Fund's Board, in considering whether the Fund
should implement a written plan, has requested and evaluated
such information as it deemed necessary to an informed
determination as to whether a written plan should be implemented
and has considered such pertinent factors as it deemed necessary
to form the basis for a decision to use assets attributable to
the Fund's Class B shares for such purposes.
In voting to approve the implementation of such a
plan, the Board has concluded, in the exercise of its reasonable
business judgment and in light of applicable fiduciary duties,
that there is a reasonable likelihood that the plan set forth
below will benefit the Fund and holders of its Class B shares.
The Plan: The material aspects of this Plan are as
follows:
1. (a) The Fund shall pay to one or more Service
Agents a fee at an annual rate of up to .50 of 1% of the value
of the Fund's average daily net assets attributable to Class B
for advertising, marketing and distributing the Fund's Class B
shares. The Fund's Directors shall determine the amounts to be
paid to Service Agents and the basis on which such payments will
be made, but in no event shall such payments exceed .50 of 1%
per annum of the value of the Fund's average daily net assets
attributable to Class B. Payments to a Service Agent are
subject to compliance by the Service Agent with the terms of any
related Plan agreement between the Service Agent and the Fund.
(b) The Fund shall pay all costs of preparing and
printing prospectuses and statements of additional information
for regulatory purposes and for distribution to existing
shareholders. The Fund also shall pay an amount of the costs
and expenses in connection with (a) preparing, printing and
distributing the Fund's prospectuses used for other purposes and
(b) implementing and operating this Plan not to exceed in any
fiscal year of the Fund the greater of $100,000 or .005 of 1% of
the average daily value of the Fund's net assets for such fiscal
year.
2. For the purposes of determining the fees payable
under this Plan, the value of the net assets attributable to
Class B shall be computed in the manner specified in the Fund's
Articles of Incorporation for the computation of the value of
the Fund's net assets attributable to such a class.
3. The Board shall be provided, at least quarterly,
with a written report of all amounts expended pursuant to this
Plan. The report shall state the purpose for which the amounts
were expended.
4. This Plan will become effective immediately upon
approval by (a) holders of a majority of the Fund's outstanding
Class B shares, and (b) a majority of the Board members,
including a majority of the Board members 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 this Plan or in any agreements entered into in connection
with this Plan, pursuant to a vote cast in person at a meeting
called for the purpose of voting on the approval of this Plan.
5. This Plan shall continue for a period of one year
from its effective date, unless earlier terminated in accordance
with its terms, and thereafter shall continue automatically for
successive annual periods, provided such continuance is approved
at least annually in the manner provided in paragraph 4(b)
hereof.
6. This Plan may be amended at any time by the
Board, provided that (a) any amendment to increase materially
the costs which the Fund may bear pursuant to this Plan shall be
effective only upon approval by a vote of holders of a majority
of the Fund's outstanding Class B shares, and (b) any material
amendments of the terms of this Plan shall become effective only
upon approval as provided in paragraph 4(b) hereof.
7. This Plan is terminable without penalty at any
time by (a) vote of a majority of the Board members 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 this Plan or in any agreements entered into in connection
with this Plan, or (b) vote of holders of a majority of the
Fund's outstanding Class B shares.
Dated: October 1, 1993
Effective Date: February 8, 1994
FIRST PRAIRIE MUNICIPAL BOND FUND
INTERMEDIATE SERIES - CLASS A
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
Average annual total return computation from inception through 2/28/94
based upon the following formula:
n
P( 1 + T ) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value as of 2/28/94 of a $1,000
hypothetical investment made on 3/1/88 (inception)
6.000
1000( 1 + T ) = 1,592.28
T = 8.06%
==========
FIRST PRAIRIE MUNICIPAL BOND FUND
INTERMEDIATE SERIES - CLASS A
TOTAL RETURN COMPUTATION
Total return computation from inception through 2/28/94
based upon the following formula:
[ C + ( C x B ) ] - A
---------------------
T = A
where: A = NAV at beginning of period
B = Additional shares purchased through dividend reinvestment
C = NAV at end of period
T = Total return
T = [ 12.18 + ( 12.18 x 0.54391 ) ] - 11.46
--------------------------------------------
11.46
T = 64.09%
========
FIRST PRAIRIE MUNICIPAL BOND FUND
INTERMEDIATE SERIES - CLASS A
SEC 30 DAY YIELD CALCULATION
INCOME 1/30/94 - 2/28/94 $107,243.72
EXPENSES 1/30/94 - 2/28/94 $5,906.49
Average Shares Entitled to Dividend
1/30/94 - 2/28/94 2,453,951.331
Maximum Offering Price per share 2/28/94 $12.56
x = 107,243.72 - 5,906.49
------------------------------------------
2,453,951.331 x 12.56
x = 0.003288
6
30 Day yield = 2 [( 1 + x) -1]
6
30 Day yield = 2 [ ( 1 + 0.003288 ) -1]
30 Day yield = 3.98%
=================
TAX EQUIVALENT YIELD
Taxable portion of yield = 0.00%
Tax exempt portion of yield = 3.98%
----------------
Yield = 3.98%
================
Federal Tax Bracket = 39.60%
================
3.98
Tax Equivalent Yield = -------------------- = 6.59%
( 1 - 0.3960 ) ================
FIRST PRAIRIE MUNICIPAL BOND FUND
INTERMEDIATE SERIES - CLASS A
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
Average annual total return computation from 2/28/93 through 2/28/94
based upon the following formula:
n
P( 1 + T ) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value as of 2/28/94 of a $1,000
hypothetical investment made on 2/28/93
1.00
1000( 1 + T ) = 1,017.64
T = 1.76%
============
FIRST PRAIRIE MUNICIPAL BOND FUND
INTERMEDIATE SERIES - CLASS A
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
Average annual total return computation from 2/28/89 through 2/28/94
based upon the following formula:
n
P( 1 + T ) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value as of 2/28/94 of a $1,000
hypothetical investment made on 2/28/89
5.00
1000( 1 + T ) = 1,490.66
T = 8.31%
============
FIRST PRAIRIE MUNICIPAL BOND FUND
INTERMEDIATE SERIES - CLASS A
TOTAL RETURN COMPUTATION
Total return computation from inception through 2/28/94
based upon the following formula:
[ C + ( C x B ) ] - A
---------------------
T = A
where: A = Maximum Offering Price at beginning of period
B = Additional shares purchased through dividend reinvestment
C = NAV at end of period
T = Total return
T = [ 12.18 + ( 12.18 x 0.54391 ) ] - 11.81
--------------------------------------------
11.81
T = 59.23%
========
FIRST PRAIRIE MUNICIPAL BOND FUND
INTERMEDIATE SERIES - CLASS B
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
Average annual total return computation from inception through 2/28/94
based upon the following formula:
n
P( 1 + T ) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value as of 2/28/94 of a $1,000
hypothetical investment made on 2/8/94 (inception)
0.058
1000( 1 + T ) = 961.04
T = -49.64%
==========
FIRST PRAIRIE MUNICIPAL BOND FUND
INTERMEDIATE SERIES - CLASS B
TOTAL RETURN COMPUTATION
Total return computation from inception through 2/28/94
based upon the following formula:
[ C + ( C x B ) ] - A
---------------------
T = A
where: A = NAV at beginning of period
B = Additional shares purchased through dividend reinvestment
C = NAV at end of period
T = Total return
T = [ 12.18 + ( 12.18 x 0.00208 ) ] - 12.32
--------------------------------------------
12.32
T = -0.93%
========
FIRST PRAIRIE MUNICIPAL BOND FUND
INTERMEDIATE SERIES - CLASS B
TOTAL RETURN COMPUTATION
Total return computation from inception through 2/28/94
based upon the following formula:
[ C + ( C x B ) ] - A D x ( E x F )
--------------------- --- -------------
T = A G
where: A = NAV at beginning of period
B = Additional shares purchased through dividend reinvestment
C = NAV at end of period
D = Applicable CDSC
E = Lower of A or C
F = Original shares
G = Original investment
T = Total return
T = [ 12.18 + (12.18 x 0.00208 ) ] - 12.32 -- 0.03 x ( 12.18 x 81.169 )
----------------------------------------- ------------------------
12.32 1000
T = -3.90%
======
FIRST PRAIRIE MUNICIPAL BOND FUND
INSURED SERIES - CLASS A
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
Average annual total return computation from inception through 2/28/94
based upon the following formula:
n
P( 1 + T ) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value as of 2/28/94 of a $1,000
hypothetical investment made on 3/1/88 (inception)
6.000
1000( 1 + T ) = 1,610.77
T = 8.27%
==========
FIRST PRAIRIE MUNICIPAL BOND FUND
INSURED SERIES - CLASS A
TOTAL RETURN COMPUTATION
Total return computation from inception through 2/28/94
based upon the following formula:
[ C + ( C x B ) ] - A
---------------------
T = A
where: A = NAV at beginning of period
B = Additional shares purchased through dividend reinvestment
C = NAV at end of period
T = Total return
T = [ 12.13 + ( 12.13 x 0.6599 ) ] - 11.94
--------------------------------------------
11.94
T = 68.63%
========
FIRST PRAIRIE MUNICIPAL BOND FUND
INSURED SERIES - CLASS A
SEC 30 DAY YIELD CALCULATION
INCOME 1/30/94 - 2/28/94 $34,813.60
EXPENSES 1/30/94 - 2/28/94 $0.00
Average Shares Entitled to Dividend
1/30/94 - 2/28/94 754,865.120
Maximum Offering Price per share 2/28/94 $12.70
x = 34,813.60 - 0.00
------------------------------------------
754,865.120 x 12.70
x = 0.003631
6
30 Day yield = 2 [( 1 + x) -1]
6
30 Day yield = 2 [ ( 1 + 0.003631 ) -1]
30 Day yield = 4.40%
=================
TAX EQUIVALENT YIELD
Taxable portion of yield = 0.00%
Tax exempt portion of yield = 4.40%
----------------
Yield = 4.40%
================
Federal Tax Bracket = 39.60%
================
4.40
Tax Equivalent Yield = -------------------- = 7.28%
( 1 - 0.3960 ) ================
FIRST PRAIRIE MUNICIPAL BOND FUND
INSURED SERIES - CLASS A
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
Average annual total return computation from 2/28/93 through 2/28/94
based upon the following formula:
n
P( 1 + T ) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value as of 2/28/94 of a $1,000
hypothetical investment made on 2/28/93
1.00
1000( 1 + T ) = 990.58
T = -0.94%
============
FIRST PRAIRIE MUNICIPAL BOND FUND
INSURED SERIES - CLASS A
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
Average annual total return computation from 2/28/89 through 2/28/94
based upon the following formula:
n
P( 1 + T ) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value as of 2/28/94 of a $1,000
hypothetical investment made on 2/28/89
5.00
1000( 1 + T ) = 1,507.09
T = 8.55%
============
FIRST PRAIRIE MUNICIPAL BOND FUND
INSURED SERIES - CLASS A
TOTAL RETURN COMPUTATION
Total return computation from inception through 2/28/94
based upon the following formula:
[ C + ( C x B ) ] - A
---------------------
T = A
where: A = Maximum Offering Price at beginning of period
B = Additional shares purchased through dividend reinvestment
C = NAV at end of period
T = Total return
T = [ 12.13 + ( 12.13 x 0.6599 ) ] - 12.50
--------------------------------------------
12.50
T = 61.08%
========
FIRST PRAIRIE MUNICIPAL BOND FUND
INSURED SERIES - CLASS B
AVERAGE ANNUAL TOTAL RETURN COMPUTATION
Average annual total return computation from inception through 2/28/94
based upon the following formula:
n
P( 1 + T ) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value as of 2/28/94 of a $1,000
hypothetical investment made on 2/8/94 (inception)
0.058
1000( 1 + T ) = 954.20
T = -55.44%
==========
FIRST PRAIRIE MUNICIPAL BOND FUND
INSURED SERIES - CLASS B
TOTAL RETURN COMPUTATION
Total return computation from inception through 2/28/94
based upon the following formula:
[ C + ( C x B ) ] - A
---------------------
T = A
where: A = NAV at beginning of period
B = Additional shares purchased through dividend reinvestment
C = NAV at end of period
T = Total return
T = [ 12.14 + ( 12.14 x 0.002277 ) ] - 12.37
--------------------------------------------
12.37
T = -1.64%
========
FIRST PRAIRIE MUNICIPAL BOND FUND
INSURED SERIES - CLASS B
TOTAL RETURN COMPUTATION
Total return computation from inception through 2/28/94
based upon the following formula:
[ C + ( C x B ) ] - A D x ( E x F )
---------------------- --- ------------
T = A G
where: A = NAV at beginning of period
B = Additional shares purchased through dividend reinvestment
C = NAV at end of period
D = Applicable CDSC
E = Lower of A or C
F = Original shares
G = Original investment
T = Total return
T = [ 12.14 + (12.14 x 0.002277 ) ] - 12.37 -- 0.03 x (12.14 x 80.841 )
------------------------------------------ -----------------------
12.37 1000
T = -4.58%
======
Other Exhibit
(a)
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Mark N. Jacobs and
Robert I. Frenkel, and each of them, with full power to act without the
other, her true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for her and in her name, place and
stead, in any and all capacities (until revoked in writing) to sign any and
all amendments to the 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 her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
First Prairie Tax Exempt Bond Fund, Inc.
________________________________________
June 10, 1994
_________________________________
Marilyn McCoy, Director
