February 14, 1994
PREMIER INSURED MUNICIPAL BOND FUND
Supplement to Prospectus Dated February 14, 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 Fund's manager, The Dreyfus Corporation ("Dreyfus"), has 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 the receipt of certain regulatory
approvals and the approvals of the stockholders of Dreyfus and of Mellon.
The merger is expected to occur in mid-1994, but could occur significantly
later.
As a result of regulatory requirement and the terms of the Merger
Agreement, Dreyfus will seek various approvals from the Fund's board and
shareholders before completion of the merger. Shareholder approval will
be solicited by a proxy statement.
__________________________________________________
The following information supplements and should be read in
conjunction with the section of the Fund's Prospectus entitled
"Performance Information."
From time to time advertising materials for the Fund also may refer
to Value Line Mutual Fund Survey company ratings and related analyses
supporting the rating.
PREMIER INSURED MUNICIPAL BOND FUND
PROSPECTUS FEBRUARY 14, 1994
Premier Insured Municipal Bond Fund (the "Fund") is an open-end,
management investment company, known as a mutual fund. Its goal is to
maximize current income exempt from Federal and, where applicable, from
State personal income taxes to the extent consistent with the
preservation of capital.
The Fund permits you to invest in any of six separate non-diversified
portfolios (each, a "Series"): the National Series, the California Series,
the Connecticut Series, the Florida Series, the New Jersey Series and the
New York Series. Each Series will invest primarily in a portfolio of
Municipal Obligations (as defined below) that are insured as to the timely
payment of principal and interest by recognized insurers of Municipal
Obligations. Each Series, other than the National Series will invest
primarily in Municipal Obligations issued by issuers in the State after
which it is named. It is anticipated that substantially all dividends paid
by each Series will be exempt from Federal income tax and also, where
applicable, will be exempt from the personal income tax of the State after
which the Series is named.
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.
The Fund provides free redemption checks with respect to Class A
shares, which you can use in amounts of $500 or more for cash or to pay
bills. You can purchase or redeem Fund shares by telephone using the
TELETRANSFER Privilege.
The Dreyfus Corporation will professionally manage the Fund's
portfolio.
-------------------
This Prospectus sets forth concisely information about the Fund that
you should know before investing. It should be read and retained for future
reference.
Part B (also known as the Statement of Additional Information), dated
February 14, 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 1-800-554-4611. When telephoning, ask for Operator 666.
-------------------
THE FUND'S 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, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY. EACH SERIES' SHARES INVOLVE
CERTAIN INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
EACH SERIES' SHARE PRICE, YIELD AND INVESTMENT RETURN FLUCTUATE
AND ARE NOT GUARANTEED.
- ----------------------------------------------------------------------
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.
- ----------------------------------------------------------------------
TABLE OF CONTENTS
Fee Table........................................ 3
Condensed Financial Information.................. 5
Alternative Purchase Methods..................... 5
Description of the Fund.......................... 6
Management of the Fund........................... 21
How to Buy Fund Shares........................... 22
Shareholder Services............................. 25
How to Redeem Fund Shares........................ 28
Distribution Plan and Shareholder Services Plan.. 32
Dividends, Distributions and Taxes............... 33
Performance Information.......................... 37
General Information.............................. 38
<TABLE>
<CAPTION>
FEE TABLE
NATIONAL CONNECTICUT
SERIES SERIES
----------------- -----------------
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)..................... 4.50% -- 4.50% --
Maximum Deferred Sales Charge Imposed on Redemption
(as a percentage of the amount subject to charge)....... -- 3.00% -- 3.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees............................................. .55% .55% .55% .55%
12b-1 Fees.................................................. -- .50% -- .50%
Service Fees................................................ .25% .25% .25% .25%
Other Expenses.............................................. .15% .15% .15% .15%
Total Series Operating Expenses............................. .95% 1.45% .95% 1.45%
EXAMPLE
An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) except
where noted, redemption at the end of each time period:
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
1 YEAR.......................................................... $54 $45/$15* $54 $45/$15*
3 YEARS......................................................... $74 $66/$46* $74 $66/$46*
*Assuming no redemption of Class B shares.
FLORIDA CALIFORNIA
SERIES SERIES
----------------- -----------------
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)..................... 4.50% -- 4.50% --
Maximum Deferred Sales Charge Imposed on Redemption
(as a percentage of the amount subject to charge)....... -- 3.00% -- 3.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees............................................. .55% .55% .55% .55%
12b-1 Fees.................................................. -- .50% -- .50%
Service Fees................................................ .25% .25% .25% .25%
Other Expenses.............................................. .15% .15% .15% .15%
Total Series Operating Expenses............................. .95% 1.45% .95% 1.45%
EXAMPLE
An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) except
where noted, redemption at the end of each time period:
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
1 YEAR.......................................................... $54 $45/$15* $54 $45/$15*
3 YEARS......................................................... $74 $66/$46* $74 $66/$46*
- -----------------------
*Assuming no redemption of Class B shares.
(3)
NEW JERSEY NEW YORK
SERIES SERIES
----------------- -----------------
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)..................... 4.50% -- 4.50% --
Maximum Deferred Sales Charge Imposed on Redemption
(as a percentage of the amount subject to charge)....... -- 3.00% -- 3.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees............................................. .55% .55% .55% .55%
12b-1 Fees.................................................. -- .50% -- .50%
Service Fees................................................ .25% .25% .25% .25%
Other Expenses.............................................. .15% .15% .15% .15%
Total Series Operating Expenses............................. .95% 1.45% .95% 1.45%
EXAMPLE
An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) except
where noted, redemption at the end of each time period:
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
1 YEAR.......................................................... $54 $45/$15* $54 $45/$15*
3 YEARS......................................................... $74 $66/$46* $74 $66/$46*
- -----------------------
*Assuming no redemption of Class B shares.
</TABLE>
- ----------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE
EXAMPLE ASSUMES A 5% ANNUAL RETURN, 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 you in understanding the
various costs and expenses that investors will bear, directly or indirectly,
the payment of which will reduce investors' return on an annual basis.
Other Expenses and Total Series Operating Expenses are based on
estimated amounts for the current fiscal year. 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. The information in the foregoing table
does not reflect any fee waivers or expense reimbursement arrangements
that may be in effect. Certain Service Agents (as defined below) may
charge their clients direct fees for effecting transactions in the relevant
Series' shares; 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 ."
(4)
CONDENSED FINANCIAL INFORMATION
The table below sets forth certain information covering the California
Series investment results for the period indicated. Further financial data
and related notes are included in the Statement of Additional Information,
available upon request. No financial data are available for the Connecticut
Series, the Florida Series, the National Series, the New Jersey Series and
the New York Series, which had not commenced operation as of the date of
this prospectus.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
beneficial interest outstanding, total investment return, ratios to average
net assets and other supplemental data for the period August 19, 1993
(commencement of operations) to December 31, 1993 (unaudited). This
information has been derived from information provided in the Fund's
financial statements.
<TABLE>
<CAPTION>
CLASS A CLASS B
PER SHARE DATA: SHARES SHARES
-------- --------
<S> <C> <C>
Net asset value, beginning of period....................................... $12.50 $12.50
-------- --------
INVESTMENT OPERATION:
Investment income-net...................................................... .25 .22
Net unrealized gain on investments......................................... .25 .26
-------- --------
TOTAL FROM INVESTMENT OPERATIONS....................................... .50 .48
-------- --------
DISTRIBUTIONS;
Dividends from investment income-net....................................... (.25) (.22)
-------- --------
Net asset value, end of period............................................. $12.75 $12.76
======== ========
TOTAL INVESTMENT RETURN(1)(2).................................................. 3.99% 3.87%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets(2)................................. -- .50%
Ratio of net investment income to average net assets(2).................... 5.04% 4.65%
Decrease reflected in above ratios due to undertakings by
The Dreyfus Corporation (limited to the expense limitation
provision of the Management Agreement)(2).............................. 2.50% 2.50%
Portfolio Turnover Rate(3)..................................................... -- --
Net Assets, end of period (000's Omitted)...................................... $1,049 $1,422
- -------------
(1) Exclusive of sales charge.
(2) Annualized.
(3) Not annualized.
</TABLE>
Further information about the Fund's performance will be contained in
the Fund's annual report for the fiscal year ending July 31, 1994, which
will be availabe approximately the end of September 1994 and may be
obtained without charge by writing to the address or calling the number
set forth on the cover page of this prospectus.
ALTERNATIVE PURCHASE METHODS
The Fund offers you two methods of purchasing each Series' shares; you
may choose the Class of shares that best suits your needs, given the
amount of your purchase, the length of time you expect to hold your shares
and any other relevant circumstances. Each Class A and Class B share of a
Series represents an identical pro rata interest in that Series' investment
portfolio.
As to each Series, Class A shares are sold at net asset value per share
plus a maximum initial sales charge of 4.50% of the public offering price
imposed at the time of purchase. The initial sales charge may be reduced
or waived for certain purchases. See "How to Buy Fund Shares_Class A
Shares." These shares are subject to an annual service fee at the rate of
.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 ."
(5)
As to each Series, 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 Series. Class B shares are
subject to a maximum 3% contingent deferred sales charge ("CDSC"),
which is assessed only if you redeem Class B shares 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 .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 .50
of 1% of the value of the average daily net assets of Class B. See
"Distribution Plan and Shareholder Services Plan - Distribution 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 of a Series automatically
will convert to Class A shares of such Series, 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.
You should consider whether, during the anticipated life of your
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
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 $250,000 or more in Fund shares.
DESCRIPTION OF THE FUND
GENERAL
The Fund is a "series fund," which is a mutual fund divided into
separate portfolios. Each portfolio is treated as a separate entity for
certain matters under the Investment Company Act of 1940 and for other
purposes, and a shareholder of one Series is not deemed to be a
shareholder of any other Series. As described below, for certain matters
Fund shareholders vote together as a group; as to others they vote
separately by Series. When used herein, the term "State" refers to the
State, if applicable, after which a Series is named.
INVESTMENT OBJECTIVE
The Fund's goal is to maximize current income exempt from Federal
income tax and, where applicable, from State personal income taxes for
residents of the States of California, Connecticut, Florida, New Jersey and
New York, to the extent consistent with the preservation of capital. To
accomplish this goal, each Series will invest primarily in debt securities
issued by States, territories and possessions of the United States and the
District of Columbia and their political subdivisions, authorities and
corporations, the interest from which is, in the opinion of bond counsel to
the issuer, exempt from Federal income taxes ( "Municipal Obligations")
that are insured as to the timely payment of principal and interest by
recognized insurers of Municipal Obligations . In addition, the California
Series, the Connecticut Series, the Florida Series, the New Jersey Series
and the New York Series (collectively, the "State Series") will invest
primarily in such Municipal Obligations of the State after which the
relevant Series is named the interest from which is, in the opinion of bond
counsel to the issuer, exempt from Federal and, if applicable, such State's
personal income taxes (collectively, "State Municipal Obligations" or
when the context so requires, "California Municipal Obligations,"
"Connecticut Municipal Obligations," "Florida Municipal
(6)
Obligations," etc.). To the extent acceptable insured State Municipal
Obligations at any time are unavailable for investment, a State Series
will invest temporarily in State Municipal Obligations that are not subject
to insurance, insured Municipal Obligations and/or other debt securities
the interest from which is, in the opinion of bond counsel to the issuer,
exempt from Federal, but not State, income tax. With respect to the
National Series, to the extent acceptable insured Municipal Obligations at
any time are unavailable for investment, such Series will invest
temporarily in Municipal Obligations that are not subject to insurance
and/or other debt securities the interest from which is, in the opinion of
bond counsel to the issuer, exempt from Federal income tax. 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.
MUNICIPAL OBLIGATIONS
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 the payment of principal and interest.
Revenue bonds are payable from the revenue derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source, but not from the general
taxing power. Tax exempt industrial development bonds, in most cases, are
revenue bonds that 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 of 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.
MANAGEMENT POLICIES
It is a fundamental policy of the Fund that it will invest at least 80% of
the value of each Series' net assets (except when maintaining a temporary
defensive position) in Municipal Obligations. Generally, 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 that are
insured Municipal Obligations which, with respect to the State Series, are
issued by issuers in the State after which such Series is named. See
"Insurance Feature" and "Risk Factors_Investing in State Municipal
Obligations" below, and "Dividends, Distributions and Taxes." No Series
will be limited in the maturities of the securities in which it will invest;
currently the longest available maturity of Municipal Obligations is 40
years.
Municipal Obligations purchased by each Series will be rated no lower
than Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by Standard
& Poor's Corporation ("S&P") or Fitch Investors Service, Inc. ("Fitch").
Municipal Obligations rated BBB by S&P or Fitch or Baa by Moody's are
considered investment grade obligations; those rated BBB by S&P or Fitch
are regarded as having an adequate capacity to pay principal and interest,
while those rated Baa by Moody's are considered medium grade obligations
which lack outstanding investment characteristics and have speculative
characteristics. See "Appendix B" in the Statement of Additional
Information. Each Series also may invest in securities which, while not
rated, are determined by The Dreyfus Corporation to be of comparable
quality to the rated securities in which the Series may invest. Each Series
also may invest in Taxable
(7)
Investments of the quality described below. Under normal market
conditions, the weighted average maturity of each Series' portfolio is
expected to exceed ten years.
In addition to usual investment practices, the Fund, on behalf of a
Series, may use speculative investment techniques such as short-selling
and lending portfolio securities. Each Series also may purchase, hold or
deal in futures contracts and options on futures contracts, as permitted
by applicable law. See "Investment Techniques" below, and "Dividends,
Distributions and Taxes."
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 securities; for example, securities the
interest upon which is paid from revenues of similar types of projects or,
with respect to the National Series also, securities whose issuers 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 users. Interest on Municipal Obligations
(including certain industrial development bonds) which are specified
private activity bonds, as defined in the Internal Revenue Code of 1986, as
amended (the "Code"), issued after August 7, 1986, while exempt from
Federal income tax, is a preference item for the purpose of the alternative
minimum tax. Where a regulated investment company receives such
interest, a proportionate share of any exempt-interest dividend paid by
the investment company may be treated as such a preference item to
shareholders. Each Series may invest without limitation in such Municipal
Obligations if The Dreyfus Corporation determines that their purchase is
consistent with the Fund's investment objective. See "Risk Factors-Other
Investment Considerations."
Each Series also 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 specified 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, the Fund's right to redeem is dependent on
the ability of the borrower to pay principal and interest on demand. Each
obligation purchased by the Fund for a Series will meet the quality
criteria established for the purchase of Municipal Obligations. The Dreyfus
Corporation, 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. No Series will invest more than 15%
of the value of its net assets in floating or variable rate demand
obligations as to which the Series cannot exercise the demand feature on
not more than seven days' notice if there is no secondary market available
for these obligations, and in other illiquid securities.
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 the 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, the participation interest will be backed by an irrevocable
letter of credit or guarantee of a bank that the Board of Trustees has
determined meets the pre
(8)
scribed 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 the 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. No
Series will invest more than 15% of the value of its net assets in
participation interests that do not have this demand feature if there is no
secondary market available for these participation interests, 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 Dreyfus Corporation, 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. No Series will invest more than 15% of the value of
its net assets in securities that are illiquid, which would include tender
option bonds as to which it cannot exercise the tender feature on not more
than seven days' notice if there is no secondary market available for these
obligations.
Each Series may acquire "stand-by commitments" with respect to
Municipal Obligations held in its portfolio. Under a stand-by commitment,
the Fund obligates a broker, dealer or bank to repurchase, at the Fund's
option, specified securities at a specified price and, in this respect,
stand-by commitments are comparable to put options. The exercise of a
stand-by commitment therefore, is subject to the ability of the seller to
make payment on demand. A Series will acquire stand-by commitments
solely to facilitate portfolio liquidity and does not intend to exercise its
rights thereunder for trading purposes. The Fund may pay for stand-by
commitments if such action is deemed necessary, thus increasing to a
degree the cost of the underlying Municipal Obligation and similarly
decreasing such security's yield to investors. Each Series also may
acquire call options on specific Municipal Obligations. A Series generally
would purchase these call options to protect the Series 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 a Series of a call option that it owns on a specific Municipal
Obligation could result in the receipt of taxable income by that Series.
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
(9)
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 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
investing in such securities is subject to a risk that should the Series
desire to sell them when a ready buyer is not available at a price the Fund
deems representative of their value, the value of such 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
Series, the Fund intends to treat such securities as liquid securities in
accordance with procedures approved by the Fund's Board of Trustees.
Because it is not possible to predict with assurance how the market for
restricted securities pursuant to Rule 144A will develop, the Fund's Board
of Trustees has directed The Dreyfus Corporation to monitor carefully
each Series' investments in such securities with particular regard to
trading activity, availability of reliable price information and other
relevant information. To the extent that, for a period of time, qualified
institutional buyers cease purchasing restricted securities pursuant to
Rule 144A, the Series' investing in such securities may have the effect of
increasing the level of illiquidity in such Series' investments during such
period.
Each Series may invest in zero coupon securities which are debt
securities issued or sold at a discount from their face value which do not
entitle the holder to any periodic payment of interest prior to maturity or
a specified redemption date (or cash payment date). The amount of the
discount varies depending on the time remaining until maturity or cash
payment date, prevailing interest rates, liquidity of the security and
perceived credit quality of the issuer. Zero coupon securities also may
take the form of debt securities that have been stripped of their
unmatured interest coupons, the coupons themselves and receipts or
certificates representing interests in such stripped debt obligations and
coupons. The market prices of zero coupon securities generally are more
volatile than the market prices of interest-bearing securities and are
likely to respond to a greater degree to changes in interest rates than
interest-bearing securities having similar maturities and credit qualities.
See "Risk Factors_Other Investment Considerations" below, and
"Dividends, Distributions and Taxes" in the Statement of Additional
Information.
From time to time, on a temporary basis other than for temporary
defensive purposes (but not to exceed 20% of the value of a 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 or Fitch; obligations of the U.S.
Government, its agencies or instrumentalities;
(10)
commercial paper rated not lower than P-1 by Moody's, A-1 by S&P or
F-1 by Fitch; 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 a 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 temporary defensive
purposes, at no time will more than 20% of the value of a Series' net
assets be invested in Taxable Investments. When a State Series has
adopted a temporary defensive position, including when acceptable State
Municipal Obligations are unavailable for investment by a State Series, in
excess of 35% of such Series' net assets may be invested in securities
that are not exempt from State personal income taxes, if applicable. Under
normal market conditions, each Series anticipates that not more than 5%
of the value of its total assets will be invested in any one category of
Taxable Investments. In certain states, dividends and distributions paid by
a Series that are attributable to interest income earned by the Series
from direct obligations of the United States may not be subject to state
income tax. Taxable Investments are more fully described in the
Statement of Additional Information, to which reference hereby is made.
INVESTMENT TECHNIQUES
The Fund, on behalf of a Series, may employ, among others, the
investment techniques described below. Use of certain of these techniques
may give rise to taxable income.
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 Fund enters into the commitment. The Fund will make commitments to
purchase such Municipal Obligations only with the intention of actually
acquiring the securities, but the Fund may sell these securities before the
settlement date if it is deemed advisable, although any gain realized on
such sale would be taxable. The Fund will not 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 committed.
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 of the Fund 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
Municipal Obligations 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.
FUTURES TRANSACTIONS_IN GENERAL
Neither the Fund nor any Series is a commodity pool. However, as a
substitute for a comparable market position in the underlying securities
and for hedging purposes, each Series may engage, to the extent permitted
by applicable regulations, in futures and options on futures transactions,
as described below.
(11)
A 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 such 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, a 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 Fund will be
required to deposit with its custodian in the broker's name an amount of
cash or cash equivalents up to approximately 10% of the contract amount.
This amount is subject to change by the exchange or board of trade on
which the contract is traded and members of such exchange or board of
trade may impose their own higher requirements. This amount is known as
"initial margin" and is in the nature of a performance bond or good faith
deposit on the contract which is returned to the Fund upon termination of
the futures position, assuming all contractual obligations have been
satisfied. Subsequent payments, known as "variation margin," to and from
the broker will be made daily as the price of the index or securities
underlying the futures contract fluctuates, making the long and short
positions in the futures contract more or less valuable, a process known
as "marking-to-market." At any time prior to the expiration of a futures
contract, the Fund may elect to close the position by taking an opposite
position at the then prevailing price, which will operate to terminate the
Fund's existing position in the contract.
Although the Fund 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 subjecting the Series engaging in the futures
transaction to a substantial loss. If it is not possible, or the Fund
determines not, to close a futures position in anticipation of adverse
price movements, the Fund will be required to make daily cash payments
of variation margin. In such circumstances, an increase in the value of the
portion of the portfolio being hedged, if any, may offset partially or
completely losses on the futures contract. However, no assurance can be
given that the price of the securities being hedged will correlate with the
price movements in a futures contract and thus provide an offset to losses
on the futures contract.
In addition, to the extent a Series is engaging in a futures transaction
as a hedging device, due to the risk of an imperfect correlation between
securities in a 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, a 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
(12)
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.
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 underlying, 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.
Each Series may utilize municipal bond index futures to protect against
changes in the market value of the Municipal Obligations in the Series'
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 an
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 Fund to protect a Series' assets from
fluctuations in rates on tax exempt securities without actually buying or
selling such securities.
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 the 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, such 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
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
(13)
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
increase in the price of securities which such 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, such
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 such Series' 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 the 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 interest rate trends, which could prove to be inaccurate.
SHORT-SELLING
Each Series may make short sales, which are transactions in which the
Series sells a security it does not own in anticipation of a decline in the
market value of that security. To complete such a transaction, the Series
must borrow the security to make delivery to the buyer. The Series then is
obligated to replace the security borrowed by purchasing it at the market
price at the time of replacement. The price at such time may be more or
less than the price at which the security was sold by the Series. Until the
security is replaced, the Series is required to pay to the lender amounts
equal to any interest or other distributions which accrue during the period
of the loan. To borrow the security, the Fund also may be required to pay a
premium, which would increase the cost of the security sold. The proceeds
of the short sale will be retained by the broker, to the extent necessary to
meet margin requirements, until the short position is closed out.
Until the Series replaces a borrowed security in connection with a
short sale, the Series will: (a) maintain daily a segregated account,
containing cash or U.S. Government securities, at such a level that (i) the
amount deposited in the account plus the amount deposited with the
broker as collateral will equal the current value of the security sold short
and (ii) the amount deposited in the segregated account plus the amount
deposited with the broker as collateral will not be less than the market
value of the security at the time it was sold short; or (b) otherwise cover
its short position.
A Series will incur a loss as a result of the short sale if the price of
the security increases between the date of the short sale and the date on
which the Series replaces the borrowed security. A Series will realize a
gain if the security declines in price between those dates. This result is
the opposite of what one would expect from a cash purchase of a long
position in a security. The amount of any gain will be decreased, and the
amount of any loss increased, by the amount of any premium or amounts in
lieu of interest or other distributions the Series may be required to pay in
connection with a short sale.
The Fund anticipates that the frequency of short sales will vary
substantially in different periods, and it does not intend that any
specified portion of a Series' assets, as a matter of practice, will be
invested in short sales. However, no securities will be sold short if, after
effect is given to any such short sale, the total market value of all
securities sold short would exceed 25% of the value of a Series' net
assets. No Series may sell short the securities of any single issuer listed
on a national securities exchange to the extent of more than 5% of the
value of such Series' net assets. No Series may sell short the securities of
any class of an issuer to the extent, at the time of the transaction, of
more than 5% of the outstanding securities of that class.
In addition to the short sales discussed above, each Series may make
short sales "against the box," a transaction in which a Series enters into
a short sale of a security which such Series owns. The proceeds of the short
sale will be held by a broker until the settlement date
(14)
at which time the Series delivers the security
to close the short position. The Series receives the net proceeds from the
short sale. At no time will a Series have more than 15% of the value of its
net assets in deposits on short sales against the box.
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. As to each Series, such loans
may not exceed 33-1/3% of the value of such Series' total assets. In
connection with such loans, the Fund will receive collateral consisting of
cash, U.S. Government securities or irrevocable letters of credit which
will be maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. Each Series can increase its
income through the investment of such collateral. The Series 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. As to each Series, the Fund might experience risk of loss
if the institution with which it has engaged in a portfolio loan transaction
breaches its agreement with the Fund.
CERTAIN FUNDAMENTAL POLICIES
Each Series may (i) borrow money from banks, but 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 such Series' total assets, the Series will not make any additional
investments; and (ii) invest up to 25% of the value of its total assets in
the securities of issuers in a single 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. 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 the value of its net assets in repurchase agreements
providing for settlement in more than seven days after notice and in other
illiquid securities (which securities could include participation interests
(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.
INSURANCE FEATURE
At the time they are purchased by a Series, the Municipal Obligations
held in such 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 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 Series or the market value thereof. The value of each 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 non-cancelable and continue in
force so long as the Municipal Obligations are outstanding and the insurer
remains in business.
(15)
Certain types of Mutual Fund Insurance obtained by the Fund are
effective only so long as the Fund is in existence, the insurer remains in
business and the Municipal Obligations described in the policy continue to
be held by the Series. The Fund, on behalf of the 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 a
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. Each Series may purchase Municipal Obligations with this type of
insurance from parties other than the issuer and the insurance would
continue for the Series' benefit.
Typically, the insurer may not withdraw coverage on insured securities
held by a 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 Fund to refuse to
insure any additional Municipal Obligations purchased by a Series after the
effective date of such notice. The Fund's Board of Trustees has reserved
the right to terminate the Mutual Fund Insurance policy for any Series if it
determines that the benefits to such Series of having its portfolio insured
are not justified by the expense involved. See "Risk Factors_Special
Investment Considerations" below.
Mutual Fund Insurance and New Issue Insurance may be obtained from
Financial Guaranty Insurance Company ("Financial Guaranty"), Municipal
Bond Investors Assurance Corporation ("MBIA"), AMBAC Indemnity
Corporation ("AMBAC Indemnity") and Capital Guaranty Insurance Company
("Capital Guaranty"), although the Fund may purchase insurance from, or
each Series may purchase 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.
Financial Guaranty is a New York stock insurance company regulated by
the New York State Department 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 a wholly-owned subsidiary of General Electric Capital
Corporation. Financial 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 September 30, 1993, Financial Guaranty's total capital and surplus
was approximately $745 million (unaudited). The claims-paying ability of
Financial Guaranty is rated "AAA" by S&P, "Aaa" by Moody's and "AAA" by
Fitch.
MBIA is the principal operating subsidiary of MBIA Inc., the principal
shareholders of which are The Aetna Casualty and Surety Company, The
Fund American Companies, Inc., subsidiaries of CIGNA Corporation, and
Credit Locale France, CAECL S.A. Approximately 35% of the outstanding
common stock of MBIA Inc. is owned by such shareholders and the
remainder is publicly-held. 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 and the District of Columbia. As of September 30, 1993, MBIA
had admitted assets of approximately $3.0 billion, total liabilities of
approximately $2.0 billion and total capital and surplus of approximately
$951 million (all figures unaudited). The claims-paying ability of MBIA is
rated "AAA" by S&P and "Aaa" by Moody's.
AMBAC Indemnity is a Wisconsin-domiciled stock insurance company,
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 100% publicly-held company.
(16)
AMBAC Indemnity had admitted assets of
approximately $1.9 billion (unaudited) and statutory capital of
approximately $1.1 billion (unaudited) as of September 30, 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 Guarantee 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 September 30, 1993, the total statutory
policyholders' surplus and contingency reserve of Capital Guaranty was
$181,383,432 (unaudited) and the total admitted assets were
$270,021,126 (unaudited).
Additional information concerning the insurance feature appears in the
Statement of Additional Information to which your attention is directed.
RISK FACTORS
INVESTING IN STATE MUNICIPAL OBLIGATIONS (STATE SERIES ONLY)
You should consider carefully the special risks inherent in each State
Series' investment in its respective State's Municipal Obligations. Certain
of the States have experienced financial difficulties, the recurrence of
which could result in defaults or declines in the market values of various
Municipal Obligations in which such Series invests. If there should be a
default or other financial crises relating to a State or an agency or
municipality thereof, the market value and marketability of outstanding
State Municipal Obligations in a State Series' portfolio and interest
income to such Series could be adversely affected. You should obtain and
review a copy of the Statement of Additional Information which more
fully sets forth these and other risk factors.
CALIFORNIA SERIES
The special risks inherent in an investment in California Municipal
Obligations result from certain amendments to the California Constitution
and other statutes that limit the taxing and spending authority of
California governmental entities, as well as from the general financial
condition of the State of California. Since the start of the State's 1990-
91 fiscal year, the State has experienced the worst economic, fiscal and
budget conditions since the 1930s. As a result, the State has experienced
recurring budget deficits for four of the last five fiscal years ending with
1991-92. Revenues and expenditures were essentially equal in 1992-93
but the original budget for that year projected revenues exceeding
expenditures by $2.6 billion. By June 30, 1993, according to California's
Department of Finance, the State's Reserve for Economic Uncertainties
had an accumulated deficit, on a budget basis, of approximately $2.8
billion. A further consequence of the large budget imbalances over the last
three fiscal years has been that the State depleted its available cash
resources and has had to use a series of external borrowings to meet its
cash needs. As a result of the deterioration in the State's budget and cash
situation in fiscal years 1991-92 and 1992-93, between October 1991 and
October 1992, the rating on the State's general obligation bonds was
reduced by S&P from AAA to A+, by Moody's from Aaa to Aa and by Fitch
from AAA to AA. These and other factors may have the effect of impairing
the ability of the issuers of California Municipal Obligations to pay
interest on, or repay principal of, such California Municipal Obligations.
CONNECTICUT SERIES-Connecticut's economy relies in part on activities
that may be adversely affected by cyclical change, and recent declines in
defense spending have had a significant impact on unemployment levels.
Although the State recorded General Fund surpluses in its fiscal years
1985 through 1987, Connecticut reported deficits from its General Fund
operations for the fiscal years 1988 through 1991. Together with the
deficit carried forward from the State's 1990 fiscal year, the total
General Fund deficit for the 1991 fiscal year was $965.7 million. The
total deficit was funded by the issuance of General Obligation
(17)
Economic Recovery Notes. The Comptroller's annual
reports for the fiscal years ended June 30, 1992 and 1993 reflected
General Fund operating surpluses of $110 million and $113.5 million,
respectively. The Comptroller's monthly report for the period ended
August 31, 1993 stated that on a GAAP basis the cumulative deficit was
$484.3 million for fiscal 1993-94. S&P, Moody's and Fitch currently rate
Connecticut's bonds AA-, Aa and AA+, respectively.
FLORIDA SERIES-The Florida Constitution and Statutes mandate that the
State budget as a whole, and each separate fund within the State budget,
be kept in balance from currently available revenues each fiscal year.
Florida's Constitution permits issuance of Florida Municipal Obligations
pledging the full faith and credit of the State, with a vote of the electors,
to finance or refinance fixed capital outlay projects authorized by the
Legislature provided that the outstanding principal does not exceed 50% of
the total tax revenues of the State for the two preceding years. Florida's
Constitution also provides that the Legislature shall appropriate monies
sufficient to pay debt service on State bonds pledging the full faith and
credit of the State of Florida as the same becomes due. All State of
Florida tax revenues, other than trust funds dedicated by Florida's
Constitution for other purposes, would be available for such an
appropriation, if required. Revenue bonds may be issued by the State of
Florida or its agencies without a vote of Florida's electors only to finance
or refinance the cost of State fixed capital outlay projects which may be
payable solely from funds derived directly from sources other than State
of Florida tax revenues. Fiscal year 1993-94 total General Revenue and
Working Capital Funds available are estimated to be $13.548 billion,
which will result in estimated unencumbered reserves of $276.3 million
at the end of fiscal 1993-94. The General Revenue and Working Capital
Funds ended the 1992-93 fiscal year with estimated unencumbered
reserves of $441.4 million.
NEW JERSEY SERIES-Although New Jersey enjoyed a period of economic
growth with unemployment levels below the national average during the
mid-1980's, its economy slowed down well before the onset of the
national recession in July 1990. Reflecting the economic downturn, New
Jersey's unemployment rate rose from 3.6% in the first quarter of 1989 to
9.1% in April of 1993. As a result of New Jersey's fiscal weakness, in July
1991, S&P lowered its rating of the State's general obligation debt from
AAA to AA+.
NEW YORK SERIES-The special risks inherent in investing in New York
Municipal Obligations result from the financial condition of New York
State, and certain of its public bodies and municipalities, including New
York City. Beginning in early 1975, New York State, New York City and
other State entities faced serious financial difficulties which jeopardized
the credit standing and impaired the borrowing abilities of such entities
and contributed to high interest rates on, and lower market prices for,
debt obligations issued by them. A recurrence of such financial
difficulties or a failure of certain financial recovery programs could
result in defaults or declines in the market values of various New York
Municipal Obligations in which the New York Series may invest. If there
should be a default or other financial crisis relating to New York State,
New York City, a State or City agency, or a State municipality, the market
value and marketability of outstanding New York Municipal Obligations in
the New York Series' portfolio and the interest income to such Series
could be adversely affected. Moreover, the significant slowdown in the
New York regional economy in the early 1990's added substantial
uncertainty to estimates of the State's tax revenues, which, in part,
caused New York State to overestimate its General Fund tax receipts in
the 1992 fiscal year by $575 million. The 1992 fiscal year was the fourth
consecutive year in which New York State incurred a cash-basis operating
deficit in the General Fund and issued deficit notes. The State's 1992-93
fiscal year was characterized by national and regional economies that
performed better than projected in April 1992. National gross domestic
product, State personal income, and employment and unemployment in the
State are estimated to have performed better than originally projected in
April 1992. After reflecting a 1992-93 year-end deposit to the refund
reserve account of $671 million, reported 1992-93 General Fund receipts
were $45 million higher than originally projected in April 1992. If not for
that year-end transaction, which had the effect of reducing 1992-93
(18)
receipts by $671 million and making those receipts
available in 1993-94, General Fund receipts would have been $716 million
higher than originally projected. There can be no assurance that New York
will not face substantial potential budget gaps in future years. In January
1992, Moody's lowered from A to Baa1 the ratings on certain
appropriation-backed debt of New York State and its agencies. The State's
general obligation, State-guaranteed and New York State Local Government
Assistance Corporation bonds continued to be rated A by Moody's. In
January 1992, S&P lowered from A to A- its ratings of New York State
general obligation bonds and stated that it continues to assess the ratings
outlook as negative. The ratings of various agency debt, state moral
obligations, contractual obligations, lease purchase obligations and State
guarantees also were lowered. In February 1991, Moody's lowered its
rating on New York City's general obligation bonds from A to Baa1. The
rating changes reflected the rating agencies' concerns about the financial
condition of New York State and City, the heavy debt load of the State and
City, and economic uncertainties in the region.
SPECIAL INVESTMENT CONSIDERATIONS
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 a Series.
Because coverage under certain Mutual Fund Insurance policies may
terminate upon sale of a security from a Series' portfolio, insurance with
this termination feature should not be viewed as assisting the
marketability of securities in the Series' portfolio, whether or not the
securities are in default or subject to a serious risk of default. The
Dreyfus Corporation intends to retain any Municipal Obligations subject to
such insurance which are in default or, in the view of The Dreyfus
Corporation, in significant risk of default and to recommend to the Board
of Trustees that the Fund 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 or Fitch) which are not in default.
To the extent that a Series holds defaulted securities subject to Mutual
Fund Insurance with this termination feature, it may be limited in its
ability in certain circumstances to purchase other Municipal Obligations.
While a defaulted Municipal Obligation is held in a Series' portfolio, such
Series continues to pay the insurance premium thereon but also is entitled
to collect interest payments from the insurer and retains 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 a
Series. Therefore, the Fund 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 Fund, at its option, may purchase from Financial
Guaranty secondary market insurance ("Secondary Market Insurance") on
any Municipal Obligation purchased by a Series. By purchasing Secondary
Market Insurance, the Fund would obtain, upon payment of a single
premium, insurance against nonpayment of scheduled principal and
interest for the remaining term of the Municipal Obligation, regardless of
whether the Series then owned such security. Such insurance coverage
would be non-cancelable 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 a
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.
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
(19)
by the 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 or Fitch, 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 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. Bonds rated BBB by Fitch 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. See "Appendix B" 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 such Series'
portfolio securities.
Federal income tax law requires the holder of a zero coupon security or
of certain pay-in- kind bonds to accrue income with respect to these
securities prior to the receipt of cash payments. To maintain its
qualification as a regulated investment company and avoid liability for
Federal income taxes, a Series may be required to distribute such income
accrued with respect to these securities and may have to dispose of
portfolio securities under disadvantageous circumstances in order to
generate cash to satisfy these distribution requirements.
Certain municipal lease/purchase obligations in which the Series 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 Dreyfus Corporation 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.
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. Shareholders 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
policies and submit possible changes in the Fund's structure to
shareholders for their consideration. If legislation were enacted that
would treat a type of Municipal Obligation as taxable, the Fund would treat
such security as a permissible Taxable Investment within the applicable
limits set forth herein.
Each Series' classification as a "non-diversified" investment company
means that the proportion of such 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, each Series
(20)
intends to conduct its operations so as to qualify as
a "regulated investment company" for purposes of the Code, which
requires that, at the end of each quarter of its taxable year, (i) at least
50% of the market value of its total assets be invested in cash, U.S.
Government securities, the securities of other regulated investment
companies and other securities, with such other securities of any one
issuer limited for the purposes of this calculation to an amount not
greater than 5% of the value of such Series' total assets, and (ii) not more
than 25% of the value of its total assets be invested in the securities of
any one issuer (other than U.S. Government securities or the securities of
other regulated investment companies). Since a relatively high percentage
of each Series' assets may be invested in the securities of a limited
number of issuers, the 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 the Fund are made independently from those of
other investment companies advised by The Dreyfus Corporation. However,
if such other investment companies are prepared to invest in, or desire to
dispose of, Municipal Obligations or Taxable Investments at the same time
as the Fund, available investments or opportunities for sales will be
allocated equitably to each investment company. In some cases, this
procedure may adversely affect the size of the position obtained for or
disposed of by the Fund or the price paid or received by the Fund.
MANAGEMENT OF THE FUND
The Dreyfus Corporation, located at 200 Park Avenue, New York, New
York 10166, was formed in 1947 and serves as the Fund's investment
adviser. As of December 31, 1993, The Dreyfus Corporation managed or
administered approximately $78 billion in assets for more than 1.9
million investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the
Fund, subject to the overall authority of the Fund's Board of Trustees in
accordance with Massachusetts law. The primary investment officer for
the California Series is Stephen C. Kris, who has been an employee of The
Dreyfus Corporation since 1988. The primary investment officer for each
of the Connecticut Series, the Florida Series, the National Series, the New
Jersey Series and the New York Series will be L. Lawrence Troutman, who
has been an employee of The Dreyfus Corporation since 1985. The Fund's
other investment officers are identified under "Management of the Fund"
in the Fund's Statement of Additional Information. The Dreyfus
Corporation also provides research services for the Fund as well as for
other funds advised by The Dreyfus Corporation through a professional
staff of portfolio managers and security analysts.
Under the terms of the Management Agreement, the Fund has agreed to
pay The Dreyfus Corporation a monthly fee at the annual rate of .55 of 1%
of the value of each Series' average daily net assets. From time to time,
The Dreyfus Corporation may waive receipt of its fees and/or voluntarily
assume certain expenses of a Series, which would have the effect of
lowering the overall expense ratio of that Series and increasing yield to
investors at the time such amounts are waived or assumed, as the case
may be. The Fund will not pay The Dreyfus Corporation at a later time for
any amounts it may waive, nor will the Fund reimburse The Dreyfus
Corporation for any amounts it may assume. For the period August 19,
1993 (commencement of operations) through December 31, 1993, no
management fee was paid by the Fund pursuant to undertakings in effect.
EXPENSES
All expenses incurred in the operation of the Fund are borne by the Fund,
except to the extent specifically assumed by the Manager. The expenses
borne by the Fund include: organizational costs, taxes, interest, loan
commitment fees, interest and distributions paid on securities sold short,
brokerage fees and commissions, if any, fees of Trustees who are not
officers, directors, employees or holders of 5% or more of the outstanding
voting securities of the Manager, Securities and Exchange Commission
fees, state Blue Sky qualification fees, advisory fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance
(21)
premiums, industry association fees, outside
auditing and legal expenses, costs of independent pricing services, costs
of maintaining the Fund's existence, costs attributable to investor
services (including, without limitation, telephone and personnel
expenses), costs of shareholders' reports and meetings, and any
extraordinary expenses. 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
among the Series on the basis determined by the Board of Trustees,
including, but not limited to, proportionately in relation to the net assets
of each Series.
The Dreyfus Corporation may pay Dreyfus Service Corporation for
shareholder and distribution services from its own monies, including past
profits but not including the management fee paid by the Fund. Dreyfus
Service Corporation may pay part or all of these payments to securities
dealers or others for servicing and distribution.
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.
HOW TO BUY FUND SHARES
The Fund's distributor is Dreyfus Service Corporation, a wholly-owned
subsidiary of The Dreyfus Corporation located at 200 Park Avenue, New
York, New York 10166. The shares it distributes are not deposits or
obligations of The Dreyfus Security Savings Bank, F.S.B. and therefore are
not insured by the Federal Deposit Insurance Corporation.
Fund shares may be purchased only by clients of certain financial
institutions (which may include banks), securities dealers ("Selected
Dealers") and other industry professionals (collectively, "Service
Agents"), except that full-time or part-time employees of The Dreyfus
Corporation or any of its affiliates or subsidiaries, directors of The
Dreyfus Corporation, Board members of a fund advised by The Dreyfus
Corporation, including members of the Fund's Board, or the spouse or
minor child of any of the foregoing may purchase Class A shares directly
through Dreyfus Service Corporation. Subsequent purchases may be sent
directly to the Transfer Agent or your Service Agent. Service Agents may
receive different levels of compensation for selling different Classes of
shares.
Management understands that some Service Agents may impose certain
conditions on their clients which are different from those described in
this Prospectus, and to the extent permitted by applicable regulatory
authority, may charge their clients direct fees which would be in addition
to any amounts which might be received under the Shareholder Services
Plan. Each Service Agent has agreed to transmit to its clients a schedule
of such fees. You should consult your Service Agent in this regard.
When purchasing Series' shares, you must specify whether the purchase
is for Class A or Class B shares. Share certificates are issued only upon
your written 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.
The minimum initial investment is $1,000. Subsequent investments
must be at least $100. The initial investment must be accompanied by the
Fund's Account Application.
You may purchase Series' shares by check or wire, or through the
TELETRANSFER Privilege described below. Checks should be made payable
to "Premier Insured Municipal Bond Fund,"and should specify the Series in
which you are investing. Payments to open new accounts which are mailed
should be sent to Premier Insured Municipal Bond Fund, P.O. Box
(22)
9387, Providence, Rhode Island 02940-9387, together
with your Account Application indicating which Class of shares is being
purchased. For subsequent investments, your Fund account number should
appear on the check and an investment slip should be enclosed and sent to
Premier Insured Municipal Bond Fund, P.O. Box 105, Newark, New Jersey
07101-0105. Neither initial nor subsequent investments should be made
by third party check. Wire payments may be made if your 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. Immediately
available funds may be transmitted by wire to The Bank of New York,
together with the applicable Series' DDA# as shown below, for purchase
of Fund shares in your name.
FOR CLASS A SHARES
DDA# 8900088311/Premier Insured Municipal Bond Fund/National
Series-Class A shares
DDA# 8900118172/Premier Insured Municipal Bond Fund/California
Series-Class A shares
DDA# 8900088346/Premier Insured Municipal Bond Fund/Connecticut
Series-Class A shares
DDA# 8900088362/Premier Insured Municipal Bond Fund/Florida
Series-Class A shares
DDA# 8900088389/Premier Insured Municipal Bond Fund/New Jersey
Series-Class A shares
DDA# 8900088400/Premier Insured Municipal Bond Fund/New York
Series-Class A shares
FOR CLASS B SHARES
DDA# 8900115440/Premier Insured Municipal Bond Fund/National
Series-Class B shares
DDA# 8900115270/Premier Insured Municipal Bond Fund/California
Series-Class B shares
DDA# 8900115459/Premier Insured Municipal Bond Fund/Connecticut
Series-Class B shares
DDA# 8900115467/Premier Insured Municipal Bond Fund/Florida
Series-Class B shares
DDA# 8900115475/Premier Insured Municipal Bond Fund/New Jersey
Series-Class B shares
DDA# 8900115491/Premier Insured Municipal Bond Fund/New York
Series-Class B shares
The wire must include your Fund account number (for new accounts,
your Taxpayer Identification Number ("TIN") should be included instead),
account registration and dealer number, if applicable. If your initial
purchase of Fund shares is by wire, please call 1-800-645-6561 after
completing your wire payment to obtain your Fund account number. Please
include your 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. You may obtain
further information about remitting funds in this manner from your bank.
All payments should be made in U.S. dollars and, to avoid fees and delays,
should be drawn only on U.S. banks. A charge will be imposed if any check
used for investment in your account does not clear. The Fund makes
available to certain large institutions the ability to issue purchase
instructions through compatible computer facilities.
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. You must direct
the institution to transmit immediately available funds through the
Automated Clearing House to The Bank of New York with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and your Fund account number PRECEDED BY THE DIGITS
"1111."
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 day the New York Stock Exchange is open for business. For
purposes of determining net asset value, options and futures contracts
will be valued 15 minutes after the close of trading on the floor of the
New York Stock Exchange. Net asset value per share of each Class is
computed by dividing the value of the net assets of each Series
represented by such Class (i.e., the value of assets of each Series less
liabilities) by the total number of Series' shares of such Class
outstanding. Each Series' investments are valued each business day by an
independent pricing service approved by the Board of Trustees 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
Trustees. For further infor-
(23)
mation regarding the methods employed in
valuing the Series' investments, see "Determination of Net Asset Value"
in the Statement of Additional Information.
Federal regulations require that you provide a certified 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
you to a $50 penalty imposed by the Internal Revenue Service (the "IRS").
If an order is received in proper form 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, 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.
Orders for the purchase of Fund shares received by dealers by the close
of trading on the floor of the New York Stock Exchange on any business day
and transmitted to Dreyfus Service Corporation by the close of its
business day (normally 5:15 p.m., New York time) will 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
dealer's responsibility to transmit orders so that they will be received by
Dreyfus Service Corporation before the close of its business day.
CLASS A SHARES_The public offering price for Class A shares of each
Series is the net asset value per share of that Class plus a sales load as
shown below:
<TABLE>
<CAPTION>
TOTAL SALES LOAD
-------------------------------
AS A % OF AS A % OF DEALERS' REALLOWANCE
OFFERING PRICE NET ASSET VALUE AS A % OF
AMOUNT OF TRANSACTION PER SHARE PER SHARE OFFERING PRICE
------------------------------- --------------------
<S> <C> <C> <C>
Less than $50,000.......................... 4.50 4.70 4.25
$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......... .50 .50 .50
$5,000,000 and over........................ .25 .25 .25
</TABLE>
Full-time employees of NASD member firms and full-time employees of
other financial institutions that have entered into an agreement with
Dreyfus Service Corporation pertaining to the sale of Fund shares (or
which otherwise have a brokerage related or clearing arrangement with an
NASD member firm or financial institution with respect to the sale of
Fund shares) may purchase Class A shares for themselves directly or
pursuant to an employee benefit plan or other program, or for their
spouses or minor children, at net asset value, provided that they have
furnished Dreyfus Service Corporation with such information as it may
request from time to time in order to verify eligibility for this privilege.
This privilege also applies to full-time employees of financial
institutions affiliated with NASD member firms whose full-time
employees are eligible to purchase Class A shares at net asset value. In
addition, Class A shares are offered at net asset value to full-time or
part-time employees of The Dreyfus Corporation or any of its affiliates or
subsidiaries, directors of The Dreyfus Corporation, Board members of a
fund advised by The Dreyfus Corporation, including members of the Fund's
Board, or the spouse or minor child of any of the foregoing.
The dealer reallowance may be changed from time to time but will
remain the same for all dealers. Dreyfus Service Corporation, at its expense,
may provide additional promotional
(24)
incentives to dealers that sell shares of funds
advised by The Dreyfus Corporation which are sold with a sales load, such
as the Fund. In some instances, those incentives may be offered only to
certain dealers who have sold or may sell significant amounts of shares.
CLASS B SHARES_The public offering price for Class B shares of each
Series 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." Dreyfus Service Corporation compensates certain Service
Agents for selling Class B shares at the time of purchase from Dreyfus
Service Corporation's own assets. The proceeds of the CDSC and the
distribution fee, in part, are used to defray these expenses.
RIGHT OF ACCUMULATION
CLASS A SHARES_Reduced sales loads apply to any purchase of Class A
shares, shares of certain other funds advised by The Dreyfus Corporation
which are sold with a sales load and shares acquired by a previous
exchange of such shares (hereinafter referred to as "Eligible Funds"), by
you and any related "purchaser" as defined in the Statement of Additional
Information, where the aggregate investment, including such purchase, is
$50,000 or more. If, for example, you previously purchased and still hold
Class A shares of the Fund, or of any other Eligible Fund or combination
thereof, with an aggregate current market value of $40,000 and
subsequently purchase Class A shares of the Fund or an Eligible Fund
having a current value of $20,000, the sales load applicable to the
subsequent purchase would be reduced to 4% of the offering price. 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 purchase you or your
Service Agent must notify Dreyfus Service Corporation 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 your holdings through a check of
appropriate records.
TELETRANSFER PRIVILEGE
You may purchase Fund shares (minimum $500, maximum $150,000 per
day) by telephone if you have checked the appropriate box and supplied the
necessary information on the Fund's Account Application or have filed an
Optional Services Form with the Transfer Agent. The proceeds will be
transferred between the bank account designated in one of these
documents and your 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.
If you have selected the TELETRANSFER Privilege, you may request a
TELETRANSFER purchase by telephoning 1-800-221-4060 or, if you are
calling from overseas, call 1-401-455-3306.
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 in this Prospectus. You should consult your Service Agent in this
regard.
EXCHANGE PRIVILEGE
The Exchange Privilege enables clients of certain Service Agents to
purchase, in exchange for Class A or Class B shares of a Series, shares of
the same Class in one of the other Series, or of the same Class in certain
other funds managed or administered by The Dreyfus Corporation, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to
you. If you desire to use this Privilege, you should consult your Service
Agent or Dreyfus Service Corporation to determine if it is available and
whether any conditions are imposed on its use.
To use this Privilege, your Service Agent acting on your behalf must
give exchange instructions to the Transfer Agent in writing, by wire or by
telephone. If you previously have estab-
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lished the Telephone Exchange
Privilege, you may telephone exchange instructions by calling 1-800-221-
4060 or, if you are calling from overseas, call 1-401-455-3306. See "How
to Redeem Fund Shares-Procedures." Before any exchange, you 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 Dreyfus
Service Corporation. Except in the case of Personal Retirement Plans, the
shares being exchanged must have a current value of at least $500;
furthermore, when establishing a new account by exchange, the shares
being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made.
Telephone exchanges may be made only if the appropriate "YES" box has
been checked on the Account Application, or a separate signed Optional
Services Form is on file with the Transfer Agent. Upon an exchange into a
new account, the following shareholder services and privileges, as
applicable and where available, will be automatically carried over to the
fund into which the exchange is made; Exchange Privilege, Check
Redemption Privilege, TELETRANSFER Privilege and the dividend/capital
gain distribution option (except for the Dividend Sweep Privilege)
selected by the investor.
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges 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 you are
exchanging Class A shares into a fund that charges a sales load, you may
qualify for share prices which do not include the sales load or which
reflect a reduced sales load, if the shares from which you are 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 your exchange
your Service Agent must notify Dreyfus Service Corporation. Any such
qualification is subject to confirmation of your holdings through a check
of appropriate records. See "Shareholder Services" in the Statement of
Additional Information. No fees currently are charged shareholders
directly in connection with exchanges, although the Fund reserves the
right, upon not less than 60 days' written notice, to charge shareholders a
nominal fee in accordance with rules promulgated by the Securities and
Exchange Commission. The Fund reserves the right to reject any exchange
request in whole or in part. The Exchange Privilege may be modified or
terminated at any time upon notice to shareholders.
The exchange of shares of one fund or Series for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize a taxable gain or loss.
AUTO-EXCHANGE PRIVILEGE
Auto-Exchange Privilege enables you 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 one of the other
Series or of other funds in the Premier Family of Funds or certain other
funds in the Dreyfus Family of Funds of which you are currently an
investor. The amount you designate, 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 day of the month
according to the schedule you have 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
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Statement of
Additional Information. The right to exercise this Privilege may be
modified or canceled by the Fund or the Transfer Agent. You may modify or
cancel your exercise of this Privilege at any time by mailing written
notification to Premier Insured Municipal Bond Fund, P.O. Box 6587,
Providence, Rhode Island 02940-6587. 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 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 in the Premier Family of Funds or Dreyfus Family of Funds
eligible to participate in this Privilege, or to obtain an Auto-Exchange
Authorization Form, please call toll free 1-800-645-6561.
AUTOMATIC ASSET BUILDER
AUTOMATIC Asset Builder permits you to purchase Fund shares
(minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Fund shares are purchased by transferring funds
from the bank account designated by you. At your option, the bank account
designated by you will be debited in the specified amount, and Fund shares
will be purchased, once a month, on either the first or fifteenth day, or
twice a month, on both days. Only an account maintained at a domestic
financial institution which is an Automated Clearing House member may
be so designated. To establish an AUTOMATIC Asset Builder account, you
must file an authorization form with the Transfer Agent. You may obtain
the necessary authorization form from Dreyfus Service Corporation. You
may cancel your participation in this Privilege or change the amount of
purchase at any time by mailing written notification to Premier Insured
Municipal Bond Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587,
and the notification will be effective three business days following
receipt. The Fund may modify or terminate this Privilege at any time or
charge a service fee. No such fee currently is contemplated.
GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Government Direct Deposit Privilege enables you to purchase Fund
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
your Fund account. You may deposit as much of such payments as you elect.
To enroll in Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment
that you desire to include in the Privilege. The appropriate form may be
obtained from Dreyfus Service Corporation or your Service Agent. Death or
legal incapacity will terminate your participation in this Privilege. You
may elect at any time to terminate your participation by notifying in
writing the appropriate Federal agency. Further, the Fund may terminate
your participation upon 30 days' notice to you.
DIVIDEND SWEEP PRIVILEGE
Dividend Sweep Privilege enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by the Fund in
shares of the same Class of another fund in the Premier Family of Funds or
the Dreyfus Family of Funds of which you are 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 you are investing in a fund that charges a
sales load, you may qualify for share prices which do not include the sales
load or which reflect a reduced sales load. If you are investing in a fund
that charges a CDSC, the shares purchased will be subject on redemption
to the CDSC, if any, applicable to the purchased shares. See "Shareholder
Services" in the Statement of Additional Information. For more
information concerning this Privilege and the funds in the Premier Family
of Funds or the Dreyfus Family of Funds eligible to participate in this
Privilege, or to request a Dividend Sweep Authorization Form, please call
toll free 1-800-645-6561. You may cancel this Privilege by mailing written
notification to Premier Insured Municipal Bond Fund, P.O. Box 9671, Providence,
Rhode Island 02940-6587. To select a new fund after cancellation, you must
submit a
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new authorization form. Enrollment in or cancellation of this
Privilege is effective three business days following receipt. This
Privilege is available only for existing accounts and may not be used to
open new accounts. Minimum subsequent investments do not apply. The
Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account. An application for the
Automatic Withdrawal Plan can be obtained from Dreyfus Service
Corporation. There is a service charge of $.50 for each withdrawal check.
The Automatic Withdrawal Plan may be ended at any time by you, 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.
LETTER OF INTENT_CLASS A SHARES
By signing a Letter of Intent form, available from Dreyfus Service
Corporation, you become 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 you hold (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 you do not
purchase the full amount indicated in the Letter of Intent. The escrow will
be released when you fulfill the terms of the Letter of Intent by
purchasing the specified amount. If your purchases qualify for a further
sales load reduction, the sales load will be adjusted to reflect your total
purchase at the end of 13 months. If total purchases are less than the
amount specified, you will be requested to remit an amount equal to the
difference between the sales load actually paid and the sales load
applicable to the aggregate purchases actually made. If such remittance is
not received within 20 days, the Transfer Agent, as attorney-in-fact
pursuant to the terms of the Letter of Intent, will redeem an appropriate
number of Class A shares held in escrow to realize the difference. Signing
a Letter of Intent does not bind you to purchase, or the Fund to sell, the
full amount indicated at the sales load in effect at the time of signing,
but you must complete the intended purchase to obtain the reduced sales
load. At the time you purchase Class A shares, you must indicate your
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
applicable sales load in effect at the time such Letter of Intent was
executed.
HOW TO REDEEM FUND SHARES
GENERAL
You may request redemption of your 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 you hold Fund shares of more than one Class, any request for
redemption must specify the Class of shares being redeemed. If you fail to
specify the Class of shares to be redeemed or if you own fewer shares of
the Class than specified to be redeemed, the redemption request may be
delayed until the Transfer Agent receives further instructions from you or
your Service Agent.
The Fund imposes no charges (other than any applicable CDSC with
respect to Class B shares) when shares are redeemed directly through
Dreyfus Service Corporation. Service Agents may charge a nominal fee for
effecting redemptions of Fund shares. Any certificates
(28)
representing Fund
shares being redeemed 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 YOU HAVE PURCHASED FUND SHARES BY
CHECK, BY THE TELETRANSFER PRIVILEGE OR THROUGH AUTOMATIC ASSET
BUILDER AND SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO
THE TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED
TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR 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 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 YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU
OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO
COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS
EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE,
AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL
OWNERSHIP. Fund shares will not be redeemed until the Transfer Agent has
received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 30 days' written notice if your 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 Dreyfus Service Corporation is imposed on any
redemption of Class B shares of a Series which reduces the current net
asset value of your Class B shares to an amount which is lower than the
dollar amount of all payments by you for the purchase of Class B shares of
such Series held by you 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 your Class B shares above the
dollar amount of all your payments for the purchase of Class B shares of
such Series held by you at the time of redemption.
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 you 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:
YEAR SINCE CDSC AS A % OF AMOUNT
PURCHASE PAYMENT INVESTED OR REDEMPTION
WAS MADE PROCEEDS
---------------------- --------------------------
Firs................................................ 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 redemp-
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tion is made first of amounts
representing shares acquired pursuant to the reinvestment 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 per 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 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 non-qualified 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 initial investment in the Dreyfus Family of Funds or other
products made available through Dreyfus Service Corporation 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 70-1/2 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 Trustees 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 you must
notify the Transfer Agent or your Service Agent must notify Dreyfus
Service Corporation. Any such qualification is subject to confirmation of
your entitlement.
PROCEDURES
You may redeem Fund shares by using the regular redemption procedure
through the Transfer Agent, using the Check Redemption Privilege with
respect to Class A shares only, through the TELETRANSFER Privilege or, if
you are a client of a Selected Dealer, through the Selected Dealer. If you
have given your Service Agent authority to instruct the Transfer Agent to
redeem shares and to credit the proceeds of such redemptions to a
designated account at your Service Agent, you may redeem shares only in
this manner and in accordance with the regular redemption procedure
described below. If you wish to use the other redemption methods
described below, you must arrange with your Service Agent for delivery of
the required application(s) to the Transfer Agent. Other redemption
procedures may be in effect for clients of certain Service Agents. The
Fund makes available to certain large institutions the ability to issue
redemption instructions through compatible computer facilities.
Your redemption request may direct that the redemption proceeds be
used to purchase shares of other funds advised or administered by The
Dreyfus Corporation that are not available through the Exchange Privilege.
The applicable CDSC will be charged upon the redemption of Class B
shares. Your redemption proceeds will be invested in shares of the other
fund
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on the next business day. Before you make such a request, you must
obtain and should review a copy of the current prospectus of the fund
being purchased. Prospectuses may be obtained from Dreyfus Service
Corporation. The prospectus will contain information concerning minimum
investment requirements and other conditions that may apply to your
purchase.
You may redeem or exchange Fund shares by telephone if you have
checked the appropriate box on the Fund's Account Application or have
filed an Optional Services Form with the Transfer Agent. If you select the
TELETRANSFER redemption or telephone exchange privilege, you authorize
the Transfer Agent to act on telephone instructions from any person
representing himself or herself to be you, or a representative of your
Service Agent, and reasonably believed by the Transfer Agent to be
genuine. The Fund will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of 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, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a TELETRANSFER redemption or an exchange of Fund shares. In such
cases, you should consider using the other redemption procedures
described herein. Use of these other redemption procedures may result in
your redemption request being processed at a later time than it would
have been if TELETRANSFER redemption had been used. During the delay,
the Fund's net asset value may fluctuate.
REGULAR REDEMPTION
Under the regular redemption procedure, you may redeem shares by
written request mailed to Premier Insured Municipal Bond Fund, P.O. Box
6587, Providence, Rhode Island 02940-6587. Written redemption requests
must specify the Class of shares being redeemed. 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. If you have any
questions with respect to signature-guarantees, please contact your
Service Agent or call the telephone number listed on the cover of this
Prospectus.
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.
CHECK REDEMPTION PRIVILEGE_CLASS A SHARES
If you hold Class A shares, you may request on the Account Application,
Optional Services Form or by later written request 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 Class A shares should be
considered in determining the amount of the check. Redemption Checks
should not be used to close your account. Redemption Checks are free, but
the Transfer Agent will impose a fee for stopping payment of a Redemption
Check upon your request or if the Transfer Agent cannot honor the Redemption
Check due to insufficient funds or other valid reason. You should date your
Redemption Checks with the current date when you write them. Please do not
postdate your Redemption Checks. If you do, the Transfer Agent will honor,
upon presentment, even if presented before the date of the check, all
postdated Redemption Checks which are dated within six months of presentment
for payment, if they are otherwise in good order. Class A shares for which
certificates have been issued may not be redeemed by
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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.
TELETRANSFER PRIVILEGE
You may redeem Fund shares (minimum $500 per day) by telephone if
you have checked the appropriate box and supplied the necessary
information on the Fund's Account Application or have filed an Optional
Services Form with the Transfer Agent. The proceeds will be transferred
between your 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 your account at an
Automated Clearing House member bank ordinarily two days after receipt
of the redemption request or, at your request, paid by check (maximum
$150,000 per day) and mailed to your address. Holders of jointly
registered Fund or bank accounts may redeem through the TELETRANSFER
Privilege for transfer to their bank account only up to $250,000 within
any 30-day period. The Fund reserves the right to refuse any request made
by telephone, including requests made shortly after a change of address,
and may limit the amount involved or the number of such requests. The
Fund may modify or terminate this Privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the TELETRANSFER Privilege, you may request a
TELETRANSFER redemption of Fund shares by telephoning 1-800-221-4060
or, if you are calling from overseas, call 1-401-455-3306. Shares issued
in certificate form are not eligible for this Privilege.
REDEMPTION THROUGH A SELECTED DEALER
If you are a customer of a Selected Dealer, you may make redemption
requests to your Selected Dealer. If the Selected Dealer transmits the
redemption request so that it is received by the Transfer Agent prior to
the close of trading on the floor of the New York Stock Exchange (currently
4:00 p.m., New York time), the redemption request will be effective on
that day. If a redemption request is received by the Transfer Agent after
the close of trading on the floor of the New York Stock Exchange, the
redemption request will be effective on the next business day. It is the
responsibility of the Selected Dealer to transmit a request so that it is
received in a timely manner. The proceeds of the redemption are credited
to your account with the Selected Dealer. See "How to Buy Fund Shares"
for a discussion of additional conditions or fees that may be imposed upon
redemption.
In addition, Dreyfus Service Corporation will accept orders from
Selected Dealers with which it has sales agreements for the repurchase of
shares held by shareholders. Repurchase orders received by dealers by the
close of trading on the floor of the New York Stock Exchange on any
business day and transmitted to Dreyfus Service Corporation prior to the
close of its business day (normally 5:15 p.m., New York time) are effected
at the price determined as of the close of trading on the floor of the New
York Stock Exchange on that day. Otherwise, the shares will be redeemed
at the next determined net asset value. It is the responsibility of the
Selected Dealer to transmit orders on a timely basis. The Selected Dealer
may charge the shareholder a fee for executing the order. This repurchase
arrangement is discretionary and may be withdrawn at any time.
REINVESTMENT PRIVILEGE_CLASS A SHARES
Upon written request, you may reinvest up to the number of Class A
shares you have redeemed, within 30 days of redemption, at the then-prevailing
net asset value without a sales load, or reinstate your account for the purpose
of exercising the Exchange Privilege. The Reinvestment Privilege may be
exercised only once.
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.
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DISTRIBUTION PLAN
Under the Distribution Plan, adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays Dreyfus Service
Corporation for advertising, marketing and distributing Class B shares at
an annual rate of .50 of 1% of the value of the average daily net assets of
Class B. Under the Distribution Plan, Dreyfus Service Corporation may
make payments to Service Agents in respect of these services. Dreyfus
Service Corporation 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, Dreyfus Service
Corporation 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 Dreyfus Service Corporation under the
Distribution Plan for advertising, marketing and distributing Class B
shares and for payments to Service Agents are payable without regard to
actual expenses incurred.
SHAREHOLDER SERVICES PLAN
Under the Shareholder Services Plan, the Fund pays Dreyfus Service
Corporation for the provision of certain services to the holders of Class A
and Class B shares a fee at the annual rate of .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 inquiries regarding the Fund and providing reports
and other information, and services related to the maintenance of
shareholder accounts. Dreyfus Service Corporation may make payments to
Service Agents in respect of these services. Dreyfus Service Corporation
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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS - Each Series of the Fund ordinarily
declares dividends from its net investment income on each day the New
York Stock Exchange is open for business. Fund shares begin earning
income 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 your 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 usually are paid on the last calendar day of each month and
are automatically reinvested in additional shares of the Series and the
Class from which they are paid at net asset value without a sales load or,
at your option, paid in cash. Each Series' earnings for Saturdays, Sundays
and holidays are declared as dividends on the preceding business day. If
you redeem all shares in your account at any time during the month, all
dividends to which you are entitled will be paid to you along with the
proceeds of the redemption. Distributions by each Series from net realized
securities gains, if any, generally are declared and paid once a year, but
the Series may make distributions on a more frequent basis to comply with
the distribution requirements of the Code, in all events in a manner
consistent with the provisions of the 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.
You may choose whether to receive dividends and distributions in cash or
to reinvest in additional shares of the Series and the Class from which
they were paid at net asset value without a sales load. All expenses are
accrued daily and deducted before declaration of dividends to investors.
(33)
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."
FEDERAL TAX TREATMENT - Under the Code, each Series of the Fund is
treated as a separate entity for purposes of qualification and taxation as
a regulated investment company. Except for dividends from Taxable
Investments, the Fund anticipates that substantially all 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 gains from the sale or other disposition
of certain market discount bonds, are taxable as ordinary income whether
or not reinvested. 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 you are 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 shares of any
Series which is deemed to relate to exempt-interest dividends is not
deductible. No dividend paid by any Series will qualify for the dividends
received deduction allowable to certain U.S. corporations.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A shares of a Series if you exchange your Class A shares
for shares of another Series or fund advised by The Dreyfus Corporation
within 91 days of purchase and such other Series or fund reduces or
eliminates its otherwise applicable sales load for the purpose of the
exchange. In this case, the amount of the sales load charge for 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 your Class A 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 on the exchange.
Although all or a substantial portion of the dividends paid by each
Series may be excluded by shareholders of the Series from their gross
income for Federal income tax purposes, each Series may purchase
specified private activity bonds, the interest from which may be (i) a
preference item for purposes of the alternative minimum tax, (ii) a
component of the "adjusted current earnings" preference item for
purposes of the corporate alternative minimum tax as well as a component
in computing the corporate environmental tax or (iii) a factor in
determining the extent to which a shareholder's Social Security benefits
are taxable. If a Series purchases such securities, the portion of the
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.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and gains
from the sale or other disposition of certain market discount bonds, 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.
Notice as to the tax status of your dividends and distributions will be
mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions
from securities gains, if any, paid during the year. These statements set
forth the dollar amount of income exempt from Federal tax and the dollar
(34)
amount, if any, subject to Federal tax. These dollar amounts will vary
depending on the size and length of time of your investment in the Fund. If
a Series pays dividends derived from taxable income, it intends to
designate as taxable the same percentage of the day's dividend 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.
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.
It is expected that each Series will qualify as a "regulated investment
company" under the Code so long as such qualification is in the best
interests of its shareholders. Such qualification relieves the Series of any
liability for Federal income tax to the extent its earnings are distributed
in accordance with applicable provisions of the Code. In addition, each
Series of the Fund is subject to a non-deductible 4% excise tax, measured
with respect to certain undistributed amounts of taxable investment
income and capital gains.
STATE AND LOCAL TAX TREATMENT-Each State Series will invest
primarily in Municipal Obligations of the State after which the Series is
named. Except to the extent specifically noted below, dividends by a State
Series are not subject to an income tax by such State to the extent that
the dividends are attributable to interest on such Municipal Obligations.
However, some or all of the other dividends or distributions by a Series
may be taxable by those States that have income taxes, even if the
dividends or distributions are attributable to income of the Series derived
from obligations of the United States or its agencies or instrumentalities.
The Fund anticipates that a substantial portion of the dividends paid by
each State Series will not be subject to income tax of the State after
which the Series is named. However, to the extent that you are obligated
to pay State or local taxes outside of such State, dividends earned by an
investment in such Series may represent taxable income. Also, all or a
portion of the dividends paid by a Series that are not subject to income
tax of the State after which the Series is named may be a preference item
for such State's alternative minimum tax (where imposed). Finally, you
should be aware that State and local taxes, other than those described
above, may apply to the dividends, distributions or shares of a Series.
The paragraphs below discuss the State tax treatment of dividends and
distributions by each State Series to residents of the State after which
such Series is named. Investors should consult their own tax advisers
regarding specific questions as to Federal, State and local taxes.
CALIFORNIA SERIES-Except for dividends from Taxable Investments, the
Fund anticipates that substantially all dividends paid by the California
Series will not be subject to Federal or State of California personal
income taxes.
If, at the close of each quarter of its taxable year, at least 50% of the
value of the California Series' total assets consists of Federal tax exempt
obligations, then the California Series may designate and pay Federal
exempt-interest dividends from interest earned on all such tax exempt
obligations. Such exempt-interest dividends may be excluded by
shareholders of the California Series from their gross income for Federal
income tax purposes.
(35)
If, at the close of each quarter of its taxable year, at least 50% of the
value of the California Series' total assets consists of obligations which,
when held by an individual, the interest therefrom is exempt from
California personal income tax, and if the California Series qualifies as a
management company under the California Revenue and Taxation Code, then
the California Series will be qualified to pay dividends to its shareholders
that are exempt from California personal income tax (but not from
California franchise tax) ("California exempt-interest dividends").
However, the total amount of California exempt-interest dividends paid by
the California Series to a noncorporate shareholder with respect to any
taxable year cannot exceed such shareholder's pro-rata share of interest
received by the California Series during such year that is exempt from
California taxation less any expenses and expenditures deemed to have
been paid from such interest.
Unlike under Federal tax law, the California Series' shareholders will
not be subject to California personal income tax, or receive a credit for
California taxes paid by the California Series, on undistributed capital
gains. In addition, California tax law does not consider any portion of the
exempt-interest dividends paid an item of tax preference for the purposes
of computing the California alternative minimum tax.
CONNECTICUT SERIES-Dividends paid by the Connecticut Series that
qualify as exempt-interest dividends for Federal income tax purposes are
not subject to the Connecticut income tax on individuals, trusts and
estates, to the extent that such dividends are derived from income
received by the Series as interest from Connecticut Municipal Obligations
or as interest from obligations the interest with respect to which
Connecticut is prohibited by Federal law from taxing. Dividends derived
from other sources, including distributions that qualify as capital gain
dividends for Federal income tax purposes, are taxable by Connecticut. In
the case of a shareholder subject to the Federal alternative minimum tax,
an exempt-interest dividend treated as a preference item for purposes of
such tax may be subject to the net Connecticut minimum tax.
Dividends qualifying as exempt-interest dividends for Federal income
tax purposes that are distributed by the Connecticut Series to entities
taxed as corporations under the Connecticut corporation business tax are
not exempt from that tax.
The shares of the Connecticut Series are not subject to property
taxation by the State of Connecticut or its political subdivisions.
FLORIDA SERIES-Dividends or distributions paid by the Florida Series to
a Florida individual resident are not taxable by Florida. However, Florida
imposes an intangible personal property tax on shares of the Series owned
by a Florida resident on January 1 of each year unless such shares qualify
for an exemption from the tax.
Dividends qualifying as exempt-interest dividends for Federal income
tax purposes as well as other federally taxable dividends and
distributions that are distributed by the Series to entities taxed as
corporations under Florida law may not be exempt from the Florida
corporate income tax.
The Fund has applied for a Technical Assistance Advisement from the
State of Florida, Department of Revenue, to the effect that Florida Series'
shares owned by a Florida resident will be exempt from the intangible
personal property tax so long as the Series' portfolio includes only assets,
such as notes, bonds, and other obligations issued by the State of Florida
or its municipalities, counties, and other taxing districts, the United
States Government, and its agencies, Puerto Rico, Guam, and the U.S. Virgin
Islands, and other assets which are exempt from that tax.
NEW JERSEY SERIES-The New Jersey Series intends to be a "qualified
investment fund" within the meaning of the New Jersey gross income tax.
The primary criteria for constituting a "qualified investment fund" are
that (i) such Series is an investment company registered with the
Securities and Exchange Commission, which for the calendar year in which
the dividends and distributions (if any) are paid, has no investments other
than interest-bearing
(36)
obligations, obligations issued at a discount, and
cash and cash items, including receivables, and financial options, futures
and forward contracts, or other similar financial instruments relating to
interest-bearing obligations, obligations issued at a discount or bond
indexes related thereto and (ii) at the close of each quarter of the taxable
year, the Series has not less than 80% of the aggregate principal amount
of all of its investments, excluding financial options, futures and forward
contracts, or other similar financial instruments related to interest-
bearing obligations, obligations issued at a discount or bond indexes
related thereto, cash and cash items, which cash items shall include
receivables, in New Jersey Municipal Obligations, territorial obligations
and certain other specified securities. Additionally, a qualified
investment fund must comply with certain continuing reporting
requirements.
If the New Jersey Series qualifies as a qualified investment fund and
the New Jersey Series complies with its reporting obligations, (a)
dividends and distributions paid by the Series to a New Jersey resident
individual shareholder will not be subject to New Jersey gross income tax
to the extent that the dividends and distributions are respectively
attributable to income earned by the Series as interest on or gain from
New Jersey Municipal Obligations or territorial obligations, and (b) gain
from the sale of shares in the Series by a New Jersey resident individual
shareholder will not be subject to the New Jersey gross income tax.
Shares of the New Jersey Series are not subject to property taxation by
New Jersey or its political subdivisions.
NEW YORK SERIES-Except for dividends from Taxable Investments, the
Fund anticipates that substantially all dividends paid by the New York
Series will not be subject to Federal, New York State or New York City
personal income taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class of shares may
be 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.
Current yield refers to each 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 pre-tax 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 a 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 such Series'
average annual total return of Class A and Class B for one, five and ten
year periods, or for shorter periods depending upon the length of time
during which each Series has operated. Computations of average annual
total return for periods
(37)
of less than one year represent an annualization of
a Series' actual total return for the applicable period. A Series' actual
total return for its first full year of operation cannot be predicted and is
therefore likely to be different from any such annualized computation.
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 applicable sales charge which, if reflected, would reduce
the performance quoted.
Performance will vary from time to time and past results are not
necessarily representative of future results. Investors should remember
that performance is a function of 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 the Fund's shares, including data from Lipper Analytical
Services, Inc., Moody's Bond Survey Bond Index, Lehman Brothers Municipal
Bond Index, Morningstar, Inc. and other industry publications.
GENERAL INFORMATION
The Fund was organized as an unincorporated business trust under the
laws of the Commonwealth of Massachusetts pursuant to an Agreement
and Declaration of Trust (the "Trust Agreement") dated March 12, 1992,
and commenced operations on August 19, 1993. On December 8, 1993, the
Fund's name was changed from Premier California Insured Municipal Bond
Fund to Premier Insured Municipal Bond Fund. The Fund is authorized to
issue an unlimited number of shares of beneficial interest, par value $.001
per share. Each Series' 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 or when
class voting is permitted by the Board of Trustees. 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.
To date, the Trustees have authorized the creation of six 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 would be treated separately from those of
the other Series.
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 each Series in the matter are identical or that the matter
does not affect any interest of such Series. However, the Rule exempts the
selection of independent accountants and the election of trustees from the
separate voting requirements of the Rule.
(38)
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Trust Agreement disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation or instrument entered into or executed
by the Fund or a Trustee. The Trust Agreement provides for
indemnification from the Fund's property for all losses and expenses of
any shareholder held personally liable for the obligations of the Fund.
Thus, the risk of a shareholder's incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund itself
would be unable to meet its obligations, a possibility which management
believes is remote. Upon payment of any liability incurred by the Fund, the
shareholder paying such liability will be entitled to reimbursement from
the general assets of the Fund. The Trustees intend to conduct the
operations of the Fund in such a way so as to avoid, as far as possible,
ultimate liability of the shareholders for liabilities of the Fund. As
discussed under "Management of the Fund" in the Statement of Additional
Information, the Fund ordinarily will not hold shareholder meetings;
however, shareholders under certain circumstances may have the right to
call a meeting of shareholders for the purpose of voting to remove
Trustees.
The Transfer Agent maintains a record of your ownership and will send
you confirmations and statements of account.
Shareholder inquiries may be made to your Service Agent or by writing
to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-
0144.
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.
