As filed with the Securities and Exchange Commission on December 28, 1994
Registration No. 33-43845
811-3700
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
__
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /_/
__
Pre-Effective Amendment No. _____ /_/
__
Pos/-Effective Amendment No. 34 /x/
--- __
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 35
---
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
(formerly The Laurel Tax-Free Municipal Funds)
------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
200 Park Avenue - 55th floor
New York, New York 10166
(Address of Principal Executive Office) (ZIP Code)
Registrant's Telephone Number, including area code: (800) 225-5267
John E. Pelletier Clifford J. Alexander, Esq.
Secretary Thomas M. Leahey, Esq.
The Dreyfus/Laurel Tax-Free Kirkpatrick & Lockhart
Municipal Funds 1800 M Street, N.W.
200 Park Avenue - 55th floor Washington, D.C. 20036
New York, New York 10166 (202) 778-9000
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective Amendment becomes effective.
It is proposed that this filing will become effective (check
appropriate box):
__ __
/X/ Immediately upon filing / / on (date) pursuant to
pursuant to paragraph (b) paragraph (b)
__ __
/_/ 60 days after filing pursuant /_/ on (date) pursuant to
to paragraph (a)(1) paragraph (a)(1)
__ _
/_/ 75 days after filing pursuant /_/ on (date) pursuant to
to paragraph (a)(2) paragraph (a)(2)
<PAGE>
If appropriate, check the following
box:
__
/_ / this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE>
The Registrant has previously filed a declaration of indefinite
registration of its shares under the Securities Act of 1933 pursuant to
Rule 24f-2 under the Investment Company Act of 1940. Registrant's Rule
24f-2 Notice for the fiscal year ended June 30, 1994, relating to Tax-Free
Money Fund, Tax-Free Bond Fund, Massachusetts Tax-Free Money Fund and
Massachusetts Tax-Free Bond Fund, and the period December 1, 1993 through
June 30, 1994, relating to New York Tax-Free Money Fund, New York Tax-Free
Bond Fund, California Tax-Free Money Fund and California Tax-Free Bond
Fund, was filed on August 30, 1994.
- 3 -
<PAGE>
Premier Limited Term Municipal Fund
Cross-Reference Sheet Pursuant to Rule 495(a)
---------------------------------------------
Items in
Part A
of Form
N-1A Caption Prospectus Caption
------ ------- ------------------
1. Cover Page Cover Page
2. Synopsis Expense Summary
3. Condensed Financial Financial Highlights
Information
4. General Description of Investment Objective and
Registrant Policies; Further
Information About The
Fund
5. Management of the Fund Further Information
About The Funds;
Management
6. Capital Stock and Cover Page; Investor
Other Securities Line; Distributions;
Taxes;
7. Purchase of Securities Expense Summary;
Being Offered Alternative Purchase
Methods; Special
Shareholder Services;
How to Invest in The
Dreyfus/Laurel Funds;
Distribution and Service
Plans; How to Exchange
Your Investment From One
Fund to Another;
8. Redemption or How to Redeem Shares
Repurchase
9. Pending Legal N.A.
Proceedings
- 1 -
<PAGE>
Items in
Part B Statement of Additional
of Form Information
N-1A Caption
------- -----------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Management of the Trust
and History
13. Investment Objectives Investment Policies
and Policies
14. Management of the Fund Management of the Trust;
Trustees and Officers of
the Trust
15. Control Persons and Management of the Trust;
Principal Holders of Miscellaneous;
Securities
16. Investment Advisory Management of the Trust;
and Other Services Investment Manager;
Shareholder Services
17. Brokerage Allocation Investment Policies;
and Other Practices Portfolio Transactions
18. Capital Stock and Description of the
Other Securities Trust; See Prospectus --
"Cover Page"; "How to
Redeem Fund Shares";
"Further Information
About The Funds; The
Dreyfus/Laurel Tax-Free
Municipal Funds"
19. Purchase, Redemption Purchase of Shares;
and Pricing of Distribution and Service
Securities Being Plans; Redemption of
Offered Shares; Valuation of
Shares
20. Tax Status Taxes
21. Underwriters Purchase of Shares;
Distribution and Service
Plans; Amounts Expended
22. Calculation of Performance Data
Performance Data
23. Financial Statements Financial Statements
- 2 -
<PAGE>
Premier Limited Term CA, MA, and NY Municipal Fund
Cross-Reference Sheet Pursuant to Rule 495(a)
---------------------------------------------
Items in
Part A of
Form
N-1A Caption Prospectus Caption
--------- ------- ------------------
1. Cover Page Cover Page
2. Synopsis Expense Summary
3. Condensed Financial Financial Highlights
Information
4. General Description of Investment Objective and
Registrant Policies; Further
Information About The
Fund
5. Management of the Fund Further Information About
The Funds; Management
6. Capital Stock and Cover Page; Investor
Other Securities Line; Distributions;
Taxes;
7. Purchase of Securities Expense Summary;
Being Offered Alternative Purchase
Methods; Special
Shareholder Services; How
to Invest in The
Dreyfus/Laurel Funds;
Distribution and Service
Plans; How to Exchange
Your Investment From One
Fund to Another;
8. Redemption or How to Redeem Shares
Repurchase
9. Pending Legal N.A.
Proceedings
<PAGE>
Items in Statement of Additional
Part B of Information Caption
Form N-1A ----------------------
__________
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Management of the Trust
and History
13. Investment Objectives Investment Policies
and Policies
14. Management of the Fund Management of the Trust;
Trustees and Officers of
the Trust
15. Control Persons and Management of the Trust;
Principal Holders of Miscellaneous;
Securities
16. Investment Advisory Management of the Trust;
and Other Services Investment Manager;
Shareholder Services
17. Brokerage Allocation Investment Policies;
and Other Practices Portfolio Transactions
18. Capital Stock and Description of the Trust;
Other Securities See Prospectus -- "Cover
Page"; "How to Redeem
Fund Shares"; "Further
Information About The
Funds; The Dreyfus/Laurel
Tax-Free Municipal Funds"
19. Purchase, Redemption Purchase of Shares;
and Pricing of Distribution and Service
Securities Being Plans; Redemption of
Offered Shares; Valuation of
Shares
20. Tax Status Taxes
21. Underwriters Purchase of Shares;
Distribution and Service
Plans; Amounts Expended
22. Calculation of Performance Data
Performance Data
23. Financial Statements Financial Statements
- 4 -
<PAGE>
Dreyfus/Laurel Limited Term CA, MA, and NY Tax-Free Money Fund
Cross-Reference Sheet Pursuant to Rule 495(a)
---------------------------------------------
Items in
Part A of
Form
N-1A Caption Prospectus Caption
--------- ------- ------------------
1. Cover Page Cover Page
2. Synopsis Expense Summary
3. Condensed Financial Financial Highlights
Information
4. General Description of Investment Objective and
Registrant Policies; Further
Information About The
Fund
5. Management of the Fund Further Information About
The Funds; Management
6. Capital Stock and Cover Page; Investor
Other Securities Line; Distributions;
Taxes;
7. Purchase of Securities Expense Summary;
Being Offered Alternative Purchase
Methods; Special
Shareholder Services; How
to Invest in The
Dreyfus/Laurel Funds;
Distribution and Service
Plans; How to Exchange
Your Investment From One
Fund to Another;
8. Redemption or How to Redeem Shares
Repurchase
9. Pending Legal N.A.
Proceedings
<PAGE>
Items in Statement of Additional
Part B of Information Caption
Form N-1A ----------------------
__________
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Management of the Trust
and History
13. Investment Objectives Investment Policies
and Policies
14. Management of the Fund Management of the Trust;
Trustees and Officers of
the Trust
15. Control Persons and Management of the Trust;
Principal Holders of Miscellaneous;
Securities
16. Investment Advisory Management of the Trust;
and Other Services Investment Manager;
Shareholder Services
17. Brokerage Allocation Investment Policies;
and Other Practices Portfolio Transactions
18. Capital Stock and Description of the Trust;
Other Securities See Prospectus -- "Cover
Page"; "How to Redeem
Fund Shares"; "Further
Information About The
Funds; The Dreyfus/Laurel
Tax-Free Municipal Funds"
19. Purchase, Redemption Purchase of Shares;
and Pricing of Distribution and Service
Securities Being Plans; Redemption of
Offered Shares; Valuation of
Shares
20. Tax Status Taxes
21. Underwriters Purchase of Shares;
Distribution and Service
Plans; Amounts Expended
22. Calculation of Performance Data
Performance Data
23. Financial Statements Financial Statements
<PAGE>
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
CONTENTS OF POST-EFFECTIVE AMENDMENT
This post-effective amendment to the registration statement of The
Dreyfus/Laurel Tax-Free Municipal Funds contains the following documents:
Facing Sheet
Cross-Reference Sheet
Contents of Post-Effective Amendment
Part A - Prospectus
- Premier Limited Term Municipal Fund
- Premier Limited Term California Municipal Fund
- Premier Limited Term Massachusetts Municipal Fund
- Premier Limited Term New York Municipal Fund
- Dreyfus/Laurel Massachusetts Tax-Free Money Fund
- Dreyfus/Laurel New York Tax-Free Money Fund
- Dreyfus/Laurel California Tax-Free Money Fund
Part B - Statement of Additional Information
- Premier Limited Term Municipal Fund
- Premier Limited Term California Municipal Fund
- Premier Limited Term Massachusetts Municipal Fund
- Premier Limited Term New York Municipal Fund
- Dreyfus/Laurel Massachusetts Tax-Free Money Fund
- Dreyfus/Laurel New York Tax-Free Money Fund
- Dreyfus/Laurel California Tax-Free Money Fund
Part C - Other Information
Signature Page - The Dreyfus/Laurel Tax-Free Municipal Funds
Exhibits
<PAGE>
- ----------------------------------------------------------------------------
PREMIER LIMITED TERM MUNICIPAL FUND
(Lion Logo)
PROSPECTUS DECEMBER 28, 1994
- -----------------------------------------------------------------------------
Premier Limited Term Municipal Fund (the "Fund"), formerly
called the "Laurel Tax-Free Bond Fund," is a separate portfolio of The
Dreyfus/Laurel Tax-Free Municipal Funds, a management investment company
(the "Company"), known as a mutual fund. The Fund seeks to maximize
current income exempt from Federal income taxes consistent with
the prudent risk of capital by investing in municipal securities which
are of investment-grade quality and intermediate maturities.
By this Prospectus, the Fund is offering four Classes of
shares -- Class A, Class B, Class C and Class R.
The Dreyfus Corporation serves as the Fund's investment
manager. The Dreyfus Corporation is referred to as "Dreyfus." You can
purchase or redeem all Classes of shares, except Class R shares, by
telephone using the TELETRANSFER Privilege.
This Prospectus sets forth concisely information about the
Fund that you should know before investing. It should be read carefully
before you invest and retained for future reference.
A Statement of Additional Information ("SAI") dated December
28, 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 ("SEC") 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.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY. ALL MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE
"EXPENSE SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS MELLON
BANK OR ITS AFFILIATES TO BE ITS INVESTMENT MANAGER. MELLON BANK OR AN
AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUND, SUCH AS
CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUND IS
DISTRIBUTED BY PREMIER MUTUAL FUND SERVICES, INC.
- ----------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------
(CONTINUED FROM PAGE 1)
Class A shares are subject to a sales charge imposed at the
time of purchase. (Class A shares of the Fund were formerly called
Investor Shares.) Class B shares are subject to a contingent deferred
sales charge imposed on redemptions made within five years of purchase.
Class C shares are subject to a .75% contingent deferred sales charge
imposed on redemptions made within the first year of purchase. Class R
shares are sold primarily to bank trust departments and other financial
service providers (including Mellon Bank, N.A. and its affiliates)
("Banks") acting on behalf of customers having a qualified trust or
investment account or similar relationship at such institution. (Class R
shares of the Fund were formerly called Trust Shares.) Other differences
between the Classes include the services offered to and the expenses
borne by each Class and certain voting rights, as described herein. These
alternatives are offered so an investor may choose the method of
purchasing shares that is most beneficial given the amount of purchase,
the length of time the investor expects to hold the shares and other
circumstances.
Shares of the Fund are also available through a servicing
network associated with Mellon Bank, N.A. ("Mellon Bank"), an affiliate
of Dreyfus. Exchange and shareholder services vary depending upon the
network through which you purchase Fund shares. See "How to Buy Fund
Shares".
TABLE OF CONTENTS
Expense Summary............................................. 3
Financial Highlights........................................ 4
Alternative Purchase Methods................................ 7
Description of the Fund..................................... 8
Management of the Fund...................................... 13
How to Buy Fund Shares...................................... 15
Shareholder Services........................................ 19
How to Redeem Fund Shares................................... 22
Distribution Plans (Class A Plan and Class B and Class C Plans Only) 26
Dividends, Other Distributions and Taxes.................... 27
Performance Information..................................... 28
General Information......................................... 29
Page 2
<TABLE>
<CAPTION>
EXPENSE SUMMARY
CLASS A CLASS B CLASS C CLASS R
Shareholder Transaction Expenses
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)............. 3.00% none none none
Maximum Deferred Sales Charge Imposed on
Redemptions (as a percentage of the
amount subject to charge)................. none 3.00% .75% none
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Management Fee .......................... 0.50% 0.50% 0.50% 0.50%
12b-1 Fee(1)............................. 0.25% 0.75% 0.75% none
Other Expenses(2)........................ 0.00% 0.00% 0.00% 0.00%
Total Fund Operating Expenses ........... 0.75% 1.25% 1.25% 0.50%
Example:
You would pay the following expenses on a
$1,000 investment, assuming (1) a 5% annual
return and (2) except where noted, redemption
at the end of each time period:
1 YEAR............................... $ 37 $43/$13(3) $20/$13(3) $ 5
3 YEARS.............................. $ 53 $60/$40(3) $ 40 $16
5 YEARS.............................. $ 70 $79/$69(3) $ 69 $28
10 YEARS............................. $ 120 $124 $ 151 $63
</TABLE>
(1) See "Distribution Plans" for a description of the Fund's Distribution
Plans for Class A, B and C shares.
(2) Does not include fees and espenses of the non-interested Trustees
(including counsel). The investment manager is contractually required to
reduce its Management Fee in an amount equal to the Fund's allocable portion
of such fees and expenses, which are estimated to be 0.02% of the Fund's net
assets. (See "Management of the Fund.")
(3) Assuming no redemption of shares.
- ----------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE
OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A
5% ANNUAL RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN
AN ACTUAL RETURN GREATER OR LESS THAN 5%.
- ----------------------------------------------------------------------------
The purpose of the foregoing table is to assist 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 Fund Operating
Expenses are based on estimated amounts for the current fiscal year.
Long-term investors in Class A, B or C shares could pay more in 12b-1
fees than the economic equivalent of paying the maximum front-end sales
charges applicable to mutual funds sold by members of the National
Association of Securities Dealers, Inc. ("NASD"). The information in the
foregoing table does not reflect any fee waivers or expense reimbursement
arrangements that may be in effect. Certain Service Agents may charge
their clients direct fees for effecting transactions in Fund shares; such
fees are not reflected in the foregoing table. See "Management of the
Fund," "How to Buy Fund Shares" and "Distribution Plans."
The Company understands that banks, brokers, dealers or other
financial institutions (including Dreyfus and its affiliates)
(collectively "Service Agents") may charge fees to their clients who are
owners of the Fund's Class A, B or C shares for various services provided
in connection with a client's account. These fees would be in addition to
any amounts received by a Service Agent under its Selling Agreement
("Agreement") with Premier Mutual Fund Services, Inc. (the
"Distributor"). The Agreement requires each Service Agent to disclose to
its clients any compensation payable to such Service Agent by the
Distributor and any other compensation payable by the client for various
services provided in connection with their accounts.
Page 3
FINANCIAL HIGHLIGHTS
The following tables are based upon a single Class A share or
Class R Share outstanding throughout each fiscal year and should be read
in conjunction with the financial statements and related notes that
appear in the Fund's Annual Report dated June 30, 1994, which is
incorporated by reference into the SAI. The financial statements and
related notes, as well as the information in the tables below insofar as
it relates to the fiscal year ended June 30, 1994,
have been audited by KPMG Peat Marwick LLP, independent auditors, whose
report thereon appears in the Fund's Annual Report. Further information
about the performance of the Fund is also included in the Fund's Annual
Report, which may be obtained without charge. The information in the
tables below for fiscal years (periods) prior to the fiscal year ended
June 30, 1994, has been audited by other independent auditors.
<TABLE>
PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
YEAR OR PERIOD ENDED JUNE 30,
1994# 1993 1992 1991 1992 1991 1990 1989 1988 1987 1986*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, $12.61 $12.21 $11.58 $11.44 $11.58 $11.44 $11.95 $11.36 $11.23 $11.06 $10.00
Beginning of year ------ ------ ------ ------ ------ ------- ------- ------- ------ ------ ------
Income from
investment orerations:
Net investment income*** 0.54 0.60 0.70 0.74 0.70 0.74 0.76 0.78 0.76 0.76 0.59
Net Realized and (0.41) 0.68 0.65 0.14 0.65 0.14 (0.18) 0.67 0.13 0.17 1.06
unrealezed gains
and losses on investments------ ------ ------ ------ ------ ------- ------- ------- ------ ------ ------
Total from investment 0.13 1.28 1.35 0.88 1.35 0.88 0.58 1.45 0.89 0.93 1.65
operations
Less distributions:
Distributions from net
investment income (0.54) (0.60) (0.70) (0.74) (0.70) (0.74) (0.77) (0.79) (0.74) (0.76) (0.59)
Distributions from net
realized capital gains(0.54) (0.28) (0.02) -- (0.02) -- (0.32) (0.07) (0.02) -- --
------ ------ ------ ------ ------ ------- ------- ------- ------ ------ ------
Total Distributions (1.08) (0.88) (0.72) (0.74) (0.72) (0.74) (1.09) (0.86) (0.76) (0.76) (0.59)
------ ------ ------ ------ ------ ------- ------- ------- ------ ------ ------
Net Asset Value,
end of year $11.66 $12.61 $12.21 $11.58 $12.21 $11.58 $11.44 $11.95 $11.36 $11.23 $11.06
------ ------ ------ ------ ------ ------- ------- ------- ------ ------ ------
Total Return++ 0.96% 10.95% 11.94% 7.97% 11.94% 7.97% 5.06% 13.29% 8.21% 8.47% 16.68%
------ ------ ------ ------ ------ ------- ------- ------- ------ ------ ------
Ratios to average net
assets/Supplemental data:
Net Assets, end of year
(in 000's) $23,715 $18,251 $26,192 $18,042 $26,192 $18.042 $15,209 $13,304 $10,150 $9,225 $6,286
Ratio of expenses to
average net assets 0.76% 1.03% 0.97% 0.81% 0.97% 0.81% 0.82% 0.79% 0.79% 0.78% 0.75%**
Ratio of net investment
income to average
net assts 4.43% 4.91% 5.82% 6.43% 5.82% 6.43% 6.45% 6.82% 6.73% 6.58% 7.25%**
Porfolio turnover rate 57% 103% 30% 54% 30% 54% 76% 101% 81% 241% 5%
</TABLE>
(1) Effective April 4, 1994 the Retail and Institutional classes of
shares were reclassified as a single class of shares known as Investor
Shares. On October 17, 1994, Investor shares were redesignated as Class
A shares. The amounts shown for the year ended June 30, 1994, were
calculated using the performance of a Retail Share outstanding from
July 1, 1993, to April 3, 1994, and the perpormance of an Investor Share
outstanding from April 4, 1994, to June 30, 1994. The Financial
Highlights
for the year ended June 30, 1993, and prior periods are based upon a
Retail Share outstanding.
* The Fund commenced operations on October 1, 1985.
** Annualized
***Net investment income per share before waiver of fees and/or
reimbursement by investment adviser and/or custodian and/or transfer
agent for the years ended June 30, 1994, 1993, 1992, 1991, 1990, 1989,
1988, 1987, and for the period ended June 30, 1986 were $0.49, $0.59,
$0.68, $0.68, $0.70, $0.68, $0.70, $0.71, and $0.54, respectively.
Page 4
+ Annualized expense ratios before voluntary waiver of fees and/or
reimbursement of expenses by investment adviser and/or custodian and/or
transfer agent for the years ended June 30, 1994, 1993, 1992, 1991, 1990,
1989, 1988, 1987 and for the period ended June 30, 1986 would have been
1.09%, 1.11%, 1.12%, 1.31%, 1.32%, 1.65%, 1.29%, 1.21%, and 1.41%,
respectively.
++ Total return represents aggregate total return for the periods
indicated.
# Effective October 17,1994, The Dreyfus Corporation serves as the
investment manager to the Fund. From April 4, 1994, through October 16,
1994, Mellon Bank served as the investment manager for the Fund. Prior to
April 4, 1994, The Boston Company Advisors, Inc. served as the investment
adviser for the Fund.
Page 5
PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
Year Period
Ended Ended
6/30/94# 6/30/93
-------- --------
Net Asset Value, Beginning of year $12.61 $12.21
-------- --------
Income from investment operations:
Net investment income*** 0.58 0.25
Net Realized and unrealezed gains (0.43) 0.40
and losses on investments -------- --------
Total from investment operations 0.15 0.65
Less distributions:
Distributions from net investment income (0.56) (0.25)
Distributions from net realized (0.54) --
capital gains
-------- --------
Total Distributions (1.10) (0.25)
-------- --------
Net Asset Value, end of year $11.66 $12.61
-------- --------
Total Return++ 1.08% 5.36%
-------- --------
Ratios to average net assets/Supplemental
data:
Net Assets, end of year (in 000's) $12,581 $8,974
Ratio of expenses to average net assets 0.50% 0.68%**
Ratio of net investment income to average 4.69% 4.82%**
net assts
Porfolio turnover rate 57% 103%
(1) The Fund commenced selling Investment shares on February 1, 1993.
Effective April 4, 1994, the Investment Class of shares was reclassified
as the Trust Class of shares. Effective October 17, 1994, the Trust
Class Shares were redesignated Class R shares. The table above is based
upon a single Investment Share outstanding from February 1, 1993 to April
3, 1994 and a Class R share outstanding from April 4, 1994 to June 30,
1994.
**Annualized.
*** Net investment income per share before waiver of fees and
reimbursement of expenses by investment adviser and/or custodian and/of
transfer agent for the year ended June 30, 1994 and for the period ended
June 30, 1993 were $0.54 and $0.24, respectively.
+ Annualized expense ratios before voluntary waiver of fees and/or
reimbursement of expenses by investment adviser and/or custofian and/or
transfer agent for the year ended June 30, 1994 and for the period ended
June 30, 1993 would gave been 0.83% and 0.93%, respectively.
++ Total return represents aggregate total return for the periods
indicated.
# Effective October 17, 1994, The Dreyfus Corporation serves as the
investment manager to the Fund. From April 4, 1994 through October 16,
1994. Mellon Bank served as the investment manager for the Fund. Prior
to April 4, 1994, The Boston Company Advisors, Inc. served as the
investment adviser for the Fund.
ALTERNATIVE PURCHASE METHODS
The Fund offers you four methods of purchasing Fund 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 Fund share represents
an identical pro rata interest in the Fund's investment portfolio.
Class A shares are sold at net asset value per share plus a
maximum initial sales charge of 3.0% 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 12b-1 fee at the rate of
0.25 of 1% of the value of the average daily net assets of Class A. See
"Distribution Plan-Class A shares."
Class B shares are sold at net asset value per share with no
initial sales charge at the time of purchase; as a result, the entire
purchase price is immediately invested in the Fund. Class B shares are
subject to a maximum 3% contingent deferred sales charge ("CDSC"), which
is assessed only if 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 distribution fee at the rate
of 0.50 of 1% of the value of the average daily net assets of Class B. In
addition, Class B shares are subject to an annual service fee at the rate
of 0.25 of 1% of the value of the average daily net assets of Class B.
See "Distribution and Service Plans - Class B and C." The distribution
fee paid by Class B will cause such Class to have a higher expense ratio
and to pay lower dividends than Class A. Approximately six years after
the date of purchase, Class B shares automatically will convert to Class
A shares, based on the relative net asset values for shares of each such
Class, and will no longer be subject to the distribution fee. (Such
conversion is subject to suspension by the Board of Trustees if adverse
tax consequences might result.) Class B shares that have been acquired
through the reinvestment of dividends and other 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 other distributions.
Class C shares are subject to a .75% CDSC, which is assessed
only if you redeem Class C shares within one year of purchase. See "How
to Redeem Fund Shares - Class C shares." These shares also are subject to
an annual distribution fee at the rate of 0.50 of 1% of the value of the
average daily net assets of Class C. Class C shares are also subject to
an annual service fee at the rate of 0.25 of 1% of the value of the
average daily net assets of Class C. See "Distribution and Service Plans
" Class B and C." The distribution fee paid by Class C will cause such
Class to have a higher expense ratio and to pay lower dividends than
Class A.
Class R shares generally may not be purchased directly by
individuals, although eligible institutions may purchase Class R shares
for accounts maintained by individuals. Class R shares are sold at net
asset value per share primarily to Banks acting on behalf of customers
having a qualified trust or investment account or similar relationship at
such institution. Class A, Class B and Class C shares are primarily sold
to retail investors by Service Agents that have entered into Selling
Agreements with the Distributor.
The decision as to which Class of shares is more beneficial
to you depends on the amount and the intended length of your investment.
You should consider whether, during the anticipated life of your
investment in the Fund, the accumulated distribution fee and CDSC, if
any, on Class B or Class C shares 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
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
Page 7
shares because the accumulated continuing distribution fees on Class B or
Class C shares may exceed the initial sales charge on Class A shares
during the life of the investment. Finally, you should consider the
effect of the CDSC period and any conversion rights of the Classes in the
context of your own investment time frame. For example, while Class C
shares have a shorter CDSC period than Class B shares, Class C shares do
not have a conversion feature and, therefore, are subject to an ongoing
distribution fee. Thus, Class B shares may be more attractive than Class C
shares to investors with longer term investment outlooks. Generally, Class
A shares may be more appropriate for investors who invest $1,000,000 or
more in Fund shares, but will not be appropriate for investors who invest
less than $100,000 in Fund shares.
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE.
The Fund seeks current income exempt from Federal income
taxes. The Fund seeks to achieve its objective by investing in debt
obligations issued by states, cities, counties, municipalities, municipal
agencies and regional districts, the interest from which is, in the
opinion of counsel to the respective issuers, exempt from Federal income
taxes ("Municipal Obligations"). The Fund seeks to maximize current
income exempt from Federal income taxes consistent with what is believed
to be the prudent risk of capital. The Fund pursues its objective by
investing in Municipal Obligations with intermediate maturities and of
"investment-grade" quality.
MANAGEMENT POLICIES.
Under normal market conditions, the Fund attempts to invest
100%, and will invest a minimum of 80%, of its total assets in Municipal
Obligations. However, the Fund has the ability under certain conditions
to invest 20% of its total assets in taxable obligations (including
obligations the interest on which is included in the calculation of the
alternative minimum tax for individuals) and may, for defensive purposes
under abnormal market conditions, temporarily invest more than 20% of its
total assets in taxable obligations. The Fund has not made any such
investments, and does not expect such action will be necessary. In
managing the Fund, the Fund's investment manager, Dreyfus, seeks to take
advantage of market developments, yield disparities and variations in the
creditworthiness of issuers. The Fund's policy of investing a minimum of
80% of its total assets in Municipal Obligations is a fundamental policy
of the Fund.
QUALITY OF MUNICIPAL OBLIGATIONS.
The Fund invests only in Municipal Obligations rated at the
time of purchase within the four highest quality ratings of Moody's
Investors Service, Inc. ("Moody's") (currently at least Baa or above for
bonds, at least MIG 3 or above for notes and at least Prime-2 or above
for commercial paper) or Standard and Poor's Ratings Group ("S&P") (at
least BBB or above for bonds, at least SP-2 or above for notes and at
least A-2 or above for commercial paper) or, if not rated by Moody's or
S&P, of comparable quality to the above ratings as determined by Dreyfus.
Municipal Obligations rated within the four highest ratings are
considered to be of investment-grade quality, although bonds rated in the
lowest of these four categories (Baa by Moody's or BBB by S&P) have some
speculative characteristics and involve greater risks and higher yields.
A discussion of the categories of Municipal Obligations and the rating
systems appears in the SAI.
The taxable instruments in which the Fund is permitted to
invest under certain circumstances include U.S. Government securities and
short-term, high quality money market instruments. In addition, the Fund
may, on occasion, purchase securities issued by other investment
companies that invest primarily in high quality debt obligations of the
kinds in which the Fund may invest.
Page 8
PRICE AND PORTFOLIO MATURITY.
The Fund generally invests in Municipal Obligations having
intermediate-term maturities, which can be expected to pay higher yields
and experience greater fluctuation in value than bonds with short-term
maturities. The average weighted maturity of the Municipal Obligations in
the portfolio is not expected to exceed ten years. There is no limit on
the maturity of any individual security. The market value of the
Municipal Obligations in the Fund's portfolio and, accordingly, the
Fund's net asset value typically will vary inversely with changes in
interest rates, declining when interest rates rise and rising when
interest rates decline. Under normal market conditions, the longer the
average maturity of the Fund's holdings, the greater its expected yield
and price volatility.
INVESTMENT TECHNIQUES
In connection with its investment objective and policies, the
Fund may employ, among others, the following investment techniques:
WHEN-ISSUED SECURITIES. The Fund may purchase Municipal
Obligations on a "when-issued" basis (i.e., delivery of and payment for
the Municipal Obligations normally take place within 45 days after the
date of the purchase commitment). The payment obligation and the interest
rate on such securities are fixed at the time of the purchase commitment.
Although the Fund generally will purchase Municipal Obligations on a when-
issued basis with the intention of acquiring the securities, the
Fund may sell such securities before the settlement date. Municipal
Obligations purchased on a when-issued basis, like other investments made
by the Fund, may decline or appreciate in value prior to their actual
delivery to the Fund.
MASTER/FEEDER OPTION. The Company may in the future seek to
achieve the Fund's investment objective by investing all of the Fund's
net investable assets in another investment company having the same
investment objective and substantially the same investment policies and
restrictions as those applicable to the Fund. Shareholders of the Fund
will be given at least 30 days' prior notice of any such investment. Such
investment would be made only if the Company's Board of Trustees
determine it to be in the best interest of the Fund and its shareholders.
In making that determination, the Board of Trustees will consider, among
other things, the benefits to shareholders and/or the opportunity to
reduce costs and achieve operational efficiencies. Although the Fund
believes that the Board of Trustees will not approve an arrangement that
is likely to result in higher costs, no assurance is given that costs
will be materially reduced if this option is implemented.
CERTAIN PORTFOLIO SECURITIES
FLOATING RATE AND VARIABLE RATE OBLIGATIONS. The Fund may
purchase floating rate and variable rate obligations. These obligations
bear interest at rates that are not fixed, but vary with changes in
specified market rates or indices. Some of these obligations may carry a
demand feature that permits the Fund to receive the par value upon demand
prior to maturity. The Fund will limit its purchases of floating rate
and variable rate Municipal Obligations to those meeting the quality
standards applicable to the Fund. Frequently, such obligations are
secured by letters of credit or other credit support arrangements provided
by banks. The quality of the underlying creditor or the bank, as
determined by Dreyfus under the supervision of the Board of Trustees must
also be equivalent to the quality standards applicable to the Fund. In
addition, Dreyfus monitors the earning power, cash flow and other
liquidity ratios of the issuers of such obligations, as well as the
creditworthiness of the institution responsible for paying the principal
amount of the obligations under the demand feature.
The Fund may invest in participation interests purchased from
banks in floating or variable rate Municipal Obligations owned by banks.
Participation interests carry a demand feature permitting the Fund to
tender them back to the bank. Each participation is backed by an
Page 9
irrevocable letter of credit or guarantee of a bank which Dreyfus under
the supervision of the Board of Trustees has determined meets the
prescribed quality standards for the Fund.
Other types of tax-exempt instruments that may become
available in the future may be purchased by the Fund as long as Dreyfus
believes the quality of these instruments meets the Fund's quality
standards.
MUNICIPAL BOND INDEX AND INTEREST RATE FUTURES CONTRACTS AND
OPTIONS ON MUNICIPAL BOND INDEX AND INTEREST RATE FUTURES CONTRACTS. The
Fund may enter into municipal bond index futures contracts and interest
rate futures contracts and purchase and sell options on these futures
contracts that are traded on a United States exchange or board of trade.
Such investments, if any, by the Fund will be made solely for the purpose
of hedging against changes in the value of its portfolio securities and
in the value of securities it intends to purchase due to anticipated
changes in interest rates and market conditions and when the transactions
are economically appropriate to the reduction of risks inherent in the
management of the Fund.
A municipal bond index futures contract, which is based on an
index of long-term, tax-exempt municipal bonds, is an agreement in which
two parties agree to take or make delivery of an amount of cash equal to
a specified dollar amount times the different 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. An interest rate
futures contract provides for the future purchase or sale of specified
interest rate sensitive debt securities such as United States Treasury
bills, bonds and notes, obligations of the Government National Mortgage
Association and bank certificates of deposit. Although most interest rate
futures contracts require the delivery of the underlying securities, some
settle in cash. Each contract designates the price, date, time and place
of delivery. Entering into a futures contract to deliver the index or
instrument underlying the contract is referred to as entering into a
"short" position in the futures contract, whereas entering into a futures
contract to take delivery of the index or instrument is referred to as
entering into a "long" position in the futures contract.
A put or call on a municipal bond index or interest rate
futures contract gives the purchaser the right, in return for the premium
paid, to assume a short or long position, respectively, in the underlying
futures contract as a specified exercise price at any time prior to the
expiration date of the option. The Fund may purchase put and call options
on both municipal bond index and interest rate futures contracts. The
Fund will sell options on these futures contracts only as part of closing
purchase transactions to terminate its options position, although no
assurance can be given that closing transactions can be effected.
Entering into a futures contract for the purchase or sale of
a municipal bond index or debt security or purchasing options on index or
interest rate futures contracts will enable the Fund to protect its
assets from fluctuations in interest rates on tax-exempt securities
without initially buying or selling the securities. The Fund may enter
into futures contracts to sell an index or debt security or may purchase
options when Dreyfus believes that interest rates will increase and
consequently the value of the Fund's portfolio securities will decrease.
The Fund may enter into futures contracts to buy an index or debt
security or may purchase call options when Dreyfus anticipates purchasing
portfolio securities at a time of declining interest rates.
There are several risks in connection with the issue of
municipal bond index and interest rate futures contracts and options on
these futures contracts as hedging devices. There can be no assurance
that there will be a correlation between price movements in the municipal
bond index or interest rate futures, on the one hand, and price movements
in municipal bonds which are the subject of the hedge, on the other hand.
Positions in futures contracts and options on futures contracts may be
closed out only by entering into offsetting positions on the exchange on
which the contract was initiated, and no assurance can be given that an
active
Page 10
market will exist for the contract or the option at any particular
time. Consequently, the Fund may realize a loss on a futures contract
that is not offset by an increase in the price of the municipal bonds
that are being hedged or may not be able to close a futures position in
the event of adverse price movements. Any income earned by the Fund from
transactions in futures contracts and options on futures contracts will
be taxable. Accordingly, it is anticipated that such investments will be
made only in unusual circumstances, such as when Dreyfus anticipates an
extreme change in interest rates or market conditions.
The Fund may not enter into futures contracts or purchase
options on futures contracts if, immediately thereafter, the sum of the
amount of margin deposits on the Fund's existing futures contracts and
premiums paid for options would exceed 5% of the value of the Fund's
total assets, after taking into account unrealized profits and losses on
any existing contracts. When a Fund enters into futures contracts,
purchases an index or debt security or purchases call options, an amount
of cash, U.S. Government Securities or other high grade debt securities
equal to the market value of the contract will be deposited and
maintained in a segregated account with the Fund's custodian to
collateralize the positions, thereby insuring that the use of the
contract is unleveraged.
At present the Fund is considering investments in futures
contracts and options on futures contracts as described above. However,
the Fund reserves the right to invest in other kinds of futures contracts
and options on futures contracts subject to the policies the Trustees may
establish from time to time.
MUNICIPAL LEASE OBLIGATIONS. The Fund may purchase municipal
lease obligations and certificates of participation in municipal lease
obligations. A municipal lease obligation does not constitute a general
obligation of the municipality for which the municipality's taxing power
is pledged. Ordinarily, a lease obligation will contain a
"non-appropriation" clause which provides that the municipality has no
obligation to make lease payments in future years unless money is
appropriated for such purpose on a yearly basis. Because of the risk of
non-appropriation, some lease obligations are issued with third-party
credit enhancements, such as insurance or a letter of credit. Lease
obligations are a relatively new type of financing that has not yet
developed the depth of marketability associated with more conventional
municipal obligations. For these reasons, before investing in a lease
obligation Dreyfus will consider, among other things, whether (1) the
leased property is essential to a governmental function of the
municipality, (2) the municipality is prohibited from substituting or
purchasing similar equipment if lease payments are not appropriated, and
(3) the municipality has maintained good market acceptability for its
lease obligations in the past. The Board of Trustees has established
guidelines for determining whether a Municipal Lease Obligation is a
liquid securitiy. Such determinations will be made based upon all
relevant factors including, the frequency of trades and quotes for the
obligation, the number of dealers willing to purchase or sell the
security and the number of potential buyers, the willingness of dealers
to undertake to make a market in the securities, and the nature of the
marketplace trades.
TENDER OPTION BONDS. The Fund may invest up to 10% of the
value of its assets in 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 the option, 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 deter-
Page 11
mined 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. Dreyfus, 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 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.
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, which would included tender option bonds for which
the required notice to exercise the tender feature is more than seven days
if there is no secondary market available for these obligations.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities
issued by other investment companies to the extent that such investments
are consistent with the Fund's investment objective and policies and
permissible under the Investment Company Act of 1940, as amended (the
"1940 Act"). As a shareholder of another investment company, the Fund
would bear, along with other shareholders, its pro rata portion of the
other investment company's expenses, including advisory fees. These
expenses would be in addition to the advisory and other expenses that the
Fund bears directly in connection with its own operations.
CERTAIN RISK CONSIDERATIONS. The ability of the Fund to meet
its investment objective is subject to the ability of municipal issuers
to meet their payment obligations. In addition, the Fund's portfolio will
be affected by general changes in interest rates which may result in
increases or decreases in the value of Fund holdings. Investors should
recognize that, in periods of declining interest rates, the yield of the
Fund will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates, the yield of the Fund will tend to be
somewhat lower. Also, when interest rates are falling, the influx of new
money to the Fund will likely be invested in portfolio instruments
producing lower yields than the balance of that Fund's portfolio, thereby
reducing the current yield of the Fund. In periods of rising interest
rates, the opposite can be expected to occur.
The Fund may invest without limit in Municipal Obligations
which are repayable out of revenue streams generated from economically
related projects or facilities or whose issuers are located in the same
state. Sizable investments in these obligations could increase risk to
the Fund should any of the related projects or facilities experience
financial difficulties. To the extent the Fund may invest in private
activity bonds, the Fund may invest only up to 5% of its total assets in
bonds where payment of principal and interest are the responsibility of a
company with less than three years operating history. The Fund is
authorized to borrow up to 10% of its total assets for temporary or
emergency purposes and to pledge its assets to the same extent in
connection with such borrowings.
The Fund is classified as a "non-diversified" investment
company, as defined under the 1940 Act, and therefore, the Fund could
invest all of its assets in the obligations of a single issuer or
relatively few issuers. However, the Fund intends to conduct its
operations so that it will qualify under the Internal Revenue Code of
1986, as amended (the "Code"), as a "regulated investment company". To
continue to qualify, among other requirements, the Fund will be required
to limit its investments so that, at the close of each quarter of the
taxable year, with respect to at least 50% of its total assets, not more
than 5% of such assets will be invested in the securities of a single
issuer. In addition, not more than 25% in value of the Fund's total
assets may be invested in the securities of a single issuer at the close
of each quarter of the taxable year. Additionally, due to the Fund's
non-diversified status, changes in the financial condition or in the
market's assessment of an individual issuer may cause the Fund's share
price to fluc-
Page 12
tuate to a greater degree than if the Fund were diversified.
However, the provisions of the Code place limits on the extent to which a
Fund's portfolio may be non-diversified.
PORTFOLIO TURNOVER. While securities are purchased for the
Fund on the basis of potential for current income and not for short-term
trading profits, in the past the portfolio turnover rate of the Fund has
exceeded 100% and may exceed 100% in the future. A portfolio turnover
rate of 100% would occur, for example, if all the securities held by the
Fund were replaced once in a period of one year. In past years the Fund's
rate of portfolio turnover exceeded that of certain other mutual funds
with the same investment objective. A higher rate of portfolio turnover
(100% or greater) involves correspondingly greater brokerage commissions
and other expenses that must be borne directly by the Fund and, thus,
indirectly by its shareholders. In addition, a high rate of portfolio
turnover may result in the realization of larger amounts of short-term
capital gains which, when distributed to the Fund's shareholders, are
taxable to them as ordinary income. Nevertheless, securities transactions
for the Fund will be based only upon investment considerations and will
not be limited by any other considerations when Dreyfus deems it
appropriate to make changes in the Fund's assets.
LIMITING INVESTMENT RISKS. The Fund is subject to a number of
investment limitations. Certain limitations are matters of fundamental
policy and may not be changed without the affirmative vote of the holders
of a majority of the Fund's outstanding shares. The SAI describes all of
the Fund's fundamental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed
without shareholder approval. If the Fund's investment objective,
policies, restrictions, practices or procedures change, shareholders
should consider whether the Fund remains an appropriate investment in
light of the shareholder's then-current position and needs.
In order to permit the sale of the Fund's shares in certain states,
the Fund may make commitments more restrictive than the investment
policies and restrictions described in this Prospectus and the SAI.
Should the Fund determine that any such commitment is no longer in the
best interest of the Fund, it may consider terminating sales of its
shares in the states involved.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER.
Dreyfus, located at 200 Park Avenue, New York, New York
10166, was formed in 1947. Dreyfus is a wholly-owned subsidiary of Mellon
Bank, which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). As of November 30, 1994, Dreyfus managed or administered
approximately $71 billion in assets for more than 1.9 million investor
accounts nationwide.
Dreyfus serves as the Fund's investment manager. Dreyfus
supervises and assists in the overall management of the Fund's affairs
under an Investment Management Agreement with the Fund, subject to the
overall authority of the Company's Board of Trustees in accordance with
Massachusetts law. Pursuant to the Investment Management Agreement,
Dreyfus provides, or arranges for the provision by one or more third
parties of investment advisory, administrative, custody, fund accounting
and transfer agency services to the Fund. As the Fund's investment
manager, Dreyfus manages the Fund by making investment decisions based on
the Fund's investment objective, policies and restrictions.
John F. Flahive has been employed by the Manager as portfolio
manager of the Fund since October 17, 1994. Prior to employment with the
Manager, Mr. Flahive was senior portfolio manager and Vice President with
Neuberger & Berman. A 1984 graduate of St. Michael's College with a
degree in Business Administration, Mr. Flahive also earned a M.B.A. from
Clarkson University in 1985, and attended the New York University
Graduate School of Business Administration for Visiting Professionals in
1986.
Page 13
Mellon is a publicly owned multibank holding company
incorporated under Pennsylvania law in 1971 and registered under the Bank
Holding Company Act of 1956, as amended. Mellon provides a comprehensive
range of financial products and services in domestic and selected
international markets. Mellon is among the twenty-five largest bank
holding companies in the United States based on total assets. Mellon's
principal wholly-owned subsidiaries are Mellon Bank, Mellon Bank (DE)
National Association, Mellon Bank (MD), The Boston Company, Inc., AFCO
Credit Corporation and a number of companies known as Mellon Financial
Services Corporations. Through its subsidiaries, including Dreyfus,
Mellon managed approximately $201 billion in assets as of September 30,
1994, including $76 billion in mutual fund assets. As of September 30,
1994, Mellon, through various subsidiaries, provided non-investment
services, such as custodial or administration services, for approximately
$659 billion in assets, including approximately $108 billion in mutual
fund assets.
Under the Investment Management Agreement, the Fund has
agreed to pay Dreyfus a monthly fee at the annual rate of 0.50 of 1% of
the value of the Fund's average daily net assets. Dreyfus pays all of the
Fund's expenses, except brokerage fees, taxes, interest, fees and
expenses of the non-interested Trustees (including counsel fees), Rule
12b-1 fees (if applicable) and extraordinary expenses. Although Dreyfus
does not pay for the fees and expenses of the non-interested Trustees
(including counsel fees), Dreyfus is contractually required to reduce its
investment management fee in an amount equal to the Fund's allocable
share of such fees and expenses. In order to compensate Dreyfus for
paying virtually all of the Fund's expenses, the Fund's investment
management fee is higher than the investment advisory fees paid by most
investment companies. Most, if not all, such companies also pay for
additional non-investment advisory expenses that are not paid by such
companies' investment advisers. From time to time, Dreyfus may waive
(either voluntarily or pursuant to applicable state limitations) a
portion of the investment management fees payable by the Fund. Prior to
October 17, 1994, the Fund was advised by Mellon Bank under the
Investment Management Agreement. For the period from July 1, 1993 through
April 3, 1994, the Fund paid its investment adviser, Boston Advisors
(an indirect wholly-owned subsidiary of Mellon Bank Corporation), 0.07%
(annualized) of the Fund's average daily net assets in investment
advisory fees (net of fees waived and expenses reimbursed) under the
Fund's previous investment advisory contract (such contract covered only
the provision of investment advisory and certain specified administrative
services). For the period from April 4, 1994 through the fiscal year
ended June 30, 1994, the Fund paid Mellon Bank 0.50% (annualized) of
the Fund's average daily net assets in investment management fees. For
the fiscal year ended June 30, 1994 total operating expenses (excluding
Rule 12b-1 fees) (net of fees waived and expenses reimbursed) of the Fund
were 0.67% and 0.50% of the Fund's average daily net assets for the
Investor and Trust Classes, respectively.
In addition, Class A, B and C shares may be subject to
certain distribution and service fees. See "Distribution Plans."
Dreyfus may pay the Distributor for shareholder services from
Dreyfus's own assets, including past profits but not including the
management fee paid by the Fund. The Distributor may use part or all of
such payments to pay Service Agents in respect of these services.
Dreyfus is authorized to allocate purchase and sale orders
for portfolio securities to certain financial institutions, including, in
the case of agency transactions, financial institutions that are
affiliated with Dreyfus or Mellon Bank or that have sold shares of the
Fund, if Dreyfus believes that the quality of the transaction and the
commission are comparable to what they would be with other qualified
brokerage firms. From time to time, to the extent consistent with its
investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank has a lending
relationship.
Page 14
Premier Mutual Fund Services, Inc. is the Fund's distributor.
The Distributor is located at One Exchange Place, Boston, Massachusetts
02109. The Distributor is a wholly-owned subsidiary of Institutional
Administration Services, Inc., a provider of mutual fund administration
services, the parent company of which is Boston Institutional Group, Inc.
CUSTODIAN; TRANSFER AND DIVIDEND DISBURSING AGENT; AND
SUB-ADMINISTRATOR--Mellon Bank (One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258) is the Fund's custodian. The Fund's Transfer and
Dividend Disbursing agent is The Shareholder Services Group, Inc.
(the"Transfer Agent"), a subsidiary of First Data Corporation, P.O. Box
9671, Providence, Rhode Island 02940-9671. Premier Mutual Fund Services,
Inc. serves as the Fund's sub-administrator and, pursuant to a
Sub-Administration Agreement, provides various administrative and
corporate secretarial services to the Fund.
HOW TO BUY FUND SHARES
GENERAL -- Class A shares, Class B shares and Class C shares
may be purchased only by clients of certain financial institutions (which
may include banks), securities dealers ("Selected Dealers") and Service
Agents, except that full-time or part-time employees or directors of
Dreyfus or any of its affiliates or subsidiaries, Board members of a fund
advised by Dreyfus, including members of the Company's Board, or the
spouse or minor child of any of the foregoing may purchase Class A shares
directly through the Distributor.
Class R shares are sold primarily to Banks acting on behalf
of customers having a qualified trust or investment account or
relationship at such institution. In addition, holders of Class R shares
of the Fund who have held their shares since April 4, 1994, may continue
to purchase Class R shares of the Fund, whether or not they otherwise
would be eligible to do so. Institutions effecting transactions in Class
R shares for the accounts of their clients may charge their clients
direct fees in connection with such transactions.
Shares of the Fund are also available through a servicing
network associated with Mellon Bank, an affiliate of Dreyfus. For more
information about purchasing Fund shares through the affiliate network
and a Prospectus, call 1-800-548-2868. Please read that Prospectus
carefully. Exchange and Shareholder Services, including the telephone
purchase options, and minimum and maximum dollar amounts associated with
such services, may vary depending upon the network through which you
purchase Fund shares.
When purchasing Fund shares, you must specify which Class is
being purchased. Stock certificates are issued only upon your written
request. No certificates are issued for fractional shares. The Fund
reserves the right to reject any purchase order.
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 Distribution and Service Plans. Each Service Agent has
agreed to transmit to its clients a schedule of such fees. You should
consult your Service Agent in this regard.
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 Fund shares by check or wire, or, with the
exception of Class R shares, through the TELETRANSFER Privilege described
below. Checks should be made payable to "Premier Limited Term Municipal
Fund". Payments to open new accounts which are mailed should be sent to
Premier Limited Term Municipal Fund, P.O. Box 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
Page 15
the check and an investment slip should be enclosed and sent to Premier
Limited Term Municipal 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 Class' DDA # as shown below, for purchase of
Fund shares in your name:
DDA# 8900227885 Premier Limited Term Municipal Fund/Class A shares;
DDA# 8900227826 Premier Limited Term Municipal Fund/Class B shares;
DDA# 8900227850 Premier Limited Term Municipal Fund/Class C 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, you should call
1-800-645-6561 after completing your wire payment in order 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. For wire information with respect to
Class R shares, please call 1-800-548-2868.
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 ("ACH") member.
You must direct the institution to transmit immediately available funds
through the ACH system to The Bank of New York with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS "1111."
Federal regulations require that you provide a certified TIN
upon opening or reopening an account. See "Dividends, Other 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").
NET ASSET VALUE ("NAV")-- An investment portfolio's NAV
refers to the worth of one share. The NAV for shares of each Class of the
Fund is computed by adding, with respect to such Class of shares, the
value of the Fund's investments, cash, and other assets attributable to
that Class, deducting liabilities of the Class and dividing the result by
the number of shares of that Class outstanding. The valuation of assets
for determining NAV for the Fund may be summarized as follows:
The portfolio securities of the Fund, except as otherwise
noted, listed or traded on a stock exchange, are valued at the latest
sale price. If no sale is reported, the mean of the latest bid and asked
prices is used. Securities traded over-the-counter are priced at the mean
of the latest bid and asked prices but will be valued at the last sale
price if required by regulations of the SEC. When market quotations are
not readily available, securities and other assets are valued at a fair
value as determined in good faith in accordance with procedures
established by the Board of Trustees.
Bonds are valued through valuations obtained from a
commercial pricing service or at the most recent mean of the bid and
asked prices provided by investment dealers in accordance with procedures
established by the Board of Trustees.
Page 16
Pursuant to a determination by the Board of Trustees that
such value represents fair value, debt securities with maturities of 60
days or less held by the Fund are valued at amortized cost. When a
security is valued at amortized cost, it is valued at its cost when
purchased, and thereafter by assuming a constant amortization to maturity
of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument.
NAV is determined on each day that the New York Stock
Exchange ("NYSE") is open (a "business day"), as of the close of business
of the regular session of the NYSE (usually 4 p.m. Eastern Time).
Investments and requests to exchange or redeem shares received by the
Fund in proper form before the close of business on the NYSE (usually 4
p.m., Eastern Time) are effective on, and will receive the price
determined on, that day (except investments made by electronic funds
transfer, which are effective two business days after your call).
Investment, exchange and redemption requests received after the close of
the NYSE are effective on and receive the share price determined on the
next business day.
Orders for the purchase of Fund shares received by dealers by
the close of trading on the floor of the NYSE on any business day and
transmitted to the Distributor or its designee 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 NYSE 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 th;ey will be received by the
Distributor or its designee before the close of its business day.
The NAV of each Class of shares of most of The Premier Funds'
investment portfolios is published in leading newspapers daily. The NAV
of any Fund may also be obtained by calling 1-800-645-6561.
CLASS A SHARES -- The public offering price of Class A shares
is the net asset value per share of that Class plus a sales load as shown
below:
Total Sales Load
--------------------------------------
As a % of As a % of Dealers' Reallowance
Offering Price Net as a % of
Per Share Asset Value Offering Price
Per Share
Amount of Transaction ---------------- ----------- ----------------
- ---------------------
Less than $100,000........ 3.00 3.10 2.75
$100,000 to less than $250,000...... 2.75 2.80 2.50
$250,000 to less than $500,000...... 2.25 2.30 2.00
$500,000 to less than $1,000,000.....2.00 2.00 1.75
There is no initial sales charge on purchases of $1,000,000
or more of Class A shares. However, if you purchase Class A shares
without an initial sales charge as part of an investment of at least
$1,000,000 and redeem all or a portion of those shares within two years after
purchase, a CDSC of 1.00% will be imposed at the time of
redemption. The terms contained in the section of the Fund's Prospectus
entitled "How to Redeem Fund Shares - Contingent Deferred Sales Charge - Class
B" (other than the amount of the CDSC and its time periods) are applicable to
the Class A shares subject to a CDSC. Letter of Intent and Right of
Accumulation apply to such purchases of Class A shares. Full-time employees
of NASD member firms and full-time employees of other financial institutions
which have entered into an agreement with the Distributor pertaining to the
sale of Fund shares (or which otherwise have a brokerage related or clearing
arrangement with an NASD member firm or financial institution with respect to
the sale of such 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 the Distributor 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
Page 17
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 or directors of Dreyfus or any of its affiliates or
subsidiaries, Board members of a fund advised by Dreyfus, including members of
the Fund's Board, or the spouse or minor child of any of the foregoing.
Holders of Class A accounts of the Fund as of December 28,
1994, may continue to purchase Class A shares of the Fund at NAV.
However, investments by such holders in other funds advised by Dreyfus
will be subject to the applicable front end sales load.
Class A shares may be purchased at net asset value through
certain broker-dealers and other financial institutions which have
entered into an agreement with the Distributor, which includes a
requirement that such shares be sold for the benefit of clients
participating in a "wrap account" or a similar program under which such
clients pay a fee to such broker-dealer or other financial institution.
The dealer reallowance may be changed from time to time but
will remain the same for all dealers. The Distributor, at its expense,
may provide additional promotional incentives to dealers that sell shares
of funds advised by Dreyfus which are sold with a sales load, such as
Class A shares. In some instances, those incentives may be offered only
to certain dealers who have sold or may sell significant amounts of
shares. Dealers receive a larger percentage of the sales load from the
Distributor than they receive for selling most other funds.
CLASS B SHARES--The public offering price for Class B shares
is the net asset value per share of that Class. No initial sales charge
is imposed at the time of purchase. A CDSC is imposed, however, on
certain redemptions of Class B shares as described under "How to Redeem
Fund Shares." The Distributor compensates certain Service Agents for
selling Class B shares at the time of purchase from the Distributor's own
assets. The proceeds of the CDSC and the distribution fee, in part, are
used to defray these expenses.
CLASS C SHARES--The public offering price for Class C shares
is the net asset value per share of that Class. No initial sales charge
is imposed at the time of purchase. A CDSC, however, is imposed on
redemptions of Class C shares made within the first year of purchase. See
"Class B shares" above and "How to Redeem Fund Shares."
CLASS R SHARES--The public offering price for Class R shares
is the net asset value per share of that Class.
RIGHT OF ACCUMULATION--CLASS A SHARES--Reduced sales loads
apply to any purchase of Class A shares, shares of other funds in the
Premier Family of Funds, shares of certain other funds advised by Dreyfus
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 SAI, where the
aggregate investment, including such purchase, is $100,000 or more. If,
for example, you previously purchased and still hold Class A shares, or
shares of any other Eligible Fund or combination thereof, with an
aggregate current market value of $80,000 and subsequently purchase Class
A shares or shares of an Eligible Fund having a current value of $40,000,
the sales load applicable to the subsequent purchase would be reduced to
2.75% 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 the Distributor if orders are made
by wire, or the Transfer Agent if orders are made by mail. The reduced
sales load is subject to confirmation of your holdings through a check of
appropriate records.
TELETRANSFER PRIVILEGE (NOT APPLICABLE TO CLASS R SHARES) --
You may purchase Fund shares (minimum $500 and maximum $150,000 per day)
by telephone if you have checked the
Page 18
appropriate box and supplied the necessary information on the Fund's
Account Application or have a filed Shareholder 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 ACH
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 of Fund shares by telephoning
1-800-221-4060 or, if calling from overseas, 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 described in this Prospectus. You should consult your Service
Agent in this regard.
FUND EXCHANGES
You may purchase, in exchange for shares of a Class, shares
of the same class of certain other funds managed or administered by
Dreyfus, 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 service, please call
1-800-645-6561 to determine if it is available and whether any conditions
are imposed on its use.
To request an exchange, your Service Agent acting on your
behalf must give exchange instructions to the Transfer Agent in writing
or by telephone. 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 by calling 1-800-645-6561.
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. The ability to issue exchange
instructions by telephone is given to all Fund shareholders
automatically, unless you check the relevant "NO" box on the Account
Application, indicating that you specifically refuse this Privilege. The
Telephone Exchange Privilege may be established for an existing account by
written request, signed by all shareholders on the account, or by a
Separate Shareholder Services Form, also available by calling 1-800-645-
6561. If you previously have established the Telephone Exchange Privilege,
you may telephone exchange instructions by calling 1-800-221-4060 or, if
calling from overseas, 1-401-455-3306. See "How to Redeem Fund
Shares-Procedures." Upon an exchange, 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: Telephone
Exchange Privilege, TELETRANSFER Privilege and the dividends and
distributions payment option (except for Dividend Sweep) selected by the
investor.
Shares will be exchanged at the next determined net asset
value; however, a sales load may be charged with respect to exchanges of
Class A shares into funds sold with a sales load. No CDSC will be imposed
on Class B or C shares at the time of an exchange; however, Class B or C
shares acquired through an exchange will be subject to the higher CDSC
applicable to the exchanged or acquired shares. The CDSC applicable on
redemption of the acquired Class B or C shares will be calculated from
the date of the initial purchase of the Class B or C shares exchanged, as
the case may be. 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 of the fund from which you are exchanging were: (a) pur-
Page 19
chased 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 other distributions paid with respect to the foregoing
categories of shares. To qualify, at the time of the exchange your
Service Agent must notify the Distributor. Any such qualification is
subject to confirmation of your holdings through a check of appropriate
records. See "Shareholder Services" in the SAI. 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 SEC. The Fund reserves the right to reject any exchange request in
whole or in part. The availability of fund exchanges may be modified or
terminated at any time upon notice to shareholders.
The exchange of shares of one fund for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize a taxable gain or loss.
AUTO-EXCHANGE PRIVILEGE
Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares
of the Fund, in shares of the same class 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 or C shares at
the time of an exchange; however, Class B or C shares acquired through an
exchange will be subject to the higher CDSC applicable to the exchanged
or acquired shares. The CDSC applicable on redemption of the acquired
Class B or C shares will be calculated from the date of the initial
purchase of the Class B or C shares exchanged, as the case may be. See
"Shareholder Services" in the SAI. 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 Limited Term Municipal 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 the 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 ACH 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 by calling 1-800-645-6561. You may cancel
your participation in this Privilege or change the amount of
Page 20
purchase at any time by mailing written notification to Premier Limited
Term Municipal 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.
DIVIDEND OPTIONS
Dividend Sweep 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 certain of the Dreyfus Family of Funds of which you are an investor.
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, such shareholder 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 or class 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
SAI. Dividend ACH permits you to transfer electronically on the payment
date dividends or dividends and capital gain distributions, if any, from
the Fund to a designated bank account. Only an account maintained at a
domestic financial institution which is an ACH member may be so
designated. Banks may charge a fee for this service.
For more information concerning these Privileges, or to
request a Dividend Options Form, please call toll free 1-800-645-6561.
You may cancel these Privileges by mailing written notification to
Premier Limited Term Municipal Fund, P.O. Box 6587, Providence, Rhode
Island 02940-6587. To select a new fund after cancellation, you must
submit a new Dividend Options Form. Enrollment in or cancellation of
these Privileges is effective three business days following receipt.
These Privileges are available only for existing accounts and may not be
used to open new accounts. Minimum subsequent investments do not apply
for Dividend Sweep. The Fund may modify or terminate these Privileges at
any time or charge a service fee. No such fee currently is contemplated.
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.
You should consider whether Direct Deposit of your entire payment into a
fund with fluctuating NAV, such as the Fund, may be appropriate for you.
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 this Privilege. The appropriate form may be
obtained by calling 1-800-645-6561. 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.
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 by calling 1-800-645-6561. The Automatic Withdrawal Plan may be
ended at any time by the shareholder, the Fund or the Transfer Agent.
Shares for which certificates have been issued may not be redeemed
through the Automatic Withdrawal Plan.
Page 21
Class B and C shares withdrawn pursuant to the Automatic
Withdrawal Plan will be subject to any applicable CDSC. Purchases of
additional Class A shares where the 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 the
Distributor, 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 of the Fund 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.
HOW TO REDEEM FUND SHARES
GENERAL--You may request redemption of your 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)
when shares are redeemed directly through the Distributor. Service Agents
or other institutions may charge their clients a nominal fee for
effecting redemptions of Fund shares. Any certificates 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 Fund's 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 SEC.
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,
Page 22
THE FUND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR
PURSUANT TO THE TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS
DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE
TELETRANSFER PURCHASE OR THE AUTOMATIC ASSET BUILDER ORDER AGAINST WHICH
SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY IF 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 45 days' written notice if the net asset value
of your account is $500 or less and remains so during the notice period.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES--A CDSC
payable to the Distributor is imposed on any redemption of Class B shares
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 the Fund 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 other 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 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 Fund's 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
- ----------------- ------------------------
First.................................................... 3.00
Second................................................... 3.00
Third.................................................... 2.00
Fourth................................................... 2.00
Fifth.................................................... 1.00
Sixth.................................................... 0.00
In determining whether a CDSC is applicable to a redemption,
the calculation will be made in a manner that results in the lowest
possible rate. It will be assumed that the redemption is made first of
amounts representing shares acquired pursuant to the reinvestment of
dividends and other 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
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
Page 23
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.
CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES--A CDSC of
.75% payable to the Distributor is imposed on any redemption of Class C
shares within one year of the date of purchase. The basis for calculating
the payment of any such CDSC will be the method used in calculating the
CDSC for Class B shares. See "Contingent Deferred Sales Charge: Class B
shares" above.
WAIVER OF CDSC--The CDSC applicable to Class B and Class C
shares 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 as a result of a combination of
any investment company with the Fund by merger, acquisition of assets or
otherwise, and (c) redemptions by such shareholders as the SEC 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 the Distributor. 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, or, except for Class R
shares, 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 and institutions. The
Fund makes available to certain large institutions the ability to issue
redemption instructions through compatible computer facilities.
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 a Shareholder Services Form with the Transfer Agent. If you
select the TELETRANSFER Privilege 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
Page 24
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 NAV may fluctuate.
REGULAR REDEMPTION. Under the regular redemption procedure, you may redeem
your shares by written request mailed to Premier Limited Term Municipal
Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. Redemption
Requests may be delivered in person only to a Dreyfus
Financial Center. These requests will be forwarded to the Fund and will be
processed only upon receipt thereby. For the location of the nearest
financial center, please call the telephone number listed under "General
Information." Redemption requests must be signed by each shareholder,
including each owner of a joint account, and each signature must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the
New York Stock Exchange Medallion Signature Program, the Securities
Transfer Agents Medallion Program ("STAMP"), and the Stock Exchanges
Medallion Program. For more information with respect to
signature-guarantees, please call the telephone number listed under
"General Information."
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.
TELETRANSFER PRIVILEGE (NOT APPLICABLE TO CLASS R SHARES).
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 a Shareholder 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 ACH member may be so designated. Redemption
proceeds will be on deposit in your account at an ACH 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 calling from overseas, 1-401-455-3306. Shares held
under Keogh Plans, IRAs or other retirement plans, and 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 NYSE (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 NYSE, 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, the Distributor will accept orders from Selected
Dealers with which it has sales agreements for the repurchase of shares
held by shareholders. Repurchase orders received by
Page 25
dealers by the close of trading on the floor of the NYSE on any business
day and transmitted to the Distributor or its designee 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 NYSE
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 PLANS
(CLASS A PLAN AND CLASS B AND C PLANS)
Class A shares are subject to a Distribution Plan adopted
pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1"). Class B and C
shares are subject to a Distribution Plan and a Service Plan, each
adopted pursuant to Rule 12b-1. Potential investors should read this
Prospectus in light of the terms governing Agreements with their Service
Agents. A Service Agent entitled to receive compensation for selling and
servicing the Fund's shares may receive different compensation with
respect to one class of shares over another.
DISTRIBUTION PLAN--CLASS A SHARES--The Class A shares of the
Fund bear some of the cost of selling those shares under the Distribution
Plan (the "Plan"). The Plan allows the Fund to spend annually up to 0.25%
of its average daily net assets attributable to Class A shares to
compensate Dreyfus Service Corporation, an affiliate of Dreyfus, for
shareholder servicing activities and the Distributor for shareholder
servicing activities and expenses primarily intended to result in the
sale of Class A shares of the Fund. The Plan allows the Distributor to
make payments from the Rule 12b-1 fees it collects from the Fund to
compensate Service Agents that have entered into Selling Agreements
("Agreements") with the Distributor. Under the Agreements, the Service
Agents are obligated to provide distribution related services with regard
to the Fund and/or shareholder services to the Service Agent's clients
that own Class A shares of the Fund.
The Fund and the Distributor may suspend or reduce payments
under the Plan at any time, and payments are subject to the continuation
of the Fund's Plan and the Agreements described above. From time to time,
the Service Agents, the Distributor and the Fund may agree to voluntarily
reduce the maximum fees payable under the Plan. See the SAI for more
details on the Plan.
DISTRIBUTION AND SERVICE PLANS--CLASS B AND C. Under a
Distribution Plan adopted pursuant to Rule 12b-1, the Fund pays the
Distributor for distributing the Fund's Class B and C shares at an
aggregate annual rate of .50 of 1% of the value of the average daily net
assets of Class B and C. Under a Service Plan adopted pursuant to Rule
12b-1, the Fund pays Dreyfus Service Corporation or the Distributor for
the provision of certain services to the holders of Class B and C shares
a fee at the annual rate of .25 of 1% of the value of the average daily
net assets of Class B and C. 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 providing services related to the maintenance of such shareholder
accounts. With regard to such services, each Service Agent is required to
disclose to its clients any compensation payable to it by the Fund and
any other compensation payable by their clients in connection with the
investment of their assets in Class B and C shares. The Distributor may
pay one or more Service Agents in respect of distribution and other
services
Page 26
for these Classes of shares. The Distributor determines the
amounts, if any, to be paid to Service Agents under the Distribution and
Service Plans and the basis on which such payments are made. The fees
payable under the Distribution and Service Plans are payable without
regard to actual expenses incurred.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund declares daily and pays dividends monthly from its
net investment income, if any, and distributes any net realized gains on
an annual basis, but it may make distributions on a more frequent basis
to comply with the distribution requirements of the Code, in all events
in a manner consistent with the provisions of the 1940 Act. The Fund will
not make distributions from net realized gains unless capital loss
carryovers, if any, have been utilized or have expired. Investors may
choose whether to receive dividends and other distributions in cash or to
reinvest them in additional Fund shares. All expenses are accrued daily
and deducted before declaration of dividends to investors. Shares
purchased on a day on which the Fund calculates its NAV will begin to
accrue dividends on that day, and redemption orders effected on any
particular day will receive dividends declared only through the business
day prior to the day of redemption. Dividends paid by each Class will be
calculated at the same time and in the same manner and will be in the
same amount, except that the expenses attributable solely to a particular
Class will be borne exclusively by that Class. Class B and C shares will
receive lower per share dividends than Class A shares which will receive
lower per share dividends than Class R shares, because of the higher
expenses borne by the relevant Class. See "Expense Summary."
It is expected that the Fund will qualify as a "regulated
investment company" under the Code so long as such qualification is in
the best interests of its shareholders. Such qualification will relieve
the Fund of any liability for Federal income tax to the extent its
earnings are distributed in accordance with applicable provisions of the
Code.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains and all or a
portion of any gains realized from the sale or other disposition of
certain market discount bonds, paid by the Fund will be taxable to U.S.
shareholders, including certain non-qualified Retirement Plans, as
ordinary income whether received in cash or reinvested in Fund shares.
Distributions from the Fund's net realized long-term capital gains will
be taxable to such shareholders as long-term capital gains for Federal
income tax purposes, regardless of how long the shareholders have held
their Fund shares and whether such distributions are received in cash or
reinvested in Fund shares. The net capital gain of an individual
generally will not be subject to Federal income tax at a rate in excess of
28%. Dividends and other distributions also may be subject to state and
local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains and all or a
portion of any gains realized from the sale or other disposition of
certain market discount bonds, paid by the Fund to a foreign investor
generally are subject to U.S. withholding tax 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 capital gains paid
by the Fund to a foreign investor, as well as the proceeds of any
redemptions from a foreign investor's account, regardless of the extent
to which gain or loss may be realized, generally will not be subject to
U.S. 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 other
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 net realized, long-term capital gains,
if any, paid during the year.
Page 27
The Code provides for the "carryover" of some or all of the
sales load imposed on Class A shares if (1) an investor redeems those
shares or exchanges those shares for shares of another fund advised or
administered by Dreyfus within 91 days of purchase and (2) in the case of
a redemption, acquires other Fund Class A shares through exercise of the
Reinvestment privilege or, in the case of an exchange, such other fund
reduces or eliminates its otherwise applicable sales load for the purpose
of the exchange. In this case, the amount of the sales load charged the
investor for the original Class A shares, up to the amount of the
reduction of the sales load pursuant to the Reinvestment Privilege or on
the exchange, as the case may be, is not included in the basis of such
shares for purposes of computing gain or loss on the redemption or the
exchange, and instead is added to the basis of the fund shares received
pursuant to the Reinvestment Privilege or the exchange.
With respect to individual investors, Federal regulations
generally require the Fund to withhold ("backup withholding") and remit
to the U.S. Treasury 31% of dividends, distributions from net realized
long-term capital 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.
The Fund may be subject to a non-deductible 4% excise tax,
measured with respect to certain undistributed amounts of taxable
investment income and capital gains.
You should consult your tax advisers regarding specific
questions as to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class may
be calculated on the basis of 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. These figures also take into
account any applicable service and distribution fees. As a result, at any
given time, the performance of Class B and C should be expected to be
lower than that of Class A and the performance of Class A, B and C should
be expected to be lower than that of Class R. Performance for each Class
will be calculated separately.
Average annual total return is calculated pursuant to a
standardized formula which assumes that an investment 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 other 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 the Fund's performance will include the
Fund's average annual total return for one, five and ten year periods, or
for shorter periods depending upon the length of time during which the
Fund has operated. Computations of average annual total return for
periods of less than one year represent an annualization of the Fund's
actual total return for the applicable period.
Page 28
Total return is computed on a per share basis and assumes the
reinvestment of dividends and other 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
net asset value (or maximum offering price in the case of Class A shares)
per share at the beginning of the period. Advertisements may include the
percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return. Total return also may
be calculated by using the net asset value per share at the beginning of
the period instead of the maximum offering price per share at the
beginning of the period for Class A shares or without giving effect to
any applicable CDSC at the end of the period for Class B or C shares.
Calculations based on the net asset value per share do not reflect the
deduction of the sales load on the Fund's Class A shares, which, if
reflected, would reduce the performance quoted.
The Fund may also advertise the yield on a Class of shares.
The Fund's yield is calculated by dividing a Class of shares' annualized
net investment income per share during a recent 30-day (or one month)
period by the maximum public offering price per Class of such share on
the last day of that period. Since yields fluctuate, yield data cannot
necessarily be used to compare an investment in a Class of shares with
bank deposits, savings accounts, and similar investment alternatives
which often provide an agreed-upon or guaranteed fixed yield for a stated
period of time.
Performance will vary from time to time and past results are
not necessarily representative of future results. You 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.
The Fund may compare the performance of its shares with
various industry standards of performance including Lipper Analytical
Services, Inc. ratings. Performance rankings as reported in CHANGING
TIMES, BUSINESS WEEK, INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL,
MUTUAL FUND FORECASTER, NO LOAD INVESTOR, MONEY MAGAZINE, MORNINGSTAR
MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT, FORBES, FORTUNE, BARRON'S
and similar publications may also be used in comparing the Fund's
performance. The Fund may also advertise non-standardized performance
information, such as total return for periods other than those required
to be shown or cumulative performance data. Furthermore, the Fund may
quote its shares' returns and yields in advertisements or in shareholder
reports.
GENERAL INFORMATION
The Company was organized as a Massachusetts business trust
under the laws of the Commonwealth of Massachusetts on March 28, 1983,
under the name The Boston Company Tax-Free Municipal Funds. The Company
then changed its name to The Laurel Tax-Free Municipal Funds, and
subsequently changed its name to the Dreyfus/Laurel Tax-Free Municipal
Funds on October 17, 1994. The Company is registered with the SEC as an
open-end management investment company, commonly known as a mutual fund.
The Company offers shares of beneficial interest of separate investment
portfolios without par value (each a "fund"). The Trustees have
authorized shares of the Fund to be issued in four classes: Class A, Class
B, Class C and Class R.
Each share (regardless of Class) has one vote. All shares of
all funds (and Classes thereof) vote together as a single Class, except
as to any matter for which a separate vote of any fund or Class is
required by the 1940 Act, and except as to any matter which affects the
interests of one or more particular funds or Classes, in which case only
the shareholders of the affected
Page 29
fund or Classes are entitled to vote, each as a separate Class. Only
holders of Class A, B or C shares, as the case may be, will be entitled
to vote on matters submitted to shareholders pertaining to the
Distribution and Service Plan relating to that Class.
At December 28, 1994, Mellon Bank, Dreyfus' parent, owned of
record through its direct and indirect subsidiaries more than 25% of the
Fund's outstanding voting shares, and is deemed, under the 1940 Act, to
be a controlling shareholder.
Unless otherwise required by the 1940 Act, ordinarily it will
not be necessary for the Fund to hold annual meetings of shareholders. As
a result, Fund shareholders may not consider each year the election of
Trustees or the appointment of auditors. However, pursuant to the Fund's
By-Laws, the holders of at least 10% of the shares outstanding and
entitled to vote may require the Fund to hold a special meeting of
shareholders for purposes of removing a Trustee from office and for any
other purpose. Fund shareholders may remove a Trustee by the affirmative
vote of a majority of the Fund's outstanding voting shares. In addition,
the Board of Trustees will call a meeting of shareholders for the purpose
of electing Trustees if, at any time, less than a majority of the
Trustees then holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and
will send you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at
144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144 or by calling
toll-free 1-800-554-4611.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS
AND IN THE FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER
OF THE FUND'S SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH,
OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 30
PLT/P1122894
<PAGE>
P R O S P E C T U S
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Premier Limited Term Municipal Fund
Class A and Class R Shares
December 28, 1994
PREMIER LIMITED TERM MUNICIPAL FUND seeks to maximize current income exempt
from Federal income taxes consistent with the prudent risk of capital by
investing in municipal securities which are of investment-grade quality and
intermediate maturities.
THIS PROSPECTUS describes Premier Limited Term Municipal Fund (the "Fund")
of The Dreyfus/Laurel Tax-Free Municipal Funds (formerly The Laurel Tax-Free
Municipal Funds), a management investment company that is part of The Premier
Family of Funds. This Prospectus describes two classes of shares--Class A Shares
and Class R Shares (collectively, the "Shares")-- of the Fund.
This Prospectus sets forth concisely the information about the Fund that a
prospective purchaser should consider before investing. Investors should read
this Prospectus and retain it for future reference. The Fund offers you four
methods of purchasing Fund Shares, but only Class A and Class R Shares are
offered by this Prospectus. SEE "ALTERNATIVE PURCHASE METHODS." Additional
information about the Fund is contained in a Statement of Additional Information
.....................................
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. ALL MUTUAL
FUND SHARES INVOLVE CERTAIN RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS MELLON BANK, N.A.
("MELLON BANK") OR ITS AFFILIATES TO BE ITS INVESTMENT MANAGER. MELLON BANK OR
AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUND, SUCH AS
CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUND IS DISTRIBUTED
BY PREMIER MUTUAL FUND SERVICES, INC.
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.
....................... 1 .......................
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<PAGE>
P R E M I E R L I M I T E D T E R M M U N I C I P A L F U N D
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dated December 28, 1994 (the "SAI"), which has been filed with the Securities
and Exchange Commission (the "SEC") and is available upon request without charge
by calling or writing to The Premier Family of Funds. The SAI bears the same
date as the Prospectus and is incorporated by reference in its entirety into
this Prospectus.
In addition to this Fund, The Premier Family of Funds also offers other
funds that provide investment opportunities for you in the equity and fixed
income markets. For more information about these additional investment
opportunities, call 1-800-548-2868.
.....................................
The Premier Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
....................... 2 .......................
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<PAGE>
P R O S P E C T U S
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Expense Summary................................... 5
Financial Highlights.............................. 8
Alternative Purchase Methods...................... 11
Investment Objective and Policies................. 13
Other Investment Policies and Risk Factors........ 14
HOW TO DO BUSINESS WITH US
Special Shareholder Services...................... 20
Investor Line..................................... 21
How to Buy Fund Shares............................ 21
BY MAIL......................................... 22
BY TELEPHONE.................................... 22
BY WIRE......................................... 22
BY AUTOMATIC MONTHLY INVESTMENTS................ 23
BY DIRECT DEPOSIT............................... 23
BY IN-KIND PURCHASES............................ 23
OFFERING PRICE.................................. 24
WHEN SHARE PRICE IS DETERMINED.................. 26
ADDITIONAL INFORMATION ABOUT INVESTMENTS........ 27
How to Exchange Your Investment From One Fund to
Another........................................... 27
BY TELEPHONE.................................... 28
BY MAIL......................................... 28
ADDITIONAL INFORMATION ABOUT EXCHANGES.......... 28
How to Redeem Shares.............................. 29
BY TELEPHONE.................................... 31
BY MAIL......................................... 31
BY AUTOMATED WITHDRAWAL PROGRAM................. 32
REDEMPTION PROCEEDS............................. 32
ADDITIONAL INFORMATION ABOUT REDEMPTIONS........ 33
</TABLE>
....................... 3 .......................
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<PAGE>
P R E M I E R L I M I T E D T E R M M U N I C I P A L F U N D
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------
TABLE OF CONTENTS (CONTINUED)
<TABLE>
<S> <C>
OTHER INFORMATION
Share Price....................................... 33
Performance Advertising........................... 34
Distributions..................................... 35
Taxes............................................. 36
Other Services.................................... 38
Further Information About The Fund................ 38
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS..... 38
MANAGEMENT...................................... 39
DISTRIBUTION PLANS (CLASS A PLAN AND CLASS B AND
C PLANS)........................................ 41
</TABLE>
.....................................
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUND'S SAI
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY THE DISTRIBUTOR IN
ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
....................... 4 .......................
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<PAGE>
P R O S P E C T U S
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Additional Classes of Shares--designated Class B and Class C--have been
added to the previously existing Class A (formerly Investor Class) and Class R
(formerly Trust Class) Shares of the Fund. Class A and Class R Shares are
offered by this Prospectus. Class B and Class C Shares are offered through a
servicing network associated with the Manager pursuant to a separate Prospectus.
Class A Shares are also offered through that network pursuant to a separate
Prospectus. For more information and a Prospectus, call 1-800-645-6561. Please
read that Prospectus carefully. Exchange and shareholder services vary depending
upon the network through which you purchase Fund Shares. SEE "HOW TO BUY FUND
SHARES."
EXPENSE SUMMARY
The purpose of the following 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 Fund Operating Expenses are based on estimated amounts for
the current fiscal year. Long-term investors in Class A, B or C Shares could pay
more in 12b-1 fees than the economic equivalent of paying the maximum front-end
sales charges applicable to mutual funds sold by members of the National
Association of Securities Dealers, Inc. ("NASD"). The information in the
foregoing table does not reflect any fee waivers or expense requirement
arrangements that may be in effect. Certain Service Agents (as defined herein)
may charge their clients direct fees for effecting transactions in Fund Shares;
such fees are not reflected in the following table. SEE "FURTHER INFORMATION
ABOUT THE FUND-- MANAGEMENT," "HOW TO BUY FUND SHARES" AND "DISTRIBUTION PLANS."
....................... 5 .......................
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<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS R
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> <C> <C> <C>
MAXIMUM SALES LOAD IMPOSED ON PURCHASES
(AS A PERCENTAGE OF OFFERING PRICE) 3.00% NONE NONE NONE
MAXIMUM DEFERRED SALES CHARGE IMPOSED ON REDEMPTIONS (AS A
PERCENTAGE OF THE AMOUNT SUBJECT TO CHARGE) NONE 3.00% 0.75% NONE
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
MANAGEMENT FEE 0.50% 0.50% 0.50% 0.50%
12B-1 FEE* 0.25% 0.75% 0.75% NONE
OTHER EXPENSES** .00% .00% .00% .00%
--------- -------- --------- --------
TOTAL FUND OPERATING EXPENSES 0.75% 1.25% 1.25% 0.50%
EXAMPLE
YOU WOULD PAY THE FOLLOWING EXPENSES ON A $1,000 1 YEAR $37 $43/13+ $20/13+ $5
INVESTMENT, ASSUMING (1) A 5% ANNUAL RETURN AND 3 YEARS 53 60/40+ 40 16
(2) EXCEPT WHERE NOTED, REDEMPTION AT THE END OF 5 YEARS 70 79/69+ 69 28
EACH TIME PERIOD: 10 YEARS 120 124 151 63
<FN>
* SEE "DISTRIBUTION PLANS" FOR A DESCRIPTION OF THE FUND'S DISTRIBUTION PLANS FOR CLASS A, B AND C
SHARES.
** DOES NOT INCLUDE FEES AND EXPENSES OF THE NON-INTERESTED TRUSTEES (INCLUDING COUNSEL). THE INVESTMENT
MANAGER IS CONTRACTUALLY REQUIRED TO REDUCE ITS MANAGEMENT FEE IN AN AMOUNT EQUAL TO THE FUND'S
ALLOCABLE PORTION OF SUCH FEES AND EXPENSES, WHICH ARE ESTIMATED TO BE .02% OF THE FUND'S NET ASSETS.
SEE "FURTHER INFORMATION ABOUT THE FUND--MANAGEMENT."
+ ASSUMING NO REDEMPTION OF SHARES.
</TABLE>
The Fund understands that banks, brokers, dealers or other financial
institutions (including The Dreyfus Corporation (the "Manager") and its
affiliates) (collectively "Service Agents") may charge fees to their clients who
are owners of the Fund's Class A, B or C Shares for various services provided in
connection with a client's account. These fees would be in addition to any
amounts received by a Service Agent under its Selling Agreement ("Agreement")
with Premier Mutual Fund Services, Inc. ("Premier"). The Agreement requires each
Service Agent to disclose to its clients any compensation payable to such
Service Agent by Premier and any other compensation payable by the client for
various services provided in connection with their accounts.
.....................................
THE INFORMATION CONTAINED IN THE TABLE ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
....................... 6 .......................
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P R O S P E C T U S
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P R E M I E R L I M I T E D T E R M M U N I C I P A L F U N D
P R O S P E C T U S
- ------------------------------------------------
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--------
--------
FINANCIAL HIGHLIGHTS
The following tables are based upon a single Class A Share or Class R Share
outstanding throughout each fiscal year and should be read in conjunction with
the financial statements and related notes that appear in the Fund's Annual
Report dated June 30, 1994, which is incorporated by reference into the SAI. The
financial statements and related notes, as well as the information in the tables
below insofar as it relates to the fiscal year ended June 30, 1994, have been
audited by KPMG Peat Marwick LLP, independent auditors, whose report thereon
appears in the Fund's Annual Report. Further information about the performance
of the Fund is also included in the Fund's Annual Report, which may be obtained
without charge. The information in the tables below for fiscal years (periods)
prior to the fiscal year ended June 30, 1994, has been audited by other
independent auditors.
<TABLE>
<CAPTION>
PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
YEAR OR PERIOD ENDED
JUNE 30,
1994# 1993 1992 1991 1990 1989 1988 1987 1986*
----------- --------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of year $12.61 $12.21 $11.58 $11.44 $11.95 $11.36 $11.23 $11.06 $10.00
Income from investment
operations:
Net investment
income*** 0.54 0.60 0.70 0.74 0.76 0.78 0.76 0.76 0.59
Net realized and
unrealized gains
and losses on
investments (0.41) 0.68 0.65 0.14 (0.18) 0.67 0.13 0.17 1.06
----------- --------- --------- --------- --------- --------- --------- --------- -----------
Total from investment
operations 0.13 1.28 1.35 0.88 0.58 1.45 0.89 0.93 1.65
Less distributions:
Distributions from
net investment
income (0.54) (0.60) (0.70) (0.74) (0.77) (0.79) (0.74) (0.76) (0.59)
Distributions from
net realized capital
gains (0.54) (0.28) (0.02) -- (0.32) (0.07) (0.02) -- --
----------- --------- --------- --------- --------- --------- --------- --------- -----------
Total Distributions (1.08) (0.88) (0.72) (0.74) (1.09) (0.86) (0.76) (0.76) (0.59)
----------- --------- --------- --------- --------- --------- --------- --------- -----------
Net Asset Value, end of
year $11.66 $12.61 $12.21 $11.58 $11.44 $11.95 $11.36 $11.23 $11.06
----------- --------- --------- --------- --------- --------- --------- --------- -----------
Total Return++ 0.96% 10.95% 11.94% 7.97% 5.06% 13.29% 8.21% 8.47% 16.68%
----------- --------- --------- --------- --------- --------- --------- --------- -----------
Ratios to average net
assets/Supplemental
data:
Net Assets, end of
year (in 000's) $23,715 $18,251 $26,192 $18,042 $15,209 $13,304 $10,150 $9,225 $6,286
Ratio of expenses to
average net assets+ 0.76% 1.03% 0.97% 0.81% 0.82% 0.79% 0.79% 0.78% 0.75%**
Ratio of net
investment income to
average net assets 4.43% 4.91% 5.82% 6.43% 6.45% 6.82% 6.73% 6.58% 7.25%**
Portfolio turnover rate 57% 103% 30% 54% 76% 101% 81% 241% 5%
<FN>
(1) EFFECTIVE APRIL 4, 1994 THE RETAIL AND INSTITUTIONAL CLASSES OF SHARES WERE RECLASSIFIED AS A SINGLE CLASS OF SHARES KNOWN
AS INVESTOR SHARES. EFFECTIVE OCTOBER 17, 1994 THE INVESTOR SHARES WERE REDESIGNATED CLASS A SHARES. THE AMOUNTS SHOWN FOR
THE YEAR ENDED JUNE 30, 1994, WERE CALCULATED USING THE PERFORMANCE OF A RETAIL SHARE OUTSTANDING FROM JULY 1, 1993, TO
APRIL 3, 1994, AND THE PERFORMANCE OF AN INVESTOR SHARE OUTSTANDING FROM APRIL 4, 1994, TO JUNE 30, 1994. THE FINANCIAL
HIGHLIGHTS FOR THE YEAR ENDED JUNE 30, 1993, AND PRIOR PERIODS ARE BASED UPON A RETAIL SHARE OUTSTANDING.
* THE FUND COMMENCED OPERATIONS ON OCTOBER 1, 1985.
** ANNUALIZED.
*** NET INVESTMENT INCOME PER SHARE BEFORE WAIVER OF FEES AND/OR REIMBURSEMENT BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR
TRANSFER AGENT FOR THE YEARS ENDED JUNE 30, 1994, 1993, 1992, 1991, 1990, 1989, 1988, 1987 AND FOR THE PERIOD ENDED JUNE
30, 1986 WERE $0.49, $0.59, $0.68, $0.68, $0.70, $0.68, $0.70, $0.71 AND $0.54, RESPECTIVELY.
+ ANNUALIZED EXPENSE RATIOS BEFORE VOLUNTARY WAIVER OF FEES AND/OR REIMBURSEMENT OF EXPENSES BY INVESTMENT ADVISER AND/OR
CUSTODIAN AND/OR TRANSFER AGENT FOR THE YEARS ENDED JUNE 30, 1994, 1993, 1992, 1991, 1990, 1989, 1988, 1987 AND FOR THE
PERIOD ENDED JUNE 30, 1986 WOULD HAVE BEEN 1.09%, 1.11%, 1.12%, 1.31%, 1.32%, 1.65%, 1.29%, 1.21%, AND 1.41%, RESPECTIVELY.
++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE PERIODS INDICATED.
# EFFECTIVE OCTOBER 17, 1994, THE DREYFUS CORPORATION SERVES AS THE INVESTMENT MANAGER TO THE FUND. FROM APRIL 4, 1994,
THROUGH OCTOBER 16, 1994, MELLON BANK SERVED AS THE INVESTMENT MANAGER FOR THE FUND. PRIOR TO APRIL 4, 1994, THE BOSTON
COMPANY ADVISORS, INC. SERVED AS THE INVESTMENT ADVISER FOR THE FUND.
</TABLE>
................ 8 ................ ............... 9 ...............
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<TABLE>
<CAPTION>
PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
Year Period
Ended Ended
6/30/94# 6/30/93
---------- ---------
<S> <C> <C>
Net Asset Value, beginning of period $12.61 $12.21
---------- ---------
Income from investment operations:
Net investment income*** 0.58 0.25
Net realized and unrealized gain/(loss) on
investments (0.43) 0.40
---------- ---------
Total from investment operations 0.15 0.65
Less distributions:
Distributions from net investment income (0.56) (0.25)
Distributions from net realized capital gains (0.54) --
---------- ---------
Total Distributions (1.10) (0.25)
---------- ---------
Net Asset Value, end of period $11.66 $12.61
---------- ---------
Total return+++ 1.08% 5.36%
---------- ---------
Ratios to average net assets/Supplemental data:
Net Assets, end of year (in 000's) $12,581 $8,974
Ratio of expenses to average net assets+ 0.50% 0.68%**
Ratio of net investment income to average net
assets 4.69% 4.82%**
Portfolio turnover rate 57% 103%
<FN>
(1) THE FUND COMMENCED SELLING INVESTMENT SHARES ON FEBRUARY 1,
1993. EFFECTIVE APRIL 4, 1994, THE INVESTMENT CLASS OF SHARES
WAS RECLASSIFIED AS THE TRUST CLASS OF SHARES. EFFECTIVE
OCTOBER 17, 1994 THE TRUST CLASS SHARES WERE REDESIGNATED CLASS
R SHARES. THE TABLE ABOVE IS BASED UPON A SINGLE INVESTMENT
SHARE OUTSTANDING FROM FEBRUARY 1, 1993 TO APRIL 3, 1994 AND A
TRUST SHARE OUTSTANDING FROM APRIL 4, 1994 TO JUNE 30, 1994.
** ANNUALIZED.
*** NET INVESTMENT INCOME PER SHARE BEFORE WAIVER OF FEES AND
REIMBURSEMENT OF EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN
AND/OR TRANSFER AGENT FOR THE YEAR ENDED JUNE 30, 1994 AND FOR
THE PERIOD ENDED JUNE 30, 1993 WERE $0.54 AND $0.24,
RESPECTIVELY.
+ ANNUALIZED EXPENSE RATIOS BEFORE VOLUNTARY WAIVER OF FEES AND/OR
REIMBURSEMENT OF EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN
AND/OR TRANSFER AGENT FOR THE YEAR ENDED JUNE 30, 1994 AND FOR
THE PERIOD ENDED JUNE 30, 1993 WOULD HAVE BEEN 0.83% AND 0.93%,
RESPECTIVELY.
+++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE PERIODS
INDICATED.
# EFFECTIVE OCTOBER 17, 1994, THE DREYFUS CORPORATION SERVES AS THE
INVESTMENT MANAGER TO THE FUND. FROM APRIL 4, 1994, THROUGH
OCTOBER 16, 1994, MELLON BANK SERVED AS THE INVESTMENT MANAGER
FOR THE FUND. PRIOR TO APRIL 4, 1994, THE BOSTON COMPANY
ADVISORS, INC. SERVED AS THE INVESTMENT ADVISER FOR THE FUND.
</TABLE>
....................... 10 .......................
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P R O S P E C T U S
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PREMIER LIMITED TERM MUNICIPAL FUND
ALTERNATIVE PURCHASE METHODS. The Fund offers you four methods of purchasing
Fund Shares, but only Class A and Class R Shares are offered by this Prospectus.
You may choose the class of Shares for which you are eligible 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 Fund Share
represents an identical pro rata interest in the Fund's investment portfolio.
Class A Shares are sold at net asset value per share ("NAV") plus a maximum
initial sales charge of 3.00% of the public offering price imposed at the time
of purchase. The initial sales charge may be reduced or waived for certain
purchases. See "Offering Price--Class A Shares." These Shares are subject to an
annual 12b-1 fee at the rate of 0.25 of 1% of the value of the average daily net
assets of Class A. SEE "DISTRIBUTION PLAN--CLASS A."
Class A Shares (and Class B and Class C Shares described below) are
primarily sold to retail investors by Service Agents that have entered into
Selling Agreements with Premier, except that full-time or part-time employees or
directors of the Manager or any of its affiliates or subsidiaries, Board members
of a fund advised by the Manager, 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 Premier. Subsequent purchases may be sent directly to the
Transfer Agent or your Service Agent.
Class R Shares generally may not be purchased directly by individuals,
although eligible institutions may purchase Class R Shares for accounts
maintained by individuals. Class R Shares are sold at NAV primarily to bank
trust departments and other financial service providers (including Mellon Bank
and its affiliates) acting on behalf of customers having a qualified trust or
investment account or similar relationship at such institution. Holders of Class
R Shares of the Fund who have held their Shares since April 4, 1994, may
continue to purchase Class R Shares of the Fund, whether or not they would
otherwise be eligible to do so. Institutions effecting transactions in Class R
Shares for the accounts of their clients may charge their clients direct fees in
connection with such transactions.
In addition to the classes of Shares offered by this Prospectus, the Fund
offers two others classes of Shares designated Class B and Class C available,
together with the Class A Shares offered by this Prospectus, through a servicing
network associated with the Manager. For more information and a Prospectus
relating to Shares offered through that network, call 1-800-645-6561. Please
read that Prospectus carefully. Exchange and shareholder services vary depending
upon the network through which you purchase Fund Shares.
....................... 11 .......................
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<PAGE>
P R E M I E R L I M I T E D T E R M M U N I C I P A L F U N D
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Class B Shares are sold at NAV with no initial sales charge at the time of
purchase; as a result, the entire purchase price is immediately invested in the
Fund. Class B Shares are subject to a maximum 3% Contingent Deferred Sales
Charge ("CDSC"), which is assessed only if 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 distribution fee at the rate of 0.50 of 1%
of the value of the average daily net assets of Class B. In addition, Class B
Shares are subject to an annual service fee at the rate of 0.25 of 1% of the
value of the average daily net assets of Class B. SEE "DISTRIBUTION AND SERVICE
PLANS--CLASS B AND C." The distribution fee paid by Class B will cause such
class to have a higher expense ratio and to pay lower dividends than Class A.
Approximately six years after the date of purchase, Class B Shares automatically
will convert to Class A Shares based on the relative NAV for shares of each such
class, and will no longer be subject to the distribution fee. (Such conversion
is subject to suspension by the Fund's Board of Trustees if adverse tax
consequences might result.) Class B Shares that have been acquired through the
reinvestment of dividends and distributions will be converted on a pro rata
basis together with other Class B Shares, in the proportion that a shareholder's
Class B Shares converting to Class A Shares bears to the total Class B Shares
not acquired through the reinvestment of dividends and distributions.
Class C Shares are subject to a 0.75% CDSC, which is assessed only if a
shareholder redeems Class C Shares within one year of purchase. See "How to
Redeem Fund Shares--Class C Shares." These Shares also are subject to an annual
distribution fee at the rate of 0.50 of 1% of the value of the average daily net
assets of Class C. Class C Shares are also subject to an annual service fee at
the rate of 0.25 of 1% of the value of the average daily net assets of Class C.
SEE "DISTRIBUTION AND SERVICE PLANS--CLASS B AND C." The distribution fee paid
by Class C will cause such class to have a higher expense ratio and to pay lower
dividends than Class A.
The decision as to which class of Shares is more beneficial to an investor
depends on the amount and the intended length of his or her investment. An
investor should consider whether, during the anticipated life of his or her
investment in the Fund, the accumulated distribution fee and CDSC, if any, on
Class B or Class C Shares 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 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 or Class
C Shares may exceed the initial sales charge on Class A Shares during the life
of the investment. Finally, an investor should consider the effect of the CDSC
period and any conversion
....................... 12 .......................
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<PAGE>
P R O S P E C T U S
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rights of the classes in the context of his or her investment time frame. For
example, while Class C Shares have a shorter CDSC period than Class B Shares,
Class C Shares do not have a conversion feature and, therefore, are subject to
an ongoing distribution fee. Thus, Class B Shares may be more attractive than
Class C Shares to investors with longer term investment outlooks. Generally,
Class A Shares may be more appropriate for investors who invest $1,000,000 or
more in Fund Shares, but will not be appropriate for investors who invest less
than $100,000 in Fund Shares.
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks current income exempt from Federal income taxes. The Fund seeks
to achieve its objective by investing in debt obligations issued by states,
cities, counties, municipalities, municipal agencies and regional districts, the
interest from which is, in the opinion of counsel to the respective issuers,
exempt from Federal income taxes ("Municipal Obligations"). The Fund seeks to
maximize current income exempt from Federal income taxes consistent with what is
believed to be the prudent risk of capital. The Fund pursues its objective by
investing in Municipal Obligations with intermediate maturities and of
"investment-grade" quality.
Under normal market conditions, the Fund attempts to invest 100%, and will
invest a minimum of 80%, of its total assets in Municipal Obligations. However,
the Fund has the ability under certain conditions to invest 20% of its total
assets in taxable obligations (including obligations the interest on which is
included in the calculation of the alternative minimum tax for individuals) and
may, for defensive purposes under abnormal market conditions, temporarily invest
more than 20% of its total assets in taxable obligations. The Fund has not made
any such investments, and does not expect such action will be necessary. In
managing the Fund, the Manager seeks to take advantage of market developments,
yield disparities and variations in the creditworthiness of issuers. The Fund's
policy of investing a minimum of 80% of its total assets in Municipal
Obligations is a fundamental policy of the Fund.
QUALITY OF MUNICIPAL OBLIGATIONS.
The Fund invests only in Municipal Obligations rated at the time of purchase
within the four highest ratings of Moody's Investors Service, Inc. ("Moody's")
(currently at least Baa or above for bonds, at least MIG 3 or above for notes
and at least Prime-2 or above for commercial paper) or Standard & Poor's Ratings
Group ("S&P") (at least BBB or above for bonds, at least SP-2 or above for notes
and at least A-2 or above for commercial paper) or, if not rated by Moody's or
S&P, of comparable quality to the above ratings as determined by the Manager.
Municipal Obligations rated within the four highest ratings are considered to be
of investment-
....................... 13 .......................
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grade quality, although bonds rated in the lowest of these four categories (Baa
by Moody's or BBB by S&P) have some speculative characteristics and involve
greater risks and higher yields. A discussion of the categories of Municipal
Obligations and the rating systems appears in the SAI.
The taxable instruments in which the Fund is permitted to invest under
certain circumstances include U.S. Government Securities and short-term, high
quality money market instruments. In addition, the Fund may, on occasion,
purchase securities issued by other investment companies that invest primarily
in high quality debt obligations of the kinds in which the Fund may invest.
PRICE AND PORTFOLIO MATURITY.
PRICE AND PORTFOLIO MATURITY. The Fund generally invests in Municipal
Obligations having intermediate-term maturities, which can be expected to pay
higher yields and experience greater fluctuation in value than bonds with
short-term maturities. The average weighted maturity of the Municipal
Obligations in the portfolio is not expected to exceed ten years. There is no
limit on the maturity of any individual security. The market value of the
Municipal Obligations in the Fund's portfolio and, accordingly, the Fund's NAV
typically will vary inversely with changes in interest rates, declining when
interest rates rise and rising when interest rates decline. Under normal market
conditions, the longer the average maturity of the Fund's holdings, the greater
its expected yield and price volatility.
OTHER INVESTMENT POLICIES AND RISK FACTORS
FLOATING RATE AND VARIABLE RATE OBLIGATIONS. The Fund may purchase floating
rate and variable rate obligations. These obligations bear interest at rates
that are not fixed, but vary with changes in specified market rates or indices.
Some of these obligations may carry a demand feature that permits the Fund to
receive the par value upon demand prior to maturity. The Fund will limit its
purchases of floating rate and variable rate Municipal Obligations to those
meeting the quality standards applicable to the Fund. Frequently, such
obligations are secured by letters of credit or other credit support
arrangements provided by banks. The quality of the underlying creditor or the
bank, as determined by the Manager under the supervision of the Trustees, must
also be equivalent to the quality standards applicable to the Fund. In addition,
the Manager monitors the earning power, cash flow and other liquidity ratios of
the issuers of such obligations, as well as the creditworthiness of the
institution responsible for paying the principal amount of the obligation under
the demand feature.
The Fund may invest in participation interests purchased from banks in
floating or variable rate Municipal Obligations owned by banks. Participation
interests carry a demand feature
....................... 14 .......................
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P R O S P E C T U S
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permitting the Fund to tender them back to the bank. Each participation is
backed by an irrevocable letter of credit or guarantee of a bank which the
Manager under the supervision of the Trustees has determined meets the
prescribed quality standards for the Fund.
Other types of tax-exempt instruments that may become available in the
future may be purchased by the Fund as long as the Manager believes the quality
of these instruments meets the Fund's quality standards.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued by
other investment companies to the extent that such investments are consistent
with its investment objective and policies and permissible under the Investment
Company Act of 1940, as amended (the "1940 Act"). As a shareholder of another
investment company, the Fund would bear, along with other shareholders, its pro
rata portion of the other investment company's expenses, including advisory
fees. These expenses would be in addition to the advisory and other expenses
that the Fund bears directly in connection with its own operations.
TENDER OPTION BONDS. The Fund may invest up to 10% of the value of its
assets in 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 Manager, 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 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. The Fund will not invest more than
15% of the value of its net assets in illiquid securities, which would include
tender option bonds for which the required notice to exercise the tender feature
is more than seven days if there is no secondary market available for these
obligations.
WHEN-ISSUED SECURITIES. The Fund may purchase Municipal Obligations on a
"when-issued" basis (i.e., delivery of and payment for the Municipal Obligations
normally take place
....................... 15 .......................
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within 45 days after the date of the purchase commitment). The payment
obligation and the interest rate on such securities are fixed at the time of the
purchase commitment. Although the Fund generally will purchase Municipal
Obligations on a when-issued basis with the intention of acquiring the
securities, the Fund may sell such securities before the settlement date.
Municipal Obligations purchased on a when-issued basis, like other investments
made by the Fund, may decline or appreciate in value prior to their actual
delivery to the Fund.
MASTER/FEEDER OPTION. The Dreyfus/Laurel Tax-Free Municipal Funds may in the
future seek to achieve the Fund's investment objective by investing all of the
Fund's assets in another investment company having the same investment objective
and substantially the same investment policies and restrictions as those
applicable to the Fund. Shareholders of the Fund will be given at least 30 days'
prior notice of any such investment. Such an investment would be made only if
the Trustees determine it to be in the best interest of the Fund and its
shareholders. In making that determination, the Trustees will consider, among
other things, the benefits to shareholders and/or the opportunity to reduce
costs and achieve operational efficiencies. Although the Fund believes that the
Trustees will not approve an arrangement that is likely to result in higher
costs, no assurance is given that costs will be materially reduced if this
option is implemented.
MUNICIPAL BOND INDEX AND INTEREST RATE FUTURES CONTRACTS AND OPTIONS ON
MUNICIPAL BOND INDEX AND INTEREST RATE FUTURES CONTRACTS. The Fund may enter
into municipal bond index futures contracts and interest rate futures contracts
and may purchase and sell options on these futures contracts that are traded on
a United States exchange or board of trade. Such investments, if any, by the
Fund will be made solely for the purpose of hedging against changes in the value
of its portfolio securities and in the value of securities it intends to
purchase due to anticipated changes in interest rates and market conditions and
when the transactions are economically appropriate to the reduction of risks
inherent in the management of the Fund.
A municipal bond index futures contract, which is based on an index of
long-term, tax-exempt municipal bonds, is an agreement in which two parties
agree to take or make delivery of an amount of cash equal to a specified dollar
amount times 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 contracts was
originally written. An interest rate futures contract provides for the future
purchase or sale of specified interest rate sensitive debt securities such as
United States Treasury bills, bonds and notes, obligations of the Government
National Mortgage Association and bank certificates of deposit. Although most
interest rate futures contracts require the delivery of the underlying
securities, some settle in cash. Each contract designates the price, date, time
and
....................... 16 .......................
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P R O S P E C T U S
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place of delivery. Entering into a futures contract to deliver the index or
instrument underlying the contract is referred to as entering into a "short"
position in the futures contract, whereas entering into a futures contract to
take delivery of the index or instrument is referred to as entering into a
"long" position in the futures contract.
A put or call option on a municipal bond index or interest rate futures
contract gives the purchaser the right, in return for the premium paid, to
assume a short or long position, respectively, in the underlying futures
contract at a specified exercise price at any time prior to the expiration date
of the option. The Fund may purchase put and call options on both municipal bond
index and interest rate futures contracts. The Fund will sell options on these
futures contracts only as part of closing purchase transactions to terminate its
options position, although no assurance can be given that closing transactions
can be effected.
Entering into a futures contract for the purchase or sale of a municipal
bond or debt security or purchasing options on index or interest rate futures
contracts will enable the Fund to protect its assets from fluctuations in
interest rates on tax-exempt securities without initially buying or selling the
securities. The Fund may enter into futures contracts to sell an index or debt
security or may purchase options when the Manager believes that interest rates
will increase and consequently the value of the Fund's portfolio securities will
decrease. The Fund may enter into futures contracts to buy an index or debt
security or may purchase call options when the Manager anticipates purchasing
portfolio securities at a time of declining interest rates. Successful use of
futures contracts by the Fund is subject to the ability of the Manager to
correctly predict movements in the direction of interest rates.
There are several risks in connection with the issue of municipal bond index
and interest rate futures contracts and options on these futures contracts as
hedging devices. There can be no assurance that there will be a correlation
between price movements in the municipal bond index or interest rate futures, on
the one hand, and price movements in municipal bonds which are the subject of
the hedge, on the other hand. Positions in futures contracts and options on
futures contracts may be closed out only by entering into offsetting positions
on the exchange on which the contract was initiated, and no assurance can be
given that an active market will exist for the contract or the option at any
particular time. Consequently, the Fund may realize a loss on a futures contract
that is not offset by an increase in the price of the municipal bonds that are
being hedged or may not be able to close a futures position in the event of
adverse price movements. Any income earned by the Fund from transactions in
futures contracts and options on futures contracts will be taxable. Accordingly,
it is anticipated that such investments will be made only in unusual
circumstances, such as when the Manager anticipates an extreme change in
interest rates or market conditions.
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The Fund may not enter into futures contracts or purchase options on futures
contracts if, immediately thereafter, the sum of the amount of margin deposits
on the Fund's existing futures contracts and premiums paid for options would
exceed 5% of the value of the Fund's total assets, after taking into account
unrealized profits and losses on any existing contracts. When the Fund enters
into futures contracts, purchases an index or debt security or purchases call
options, an amount of cash, U.S. Government Securities or other high grade debt
securities equal to the market value of the contract will be deposited and
maintained in a segregated account with the Fund's custodian to collateralize
the positions, thereby insuring that the use of the contract is unleveraged.
At present the Fund is considering investments in futures contracts and
options on futures contracts as described above. However, the Fund reserves the
right to invest in other kinds of futures contracts and options on futures
contracts subject to the policies the Trustees may establish from time to time.
Further information about the investment policies of the Fund, including a
list of restrictions on investment activities that cannot be changed without
shareholder approval, appears in the SAI.
MUNICIPAL LEASE OBLIGATIONS. The Fund may purchase municipal lease
obligations and certificates of participation in municipal lease obligations. A
municipal lease obligation does not constitute a general obligation of the
municipality for which the municipality's taxing power is pledged. Ordinarily, a
lease obligation will contain a "non-appropriation" clause which provides that
the municipality has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis. Because of the risk of
non-appropriation, some lease obligations are issued with third-party credit
enhancements, such as insurance or a letter of credit. Lease obligations are a
relatively new type of financing that has not yet developed the depth of
marketability associated with more conventional municipal obligations. For these
reasons, before investing in a lease obligation the Manager will consider, among
other things, whether (1) the leased property is essential to a governmental
function of the municipality, (2) the municipality is prohibited from
substituting or purchasing similar equipment if lease payments are not
appropriated, and (3) the municipality has maintained good market acceptability
for its lease obligations in the past. The Board of Trustees has established
guidelines for determining whether a Municipal Obligation is a liquid security.
Such determination will be made based upon all relevant factors including, the
frequency of trades and quotes for the obligation, the number of dealers willing
to purchase or sell the security and the number of potential buyers, the
willingness of dealers to undertake to make a market in the securities, and the
nature of the marketplace trades.
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CERTAIN RISK CONSIDERATIONS. The ability of the Fund to meet its investment
objective is subject to the ability of municipal issuers to meet their payment
obligations. In addition, the portfolio of the Fund will be affected by general
changes in interest rates which may result in increases or decreases in the
value of Fund holdings. Investors should recognize that, in periods of declining
interest rates, the yield of the Fund will tend to be somewhat higher than
prevailing market rates, and in periods of rising interest rates, the yield of
the Fund will tend to be somewhat lower. Also, when interest rates are falling,
the influx of new money to the Fund will likely be invested in portfolio
instruments producing lower yields than the balance of the Fund's portfolio,
thereby reducing the current yield of the Fund. In periods of rising interest
rates, the opposite can be expected to occur.
The Fund may invest without limit in Municipal Obligations which are
repayable out of revenue streams generated from economically related projects or
facilities or whose issuers are located in the same state. Sizeable investments
in these obligations could increase risk to the Fund should any of the related
projects or facilities experience financial difficulties. To the extent the Fund
may invest in private activity bonds, the Fund may invest only up to 5% of its
total assets in such bonds where payment of principal and interest are the
responsibility of a company with less than three years' operating history. The
Fund is authorized to borrow up to 10% of its total assets for temporary or
emergency purposes and to pledge its assets to the same extent in connection
with such borrowings.
The Fund is classified as a "non-diversified" investment company, as defined
under the 1940 Act, and therefore, the Fund could invest all of its assets in
the obligations of a single issuer or relatively few issuers. However, the Fund
intends to conduct its operations so that the Fund will qualify under the
Internal Revenue Code of 1986 (the "Code") as a "regulated investment company".
To continue to qualify, among other requirements, the Fund will be required to
limit its investments so that, at the close of each quarter of the taxable year,
with respect to at least 50% of its total assets, not more than 5% of such
assets will be invested in the securities of a single issuer. In addition, not
more than 25% in value of the Fund's total assets may be invested in the
securities of a single issuer at the close of each quarter of the taxable year.
Additionally, due to the Fund's non-diversified status, changes in the financial
condition or in the market's assessment of an individual issuer may cause the
Fund's share price to fluctuate to a greater degree than if the Fund were
diversified. However, the provisions of the Code place limits on the extent to
which the Fund's portfolio may be non-diversified.
PORTFOLIO TURNOVER. While securities are purchased for the Fund on the basis
of potential for current income and not for short-term trading profits, in the
past the portfolio turnover rate of the Fund has exceeded 100% and may exceed
100% in the future. A portfolio turnover rate of 100% would occur, for example,
if all the securities held by the Fund were replaced once in a
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period of one year. In past years the Fund's rate of portfolio turnover exceeded
that of certain other mutual funds with the same investment objective. A higher
rate of portfolio turnover (100% or greater) involves correspondingly greater
brokerage commissions and other expenses which must be borne directly by the
Fund and, thus, indirectly by its shareholders. In addition, a high rate of
portfolio turnover may result in the realization of larger amounts of short-term
capital gains which, when distributed to the Fund's shareholders, are taxable to
them as ordinary income. (SEE "DISTRIBUTIONS" AND "TAXES.") Nevertheless,
security transactions for the Fund will be based only upon investment
considerations and will not be limited by any other considerations when the
Manager deems it appropriate to make changes in the Fund's assets.
LIMITING INVESTMENT RISKS. The Fund is subject to a number of investment
limitations. Certain limitations are matters of fundamental policy and may not
be changed without the affirmative vote of the holders of a majority of the
Fund's outstanding Shares. The SAI describes all of the Fund's fundamental and
non-fundamental restrictions.
The investment objective, policies, restrictions, practices and procedures
of the Fund, unless otherwise specified, may be changed without shareholder
approval. If the Fund's investment objective, policies, restrictions, practices
or procedures change, shareholders should consider whether the Fund remains an
appropriate investment in light of their then current position and needs.
In order to permit the sale of the Fund's Shares in certain states, the Fund
may make commitments more restrictive than the investment policies and
restrictions described in this Prospectus and the SAI. Should the Fund determine
that any such commitment is no longer in the best interests of the Fund, it may
consider terminating sales of its Shares in the states involved.
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HOW TO DO BUSINESS WITH US
SPECIAL SHAREHOLDER SERVICES
You may establish one or more special services designed to provide an easy way
to do business with the Fund. By electing these services on your application or
by completing the appropriate forms, you may authorize:
-INVESTMENT BY PHONE.
-AUTOMATIC MONTHLY INVESTMENTS.
-EXCHANGES OR REDEMPTIONS BY PHONE.
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By electing the service which enables you to exchange and redeem by phone,
you agree to indemnify the Fund, its transfer agent and its investment manager
from any loss, claim or expense you may incur as a result of their acting on
such instruction. The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. These include personal
identification procedures, recording of telephone conversations and providing
written confirmation of each transaction. A failure on the part of the Fund to
employ such procedures may subject it to liability for any loss due to
unauthorized or fraudulent instructions.
INVESTOR LINE
You may reach The Premier Family of Funds by calling our Investor Line at
1-800-548-2868. If you call on a rotary phone during normal business hours (9
a.m. to 5 p.m., Eastern time), you will reach a Premier Family of Funds
operator. If you call on a Touch-Tone phone, you will receive instructions on
how to: (1) request a current prospectus or information booklets about The
Premier Family of Funds' investment portfolios and services, (2) listen to NAVs,
yields and total return figures, and (3) talk with a customer service
representative during normal business hours. For more information about direct
access using a Touch-Tone phone, please contact The Premier Family of Funds.
HOW TO BUY FUND SHARES
Premier serves as the Fund's distributor. Premier is a wholly-owned subsidiary
of Institutional Administration Services, Inc., a provider of mutual fund
administration services, the parent company of which is Boston Institutional
Group, Inc. Premier also serves as the sub-administrator and, pursuant to a
Sub-Administration Agreement, provides various administrative and corporate
secretarial services to the Fund.
Premier has established various procedures for purchasing Class R and Class
A Shares of the Fund. Class R Shares are sold primarily to bank trust
departments and other financial service providers (including Mellon Bank and its
affiliates) ("Banks") acting on behalf of customers having a qualified trust or
investment account or relationship at such institution. Class A Shares are
primarily sold to retail investors by Premier and by Service Agents that have
entered into a Shareholder Servicing and Sales Support Agreement with Premier.
Once an investor has established an account, additional purchases may, in
certain cases, be made directly through the Fund's transfer agent. If Shares of
the Fund are held in an account at a Bank or with an Agent, such Bank or Agent
may require you to place all Fund purchase, exchange and redemption
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orders through them. All Banks and Agents have agreed to transmit your
transaction requests to the Fund's transfer agent or to Premier. You may
diversify your investments by choosing a combination of investment portfolios
offered by The Premier Family of Funds.
You may invest in the following ways:
BY MAIL.
Send your application and check or money order to The Premier Family of
Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830. Checks must be
payable in U.S. dollars and drawn on U.S. banks. When making subsequent
investments, enclose your check with the return remittance portion of the
confirmation of your previous investment. If the remittance portion is not
available, indicate on your check or a separate piece of paper your name,
address, the Fund and class of Shares of the Fund that you are buying and the
account number. Orders to purchase Shares are effective on the day the Fund
receives your check or money order. (SEE "WHEN SHARE PRICE IS DETERMINED.")
BY TELEPHONE.
Once your account is open, you may make investments by telephone by calling
1-800-548-2868 if you have elected the service authorizing the Fund to draw on
your bank account when you call with instructions. Investments made by phone in
any one account must be in an amount of at least $100 and are effective two days
after your call. (SEE "WHEN SHARE PRICE IS DETERMINED.")
BY WIRE.
You may make your initial or subsequent investments in the Fund by wiring
funds.
To do so:
(1) Instruct your bank to wire funds to Federal Reserve Bank of Boston, BOS
SAFE DEP, Account No. 011001234, The Dreyfus Funds 080071.
(2) Be sure to specify on the wire:
(A) The Dreyfus Funds.
(B) The Fund name and the class of Shares of the Fund you are buying and
account number (if you have one).
(C) Your name.
(D) Your city and state.
In order for a wire purchase to be effective on the same day it is received
both the trading instructions and the wire must be received before 4 p.m.,
Eastern time. (SEE "WHEN SHARE PRICE IS DETERMINED.")
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BY AUTOMATIC MONTHLY INVESTMENTS.
Once your account is open, you may make investments automatically by
electing the Automatic Investment Program, the service authorizing the Fund to
draw on your bank account regularly by paper or electronic draft. Such
investments must be in amounts of not less than $100 in any one account. You
should inquire at your bank whether it will honor a preauthorized paper or
electronic draft. Contact the Fund if your bank requires additional
documentation. Call 1-800-548-2868 or write The Premier Family of Funds, One
Exchange Place, Boston, Massachusetts 02109 for more information about the
Automatic Investment Program.
BY DIRECT DEPOSIT.
If your employer offers Direct Deposit, you may arrange to automatically
purchase Shares of a Fund (minimum $100) each pay period. Direct Deposit
investing may also be available to persons receiving regular payments from other
sources (including government pension or social security payments). Note that it
may not be appropriate to Direct Deposit your entire paycheck into the Fund
because it has a fluctuating NAV. Call 1-800-548-2868 or write The Premier
Family of Funds, One Exchange Place, Boston, Massachusetts 02109 for more
information or a Direct Deposit authorization form.
BY IN-KIND PURCHASES.
If the following conditions are satisfied, the Fund may, at its discretion,
permit you to purchase Shares through an "in-kind" exchange of securities you
hold. Any securities exchanged must meet the investment objective, policies and
limitations of the Fund, must have a readily ascertainable market value, must be
liquid and must not be subject to restrictions on resale. The market value of
any securities exchanged, plus any cash, must be at least equal to $25,000.
Shares purchased in exchange for securities generally cannot be redeemed for
fifteen days following the exchange in order to allow time for the transfer to
settle.
The basis of the exchange will depend upon the relative NAV of the Shares
purchased and securities exchanged. Securities accepted by the Fund will be
valued in the same manner as the Fund values its assets. Any interest earned on
the securities following their delivery to the Fund and prior to the exchange
will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. Call 1-800-548-2868 or write The Premier
Family of Funds, One Exchange Place, Boston, Massachusetts 02109 for more
information about "in-kind" purchases.
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OFFERING PRICE.
CLASS A SHARES. The public offering price of Class A Shares is the NAV of
that class plus a sales load as shown below:
<TABLE>
<CAPTION>
Total Sales Load
----------------------------
As a % of As a % of Dealers'
Offering Net Asset Reallowance as a
Price Value % of
Amount of Transaction Per Share Per Share Offering Price
- ------------------------------------------------ ------------- ------------- -------------------
<S> <C> <C> <C>
Less than $100,000.............................. 3.00 3.10 2.75
$100,000 TO LESS THAN $250,000.................. 2.75 2.80 2.50
$250,000 TO LESS THAN $500,000.................. 2.25 2.30 2.00
$500,00 TO LESS THAN $1,000,000................. 2.00 2.00 1.75
</TABLE>
There is no initial sales charge on purchases of $1,000,000 or more of Class
A Shares. However, if you purchase Class A Shares without an initial sales
charge as part of an investment of at least $1,000,000 and redeem all or a
portion of those Shares within two years after purchase, a CDSC of 1.00% will be
imposed at the time of redemption. The terms contained in the section of this
Prospectus entitled "HOW TO REDEEM FUND SHARES--CONTINGENT DEFERRED SALES
CHARGE--CLASS B" (other than the amount of the CDSC and its time periods) are
applicable to the Class A Shares subject to a CDSC. Letter of Intent and Right
of Accumulation apply to such purchases of Class A Shares.
Full-time employees of NASD member firms and full-time employees of other
financial institutions which have entered into an agreement with Premier
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 such 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 NAV, provided that they have
furnished Premier 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 NAV. In
addition, Class A Shares are offered at NAV to full-time or part-time employees
or directors of the Manager or any of its affiliates or subsidiaries, Board
members of a fund advised by the Manager, including members of the Fund's Board,
or the spouse or minor child of any of the foregoing.
Class A Shares will be offered at NAV without a sales load to employees
participating in certain eligible benefit plans. Class A Shares may be purchased
at NAV through certain broker-dealers and other financial institutions which
have entered into an agreement with Premier, which includes a requirement that
such Shares be sold for the benefit of clients participating in a "wrap
....................... 24 .......................
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P R O S P E C T U S
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account" or a similar program under which such clients pay a fee to such
broker-dealer or other financial institution. Holders of accounts with Class A
Shares of the Fund as of December 28, 1994, may also purchase additional Class A
Shares of the Fund in the same account at NAV.
The dealer reallowance may be changed from time to time but will remain the
same for all dealers. Premier, at its expense, may provide additional
promotional incentives to dealers that sell shares of funds advised by the
Manager which are sold with a sales load, such as Class A Shares. In some
instances, those incentives may be offered only to certain dealers who have sold
or may sell significant amounts of shares. Dealers receive a larger percentage
of the sales load from Premier than they receive for selling most other funds.
CLASS R SHARES. The public offering price for Class R Shares is the NAV of
that class.
CLASS B SHARES. The public offering price for Class B Shares is the NAV 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--CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES."
Premier compensates certain Service Agents for selling Class B Shares at the
time of purchase from Premier's own assets. The proceeds of the CDSC and the
distribution fee, in part, are used to defray these expenses.
CLASS C SHARES. The public offering price for Class C Shares is the NAV of
that class. No initial sales charge is imposed at the time of purchase. A CDSC,
however, is imposed on redemptions of Class C Shares made within the first year
of purchase. SEE "HOW TO REDEEM FUND SHARES--CONTINGENT DEFERRED SALES
CHARGES--CLASS C SHARES."
RIGHT OF ACCUMULATION--CLASS A SHARES. Reduced sales loads apply to any
purchase of Class A Shares, shares of other funds in the Premier Family of
Funds, shares of certain other funds advised by the Manager 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 SAI, where the aggregate investment, including
such purchase, is $100,000 or more. If, for example, you previously purchased
and still hold Class A Shares, or shares of any other Eligible Fund or
combination thereof, with an aggregate current market value of $80,000 and
subsequently purchase Class A Shares or shares of an Eligible Fund having a
current value of $40,000, the sales load applicable to the subsequent purchase
would be reduced to 2.75% 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 Premier if orders are made by wire, or the transfer
agent if orders are made by mail. The reduced sales is subject to confirmation
of your holdings through a check of appropriate records.
....................... 25 .......................
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LETTER OF INTENT--CLASS A SHARES. By signing a Letter of Intent form,
available from Premier, 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 of the Fund 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.
WHEN SHARE PRICE IS DETERMINED.
NAV is determined at the close of the New York Stock Exchange ("NYSE") on
each day that the NYSE is open (a "business day"). Investments and requests to
exchange or redeem Shares that are received by The Premier Family of Funds with
regard to the Fund before the close of regular trading on the NYSE (usually 4
p.m., Eastern time) are effective on, and will receive the price determined,
that day (except investments made by electronic funds transfer, which are
effective two business days after your call). Investment, exchange or redemption
requests received after the close of the NYSE, are effective on, and receive the
first Share price determined, the next business day.
....................... 26 .......................
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P R O S P E C T U S
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ADDITIONAL INFORMATION ABOUT INVESTMENTS.
Once you have mailed or otherwise transmitted your investment instruction to
the Fund, it may not be modified or canceled. The Fund reserves the right to
reject any application or investment. The Fund reserves the right to make
exceptions to the minimum initial investment and account minimum amount from
time to time.
The minimum initial investment to establish a new account in the Fund is
$1,000, except for Uniform Transfers (Gifts) to Minors Act accounts, for which
the minimum initial investment is $500. For full-time or part-time employees or
directors of Mellon Bank, the Manager or any of their affiliates or
subsidiaries, Board members of a fund advised by the Manager, including members
of The Dreyfus/Laurel Tax-Free Municipal Funds' Board, or the spouse or minor
child of any of the foregoing, the minimum initial investment is $1,000. Also,
for full-time or part-time employees of Mellon Bank, the Manager or any of their
affiliates or subsidiaries who elect to have a portion of their pay directly
deposited into an account in the Fund or another fund advised by the Manager,
the minimum initial investment is $50. The Fund may suspend the offering of
Shares of any class of the Fund and reserves the right to vary initial and
subsequent investment minimums. Subsequent investments to purchase additional
Shares in the Fund must be in an amount of $100 or more.
The Fund intends, upon 60 days' prior notice, to involuntarily redeem Shares
in any account if the total value of the Shares is less than a specified
minimum, as a result of redemptions but not as a result of market action, unless
you have established an automatic monthly investment to purchase additional
Shares. The Fund reserves the right to change such minimum from time to time.
Any time the Shares of the Fund held in an account have a value of less than
$1,000 ($500 for Uniform Gifts/Transfers to Minors Acts accounts), a
notification may be sent advising you of the need either to make an investment
to bring the value of the Shares held in the account up to $1,000 ($500) or to
establish an automatic monthly investment to purchase additional Shares. If the
investment is not made or the automatic monthly investment is not established
within 60 days from the date of notification, the Shares held in the account
will be redeemed and the proceeds from the redemption will be sent by check to
your address of record.
HOW TO EXCHANGE YOUR INVESTMENT
FROM ONE FUND TO ANOTHER
You may exchange your Fund Shares for shares of the same class of certain other
funds that are advised by the Manager and that were previously advised by Mellon
Bank. As noted below, exchanges from any one fund may be limited in any one
calendar year. In addition, the Shares being exchanged and the Shares of each
fund being acquired must have a current value of at
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least $100 and otherwise meet the minimum investment requirement of the fund
being acquired. Call the Investor Line for additional information and a
prospectus describing other investment portfolios offered by The Dreyfus Family
of Funds. Shares will be exchanged at the next determined NAV; 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 or C Shares at the time of
an exchange; however, Class B or C Shares acquired through an exchange will be
subject to the higher CDSC applicable to the exchanged or acquired shares. The
CDSC applicable on redemption of the acquired Class B or C Shares will be
calculated from the date of the initial purchase of the Class B or C Shares
exchanged, as the case may be. 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 of the fund
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 the exchange your
Service Agent must notify Premier. Any such qualification is subject to
confirmation of your holdings through a check of appropriate records. 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 SEC. The Fund reserves the right to reject any exchange
request in whole or in part.
BY TELEPHONE.
You may exchange your Shares by calling 1-800-548-2868 if you have
authorized the Fund to accept telephone instructions.
BY MAIL.
You may direct The Fund to exchange your Shares by writing to The Premier
Family of Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830. The request
should be signed by each person in whose name the Shares are registered. All
signatures should be exactly as the name appears in the registration; for
example, if an owner's name is registered as John Robert Jones, he should sign
that way and not as John R. Jones.
ADDITIONAL INFORMATION ABOUT EXCHANGES.
(1) In an exchange from one account to another account, the Shares being
sold and the new Shares being purchased must have a current value of at
least $100.
(2) Exchanges from any one fund account may be limited in any one calendar
year. The Fund reserves the right to make exceptions to an exchange
limitation from time to
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time. An exchange limitation will not apply to the exchange of Shares of
a money market fund and the Shares of any of the funds exchanged
pursuant to an Automatic Withdrawal Program.
(3) The Shares being acquired must be qualified for sale in your state of
residence.
(4) If the Shares are represented by a negotiable stock certificate, the
certificate must be returned before the exchange can be effected.
(5) Once you have telephoned or mailed your exchange request, it is
irrevocable and may not be modified or canceled.
(6) An exchange is based on the next calculated NAV of each fund after
receipt of your exchange order.
(7) Shares may not be exchanged unless you have furnished the Fund with your
tax identification number, certified as prescribed by the Code and the
regulations thereunder. (SEE "TAXES.")
(8) An exchange of the Fund's Shares is, for Federal income tax purposes, a
sale of the Shares, on which you may realize a taxable gain or loss.
(9) If the request is made by a corporation, partnership, trust, fiduciary,
agent, estate, guardian, pension plan, profit sharing plan or
unincorporated association, the Fund may require evidence satisfactory
to it of the authority of the individual signing the request.
Shareholders will be given 60 days' notice prior to any material changes in the
exchange privilege.
HOW TO REDEEM SHARES
The Fund will redeem or "buy back" your Shares at any time at their NAV. (BEFORE
REDEEMING, PLEASE READ "ADDITIONAL INFORMATION ABOUT REDEMPTIONS.") Your
redemption proceeds may be delayed if you have owned your Shares less than 10
days. (SEE "REDEMPTION PROCEEDS.")
If an investor fails to specify the class of Shares to be redeemed or if he
or she owns fewer Shares of the class than specified to be redeemed, the
redemption request may be delayed until the transfer agent receives further
instructions from the investor or his or her Service Agent.
The Fund imposes no charges (other than any applicable CDSC) when Shares are
redeemed directly through Premier. Service Agents or other institutions may
charge their clients a nominal fee for effecting redemptions of Fund Shares.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES. A CDSC payable to Premier
is imposed on any redemption of Class B Shares which reduces the current NAV 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 the Fund held by you at
the time of redemption. No CDSC will be imposed to the extent that the NAV of
the Class B Shares redeemed does not exceed (i) the
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current NAV of Class B Shares acquired through reinvestment of dividends or
capital gain distributions, plus (ii) increases in the NAV of your Class B
Shares above the dollar amount of all your payments for the purchase of Class B
Shares 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 Fund's performance, a CDSC may be applied to
the then-current NAV 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:
<TABLE>
<CAPTION>
CDSC as a
% of Amount
Year Since Invested or
Purchase Payment Redemption
Was Made Proceeds
- --------------------------------------------------------------- ---------------
<S> <C>
FIRST.......................................................... 3.00
SECOND......................................................... 3.00
THIRD.......................................................... 2.00
FOURTH......................................................... 2.00
FIFTH.......................................................... 1.00
SIXTH.......................................................... 0.00
</TABLE>
In determining whether a CDSC is applicable to a redemption, the calculation
will be made in a manner that results in the lowest possible rate. It will be
assumed that the redemption is made first of amounts representing Shares
acquired pursuant to the reinvestment of dividends and distributions; then of
amounts representing the increase in NAV 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 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 NAV 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
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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.
CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES. A CDSC of .75% payable to
Premier is imposed on any redemption of Class C Shares within one year of the
date of purchase. The basis for calculating the payment of any such CDSC will be
the method used in calculating the CDSC for Class B Shares. SEE "CONTINGENT
DEFERRED SALES CHARGE--CLASS B SHARES" ABOVE.
WAIVER OF CDSC. The CDSC applicable to Class B and Class C Shares 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 certain eligible benefit plans,
(c) redemptions as a result of a combination of any investment company with the
Fund by merger, acquisition of assets or otherwise, and (d) redemptions by such
shareholders as the SEC or its staff may permit. If the Fund's Trustees
determine to discontinue the waiver of the CDSC, the disclosure in this
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 an investor
must notify the transfer agent or his or her Service Agent must notify Premier.
Any such qualification is subject to confirmation of the investor's entitlement.
BY TELEPHONE.
If you have authorized the Fund to accept telephone instructions, you may
redeem your Shares by calling 1-800-548-2868. Once made, your telephone request
may not be modified or canceled. (BEFORE CALLING, READ "ADDITIONAL INFORMATION
ABOUT REDEMPTIONS" AND "WHEN SHARE PRICE IS DETERMINED.")
BY MAIL.
Your written instructions to redeem Shares may be in any one of the
following forms:
-A LETTER TO THE FUND.
-AN ASSIGNMENT FORM OR STOCK POWER.
-AN ENDORSEMENT ON THE BACK OF YOUR NEGOTIABLE STOCK CERTIFICATE, IF YOU
HAVE ONE.
Once mailed to The Premier Family of Funds, P.O. Box 9692, Providence, Rhode
Island 02940-9830, the redemption request is irrevocable and may not be modified
or canceled. A letter of instruction should state the number of Shares or the
dollar amount to be redeemed. The letter must include your account number, and
for redemptions in an amount in excess of $25,000, a
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signature guarantee of each owner. The redemption request must be signed by each
person in whose name the Shares are registered; for example, in the case of
joint ownership, each owner must sign. All signatures should be exactly as the
name appears in the registration. If the owner's name appears in the
registration as John Robert Jones, he should sign that way and not as John R.
Jones. Signature guarantees can be obtained from commercial banks, credit unions
if authorized by state laws, savings and loans institutions, trust companies,
members of a recognized stock exchange, or from other eligible guarantors who
are members of the Securities Transfer Agents Medallion Program ("STAMP") or any
other industry recognized program approved by the Securities Transfer
Association. (BEFORE WRITING, SEE "ADDITIONAL INFORMATION ABOUT REDEMPTIONS.")
BY AUTOMATED WITHDRAWAL PROGRAM.
The Fund's Automated Withdrawal Program automatically redeems enough Shares
each month to provide you with a check for an amount which you specify (with a
minimum of $100). To set up an Automated Withdrawal Program, call the Fund at
1-800-548-2868 for instructions. Only shareholders with a Fund account balance
of $10,000 or more may participate in this program. Shares will be redeemed on
the 15th day or 30th day of each month or the next business day, and your check
will be mailed the next day. If your monthly checks exceed the dividends,
interest and capital appreciation on your Shares, the payments will deplete your
investment. Amounts paid to you by Automated Withdrawals are not a return on
your investment. They are derived from the redemption of Shares in your account,
and you must report on your income tax return, any gains or losses that you
realize.
You may specify an Automated Withdrawal Program when you make your first
investment. If you would like to establish an Automated Withdrawal Program
thereafter, the request for the Automated Withdrawal Program must be signed by
all owners.
When you make your first investment you may request that Automated
Withdrawals be sent to an address other than the address of record. Thereafter,
a request to send Automated Withdrawals to an address other than the address of
record must be signed by all owners.
The Fund may terminate the Automated Withdrawal Program at any time, upon
notice to you, and you likewise may terminate it or change the amount of the
Automated Withdrawal Program, by notice to the Fund in writing or by telephone.
Termination or change will become effective within five days following receipt
of your instruction. Your Automated Withdrawal Program plan may begin any time
after you have owned your Shares for 10 days.
REDEMPTION PROCEEDS.
Redemption proceeds may be sent to you:
BY MAIL. If your redemption check is mailed, it is usually mailed by the
second business day after receipt of your redemption request, but not later than
seven days afterwards. When a
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redemption occurs shortly after a recent purchase, the Fund may hold the
redemption proceeds beyond seven days but only until the purchase check clears,
which may take up to 10 days or more. No dividend is paid on the redemption
proceeds after the redemption and before the check is mailed. If you anticipate
redemptions soon after you purchase your Shares, you are advised to wire funds
to avoid delay.
BY WIRE AND ELECTRONIC FUNDS TRANSFER. You may authorize the Fund to
transmit redemption proceeds by wire or electronic funds transfer. Proceeds from
the redemption of the Fund's Shares will normally be transmitted on the first
business day, but not later than the seventh day, following the date of
redemption. Your bank usually will receive wired funds the day they are
transmitted. Electronically transferred funds will ordinarily be received within
two business days after transmission. Once the funds are transmitted, the time
of receipt and the availability of the funds are not within the Fund's control.
If your bank account changes, you must send a new "voided" check preprinted with
the bank registration with written instructions signed by all owners (with their
signatures guaranteed), including tax identification number.
ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
(1) Redemptions specifying a certain date or price cannot be accepted and
will be returned.
(2) If the Shares being redeemed are represented by a negotiable stock
certificate, the certificate must be returned before the redemption can
be effected.
(3) All redemptions are made and the price is determined on the day when all
documentation is received in good order.
(4) If the request to redeem is made by a corporation, partnership, trust,
fiduciary, agent, estate, guardian, pension plan, profit sharing plan,
or unincorporated association, the Fund may require evidence
satisfactory to it of the authority of the individual signing the
request. Please call or write the Fund for further information.
- ------------------------------------------------
OTHER INFORMATION
SHARE PRICE
An investment portfolio's NAV refers to the worth of one Share. The NAV for
Class A and Class R Shares of the Fund is computed by adding with respect to
each class of Shares the value of all the class' investments, cash, and other
assets, deducting liabilities and dividing the result by the number of Shares of
that class outstanding. The valuation of assets for determining NAV for the Fund
may be summarized as follows:
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The portfolio securities of the Fund, except as otherwise noted, listed or
traded on a stock exchange are valued at the latest sale price. If no sale is
reported, the mean of the latest bid and asked prices is used. Securities traded
over-the-counter are priced at the mean of the latest bid and asked prices but
will be valued at the last sale price if required by regulations of the SEC.
When market quotations are not readily available, securities and other assets
are valued at fair value as determined in good faith in accordance with
procedures established by the board of trustees.
Bonds are valued through valuations obtained from a commercial pricing
service or at the most recent mean of the bid and asked prices provided by
investment dealers in accordance with procedures established by the Board of
Trustees.
Pursuant to a determination by the Dreyfus/Laurel Tax-Free Municipal Funds'
Board of Trustees that such value represents fair value, debt securities with
maturities of 60 days or less held by the Fund are valued at amortized cost.
When a security is valued at amortized cost, it is valued at its cost when
purchased, and thereafter by assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument.
The NAV of each class of Shares of most of The Dreyfus Family of Funds'
investment portfolios (other than the money market funds) is published in
leading newspapers daily. The yield of each class of Shares of most of the
Dreyfus Family of Funds' money market funds is published weekly in leading
financial publications and in many local newspapers. The NAV of the Fund may
also be obtained by calling The Dreyfus Family of Funds.
PERFORMANCE ADVERTISING
From time to time, a Fund may advertise the yield, tax-equivalent yield and
total return on a class of Shares. TOTAL RETURN, YIELD AND TAX-EQUIVALENT YIELD
FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE
PERFORMANCE. The "total return" of a class of Shares of the Fund may be
calculated on an average annual total return basis or a cumulative total return
basis. Average annual total return refers to the average annual compounded rates
of return on a class of Shares over one-, five-, and ten-year periods or the
life the Fund (as stated in the advertisement) that would equate an initial
amount invested at the beginning of a stated period to the ending redeemable
value of the investment, assuming the reinvestment of all dividends and capital
gains distributions. Cumulative total return reflects the total percentage
change in the value of the investment over the measuring period, again assuming
the reinvestment of all dividends and capital gains distributions.
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The Fund's "Yield" is calculated by dividing a class of Shares' annualized
net investment income per Share during a recent 30-day (or one month) period by
the maximum public offering price per class of such Share on the last day of
that period. Since yields fluctuate, yield data cannot necessarily be used to
compare an investment in a class of Shares with bank deposits, savings accounts,
and similar investment alternatives which often provide an agreed-upon or
guaranteed fixed yield for a stated period of time. The tax-equivalent yield of
the Fund shows the level of taxable yield needed to produce an after-tax
equivalent to the Fund's tax-free yield. This is done by increasing a class'
yield by the amount necessary to reflect the payment of Federal income tax at a
stated tax rate.
Total return and yield quotations will be computed separately for each class
of the Fund's Shares. Because of the difference in the fees and expenses borne
by Class R and Class A Shares of the Fund, the return and yield on Class R
Shares will generally be higher than the return and yield on Class A Shares. Any
fees charged by a Bank or Agent directly to its customers' accounts in
connection with investments in the Fund will not be included in calculations of
total return or yield. The Fund's Annual Report and Semi-Annual Report contain
additional performance information and is available upon request without charge
from the Fund's distributor or your Bank or Agent.
The Fund may compare the performance of its Class A and Class R Shares with
various industry standards of performance including Lipper Analytical Services,
Inc. ratings. Performance rankings as reported in CHANGING TIMES, BUSINESS WEEK,
INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL, MUTUAL FUND FORECASTER, NO LOAD
INVESTOR, MONEY MAGAZINE, MORNINGSTAR MUTUAL FUND VALUES, U.S. NEWS AND WORLD
REPORT, FORBES, FORTUNE, BARRON'S and similar publications may also be used in
comparing the Fund's performance. The Fund may also advertise non-standardized
performance information, such as total return, for periods other than those
required to be shown on cumulative performance data. Furthermore, the Fund may
quote its Class A and Class R Shares' returns and yields in advertisements or in
shareholder reports.
DISTRIBUTIONS
The Fund declares daily and pays monthly (on the first business day of the
following month) dividends from its net investment income, if any, and
distributes any net long-term capital gains on an annual basis. The Board of
Trustees may elect not to distribute capital gains in whole or in part to take
advantage of capital loss carryovers.
Unless you choose to receive dividend and/or capital gain distributions in
cash, your distributions will be automatically reinvested in additional Shares
of the Fund at the NAV. You may change the method of receiving distributions at
any time by writing to the Fund. Checks which are sent to shareholders who have
requested distributions to be paid in cash and which are
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subsequently returned by the United States Postal Service as not deliverable or
which remain uncashed for six months or more will be reinvested in additional
Fund Shares in the shareholder's account at the then current NAV. Subsequent
Fund distributions will be automatically reinvested in additional Fund Shares in
the shareholder's account.
Distributions paid by the Fund with respect to one class of Shares may be
greater or less per Share than those paid with respect to another class of
Shares due to the different expenses of the different classes.
Shares purchased on a day on which the Fund calculates its NAV will begin to
accrue dividends on that day, and redemption orders effected on any particular
day will receive all dividends declared only through the business day prior to
the day of redemption. Distribution checks normally are mailed within seven days
after the record date.
Any dividend and/or capital gain distribution paid by the Fund will reduce
each Share's NAV by the amount of the distribution. Shareholders are subject to
taxes with respect to any such distribution. At any given time, the value of the
Fund's Shares includes the undistributed net gains, if any, realized by the Fund
on the sale of portfolio securities, and undistributed dividends and interest
received, less the Fund's expenses. Because such gains and income are included
in the value of your Shares, when they are distributed the value of your Shares
is reduced by the amount of the distribution. Accordingly, if your distribution
is reinvested in additional Shares, the distribution has no effect on the value
of your investment; while you own more Shares, the value of each Share has been
reduced by the amount of the distribution. Likewise, if you take your
distribution in cash, the value of your Shares immediately after the
distribution plus the cash received is equal to the value of the Shares
immediately before the distribution. For example, if you own a Fund Share that
immediately before a distribution has a value of $10, including $2 in
undistributed dividends and capital gains realized by the Fund during the year,
and if the $2 is distributed, the value of the Share will decline to $8. If the
$2 is reinvested at $8 per Share, you will receive .250 Shares, so that, after
the distribution, you will have 1.250 Shares at $8 per Share, or $10, the same
as before.
TAXES
The Fund intends to qualify for treatment as a regulated investment company
under the Code so that it will be relieved of Federal income tax on that part of
its investment company taxable income (consisting generally of taxable net
investment income and net short-term capital gain) and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) that is
distributed to its shareholders. In addition, the Fund intends to continue to
qualify to pay
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"exempt-interest" dividends, which requires, among other things, that at the
close of each quarter of its taxable year at least 50% of the value of its total
assets must consist of municipal securities.
Dividends from the Fund's investment company taxable income are taxable to
you as ordinary income, to the extent of the Fund's earnings and profits.
Distributions by the Fund that are designated by it as "exempt-interest
dividends" generally may be excluded by you from your gross income.
Distributions by the Fund of net capital gain, when designated as such, are
taxable to you as long-term capital gains, regardless of the length of time you
have owned your Shares.
Interest on indebtedness incurred or continued to purchase or carry Shares
of the Fund will not be deductible for Federal income tax purposes to the extent
that the Fund's distributions (other than capital gains distributions) consist
of exempt-interest dividends. The Fund may invest in "private activity bonds,"
the interest on which is treated as a tax preference item for shareholders in
determining their liability for the alternative minimum tax. Proposals may be
introduced before Congress for the purpose of restricting or eliminating the
Federal income tax exemption for interest on municipal securities. If such a
proposal were enacted, the availability of such securities for investment by the
Fund and the value of its portfolio would be affected. In such event, that Fund
would reevaluate its investment objective and and policies.
Dividends and other distributions are taxable to you regardless of whether
they are received in cash or reinvested in additional Fund Shares, even if the
value of your Shares is below your cost. If you purchase Shares shortly before a
taxable distribution (i.e., any distribution other than an exempt-interest
dividend paid by the Fund), you must pay income taxes on the distribution, even
though the value of your investment (plus cash received, if any) remains the
same. In addition, the Share price at the time you purchase Shares may include
unrealized gains in the securities held in the Fund. If these portfolio
securities are subsequently sold and the gains are realized, they will, to the
extent not offset by capital losses, be paid to you as a capital gain
distribution and will be taxable to you.
In January of each year, the Fund will send you a Form 1099-DIV notifying
you of the status for Federal income tax purposes of your distributions for the
preceding year. The Fund also will advise shareholders of the percentage, if
any, of the dividends paid by the Fund that are exempt from Federal income tax
and the portion, if any, of those dividends that is a tax preference item for
purposes of the alternative minimum tax.
You must furnish the Fund with your taxpayer identification number ("TIN")
and state whether you are subject to withholding for your prior under-reporting,
certified under penalties of perjury as prescribed by the Code and the
regulations thereunder. Unless previously furnished, investments received
without such a certification will be returned. The Fund is required to withhold
a portion of all dividends, capital gain distributions and redemption proceeds
payable to
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any individuals and certain other non-corporate shareholders who do not provide
the Fund with a correct TIN; withholding from dividends and capital gain
distributions also is required for such shareholders who otherwise are subject
to backup withholding.
In addition, in order to avoid the application of a 4% nondeductible excise
tax on certain undistributed amounts of ordinary income and capital gains, the
Fund may make an additional distribution shortly before December 31 in each year
of any undistributed ordinary (taxable) income or capital gains and expects to
pay any other dividends and distributions necessary to avoid the application of
this tax.
The foregoing is only a summary of some of the important tax considerations
generally affecting the Fund and its shareholders; see the SAI for a further
discussion. There may be other Federal, state or local tax considerations
applicable to a particular investor; for example, the Fund's dividends may be
wholly or partly taxable under state and/or local laws. You therefore are urged
to consult your own tax adviser.
OTHER SERVICES
At least twice a year you will receive the financial statements of the Fund with
a summary of its investments and performance. The Fund will send you a
confirmation statement after every transaction (except with regard to
reinvestment of dividends and other distributions) that affect your Fund
account. In addition, an account statement will be mailed to you quarterly or
monthly depending on the Fund's reporting schedule. You may also request a
statement of your account activity at any time. Carefully review such
confirmation statements and account statements and notify the Fund immediately
if there is an error. From time to time, to reduce expenses, only one copy of
the Fund's shareholder reports (such as a Fund's Annual Report) may be mailed to
your household. Please call the Fund if you need additional copies.
No later than January 31 of each year, the Fund will send you the following
reports, which you may use in completing your federal income tax return:
Form 1099-DIV Reports taxable distributions (and returns of capital, if any)
during the preceding year.
Form 1099-B Reports proceeds paid on redemptions during the preceding year.
In addition, the Fund may send you other relevant tax-related forms.
FURTHER INFORMATION ABOUT THE FUND
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS.
The Dreyfus/Laurel Tax-Free Municipal Funds offers Shares of beneficial
interest of separate investment portfolios without par value (each a "fund").
The Boston Company Tax-Free Municipal
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Funds was organized as a Massachusetts business trust under the laws of The
Commonwealth of Massachusetts on March 28, 1983, changed its name to The Laurel
Tax-Free Municipal Funds, and changed its name again to The Dreyfus/Laurel
Tax-Free Municipal Funds on October 17, 1994. The Dreyfus/Laurel Tax-Free
Municipal Funds is registered with the SEC as an open-end management investment
company, commonly known as a mutual fund. The Trustees have authorized Shares of
the Fund to be issued in four classes--Class A, Class B, Class C and Class R
Shares.
Each Share (regardless of class) has one vote. All Shares of a fund (and
classes thereof) vote together as a single class, except as to any matter for
which a separate vote of any fund or class is required by the 1940 Act, and
except as to any matter which affects the interests of one or more particular
funds or classes, in which case only the shareholders of the affected funds or
classes are entitled to vote, each as a separate class. At your written request,
The Premier Family of Funds will issue negotiable stock certificates.
At December 6, 1994, Mellon Bank Corporation, the Manager's parent, owned of
record through its direct and indirect subsidiaries more than 25% of The
Dreyfus/Laurel Tax-Free Municipal Funds' outstanding voting shares, and is
deemed, under the 1940 Act, to be a controlling shareholder.
MANAGEMENT.
THE BOARD OF TRUSTEES. The business affairs of The Dreyfus/Laurel Tax-Free
Municipal Funds are managed under the direction of its Trustees. The SAI
contains the names and general background information concerning the Trustees
and officers of The Dreyfus/Laurel Tax-Free Municipal Funds.
INVESTMENT MANAGER. The Manager is located at 200 Park Avenue, New York, New
York 10166. As of November 30, 1994, the Manager managed or administered
approximately $71 billion in assets for more than 1.9 million investor accounts
nationwide. The Manager is a wholly-owned subsidiary of Mellon Bank (One Mellon
Bank Center, Pittsburgh, Pennsylvania 15258), the Fund's prior investment
manager. Pursuant to an Investment Management Agreement, transferred from Mellon
Bank to the Manager and effective as of October 17, 1994, the Manager provides,
or arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to the
Fund. As investment manager, the Manager manages the Fund by making investment
decisions based on the Fund's investment objective, policies and restrictions,
and is paid a fee.
Under the Investment Management Agreement, the Fund pays a fee computed
daily, and paid monthly, at the annual rate of 0.50% of the Fund's average daily
net assets less certain expenses described below. The Manager pays all of the
expenses of the Fund except brokerage fees, taxes, interest, fees and expenses
of the non-interested Trustees (including counsel fees) and
....................... 39 .......................
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extraordinary expenses. Although the Manager does not pay for the fees and
expenses of the non-interested Trustees (including counsel fees), the Manager is
contractually required to reduce its investment management fee in an amount
equal to the Fund's allocable share of such expenses. In order to compensate the
Manager for paying virtually all of the Fund's expenses, the Fund's investment
management fee is higher than the investment advisory fees paid by most
investment companies. Most, if not all, such companies also pay for additional
non-investment advisory expenses that are not paid by such companies' investment
adviser. From time to time, the Manager may waive (either voluntarily or
pursuant to applicable state limitations) additional investment management fees
payable by the Fund. For the period from July 1, 1993 through April 3, 1994, the
Fund paid its investment adviser, The Boston Company Advisors, Inc. ("Boston
Advisors") (an indirect wholly-owned subsidiary of Mellon Bank Corporation),
0.07% (annualized) of the Fund's average daily net assets in investment advisory
fees (net of fees waived and expenses reimbursed) under the Fund's previous
investment advisory contract (such contract covered only the provision of
investment advisory and certain specified administrative services). For the
period from April 4, 1994 through the fiscal year ended June 30, 1994, the Fund
paid Mellon Bank 0.50% (annualized) of the Fund's average daily net assets in
investment management fees. For the fiscal year ended June 30, 1994 total
operating expenses (excluding Rule 12b-1 fees) (net of fees waived and expenses
reimbursed) of the Fund were 0.67% and 0.50% of the Fund's average daily net
assets for the Class A and Class R Classes, respectively.
The Manager is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, in the case of agency
transactions, financial institutions which are affiliated with the Manager or
which have sold Shares of the Fund, if the Manager believes that the quality of
the transaction and the commission are comparable to what they would be with
other qualified brokerage firms. From time to time, to the extent consistent
with its investment objective, policies and restrictions, the Fund may invest in
securities of companies with which Mellon Bank has a lending relationship.
Mellon Bank is a subsidiary of Mellon Bank Corporation. As of June 30, 1994,
Mellon Bank Corporation was the 24th largest bank holding company in the United
States in terms of total assets. Through its bank subsidiaries, it operates 631
domestic retail banking locations including 432 branch offices. Mellon Bank
Corporation has 25 domestic representative offices. There are international
branches in Grand Cayman, British West Indies and London, England, and two
international representative offices in Tokyo, Japan and Hong Kong. Mellon Bank
has a banking subsidiary, Mellon Bank Canada, in Toronto. Mellon Bank is a
registered municipal securities dealer.
....................... 40 .......................
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The Glass-Steagall Act of 1933 prohibits a national bank from engaging in
the business of issuing, underwriting, selling or distributing certain
securities. The activities of Mellon Bank and the Manager may raise issues under
these provisions. However, Mellon Bank has been advised by its counsel that
these activities are consistent with these statutory and regulatory obligations.
For more information on the Glass-Steagall Act of 1933, see "FEDERAL LAW
AFFECTING MELLON BANK" in the SAI.
John F. Flahive has been employed by the Manager as portfolio manager of the
Fund since October 17, 1994. Prior to employment with the Manager, Mr. Flahive
was senior portfoio manager and Vice President with Neuberger & Berman. A 1984
graduate of St. Michael's College with a degree in Business Administration, Mr.
Flahive also earned an M.B.A. from Clarkson University in 1985, and attended the
New York University Graduate School of Business Administration for Visiting
Professionals in 1986.
OTHER SERVICE PROVIDERS. Under a Custody and Fund Accounting Agreement,
Mellon Bank acts as custodian and fund accountant, maintaining possession of the
Fund's investment securities and provides certain account and related services.
The Shareholder Services Group, Inc., a subsidiary of First Data
Corporation, serves as transfer agent ("Transfer Agent") for the Fund's Shares.
The Transfer Agent carries out all shareholder transactions, such as purchases,
redemptions and distributions. The Transfer Agent is located at One American
Express Plaza, Providence, Rhode Island 02903.
Shares of the Fund are sold on a continuous basis by Premier, as the Fund's
sponsor and distributor. Premier is a registered broker-dealer with principal
offices at One Exchange Place, Boston, Massachusetts 02109. The Dreyfus/Laurel
Tax-Free Municipal Funds has entered into a distribution agreement with Premier
which provides that Premier has the exclusive right to distribute Shares of the
Fund. Premier may pay service and/or distribution fees to Agents that assist
customers in purchasing and servicing of Shares of the Fund. (SEE "DISTRIBUTION
PLANS.")
DISTRIBUTION PLANS (CLASS A PLAN AND CLASS B AND C PLANS).
Class A Shares are subject to a Distribution Plan adopted pursuant to Rule
12b-1 under the 1940 Act ("Rule 12b-1"). Class B and C Shares are subject to a
Distribution Plan and a Service Plan, each adopted pursuant to Rule 12b-1.
Potential investors should read this Prospectus in light of the terms governing
Agreements with their Service Agents. A Service Agent entitled to receive
compensation for selling and servicing the Fund's Shares may receive different
compensation with respect to one class of Shares over another.
DISTRIBUTION PLAN--CLASS A. The Class A Shares of the Fund bear some of the
cost of selling those Shares under the Distribution Plan (the "Plan"). The Plan
allows the Fund to spend annually up to 0.25% of its average daily net assets
attributable to Class A Shares to compensate
....................... 41 .......................
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Dreyfus Service Corporation, an affiliate of the Manager, for shareholder
servicing activities and Premier for shareholder servicing activities and for
activities or expenses primarily intended to result in the sale of Class A
Shares of the Fund. The Plan allows Premier to make payments from the Rule 12b-1
fees it collects from the Fund to compensate Service Agents that have entered
into Selling Agreements ("Agreements") with Premier. Under the Agreements, the
Service Agents are obligated to provide distribution related services with
regard to the Fund and/or shareholder services to the Service Agent's clients
that own Class A Shares of the Fund.
The Fund and Premier may suspend or reduce payments under the Plan at any
time, and payments are subject to the continuation of the Fund's Plan and the
Agreements described above. From time to time, the Service Agents, Premier and
the Fund may agree to voluntarily reduce the maximum fees payable under the
Plan. See the SAI for more details on the Plan.
DISTRIBUTION PLANS--CLASS B AND C. Under a Distribution Plan adopted
pursuant to Rule 12b-1, the Fund pays Premier for distributing the Fund's Class
B and C Shares, at an aggregate annual rate of .50 of 1% of the value of the
average daily net assets of Class B and C. Under a Service Plan adopted pursuant
to Rule 12b-1, the Fund pays Dreyfus Service Corporation or Premier for the
provision of certain services to the holders of Class B and C Shares a fee at
the annual rate of .25 of 1% of the value of the average daily net assets of
Class B and C. 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 providing services related to
the maintenance of such shareholder accounts. With regard to such services, each
Service Agent is required to disclose to its clients any compensation payable to
it by the Fund and any other compensation payable by their clients in connection
with the investment of their assets in Class B and C Shares. Premier may pay one
or more Service Agents in respect of distribution and other services for these
classes of Shares. Premier determines the amounts, if any, to be paid to Service
Agents under the Distribution and Service Plans and the basis on which such
payments are made. The fees payable under the Distribution and Service Plans are
payable without regard to actual expenses incurred.
....................... 42 .......................
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P R O S P E C T U S
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- ------------------------------------------------
FOR MORE INFORMATION
FUND INFORMATION AND PROSPECTUS
Call 1-800-548-2868
Please read the prospectus before you invest or send money.
TO INVEST, REDEEM AND EXCHANGE
Call 1-800-548-2868 (for overseas, call collect (412) 234-0621)
9:00 a.m. to 5:00 p.m., Eastern time
Monday through Friday
Or Write: The Premier Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
YIELD AND SHARE PRICE INFORMATION
1-800-548-2868
24 hours a day, 7 days a week
The Premier Family of Funds
One Exchange Place
Boston, Massachusetts 02109
....................... 43 .......................
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Premier Limited Term California Municipal Fund
Premier Limited Term Massachusetts Municipal Fund
Premier Limited Term New York Municipal Fund
Class A and Class R Shares
Dreyfus/Laurel California Tax-Free Money Fund
Dreyfus/Laurel Massachusetts Tax-Free Money Fund
Dreyfus/Laurel New York Tax-Free Money Fund
Investor and Class R Shares
December 28, 1994
THE PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND, THE PREMIER LIMITED TERM
MASSACHUSETTS MUNICIPAL FUND, AND THE PREMIER LIMITED TERM NEW YORK MUNICIPAL
FUND (THE "BOND FUNDS") seek to maximize current income exempt from Federal
income taxes and state personal income taxes for resident shareholders of the
named state consistent with the prudent risk of capital by investing in
municipal securities which are of investment-grade quality and intermediate
maturities.
.....................................
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. ALL MUTUAL
FUND SHARES INVOLVE CERTAIN RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THE
MONEY FUNDS ARE MONEY MARKET FUNDS THAT STRIVE TO MAINTAIN CONSTANT NET ASSET
VALUES OF $1.00 PER SHARE, ALTHOUGH THERE CAN BE NO ASSURANCE THEY WILL BE ABLE
TO DO SO.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS MELLON BANK, N.A.
("MELLON BANK") OR ITS AFFILIATES TO BE ITS INVESTMENT MANAGER. MELLON BANK OR
AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUND, SUCH AS
CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUND IS DISTRIBUTED
BY PREMIER MUTUAL FUNDS SERVICES, INC.
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.
....................... 1 .......................
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THE DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND, THE DREYFUS/LAUREL
MASSACHUSETTS TAX-FREE MONEY FUND, AND THE DREYFUS/LAUREL NEW YORK TAX-FREE
MONEY FUND (THE "MONEY FUNDS") seek to provide a high level of current income
exempt from Federal income taxes and state personal income taxes for resident
shareholders of the named state to the extent consistent with the preservation
of capital and the maintenance of liquidity by investing in high quality,
short-term municipal securities.
THIS PROSPECTUS describes The Money Funds and The Bond Funds (each a "Fund"
and collectively the "Funds") of The Dreyfus/Laurel Tax-Free Municipal Funds
(formerly The Laurel Tax-Free Municipal Funds and previously The Boston Company
Tax-Free Municipal Funds), a non-diversified management investment company. This
Prospectus describes two classes of Shares-- Class A Shares and Class R Shares
for the Bond Funds, and Investor and Class R Shares for the Money Funds
(collectively, the "Shares").
This Prospectus sets forth concisely the information about the Funds that a
prospective purchaser should consider before investing. Investors should read
this Prospectus and retain it for future reference. Each Bond Fund offers you
four methods of purchasing Fund Shares, but only Class A and Class R Shares are
offered by this Prospectus. SEE "ALTERNATIVE PURCHASE METHODS." Additional
information about the Funds is contained in a Statement of Additional
Information dated December 28, 1994 (the "SAI"), which has been filed with the
Securities and Exchange Commission (the "SEC") and is available upon request
without charge by calling or writing to The Dreyfus Family of Funds. The SAI
bears the same date as the Prospectus and is incorporated by reference in its
entirety into this Prospectus.
In addition to these Funds, The Dreyfus Family of Funds also offers others
funds that provide investment opportunities for you in the equity, fixed income
and money markets. For more information about these additional investment
opportunities, call 1-800-548-2868.
.....................................
The Dreyfus Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
....................... 2 .......................
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Expense Summary........................................ 5
Financial Highlights................................... 8
Alternative Purchase Methods for Bonds Funds........... 27
Investment Objective and Policies...................... 29
Other Investment Policies and Risk Factors............. 31
HOW TO DO BUSINESS WITH US
Special Shareholder Services........................... 39
Investor Line.......................................... 39
How to Buy Fund Shares................................. 40
BY MAIL.............................................. 40
BY TELEPHONE......................................... 40
BY WIRE.............................................. 41
BY AUTOMATIC MONTHLY INVESTMENTS..................... 41
BY DIRECT DEPOSIT.................................... 41
BY IN-KIND PURCHASES................................. 42
OFFERING PRICE FOR BOND FUNDS........................ 42
WHEN SHARE PRICE IS DETERMINED....................... 45
ADDITIONAL INFORMATION ABOUT INVESTMENTS............. 45
How to Exchange Your Investment From One Fund to
Another............................................... 46
BY TELEPHONE......................................... 47
BY MAIL.............................................. 47
ADDITIONAL INFORMATION ABOUT EXCHANGES............... 47
How to Redeem Shares................................... 48
BY TELEPHONE......................................... 50
BY MAIL.............................................. 50
BY AUTOMATED WITHDRAWAL PROGRAM...................... 51
BY CHECK WRITING..................................... 51
REDEMPTION PROCEEDS.................................. 52
ADDITIONAL INFORMATION ABOUT REDEMPTIONS............. 53
</TABLE>
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TABLE OF CONTENTS (CONTINUED)
<TABLE>
<S> <C>
OTHER INFORMATION
Share Price............................................ 53
Performance Advertising................................ 54
Distributions.......................................... 55
Taxes.................................................. 57
Other Services......................................... 58
Further Information About The Funds.................... 59
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS.......... 59
MANAGEMENT........................................... 59
DISTRIBUTION PLANS (CLASS A AND INVESTOR CLASS PLAN
AND CLASS B AND C PLAN).............................. 64
</TABLE>
.....................................
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE FUNDS' SAI
INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUNDS OR BY THE DISTRIBUTOR IN
ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT BE LAWFULLY MADE.
....................... 4 .......................
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Additional Classes of Shares--designated Class B and Class C--have been
added to the previously existing Class A (formerly Investor Class) and Class R
(formerly Trust Class) Shares of the Bond Funds. Class A and Class R Shares are
offered by this Prospectus. Class B and Class C Shares of the Bond Funds are
offered through a servicing network associated with The Dreyfus Corporation (the
"Manager") pursuant to a separate Prospectus. Class A Shares of the Bond Funds
are also offered through that network pursuant to a separate Prospectus. For
more information and a Prospectus call 1-800-645-6561. Please read that
Prospectus carefully. Exchange and shareholder services vary depending upon the
network through which you purchase Fund Shares. SEE "HOW TO BUY FUND SHARES."
EXPENSE SUMMARY
The purpose of the following 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 Fund Operating Expenses are based on estimated amounts for
the current fiscal year. Long-term investors in Investor, Class A, B or C Shares
could pay more in 12b-1 fees than the economic equivalent of paying the maximum
front-end sales charges applicable to mutual funds sold by members of the
National Association of Securities Dealers, Inc. ("NASD"). The information in
the table does not reflect any fee waivers or expense reimbursement arrangements
that may be in effect. Certain Service Agents (as defined herein) may charge
their clients direct fees for effecting transactions in Fund Shares; such fees
are not reflected in the foregoing table. See "Further Information About the
Fund--Management," "How to Buy Fund Shares" and "Distribution Plans."
....................... 5 .......................
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<TABLE>
<CAPTION>
INVESTOR CLASS R
A MONEY FUND SHARES SHARES
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
MAXIMUM SALES LOAD IMPOSED ON PURCHASES NONE NONE
MAXIMUM SALES LOAD IMPOSED ON REINVESTMENTS NONE NONE
DEFERRED SALES LOAD NONE NONE
REDEMPTION FEE NONE NONE
EXCHANGE FEE NONE NONE
ESTIMATED ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS)
MANAGEMENT FEE 0.35% 0.35%
12B-1 FEE** 0.25% NONE
OTHER EXPENSES* 0.00% 0.00%
-------- -------
TOTAL FUND OPERATING EXPENSES 0.60% 0.35%
EXAMPLES
1 YEAR $ 6 $ 4
YOU WOULD PAY THE FOLLOWING ON A $1,000 3 YEARS $19 $11
INVESTMENT, ASSUMING (1) A 5% ANNUAL RETURN AND 5 YEARS $33 $20
(2) REDEMPTION AT THE END OF EACH TIME PERIOD: 10 YEARS $75 $44
<FN>
* DOES NOT INCLUDE FEES AND EXPENSES OF THE NON-INTERESTED TRUSTEES (INCLUDING
COUNSEL). THE INVESTMENT MANAGER IS CONTRACTUALLY REQUIRED TO REDUCE ITS
MANAGEMENT FEE IN AN AMOUNT EQUAL TO THE FUND'S ALLOCABLE PORTION OF SUCH FEES
AND EXPENSES, WHICH ARE ESTIMATED TO BE 0.02% OF THE FUND'S NET ASSETS. (See
"Management.")
** SEE "DISTRIBUTION PLANS" FOR A DESCRIPTION OF A FUND'S PLAN OF DISTRIBUTION FOR
THE INVESTOR SHARES.
</TABLE>
The Money Funds understand that banks, brokers, dealers or other financial
institutions (including Dreyfus and its affiliates) (collectively "Service
Agents") may charge fees to their clients who are owners of a Fund's Investor
Shares for various services provided in connection with a client's account.
These fees would be in addition to any amounts received by a Service Agent under
its Selling Agreement ("Agreement") with Premier Mutual Fund Services, Inc.
("Premier"). The Agreement requires each Service Agent to disclose to its
clients any compensation payable to such Service Agent by Premier and any other
compensation payable by the clients for various services provided in connection
with their accounts.
....................... 6 .......................
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<TABLE>
<CAPTION>
A BOND FUND CLASS A CLASS B CLASS C CLASS R
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
MAXIMUM SALES LOAD IMPOSED ON PURCHASES (AS A PERCENTAGE
OF OFFERING PRICE) 3.00 % NONE NONE NONE
MAXIMUM DEFERRED SALES CHARGE IMPOSED ON REDEMPTIONS (AS A
PERCENTAGE OF THE AMOUNT SUBJECT TO CHARGE) NONE 3.00 % .75 % NONE
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
MANAGEMENT FEE .50 % .50 % .50 % .50%
12B-1 FEE* .25 % .75 % .75 % NONE
OTHER EXPENSES** .00 % .00 % .00 % .00%
TOTAL FUND OPERATING EXPENSES .75 % 1.25 % 1.25 % .50%
EXAMPLES:
YOU WOULD PAY THE FOLLOWING EXPENSES ON A $1,000 1 YEAR $37 $43/13+ $20/13+ $5
INVESTMENT, ASSUMING (1) A 5% ANNUAL RETURN AND 3 YEARS $53 $60/40+ $40 $16
(2) EXCEPT WHERE NOTED, REDEMPTION AT THE END OF 5 YEARS $70 $79/69+ $69 $28
EACH TIME PERIOD: 10 YEARS $120 $124 $151 $63
<FN>
* SEE "DISTRIBUTION PLANS" FOR A DESCRIPTION OF EACH FUND'S DISTRIBUTION AND SERVICE PLANS FOR CLASS A, B
AND C SHARES.
** DOES NOT INCLUDE FEES AND EXPENSES OF THE NON-INTERESTED TRUSTEES (INCLUDING COUNSEL). THE INVESTMENT
MANAGER IS CONTRACTUALLY REQUIRED TO REDUCE ITS MANAGEMENT FEE IN AN AMOUNT EQUAL TO EACH FUND'S
ALLOCABLE PORTION OF SUCH FEES AND EXPENSES, WHICH ARE ESTIMATED TO BE .02% OF THE FUND'S NET ASSETS. See
"Further Information About the Fund -- Management."
+ ASSUMING NO REDEMPTION OF SHARES.
</TABLE>
The Bond Funds understand that banks, brokers, dealers or other financial
institutions (including Dreyfus and its affiliates) (collectively "Service
Agents") may charge fees to their clients who are owners of the Funds' Class A,
B or C Shares for various services provided in connection with a client's
account. These fees would be in addition to any amounts received by a Service
Agent under its Selling Agreement ("Agreement") with Premier. The Agreement
requires each Service Agent to disclose to its clients any compensation payable
to such Service Agent by Premier and any other compensation payable by the
client for various services provided in connection with their accounts.
.....................................
THE INFORMATION CONTAINED IN THE TABLES ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
....................... 7 .......................
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P R O S P E C T U S
FINANCIAL HIGHLIGHTS
The following tables are based upon a single Investor, Class A or Class R Share
outstanding through each fiscal year (period) and should be read in conjunction
with the financial statements and related notes that appear in each Fund's
Annual Report dated June 30, 1994, which is incorporated by reference into the
SAI. The financial statements and related notes, as well as the information in
the tables below insofar as it relates to the fiscal year (period) ended June
30, 1994, have been audited by KPMG Peat Marwick LLP, independent auditors,
whose report thereon appears in the Funds' Annual Report. Further information
about the performance of each Fund is also included in each Fund's Annual
Report, which may be obtained without charge. The information in the tables
below for the fiscal years (periods) prior to the fiscal year (period) ended
June 30, 1994, has been audited by other independent auditors.
<TABLE>
<CAPTION>
DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
PERIOD ENDED JUNE 30, YEAR OR PERIOD ENDED NOVEMBER 30,
1994## 1993# 1992 1991 1990 1989 1988*
----------- ----------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----------- ----------- --------- --------- --------- --------- ----------
Income from investment operations:
Net investment income*** 0.012 0.023 0.031 0.046 0.056 0.060 0.033
Less distributions:
Distributions from net investment
income (0.012) (0.023) (0.031) (0.046) (0.056) (0.060) (0.033)
----------- ----------- --------- --------- --------- --------- ----------
Net Asset Value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----------- ----------- --------- --------- --------- --------- ----------
----------- ----------- --------- --------- --------- --------- ----------
Total Return++ 1.25% 2.41% 3.10% 4.65% 5.75% 6.18% 3.39%
----------- ----------- --------- --------- --------- --------- ----------
Ratios to average net
assets/Supplemental data:
Net Assets, end of period
(in 000's) $17,170 $15,490 $26,987 $27,831 $27,493 $15,745 $9,112
Ratio of expenses to average net
assets+ 0.47%** 0.32% 0.32% 0.32% 0.32% 0.32% 0.67%**
Ratio of net investment income to
average net assets 2.11%** 2.40% 3.03% 4.57% 5.58% 6.02% 4.55%**
<FN>
(1) EFFECTIVE APRIL 4, 1994, THE RETAIL AND INSTITUTIONAL
CLASSES OF SHARES WERE REDESIGNATED THE INVESTOR CLASS OF
SHARES. THE AMOUNTS SHOWN FOR THE PERIOD ENDED JUNE 30,
1994 WERE CALCULATED USING THE PERFORMANCE OF A RETAIL
SHARE OUTSTANDING FROM DECEMBER 1, 1993, TO APRIL 3, 1994
AND THE PERFORMANCE OF AN INVESTOR SHARE OUTSTANDING FROM
APRIL 4, 1994, TO JUNE 30, 1994. THE FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED NOVEMBER 30, 1993, AND PRIOR PERIODS
ARE BASED UPON A RETAIL SHARE OUTSTANDING.
* THE FUND COMMENCED OPERATIONS ON MARCH 2, 1988.
** ANNUALIZED.
*** NET INVESTMENT INCOME PER SHARE BEFORE WAIVER OF FEES
AND/OR REIMBURSEMENT OF EXPENSES BY INVESTMENT ADVISER
AND/OR CUSTODIAN AND/OR TRANSFER AGENT FOR THE PERIOD ENDED
JUNE 30, 1994, FOR THE YEARS ENDED NOVEMBER 30, 1993, 1992,
1991, 1990, 1989, AND FOR THE PERIOD ENDED NOVEMBER 30,
1988, WERE $0.010, $0.016, $0.026, $0.041, $0.050, $0.053,
AND $0.028, RESPECTIVELY.
# THE PER SHARE AMOUNTS HAVE BEEN CALCULATED USING THE MONTHLY
AVERAGE SHARES METHOD, WHICH MORE APPROPRIATELY PRESENTS PER
SHARE DATA FOR THIS PERIOD SINCE USE OF THE UNDISTRIBUTED
METHOD DID NOT ACCORD WITH RESULTS OF OPERATIONS.
## THE FUND CHANGED ITS FISCAL YEAR END TO JUNE 30. PRIOR TO
THIS, THE FUND'S FISCAL YEAR END WAS NOVEMBER 30. EFFECTIVE
OCTOBER 17, 1994, THE DREYFUS CORPORATION SERVES AS THE
FUND'S INVESTMENT MANAGER. FROM APRIL 4, 1994 THROUGH OCTOBER
16, 1994, MELLON BANK SERVED AS THE INVESTMENT MANAGER FOR
THE FUND BEGINNING APRIL 4, 1994. PRIOR TO APRIL 4, 1994, THE
BOSTON COMPANY ADVISORS, INC. SERVED AS THE INVESTMENT
ADVISER FOR THE FUND.
+ ANNUALIZED EXPENSE RATIOS BEFORE VOLUNTARY WAIVER OF FEES
AND/OR REIMBURSEMENT OF EXPENSES BY INVESTMENT ADVISER AND/OR
CUSTODIAN AND/OR TRANSFER AGENT FOR THE PERIOD ENDED JUNE 30,
1994, FOR THE YEARS ENDED NOVEMBER 30, 1993, 1992, 1991, 1990,
1989, AND FOR THE PERIOD ENDED NOVEMBER 30, 1988 WERE 0.85%,
1.08%, 0.83%, 0.78%, 0.93%, 1.01%, AND 1.41%, RESPECTIVELY.
++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE PERIODS
INDICATED.
</TABLE>
................ 8 ................ ............... 9 ...............
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<TABLE>
<CAPTION>
DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH PERIOD.(1)
PERIOD
ENDED PERIOD ENDED
JUNE 30, NOVEMBER 30,
1994## 1993#*
<S> <C> <C>
Net Asset Value, Beginning of period $1.00 $1.00
--------- ------------
Income from investment operations:
Net investment income*** 0.013 0.020
Less distributions:
Distributions from net investment income (0.013) (0.020)
--------- ------------
Net Asset Value, end of period $1.00 $1.00
--------- ------------
--------- ------------
Total Return++ 1.31% 1.98%
--------- ------------
Ratios to average net assets/Supplemental data:
Net Assets, end of period (in 000's) $9,747 $6,408
Ratio of expenses to average net assets+ 0.29%** 0.28%**
Ratio of net investment income to average net assets 2.29%** 2.13%**
<FN>
(1) EFFECTIVE APRIL 4, 1994, THE INVESTMENT CLASS SHARES WERE RECLASSIFIED AS
THE TRUST CLASS SHARES. ON OCTOBER 17, 1994, THE TRUST CLASS SHARES WERE
REDESIGNATED CLASS R SHARES. THE TABLE ABOVE IS BASED UPON AN INVESTMENT
SHARE OUTSTANDING. THE TABLE ABOVE IS BASED UPON AN INVESTMENT SHARE
OUTSTANDING FROM FEBRUARY 1, 1993 TO APRIL 3, 1993 AND A TRUST SHARE
OUTSTANDING FROM APRIL 4, 1994 TO JUNE 30, 1994.
* THE FUND COMMENCED SELLING INVESTMENT SHARES ON FEBRUARY 1, 1993.
** ANNUALIZED.
*** NET INVESTMENT INCOME PER SHARE BEFORE WAIVER OF FEES AND REIMBURSEMENT OF
EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR TRANSFER AGENT FOR
THE PERIODS ENDED JUNE 30, 1994 AND NOVEMBER 30, 1993 WERE $0.011 AND
$0.013, RESPECTIVELY.
# THE PER SHARE AMOUNTS HAVE BEEN CALCULATED USING THE MONTHLY AVERAGE SHARES
METHOD, WHICH MORE APPROPRIATELY PRESENTS PER SHARE DATA FOR THIS PERIOD
SINCE USE OF THE UNDISTRIBUTED METHOD DID NOT ACCORD WITH RESULTS OF
OPERATIONS.
## THE FUND CHANGED ITS FISCAL YEAR END TO JUNE 30. PRIOR TO THIS, THE FUND'S
FISCAL YEAR END WAS NOVEMBER 30. EFFECTIVE OCTOBER 17, 1994, THE DREYFUS
CORPORATION SERVES AS THE FUND'S INVESTMENT MANAGER. FROM APRIL 4, 1994
THROUGH OCTOBER 16, 1994, MELLON BANK SERVED AS THE INVESTMENT MANAGER FOR
THE FUND BEGINNING APRIL 4, 1994. PRIOR TO APRIL 4, 1994, THE BOSTON COMPANY
ADVISORS, INC. SERVED AS THE INVESTMENT ADVISER FOR THE FUND.
+ ANNUALIZED EXPENSE RATIOS BEFORE VOLUNTARY WAIVER OF FEES AND REIMBURSEMENT
OF EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR TRANSFER AGENT FOR
THE PERIODS ENDED JUNE 30, 1994 AND NOVEMBER 30, 1993 WERE 0.67% AND 1.03%,
RESPECTIVELY.
++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE PERIODS INDICATED.
</TABLE>
....................... 10 .......................
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<TABLE>
<CAPTION>
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
YEAR ENDED NOVEMBER 30,
PERIOD ENDED JUNE 30,
1994# 1993 1992 1991
----------- ---------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, beginning of
period $13.07 $12.81 $12.53 $12.29
----------- ---------- -------- --------
Income from investment
operations:
Net investment income*** 0.34 0.67 0.70 0.73
Net realized and unrealized
gain/ (loss) on investments (0.46) 0.66 0.44 0.24
----------- ---------- -------- --------
Total from investment
operations (0.12) 1.33 1.14 0.97
----------- ---------- -------- --------
Less Distributions:
Distributions from net
investment income (0.34) (0.67) (0.70) (0.73)
Distributions from net
realized capital gains --**** (0.40) (0.16) --
----------- ---------- -------- --------
Total Distributions (0.34) (1.07) (0.86) (0.73)
----------- ---------- -------- --------
Net Asset Value, end of period $12.61 $13.07 $12.81 $12.53
----------- ---------- -------- --------
----------- ---------- -------- --------
Total Return+++ (0.95)% 10.58% 9.27% 8.07%
----------- ---------- -------- --------
Ratios to average net assets/
Supplemental data:
Net Assets, end of period (in
000's) $10,143 $10,971 $21,831 $16,203
Ratio of expenses to average
net assets+ 0.58%** 0.45%++ 0.45% 0.45%
Ratio of net investment income
to average net assets 4.51%** 5.09% 5.38% 5.84%
Portfolio turnover rate 5% 38% 41% 27%
<FN>
(1) EFFECTIVE APRIL 4, 1994 THE RETAIL AND INSTITUTIONAL CLASSES OF SHARES WERE
RECLASSIFIED AS A SINGLE CLASS OF SHARES KNOWN AS INVESTOR SHARES. ON
OCTOBER 17, 1994, THE INVESTOR CLASS OF SHARES WERE REDESIGNATED CLASS A
SHARES. THE AMOUNTS SHOWN FOR THE PERIOD ENDED JUNE 30, 1994 WERE
CALCULATED USING THE PERFORMANCE OF A RETAIL SHARE OUTSTANDING FROM
DECEMBER 1, 1993, TO APRIL 3, 1994 AND THE PERFORMANCE OF AN INVESTOR SHARE
OUTSTANDING FROM APRIL 4, 1994, TO JUNE 30, 1994. THE FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED NOVEMBER 30, 1993, AND PRIOR PERIODS ARE BASED UPON A
RETAIL SHARE OUTSTANDING.
** ANNUALIZED.
*** NET INVESTMENT INCOME PER SHARE BEFORE WAIVER OF FEES AND REIMBURSEMENT OF
EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR TRANSFER AGENT FOR
THE PERIOD ENDED JUNE 30, 1994, AND FOR THE YEARS ENDED NOVEMBER 30, 1993,
1992 AND 1991 WERE $0.31, $0.67, $0.64 AND $0.66, RESPECTIVELY.
**** AMOUNT REPRESENTS LESS THAN $0.01.
+ ANNUALIZED EXPENSE RATIOS BEFORE VOLUNTARY WAIVER OF FEES AND REIMBURSEMENT
OF EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR TRANSFER AGENT FOR
THE PERIOD ENDED JUNE 30, 1994, AND FOR THE YEARS ENDED NOVEMBER 30, 1993,
1992 AND 1991 WERE 0.95%, 1.10%, 0.93% AND 1.03%, RESPECTIVELY.
++ THE OPERATING EXPENSE RATIO EXCLUDES INTEREST EXPENSE. THE OPERATING EXPENSE
RATIO INCLUDING INTEREST EXPENSE WAS 0.46% FOR THE YEAR ENDED NOVEMBER 30,
1993.
+++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE PERIODS INDICATED.
# THE FUND CHANGED ITS FISCAL YEAR END TO JUNE 30. PRIOR TO THIS, THE FUND'S
FISCAL YEAR END WAS NOVEMBER 30. EFFECTIVE OCTOBER 17, 1994 THE DREYFUS
CORPORATION SERVES AS THE FUND'S INVESTMENT MANAGER. FROM APRIL 4, 1994
THROUGH OCTOBER 16, 1994 MELLON BANK SERVED AS THE INVESTMENT MANAGER FOR
THE FUND BEGINNING APRIL 4, 1994. PRIOR TO APRIL 4, 1994, THE BOSTON COMPANY
ADVISORS, INC. SERVED AS THE INVESTMENT ADVISER FOR THE FUND.
</TABLE>
....................... 11 .......................
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<TABLE>
<CAPTION>
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
(CONTINUED)
YEAR OR PERIOD ENDED NOVEMBER 30,
1990 1989 1988*
------- ------- ---------
<S> <C> <C> <C>
Net Asset Value, beginning of period $12.16 $11.84 $12.00
------- ------- ---------
Income from investment operations:
Net investment income*** 0.73 0.76 0.47
Net realized and unrealized gain/(loss) on
investments 0.20 0.32 (0.16)
------- ------- ---------
Total from investment operations 0.93 1.08 0.31
------- ------- ---------
Less Distributions:
Distributions from net investment income (0.73) (0.76) (0.47)
Distributions from net realized capital gains (0.07) -- --
------- ------- ---------
Total Distributions (0.80) (0.76) (0.47)
------- ------- ---------
Net Asset Value, end of period $12.29 $12.16 $11.84
------- ------- ---------
------- ------- ---------
Total Return+++ 7.96% 9.38% 2.61%
------- ------- ---------
Ratios to average net assets/Supplemental data:
Net Assets, end of period (in 000's) $12,481 $5,132 $3,202
Ratio of expenses to average net assets+ 0.45% 0.45% 0.68%**
Ratio of net investment income to average net
assets 6.07% 6.28% 5.43%**
Portfolio turnover rate 75% 59% --
<FN>
(1) EFFECTIVE APRIL 4, 1994, THE RETAIL AND INSTITUTIONAL CLASSES OF SHARES
WERE RECLASSIFIED AS A SINGLE CLASS OF SHARES KNOWN AS INVESTOR SHARES.
ON OCTOBER 17, 1994, THE INVESTOR CLASS OF SHARES WERE REDESIGNATED CLASS
A SHARES. THE FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED NOVEMBER 30, 1990,
AND PRIOR PERIODS ARE BASED UPON A RETAIL SHARE OUTSTANDING.
* THE FUND COMMENCED OPERATIONS ON MARCH 7, 1988.
** ANNUALIZED.
*** NET INVESTMENT INCOME PER SHARE BEFORE WAIVER OF FEES AND REIMBURSEMENT OF
EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR TRANSFER AGENT FOR
THE YEARS ENDED NOVEMBER 30, 1990, 1989, AND FOR THE PERIOD ENDED NOVEMBER
30, 1988, WERE $0.66, $0.59 AND $0.33, RESPECTIVELY.
+ ANNUALIZED EXPENSE RATIOS BEFORE VOLUNTARY WAIVER OF FEES AND REIMBURSEMENT
OF EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR TRANSFER AGENT
FOR THE YEARS ENDED NOVEMBER 30, 1990, 1989, AND FOR THE PERIOD ENDED
NOVEMBER 30, 1988 WERE 1.03%, 1.85%, AND 2.33%, RESPECTIVELY.
+++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE PERIODS INDICATED.
</TABLE>
....................... 12 .......................
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<TABLE>
<CAPTION>
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH PERIOD.(1)
PERIOD
PERIOD ENDED
ENDED JUNE NOVEMBER
30, 1994# 30, 1993#
<S> <C> <C>
Net Asset Value, Beginning of period $13.07 $12.96
----------- -----------
Income from investment operations:
Net investment income*** 0.35 0.55
Net realized and unrealized gain/(loss) on
investments (0.46) 0.52
----------- -----------
Total from investment operations (0.11) 1.07
----------- -----------
Less Distributions:
Distributions from net investment income (0.35) (0.56)
Distributions from net realized capital gains --**** (0.40)
----------- -----------
Total Distributions (0.35) (0.96)
----------- -----------
Net Asset Value, end of period $12.61 $13.07
----------- -----------
----------- -----------
Total Return+++ (0.87)% 8.32%
----------- -----------
Ratios to average net assets/Supplemental data:
Net Assets, end of period (in 000's) $12,235 $8,291
Ratio of expenses to average net assets+ 0.42%** 0.40%**++
Ratio of net investment income to average net
assets 4.68%** 5.04%**
Portfolio turnover rate 5% 38%
<FN>
(1) EFFECTIVE APRIL 4, 1994 THE INVESTMENT CLASS SHARES WERE RECLASSIFIED
AS THE TRUST CLASS SHARES. ON OCTOBER 17, 1994, THE TRUST CLASS SHARES
WERE REDESIGNATED CLASS R SHARES. THE TABLE ABOVE IS BASED UPON AN
INVESTMENT SHARE OUTSTANDING FROM FEBRUARY 1, 1993 TO APRIL 3, 1993
AND A TRUST SHARE OUTSTANDING FROM APRIL 4, 1994 TO JUNE 30, 1994.
*THE FUND COMMENCED SELLING INVESTMENT SHARES ON FEBRUARY 1, 1993.
** ANNUALIZED.
*** NET INVESTMENT INCOME PER SHARE BEFORE WAIVER OF FEES AND
REIMBURSEMENT OF EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN
AND/OR TRANSFER AGENT FOR THE PERIODS ENDED JUNE 30, 1994 AND NOVEMBER
30, 1993 WERE $0.32 AND $0.49, RESPECTIVELY.
**** AMOUNT REPRESENTS LESS THAN $0.01.
+ ANNUALIZED EXPENSE RATIOS BEFORE VOLUNTARY WAIVER OF FEES AND
REIMBURSEMENT OF EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR
TRANSFER AGENT FOR THE PERIODS ENDED JUNE 30, 1994 AND NOVEMBER 30,
1993 WERE 0.79% AND 1.06%, RESPECTIVELY.
++ THE OPERATING EXPENSE RATIO EXCLUDES INTEREST EXPENSE. THE OPERATING
EXPENSE RATIO INCLUDING INTEREST EXPENSE WAS 0.41% FOR THE PERIOD ENDED
NOVEMBER 30, 1993.
+++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE PERIODS
INDICATED.
# THE FUND CHANGED ITS FISCAL YEAR END TO JUNE 30. PRIOR TO THIS, THE
FUND'S FISCAL YEAR END WAS NOVEMBER 30. EFFECTIVE OCTOBER 17, 1994, THE
DREYFUS CORPORATION SERVES AS THE FUND'S INVESTMENT MANAGER. FROM APRIL
4, 1994 THROUGH OCTOBER 11, 1994, MELLON BANK SERVED AS THE INVESTMENT
MANAGER FOR THE FUND BEGINNING APRIL 4, 1994. PRIOR TO APRIL 4, 1994,
THE BOSTON COMPANY ADVISORS, INC. SERVED AS THE INVESTMENT ADVISER FOR
THE FUND.
</TABLE>
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P R O S P E C T U S
<TABLE>
<CAPTION>
DREYFUS/LAUREL MASSACHUSETTS TAX-FREE MONEY FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR.(1)
YEAR ENDED JUNE 30,
1994# 1993 1992 1991 1990 1989 1988 1987 1986 1985
-------- -------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
Beginning of year $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- --------- --------- --------- --------- --------- --------- --------- ---------
Income from
investment
operations:
Net Investment
Income*** 0.018 0.019 0.034 0.051 0.056 0.055 0.042 0.039 0.047 0.052
-------- -------- --------- --------- --------- --------- --------- --------- --------- ---------
Less
distributions:
Distributions
from net
investment
income (0.018) (0.019) (0.034) (0.051) (0.056) (0.055) (0.042) (0.039) (0.047) (0.052)
-------- -------- --------- --------- --------- --------- --------- --------- --------- ---------
Net Asset Value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- --------- --------- --------- --------- --------- --------- --------- ---------
-------- -------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Return++ 1.83% 1.94% 3.36% 4.93% 5.56% 5.62% 4.12% 3.97% 4.69% 5.45%
-------- -------- --------- --------- --------- --------- --------- --------- --------- ---------
Ratios to average
net assets/
Supplemental data:
Net assets, end
of year (in
000's) $86,505 $68,952 $149,679 $160,392 $159,551 $134,941 $146,592 $137,295 $111,095 $100,406
Ratio of
operating
expenses to
average net
assets+ 0.70% 0.68% 0.67% 0.64% 0.65% 0.67% 0.65% 0.47% 0.50% 0.55%
Ratio of net
investment
income to
average net
assets 1.80% 1.98% 3.38% 5.07% 5.64% 5.45% 4.25% 3.92% 4.71% 5.08%
<FN>
(1) EFFECTIVE APRIL 4, 1994, THE RETAIL AND INSTITUTIONAL
CLASSES OF SHARES WERE REDESIGNATED THE INVESTOR CLASS
OF SHARES. THE AMOUNTS SHOWN FOR THE YEAR ENDED JUNE
30, 1994, WERE CALCULATED USING THE PERFORMANCE OF A
RETAIL SHARE OUTSTANDING FROM JULY 1, 1993, TO APRIL
3, 1994, AND THE PERFORMANCE OF AN INVESTOR SHARE
OUTSTANDING FROM APRIL 4, 1994, TO JUNE 30, 1994. THE
FINANCIAL HIGHLIGHTS FOR THE PRIOR YEARS ARE BASED
UPON A RETAIL SHARE OUTSTANDING.
*** NET INVESTMENT INCOME PER SHARE BEFORE WAIVER OF FEES
AND/OR REIMBURSEMENT OF EXPENSES BY INVESTMENT ADVISER
AND/OR CUSTODIAN AND/OR TRANSFER AGENT FOR THE YEARS
ENDED JUNE 30, 1994, 1993, 1989, 1987, 1986, 1985 WERE
$0.017, $0.019, $0.055, $0.038, $0.044 AND $0.049,
RESPECTIVELY.
+ ANNUALIZED EXPENSE RATIOS BEFORE VOLUNTARY WAIVER OF FEES
AND/OR REIMBURSEMENT OF EXPENSES BY INVESTMENT ADVISER
AND/OR CUSTODIAN AND/OR TRANSFER AGENT FOR THE YEARS ENDED
JUNE 30, 1994, 1993, 1989, 1987, 1986, 1985 WOULD HAVE
BEEN 0.78%, 0.69%, 0.70%, 0.64%, 0.79% AND 0.86%,
RESPECTIVELY.
++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE
PERIODS INDICATED.
# EFFECTIVE OCTOBER 17, 1994, THE DREYFUS CORPORATION SERVES
AS THE FUND'S INVESTMENT MANAGER. FROM APRIL 4, 1994
THROUGH OCTOBER 16, 1994, MELLON BANK SERVED AS THE
INVESTMENT MANAGER FOR THE FUND BEGINNING APRIL 4, 1994.
PRIOR TO APRIL 4, 1994, THE BOSTON COMPANY ADVISORS, INC.
SERVED AS THE INVESTMENT ADVISER FOR THE FUND.
</TABLE>
............... 14 ............... ............... 15 ...............
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<TABLE>
<CAPTION>
DREYFUS/LAUREL MASSACHUSETTS TAX-FREE MONEY FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
Year Period
Ended Ended
6/30/94# 6/30/93*
-------- ----------
<S> <C> <C>
Net Asset Value, beginning of period $1.00 $1.00
-------- ----------
Income from investment operations:
Net investment income*** 0.019 0.007
Less distributions:
Distributions from net investment income (0.019) (0.007)
-------- ----------
Net Asset Value, end of period $1.00 $1.00
-------- ----------
-------- ----------
Total Return++ 1.97% 0.73%
-------- ----------
Ratios to average net assets/Supplemental data:
Net Assets, end of period (in 000's) $19,830 $19,645
Ratio of expenses to average net assets+ 0.56% 0.57%**
Ratio of net investment income to average net assets 1.94% 1.78%**
<FN>
(1) EFFECTIVE APRIL 4, 1994, THE INVESTMENT CLASS SHARES WERE RECLASSIFIED
AS THE TRUST CLASS SHARES. ON OCTOBER 17, 1994, THE TRUST CLASS SHARES
WERE REDESIGNATED CLASS R SHARES. THE TABLE ABOVE IS BASED UPON AN
INVESTMENT SHARE OUTSTANDING FROM FEBRUARY 1, 1993 TO APRIL 3, 1993 AND
A TRUST SHARE OUTSTANDING FROM APRIL 4, 1994 TO JUNE 30, 1994.
*THE FUND COMMENCED SELLING INVESTMENT SHARES ON FEBRUARY 1, 1993.
** ANNUALIZED.
*** NET INVESTMENT INCOME PER SHARE BEFORE WAIVER OF FEES AND REIMBURSEMENT
OF EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR TRANSFER AGENT
FOR THE YEAR ENDED JUNE 30, 1994 AND FOR THE PERIOD ENDED JUNE 30, 1993
WERE $0.019 AND $0.007, RESPECTIVELY.
+ ANNUALIZED EXPENSE RATIOS BEFORE VOLUNTARY WAIVER OF FEES AND/OR
REIMBURSEMENT OF EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR
TRANSFER AGENT FOR THE YEAR ENDED JUNE 30, 1994 AND FOR THE PERIOD ENDED
JUNE 30, 1993 WOULD HAVE BEEN 0.64% AND 0.62%, RESPECTIVELY.
++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE PERIODS INDICATED.
# EFFECTIVE OCTOBER 17, 1994, THE DREYFUS CORPORATION SERVES AS THE FUND'S
INVESTMENT MANAGER. FROM APRIL 4, 1994 THROUGH OCTOBER 16, 1994, MELLON
BANK SERVED AS THE INVESTMENT MANAGER FOR THE FUND BEGINNING APRIL 4,
1994. PRIOR TO APRIL 4, 1994, THE BOSTON COMPANY ADVISORS, INC. SERVED AS
THE INVESTMENT ADVISER FOR THE FUND.
</TABLE>
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<TABLE>
<CAPTION>
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
YEAR OR PERIOD ENDED JUNE 30,
1994# 1993 1992 1991 1990 1989 1988 1987 1986*
---------- -------- -------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, Beginning
of period $12.38 $11.83 $11.23 $11.09 $11.25 $10.89 $10.74 $10.78 $10.00
---------- -------- -------- -------- -------- -------- -------- -------- ----------
Income from investment
operations:
Net Investment Income*** 0.54 0.64 0.73 0.73 0.72 0.74 0.72 0.72 0.58
Net realized and
unrealized gain/(loss) on
investments (0.36) 0.55 0.60 0.14 (0.16) 0.36 0.15 (0.04) 0.78
---------- -------- -------- -------- -------- -------- -------- -------- ----------
Total from investment
operations 0.18 1.19 1.33 0.87 0.56 1.10 0.87 0.68 1.36
---------- -------- -------- -------- -------- -------- -------- -------- ----------
Less distributions:
Distributions from net
investment income (0.54) (0.64) (0.73) (0.73) (0.72) (0.74) (0.72) (0.72) (0.58)
Distributions from net
realized capital gains (0.28) -- -- -- -- -- -- -- --
---------- -------- -------- -------- -------- -------- -------- -------- ----------
Total Distributions (0.82) (0.64) (0.73) (0.73) (0.72) (0.74) (0.72) (0.72) (0.58)
---------- -------- -------- -------- -------- -------- -------- -------- ----------
Net Asset Value, end of
period $11.74 $12.38 $11.83 $11.23 $11.09 $11.25 $10.89 $10.74 $10.78
---------- -------- -------- -------- -------- -------- -------- -------- ----------
---------- -------- -------- -------- -------- -------- -------- -------- ----------
Total Return++ 1.38% 10.27% 12.21% 8.13% 5.13% 10.44% 8.37% 6.27% 13.75%
---------- -------- -------- -------- -------- -------- -------- -------- ----------
Ratios to average net
assets/Supplemental data:
Net assets, end of period
(in 000's) $21,276 $20,106 $20,513 $16,337 $16,093 $14,957 $14,702 $15,355 $7,708
Ratio of expenses to
average net assets+ 0.76% 0.75% 0.76% 0.88% 0.92% 0.96% 0.96% 0.79% 0.75%**
Ratio of net investment
income to average net
assets 4.40% 5.30% 6.34% 6.59% 6.45% 6.70% 6.69% 6.45% 7.00%**
Portfolio turnover rate 19% 60% 23% 41% 99% 93% 104% 127% 33%
<FN>
(1) EFFECTIVE APRIL 4, 1994, THE RETAIL AND INSTITUTIONAL
CLASSES OF SHARES WERE REDESIGNATED THE INVESTOR CLASS
OF SHARES. ON OCTOBER 17, 1994, THE INVESTOR CLASS OF
SHARES WERE REDESIGNATED CLASS A SHARES. THE AMOUNTS
SHOWN FOR THE YEAR ENDED JUNE 30, 1994, WERE
CALCULATED USING THE PERFORMANCE OF A RETAIL SHARE
OUTSTANDING FROM JULY 1, 1993, TO APRIL 3, 1994, AND
THE PERFORMANCE OF AN INVESTOR SHARE OUTSTANDING FROM
APRIL 4, 1994, TO JUNE 30, 1994. THE FINANCIAL
HIGHLIGHTS FOR THE YEAR ENDED JUNE 30, 1993, AND PRIOR
PERIODS ARE BASED UPON A RETAIL SHARE OUTSTANDING.
* THE FUND COMMENCED OPERATIONS ON SEPTEMBER 24, 1985.
** ANNUALIZED.
*** NET INVESTMENT INCOME PER SHARE BEFORE WAIVER OF FEES
AND/OR REIMBURSEMENT OF EXPENSES BY INVESTMENT ADVISER
AND/OR CUSTODIAN AND/OR TRANSFER AGENT FOR THE YEARS
ENDED JUNE 30, 1994, 1993, 1987 AND FOR THE PERIOD
ENDED JUNE 30, 1986 WERE $0.53, $0.62, $0.70 AND $0.55,
RESPECTIVELY.
+ ANNUALIZED EXPENSE RATIOS BEFORE VOLUNTARY WAIVER OF FEES
AND/OR REIMBURSEMENT OF EXPENSES BY INVESTMENT ADVISER
AND/OR CUSTODIAN AND/OR TRANSFER AGENT FOR THE YEARS ENDED
JUNE 30, 1994, 1993, 1987 AND FOR THE PERIOD ENDED JUNE
30, 1986 WOULD HAVE BEEN 0.89%, 0.92%, 0.95% AND 1.15%,
RESPECTIVELY.
++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE
PERIODS INDICATED.
# EFFECTIVE OCTOBER 17, 1994, THE DREYFUS CORPORATION SERVES
AS THE FUND'S INVESTMENT MANAGER. FROM APRIL 4, 1994
THROUGH OCTOBER 16, 1994, MELLON BANK SERVED AS THE
INVESTMENT MANAGER FOR THE FUND. PRIOR TO APRIL 4, 1994,
THE BOSTON COMPANY ADVISORS, INC. SERVED AS THE INVESTMENT
ADVISER FOR THE FUND.
</TABLE>
............... 18 ............... ............... 19 ...............
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<TABLE>
<CAPTION>
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
Year Period
Ended Ended
6/30/94# 6/30/93
-------- ---------
<S> <C> <C>
Net Asset Value, beginning of period $12.38 $12.08
-------- ---------
Income from investment operations:
Net investment income*** 0.55 0.25
Net realized and unrealized gain/(loss) on
investments (0.35) 0.29
-------- ---------
Total from investment operations 0.20 0.54
Less distributions:
Distributions from net investment income (0.56) (0.24)
Distributions from net realized capital gains (0.28) --
-------- ---------
Total distributions (0.84) (0.24)
-------- ---------
Net Asset Value, end of period $11.74 $12.38
-------- ---------
-------- ---------
Total Return++ 1.53% 4.53%
-------- ---------
Ratios to average net assets/Supplemental data:
Net assets, end of period (in 000's) $15,681 $9,411
Ratio of expenses to average net assets+ 0.62% 0.65%**
Ratio of net investment income to average net assets 4.54% 4.84%**
Portfolio turnover rate 19% 60%
<FN>
(1) THE FUND COMMENCED SELLING INVESTMENT SHARES ON FEBRUARY 1, 1993.
EFFECTIVE APRIL 4, 1994 THE INVESTMENT CLASS SHARES WERE RECLASSIFIED
AS THE TRUST CLASS SHARES. ON OCTOBER 17, 1994, THE TRUST CLASS SHARES
WERE REDESIGNATED CLASS R SHARES. THE TABLE ABOVE IS BASED UPON AN
INVESTMENT SHARE OUTSTANDING FROM FEBRUARY 1, 1993 TO APRIL 3, 1993 AND
A TRUST SHARE OUTSTANDING FROM APRIL 4, 1994 TO JUNE 30, 1994.
** ANNUALIZED.
*** NET INVESTMENT INCOME PER SHARE BEFORE WAIVER OF FEES AND REIMBURSEMENT
OF EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR TRANSFER AGENT
FOR THE YEAR ENDED JUNE 30, 1994 AND FOR THE PERIOD ENDED JUNE 30, 1993
WERE $0.54 AND $0.24, RESPECTIVELY.
+ ANNUALIZED EXPENSE RATIOS BEFORE VOLUNTARY WAIVER OF FEES AND/OR
REIMBURSEMENT OF EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR
TRANSFER AGENT FOR THE YEAR ENDED JUNE 30, 1994 AND FOR THE PERIOD ENDED
JUNE 30, 1993 WOULD HAVE BEEN 0.75% AND 0.87%, RESPECTIVELY.
++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE PERIODS
INDICATED.
# EFFECTIVE OCTOBER 17, 1994, THE DREYFUS CORPORATION SERVES AS THE FUND'S
INVESTMENT MANAGER. FROM APRIL 4, 1994 THROUGH OCTOBER 16, 1994, MELLON
BANK SERVED AS THE INVESTMENT MANAGER FOR THE FUND. PRIOR TO APRIL 4,
1994, THE BOSTON COMPANY ADVISORS, INC. SERVED AS THE INVESTMENT ADVISER
FOR THE FUND.
</TABLE>
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<TABLE>
<CAPTION>
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR
PERIOD.(1)
YEAR
PERIOD ENDED JUNE 30, ENDED NOVEMBER 30,
1994# 1993 1992
--------- ------- --------
<S> <C> <C> <C>
Net asset value, Beginning of period $1.00 $1.00 $1.00
--------- ------- --------
Income from investment operations:
Net Investment Income**** 0.012 0.021 0.031
Less Distributions:
Dividends from net investment income (0.012) (0.021) (0.031)
Distributions from net realized capital
gains -- -- -- ***
--------- ------- --------
Net Asset Value, end of period $1.00 $1.00 $1.00
--------- ------- --------
--------- ------- --------
Total Return++ 1.23% 2.15% 3.11%
--------- ------- --------
Ratio to average net assets/Supplemental data:
Net assets, end of period (in 000's) $8,011 $9,356 $11,183
Ratio of expenses to average net assets+ 0.44%** 0.31% 0.32%
Ratio of net investment income to average
net assets 2.12%** 2.13% 3.08%
<FN>
(1) EFFECTIVE APRIL 4, 1994, THE RETAIL AND INSTITUTIONAL CLASSES OF SHARES
WERE REDESIGNATED THE INVESTOR CLASS OF SHARES. THE AMOUNTS SHOWN FOR THE
PERIOD ENDED JUNE 30, 1994 WERE CALCULATED USING THE PERFORMANCE OF A
RETAIL SHARE OUTSTANDING FROM DECEMBER 1, 1993, TO APRIL 3, 1994 AND THE
PERFORMANCE OF AN INVESTOR SHARE OUTSTANDING FROM APRIL 4, 1994, TO JUNE
30, 1994. THE FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED NOVEMBER 30, 1993,
AND PRIOR PERIODS ARE BASED UPON A RETAIL SHARE OUTSTANDING.
** ANNUALIZED.
*** AMOUNT REPRESENTS LESS THAN $.001 PER INVESTOR SHARE FOR THE YEAR ENDED
NOVEMBER 30, 1992.
**** NET INVESTMENT INCOME PER SHARE BEFORE WAIVER OF FEES AND REIMBURSEMENT
OF EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR TRANSFER AGENT
FOR THE PERIOD ENDED JUNE 30, 1994, AND FOR THE YEARS ENDED NOVEMBER 30,
1993 AND 1992, WERE $0.009, $0.008 AND $0.024, RESPECTIVELY.
+ ANNUALIZED EXPENSE RATIOS BEFORE VOLUNTARY WAIVER OF FEES AND
REIMBURSEMENT OF EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR
TRANSFER AGENT FOR THE PERIOD ENDED JUNE 30, 1994, AND FOR THE YEARS ENDED
NOVEMBER 30, 1993 AND 1992, WERE 0.97%, 1.29% AND 1.03%, RESPECTIVELY.
++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE PERIODS INDICATED.
# THE FUND CHANGED ITS FISCAL YEAR END TO JUNE 30. PRIOR TO THIS, THE FUND'S
FISCAL YEAR END WAS NOVEMBER 30. EFFECTIVE OCTOBER 17, 1994, THE DREYFUS
CORPORATION SERVES AS THE FUND'S INVESTMENT MANAGER. FROM APRIL 4, 1994
THROUGH OCTOBER 16, 1994, MELLON BANK SERVED AS THE INVESTMENT MANAGER FOR
THE FUND. PRIOR TO APRIL 4, 1994, THE BOSTON COMPANY ADVISORS, INC. SERVED
AS THE INVESTMENT ADVISER FOR THE FUND.
</TABLE>
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<TABLE>
<CAPTION>
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR
PERIOD.(1) (CONTINUED)
YEAR OR PERIOD ENDED NOVEMBER 30,
1991 1990 1989 1988*
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
Net asset value, Beginning of
period $1.00 $1.00 $1.00 $1.00
-------- -------- -------- ----------
Income from investment operations:
Net Investment Income**** 0.046 0.054 0.058 0.032
Less Distributions:
Dividends from net investment
income (0.046) (0.054) (0.058) (0.032)
Distributions from net realized
capital gains -- -- -- --
-------- -------- -------- ----------
Net Asset Value, end of period $1.00 $1.00 $1.00 $1.00
-------- -------- -------- ----------
-------- -------- -------- ----------
Total Return++ 4.65% 5.53% 5.90% 3.19%
-------- -------- -------- ----------
Ratio to average net
assets/Supplemental data:
Net assets, end of period (in
000's) $15,989 $16,870 $14,129 $8,929
Ratio of expenses to average net
assets+ 0.32% 0.32% 0.32% 0.65%**
Ratio of net investment income
to average net assets 4.58% 5.38% 5.73% 4.33%**
<FN>
(1) EFFECTIVE APRIL 4, 1994, THE RETAIL AND INSTITUTIONAL CLASSES OF SHARES
WERE REDESIGNATED THE INVESTOR CLASS OF SHARES. THE FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED NOVEMBER 30, 1991, AND PRIOR PERIODS ARE BASED UPON A
RETAIL SHARE OUTSTANDING.
* THE FUND COMMENCED OPERATIONS ON MARCH 2, 1988.
** ANNUALIZED.
**** NET INVESTMENT INCOME PER SHARE BEFORE WAIVER OF FEES AND REIMBURSEMENT OF
EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR TRANSFER AGENT FOR
THE YEARS ENDED NOVEMBER 30, 1991, 1990, 1989, AND FOR THE PERIOD ENDED
NOVEMBER 30, 1988, WERE $0.040, $0.047, $0.050, AND $0.026, RESPECTIVELY.
+ ANNUALIZED EXPENSE RATIOS BEFORE VOLUNTARY WAIVER OF FEES AND REIMBURSEMENT
OF EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR TRANSFER AGENT
FOR THE YEARS ENDED NOVEMBER 30, 1991, 1990, 1989, AND FOR THE PERIOD ENDED
NOVEMBER 30, 1988 WERE 0.93%, 1.03%, 1.10%, AND 1.42%, RESPECTIVELY.
++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE PERIODS INDICATED.
</TABLE>
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<TABLE>
<CAPTION>
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH PERIOD.(1)
PERIOD
PERIOD ENDED
ENDED JUNE NOVEMBER
30, 1994# 30, 1993*
<S> <C> <C>
Net Asset Value, Beginning of period $1.00 $1.00
---------- ---------
Income from investment operations:
Net investment income*** 0.013 0.018
Less Distributions:
Dividends from net investment income (0.013) (0.018)
Net Asset Value, end of period $1.00 $1.00
---------- ---------
---------- ---------
Total Return++ 1.32% 1.76%
---------- ---------
Ratios to average net assets/Supplemental Data:
Net Assets, end of period (in 000's) $5,459 $7,700
Ratio of expenses to average net assets+ 0.28%** 0.26%**
Ratio of net investment income to average net assets 2.27%** 2.12%**
<FN>
(1) EFFECTIVE APRIL 4, 1994, THE INVESTMENT CLASS SHARES WERE REDESIGNATED AS
THE TRUST CLASS SHARES. ON OCTOBER 17, 1994, THE TRUST CLASS SHARES WERE
REDESIGNATED CLASS R SHARES. THE TABLE ABOVE IS BASED UPON A RETAIL SHARE
OUTSTANDING FROM FEBRUARY 1, 1993 TO APRIL 3, 1993 AND A TRUST SHARE
OUTSTANDING FROM APRIL 4, 1994 TO JUNE 30, 1994.
*THE FUND COMMENCED SELLING INVESTMENT SHARES ON FEBRUARY 1, 1993.
** ANNUALIZED.
*** NET INVESTMENT INCOME PER SHARE BEFORE WAIVER OF FEES AND REIMBURSEMENT OF
EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR TRANSFER AGENT FOR
THE PERIODS ENDED JUNE 30, 1994 AND NOVEMBER 30, 1993 WERE $0.010 AND
$0.007, RESPECTIVELY.
+ ANNUALIZED EXPENSE RATIOS BEFORE VOLUNTARY WAIVER OF FEES AND REIMBURSEMENT
OF EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR TRANSFER AGENT
FOR THE PERIODS ENDED JUNE 30, 1994 AND NOVEMBER 30, 1993 WERE 0.82% AND
1.22%, RESPECTIVELY.
++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE PERIODS INDICATED.
# THE FUND CHANGED ITS FISCAL YEAR END TO JUNE 30. PRIOR TO THIS, THE FUND'S
FISCAL YEAR END WAS NOVEMBER 30. EFFECTIVE OCTOBER 17, 1994, THE DREYFUS
CORPORATION SERVES AS THE FUND'S INVESTMENT MANAGER. FROM APRIL 4, 1994
THROUGH OCTOBER 16, 1994, MELLON BANK SERVED AS THE INVESTMENT MANAGER FOR
THE FUND. PRIOR TO APRIL 4, 1994, THE BOSTON COMPANY ADVISORS, INC. SERVED
AS THE INVESTMENT ADVISER FOR THE FUND.
</TABLE>
....................... 23 .......................
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<PAGE>
P R O S P E C T U S
------------------------------------------------------------
P R O S P E C T U S
<TABLE>
<CAPTION>
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
YEAR OR PERIOD ENDED NOVEMBER 30,
PERIOD ENDED JUNE 30,
1994# 1993 1992 1991 1990 1989 1988*
---------- -------- -------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of period $13.04 $12.70 $12.34 $12.02 $11.90 $11.75 $12.00
---------- -------- -------- -------- ------- ------- ---------
Income from investment
operations:
Net investment income*** 0.35 0.66 0.68 0.70 0.73 0.72 0.47
Net realized and
unrealized gain/(loss) on
investments (0.45) 0.46 0.36 0.32 0.11 0.15 (0.24)
---------- -------- -------- -------- ------- ------- ---------
Total from investment
operations (0.10) 1.12 1.04 1.02 0.84 0.87 0.23
---------- -------- -------- -------- ------- ------- ---------
Less distributions:
Distributions from net
investment income (0.35) (0.66) (0.68) (0.70) (0.72) (0.72) (0.48)
Distributions from net
realized capital gains -- (0.12) -- -- -- -- --
---------- -------- -------- -------- ------- ------- ---------
Total distributions (0.35) (0.78) (0.68) (0.70) (0.72) (0.72) (0.48)
---------- -------- -------- -------- ------- ------- ---------
Net Asset Value, end of
period $12.59 $13.04 $12.70 $12.34 $12.02 $11.90 $11.75
---------- -------- -------- -------- ------- ------- ---------
---------- -------- -------- -------- ------- ------- ---------
Total Return++ (0.80)% 9.00% 8.65% 8.71% 7.35% 7.60% 1.95%
---------- -------- -------- -------- ------- ------- ---------
Ratios to average net
assets/Supplemental Data:
Net Assets, end of period
(in 000's) $2,922 $2,100 $5,308 $5,202 $3,959 $3,535 $2,315
Ratio of expenses to
average net assets+ 0.57%** 0.46% 0.45% 0.45% 0.45% 0.44% 0.70%**
Ratio of net investment
income to average net
assets 4.66%** 5.11% 5.43% 5.74% 6.14% 6.30% 5.54%**
Portfolio turnover rate 13% 32% 0% 0% 45% 7% 74%
<FN>
(1) EFFECTIVE APRIL 4, 1994, THE RETAIL AND
INSTITUTIONAL CLASSES OF SHARES WERE
REDESIGNATED THE INVESTOR CLASS OF SHARES.
ON OCTOBER 17, 1994, THE INVESTOR CLASS OF
SHARES WERE REDESIGNATED CLASS A SHARES. THE
AMOUNTS SHOWN FOR THE PERIOD ENDED JUNE 30,
1994 WERE CALCULATED USING THE PERFORMANCE
OF A RETAIL SHARE OUTSTANDING FROM DECEMBER
1, 1993, TO APRIL 3, 1994 AND THE
PERFORMANCE OF AN INVESTOR SHARE OUTSTANDING
FROM APRIL 4, 1994, TO JUNE 30, 1994. THE
FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED
NOVEMBER 30, 1993, AND PRIOR PERIODS ARE
BASED UPON A RETAIL SHARE OUTSTANDING.
* THE FUND COMMENCED OPERATIONS ON MARCH 7,
1988.
** ANNUALIZED.
*** NET INVESTMENT INCOME PER SHARE BEFORE WAIVER
OF FEES AND REIMBURSEMENT OF EXPENSES BY
INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR
TRANSFER AGENT FOR THE PERIOD ENDED JUNE 30,
1994, FOR THE YEARS ENDED NOVEMBER 30, 1993,
1992, 1991, 1990 AND 1989, AND FOR THE PERIOD
ENDED NOVEMBER 30, 1988 WERE $0.28, $0.42,
$0.52, $0.52, $0.59, $0.45 AND $0.31,
RESPECTIVELY.
+ ANNUALIZED EXPENSE RATIOS BEFORE VOLUNTARY
WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES BY
INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR
TRANSFER AGENT FOR THE PERIOD ENDED JUNE 30,
1994, FOR THE YEARS ENDED NOVEMBER 30, 1993,
1992, 1991, 1990 AND 1989, AND FOR THE PERIOD
ENDED NOVEMBER 30, 1988 WERE 1.51%, 2.32%,
1.70%, 1.88%, 1.61%, 2.67% AND 2.61%,
RESPECTIVELY.
++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN
FOR THE PERIODS INDICATED.
# THE FUND CHANGED ITS FISCAL YEAR END TO JUNE 30.
PRIOR TO THIS, THE FUND'S FISCAL YEAR END WAS
NOVEMBER 30. EFFECTIVE OCTOBER 17, 1994, THE
DREYFUS CORPORATION SERVES AS THE FUND'S
INVESTMENT MANAGER. FROM APRIL 4, 1994 THROUGH
OCTOBER 16, 1994, MELLON BANK SERVED AS THE
INVESTMENT MANAGER FOR THE FUND. PRIOR TO APRIL
4, 1994, THE BOSTON COMPANY ADVISORS, INC.
SERVED AS THE INVESTMENT ADVISER FOR THE FUND.
</TABLE>
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<TABLE>
<CAPTION>
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH PERIOD.(1)
PERIOD
PERIOD ENDED
ENDED JUNE NOVEMBER
30, 1994# 30, 1993*
<S> <C> <C>
Net Asset Value, Beginning of period $13.04 $12.85
---------- ---------
Income from investment operations:
Net investment income*** 0.37 0.57
Net realized and unrealized gain/(loss) on
investments (0.45) 0.31
---------- ---------
Total from investment operations (0.08) 0.88
Less distributions:
Distributions from net investment income (0.37) (0.57)
Distributions from net realized capital gains -- (0.12)
---------- ---------
Total distributions (0.37) (0.69)
---------- ---------
Net Asset Value, end of period $12.59 $13.04
---------- ---------
---------- ---------
Total Return++ (0.67)% 6.95%
---------- ---------
Ratios to average net assets/Supplemental Data:
Net Assets, end of period (in 000's) $2,388 $2,542
Ratio of expenses to average net assets+ 0.29%** 0.25%**
Ratio of net investment income to average net assets 4.94%** 5.20%**
Portfolio turnover rate 13% 32%
<FN>
(1) EFFECTIVE APRIL 4, 1994, THE INVESTMENT CLASS SHARES WERE REDESIGNATED
THE TRUST CLASS SHARES. EFFECTIVE OCTOBER 17, 1994, THE TRUST CLASS
SHARES WERE REDESIGNATED CLASS R SHARES. THE TABLE ABOVE IS BASED UPON A
RETAIL SHARE OUTSTANDING FROM FEBRUARY 1, 1993 TO APRIL 3, 1994 AND A
TRUST SHARE OUTSTANDING FROM APRIL 4, 1994 TO JUNE 30, 1994.
*THE FUND COMMENCED SELLING INVESTMENT SHARES ON FEBRUARY 1, 1993.
** ANNUALIZED.
*** NET INVESTMENT INCOME PER SHARE BEFORE WAIVER OF FEES AND REIMBURSEMENT OF
EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR TRANSFER AGENT FOR
THE PERIODS ENDED JUNE 30, 1994 AND NOVEMBER 30, 1993 WERE $0.30 AND
$0.36, RESPECTIVELY.
+ ANNUALIZED EXPENSE RATIOS BEFORE VOLUNTARY WAIVER OF FEES AND REIMBURSEMENT
OF EXPENSES BY INVESTMENT ADVISER AND/OR CUSTODIAN AND/OR TRANSFER AGENT
FOR THE PERIODS ENDED JUNE 30, 1994 AND NOVEMBER 30, 1993 WERE 1.23% AND
2.22%, RESPECTIVELY.
++ TOTAL RETURN REPRESENTS AGGREGATE TOTAL RETURN FOR THE PERIODS INDICATED.
# THE FUND CHANGED ITS FISCAL YEAR END TO JUNE 30. PRIOR TO THIS, THE FUND'S
FISCAL YEAR END WAS NOVEMBER 30. EFFECTIVE OCTOBER 17, 1994, THE DREYFUS
CORPORATION SERVES AS THE FUND'S INVESTMENT MANAGER. FROM APRIL 4, 1994
THROUGH OCTOBER 16, 1994, MELLON BANK SERVED AS THE INVESTMENT MANAGER FOR
THE FUND. PRIOR TO APRIL 4, 1994, THE BOSTON COMPANY ADVISORS, INC. SERVED
AS THE INVESTMENT ADVISER FOR THE FUND.
</TABLE>
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THE TAX-FREE FUNDS
ALTERNATIVE PURCHASE METHODS FOR BOND FUNDS.
Each of the Premier Limited Term California Municipal Fund, Premier Limited
Term Massachusetts Municipal Fund, and Premier Limited Term New York Municipal
Fund offers you four methods of purchasing Fund Shares, but only Class A and
Class R Shares are offered by this Prospectus. You may choose the class of
Shares for which you are eligible 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 Fund Share represents an identical pro rata
interest in the Fund's investment portfolio.
Class A Shares are sold at net asset value per share ("NAV") plus a maximum
initial sales charge of 3.00% of the public offering price imposed at the time
of purchase. The initial sales charge may be reduced or waived for certain
purchases. SEE "OFFERING PRICE FOR BOND FUNDS-- CLASS A SHARES." These Shares
are subject to an annual 12b-1 fee at the rate of 0.25 of 1% of the value of the
average daily net assets of Class A. SEE "DISTRIBUTION PLAN--CLASS A." ON
OCTOBER 17, 1994, THE INVESTOR CLASS OF SHARES WERE REDESIGNATED CLASS A SHARES.
Class A Shares (and Class B and Class C Shares described below) are
primarily sold to retail investors by Service Agents that have entered into
Selling Agreements with Premier, except that full-time or part-time employees or
directors of the Manager or any of its affiliates or subsidiaries, Board members
of a fund advised by the Manager, 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 Premier. Subsequent purchases may be sent directly to the
transfer agent or your Service Agent.
Class R Shares generally may not be purchased directly by individuals,
although eligible institutions may purchase Class R Shares for accounts
maintained by individuals. Class R Shares are sold at NAV primarily to bank
trust departments and other financial service providers (including Mellon Bank
and its affiliates) acting on behalf of customers having a qualified trust or
investment account or similar relationship at such institution. Holders of Class
R Shares of the Fund who have held their Shares since April 4, 1994, may
continue to purchase Class R Shares of the Fund whether or not they would
otherwise be eligible to do so. Institutions effecting transactions in Class R
Shares for the accounts of their clients may charge their clients direct fees in
connection with such transactions.
In addition to the classes of Shares offered by this Prospectus, each Bond
Fund offers two other classes of Shares designated Class B and Class C
available, together with the Class A Shares offered by this Prospectus, through
a servicing network associated with the Manager. For more
....................... 27 .......................
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information and a Prospectus relating to Shares offered through that network,
call 1-800-645-6561. Please read that Prospectus carefully. Exchange and
shareholder services vary depending upon the network through which you purchase
Fund Shares.
Class B Shares are sold at NAV with no initial sales charge at the time of
purchase; as a result, the entire purchase price is immediately invested in the
Fund. Class B Shares are subject to a maximum 3% contingent deferred sales
charge ("CDSC"), which is assessed only if 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 distribution fee at the rate of 0.50 of 1%
of the value of the average daily net assets of Class B. In addition, Class B
Shares are subject to an annual service fee at the rate of 0.25 of 1% of the
value of the average daily net assets of Class B. SEE "DISTRIBUTION AND SERVICE
PLANS--CLASS B AND C." The distribution fee paid by Class B will cause such
class to have a higher expense ratio and to pay lower dividends than Class A.
Approximately six years after the date of purchase, Class B Shares automatically
will convert to Class A Shares based on the relative NAV of each such class, and
will no longer be subject to the distribution fee. (Such conversion is subject
to suspension by a Fund's Board of Trustees if adverse tax consequences might
result.) Class B Shares that have been acquired through the reinvestment of
dividends and distributions will be converted on a pro rata basis together with
other Class B Shares, in the proportion that a shareholder's Class B Shares
converting to Class A Shares bears to the total Class B Shares not acquired
through the reinvestment of dividends and distributions.
Class C Shares are subject to a 0.75% CDSC, which is assessed only if a
shareholder redeems Class C Shares within one year of purchase. SEE "HOW TO
REDEEM FUND SHARES-- CLASS C SHARES." These Shares also are subject to an annual
distribution fee at the rate of 0.50 of 1% of the value of the average daily net
assets of Class C. Class C Shares are also subject to an annual service fee at
the rate of 0.25 of 1% of the value of the average daily net assets of Class C.
SEE "DISTRIBUTION AND SERVICE PLANS--CLASS B AND C." The distribution fee paid
by Class C will cause such class to have a higher expense ratio and to pay lower
dividends than Class A.
The decision as to which class of Shares is more beneficial to an investor
depends on the amount and the intended length of his or her investment. And
investor should consider whether, during the anticipated life of his or her
investment in the Fund, the accumulated distribution fee and CDSC, if any, on
Class B or Class C Shares 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 Shares. Additionally, investors
qualifying for reduced initial sales
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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 or Class C Shares may exceed the initial sales
charge on Class A Shares during the life of the investment. Finally, an investor
should consider the effect of the CDSC period and any conversion rights of the
classes in the context of his or her investment time frame. For example, while
Class C Shares have a shorter CDSC period than Class B Shares, Class C Shares do
not have a conversion feature and, therefore, are subject to an ongoing
distribution fee. Thus, Class B Shares may be more attractive than Class C
Shares to investors with longer term investment outlooks. Generally, Class A
Shares may be more appropriate for investors who invest $1,000,000 or more in
Fund Shares, but will not be appropriate for investors who invest less than
$100,000 in Fund Shares.
INVESTMENT OBJECTIVE AND POLICIES
Each Fund seeks current income exempt from Federal income taxes and from the
state personal income taxes for resident shareholders of the named state. Each
Fund seeks to achieve its objective by investing in debt obligations issued by
the Fund's respective state (e.g., California, Massachusetts or New York), and
such state's political subdivisions, municipalities, public authorities and in
municipal obligations issued by other governmental entities if, in the opinion
of counsel to the respective issuers, the interest from such obligations is
excluded from gross income for Federal income tax purposes and is exempt from
state personal income taxes for resident shareholders of the named state
("Municipal Obligations").
Under normal market conditions, each Fund attempts to invest 100%, and will
invest a minimum of 80%, of its total assets in Municipal Obligations of such
Fund's named state. When, in the opinion of the Manager, adverse market
conditions exist for Municipal Obligations, and a "defensive" investment posture
is warranted, each Fund may temporarily invest more than 20% of its total assets
in money market instruments having maturity and quality characteristics
comparable to those (discussed below) for Municipal Obligations, but which
produce interest which is not exempt from the state personal income taxes for
resident shareholders of a Fund's named state, or more than 20% of its total
assets in such instruments which produce income exempt from Federal, but not the
state personal income taxes for resident shareholders of a Fund's named state,
or more than 20% of its total assets in taxable obligations (including
obligations the interest on which is included in the calculation of alternative
minimum tax for individuals). Periods when a defensive posture is warranted
include those periods when a Fund's monies available for investment exceed the
relevant state's Municipal Obligations available for purchase to meet such
Fund's rating, maturity and other investment criteria. Each Fund does not
anticipate that it will find it necessary to make any investments in securities
the interest from
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which is not exempt from Federal income and the respective state personal income
taxes. Each Fund's policy of investing a minimum of 80% of its total assets in
Municipal Obligations of such Fund's named state is a fundamental policy of the
Fund.
THE MONEY FUNDS.
Each Money Fund seeks a high level of current income exempt from Federal
income taxes and from the state personal income taxes for resident shareholders
of the named state, to the extent consistent with the preservation of capital
and maintenance of liquidity. A Money Fund pursues these objectives by investing
in a varied portfolio of high quality, short-term Municipal Obligations of such
Fund's named state.
The Municipal Obligations purchased by a Money Fund consist of: (1)
municipal bonds; (2) municipal notes; and (3) municipal commercial paper. The
Money Funds will limit their portfolio investments to securities that, at the
time of acquisition, (i) are rated in the two highest categories by at least two
nationally recognized statistical rating organizations (or by one organization
if only one organization has rated the security), (ii) if not rated, are
obligations of an issuer whose other outstanding short-term debt obligations are
so rated, or (iii) if not rated, are of comparable quality, as determined by the
Manager and in accordance with procedures established by the Board of Trustees.
The Money Funds will limit their investments to securities that present minimal
credit risk, as determined by the Manager under procedures established by the
Board of Trustees.
The Money Funds invest only in securities that have remaining maturities of
thirteen months or less at the date of purchase. Floating rate or variable rate
obligations (described below) which are payable on demand under conditions
established by the SEC, may have a stated maturity in excess of thirteen months;
these securities will be deemed to have remaining maturities of thirteen months
or less. Each Money Fund maintains a dollar-weighted average portfolio maturity
of 90 days or less and seeks to maintain a constant NAV of $1.00, although there
is no assurance it can do so on a continuing basis.
THE BOND FUNDS.
Each Bond Fund seeks to maximize current income exempt from Federal income
taxes and state personal income taxes for resident shareholders of the named
state, consistent with what is believed to be the prudent risk of capital. A
Bond Fund pursues its objectives by investing in Municipal Obligations of such
Fund's named state, with intermediate maturities and of "investment-grade"
quality.
The Bond Funds invest only in Municipal Obligations rated at the time of
purchase within the four highest quality ratings of Moody's Investors Service,
Inc. ("Moody's") (currently at least Baa or above for bonds, at least MIG 3 or
above for notes and at least Prime-2 or above for
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commercial paper) or Standard & Poor's Ratings Group ("S&P") (at least BBB or
above for bonds, at least SP-2 or above for notes and at least A-2 or above for
commercial paper) or, if not rated by Moody's or S&P, of comparable quality to
the above ratings as determined by the Manager. Municipal Obligations rated
within the four highest ratings are considered to be of investment-grade
quality, although bonds rated in the lowest of these four categories (Baa by
Moody's or BBB by S&P) have some speculative characteristics and involve greater
risks and higher yields.
Because many issuers of Municipal Obligations may choose not to have their
obligations rated, it is possible that a large portion of a Bond Fund's bond
portfolio may consist of unrated obligations. Unrated obligations are not
necessarily of lower quality than rated obligations, but to the extent a Bond
Fund invests in unrated obligations, the Bond Fund will be more reliant on the
Manager's judgment, analysis and experience than would be the case if the Bond
Fund invested only in rated obligations.
The taxable instruments in which each Bond Fund is permitted to invest under
certain circumstances include U.S. Government Securities and short-term, high
quality money market instruments. In addition, each Bond Fund may, on occasion,
purchase securities issued by other investment companies that invest primarily
in high quality debt obligations of the kinds in which the Bond Fund may invest.
A discussion of the categories of Municipal Obligations and the ratings systems
appears in the SAI.
The Bond Funds generally invest in Municipal Obligations having
intermediate-term maturities, which can be expected to pay higher yields and
experience greater fluctuations in value than bonds with short-term maturities.
The average weighted maturity of the Municipal Obligations in each Bond Fund's
individual portfolio is not expected to exceed ten years. There is no limit on
the maturity of any individual security. The market value of the Municipal
Obligations in a Bond Fund's portfolio and, accordingly, a Bond Fund's NAV
typically will vary inversely with changes in interest rates, declining when
interest rates rise and rising when interest rates decline. Under normal market
conditions, the longer the average maturity of a Bond Fund's holdings, the
greater its expected yield and price volatility.
OTHER INVESTMENT POLICIES AND RISK FACTORS.
FLOATING RATE AND VARIABLE RATE OBLIGATIONS. The Funds may purchase floating
rate and variable rate obligations. These obligations bear interest at rates
that are not fixed, but vary with changes in specified market rates or indices.
Some of these obligations may carry a demand feature that permits the Funds to
receive the par value upon demand prior to maturity. The Money Funds may invest
in floating rate and variable rate obligations carrying stated maturities in
excess of thirteen months at the date of purchase if these obligations carry
demand features that comply with conditions established by the SEC. The Funds
will limit their purchases of floating
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rate and variable rate Municipal Obligations to those meeting the quality
standards applicable to such Fund. Frequently, such obligations are secured by
letters of credit or other credit support arrangements provided by banks. The
quality of the underlying creditor or the bank, as determined by the Manager
under the supervision of the Trustees must also be equivalent to the quality
standards applicable to the Fund. In addition, the Manager monitors the earning
power, cash flow and other liquidity ratios of the issuers of such obligations,
as well as the creditworthiness of the institution responsible for paying the
principal amount of the obligations under the demand feature.
The Funds may invest in participation interests purchased from banks in
floating or variable rate Municipal Obligations owned by banks. Participation
interests carry a demand feature permitting the Funds to tender them back to the
bank. Each participation is backed by an irrevocable letter of credit or
guarantee of a bank which the Manager under the supervision of the Trustees has
determined meets the prescribed quality standards for the Funds.
Other types of tax-exempt instruments that may become available in the
future may be purchased by the Funds as long as the Manager believes the quality
of these instruments meets the Fund's quality standards.
MUNICIPAL BOND INDEX AND INTEREST RATE FUTURES CONTRACTS AND OPTIONS ON
MUNICIPAL BOND INDEX AND INTEREST RATE FUTURES CONTRACTS. The Bond Funds may
enter into municipal bond index futures contracts and interest rate futures
contracts and may purchase and sell options on these futures contracts that are
traded on a United States exchange or board of trade. Such investments, if any,
by a Bond Fund will be made solely for the purpose of hedging against changes in
the value of its portfolio securities and in the value of securities it intends
to purchase due to anticipated changes in interest rates and market conditions
and when the transactions are economically appropriate to the reduction of risks
inherent in the management of the Bond Funds.
A municipal bond index futures contract, which is based on an index of
long-term, tax-exempt municipal bonds, is an agreement in which two parties
agree to take or make delivery of an amount of cash equal to a specified dollar
amount times 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. An interest rate futures contract provides for the future
purchase or sale of specified interest rate sensitive debt securities such as
United States Treasury bills, bonds and notes, obligations of the Government
National Mortgage Association and bank certificates of deposit. Although most
interest rate futures contracts require the delivery of the underlying
securities, some settle in cash. Each contract designates the price, date, time
and place of delivery. Entering into a futures contract to deliver the index or
instrument underlying
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the contract is referred to as entering into a "short" position in the futures
contract, whereas entering into a futures contract to take delivery of the index
or instrument is referred to as entering into a "long" position in the futures
contract.
A put or call option on a municipal bond index or interest rate futures
contract gives the purchaser the right, in return for the premium paid, to
assume a short or long position, respectively, in the underlying futures
contract at a specified exercise price at any time prior to the expiration date
of the option. The Bond Funds may purchase put and call options on both
municipal bond index and interest rate futures contracts. The Bond Funds will
sell options on these futures contracts only as part of closing purchase
transactions to terminate its options position, although no assurance can be
given that closing transactions can be effected.
Entering into a futures contract for the purchase or sale of a municipal
bond index or debt security or purchasing options on index or interest rate
futures contracts will enable a Fund to protect its assets from fluctuations in
interest rates on tax-exempt securities without initially buying or selling the
securities. The Bond Funds may enter into futures contracts to sell an index or
debt security or may purchase options when the Manager believes that interest
rates will increase and consequently the value of the Bond Funds' portfolio
securities will decrease. The Bond Funds may enter into futures contracts to buy
an index or debt security or may purchase call options when the Manager
anticipates purchasing portfolio securities at a time of declining interest
rates.
There are several risks in connection with the issue of municipal bond index
and interest rate futures contracts and options on these futures contracts as
hedging devices. There can be no assurance that there will be a correlation
between price movements in the municipal bond index or interest rate futures, on
the one hand, and price movements in municipal bonds which are the subject of
the hedge, on the other hand. Positions in futures contracts and options on
futures contracts may be closed out only by entering into offsetting positions
on the exchange on which the contract was initiated, and no assurance can be
given that an active market will exist for the contract or the option at any
particular time. Consequently, the Bond Funds may realize a loss on a futures
contract that is not offset by an increase in the price of the municipal bonds
that are being hedged or may not be able to close a futures position in the
event of adverse price movements. Any income earned by the Bond Funds from
transactions in futures contracts and options on futures contracts will be
taxable. Accordingly, it is anticipated that such investments will be made only
in unusual circumstances, such as when the Manager anticipates an extreme change
in interest rates or market conditions. Successful use of futures contracts by a
Bond Fund is subject to the ability of the Manager to correctly predict
movements in the direction of interest rates.
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A Bond Fund may not enter into futures contracts or purchase options on
futures contracts if, immediately thereafter, the sum of the amount of margin
deposits on the Bond Fund's existing futures contracts and premiums paid for
options would exceed 5% of the value of the Bond Fund's total assets, after
taking into account unrealized profits and losses on any existing contracts.
When a Fund enters into futures contracts, purchases an index or debt security
or purchases call options, an amount of cash, U.S. Government Securities or
other high grade debt securities equal to the market value of the contract will
be deposited and maintained in a segregated account with the Bond Fund's
custodian to collateralize the positions, thereby insuring that the use of the
contract is unleveraged.
At present the Bond Funds are considering investments in futures contracts
and options on futures contracts as described above. However, the Bond Funds
reserve the right to invest in other kinds of futures contracts and options on
futures contracts subject to the policies the Trustees may establish from time
to time.
MUNICIPAL LEASE OBLIGATIONS. The Bond Funds may purchase municipal lease
obligations and certificates of participation in municipal lease obligations. A
municipal lease obligation does not constitute a general obligation of the
municipality for which the municipality's taxing power is pledged. Ordinarily, a
lease obligation will contain a "non-appropriation" clause which provides that
the municipality has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis. Because of the risk of
non-appropriation, some lease obligations are issued with third-party credit
enhancements, such as insurance or a letter of credit. Lease obligations are a
relatively new type of financing that has not yet developed the depth of
marketability associated with more conventional municipal obligations. For these
reasons, before investing in a lease obligation the Manager will consider, among
other things, whether (1) the leased property is essential to a governmental
function of the municipality, (2) the municipality is prohibited from
substituting or purchasing similar equipment if lease payments are not
appropriated, and (3) the municipality has maintained good market acceptability
for its lease obligations in the past. The Board of Trustees has established
guidelines for determining whether a Municipal Obligation is a liquid security.
Such determination will be made based upon all relevant factors including the
frequency of trades and quotes for the obligation, the number of dealers willing
to purchase or sell the security and the number of potential buyers, the
willingness of dealers to undertake to make a market in the securities, and the
nature of the marketplace trades.
OTHER INVESTMENT COMPANIES. Each Fund may invest in securities issued by
other investment companies to the extent that such investments are consistent
with its investment objective and policies and permissible under the Investment
Company Act of 1940 (the "1940
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Act"), as amended. As a shareholder of another investment company, the Fund
would bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the advisory and other expenses that the Fund bears directly in
connection with its own operations.
TENDER OPTION BONDS. Each Fund may invest up to 10% of the value of its
assets in 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 Manager, 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 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. Each Money Fund will not invest
more than 10%, and each Bond Fund will not invest more than 15% of the value of
such Fund's net assets in illiquid securities, which would include tender option
bonds for which the required notice to exercise the tender feature is more than
seven days if there is no secondary market available for these obligations.
WHEN-ISSUED SECURITIES. The Funds may purchase Municipal Obligations on a
"when-issued" basis (i.e., delivery of and payment for the Municipal Obligations
normally take place within 45 days after the date of the purchase commitment).
The payment obligation and the interest rate on such securities are fixed at the
time of the purchase commitment. Although the Funds generally will purchase
Municipal Obligations on a when-issued basis with the intention of acquiring the
securities, the Funds may sell such securities before the settlement date.
Municipal Obligations purchased on a when-issued basis, like other investments
made by the Funds, may decline or appreciate in value prior to their actual
delivery to the Funds.
CERTAIN RISK CONSIDERATIONS REGARDING THE STATE OF CALIFORNIA. On July 15,
1994, Moody's, citing the State's deteriorating financial position, lowered
California's general obligation
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bond ratings from Aa to A1. On July 15, 1994, S&P, citing the State's
deteriorating financial position, lowered California's general obligation bond
ratings from A+ to A. Investors should be aware that certain California
constitutional amendments, legislative measures, executive orders,
administrative regulations and voter initiatives could result in certain adverse
consequences affecting California's Constitution and statutes that limit the
taxing and spending authority of California governmental entities and may impair
the ability of the issuers of some California Municipal Obligations to maintain
debt service on their obligations. Other measures affecting the taxing or
spending authority of California or its political subdivisions may be approved
or enacted in the future. Some of the significant financial considerations
relating to a Fund's investments in California Municipal Obligations are
summarized in the SAI.
CERTAIN RISK CONSIDERATIONS REGARDING THE COMMONWEALTH OF MASSACHUSETTS. The
Massachusetts statutes that limit the taxing authority of certain Massachusetts
governmental entities may impair the ability of some issuers of Massachusetts
Municipal Obligations to maintain debt service on their obligations. Some of the
significant financial considerations relating to investments in Massachusetts
Municipal Obligations are summarized in the SAI. It should be noted that the
Commonwealth has experienced fiscal difficulties in recent years, including an
operating deficit in each of the fiscal years ended June 30, 1989 through 1991.
Budgeted operating funds ended fiscal 1992, 1993 and, based on preliminary
financial information, fiscal 1994 with an excess of revenues and other sources
over expenditures and other uses. Budgeted revenues and other sources to be
collected in fiscal 1995 are currently estimated by the Executive Office of
Administration and Finance to fall short of the expenditures authorized by the
fiscal 1995 budget.
During the period from 1989 through 1992, Massachusetts experienced a
slowdown in certain sectors of the economy, including high technology,
construction, real estate, financial services and manufacturing. Since 1992,
employment within most of these sectors has improved as part of a general
recovery of the economy. Employment losses within the manufacturing sector have
continued, but at a slower rate than in prior years. Any significant imbalance
in tax revenues and state expenditures is likely to affect the bond ratings and
credit standing of the public authorities and municipalities within
Massachusetts, as well as of the Commonwealth itself. Any such imbalance could
adversely affect the market values and marketability of obligations issued by
such entities, and could result in payment defaults on outstanding obligations.
CERTAIN RISK CONSIDERATIONS REGARDING THE STATE OF NEW YORK AND NEW YORK
CITY. Certain substantial issuers of New York Municipal Obligations (including
issuers whose obligations may be acquired by the Funds) have experienced serious
financial difficulties in recent years. These difficulties have at times
jeopardized the credit standing and impaired the borrowing
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abilities of all New York issuers and have generally contributed to higher
interest costs for their borrowings and fewer markets for their outstanding debt
obligations. In recent years, several different issues of municipal securities
of New York State and its agencies and instrumentalities and of New York City
have been downgraded by S&P and Moody's. A recurrence of the financial
difficulties previously experienced by certain issuers of New York Municipal
Obligations could result in defaults or declines in the market values of those
issuers' existing obligations and, possibly, in the obligations of other issuers
of New York Municipal Obligations. Default by an issuer of New York Municipal
Obligations with respect to the payment of their municipal obligations could
adversely affect the market values and marketability of all New York Municipal
Obligations, and, consequently, the NAV of a Fund's portfolio. Other
considerations effecting the Funds' investments in New York Municipal
Obligations are summarized in the SAI.
LIMITING INVESTMENT RISKS AND CERTAIN RISK CONSIDERATIONS. The Funds are
subject to a number of investment limitations. Certain limitations are matters
of fundamental policy and may not be changed without the affirmative vote of the
holders of a majority of a Fund's outstanding Shares. The SAI describes all of
the Funds' fundamental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices and procedures
of the Funds, unless otherwise specified, may be changed without shareholder
approval. If a Fund's investment objective, policies, restrictions, practices or
procedures change, shareholders should consider whether such Fund remains an
appropriate investment in light of their then current position and needs.
In order to permit the sale of the Funds' Shares in certain states, the
Funds may make commitments more restrictive than the investment policies and
restrictions described in this Prospectus and the SAI. Should a Fund determine
that any such commitment is no longer in the best interests of such Fund, it may
consider terminating sales of its Shares in the states involved.
Each Fund is classified as a "non-diversified" investment company, as
defined under the 1940 Act, and therefore, each Fund could invest all of its
assets in the obligations of a single issuer or relatively few issuers. However,
the Funds intend to conduct their operations so that each Fund will qualify
under the Internal Revenue Code of 1986 (the "Code") as a "regulated investment
company". To continue to qualify, among other requirements, each Fund will be
required to limit its investments so that, at the close of each quarter of the
taxable year, with respect to at least 50% of its total assets, not more than 5%
of such assets will be invested in the securities of a single issuer. In
addition, not more than 25% in value of each Fund's total assets may be invested
in the securities of a single issuer at the close of each quarter of the taxable
year. Additionally, due to the Funds' non-diversified status, changes in the
financial condition or
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in the market's assessment of an individual issuer may cause a Bond Fund's share
price to fluctuate to a greater degree than if the Fund were diversified.
However, the provisions of the Code place limits on the extent to which a Fund's
portfolio may be non-diversified.
The ability of the Funds to meet their investment objectives is subject to
the ability of municipal issuers to meet their payment obligations. In addition,
the portfolio of each Fund will be affected by general changes in interest rates
which may result in increases or decreases in the value of Fund holdings.
Investors should recognize that, in periods of declining interest rates, the
yield of each Fund will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates, the yield of each Fund will tend to be
somewhat lower. Also, when interest rates are falling, the influx of new money
to each Fund will likely be invested in portfolio instruments producing lower
yields than the balance of that Fund's portfolio, thereby reducing the current
yield of the Fund. In periods of rising interest rates, the opposite can be
expected to occur.
The Funds may invest without limit in Municipal Obligations which are
repayable out of revenue streams generated from economically related projects or
facilities or whose issuers are located in the same state. Sizable investments
in these obligations could increase risk to the Funds should any of the related
projects or facilities experience financial difficulties. To the extent the
Funds may invest in private activity bonds, each Fund may invest only up to 5%
of its total assets in bonds where payment of principal and interest are the
responsibility of a company with less than three years operating history. Each
Fund is authorized to borrow up to 10% of its total assets for temporary or
emergency purposes and to pledge its assets to the same extent in connection
with such borrowings.
MASTER/FEEDER OPTION. The Dreyfus/Laurel Tax-Free Municipal Funds may in the
future seek to achieve a Fund's investment objectives by investing all of the
Fund's assets in another investment company having the same investment
objectives and substantially the same investment policies and restrictions as
those applicable to such Fund. Shareholders of a Fund will be given at least 30
days' prior notice of any such investment. Such investment would be made only if
the trustees determine it to be in the best interest of a Fund and their
shareholders. In making that determination, the Trustees will consider, among
other things, the benefits to shareholders and/or the opportunity to reduce
costs and achieve operational efficiencies. Although the Funds believe that the
Trustees will not approve an arrangement that is likely to result in higher
costs, no assurance is given that costs will be materially reduced if this
option is implemented.
PORTFOLIO TURNOVER. While securities are purchased for the Bond Funds on the
basis of potential for current income and not for short-term trading profits, it
is anticipated that a Bond Fund's portfolio turnover rate may exceed 100%. A
portfolio turnover rate of 100% would occur,
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for example, if all the securities held by a Bond Fund were replaced once in a
period of one year. A higher rate of portfolio turnover (100% or greater)
involves correspondingly greater brokerage commissions and other expenses which
must be borne directly by a Bond Fund and, thus, indirectly by its shareholders.
In addition, a high rate of portfolio turnover may result in the realization of
larger amounts of short-term capital gains which, when distributed to a Bond
Fund's shareholders, are taxable to them as ordinary income. (SEE
"DISTRIBUTIONS" AND "TAXES.") Nevertheless, security transactions for a Bond
Fund will be based only upon investment considerations and will not be limited
by any other considerations when the Manager deems it appropriate to make
changes in a Bond Fund's assets.
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HOW TO DO BUSINESS WITH US
SPECIAL SHAREHOLDER SERVICES
You may establish one or more special services designed to provide an easy way
to do business with the Funds. By electing these services on your application or
by completing the appropriate forms, you may authorize:
-INVESTMENT BY PHONE.
- AUTOMATIC MONTHLY INVESTMENTS.
- EXCHANGES OR REDEMPTIONS BY PHONE.
By electing the service which enables you to exchange and redeem by phone,
you agree to indemnify the Fund, its transfer agent and its investment manager
from any loss, claim or expense you may incur as a result of their acting on
such instruction. The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. These include personal
identification procedures, recording of telephone conversations and providing
written confirmation of each transaction. A failure on the part of a Fund to
employ such procedures may subject it to liability for any loss due to
unauthorized or fraudulent instructions.
INVESTOR LINE
You may reach The Funds by calling our Investor Line at 1-800-548-2868. If
you call on a rotary phone during normal business hours (9 a.m. to 5 p.m.,
Eastern time), you will reach a Dreyfus Family of Funds operator. If you call on
a Touch-Tone phone, you will receive instructions on how to: (1) request a
current prospectus or information booklets about The Dreyfus Family of Funds'
investment portfolios and services, (2) listen to NAVs, yields and total return
figures, and
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(3) talk with a customer service representative during normal business hours.
For more information about direct access using a Touch-Tone phone, please
contact The Dreyfus Family of Funds.
HOW TO BUY FUND SHARES
Premier serves as the fund's distributor. Premier is a wholly-owned subsidiary
of Institutional Administration Services, Inc., a provider of mutual fund
administration services, the parent company of which is Boston Institutional
Group, Inc. Premier also serves as the Fund's sub-administrator and, pursuant to
a Sub-Administration Agreement, provides various administrative and corporate
secretarial services to the Fund. Premier has established various procedures for
purchasing Class R and Investor or Class A Shares of a Fund. Class R Shares are
sold primarily to bank trust departments and other financial service providers
(including Mellon Bank and its affiliates) ("Banks") acting on behalf of
customers having a qualified trust or investment account or relationship at such
institution. Investor or Class A Shares are primarily sold to retail investors
by Premier and by Agents that have entered into a Shareholder Servicing and
Sales Support Agreement with Premier. Once an investor has established an
account, additional purchases may, in certain cases, be made directly through a
Fund's transfer agent. If Shares of a Fund are held in an account at a Bank or
with an Agent, such Bank or Agent may require you to place all Fund purchase,
exchange and redemption orders through them. All Banks and Agents have agreed to
transmit your transaction requests to a Fund's transfer agent or to Premier. You
may diversify your investments by choosing a combination of investment
portfolios offered by The Dreyfus Family of Funds.
You may invest in the following ways:
BY MAIL.
Send your application and check or money order to The Dreyfus Family of
Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830. Checks must be
payable in U.S. dollars and drawn on U.S. banks. When making subsequent
investments, enclose your check with the return remittance portion of the
confirmation of your previous investment. If the remittance portion is not
available, indicate on your check or a separate piece of paper your name,
address, the Fund and class of Shares of such Fund that you are buying and the
account number. Orders to purchase Shares are effective on the day the Funds
receive your check or money order. (SEE "WHEN SHARE PRICE IS DETERMINED.")
BY TELEPHONE.
Once your account is open, you may make investments by telephone by calling
1-800-548-2868 if you have elected the service authorizing the Funds to draw on
your bank
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account when you call with instructions. Investments made by phone in any one
account must be in an amount of at least $100 and are effective two days after
your call. (SEE "WHEN SHARE PRICE IS DETERMINED.")
BY WIRE.
You may make your initial or subsequent investments in the Funds by wiring
funds.
To do so:
(1) Instruct your bank to wire funds to Federal Reserve Bank of Boston, BOS
SAFE DEP, Account No. 011001234, The Dreyfus Funds 080071
(2) Be sure to specify on the wire:
(A) The Dreyfus Funds.
(B)The Fund name and the class of Shares of such Fund you are buying and
account number (if you have one).
(C) Your name.
(D) Your city and state.
In order for a wire purchase to be effective on the same day it is received
both the trading instructions and the wire must be received before 4 p.m.,
Eastern time. (SEE "WHEN SHARE PRICE IS DETERMINED.")
BY AUTOMATIC MONTHLY INVESTMENTS.
Once your account is open, you may make investments automatically by
electing the Automatic Investment Program, the service authorizing the Funds to
draw on your bank account regularly by paper or electronic draft. Such
investments must be in amounts of not less than $100 in any one account. You
should inquire at your bank whether it will honor a preauthorized paper or
electronic draft. Contact the Funds if your bank requires additional
documentation. Call 1-800-548-2868 or write The Dreyfus Family of Funds, One
Exchange Place, Boston, Massachusetts 02109 for more information about the
Automatic Investment Program.
BY DIRECT DEPOSITS.
If your employer offers Direct Deposit, you may arrange to automatically
purchase Shares of a Fund (minimum $100) each pay period. Direct Deposit
investing may also be available to persons receiving regular payments from other
sources (including government pension or social security payments). Note that it
may not be appropriate to Direct Deposit your entire paycheck into a Bond Fund
because they have a fluctuating net asset value. Call 1-800-548-2868 or write
The Dreyfus Family of Funds, One Exchange Place, Boston, Massachusetts 02109 for
more information or a Direct Deposit authorization form.
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BY IN-KIND PURCHASES.
If the following conditions are satisfied, The Dreyfus Family of Funds may
at its discretion, permit you to purchase Shares through an "in-kind" exchange
of securities you hold. Any securities exchanged must meet the investment
objective, policies and limitations of the respective Fund, must have a readily
ascertainable market value, must be liquid and must not be subject to
restrictions on resale. The market value of any securities exchanged, plus any
cash, must be at least equal to $25,000. Shares purchased in exchange for
securities generally cannot be redeemed for fifteen days following the exchange
in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative net asset value of
the Shares purchased and securities exchanged. Securities accepted by a Fund
will be valued in the same manner as the Fund values its assets. Any interest
earned on the securities following their delivery to the Funds and prior to the
exchange will be considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property of
the Fund, along with the securities. Call 1-800-548-2868 or write The Dreyfus
Family of Funds, One Exchange Place, Boston, Massachusetts 02109 for more
information about "in-kind" purchases.
OFFERING PRICE FOR BOND FUNDS.
CLASS A SHARES--The public offering price of Class A Shares of the Bond
Funds is the NAV of that class plus a sales load as shown below:
<TABLE>
<CAPTION>
Total Sales Load
---------------------
As a % of As a % of Dealers'
offering net asset Reallowance as a
price value % of
Amount of Transaction per share per share offering price
-------------------------------------- --------- --------- ----------------
<S> <C> <C> <C>
LESS THAN $100,000.................... 3.00 3.10 2.75
$100,000 TO LESS THAN $250,000........ 2.75 2.80 2.50
$250,000 TO LESS THAN $500,000........ 2.25 2.30 2.00
$500,000 TO LESS THAN $1,000,000...... 2.00 2.00 1.75
</TABLE>
There is no initial sales charge on purchases of $1,000,000 or more of Class
A Shares. However, if you purchase Class A Shares without an initial sales
charge as a part of an investment of at least $1,000,000 and redeem all or a
portion of those Shares within two years after purchase, a CDSC of 1.00% will be
imposed at the time of redemption. The terms contained in the section of the
Prospectus entitled "HOW TO REDEEM FUND SHARES--CONTINGENT DEFERRED SALES
CHARGE--CLASS B" (other than the amount of the CDSC and its time periods) are
applicable to the Class A Shares subject to a CDSC. Letter of Intent and Right
of Accumulation apply to such purchases of Class A Shares.
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Full-time employees of NASD member firms and full-time employees of other
financial institutions which have entered into an agreement with Premier
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 such 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 NAV, provided that they have
furnished Premier 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 NAV. In
addition, Class A Shares are offered at NAV to full-time or part-time employees
or directors of the Manager or any of its affiliates or subsidiaries, Board
members of a fund advised by the Manager, including members of the Fund's Board,
or the spouse or minor child of any of the foregoing.
Class A Shares will be offered at NAV without a sales load to employees
participating in certain eligible benefit plans. Class A Shares may be purchased
at NAV through certain broker-dealers and other financial institutions which
have entered into an agreement with Premier, which includes a requirement that
such shares be sold for the benefit of clients participating in a "wrap account"
or a similar program under which such clients pay a fee to such broker-dealer or
other financial institution. Holders of accounts with Class A Shares of a Fund
as of December 28, 1994, may also purchase additional Class A Shares of that
Fund in the same account at NAV.
The dealer reallowance may be changed from time to time but will remain the
same for all dealers. Premier, at its expense, may provide additional
promotional incentives to dealers that sell the Shares of funds advised by the
Manager which are sold with a sales load, such as Class A Shares. In some
instances, those incentives may be offered only to certain dealers who have sold
or may sell significant amounts of shares. Dealers receive a larger percentage
of the sales load from Premier than they receive for selling most other funds.
CLASS R SHARES. The public offering price for Class R Shares is the NAV of
that class.
CLASS B SHARES. The public offering price for Class B Shares is the NAV 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--CONTINGENT DEFERRED SALES CHARGES--CLASS B SHARES."
Premier compensates certain Service Agents for selling Class B Shares at the
time of purchase from Premier's own assets. The proceeds of the CDSC and the
distribution fee, in part, are used to defray these expenses.
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CLASS C SHARES. The public offering price for Class C Shares is the NAV of
that class. No initial sales charge is imposed at the time of purchase. A CDSC,
however, is imposed on redemptions of Class C Shares made within the first year
of purchase. SEE "HOW TO REDEEM FUND SHARES--CONTINGENT DEFERRED SALES
CHARGES--CLASS C SHARES."
RIGHT OF ACCUMULATION--CLASS A SHARES. Reduced sales loads apply to any
purchase of Class A Shares, shares of other funds in the Premier Family of
Funds, shares of certain other funds advised by the Manager 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 SAI, where the aggregate investment, including
such purchase, is $100,000 or more. If, for example, you previously purchased
and still hold Class A Shares, or shares of any other Eligible Fund or
combination thereof, with an aggregate current market value of $80,000 and
subsequently purchase Class A Shares or shares of an Eligible Fund having a
current value of $40,000, the sales load applicable to the subsequent purchase
would be reduced to 2.75% 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 of you or your
Service Agent must notify Premier if orders are made by wire, or the transfer
agent if orders are made by mail. The reduced sales is subject to confirmation
of your holdings through a check of appropriate records.
LETTER OF INTENT--CLASS A SHARES. By signing a Letter of Intent form,
available from Premier, 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
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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 of a Fund 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.
WHEN SHARE PRICE IS DETERMINED.
The offering price of Shares of the Money Funds is their NAV; the offering
price of Shares of the Bond Funds is their NAV plus, in the case of Class A
Shares, the applicable sales load discussed in the preceding section entitled
"OFFERING PRICE FOR BOND FUNDS." The Bond Funds' NAV is determined at the close
of the New York Stock Exchange ("NYSE") on each day that the NYSE is open (a
"business day"). Investments and requests to exchange or redeem Shares that are
received by The Premier Family of Funds with regard to the Bond Funds before the
close of regular trading on the NYSE (usually 4 p.m., Eastern time) are
effective on, and will receive the price determined, that day (except
investments made by electronic funds transfer which are effective two business
days after your call). Investments and requests to exchange or redeem Shares
received by the Fund with regard to Money Funds before 4 p.m., Eastern time, are
effective on, and will receive the price next determined, that business day
(except investments made by electronic funds transfer which are effective two
business days after your call). The NAV of a Money Fund is calculated two times
each business day, at 12 noon and 4 p.m., Eastern time. Investment, exchange or
redemption requests received after (i) the close of the NYSE for the Bond Funds,
or (ii) 4 p.m., Eastern time, for Money Funds, are effective on, and receive the
first Share price determined, the next business day.
ADDITIONAL INFORMATION ABOUT INVESTMENTS.
Once you have mailed or otherwise transmitted your investment instruction to
the Funds, it may not be modified or canceled. The Funds reserve the right to
reject any application or investment. The Funds reserve the right to make
exceptions to the minimum initial investment and account minimum amount from
time to time.
The minimum initial investment to establish a new account in a Fund is
$1,000, except for Uniform Transfers (Gifts) to Minors Act accounts, for which
the minimum initial investment is $500. For full-time or part-time employees or
directors of Mellon Bank, the Manager or any of their affiliates or
subsidiaries, Board members of a fund advised by the Manager, including members
of The Dreyfus/Laurel Tax-Free Municipal Funds' Board, or the spouse or minor
child of any of the foregoing, the minimum initial investment is $1,000. Also,
for full-time or part-time employees of Mellon Bank, the Manager or any of its
affiliates or subsidiaries who elect to have a
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portion of their pay directly deposited into an account in a Fund or another
fund advised by the Manager, the minimum initial investment is $50. The Funds
may suspend the offering of Shares of any class of any Fund and reserve the
right to vary initial and subsequent investment minimums. Subsequent investments
to purchase additional Shares in a Fund must be in an amount of $100 or more.
The Funds intend, upon 60 days' prior notice, to involuntarily redeem Shares
in any account if the total value of the Shares is less than a specified
minimum, as a result of redemptions but not as a result of market action, unless
you have established an automatic monthly investment to purchase additional
Shares. The Funds reserve the right to change such minimum from time to time.
Any time the Shares of a Fund held in an account have a value of less than
$1,000 ($500 for Uniform Gifts/Transfers to Minors Acts accounts), a
notification may be sent advising you of the need to either make an investment
to bring the value of the Shares held in the account up to $1,000 ($500) or to
establish an automatic monthly investment to purchase additional Shares. If the
investment is not made or the automatic monthly investment is not established
within 60 days from the date of notification, the Shares held in the account
will be redeemed and the proceeds from the redemption will be sent by check to
your address of record.
HOW TO EXCHANGE YOUR INVESTMENT
FROM ONE FUND TO ANOTHER
You may exchange your Fund Shares for shares of the same class of certain other
funds that are advised by the Manager and that were previously advised by Mellon
Bank. As noted below, exchanges from any one fund account may be limited in any
one calendar year. In addition, the Shares being exchanged and the Shares of
each fund being acquired must have a current value of at least $100 and
otherwise meet the minimum investment requirement of the fund being acquired.
Call the Investor Line for additional information and a prospectus describing
other investment portfolios offered by The Dreyfus Family of Funds. Shares will
be exchanged at the next determined NAV; 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 or C Shares at the time of an exchange;
however, Class B or C Shares acquired through an exchange will be subject to the
higher CDSC applicable to the exchanged or acquired Shares. The CDSC applicable
on redemption of the acquired Class B or C Shares will be calculated from the
date of the initial purchase of the Class B or C Shares exchanged, as the case
may be. 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 of the fund from
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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 the exchange your
Service Agent must notify Premier. Any such qualification is subject to
confirmation of your holdings through a check of appropriate records. No fees
currently are charged shareholders directly in connection with exchanges,
although the Funds reserve the right, upon not less than 60 days' written
notice, to charge shareholders a nominal fee in accordance with rules
promulgated by the SEC. The Funds reserve the right to reject any exchange
request in whole or in part.
BY TELEPHONE.
You may exchange your Shares by calling 1-800-548-2868 if you have
authorized the Funds to accept telephone instructions.
BY MAIL.
You may direct the Funds to exchange your Shares by writing to The Dreyfus
Family of Funds, P.O. Box 9692, Providence, Rhode Island 02940-9830. The request
should be signed by each person in whose name the Shares are registered. All
signatures should be exactly as the name appears in the registration; for
example, if an owner's name is registered as John Robert Jones, he should sign
that way and not as John R. Jones.
ADDITIONAL INFORMATION ABOUT EXCHANGES.
(1) In an exchange from one account to another account, the Shares being
sold and the new Shares being purchased must have a current value of at
least $100. Shareholders of the Money Funds may establish automatic
monthly exchanges, the Automatic Withdrawal Program, from such Money
Fund to another fund offered by the Funds in an amount of $100 or more.
To set up an Automatic Withdrawal Program, call the Funds at
1-800-548-2868 for instructions.
(2) Exchanges from any one fund account may be limited in any one calendar
year. The Funds reserve the right to make exceptions to an exchange
limitation from time to time. An exchange limitation will not apply to
the exchange of Shares of a money market fund and the Shares of any of
the funds exchanged pursuant to an Automatic Withdrawal Program.
(3) The Shares being acquired must be qualified for sale in your state of
residence.
(4) If the Shares are represented by a negotiable stock certificate, the
certificate must be returned before the exchange can be effected.
(5) Once you have telephoned or mailed your exchange request, it is
irrevocable and may not be modified or canceled.
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(6) An exchange is based on the next calculated NAV of each fund after
receipt of your exchange order.
(7) Shares may not be exchanged unless you have furnished the Funds with
your tax identification number, certified as prescribed by the Code and
the regulations thereunder. (SEE "TAXES.")
(8) An exchange of a Bond Fund's Shares is, for federal income tax purposes,
a sale of the Shares, on which you may realize a taxable gain or loss.
(9) If the request is made by a corporation, partnership, trust, fiduciary,
agent, estate, guardian, pension plan, profit sharing plan or
unincorporated association, the Funds may require evidence satisfactory
to it of the authority of the individual signing the request.
Shareholders will be given 60 days' notice prior to any material changes in
the exchange privilege.
HOW TO REDEEM SHARES
The Funds will redeem or "buy back" your Shares at any time at their NAV.
(BEFORE REDEEMING, PLEASE READ "ADDITIONAL INFORMATION ABOUT REDEMPTIONS.") Your
redemption proceeds may be delayed if you have owned your Shares less than 10
days. (SEE "REDEMPTION PROCEEDS.")
If an investor fails to specify the class of Shares to be redeemed or if he
or she owns fewer Shares of the class than specified to be redeemed, the
redemption request may be delayed until the transfer agent receives further
instructions from the investor or his or her Service Agent.
The Funds impose no charges (other than any applicable CDSC) when Shares are
redeemed directly through Premier. Service Agents or other institutions may
charge their clients a nominal fee for effecting redemptions of Fund Shares.
CONTINGENT DEFERRED SALES CHARGE--CLASS B SHARES. A CDSC payable to Premier
is imposed on any redemption of Class B Shares which reduces the current NAV 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 the Fund held by you at
the time of redemption. No CDSC will be imposed to the extent that the NAV of
the Class B Shares redeemed does not exceed (i) the current NAV of Class B
Shares acquired through reinvestment of dividends or capital gain distributions,
plus (ii) increases in the NAV of your Class B Shares above the dollar amount of
all your payments for the purchase of Class B Shares 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 Fund's performance, a CDSC may be applied to
the then-current NAV rather than the purchase price.
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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:
<TABLE>
<CAPTION>
CDSC as a
% of Amount
Year Since Invested or
Purchase Payment Redemption
Was Made Proceeds
------------------ ---------------
<S> <C>
First.......................................................... 3.00
Second......................................................... 3.00
Third.......................................................... 2.00
Fourth......................................................... 2.00
Fifth.......................................................... 1.00
Sixth.......................................................... 0.00
</TABLE>
In determining whether a CDSC is applicable to a redemption, the calculation
will be made in a manner that results in the lowest possible rate. It will be
assumed that the redemption is made first of amounts representing Shares
acquired pursuant to the reinvestment of dividends and distributions; then of
amounts representing the increase in NAV 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 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 NAV 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.
CONTINGENT DEFERRED SALES CHARGE--CLASS C SHARES. A CDSC of .75% payable to
Premier is imposed on any redemption of Class C Shares within one year of the
date of
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purchase. The basis for calculating the payment of any such CDSC will be the
method used in calculating the CDSC for Class B Shares. SEE "CONTINGENT DEFERRED
SALES CHARGE--CLASS B SHARES" above.
WAIVER OF CDSC. The CDSC applicable to Class B and Class C Shares 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 certain eligible benefit plans,
(c) redemptions as a result of a combination of any investment company with the
Fund by merger, acquisition of assets or otherwise, and (d) redemption by such
shareholders as the SEC 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 an investor
must notify the transfer agent or his or her Service Agent must notify Premier.
Any such qualification is subject to confirmation of the investor's entitlement.
BY TELEPHONE.
If you have authorized the Funds to accept telephone instructions, you may
redeem your Shares by calling 1-800-548-2868. Once made, your telephone request
may not be modified or canceled. (BEFORE CALLING, READ "ADDITIONAL INFORMATION
ABOUT REDEMPTIONS" AND "WHEN SHARE PRICE IS DETERMINED.")
BY MAIL.
Your written instructions to redeem Shares may be in any one of the
following forms:
-A LETTER TO THE DREYFUS FAMILY OF FUNDS.
-AN ASSIGNMENT FORM OR STOCK POWER.
-AN ENDORSEMENT ON THE BACK OF YOUR NEGOTIABLE STOCK CERTIFICATE, IF YOU
HAVE ONE.
Once mailed to The Dreyfus Family of Funds P.O. Box 9692 Providence, Rhode
Island 02940-9830, the redemption request is irrevocable and may not be modified
or canceled. A letter of instruction should state the number of Shares or the
dollar amount to be redeemed. The letter must include your account number, and
for redemptions in an amount in excess of $25,000, a signature guarantee of each
owner. The redemption request must be signed by each person in whose name the
Shares are registered; for example, in the case of joint ownership, each owner
must sign. All signatures should be exactly as the name appears in the
registration. If the owner's name appears in the registration as John Robert
Jones, he should sign that way and not as
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John R. Jones. Signature guarantees can be obtained from commercial banks,
credit unions if authorized by state laws, savings and loans institutions, trust
companies, members of a recognized stock exchange, or from other eligible
guarantors who are members of the Securities Transfer Agents Medallion Program
("STAMP") or any other industry recognized program approved by the Securities
Transfer Association. (BEFORE WRITING, SEE "ADDITIONAL INFORMATION ABOUT
REDEMPTIONS.")
BY AUTOMATED WITHDRAWAL PROGRAM.
The Funds' Automated Withdrawal Program automatically redeems enough Shares
each month to provide you with a check for an amount which you specify (with a
minimum of $100). To set up an Automated Withdrawal Program, call the Funds at
1-800-548-2868 for instructions. Only shareholders with a Fund account balance
of $10,000 or more may participate in this program. Shares will be redeemed on
the 15th day or 30th day of each month or the next business day, and your check
will be mailed the next day. If your monthly checks exceed the dividends,
interest and capital appreciation on your Shares, the payments will deplete your
investment. Amounts paid to you by Automated Withdrawals are not a return on
your investment. They are derived from the redemption of Shares in your account,
and you must report on your income tax return, any gains or losses that you
realize.
You may specify an Automated Withdrawal Program when you make your first
investment. If you would like to establish an Automated Withdrawal Program
thereafter, the request for the Automated Withdrawal Program must be signed by
all owners.
When you make your first investment you may request that Automated
Withdrawals be sent to an address other than the address of record. Thereafter,
a request to send Automated Withdrawals to an address other than the address of
record must be signed by all owners.
The Funds may terminate the Automated Withdrawal Program at any time, upon
notice to you, and you likewise may terminate it or change the amount of the
Automated Withdrawal Program, by notice to the Funds in writing or by telephone.
Termination or change will become effective within five days following receipt
of your instruction. Your Automated Withdrawal Program plan may begin any time
after you have owned your Shares for 10 days.
BY CHECK WRITING.
You may redeem Shares of a Money Fund by writing a draft ("check") against
your account balance. (Shares held in certificate form may not be redeemed by
check.) There is no limit on the number of checks you can write, but they must
be for at least $250. When checks are presented, The Funds will redeem a
sufficient number of Shares from your account to pay the check amount. You will
continue to receive dividends on all Shares until your check is presented for
payment.
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If you want to add Check Writing to an existing Money Fund account, call
1-800-548-2868 or write to The Dreyfus Family of Funds P.O. Box 9692 Providence,
Rhode Island 02940-9830. For a new Money Fund account, you may elect Check
Writing on your purchase application. You will receive an initial supply of
checks usually within 10 days after your account has been established and your
completed signature card is on file with the Funds.
Checks must be signed in accordance with the instructions you furnished on
your signature card. In all situations, including joint accounts, only one
signature is necessary unless you indicated otherwise on the card. The Funds
will return checks that do not carry all required signatures or that contain
other irregularities.
The Funds will also return checks drawn on insufficient funds or on funds
from investments made by check or draft within the previous 10 days unless the
Funds have previously received proof that the investment check or draft has been
paid. The Funds will not be liable for any loss or expenses associated with
returned checks.
You may request a stop payment on any check and the Funds will attempt to
carry out your request. The Funds cannot guarantee that such efforts will be
effective.
REDEMPTION PROCEEDS.
Redemption proceeds may be sent to you:
BY MAIL.
If your redemption check is mailed, it is usually mailed by the second
business day after receipt of your redemption request, but not later than seven
days afterwards. When a redemption occurs shortly after a recent purchase, the
Funds may hold the redemption proceeds beyond seven days but only until the
purchase check clears, which may take up to 10 days or more. No dividend is paid
on the redemption proceeds after the redemption and before the check is mailed.
If you anticipate redemptions soon after you purchase your Shares, you are
advised to wire funds to avoid delay.
BY WIRE AND ELECTRONIC FUNDS TRANSFER.
You may authorize the Funds to transmit redemption proceeds by wire or
electronic funds transfer. Proceeds from the redemption of Bond Fund Shares will
normally be transmitted on the first business day, but not later than the
seventh day, following the date of redemption. Your bank usually will receive
wired funds the day they are transmitted. Electronically transferred funds will
ordinarily be received within two business days after transmission. Once the
funds are transmitted, the time of receipt and the availability of the funds are
not within the Funds' control. If your bank account changes, you must send a new
"voided" check preprinted with the bank registration with written instructions
signed by all owners (with their signatures guaranteed), including tax
identification number.
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ADDITIONAL INFORMATION ABOUT REDEMPTIONS.
(1) Redemptions specifying a certain date or price cannot be accepted and
will be returned.
(2) If the Shares being redeemed are represented by a negotiable stock
certificate, the certificate must be returned before the redemption can
be effected.
(3) All redemptions are made and the price is determined on the day when all
documentation is received in good order.
(4) If the request to redeem is made by a corporation, partnership, trust,
fiduciary, agent, estate, guardian, pension plan, profit sharing plan,
or unincorporated association, the Funds may require evidence
satisfactory to it of the authority of the individual signing the
request. Please call or write the Funds for further information.
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OTHER INFORMATION
SHARE PRICE
An investment portfolio's NAV refers to the worth of one Share. The NAV for
Investor and Class R Shares of a Money Fund is calculated on the basis of
amortized cost, which involves initially valuing a portfolio instrument at its
cost and thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. Each Money Fund intends to maintain a constant NAV of
$1.00, although there is no assurance that this can be done on a continuing
basis.
The NAV for Class A and Class R Shares of a Bond Fund is computed by adding
with respect to each class of Shares the value of all the class' investments,
cash, and other assets, deducting liabilities and dividing the result by number
of Shares of that class outstanding. The valuation of assets for determining NAV
for the Bond Funds may be summarized as follows:
The portfolio securities of each Bond Fund, except as otherwise noted,
listed or traded on a stock exchange, are valued at the latest sale price. If no
sale is reported, the mean of the latest bid and asked prices is used.
Securities traded over-the-counter are priced at the mean of the latest bid and
asked prices but will be valued at the last sale price if required by
regulations of the SEC. When market quotations are not readily available,
securities and other assets are valued at fair value as determined in good faith
in accordance with procedures established by the Board of Trustees.
Bonds are valued through valuations obtained from a commercial pricing
service or at the most recent mean of the bid and asked prices provided by
investment dealers in accordance with procedures established by the Board of
Trustees.
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Pursuant to a determination by The Dreyfus/Laurel Tax-Free Municipal Funds'
Board of Trustees that such value represents fair value, debt securities with
maturities of 60 days or less held by the Bond Funds are valued at amortized
cost. When a security is valued at amortized cost, it is valued at its cost when
purchased, and thereafter by assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument.
The NAV of each class of Shares of most of The Dreyfus Family of Funds'
investment portfolios (other than money market funds) is published in leading
newspapers daily. The yield of each class of Shares of most of The Dreyfus
Family of Funds' money market funds is published weekly in leading financial
publications and in many local newspapers. The NAV of a Bond Fund and the yield
of a Money Fund may also be obtained by calling The Dreyfus Family of Funds.
PERFORMANCE ADVERTISING
From time to time, a Fund may advertise the yield and tax-equivalent yield on a
class of shares. A Bond Fund may also advertise total return on a class of
Shares. TOTAL RETURN, YIELD AND TAX-EQUIVALENT YIELD FIGURES ARE BASED ON
HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. The
"total return" of a class of Shares of a Bond Fund may be calculated on an
average annual total return basis or a cumulative total return basis. Average
annual total return refers to the average annual compounded rates of return on a
class of Shares over one-, five-, and ten-year periods or the life of the Bond
Fund (as stated in the advertisement) that would equate an initial amount
invested at the beginning of a stated period to the ending redeemable value of
the investment, assuming the reinvestment of all dividends and capital gains
distributions. Cumulative total return reflects the total percentage change in
the value of the investment over the measuring period, again assuming the
reinvestment of all dividends and capital gains distributions.
The "yield" of a class of Shares in a Money Fund refers to the income
generated by an investment in such class over a seven-day period identified in
the advertisement. This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The "effective yield" is calculated similarly, but, when annualized, the income
earned by an investment in a class of Shares in a Money Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment. With respect to
a Bond Fund, "yield" is calculated by dividing a class of Shares' annualized net
investment income per Share during a recent 30-day (or one month) period by the
maximum public offering price per class of such Share on the last day of that
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period. Since yields fluctuate, yield data cannot necessarily be used to compare
an investment in a class of Shares with bank deposits, savings accounts, and
similar investment alternatives which often provide an agreed-upon or guaranteed
fixed yield for a stated period of time. The tax-equivalent yield of a Fund
shows the level of taxable yield needed to produce an after-tax equivalent to
such Fund's tax-free yield. This is done by increasing a class' yield by the
amount necessary to reflect the payment of federal income tax (and state income
tax, if applicable) at a stated tax rate.
Total return and yield quotations will be computed separately for each class
of a Fund's Shares. Because of the difference in the fees and expenses borne by
Class R Shares of a Fund and Class A or Investor Shares of a Fund, the return
and yield on Class R Shares will generally be higher than the return and yield
on Class A or Investor Shares. Any fees charged by a Bank or Agent directly to
its customers' account in connection with investments in a Fund will not be
included in calculations of total return or yield. The Bond Funds' Annual Report
and semi-annual report contain additional performance information and are
available upon request without charge from a Fund's distributor or your Bank or
Agent.
A Fund may compare the performance of its Investor, Class A and Class R
Shares with various industry standards of performance including Lipper
Analytical Services, Inc. ratings. Performance rankings as reported in CHANGING
TIMES, BUSINESS WEEK, INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL,
IBC/DONOGHUE'S MONEY FUND REPORT, MUTUAL FUND FORECASTER, NO LOAD INVESTOR,
MONEY MAGAZINE, MORNINGSTAR MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT,
FORBES, FORTUNE, BARRON'S and similar publications may also be used in comparing
a Fund's performance. The Bond Funds may also advertise non-standardized
performance information, such as total returns, for periods other than those
required to be shown on cumulative performance data. Furthermore, a Fund may
quote its Investor, Class A and Class R Shares' returns and yields in
advertisements or in shareholder reports.
DISTRIBUTIONS
Each Fund declares daily and pays monthly (on the first business day of the
following month) dividends from its net investment income, if any, and
distributes any net long-term capital gains on an annual basis. The Board of
Trustees may elect not to distribute capital gains in whole or in part to take
advantage of capital loss carryovers.
Unless you choose to receive dividend and/or capital gain distributions in
cash, your distributions will be automatically reinvested in additional Shares
of the distributing Fund at the NAV. You may change the method of receiving
distributions at any time by writing to the Funds. Checks which are sent to
shareholders who have requested distributions to be paid in cash and which are
subsequently returned by the United States Postal Service as not deliverable or
which
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remain uncashed for six months or more will be reinvested in additional Fund
Shares in the shareholder's account at the then current NAV. Subsequent Fund
distributions will be automatically reinvested in additional Fund Shares in the
shareholder's account.
Distributions paid by a Fund with respect to one class of Shares may be
greater or less per Share than those paid with respect to another class of
Shares due to the different expenses of the different classes.
Shares purchased on a day on which a Money Fund calculates its NAV will not
begin to accrue dividends until the following business day. Redemption orders
effected on any particular day will receive all dividends declared through the
day of redemption. However, if as a shareholder of a Money Fund you follow the
special wire purchase and redemption procedures outlined under "HOW TO DO
BUSINESS" and "HOW TO REDEEM SHARES," you may receive the dividend declared on
the day of purchase if the purchase order is received prior to 12:00 noon,
Eastern time, and the immediately available funds are received by the Money
Fund's custodian by 4:00 p.m., Eastern time. You will not receive the dividends
declared on the day of redemption if the redemption order is placed prior to
12:00 noon, Eastern time.
Shares purchased on a day on which a Bond Fund calculates its NAV will begin
to accrue dividends on that day, and redemption orders on Bond Funds effected on
any particular day will receive all dividends declared only through the business
day prior to the day of redemption. Distribution checks normally are mailed
within seven days after the record date.
THE BOND FUNDS. Any dividend and/or capital gain distribution paid by a Bond
Fund will reduce each Share's NAV by the amount of the distribution.
Shareholders are subject to taxes with respect to any such distribution. At any
given time, the value of a Bond Fund's Shares includes the undistributed net
gains, if any, realized by the Bond Fund on the sale of portfolio securities,
and undistributed dividends and interest received, less the Fund's expenses.
Because such gains and income are included in the value of your Shares, when
they are distributed the value of your Shares is reduced by the amount of the
distribution. Accordingly, if your distribution is reinvested in additional
Shares, the distribution has no effect on the value of your investment; while
you own more Shares, the value of each Share has been reduced by the amount of
the distribution. Likewise, if you take your distribution in cash, the value of
your Shares immediately after the distribution plus the cash received is equal
to the value of the Shares immediately before the distribution. For example, if
you own a Bond Fund Share that immediately before a distribution has a value of
$10, including $2 in undistributed dividends and capital gains realized by the
Bond Fund during the year, and if the $2 is distributed, the value of the Share
will decline to $8. If the $2 is reinvested at $8 per Share, you will receive
.250 Shares, so that, after the distribution, you will have 1.250 Shares at $8
per Share, or $10, the same as before.
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TAXES
Each Fund intends to qualify for treatment as a regulated investment company
under the Code so that it will be relieved of Federal income tax on that part of
its investment company taxable income (consisting generally of taxable net
investment income and net short-term capital gain) and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) that is
distributed to its shareholders. In addition, each Fund intends to continue to
qualify to pay "exempt-interest" dividends, which requires, among other things,
that at the close of each quarter of its taxable year at least 50% of the value
of its total assets must consist of municipal securities.
Dividends from a Fund's investment company taxable income are taxable to you
as ordinary income, to the extent of the Fund's earnings and profits.
Distributions by each Fund that are designated by it as "exempt-interest
dividends" generally may be excluded by you from your gross income.
Distributions by a Fund of net capital gain, when designated as such, are
taxable to you as long-term capital gains, regardless of the length of time you
have owned your Shares.
Interest on indebtedness incurred or continued to purchase or carry Shares
of a Fund will not be deductible for Federal income tax purposes to the extent
that a Fund's distributions (other than capital gains distributions) consist of
exempt-interest dividends. A Fund may invest in "private activity bonds," the
interest on which is treated as a tax preference item for shareholders in
determining their liability for the alternative minimum tax. Proposals may be
introduced before Congress for the purpose of restricting or eliminating the
Federal income tax exemption for interest on municipal securities. If such a
proposal were enacted, the availability of such securities for investment by a
Fund and the value of its portfolio would be affected. In such event, each Fund
would reevaluate its investment objective and policies.
Dividends and other distributions are taxable to you regardless of whether
they are received in cash or reinvested in additional Fund Shares, even if the
value of your Shares is below your cost. If you purchase Shares shortly before a
taxable distribution (i.e., any distribution other than an exempt-interest
dividend paid by a Fund), you must pay income taxes on the distribution, even
though the value of your investment (plus cash received, if any) remains the
same. In addition, the Share price at the time you purchase Shares may include
unrealized gains in the securities held in the Fund. If these portfolio
securities are subsequently sold and the gains are realized, they will, to the
extent not offset by capital losses, be paid to you as a capital gain
distribution and will be taxable to you.
In January of each year, the Funds will send you a Form 1099-DIV notifying
you of the status for Federal income tax purposes of your distributions for the
preceding year. The Funds
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also will advise shareholders of the percentage, if any, of the dividends paid
by a Fund that are exempt from Federal income tax and the portion, if any, of
those dividends that is a tax preference item for purposes of the alternative
minimum tax.
You must furnish the Funds with your taxpayer identification number ("TIN")
and state whether you are subject to withholding for prior under-reporting,
certified under penalties of perjury as prescribed by the Code and the
regulations thereunder. Unless previously furnished, investments received
without such a certification will be returned. Each Fund is required to withhold
a portion of all dividends, capital gain distributions and redemption proceeds
payable to any individuals and certain other non-corporate shareholders who do
not provide the Fund with a correct TIN; withholding from dividends and capital
gain distributions also is required for such shareholders who otherwise are
subject to backup withholding.
In addition, in order to avoid the application of a 4% nondeductible excise
tax on certain undistributed amounts of ordinary income and capital gains, each
Fund may make an additional distribution shortly before December 31 in each year
of any undistributed ordinary (taxable) income or capital gains and expects to
pay any other dividends and distributions necessary to avoid the application of
this tax.
The foregoing is only a summary of some of the important tax considerations
generally affecting each Fund and its shareholders; see the SAI for a further
discussion. There may be other federal, state or local tax considerations
applicable to a particular investor; for example, each Fund's dividends may be
wholly or partly taxable under state and/or local laws. You therefore are urged
to consult your own tax adviser.
OTHER SERVICES
At least twice a year you will receive the financial statements of each Fund
that you own Shares of with a summary of its investments and performance. The
Funds will send you a confirmation statement after every transaction (except
with regard to Money Fund transactions and the reinvestment of dividends and
other distributions) that affect your accounts. In addition, an account
statement will be mailed to you quarterly or monthly depending on the Fund's
reporting schedule. You may also request a statement of your account activity at
any time. Carefully review such confirmation statements and account statements
and notify the Funds immediately if there is an error. From time to time, to
reduce expenses, only one copy of a Fund's shareholder reports (such as a Fund's
Annual Report) may be mailed to your household. Please call the Funds if you
need additional copies.
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No later than January 31 of each year, the Funds will send you the following
reports, which you may use in completing your federal income tax return:
Form 1099-DIV Reports taxable distributions (and returns of capital, if any)
during the preceding year.
Form 1099-B Reports proceeds paid on redemptions during the preceding year
(for Bond Funds).
In addition, the Funds may send you other relevant tax-related forms.
FURTHER INFORMATION ABOUT THE FUNDS
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS.
The Dreyfus/Laurel Tax-Free Municipal Funds offers Shares of beneficial
interest of separate investment portfolios without par value (each a "fund").
The Boston Company Tax-Free Municipal Funds was organized as a Massachusetts
business trust under the laws of The Commonwealth of Massachusetts on March 28,
1983, changed its name to the Laurel Tax-Free Municipal Funds, and changed its
name again to the Dreyfus/Laurel Tax-Free Municipal Fund on October 17, 1994.
The Dreyfus/Laurel Tax-Free Municipal Fund is registered with the SEC as an
open-end management investment company, commonly known as a mutual fund. The
Trustees have authorized Shares of each Bond Fund to be issued in four
classes--Class A, Class R, Class B, and Class C--and Shares of each Money Fund
be issued in two Classes--Investor and Class R.
Each Share (regardless of class) has one vote. All Shares of a fund (and
classes thereof) vote together as a single class, except as to any matter for
which a separate vote of any fund or class is required by the 1940 Act, and
except as to any matter which affects the interests of one or more particular
funds or classes, in which case only the shareholders of the affected funds or
classes are entitled to vote, each as a separate class. At your written request,
the Funds will issue negotiable stock certificates.
At December 6, 1994, Mellon Bank Corporation, the Manager's parent, owned of
record through its direct and indirect subsidiaries more than 25% of The
Dreyfus/Laurel Tax-Free Municipal Funds' outstanding voting shares, and is
deemed, under the 1940 Act, to be a controlling shareholder.
MANAGEMENT.
THE BOARD OF TRUSTEES. The business affairs of The Dreyfus/Laurel Tax-Free
Municipal Funds are managed under the direction of its Trustees. The SAI
contains the names and general background information concerning the Trustees
and Officers of The Dreyfus/Laurel Tax-Free Municipal Funds.
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INVESTMENT MANAGER. The Manager is located at 200 Park Avenue, New York, New
York 10166. As of November 30, 1994, the Manager managed or administered
approximately $71 billion in assets for more than 1.9 million investor accounts
nationwide. The Manager is a wholly-owned subsidiary of Mellon Bank, N.A. (One
Mellon Bank Center, Pittsburgh, Pennsylvania 15258), the Funds' prior investment
manager. Pursuant to an Investment Management Agreement, transferred from Mellon
Bank to the Manager effective October 17, 1994, the Manager provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to each
Fund. As investment manager, the Manager manages the Funds by making investment
decisions based on each Fund's investment objective, policies and restrictions,
and is paid a fee.
Under the Investment Management Agreement, the Money Funds and the Bond
Funds pay a fee, computed daily and paid monthly, at the annual rate of .35% and
.50%, respectively, of such Funds' average daily net assets less certain
expenses described below. The Manager pays all of the expenses of a Fund except
brokerage fees, taxes, interest, fees and expenses of the non-interested
Trustees (including counsel fees) and extraordinary expenses. Although the
Manager does not pay for the fees and expenses of the non-interested trustees
(including counsel fees), the Manager is contractually required to reduce its
investment management fee in an amount equal to a Fund's allocable share of such
expenses. In order to compensate the Manager for paying virtually all of a
Fund's expenses, each Fund's investment management fee is higher than the
investment advisory fees paid by most investment companies. Most, if not all,
such companies also pay for additional non-investment advisory expenses that are
not paid by such companies' investment adviser. From time to time, the Manager
may waive (either voluntarily or pursuant to applicable state limitations)
additional investment management fees payable by the Fund. For the period from
July 1, 1993 through April 3, 1994, the Dreyfus/Laurel Massachusetts Tax-Free
Money Fund and the Premier Limited Term Massachusetts Municipal Fund each paid
its investment adviser, The Boston Company Advisors, Inc. ("Boston Advisors")
(an indirect wholly-owned subsidiary of Mellon Bank Corporation), 0.39% and
0.33% (annualized), respectively, of such Fund's average daily net assets in
investment advisory fees (net of fees waived and expenses reimbursed), under
such Fund's previous investment advisory contract (such contract covered only
the provision of investment advisory and certain specified administrative
services). For the period from April 4, 1994 through the fiscal year ended June
30, 1994, the Dreyfus/Laurel Massachusetts Tax-Free Money Fund and the Premier
Limited Term Massachusetts Municipal Fund each paid Mellon Bank 0.35% and 0.50%
(annualized), respectively, of such Fund's average daily net assets in
investment management fees. For the period from December 1, 1993 through April
3, 1994, the Dreyfus/Laurel California Tax-Free Money Fund, the Premier Limited
Term
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California Municipal Fund, the Dreyfus/Laurel New York Tax-Free Money Fund and
the Premier Limited Term New York Municipal Fund each paid its investment
adviser, Boston Advisors, 0.00%, 0.00%, 0.00% and 0.00% (annualized),
respectively, of such Fund's average daily net assets in investment advisory
fees (net of fees waived and expenses reimbursed), under such Fund's previous
investment advisory contract (such contract covered only the provision of
investment advisory and certain specified administrative services). For the
period from April 4, 1994 through the fiscal year ended June 30, 1994, the
Dreyfus/Laurel California Tax-Free Money Fund, the Premier Limited Term
California Municipal Fund, the Dreyfus/Laurel New York Tax-Free Money Fund and
the Premier Limited Term New York Municipal Fund each paid Mellon Bank 0.35%,
0.50%, 0.35% and 0.50% (annualized), respectively, of such Fund's average daily
net assets in investment management fees.
For the fiscal year ended June 30, 1994, total operating expenses (excluding
Rule 12b-1 fees) (net of fees waived and expenses reimbursed) of the
Dreyfus/Laurel Massachusetts Tax-Free Money Fund were 0.60% and 0.56%
(annualized) of the Fund's average daily net assets for the Investor and Trust
Classes, respectively. For the fiscal year ended June 30, 1994, total operating
expenses (excluding Rule 12b-1 fees) (net of fees waived and expenses
reimbursed) of the Fund were 0.67% and 0.62% (annualized) of the Fund's average
daily net assets for the Investor and Trust Classes, respectively. For the
period ended June 30, 1994, total operating expenses (excluding Rule 12b-1 fees)
(net of fees waived and expenses reimbursed) of the Dreyfus/Laurel California
Tax-Free Money Fund were 0.33% and 0.29% (annualized) of the Fund's average
daily net assets for the Investor and Trust Classes, respectively. For the
period ended June 30, 1994, total operating expenses (excluding Rule 12b-1 fees)
(net of fees waived and expenses reimbursed) of the Premier Limited Term
California Municipal Fund were 0.46% and 0.42% (annualized) of the Fund's
average daily net assets for the Investor and Trust Classes, respectively. For
the period ended June 30, 1994, total operating expenses (excluding Rule 12b-1
fees) (net of fees waived and expenses reimbursed) of the Dreyfus/Laurel New
York Tax-Free Money Fund were 0.30% and 0.28% (annualized) of the Fund's average
daily net assets for the Investor and Trust Classes, respectively. For the
period ended June 30, 1994, total operating expenses (excluding Rule 12b-1 fees)
(net of fees waived and expenses reimbursed) of the Premier Limited Term New
York Municipal Fund were 0.38% and 0.29% (annualized) of the Fund's average
daily net assets for the Investor and Trust Classes, respectively.
The Manager is authorized to allocate purchase and sale orders for portfolio
securities to certain financial institutions, including, in the case of agency
transactions, financial institutions which are affiliated with the Manager or
which have sold Shares of a Fund, if the Manager believes that the quality of
the transaction and the commission are comparable to what they
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would be with other qualified brokerage firms. From time to time, to the extent
consistent with its investment objective, policies and restrictions, a Fund may
invest in securities of companies with which Mellon Bank has a lending
relationship.
Mellon Bank is a subsidiary of Mellon Bank Corporation. As of June 30, 1994
Mellon Bank Corporation was the 24th largest bank holding company in the United
States in terms of total assets. Through its bank subsidiaries, it operates 631
domestic retail banking locations including 432 branch offices. Mellon Bank
Corporation has 25 domestic representative offices. There are international
branches in Grand Cayman, British West Indies and London, England, and two
international representative offices in Tokyo, Japan and Hong Kong. Mellon Bank
has a banking subsidiary, Mellon Bank Canada, in Toronto. Mellon Bank is a
registered municipal securities dealer.
The Glass-Steagall Act of 1933 prohibits a national bank from engaging in
the business of issuing, underwriting, selling or distributing certain
securities. The activities of Mellon Bank and the Manager may raise issues under
these provisions. However, Mellon Bank has been advised by its counsel that
these activities are consistent with these statutory and regulatory obligations.
For more information on the Glass-Steagall Act of 1933, SEE "FEDERAL LAW
AFFECTING MELLON BANK" in the SAI.
David A. Holmes has been employed by the Manager as the portfolio manager of
Premier Limited Term California Municipal Fund since October 17, 1994. Mr.
Holmes has been employed by The Boston Company as a portfolio manager for The
Boston Company's Tax-Exempt Fixed Income Fund since 1992. In that capacity, Mr.
Holmes is responsible for managing tax-exempt debt securities with orientation
towards recognition of relative value as well as covering evaluation of
investment opportunities, including credit analysis and representing tax-exempt
fixed-income policies to clients and other interested parties. Mr. Holmes
received as B.S. in Public Administration from the University of Indiana in
1984.
Kristin D. Lindquist has been employed by the Manager as the portfolio
manager of Premier Limited Term Massachusetts Municipal Fund and Premier Limited
Term New York Municipal Fund since October 17, 1994. Ms. Lindquist is a Vice
President of Boston Safe Deposit and Trust Company, a subsidiary of the Boston
Company and Mellon Bank, where she is responsible for managing Tax-Exempt Fixed
Income Fund Portfolios for the Private Asset Management Group. Prior to joining
Boston Safe in 1991, Ms. Lindquist was an Assistant Vice President at Shawmut
Bank, N.A. where she traded municipal securities. She received her Bachelor of
Arts degree in economics from Colby College in 1986.
....................... 62 .......................
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<PAGE>
P R O S P E C T U S
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- --------------------------------------------------------------------------------
OTHER SERVICE PROVIDERS. Under a Custody and Fund Accounting Agreement,
Mellon Bank acts as custodian and fund accountant, maintaining possession of the
Fund's investment securities and providing certain accounting and related
services.
The Shareholder Services Group, Inc., a subsidiary of First Data
Corporation, serves as transfer agent ("Transfer Agent") for each Fund's Shares.
The Transfer Agent carries out all shareholder transactions, such as purchases,
redemptions and distributions. The Transfer Agent is located at One American
Express Plaza, Providence, Rhode Island 02903.
Shares of the Funds are sold on a continuous basis by Premier, as the Funds'
sponsor and distributor. Premier is a registered broker-dealer with principal
offices at One Exchange Place, Boston, Massachusetts 02109. The Dreyfus/Laurel
Tax-Free Municipal Funds has entered into a distribution agreement with Premier
which provides that Premier has the exclusive right to distribute Shares of the
Funds. Premier may pay service and/or distribution fees to Agents that assist
customers in purchasing and servicing of Shares of the Funds. (SEE "DISTRIBUTION
PLANS.")
DISTRIBUTION PLANS.
Investor and Class A Shares are subject to a Distribution Plan adopted
pursuant to Rule 12b-1 under the 1940 Act ("Rule 12b-1"). Class B and C Shares
are subject to a Distribution Plan and a Service Plan, each adopted pursuant to
Rule 12b-1. Potential investors should read this Prospectus in light of the
terms governing Agreements with their Service Agents. A Service Agent entitled
to receive compensation for selling and servicing the Fund's Shares may receive
different compensation with respect to one class of Shares over another.
DISTRIBUTION PLAN--CLASS A AND INVESTOR CLASS--The Investor and Class A
Shares of each Fund bear some of the cost of selling those Shares under the
Distribution Plan (the "Plan"). The Plan allows a Fund to spend annually up to
0.25% of its average daily net assets attributable to Investor or Class A Shares
to compensate Dreyfus Service Corporation, an affiliate of the Manager, for
shareholder servicing activities and Premier for shareholder servicing
activities and for activities or expenses primarily intended to result in the
sale of Investor or Class A Shares of a Fund. The Plan allows Premier to make
payments from the Rule 12b-1 fees it collects from a Fund to compensate Service
Agents that have entered into Selling Agreements ("Agreements") with Premier.
Under the Agreements, the Service Agents are obligated to provide distribution
related services with regard to a Fund and/or shareholder services to the
Service Agent's clients that own Investor or Class A Shares of a Fund.
The Fund and Premier may suspend or reduce payments under the Plan at any
time, and payments are subject to the continuation of the Fund's Plan and the
Agreements described above. From time to time, the Service Agents, Premier and
the Fund may agree to voluntarily reduce the maximum fees payable under the
Plan. See the SAI for more details on the Plan.
....................... 63 .......................
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<PAGE>
P R O S P E C T U S
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- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS--CLASS B AND C. Under a Distribution Plan
adopted pursuant to Rule 12b-1, each Fund pays Premier for distributing the
Fund's Class B and C Shares, at an aggregate annual rate of .50 of 1% of the
value of the average daily net assets of Class B and C. Under a Service Plan
adopted pursuant to Rule 12b-1, the Fund pays Dreyfus Service Corporation or
Premier for the provision of certain services to the holders of Class B and C
Shares a fee at the annual rate of .25 of 1% of the value of the average daily
net assets of Class B and C. 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 providing
services related to the maintenance of such shareholder accounts. With regard to
such services, each Service Agent is required to disclose to its clients any
compensation payable to it by the Fund and any other compensation payable by
their clients in connection with the investment of their assets in Class B and C
Shares. Premier may pay one or more Service Agents in respect of distribution
and other services for these classes of Shares. Premier determines the amounts,
if any, to be paid to Service Agents under the Distribution and Service Plans
and the basis on which such payments are made. The fees payable under the
Distribution Plans are payable without regard to actual expenses incurred.
....................... 64 .......................
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<PAGE>
P R O S P E C T U S
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- ------------------------------------------------
FOR MORE INFORMATION
FUND INFORMATION AND PROSPECTUSES
Call 1-800-548-2868
Please read the prospectus before you invest or send money.
TO INVEST, REDEEM AND EXCHANGE
Call 1-800-548-2868 (for overseas, call collect (401) 455-3476
Or Write: The Dreyfus Family of Funds
P.O. Box 9692
Providence, Rhode Island 02940-9830
YIELD AND SHARE PRICE INFORMATION
1-800-548-2868
24 hours a day, 7 days a week
The Dreyfus Family of Funds
One Exchange Place
Boston, Massachusetts 02109
....................... 65 .......................
- --------------------------------------------------------------------------------
(Dreyfus Lion Logo)
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
PROSPECTUS DECEMBER 28, 1994
Premier Limited Term California Municipal Fund, Premier Limited Term
Massachusetts Municipal Fund and Premier Limited Term New York Municipal
Fund (each a "Fund" and collectively the "Funds"), formerly called the
"Laurel California Tax-Free Bond Fund, Laurel Massachusetts Tax-Free Bond
Fund and Laurel New York Tax-Free Bond Fund," respectively, are separate
portfolios of The Dreyfus/Laurel Tax-Free Municipal Funds, a management
investment company (the "Company"), known as a mutual fund. The Funds
seek to maximize current income exempt from Federal income taxes and
state personal income taxes for resident shareholders of the named state
consistent with the prudent risk of capital by investing in municipal
securities which are of investment-grade quality and intermediate maturities.
By this Prospectus, each Fund is offering four Classes of shares-Class
A, Class B, Class C and Class R.
The Dreyfus Corporation serves as the Funds' investment manager. The
Dreyfus Corporation is referred to as "Dreyfus."
-----------------------
This Prospectus sets forth concisely information about the Funds that
you should know before investing. It should be read carefully before you
invest and retained for future reference.
A Statement of Additional Information ("SAI") dated December 28, 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 ("SEC") and is incorporated herein by reference. For
a free copy, write to the Funds at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call 1-800-554-4611. When
telephoning, ask for Operator 666.
-----------------------
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. ALL MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH EACH FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUNDS' PROSPECTUS. THE FUNDS PAY MELLON BANK OR
ITS AFFILIATES TO BE ITS INVESTMENT MANAGER. MELLON BANK OR AN AFFILIATE
MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUNDS, SUCH AS
CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUNDS ARE
DISTRIBUTED BY PREMIER MUTUAL FUND SERVICES, INC.
- ------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------
(Continued from page 1)
Class A shares are subject to a sales charge imposed at the time of
purchase. (Class A shares of each Fund were formerly called Investor
Shares.) Class B shares are subject to a contingent deferred sales
charge imposed on redemptions made within five years of purchase. Class
C shares are subject to a .75% contingent deferred sales charge imposed
on redemptions made within the first year of purchase. Class R shares
are sold primarily to bank trust departments and other financial service
providers (including Mellon Bank, N.A. and its affiliates) ("Banks")
acting on behalf of customers having a qualified trust or investment
account or similar relationship at such institution. (Class R shares of
each Fund were formerly called Trust Shares.) Other differences between
the Classes include the services offered to and the expenses borne by
each Class and certain voting rights, as described herein. These
alternatives are offered so an investor may choose the method of
purchasing shares that is most beneficial given the amount of purchase,
the length of time the investor expects to hold the shares and other
circumstances.
You can purchase or redeem all Classes of shares, except Class R
shares, by telephone using the TELETRANSFER Privilege.
Shares of each Fund are also available through a servicing network
associated with Mellon Bank, N.A. ("Mellon Bank"), an affiliate of
Dreyfus. Exchange and shareholder services vary depending upon the
network through which you purchase Fund shares. See "How to Buy Fund
Shares".
- ------------------------------------------------------------------------
TABLE OF CONTENTS
- ------------------------------------------------------------------------
Expense Summary............................................. 3
Financial Highlights........................................ 4
Alternative Purchase Methods................................ 15
Description of the Funds.................................... 16
Management of the Funds..................................... 22
How to Buy Fund Shares...................................... 24
Shareholder Services........................................ 29
How to Redeem Fund Shares.......................... ........ 32
Distribution Plans (Class A and Class B and Class C Plans).. 36
Dividends, Other Distributions and Taxes.................... 36
Performance Information..................................... 38
General Information......................................... 39
<TABLE>
<CAPTION>
EXPENSE SUMMARY CLASS A CLASS B CLASS C CLASS R
------- ------- ------- -------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)................... 3.00%. none none none
Maximum Deferred Sales Charge Imposed on Redemptions
(as a percentage of the amount subject to charge)...... none 3.00% .75% none
Annual Fund Operating Expenses
(as a percentage of average daily net assets)
Management Fee......................................... .50% .50% .50% .50%
12b-1 Fee1............................................. .25% .75% .75% none
Other Expenses2 ....................................... .00% .00% .00% .00%
Total Fund Operating Expenses.......................... .75% 1.25% 1.25% .50%
</TABLE>
<TABLE>
<CAPTION>
Example
You 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:
<S> <C> <C> <C> <C>
1 YEAR $ 37 $43/$13 3 $20/$13 3 $ 5
3 YEARS $ 53 $60/$40 3 $40 $16
5 YEARS $ 70 $79/$69 3 $69 $28
10 YEARS $120 $124 $151 $63
</TABLE>
1 See "Distribution Plans" for a description of the Fund's Distribution
Plan and Service Plan for Class A, B and C shares.
2 Does not include fees and expenses of the non-interested Trustees
(including counsel). The investment manager is contractually
required to reduce its Management Fee in an amount equal to the Fund's
allocable portion of such fees and expenses, which are estimated to be
.02% of the Fund's net assets. (See "Management of the Fund.")
3 Assuming no redemption of shares.
- ------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5%
ANNUAL RETURN, THE FUNDS' 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 Fund Operating Expenses are based
on estimated amounts for the current fiscal year. Long-term investors in
Class A, B or C shares could pay more in 12b-1 fees than the economic
equivalent of paying the maximum front-end sales charges applicable to
mutual funds sold by members of the National Association of Securities
Dealers, Inc. ("NASD"). The information in the foregoing table does not
reflect any fee waivers or expense reimbursement arrangements that may
be in effect. Certain Service Agents may charge their clients direct
fees for effecting transactions in Fund shares; such fees are not
reflected in the foregoing table. See "Management of the Funds," "How to
Buy Fund Shares" and "Distribution Plans."
The Company understands that banks, brokers, dealers or other
financial institutions (including Dreyfus and its affiliates)
(collectively "Service Agents") may charge fees to their clients who are
owners of the Fund's Class A, B or C shares for various services
provided in connection with a client's account. These fees would be in
addition to any amounts received by a Service Agent under its Selling
Agreement ("Agreement") with Premier Mutual Fund Services, Inc. (the
"Distributor"). The Agreement requires each Service Agent to disclose to
its clients any compensation payable to such Service Agent by the
Distributor and any other compensation payable by the client for various
services provided in connection with their accounts.
FINANCIAL HIGHLIGHTS
The following tables are based upon a single Class A or Class R Share
outstanding through each fiscal year (period) and should be read in
conjunction with the financial statements and related notes that appear
in each Fund's Annual Report dated June 30, 1994, which is incorporated
by reference into the SAI. The financial statements and related notes,
as well as the information in the tables below insofar as it relates to
the fiscal year (period) ended June 30, 1994, have been audited by KPMG
Peat Marwick LLP, independent auditors, whose report thereon appears in
the Funds' Annual Report. Further information about the performance of
each Fund is also included in each Fund's Annual Report, which may be
obtained without charge. The information in the tables below for fiscal
years (periods) prior the to the fiscal year (period) ended June 30,
1994, has been audited by other independent auditors.
<TABLE>
<CAPTION>
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
<S> <C> <C> <C> <C> <C> <C> <C>
PERIOD YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
6/30/94# 11/30/93 11/30/92 11/30/91 11/30/90 11/30/89 11/30/88*
(unaudited)
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, beginning of period $13.07 $12.81 $12.53 $12.29 $12.16 $11.84 $12.00
------ ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income*** 0.34 0.67 0.70 0.73 0.73 0.76 0.47
Net realized and unrealized gain/(loss)
on investments (0.46) 0.66 0.44 0.24 0.20 0.32 (0.16)
------ ------ ------ ------ ------ ------ ------
Total from investment operations (0.12) 1.33 1.14 0.97 0.93 1.08 0.31
Less Distributions:
Distributions from net
investment income (0.34) (0.67) (0.70) (0.73) (0.73) (0.76) (0.47)
Distributions from net realized
capital gains --**** (0.40) (0.16) -- (0.07) -- --
------ ------ ------ ------ ------ ------ ------
Total Distributions (0.34) (1.07) (0.86) (0.73) (0.80) (0.76) (0.47)
------ ------ ------ ------ ------ ------ ------
Net Asset Value, end of period $12.61 $13.07 $12.81 $12.53 $12.29 $12.16 $11.84
------ ------ ------ ------ ------ ------ ------
Total Return 3 dagger (0.95)% 10.58% 9.27% 8.07% 7.96% 9.38% 2.61%
====== ====== ====== ====== ====== ====== ======
Ratios to average net assets/
Supplemental Data:
Net assets, end of period (in 000's) $10,143 $10,971 $21,831 $16,203 $12,481 $5,132 $3,202
Ratio of expenses to average net assets 0.58%** 0.45% 0.45% 0.45% 0.45% 0.45% 0.68%**
2 dagger
Ratio of net income to average net assets 4.51%** 5.09% 5.38% 5.84% 6.07% 6.28% 5.43%**
Porfolio turnover rate 5% 38% 41% 27% 75% 59% --
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Effective April 4, 1994 the Retail and Institutional Classes of
shares were reclassified as a single class of shares known as
Investor Shares. On October 17, 1994, the Investor Class of shares
were redesignated Class A Shares. The amounts shown for the period
ended June 30, 1994 were calculated using the performance of a
Retail Share outstanding from December 1, 1993, to April 3, 1994
and the performance of an Investor Share outstanding from April
4, 1994 to June 30, 1994. The Financial Highlights for the year
ended November 30, 1993, and prior periods are based upon a
Retail Share outstanding.
* The Fund commenced operations on March 7, 1988.
** Annualized.
*** Net investment income per share before waiver of fees and
reimbursement of expenses by investment adviser and/or custodian
and/or transfer agent for the period ended June 30, 1994, and for
the years ended November 30, 1993, 1992, 1991, 1990, 1989, and
for the period ended November 30, 1988 were $0.31, $0.67, $0.64,
$0.66, $0.66, $0.59 and $0.33, respectively.
**** Amount respresent less than $0.01.
1 dagger
Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by investment adviser and/or
custodian and/or transfer agent for the period ended June 30,
1994, and for the years ended November 30, 1993, 1992, 1991,
1990, 1989, and for the period ended November 30, 1988 were
0.95%, 1.10%, 0.93%, 1.03%, 1.03%, 1.85% and 2.33%, respectively.
2 dagger
The operating expense ratio excludes interest expense. The
operating expense ratio including interest expense was 0.46% for
the year ended November 30, 1993.
3 dagger
Total return represents aggregate total return for the periods
indicated.
# The Fund changed its fiscal year end to June 30. Prior to this,
the Fund's fiscal year end was November 30. Effective October 17,
1994 The Dreyfus Corporation serves as the Fund's investment
manager. From April 4, 1994 through October 16, 1994, Mellon Bank
served as investment manager for the Fund. Prior to April 4,
1994, The Boston Company Advisors, Inc. served as the investment
manager of the Fund.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
<S> <C> <C>
PERIOD
PERIOD ENDED
ENDED JUNE NOVEMBER
30, 1994* 30, 1993#
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of period $13.07 $12.96
------ ------
Income from investment orerations:
Net investment income*** 0.35 0.55
Net realized and unrealezed gain/(loss) on investments (0.46) 0.52
------ ------
Total from investment operations (0.11) 1.07
Less Distributions:
Distributions from net investment income (0.35) (0.56)
Distributions from net realized capital gains --**** (0.40)
------ ------
Total Distributions (0.35) (0.96)
Net Asset Value, end of period $12.61 $13.07
------ ------
Total Return (0.87)% 8.32%
Ratios to average net assets/Supplemental data:
Net Assets, end of period (in 000s) $12,235 $8,291
Ratio of expenses to average net assets 0.42%** 0.40%** 2 dagger
Ratio of net investment income to average net assts 4.68%** 5.04%**
Porfolio turnover rate 5% 38%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Effective April 4, 1994 the Investment Class of shares was
reclassified as the Trust Class of shares. On October 17, 1994,
the Trust Class of shares were redesignated Class R shares. The
amounts shown for the period ended June 30, 1994, were calculated
using the performance of an Investment Class share outstanding
from February 1, 1993, to April 3, 1994, and the performance of a
Trust Share outstanding from April 4, 1994 to June 30, 1994. The
Financial Highlights for the period ended November 30, 1993 and
prior periods are based upon an Investment Class share
outstanding.
# The Fund commenced selling Investment Shares on February 1, 1993.
* The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30. Effective October 17, 1994,
The Dreyfus Corporation serves as the Fund's investment manager.
From April 4, 1994 through October 16, 1994, Mellon Bank served as
investment manager for the Fund. Prior to April 4, 1994,
The Boston Company Advisors, Inc. served as the investment manager
of the Fund.
** Annualized.
*** Net investment income per share before waiver of fees and
reimbursement of expenses by investment adviser and/or custodian
and/or transfer agent for the periods ended June 30, 1994 and
November 30, 1993 were $0.32 and $0.49, respectively.
**** Amount respresent less than $0.01.
1 dagger
Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by investment adviser and/or custodian
and/or transfer agent for the periods ended June 30, 1994 and
November 30, 1993 were 0.79% and 1.06%, respectively.
2 dagger
The operating expense ratio excludes interest expense. The
operating expense ratio including interest expense was 0.41% for
the period ended November 30, 1993.
3 dagger
Total return represents aggregate total return for the periods
indicated.
[This Page Intentionally Left Blank]
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
6/30/94# 6/30/93 6/30/92 6/30/91 6/30/90 6/30/89 6/30/88 6/30/87 6/30/86*
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, beginning
of period $12.38 $11.83 $11.23 $11.09 $11.25 $10.89 $10.74 $10.78 $10.00
------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income*** 0.54 0.64 0.73 0.73 0.72 0.74 0.72 0.72 0.58
Net realized and unrealized
gain/(loss) on investments (0.36) 0.55 0.60 0.14 (0.16) 0.36 0.15 (0.04) 0.78
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 0.18 1.19 1.33 0.87 0.56 1.10 0.87 0.68 1.36
------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions:
Distributions from net
investment income (0.54) (0.64) (0.73) (0.73) (0.72) (0.74) (0.72) (0.72) (0.58)
Distributions from net
realized capital gains (0.28) . . . . . . . .
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (0.82) (0.64) (0.73) (0.73) (0.72) (0.74) (0.72) (0.72) (0.58)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, end of period $11.74 $12.38 $11.83 $11.23 $11.09 $11.25 $10.89 $10.74 $10.78
------ ------ ------ ------ ------ ------ ------ ------ ------
Total Return 1.38% 10.27 12.21% 8.13% 5.13% 10.44% 8.37% 6.27% 13.75%
====== ====== ====== ====== ====== ====== ====== ====== ======
Ratios to average net assets/
Supplemental Data:
Net assets, end of
period (in 000's) $21,276 $20,106 $20,513 $16,337 $16,093 $14,957 $14,702 $15,355 $7,708
Ratio of expenses to average
net assets 0.76%** 0.75% 0.76% 0.88% 0.92% 0.96% 0.96% 0.79% 0.75%**
Ratio of net income to average
net assets 4.40%** 5.30% 6.34% 6.59% 6.45% 6.70% 6.69% 6.45% 7.00**
Porfolio turnover rate 19% 60% 23% 41% 99% 93% 104% 127% 33%
</TABLE>
(1) Effective April 4, 1994 the Retail and Institutional Classes of
shares were redesignated the Investor Class of shares. The amounts
shown for the year ended June 30, 1994 were calculated using the
performance of a Retail Share outstanding from July 1, 1993, to
April 3, 1994 and the performance of an Investor Share outstanding
from April 4, 1994 to June 30, 1994. On October 17, 1994 the
Investor Class shares were redesignated Class A shares. The
Financial Highlights for the year ended June 30, 1993, and prior
periods are based upon a Retail Share outstanding.
* The Fund commenced operations on September 24, 1985.
** Annualized.
*** Net investment income per share before waiver of fees and/or
reimbursement of expenses by investment adviser and/or custodian
and/or transfer agent for the years ended June 30, 1994, 1993,
1987 and for the period ended June 30, 1986 were $0.53, $0.62,
$0.70 and $0.55, respectively.
1 dagger
Annualized expense ratios before voluntary waiver of fees and/or
reimbursement of expenses by investment adviser and/or custodian
and/or transfer agent for the years ended June 30, 1994, 1993,
1987 and for the period ended June 30, 1986 would have been 0.89%,
0.92%, 0.95% and 1.15%, respectively.
2 dagger
Total return represents aggregate total return for the periods
indicated.
# Effective October 17, 1994, The Dreyfus Corporation serves as the
Fund's investment manager. From April 4, 1994 through October 16,
1994, Mellon Bank served as investment manager for the Fund. Prior
to April 4, 1994, The Boston Company Advisors, Inc. served as the
investment manager of the Fund.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
<S> <C> <C>
------ ------
YEAR PERIOD
ENDED ENDED
6/30/94* 6/30/93
- -------------------------------------------------------------------------------------------------------------
Net Asset Value, beginning of period $12.38 $12.08
------ ------
Income from investment orerations:
Net investment income*** 0.55 0.25
Net realized and unrealezed gain/(loss) on investments (0.35) 0.29
------ ------
Total from investment operations 0.20 0.54
Less Distributions:
Distributions from net investment income (0.56) (0.24)
Distributions from net realized capital gains (0.28) --
------ ------
Total Distributions (0.84) (0.24)
Net Asset Value, end of period $11.74 $12.38
====== ======
Total Return 1.53% 4.53%
------ ------
Ratios to average net assets/Supplemental data:
Net Assets, end of period (in 000's) $15,681 $9,411
Ratio of expenses to average net assets 0.62% 0.65%**
Ratio of net investment income to average net assts 4.54% 4.84%**
Porfolio turnover rate 19% 60%
</TABLE>
(1) The Fund commenced selling Investment Shares on February 1, 1993.
Effective April 4, 1994 the Investment Class of shares was
reclassified as the Trust Class of shares. On October 17, 1994 the
Trust Class shares were redesignated Class R shares. The table
above is based upon an Investment share outstanding from February
1, 1993 to April 3, 1993 and a Trust share outstanding from
April 4, 1994 to June 30, 1994.
** Annualized.
*** Net investment income per share before waiver of fees and
reimbursement of expenses by investment adviser and/or custodian
and/or transfer agent for the year ended June 30, 1994 and for the
period ended June 30, 1993 were $0.54 and $0.24, respectively.
1 dagger
Annualized expense ratios before voluntary waiver of fees and/or
reimbursement of expenses by investment adviser and/or custodian
and/or transfer agent for the year ended June 30, 1994 and for the
period ended June 30, 1993 would have been 0.75% and 0.87%,
respectively.
2 dagger
Total return represents aggregate total return for the periods
indicated.
* Effective October 17, 1994, The Dreyfus Corporation serves as the
Fund's investment manager. From April 4, 1994 through October 17,
1994, Mellon Bank served as investment manager for the Fund. Prior
to April 4, 1994,
The Boston Company Advisors, Inc. served as the investment manager
of the Fund.
[This Page Intentionally Left Blank]
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
<S> <C> <C> <C> <C> <C> <C> <C>
PERIOD YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
6/30/94# 11/30/93 11/30/92 11/30/91 11/30/90 11/30/89 11/30/88*
- ------------------------------------------------------------------------------------------------------------------------
Net Asset Value, beginning of year
or period $13.04 $12.70 $12.34 $12.02 $11.90 $11.75 $12.00
------ ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income*** 0.35 0.66 0.68 0.70 0.73 0.72 0.47
Net realized and unrealized gain /(loss)
on investments (0.45) 0.46 0.36 0.32 0.11 0.15 (0.24)
------ ------ ------ ------ ------ ------ ------
Total from investment operations (0.10) 1.12 1.04 1.02 0.84 0.87 0.23
------ ------ ------ ------ ------ ------ ------
Less Distributions:
Distributions from net
------ ------ ------ ------ ------ ------ ------
investment income (0.35) (0.66) (0.68) (0.70) (0.72) (0.72) (0.48)
Distributions from net realized
capital gains -- (0.12) -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total Distributions (0.35) (0.78) (0.68) (0.70) (0.72) (0.72) (0.48)
------ ------ ------ ------ ------ ------ ------
Net Asset Value, end of year or period $12.59 $13.04 $12.70 $12.34 $12.02 $11.90 $11.75
------ ------ ------ ------ ------ ------ ------
Total Return (0.80)% 9.00% 8.65% 8.71% 7.35% 7.60% 1.95%
====== ====== ====== ====== ====== ====== ======
Ratios to average net assets/
Supplemental Data:
Net assets, end of year or period
(in 000's) $2,922 $2,100 $5,308 $5,202 $3,959 $3,535 $2,315
Ratio of expenses to average
net assets 0.57%** 0.46% 0.45% 0.45% 0.45% 0.44% 0.70%**
Ratio of net investment income to
average net assets 4.66%** 5.11% 5.43% 5.74% 6.14% 6.30% 5.54%**
Porfolio turnover rate 13% 32% 0% 0% 45% 7% 74%
</TABLE>
(1) Effective April 4, 1994 the Retail and Institutional Classes of
shares were redesignated the Investor Class of shares. The amounts
shown for the period ended June 30, 1994 were calculated using the
performance of a Retail Share outstanding from December 1, 1993, to
April 3, 1994 and the performance of an Investor Share outstanding
from April 4, 1994 to June 30, 1994. On October 17, 1994 the
Investor Class shares were redesignated Class A shares. The
Financial Highlights for the year ended November 30, 1993, and
prior periods are based upon a Retail Share outstanding.
* The Fund commenced operations on March 7, 1988.
** Annualized.
*** Net investment income per share before waiver of fees and
reimbursement of expenses by investment dviser and/or custodian
and/or transfer agent for the period ended June 30, 1994, and for
the years ended November 30, 1993, 1992, 1991, 1990 and 1989, and
for the period ended November 30, 1988 were $0.28, $0.42, $0.52,
$0.52, $0.59, $0.45 and $0.31, respectively.
1 dagger
Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by investment adviser and/or custodian
and/or transfer agent for the period ended June 30, 1994, and for
the years ended November 30, 1993, 1992, 1991, 1990 and 1989, and
for the period ended November 30, 1988 were 1.51%, 2.32%, 1.70%,
1.88%, 1.61%, 2.67% and 2.61%, respectively.
2 dagger
Total return represents aggregate total return for the periods
indicated.
# The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30. Effective October 17,
1994, The Dreyfus Corporation serves as the Fund's investment
manager. From April 4, 1994 through October 17, 1994, Mellon Bank
served as investment manager for the Fund. Prior to April 4, 1994,
The Boston Company Advisors, Inc. served as the investment manager
of the Fund.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
<C> <C> <C>
PERIOD
PERIOD ENDED
ENDED JUNE NOVEMBER
30, 1994* 30, 1993#
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of period $13.04 $12.85
------ ------
Income from investment orerations:
Net investment income*** 0.37 0.57
Net realized and unrealized gain/(loss) on investments (0.45) 0.31
------ ------
Total from investment operations (0.08) 0.88
Less Distributions:
Distributions from net investment income (0.37) (0.57)
Distributions from net realized capital gains -- (0.12)
------ ------
Total Distributions (0.37) (0.69)
Net Asset Value, end of period $12.59 $13.04
------ ------
Total Return (0.67)% 6.95%
Ratios to average net assets/Supplemental data:
Net Assets, end of period (in 000's) $2,388 $2,542
Ratio of expenses to average net assets 0.29%** 0.25%**
Ratio of net investment income to average net assts 4.94%** 5.20%**
Porfolio turnover rate 13% 32%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Effective April 4, 1994 the Investment Class of shares was
reclassified as the Trust Class of shares. Effective October 17,
1994, the Trust class of shares were redesignated Class R Shares.
The table above is based upon a Retail Share outstanding from
February 1, 1993 to April 3, 1994 and a Trust Share outstanding
from April 4, 1994 to June 30, 1994.
# The Fund commenced selling Investment Shares on February 1, 1993.
* The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30. Effective October 17,
1994, The Dreyfus Corporation serves as investment manager. From
April 4, 1994 through October 16, 1994, Mellon Bank served as
investment manager for the Fund. Prior to April 4, 1994,
The Boston Company Advisors, Inc. served as the investment manager
of the Fund.
** Annualized.
*** Net investment income per share before waiver of fees and
reimbursement of expenses by investment adviser and/or custodian
and/or transfer agent for the periods ended June 30, 1994 and
November 30, 1993 were $0.30 and $0.36, respectively.
1 dagger
Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by investment adviser and/or custodian
and/or transfer agent for the periods ended June 30, 1994 and
November 30, 1993 were 1.23% and 2.22%, respectively.
2 dagger
Total return represents aggregate total return for the periods
indicated.
ALTERNATIVE PURCHASE METHODS
The Funds offer you four methods of purchasing Fund 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 Fund share represents an
identical pro rata interest in a Funds' investment portfolio.
Class A shares are sold at net asset value per share plus a maximum
initial sales charge of 3.0% 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 12b-1 fee at the rate of 0.25 of 1% of
the value of the average daily net assets of Class A. See "Distribution
Plan - Class A shares."
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 a Fund. 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 distribution fee at the rate of 0.50 of 1% of
the value of the average daily net assets of Class B. In addition, Class
B shares are subject to an annual service fee at the rate of 0.25 of 1%
of the value of the average daily net assets of Class B. See
"Distribution and Service Plans - Class B and C." The distribution fee
paid by Class B will cause such Class to have a higher expense ratio and
to pay lower dividends than Class A. Approximately six years after the
date of purchase, Class B shares automatically will convert to Class A
shares, based on the relative net asset values for shares of each such
Class, and will no longer be subject to the distribution fee. (Such
conversion is subject to suspension by the Board of Trustees if adverse
tax consequences might result.) Class B shares that have been acquired
through the reinvestment of dividends and other 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 other distributions.
Class C shares are subject to a .75% CDSC, which is assessed only if
you redeem Class C shares within one year of purchase. See "How to
Redeem Fund Shares - Class C shares." These shares also are subject to
an annual distribution fee at the rate of 0.50 of 1% of the value of the
average daily net assets of Class C. Class C shares are also subject to
an annual service fee at the rate of 0.25 of 1% of the value of the
average daily net assets of Class C. See "Distribution and Service Plans
- - Class B and C." The distribution fee paid by Class C will cause such
Class to have a higher expense ratio and to pay lower dividends than
Class A.
Class R shares generally may not be purchased directly by individuals,
although eligible institutions may purchase Class R shares for accounts
maintained by individuals. Class R shares are sold at net asset value
per share primarily to Banks acting on behalf of customers having a
qualified trust or investment account or similar relationship at such
institution. Class A, Class B and Class C shares are primarily sold to
retail investors by Service Agents that have entered into Selling
Agreements with the Distributor.
The decision as to which Class of shares is more beneficial to you
depends on the amount and the intended length of your investment. You
should consider whether, during the anticipated life of your investment
in the Fund, the accumulated distribution fee and CDSC, if any, on Class
B or Class C shares 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 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 or Class C shares may exceed the initial
sales charge on Class A shares during the life of the investment.
Finally, you should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of your own investment
time frame. For example, while Class C shares have a shorter CDSC period
than Class B shares, Class C shares do not have a conversion feature
and, therefore, are subject to an ongoing distribution fee. Thus, Class
B shares may be more attractive than Class C shares to investors with
longer term investment outlooks. Generally, Class A shares may be more
appropriate for investors who invest $1,000,000 or more in Fund shares,
but will not be appropriate for investors who invest less than $100,000
in Fund shares.
DESCRIPTION OF THE FUNDS
INVESTMENT OBJECTIVE
Each Fund seeks to maximize current income exempt from Federal income
taxes and state personal income taxes for resident shareholders of the
named state, consistent with what is believed to be the prudent risk of
capital. The Funds pursue their objectives by investing in Municipal
Obligations of such Fund's named state, with intermediate maturities and
of "investment-grade" quality.
MANAGEMENT POLICIES
Under normal market conditions, each Fund attempts to invest 100%, and
will invest a minimum of 80%, of its total assets in Municipal
Obligations of such Fund's named state. When, in Dreyfus' opinion,
adverse market conditions exist for Municipal Obligations, and a
"defensive" investment posture is warranted, each Fund may temporarily
invest more than 20% of its total assets in money market instruments
having maturity and quality characteristics comparable to those
(discussed below) for Municipal Obligations, but which produce interest
which is not exempt from the state personal income taxes for resident
shareholders of a Fund's named state, or more than 20% of its total
assets in such instruments which produce income exempt from Federal, but
not the state personal income taxes for resident shareholders of a
Fund's named state, or more than 20% of its total assets in taxable
obligations (including obligations the interest on which is included in
the calculation of alternative minimum tax for individuals). Periods
when a defensive posture is warranted include those periods when a
Fund's monies available for investment exceed the relevant state's
Municipal Obligations available for purchase to meet such Fund's rating,
maturity and other investment criteria. Each Fund does not anticipate
that it will find it necessary to make any investments in securities the
interest from which is not exempt from Federal income and the respective
state's personal income taxes. The Fund's policy of investing in a
minimum of 80% of its total assets in Municipal Obligations is a
fundamental policy of the Fund.
The Funds invest only in Municipal Obligations rated at the time of
purchase within the four highest quality ratings of Moody's Investors
Service, Inc. ("Moody's") (currently at least Baa or above for bonds, at
least MIG 3 or above for notes and at least Prime-2 or above for
commercial paper) or Standard & Poor's Ratings Group ("S&P") (at least
BBB or above for bonds, at least SP-2 or above for notes and at least A-
2 or above for commercial paper) or, if not rated by Moody's or S&P, of
comparable quality to the above ratings as determined by Dreyfus.
Municipal Obligations rated within the four highest ratings are
considered to be of investment-grade quality, although bonds rated in
the lowest of these four categories (Baa by Moody's or BBB by S&P) have
some speculative characteristics and involve greater risks and higher
yields.
Because many issuers of Municipal Obligations may choose not to have
their obligations rated, it is possible that a large portion of a Funds'
bond portfolio may consist of unrated obligations. Unrated obligations
are not necessarily of lower quality than rated obligations, but to the
extent the Funds invest in unrated obligations, the Funds will be more
reliant on Dreyfus' judgment, analysis and experience than would be the
case if the Funds invested only in rated obligations.
The taxable instruments in which each Fund is permitted to invest
under certain circum stances include U.S. Government Securities and
short-term, high quality money market instruments. In addition, each
Fund may, on occasion, purchase securities issued by other investment
companies that invest primarily in high quality debt obligations of the
kinds in which the Fund may invest. A discussion of the categories of
Municipal Obligations and the ratings systems appears in the SAI.
The Funds generally invest in Municipal Obligations having
intermediate-term maturities, which can be expected to pay higher yields
and experience greater fluctuations in value than bonds with short-term
maturities. The average weighted maturity of the Municipal Obligations
in each Fund's individual portfolio is not expected to exceed ten years.
There is no limit on the maturity of any individual security. The market
value of the Municipal Obligations in a Fund's portfolio and,
accordingly, a Fund's net asset value typically will vary inversely with
changes in interest rates, declining when interest rates rise and rising
when interest rates decline. Under normal market conditions, the longer
the average maturity of a Fund's holdings, the greater its expected
yield and price volatility.
INVESTMENT TECHNIQUES
In connection with its investment objective and policies, the Funds
may employ, among others, the following investment techniques:
WHEN-ISSUED SECURITIES. The Funds may purchase Municipal Obligations
on a "when-issued" basis (i.e., delivery of and payment for the
Municipal Obligations normally take place within 45 days after the date
of the purchase commitment). The payment obligation and the interest
rate on such securities are fixed at the time of the purchase
commitment. Although the Funds generally will purchase Municipal
Obligations on a when-issued basis with the intention of acquiring the
securities, the Funds may sell such securities before the settlement
date. Municipal Obligations purchased on a when-issued basis, like other
investments made by the Funds, may decline or appreciate in value prior
to their actual delivery to the Funds.
MASTER/FEEDER OPTION. The Company may in the future seek to achieve a
Fund's investment objective by investing all of the Fund's assets in
another investment company having the same investment objective and
substantially the same investment policies and restrictions as those a
pplicable to such Fund. Shareholders of a Fund will be given at least 30
days' prior notice of any such investment. Such investment would be made
only if the Company's Board of Trustees determine it to be in the best
interest of a Fund and its shareholders. In making that determination,
the Board of Trustees will consider, among other things, the benefits to
shareholders and/or the opportunity to reduce costs and achieve
operational efficiencies. Although the Funds believe that the Board of
Trustees will not approve an arrangement that is likely to result in
higher costs, no assurance is given that costs will be materially
reduced if this option is implemented.
MUNICIPAL BOND INDEX AND INTEREST RATE FUTURES CONTRACTS AND OPTIONS
ON MUNICIPAL BOND INDEX AND INTEREST RATE FUTURES CONTRACTS. The Funds
may enter into municipal bond index futures contracts and interest rate
futures contracts and purchase and sell options on these futures
contracts that are traded on a United States exchange or board of trade.
Such investments, if any, by a Fund will be made solely for the purpose
of hedging against changes in the value of its portfolio securities and
in the value of securities it intends to purchase due to anticipated
changes in interest rates and market conditions and when the
transactions are economically appropriate to the reduction of risks
inherent in the management of the Funds.
A municipal bond index futures contract, which is based on an index of
long-term, tax-exempt municipal bonds, is an agreement in which two
parties agree to take or make delivery of an amount of cash equal to a
specified dollar amount times the different 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. An interest rate
futures contract provides for the future purchase or sale of specified
interest rate sensitive debt securities such as United States Treasury
bills, bonds and notes, obligations of the Government National Mortgage
Association and bank certificates of deposit. Although most interest
rate futures contracts require the delivery of the underlying
securities, some settle in cash. Each contract designates the price,
date, time and place of delivery. Entering into a futures contract to
deliver the index or instrument underlying the contract is referred to
as entering into a "short" position in the futures contract, whereas
entering into a futures contract to take delivery of the index or
instrument is referred to as entering into a "long" position in the
futures contract.
A put or call on a municipal bond index or interest rate futures
contract gives the purchaser the right, in return for the premium paid,
to assume a short or long position, respectively, in the underlying
futures contract as a specified exercise price at any time prior to the
expiration date of the option. The Funds may purchase put and call
options on both municipal bond index and interest rate futures
contracts. The Funds will sell options on these futures contracts only
as part of closing purchase transactions to terminate its options
position, although no assurance can be given that closing transactions
can be effected.
Entering into a futures contract for the purchase or sale of a
municipal bond index or debt security or purchasing options on index or
interest rate futures contracts will enable a Fund to protect its assets
from fluctuations in interest rates on tax-exempt securities without
initially buying or selling the securities. The Funds may enter into
futures contracts to sell an index or debt security or may purchase
options when Dreyfus believes that interest rates will increase and
consequently the value of the Funds' portfolio securities will decrease.
The Funds may enter into futures contracts to buy an index or debt
security or may purchase call options when Dreyfus anticipates
purchasing portfolio securities at a time of declining interest rates.
There are several risks in connection with the issue of municipal bond
index and interest rate futures contracts and options on these futures
contracts as hedging devices. There can be no assurance that there will
be a correlation between price movements in the municipal bond index or
interest rate futures, on the one hand, and price movements in municipal
bonds which are the subject of the hedge, on the other hand. Positions
in futures contracts and options on futures contracts may be closed out
only by entering into offsetting positions on the exchange on which the
contract was initiated, and no assurance can be given that an active
market will exist for the contract or the option at any particular time.
Consequently, the Funds may realize a loss on a futures contract that is
not offset by an increase in the price of the municipal bonds that are
being hedged or may not be able to close a futures position in the event
of adverse price movements. Any income earned by the Funds from
transactions in futures contracts and options on futures contracts will
be taxable. Accordingly, it is anticipated that such investments will be
made only in unusual circumstances, such as when Dreyfus anticipates an
extreme change in interest rates or market conditions. Successful use of
futures contracts by the Fund is subject to the ability of Dreyfus to
correctly predict movements in the direction of interest rates.
The Funds may not enter into futures contracts or purchase options on
futures contracts if, immediately thereafter, the sum of the amount of
margin deposits on the Funds' existing futures contracts and premiums
paid for options would exceed 5% of the value of a Fund's total assets,
after taking into account unrealized profits and losses on any existing
contracts. When a Fund enters into futures contracts, purchases an index
or debt security or purchases call options, an amount of cash, U.S.
Government Securities or other high grade debt securities equal to the
market value of the contract will be deposited and maintained in a
segregated account with the Fund's custodian to collateralize the
positions, thereby insuring that the use of the contract is unleveraged.
At present the Funds are considering investments in futures contracts
and options on futures contracts as described above. However, the Funds
reserve the right to invest in other kinds of futures contracts and
options on futures contracts subject to the policies the trustees may
establish from time to time.
CERTAIN PORTFOLIO SECURITIES
FLOATING RATE AND VARIABLE RATE OBLIGATIONS. The Funds may purchase
floating rate and variable rate obligations. These obligations bear
interest at rates that are not fixed, but vary with changes in specified
market rates or indices. Some of these obligations may carry a demand
feature that permits the Funds to receive the par value upon demand
prior to maturity. The Funds will limit their purchases of floating rate
and variable rate Municipal Obligations to those meeting the quality
standards applicable to such Fund. Frequently, such obligations are
secured by letters of credit or other credit support arrangements
provided by banks. The quality of the underlying creditor or the bank,
as determined by Dreyfus under the supervision of the Board of Trustees
must also be equivalent to the quality standards applicable to the Fund.
In addition, Dreyfus monitors the earning power, cash flow and other
liquidity ratios of the issuers of such obligations, as well as the
creditworthiness of the institution responsible for paying the principal
amount of the obligations under the demand feature.
The Funds may invest in participation interests purchased from banks
in floating or variable rate Municipal Obligations owned by banks.
Participation interests carry a demand feature permitting the Funds to
tender them back to the bank. Each participation is backed by an
irrevocable letter of credit or guarantee of a bank which Dreyfus under
the supervision of the Board of Trustees has determined meets the
prescribed quality standards for the Funds.
Other types of tax-exempt instruments that may become available in the
future may be purchased by the Funds as long as Dreyfus believes the
quality of these instruments meets the Funds' quality standards.
MUNICIPAL LEASE OBLIGATIONS. The Bond Funds may purchase municipal
lease obligations and certificates of participation in municipal lease
obligations. A municipal lease obligation does not constitute a general
obligation of the municipality for which the municipality's taxing power
is pledged. Ordinarily, a lease obligation will contain a "non-
appropriation" clause which provides that the municipality has no
obligation to make lease payments in future years unless money is
appropriated for such purpose on a yearly basis. Because of the risk of
non-appropriation, some lease obligations are issued with third-party
credit enhancements, such as insurance or a letter of credit. Lease
obligations are a relatively new type of financing that has not yet
developed the depth of marketability associated with more conventional
municipal obligations. For these reasons, before investing in a lease
obligation Dreyfus will consider, among other things, whether (1) the
leased property is essential to a governmental function of the
municipality, (2) the municipality is prohibited from substituting or
purchasing similar equipment if lease payments are not appropriated, and
(3) the municipality has maintained good market acceptability for its
lease obligations in the past. The Board of Trustees has established
guidelines for determining whether a Municipal Lease Obligation is a
liquid security. Such determination will be made based upon all relevant
factors including, the frequency of trades and quotes for the
obligation, the number of dealers willing to purchase or sell the
security and the number of potential buyers, the willingness of dealers
to undertake to make a market in the securities, and the nature of the
marketplace trades.
OTHER INVESTMENT COMPANIES. Each Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with the Fund's investment objective and policies and
permissible under the Investment Company Act of 1940, as amended (the
"1940 Act"). As a shareholder of another investment company, the Fund
would bear, along with other shareholders, its pro rata portion of the
other investment company's expenses, including advisory fees. These
expenses would be in addition to the advisory and other expenses that
the Fund bears directly in connection with its own operations.
TENDER OPTION BONDS. Each Fund may invest up to 10% of the value of
its assets in 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 sub
stantially 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. Dreyfus 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 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. Each Fund will not invest more than 15% of the value of
such Fund's net assets in illiquid securities, which would include
tender option bonds for which the required notice to exercise the tender
feature is more than seven days if there is no secondary market
available for these obligations.
CERTAIN RISK CONSIDERATIONS REGARDING THE STATE OF CALIFORNIA.
On July 15, 1994, Moody's, citing the State's deteriorating financial
position, lowered California's general obligation bond ratings from Aa
to A1. On July 15, 1994, S&P, citing the State's deteriorating financial
position, lowered California general obligation bond ratings from A+ to
A. Investors should be aware that certain California constitutional
amendments, legislative measures, executive orders, administrative
regulations and voter initiatives could result in certain adverse
consequences affecting California's Constitution and statutes that limit
the taxing and spending authority of California governmental entities
and may impair the ability of the issuers of some California Municipal
Obligations to maintain debt service on their obligations. Other
measures affecting the taxing or spending authority of California or its
political subdivisions may be approved or enacted in the future. Some of
the significant financial considerations relating to a Fund's
investments in California Municipal Obligations are summarized in the
SAI.CERTAIN RISK CONSIDERATIONS REGARDING THE COMMONWEALTH OF MASS
ACHUSETTS. The Massachusetts statutes that limit the taxing authority of
certain Massachusetts governmental entities may impair the ability of
some issuers of Massachusetts Municipal Obligations to maintain debt
service on their obligations. Some of the significant financial
considerations relating to investments in Massachusetts Municipal
Obligations are summarized in the SAI. It should be noted that the
Commonwealth has experienced fiscal difficulties in recent years,
including an operating deficit in each of the fiscal years ended June
30, 1989 through 1991. Budgeted operating funds ended fiscal 1992, 1993
and based on preliminary financial information, fiscal 1994, with an
excess of revenues and other sources over expenditures and other uses.
Budgeted revenues and other sources to be collected in fiscal 1995 are
currently estimated by the Executive Office of Administration and
Finance to fall short of the expenditures authorized by the fiscal 1995
budget.
During the period from 1989 through 1992, Massachusetts experienced a
slowdown in certain sectors of the economy, including high technology,
construction, real estate, financial services and manufacturing. Since
1992, employment within most of these secors has improved as part of a
general recovery of the economy. Employment losses within the
manufacturing sector have continued, but at a slower rate than in prior
years. Any significant imbalance in revenues and expenditures is likely
to affect the bond ratings and credit standing of the public authorities
and municipalities within Massachusetts, as well as of the Commonwealth
itself. Any such imbalance could adversely affect the market values and
marketability of obligations issued by such entities, and could result
in payment defaults on outstanding obligations.
CERTAIN RISK CONSIDERATIONS REGARDING THE STATE OF NEW YORK AND
NEW YORK CITY. Certain substantial issuers of New York Municipal
Obligations (including issuers whose obligations may be acquired by the
Funds) have experienced serious financial difficulties in recent years.
These difficulties have at times jeopardized the credit standing and
impaired the borrowing abilities of all New York issuers and have
generally contributed to higher interest costs for their borrowings and
fewer markets for their outstanding debt obligations. In recent years,
several different issues of municipal securities of New York State and
its agencies and instrumentalities and of New York City have been
downgraded by S&P and Moody's. A recurrence of the financial
difficulties previously experienced by certain issuers of New York
Municipal Obligations could result in defaults or declines in the market
values of those issuers' existing obligations and, possibly, in the
obligations of other issuers of New York Municipal Obligations. Default
by an issuer of New York Municipal Obligations with respect to the
payment of their municipal obligations could adversely affect the market
values and marketability of all New York Municipal Obligations, and,
consequently, the NAV of a Fund's portfolio. Other considerations
effecting the Funds' investments in New York Municipal Obligations are
summarized in the SAI.
PORTFOLIO TURNOVER. While securities are purchased for the Funds on
the basis of potential for current income and not for short-term trading
profits, the Funds' turnover rate may exceed 100%. A portfolio turnover
rate of 100% would occur, for example, if all the securities held
by the Funds were replaced once in a period of one year. A higher rate
of portfolio turnover (100% or greater) involves correspondingly greater
brokerage commissions and other expenses that must be borne directly by
the Funds and, thus, indirectly by its shareholders. In addition, a high
rate of portfolio turnover may result in the realization of larger
amounts of short-term capital gains that, when distributed to the Funds'
shareholders, are taxable to them as ordinary income. Nevertheless,
securities transactions for the Funds will be based only upon investment
considerations and will not be limited by any other considerations when
Dreyfus deems it appropriate to make changes in the Funds' assets.
LIMITING INVESTMENT RISKS AND CERTAIN RISK CONSIDERATIONS. The
Funds are subject to a number of investment limitations. Certain
limitations are matters of fundamental policy and may not be changed
without the affirmative vote of the holders of a majority of the Funds'
outstanding shares. The SAI describes all of the Funds' fundamental and
non-fundamental restrictions.
The investment objectives, policies, restrictions, practices and
procedures of the Funds, unless otherwise specified, may be changed
without shareholder approval. If a Fund's investment objective,
policies, restrictions, practices or procedures change, shareholders
should consider whether the Fund remains an appropriate investment in
light of the shareholder's then-current position and needs.
In order to permit the sale of the Funds' shares in certain states,
the Funds may make commitments more restrictive than the investment
policies and restrictions described in this Prospectus and the SAI.
Should the Funds determine that any such commitment is no longer in the
best interest of such Funds, it may consider terminating sales of its
shares in the states involved.
Each Fund is classified as a "non-diversified" investment company, as
defined under the 1940 Act, and therefore, each Fund could invest all of
its assets in the obligations of a single issuer or relatively few
issuers. However, the Funds intend to conduct their operations so that
each Fund will qualify under the Internal Revenue Code of 1986, as
amended (the "Code"), as a "regulated investment company". To continue
to qualify, among other requirements, each Fund will be required to
limit its investments so that, at the close of each quarter of the
taxable year, with respect to at least 50% of its total assets, not more
than 5% of such assets will be invested in the securities of a single
issuer. In addition, not more than 25% in value of each Fund's total
assets may be invested in the securities of a single issuer at the close
of each quarter of the taxable year. Additionally, due to the Funds'
non-diversified status, changes in the financial condition or in the
market's assessment of an individual issuer may cause a Fund's share
price to fluctuate to a greater degree than if the Fund were
diversified. However, the provisions of the Code place limits on the
extent to which a Fund's portfolio may be non-diversified.
The ability of the Funds to meet their investment objectives is
subject to the ability of municipal issuers to meet their payment
obligations. In addition, the portfolio of each Fund will be affected by
general changes in interest rates which may result in increases or
decreases in the value of Fund holdings. Investors should recognize
that, in periods of declining interest rates, the yield of each Fund
will tend to be somewhat higher than prevailing market rates, and in
periods of rising interest rates, the yield of each Fund will tend to be
somewhat lower. Also, when interest rates are falling, the influx of new
money to each Fund will likely be invested in portfolio instruments
producing lower yields than the balance of that Fund's portfolio,
thereby reducing the current yield of the Fund. In periods of rising
interest rates, the opposite can be expected to occur.
The Funds may invest without limit in Municipal Obligations which are
repayable out of revenue streams generated from economically related
projects or facilities or whose issuers are located in the same state.
Sizable investments in these obligations could increase risk to the
Funds should any of the related projects or facilities experience
financial difficulties. To the extent the Funds may invest in private
activity bonds, each Fund may invest only up to 5% of its total assets
in bonds where payment of principal and interest are the responsibility
of a company with less than three years operating history. Each Fund is
authorized to borrow up to 10% of its total assets for temporary or
emergency purposes and to pledge its assets to the same extent in
connection with such borrowings.
MANAGEMENT OF THE FUNDS
INVESTMENT MANAGER. Dreyfus, located at 200 Park Avenue, New York, New
York 10166, was formed in 1947. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). As of November 30, 1994, Dreyfus managed or a
dministered approximately $71 billion in assets for more than 1.9
million investor accounts nationwide.
Dreyfus serves as the Funds' investment manager. Dreyfus supervises
and assists in the overall management of the Funds' affairs under an
Investment Management Agreement with the Funds, subject to the overall
authority of the Company's Board of Trustees in accordance with
Massachusetts law. Pursuant to the Investment Management Agreement,
Dreyfus provides, or arranges for the provision by one or more third
parties of, investment advisory, administrative, custody, fund
accounting and transfer agency services to the Funds. As the Funds'
investment manager, Dreyfus manages the Funds by making investment
decisions based on the Funds' investment objectives, policies and
restrictions.
David A. Holmes has been employed by the Manager as the portfolio
manager of Premier Limited Term California Municipal Fund since October
17, 1994. Mr. Holmes has also been a portfolio manager for The Boston
Company's Tax-Exempt Fixed Income Fund since 1992. In that capacity, Mr
Holmes is responsible for managing tax-exempt debt securities with
orientation towards recognition of relative value as well as covering
evaluation of investment opportunities, including credit analysis and
representing tax-exempt fixed-income policies to clients and other
interested parties. Mr. Holmes received a B.S. in Public Administration
from the University of Indiana in 1984.
Kristin D. Lindquist has been employed by the Manager as the portfolio
manager of Premier Limited Term Massachusetts Municipal Fund and
Premier Limited Term New York Municipal Fund since October 17, 1994. Ms.
Lindquist is also a Vice President of Boston Safe Deposit and Trust
Company, a subsidiary of the Boston Company and Mellon Bank, where she
is responsible for managing Tax-Exempt Fixed Income Fund Portfolios for
the Private Asset Management Group. Prior to joining Boston Safe in
1991, Ms. Linqduist was an Assistant Vice President at Shawmut Bank,
N.A. where she traded municipal securities. She received her Bachelor of
Arts degree in economics from Colby College in 1986.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range
of financial products and services in domestic and selected
international markets. Mellon is among the twenty-five largest bank
holding companies in the United States based on total assets. Mellon's
principal wholly owned subsidiaries are Mellon Bank, Mellon Bank (DE)
National Association, Mellon Bank-(MD), The Boston Company, Inc., AFCO
Credit Corporation and a number of companies known as Mellon Financial
Services Corporations. Through its subsidiaries, including Dreyfus,
Mellon managed approximately $201 billion in assets as of September 30,
1994, including $76 billion in mutual fund assets. As of September 30,
1994, Mellon, through various subsidiaries, provided non-investment
services, such as custodial or administration services, for
approximately $659 billion in assets, including approximately $108
billion in mutual fund assets.
Under the Investment Management Agreement, the Funds have agreed to
pay Dreyfus a monthly fee at the annual rate of 0.50 of 1% of the value
of the Funds' average daily net assets. Dreyfus pays all of the Funds'
expenses, except brokerage fees, taxes, interest, fees and expenses of
the non-interested Trustees (including counsel fees), Rule 12b-1 fees
(if applicable) and extraordinary expenses. Although Dreyfus does not
pay for the fees and expenses of the non-interested Trustees (including
counsel fees), Dreyfus is contractually required to reduce its
investment management fee in an amount equal to the Funds' allocable
share of such fees and expenses. In order to compensate Dreyfus for
paying virtually all of the Funds' expenses, the Funds' investment
management fee is higher than the investment advisory fees paid by most
investment companies. Most, if not all, such companies also pay for
additional non-investment advisory expenses that are not paid by such
companies' investment advisers. From time to time, Dreyfus may waive
(either voluntarily or pursuant to applicable state limitations) a
portion of the investment management fees payable by the Funds. Prior to
October 17, 1994, the Funds was advised by Mellon Bank under the
Investment Management Agreement.
For the period from July 1, 1993 through April 3, 1994, the Premier
Limited Term Massachusetts Municipal Fund paid its investment adviser,
The Boston Company Advisors, Inc. (the "Boston Advisors") (an indirect
wholly owned subsidiary of Mellon Bank Corporation), 0.33% (annualized)
of the Fund's average daily net assets in investment advisory fees (net
of fees waived and expenses reimbursed), under the Fund's previous
investment advisory contract (such contract covered only the provision
of investment advisory and certain specified administrative services).
For the period from April 4, 1994 through the fiscal year ended June 30,
1994, the Premier Limited Term Massachusetts Municipal Fund paid Mellon
Bank 0.50% (annualized) of the Fund's average daily net assets in
investment management fees. For the period from December 1, 1993 through
April 3, 1994, the Premier Limited Term California Municipal Fund and
the Premier Limited Term New York Municipal Fund each paid their
investment adviser, Boston Advisors, 0.00% and 0.00% (annualized),
respectively, of such Fund's average daily net assets in investment
advisory fees (net of fees waived and expenses reimbursed), under such
Fund's previous investment advisory contract (such contract covered only
the provision of investment advisory and certain specified
administrative services). For the period from April 4, 1994 through the
fiscal year ended June 30, 1994, the Premier Limited Term California
Municipal Fund and the Premier Limited Term New York Municipal Fund each
paid Mellon Bank 0.50% and 0.50% (annualized), respectively, of such
Fund's average daily net assets in investment management fees.
For the fiscal year ended June 30, 1994, total operating expenses
(excluding Rule 12b-1 fees) (net fees waived and expenses reimbursed) of
the Premier Limited Term New York Municipal Fund were 0.67% and 0.62%
(annualized) of the Fund's average daily net assets for the Investor and
Trust Classes, respectively. For the period ended June 30, 1994, total
operating expenses (excluding Rule 12b-1 fees) (net of fees waived and
expenses reimbursed) of the Premier Limited Term California Municipal
Fund were 0.46% and 0.42% (annualized) of the Fund's average daily net
assets for the Investor and Trust Classes, respectively. For the period
ended June 30, 1994, total operating expenses (excluding Rule 12b-1
fees) (net of fees waived and expenses reimbursed) of the Premier
Limited Term New York Municipal Fund were 0.38% and 0.29% (annualized)
of the Fund's average daily net assets for the Investor and Trust
Classes, respectively.
In addition, Class A, B and C shares may be subject to certain
distribution and service fees. See "Distribution Plans."
Dreyfus may pay the Distributor for shareholder services from Dreyfus'
own assets, including past profits but not including the management fee
paid by the Funds. The Distributor may use part or all of such payments
to pay Service Agents in respect of these services.
Dreyfus is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in
the case of agency transactions, financial institutions that are
affiliated with Dreyfus or Mellon Bank or that have sold shares of the
Funds, if Dreyfus believes that the quality of the transaction and the
commission are comparable to what they would be with other qualified
brokerage firms. From time to time, to the extent consistent with their
investment objectives, policies and restrictions, the Funds may invest
in securities of companies with which Mellon Bank has a lending
relationship.
CUSTODIAN; TRANSFER AND DIVIDEND DISBURSING AGENT; AND SUB-ADM
INISTRATOR - Mellon Bank, One Mellon Bank Center, Pittsburgh, PA 15258
is the Fund's custodian. The Fund's Transfer and Dividend Disbursing
Agent is The Shareholder Services Group, Inc. (the "Transfer Agent"), a
subsidiary of First Data Corporation, P.O. Box 9671, Providence, Rhode
Island 02940-9671. Premier Mutual Fund Services, Inc. serves as the
Fund's sub-administrator and, pursuant to a Sub-Administration
Agreement, provides various administrative and corporate secretarial
services to the Fund.
HOW TO BUY FUND SHARES
GENERAL - The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"). The Distributor is located at One Exchange Place,
Boston, Massachusetts 02109. The Distributor is a wholly owned
subsidiary of Institutional Administration Services, Inc., a provider of
mutual fund administration services, the parent company of which is
Boston Institutional Group, Inc.
Class A shares, Class B shares and Class C shares may be purchased
only by clients of certain financial institutions (which may include
banks), securities dealers ("Selected Dealers") and Service Agents,
except that full-time or part-time employees or directors of Dreyfus or
any of its affiliates or subsidiaries, Board members of a fund advised
by Dreyfus, including members of the Company's Board, or the spouse or
minor child of any of the foregoing may purchase Class A shares directly
through the Distributor.
Class R shares are sold primarily to Banks acting on behalf of
customers having a qualified trust or investment account or relationship
at such institution. In addition, holders of Class R shares of the Fund
who have held their shares since April 4, 1994, may continue to purchase
Class R shares of the Fund, whether or not they otherwise would be
eligible to do so. Class R shares may be purchased for a retirement plan
only by a custodian, trustee, investment manager or other entity
authorized to act on behalf of such plan. Institutions effecting
transactions in Class R shares for the accounts of their clients may
charge their clients direct fees in connection with such transactions.
Shares of the Funds are also available through a servicing network
associated with Mellon Bank, an affiliate of Dreyfus. For more
information about purchasing Fund shares through the affiliate network
and a Prospectus, call 1-800-548-2868. Please read that Prospectus
carefully. Exchange and Shareholder Services, including the telephone
purchase options, and minimum and maximum dollar amounts associated with
such services, may vary depending upon the network through which you
purchase Fund shares.
When purchasing Fund shares, you must specify which Class is being
purchased. Stock certificates are issued only upon your written request.
No certificates are issued for fractional shares. The Funds reserve the
right to reject any purchase order.
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 Distribution and Service Plans. Each Service Agent
has agreed to transmit to its clients a schedule of such fees. You
should consult your Service Agent in this regard.
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 Fund shares by check or wire, or, with the exception
of Class R shares, through the TELETRANSFER Privilege described below.
Checks should be made payable to "Premier Limited Term California
Municipal Fund," "Premier Limited Term Massachusetts Municipal Fund, or
Premier Limited Term New York Municipal Fund." Payments to open new
accounts which are mailed should be sent to Premier Limited Term
California Municipal Fund, Premier Limited Term Massachusetts Municipal
Fund, or Premier Limited Term New York Municipal Fund, P.O. Box 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
Limited Term California Municipal Fund, Premier Limited Term
Massachusetts Municipal Fund, or Premier Limited Term New York Municipal
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. To purchase Class A, Class B or
Class C shares in your name, immediately available funds may be
transmitted by wire to The Bank of New York, DDA# 8900251379 for Class A
shares of the Premier Limited Term California Municipal Fund; DDA#
8900227893 for Class A shares of the Premier Limited Term Massachusetts
Municipal Fund: DDA# 8900251409 for Class A shares of the Premier
Limited Term New York Municipal Fund; DDA# 8900251387 for Class B shares
of the Premier Limited Term California Municipal Fund; DDA# 8900227907
for Class B shares of the Premier Limited Term Massachusetts Mu
nicipal Fund; DDA# 8900251417 for Class B shares of the Premier Limited
Term New York Municipal Fund; DDA# 8900251395 for Class C shares of the
Premier Limited Term California Municipal Fund; DDA# 8900227915 for
Class C shares of the Premier Limited Term Massachusetts Municipal Fund;
DDA# 8900251425 for Class C shares of the Premier Limited Term New York
Municipal Fund. For wire information with respect to Class R shares of
each Fund, please call 1-800-548-2868.
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, you should call 1-800-645-6561 after
completing your the wire payment in order to obtain your Fund account
num ber. Please include your Fund account number on the Funds' Account
Application and promptly mail the Account Application to the Funds, 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 Funds 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 ("ACH") member. You must
direct the institution to transmit immediately available funds through
the ACH system to The Bank of New York with instructions to credit your
Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS "1111."
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Other Distributions and
Taxes" and the Funds' Account Application for further information
concerning this requirement. Failure to furnish a certified TIN to the
Funds could subject you to a $50 penalty imposed by the Internal Revenue
Service (the "IRS").
NET ASSET VALUE ("NAV") - An investment portfolio's NAV refers to the
worth of one share. The NAV for shares of each Class of the Funds is
computed by adding, with respect to such Class of shares, the value of
the Funds' investments, cash, and other assets attributable to that
Class, deducting liabilities of the Class and dividing the result by the
number of shares of that Class outstanding. The valuation of assets for
determining NAV for the Funds may be summarized as follows:
The portfolio securities of the Funds, except as otherwise noted,
listed or traded on a stock exchange, are valued at the latest sale
price. If no sale is reported, the mean of the latest bid and asked
prices is used. Securities traded over-the-counter are priced at the
mean of the latest bid and asked prices but will be valued at the last
sale price if required by regulations of the SEC. When market quotations
are not readily available, securities and other assets are valued at a
fair value as determined in good faith in accordance with procedures
established by the Board of Trustees.
Bonds are valued through valuations obtained from a commercial pricing
service or at the most recent mean of the bid and asked prices provided
by investment dealers in accordance with procedures established by the
Board of Trustees.
Pursuant to a determination by the Board of Trustees that such value
represents fair value, debt securities with maturities of 60 days or
less held by the Funds are valued at amortized cost. When a security is
valued at amortized cost, it is valued at its cost when purchased, and
thereafter by assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument.
Orders for the purchase of Fund shares received by dealers by the
close of trading on the floor of the New York Stock Exchange ("NYSE")on
any business day and transmitted to the Distributor or its designee 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 NYSE 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 the Distributor or its designee before the close of its
business day.
NAV is determined on each day that the NYSE is open (a "business
day"), as of the close of business of the regular session of the NYSE
(usually 4 p.m. Eastern Time). Investments and requests to exchange or
redeem shares received by the Funds in proper form before the close of
business on the NYSE (usually 4 p.m., Eastern Time) are effective on,
and will receive the price determined on, that day (except investments
made by electronic funds transfer, which are effec tive two business
days after your call). Investment, exchange and redemption requests
received after the close of the NYSE are effective on and receive the
share price determined on the next business day.
The NAV of each Class of shares of most of The Premier Funds'
investment portfolios is published in leading newspapers daily. The NAV
of any Fund may also be obtained by calling 1-800-645-6561.
CLASS A SHARES
The public offering price of Class A shares 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 $100,000........ 3.00 3.10 2.75
$100,000 to less than $250,000 2.75 2.80 2.50
$250,000 to less than $500,000 2.25 2.30 2.00
$500,000 to less than $1,000,000 2.00 2.00 1.75
</TABLE>
There is no initial sales charge on purchases of $1,000,000 or more of
Class A shares. However, if you purchase Class A shares without an
initial sales charge as part of an investment of at least $1,000,000 and
redeem all or a portion of those shares within two years after purchase,
a CDSC of 1.00% will be imposed at the time of redemption. The terms
contained in the section of the Funds' Prospectus entitled "How to
Redeem Fund Shares - Contingent Deferred Sales Charge - Class B" (other
than the amount of the CDSC and its time periods) are applicable to the
Class A shares subject to a CDSC. Letter of Intent and Right of
Accumulation apply to such purchases of Class A shares.
Full-time employees of NASD member firms and full-time employees of
other financial institutions which have entered into an agreement with
the Distributor pertaining to the sale of Fund shares (or which
otherwise have a brokerage related or clearing arrangement with an NASD
member firm or financial institution with respect to the sale of such
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
the Distributor 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 NAV. In addition, Class A shares are offered
at net asset value to full-time or part-time employees or directors of
Dreyfus or any of its affiliates or subsidiaries, Board members of a
fund advised by Dreyfus, including members of the Funds' Board, or the
spouse or minor child of any of the foregoing.
Holders of Class A accounts of the Funds as of December 28, 1994, may
continue to purchase Class A shares of the Funds at NAV. However,
investments by such holders in other funds advised by Dreyfus will be
subject to the applicable front end sales load.
Class A shares may be purchased at NAV through certain broker-dealers
and other financial institutions which have entered into an agreement
with the Distributor, which includes a requirement that such shares be
sold for the benefit of clients participating in a "wrap account" or a
similar program under which such clients pay a fee to such broker-dealer
or other financial institution.
The dealer reallowance may be changed from time to time but will
remain the same for all dealers. The Distributor, at its expense, may
provide additional promotional incentives to dealers that sell shares of
funds advised by Dreyfus which are sold with a sales load, such as Class
A shares. In some instances, those incentives may be offered only to
certain dealers who have sold or may sell significant amounts of shares.
Dealers receive a larger percentage of the sales load from the
Distributor than they receive for selling most other funds.
CLASS B SHARES
The public offering price for Class B shares is the NAV 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." The Distributor compensates
certain Service Agents for selling Class B shares at the time of
purchase from the Distributor's own assets. The proceeds of the CDSC and
the distribution fee, in part, are used to defray these expenses.
CLASS C SHARES
The public offering price for Class C shares is the NAV per share of
that Class. No initial sales charge is imposed at the time of purchase.
A CDSC, however, is imposed on redemptions of Class C shares made within
the first year of purchase. See "Class B shares" above and "How to
Redeem Fund Shares."
CLASS R SHARES
The public offering price for Class R shares is the NAV per share of
that Class.
RIGHT OF ACCUMULATION- CLASS A SHARES
Reduced sales loads apply to any purchase of Class A shares, shares of
other funds in the Premier Family of Funds, shares of certain other
funds advised by Dreyfus 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 SAI, where the aggregate investment, including such purchase, is
$100,000 or more. If, for example, you previously purchased and still
hold Class A shares, or shares of any other Eligible Fund or combination
thereof, with an aggregate current market value of $80,000 and
subsequently purchase Class A shares or shares of an Eligible Fund
having a current value of $40,000, the sales load applicable to the
subsequent purchase would be reduced to 2.75% 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 the Distributor if orders are made by
wire, or the Transfer Agent if orders are made by mail. The reduced
sales load is subject to confirmation of your holdings through a check
of appropriate records.
TELETRANSFER PRIVILEGE (NOT APPLICABLE TO CLASS R SHARES)
You may purchase Fund shares (minimum $500 and maximum $150,000 per
day) by telephone if you have checked the appropriate box and supplied
the necessary information on the Funds' Account Application or have a
filed Shareholder 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 ACH member may be so
designated. The Funds 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 of Fund shares by telephoning 1-800-221-4060 or,
if calling from overseas, 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 described in this Prospectus. You should consult your Service
Agent in this regard.
FUND EXCHANGES
You may purchase, in exchange for shares of a Class, shares of the
same class of certain other funds managed or administered by Dreyfus, 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 service, please call 1-800-
645-6561 to determine if it is available and whether any conditions are
imposed on its use. With respect to Class R shares held by Retirement
Plans, exchanges may be made only between a shareholder's Retirement
Plan account in one fund and such shareholder's Retirement Plan in
another fund.
To request an exchange, your Service Agent acting on your behalf must
give exchange instructions to the Transfer Agent in writing or by
telephone. 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 by calling 1-800-645-6561. 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. The ability to issue exchange instructions
by telephone is given to all Fund shareholders automatically,
unless you check the relevant "No" box on the Account Application,
indicating that you specifically refuse this privilege. The Telephone
Exchange Privilege may be established for an existing account by written
request, signed by all shareholders on the account, or by a Separate
Shareholder Services Form, also available by calling 1-800-645-6561. If
you previously have established the Telephone Exchange Privilege, you
may telephone exchange instructions by calling 1-800-221-4060 or, if
calling from overseas, 1-401-455-3306. See "How to Redeem Fund Shares -
Procedures." Upon an exchange, 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: Telephone
Exchange Privilege, TELETRANSFER Privilege and the dividends and
distributions payment option (except for Dividend Sweep) selected by the
investor.
Shares will be exchanged at the next determined NAV; 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 or C
shares at the time of an exchange; however, Class B or C shares acquired
through an exchange will be subject to the higher CDSC applicable to the
exchanged or acquired shares. The CDSC applicable on redemption of the
acquired Class B or C shares will be calculated from the date of the
initial purchase of the Class B or C shares exchanged, as the case may
be. 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 share
s of the fund 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
other distributions paid with respect to the foregoing categories of
shares. To qualify, at the time of the exchange your Service Agent must
notify the Distributor. Any such qualification is subject to
confirmation of your holdings through a check of appropriate records.
See "Shareholder Services" in the SAI. 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 SEC. The Fund reserves the right to reject any exchange request
in whole or in part. The availability of fund exchanges may be modified
or terminated at any time upon notice to shareholders.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder
may realize, or an exchange on behalf of a Retirement Plan which is not
tax exempt may result in, 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 shares of
a Fund, in shares of the same class 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 NAV; 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 or C shares at the time
of an exchange; however, Class B or C shares acquired through an
exchange will be subject to the higher CDSC applicable to the exchanged
or acquired shares. The CDSC applicable on redemption of the acquired
Class B or C shares will be calculated from the date of the initial
purchase of the Class B or C shares exchanged, as the case may be. See
"Shareholder Services" in the SAI. The right to exercise this Privilege
may be modified or canceled by the Funds or the Transfer Agent. You may
modify or cancel your exercise of this Privilege at any time by mailing
written notification to Premier Limited Term California Municipal Fund,
Premier Limited Term Massachusetts Municipal Fund, or Premier Limited
Term New York Municipal Fund, P.O. Box 6587, Providence, Rhode Island
02940-6587. The Funds 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 the 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 ACH 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 by calling 1-800-645-6561. You may cancel
your participation in this Privilege or change the amount of purchase at
any time by mailing written notification to Premier Limited Term
California Municipal Fund, Premier Limited Term Massachusetts Municipal
Fund, or Premier Limited Term New York Municipal Fund, P.O. Box 6587,
Providence, Rhode Island 02940-6587, and the notification will be
effective three business days following receipt. The Funds may modify or
terminate this Privilege at any time or charge a service fee. No such
fee currently is contemplated.
DIVIDEND OPTIONS
Dividend Sweep enables you to invest automatically dividends or
dividends and capital gain distributions, if any, paid by a Fund in
shares of the same class of another fund in the Premier Family of Funds
or certain of the Dreyfus Family of Funds of which you are an investor.
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, such shareholder 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 or class 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
SAI. Dividend ACH permits you to transfer electronically on the payment
date dividends or dividends and capital gain distributions, if any, from
a Fund to a designated bank account. Only an account maintained at a
domestic financial institution which is an ACH member may be so
designated. Banks may charge a fee for this service.
For more information concerning these Privileges, or to request a
Dividend Options Form, please call toll free 1-800-645-6561. You may
cancel these Privileges by mailing written notification to Premier
Limited Term California Municipal Fund, Premier Limited Term
Massachusetts Municipal Fund, or Premier Limited Term New York Municipal
Fund, P.O. Box 6587, Providence, Rhode Island 02940-6587. To select a
new fund after cancellation, you must submit a new Dividend Options
Form. Enrollment in or cancellation of these Privileges is effective
three business days following receipt. These Privileges are available
only for existing accounts and may not be used to open new accounts.
Minimum subsequent investments do not apply for Dividend Sweep. The
Funds may modify or terminate these Privileges 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. You should consider whether Direct Deposit of your entire payment
into a fund with fluctuating NAV, such as the Funds, may be appropriate
for you. 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 this Privilege. The appropriate
form may be obtained by calling 1-800-645-6561. 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 Funds may terminate
your participation upon 30 days' notice to you.
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 by
calling 1-800-645-6561. The Automatic Withdrawal Plan may be ended at
any time by the shareholder, the Fund or the Transfer Agent. Shares for
which certificates have been issued may not be redeemed through the
Automatic Withdrawal Plan.
Class B and C shares withdrawn pursuant to the Automatic Withdrawal
Plan will be subject to any applicable CDSC. Purchases of additional
Class A shares where the 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 the Distributor,
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 of the Funds held in escrow to
realize the difference. Signing a Letter of Intent does not bind you to
purchase, or the Funds 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.
HOW TO REDEEM FUND SHARES
GENERAL
You may request redemption of your 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 Funds will redeem the
shares at the next determined NAV 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 Funds impose no charges (other than any applicable CDSC) when
shares are redeemed directly through the Distributor. Service Agents or
other institutions may charge their clients a nominal fee for effecting
redemptions of Fund shares. Any certificates 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 Funds' then-current net asset value.
The Funds 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 SEC. 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 FUNDS 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 Funds reserve the right to redeem your account at its option upon
not less than 45 days' written notice if the net asset value of your
account is $500 or less and remains so during the notice period.
CONTINGENT DEFERRED SALES CHARGE - CLASS B SHARES
A CDSC payable to the Distributor is imposed on any redemption of
Class B shares 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 the Funds 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 other 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 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 Funds' 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
- ---------------- ----------------------
First.................................................... 3.00
Second................................................... 3.00
Third.................................................... 2.00
Fourth................................................... 2.00
Fifth.................................................... 1.00
Sixth.................................................... .00
In determining whether a CDSC is applicable to a redemption, the
calculation will be made in a manner that results in the lowest possible
rate. It will be assumed that the redemption is made first of amounts
representing shares acquired pursuant to the reinvestment of dividends
and other 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 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.
CONTINGENT DEFERRED SALES CHARGE - CLASS C SHARES
A CDSC of .75% payable to the Distributor is imposed on any redemption
of Class C shares within one year of the date of purchase. The basis for
calculating the payment of any such CDSC will be the method used in
calculating the CDSC for Class B shares. See "Contingent Deferred Sales
Charge - Class B shares" above.
WAIVER OF CDSC
The CDSC applicable to Class B and Class C shares 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 as a result of a combination of any
investment company with the Funds by merger, acquisition of assets or
otherwise, and (c) redemptions by such shareholders as the SEC or its
staff may permit. If the Funds' Trustees determine to discontinue the
waiver of the CDSC, the disclosure in the Funds' 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 Funds' 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 the
Distributor. 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, or, except for Class R shares, 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 and institutions. The Funds makes available to
certain large institutions the ability to issue redemption instructions
through compatible computer facilities.
You may redeem or exchange Fund shares by telephone if you have
checked the appropriate box on the Funds' Account Application or have
filed a Shareholder Services Form with the Transfer Agent. If you select
the TELETRANSFER Privilege 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 Funds will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine and, if it does not follow such
procedures, the Funds or the Transfer Agent may be liable for any losses
due to unauthorized or fraudulent instructions. Neither the Funds 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 Funds' net asset value may fluctuate.
REGULAR REDEMPTION. Under the regular redemption procedure, you may
redeem your shares by written request mailed to Premier Limited Term
California, Massachusetts, or New York Municipal Fund, P.O. Box 6587,
Providence, Rhode Island 02940-6587. Redemption requests may be deli
vered in person only to a Dreyfus Financial Center. These requests will
be forwarded to the Fund and will be processed only upon receipt
thereby. For the location of the nearest financial center, please call
the telephone number listed under "General Information." Redemption
requests must be signed by each shareholder, including each owner of a
joint account, and each signature must be guaranteed. The Transfer Agent
has adopted standards and procedures pursuant to which signature-
guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP"), and the Stock Exchanges Medallion Program.
For more information with respect to signature-guarantees, please call
the telephone number listed under "General Information."
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.
TELETRANSFER PRIVILEGE (NOT APPLICABLE TO CLASS R SHARES). 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 Funds' Account Application or have filed a Shareholder 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 ACH member may be so designated. Redemption proceeds will be
on deposit in your account at an ACH 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 Funds 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 Funds 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 calling from overseas, 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 NYSE (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 NYSE, 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, the Distributor 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 NYSE on any business day and transmitted to
the Distributor or its designee 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 NYSE on that day.
Otherwise, the shares will be redeemed at the next determined NAV. 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 NAV 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 PLANS
(CLASS A PLAN AND CLASS B AND C PLANS)
Class A shares are subject to a Distribution Plan adopted pursuant to
Rule 12b-1 under the 1940 Act ("Rule 12b-1"). Class B and C shares are
subject to a Distribution Plan and a Service Plan, each adopted pursuant
to Rule 12b-1. Potential investors should read this Prospectus in light
of the terms governing Agreements with their Service Agents. A Service
Agent entitled to receive compensation for selling and servicing the
Funds' shares may receive different compensation with respect to one
class of shares over another.
DISTRIBUTION PLAN
Class A shares - The Class A shares of the Fund bear some of the cost
of selling those shares under the Distribution Plan (the "Plan"). The
Plan allows the Fund to spend annually up to 0.25% of its average daily
net assets attributable to Class A shares to compensate Dreyfus Service
Corporation, an affiliate of Dreyfus, for shareholder servicing
activities and the Distributor for shareholder servicing activities and
expenses primarily intended to result in the sale of Class A shares of
the Fund. The Plan allows the Distributor to make payments from the Rule
12b-1 fees it collects from the Fund to compensate Service Agents that
have entered into Selling Agreements ("Agreements") with the
Distributor. Under the Agreements, the Service Agents are obligated to
provide distribution related services with regard to the Fund and/or
shareholder services to the Service Agent's clients that own Class A
shares of the Fund.
DISTRIBUTION AND SERVICE PLANS - CLASS B AND C
Under a Distribution Plan adopted pursuant to Rule 12b-1, each Fund
pays the Distributor for distributing the Funds' Class B and C shares at
an aggregate annual rate of .50 of 1% of the value of the average daily
net assets of Class B and C. Under a Service Plan adopted pursuant to
Rule 12b-1, the Funds pays Dreyfus Service Corporation or the
Distributor for the provision of certain services to the holders of
Class B and C shares a fee at the annual rate of .25 of 1% of the value
of the average daily net assets of Class B and C. The services provided
may include personal services relating to shareholder accounts, such as
answering shareholder inquiries regarding the Funds and providing
reports and other information, and providing services related to the
maintenance of such shareholder accounts. With regard to such services,
each Service Agent is required to disclose to its clients any
compensation payable to it by the Funds and any other compensation
payable by their clients in connection with the investment of their
assets in Class B and C shares. The Distributor may pay one or more
Service Agents in respect of distribution and other services for these
Classes of shares. The Distributor determines the amounts, if any, to be
paid to Service Agents under the Distribution and Service Plans and the
basis on which such payments are made. The fees payable under the
Distribution and Service Plans are payable without regard to actual
expenses incurred.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
Each Fund declares daily and pays dividends monthly from its net
investment income, if any, and distributes any net realized gains on an
annual basis, but it may make distributions on a more frequent basis to
comply with the distribution requirements of the Code, in all events in
a manner consistent with the provisions of the 1940 Act. The Fund will
not make distributions from net realized gains unless capital loss
carryovers, if any, have been utilized or have expired. Investors may
choose whether to receive dividends and other distributions in cash or
to reinvest them in additional Fund shares. All expenses are accrued
daily and deducted before declaration of dividends to investors. Shares
purchased on a day on which a Fund calculates its NAV will begin to
accrue dividends on that day, and redemption orders effected on any
particular day will receive dividends declared only through the business
day prior to the day of redemption. Dividends paid by each Class will be
calculated at the same time and in the same manner and will be in the
same amount, except that the expenses attributable solely to a
particular Class will be borne exclusively by that Class. Class B and C
shares will receive lower per share dividends than Class A shares which
will receive lower per share dividends than Class R shares, because of
the higher expenses borne by the relevant Class. See "Expense Summary."
It is expected that the Funds 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 will relieve the Funds
of any liability for Federal income tax to the extent its earnings are
distributed in accordance with applicable provisions of the Code.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains and all or a
portion of any gains realized from the sale or other disposition of
certain market discount bonds, paid by the Funds will be taxable to U.S.
shareholders, including certain non-qualified Retirement Plans, as
ordinary income whether received in cash or reinvested in Fund shares.
Distributions from the Funds' net realized long-term capital gains will
be taxable to such shareholders as long-term capital gains for Federal
income tax purposes, regardless of how long the shareholders have held
their Fund shares and whether such distributions are received in cash or
reinvested in Fund shares. The net capital gain of an individual
generally will not be subject to Federal income tax at a rate in excess
of 28%. Dividends and other distributions also may be subject to state
and local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term capital gains and all or a
portion of any gains realized from the sale or other disposition of
certain market discount bonds, paid by the Funds to a foreign investor
generally are subject to U.S. withholding tax 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 capital gains paid
by the Funds 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. 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 other
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 net realized, long-term capital gains, if any, paid
during the year.
The Code provides for the "carryover" of some or all of the sales load
imposed on Class A shares if (1) an investor redeems those shares or
exchanges those shares for shares of another fund advised or
administered by Dreyfus within 91 days of purchase and (2) in the case
of a redemption, acquires other Fund Class A shares through exercise of
the Reinvestment Privilege or, in the case of an exchange, such other
fund reduces or eliminates its otherwise applicable sales load for the
purpose of the exchange. In this case, the amount of the sales load
charged the investor for the original Class A shares, up to the amount
of the reduction of the sales load pursuant to the Reinvestment
Privilege or on the exchange, as the case may be, is not included in the
basis of such shares for purposes of computing gain or loss on the
redemption or the exchange, and instead is added to the basis of the
fund shares received pursuant to the Reinvestment Privilege or the
exchange.
With respect to individual investors, Federal regulations generally
require the Funds to withhold ("backup withholding") and remit to the
U.S. Treasury 31% of dividends, distributions from net realized long-
term capital 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 with
holding 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 Funds 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.
The Funds may be subject to a non-deductible 4% excise tax, measured
with respect to certain undistributed amounts of taxable investment
income and capital gains.
You should consult your tax advisers regarding specific questions as
to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance for each Class may be
calculated on the basis of 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 Funds during the measuring period were
reinvested in shares of the same Class. These figures also take into
account any applicable service and distribution fees. As a result, at
any given time, the performance of Class B and C should be expected to
be lower than that of Class A and the performance of Class A, B and C
should be expected to be lower than that of Class R. Performance for
each Class will be calculated separately.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment 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 other 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 the Funds' performance will include the
Funds' average annual total return for one, five and ten year periods,
or for shorter periods depending upon the length of time during which
the Funds have operated. Computations of average annual total return for
periods of less than one year represent an annualization of the Funds'
actual total return for the applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and other 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 net asset value (or maximum offering price in the case
of Class A shares) per share at the beginning of the period.
Advertisements may include the percentage rate of total return or may
include the value of a hypothetical investment at the end of the period
which assumes the application of the percentage rate of total return.
Total return also may be calculated by using the net asset value per
share at the beginning of the period instead of the maximum offering
price per share at the beginning of the period for Class A shares or
without giving effect to any applicable CDSC at the end of the period
for Class B or C shares. Calculations based on the net asset value per
share do not reflect the deduction of the sales load on the Funds' Class
A shares, which, if reflected, would reduce the performance quoted.
The Funds may also advertise the yield and tax-equivalent yield on a
Class of shares. The Funds' yield is calculated by dividing a Class of
shares' annualized net investment income per share during a recent 30-
day (or one month) period by the maximum public offering price per Class
of such share on the last day of that period. Since yields fluctuate,
yield data cannot necessarily be used to compare an investment in a
Class of shares with bank deposits, savings accounts, and similar
investment alternatives which often provide an agreed-upon or guaranteed
fixed yield for a stated period of time. The tax-equivalent yield of a
Fund shows the level of taxable yield needed to produce an after-tax
equivalent to such Fund's tax-free yield. This is done by increasing a
class' yield by the amount necessary to reflect the payment of federal
income tax (and state income tax, if applicable) at a stated tax rate.
Performance will vary from time to time and past results are not
necessarily representative of future results. You 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.
The Funds may compare the performance of its shares with various
industry standards of performance including Lipper Analytical Services,
Inc. ratings. Performance rankings as reported in CHANGING TIMES,
BUSINESS WEEK, INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL, MUTUAL
FUND FORECASTER, NO LOAD INVESTOR, MONEY MAGAZINE, MORNINGSTAR MUTUAL
FUND VALUES, U.S. NEWS AND WORLD REPORT, FORBES, FORTUNE, BARRON'S and
similar publications may also be used in comparing the Funds'
performance. Furthermore, the Funds may quote its shares' total returns
and yields in advertisements or in shareholder reports. The Funds may
also advertise non-standardized performance information, such as total
return for periods other than those required to be shown or cumulative
performance data. The Funds may advertise a quotation of yield or other
similar quotation demonstrating the income earned or distributions made
by the Funds.
GENERAL INFORMATION
The Company was organized as a Massachusetts business trust under the
laws of the Commonwealth of Massachusetts on March 28, 1983, under the
name The Boston Company Tax-Free Municipal Funds. The Company then
changed its name to The Laurel Tax-Free Municipal Funds, and
subsequently changed its name to the Dreyfus/Laurel Tax-Free Municipal
Funds on October 17, 1994. The Company is registered with the SEC as an
open-end management investment company, commonly known as a mutual fund.
The Company offers shares of beneficial interest of separate investment
portfolios without par value (each a "fund"). The Trustees have
authorized shares of each Fund to be issued in four classes - Class A,
Class B, Class C and Class R.
Each share (regardless of Class) has one vote. All shares of all funds
(and Classes thereof) vote together as a single Class, except as to any
matter for which a separate vote of any fund or Class is required by the
1940 Act, and except as to any matter which affects the interests of one
or more particular funds or Classes, in which case only the shareholders
of the affected fund or Classes are entitled to vote, each as a separate
Class. Only holders of Class A, B or C shares, as the case may be, will
be entitled to vote on matters submitted to shareholders pertaining to
the Distribution Plan relating to that Class.
At December 28, 1994, Mellon Bank, Dreyfus' parent, owned of record
through its direct and indirect subsidiaries more than 25% of the Fund's
outstanding voting shares, and is deemed, under the 1940 Act, to be a
controlling shareholder.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Funds to hold annual meetings of shareholders. As a
result, Fund shareholders may not consider each year the election of
Trustees or the appointment of auditors. However, pursuant to the Funds'
By-Laws, the holders of at least 10% of the shares outstanding and
entitled to vote may require the Funds to hold a special meeting of
shareholders for purposes of removing a Trustee from office and for any
other purpose. Fund shareholders may remove a Trustee by the affirmative
vote of a majority of the Funds' outstanding voting shares. In addition,
the Board of Trustees will call a meeting of shareholders for the
purpose of electing Trustees if, at any time, less than a majority of
the Trustees then holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and will send
you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Funds at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144 or by calling toll-
free 1-800-554-4611.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE
FUNDS' SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
FUNDS. 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.
__________________________________________________________________________
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
CLASS A, CLASS B, CLASS C AND CLASS R
PREMIER LIMITED TERM MUNICIPAL FUND
CLASS A, CLASS B, CLASS C AND CLASS R
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
^ December 28, 1994
--------------------------------------------------------------------------
This Statement of Additional Information ("SAI"), which
is not a prospectus, supplements and should be read in conjunction with
the current Prospectuses of the Premier Limited Term California^ Municipal
Fund ("California Municipal Fund"), Premier Limited Term Massachusetts
Municipal Fund ("Massachusetts Municipal Fund"), and Premier Limited Term
New York Municipal Fund ("New York Municipal Fund"), (formerly the Laurel
California Tax-Free Bond Fund, Laurel Massachusetts Tax-Free Bond Fund,
and Laurel New York Tax-Free Bond Fund, respectively) and the Premier
Limited Term Municipal Fund ("Municipal Fund") (formerly the Laurel Tax
Free Bond Fund) (the "Funds"), dated December ^ 28, 1994, as they may be
revised from time to time. The Funds are separate portfolios of the
Dreyfus/Laurel Tax-Free Municipal Funds, a managed investment (the " ^
Trust"), known as a mutual fund. To obtain a copy of a Fund's Prospectus,
please write to the Fund at ^ 144 Glenn Curtiss Boulevard, Uniondale, New
York 11556-0144, or call the following numbers:
Call Toll Free 1-800-^ 645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Funds'
investment manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Funds' shares.
<PAGE>
TABLE OF CONTENTS
Page
----
Investment Objective and Management Policies . . . . . . . . . . . . . .
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . .
Management Arrangements . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution and Service Plans . . . . . . . . . . . . . . . . . . . . .
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . .
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . .
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . .
Dividends, Other Distributions and Taxes . . . . . . . . . . . . . . . .
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . .
Performance Information . . . . . . . . . . . . . . . . . . . . . . . . .
Information About the Fund . . . . . . . . . . . . . . . . . . . . . . .
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors . . . . . . . . . . . . . . . . . . .
Financial ^ Statements . . . . . . . . . . . . . . . . . . . . . . . . .
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INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectuses entitled
"Description of the Fund."
Portfolio Securities
--------------------
Description of Municipal Obligations. For purposes of this
Statement of Additional Information, the term "Municipal Obligations"
shall mean, with respect to the Municipal Fund, debt obligations issued by
states, cities, counties, municipalities, municipal agencies and regional
districts, the interest from which is, in the opinion of counsel to the
respective issuers, exempt from Federal income taxes. The term "Municipal
Obligations" and "Massachusetts Municipal Obligations" shall mean, with
respect to the Massachusetts Municipal ^ Fund, debt obligations issued by
the Commonwealth of Massachusetts, its political subdivisions,
municipalities and public authorities and municipal obligations issued by
other governmental entities if, in the opinion of counsel to the
respective issuers, the interest from such obligations is excluded from
gross income for Federal income tax purposes and is exempt from Federal
and Massachusetts personal income taxes. The term "Municipal Obligations"
and "California Municipal Obligations" shall mean, with respect to the
California Municipal ^ Fund, debt obligations issued by the State of
California, its political subdivisions, municipalities and public
authorities and municipal obligations issued by other government entities
if, in the opinion of counsel to the respective issuers, the interest from
such obligations is exempt from Federal and California personal income
taxes. The term "Municipal Obligations" and "New York Municipal
Obligations" shall mean, with respect to the New York Municipal Fund ^,
debt obligations issued by the State of New York, its political
subdivisions, municipalities and public authorities and municipal
obligations issued by other governmental entities if, in the opinion of
counsel to the respective issuers, the interest from such obligations is
excluded from gross income for Federal income tax purposes and is exempt
from Federal and New York personal income taxes. "Municipal Obligations"
(and "Massachusetts Municipal Obligations," "California Municipal
Obligations" and "New York Municipal Obligations") include the following:
Municipal Bonds. Municipal Bonds, which generally have a
maturity of more than one year when issued, have two principal
classifications: General Obligation Bonds and Revenue Bonds. A Private
Activity Bond is a particular kind of Revenue Bond. The classification of
General Obligation Bonds, Revenue Bonds and Private Activity Bonds are
discussed below.
1. General Obligation Bonds. The proceeds of these obligations
are used to finance a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and
sewer systems. General Obligation Bonds are secured by the issuer's
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<PAGE>
pledge of its faith, credit and taxing power for the payment of principal
and interest.
2. Revenue Bonds. Revenue Bonds are issued to finance a wide
variety of capital projects including: electric, gas, water and sewer
systems; highways, bridges and tunnels; port and airport facilities;
colleges and universities; and hospitals. The principal security for a
Revenue Bond is generally the net revenues derived from a particular
facility, group of facilities or, in some cases, the proceeds of a special
excise or other specific revenue source. Although the principal security
behind these bonds may vary, many provide additional security in the form
of a debt service reserve fund whose money may be used to make principal
and interest payments on the issuer's obligations. Some authorities
provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.
3. Private Activity Bonds. Private Activity Bonds, which are
considered Municipal Bonds if the interest paid thereon is exempt from
Federal income tax, are issued by or on behalf of public authorities to
raise money to finance various privately operated facilities for business
and manufacturing, housing, sports and pollution control. These bonds are
also used to finance public facilities such as airports, mass transit
systems, ports and parking. The payment of the principal and interest on
such bonds is dependent solely on the ability of the facility's user to
meet its financial obligations and the pledge, if any, of real and
personal property so financed as security for such payment. As noted in
the Prospectuses and discussed below under "Taxes," interest income on
these bonds may be an item of tax preference subject to the Federal
alternative minimum tax for individuals and corporations.
Municipal Notes. Municipal Notes generally are used to provide
for short-term capital needs and generally have maturities of thirteen
months or less. Municipal Notes include:
1. Tax Anticipation Notes. Tax Anticipation Notes are issued to
finance working capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenue, such as income,
sales, use and business taxes, and are payable from these specific future
taxes.
2. Revenue Anticipation Notes. Revenue Anticipation Notes are
issued in expectation of receipt of other kinds of revenue, such as
Federal revenues available under the Federal Revenue Sharing Programs.
3. Bond Anticipation Notes. Bond Anticipation Notes are issued
to provide interim financing until long-term financing can be arranged.
In most cases, the long-term bonds then provide the money for the
repayment of the Notes.
Municipal Commercial Paper. Issues of Municipal Commercial Paper
typically represent short-term, unsecured, negotiable promissory notes.
These obligations are issued by agencies of state and local governments to
4
<PAGE>
finance seasonal working capital needs of municipalities or to provide
interim construction financing and are paid from general revenues of
municipalities or are refinanced with long-term debt. In most cases,
Municipal Commercial Paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions.
Municipal Lease Obligations. Municipal leases may take the form
of a lease or a certificate of participation in a purchase contract issued
by state and local government authorities to obtain funds to acquire a
wide variety of equipment and facilities such as fire and sanitation
vehicles, computer equipment and other capital assets. A lease obligation
does not constitute a general obligation of the municipality for which the
municipality's taxing power is pledged, although the lease obligation is
ordinarily backed by the municipality's covenant to budget for,
appropriate and make payments due under the lease obligation. Municipal
leases have special risks not normally associated with Municipal Bonds.
These obligations frequently contain "non-appropriation" clauses that
provide that the governmental issuer of the obligation has no obligation
to make future payments under the lease or contract unless money is
appropriated for such purposes by the legislative body on a yearly or
other periodic basis. In addition to the non-appropriation risk,
municipal leases represent a type of financing that has not yet developed
the depth of marketability associated with Municipal Bonds; moreover,
although the obligations will be secured by the leased equipment, the
disposition of the equipment in the event of foreclosure might prove
difficult. For purposes of the 15% limitation on the purchase of illiquid
securities ^, a Fund will not consider the municipal lease obligations or
certificates of participation in municipal lease obligations in which it
invests as liquid, unless Dreyfus shall determine, based upon such factors
as the frequency of trades and quotes for the obligation, the number of
dealers willing to purchase or sell the security and the number of other
potential buyers, the willingness of dealers to undertake to make a market
in the security and the nature of marketplace trades, that a security
shall be treated as liquid for purposes of such limitation.
Obligations of issuers of Municipal Obligations are subject to
the provisions of bankruptcy, insolvency and other laws affecting the
rights and remedies of creditors. In addition, the obligations of such
issuers may become subject to laws enacted in the future by Congress,
state legislators, or referenda extending the time for payment of
principal and/or interest, or imposing other constraints upon enforcement
of such obligations or upon municipalities to levy taxes. There is also
the possibility that, as a result of litigation or other conditions, the
power or ability of any issuer to pay, when due, the principal of and
interest on its Municipal Obligations may be materially affected.
Investments in Municipal Bond Index Futures Contracts and Options
on Interest Rate Futures Contracts. The Funds may invest in municipal
bond index futures contracts and interest rate futures contracts that are
traded on a domestic exchange or board of trade. Such investments may be
made by a Fund solely for the purpose of hedging against changes in the
5
<PAGE>
value of its portfolio securities due to anticipated changes in interest
rates and market conditions, and not for purposes of speculation.
Further, such investments will be made only in unusual circumstances, such
as when Dreyfus anticipates an extreme change in interest rates or market
conditions.
Municipal Bond Index Futures Contracts. A municipal bond index
futures contract is an agreement pursuant to which two parties agree to
take or make delivery of an amount of cash equal to a specific dollar
amount times 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. No physical delivery of the underlying
municipal bonds in the index is made. Municipal bond index futures
contracts based on an index of 40 tax-exempt, long-term municipal bonds
with an original issue size of at least $50 million and a rating of A- or
higher by S&P or A or higher by Moody's began trading mid-1985.
The purpose of the acquisition or sale of a municipal bond index
futures contract by a Fund, as the holder of long-term municipal
securities, is to protect the Fund from fluctuations in interest rates on
tax-exempt securities without actually buying or selling long-term
municipal securities.
Unlike the purchase or sale of a Municipal Bond, no consideration
is paid or received by a Fund upon the purchase or sale of a futures
contract. Initially, a Fund will be required to deposit with the broker
an amount of cash or cash equivalents equal to approximately 10% of the
contract amount (this amount is subject to change by the board of trade on
which the contract is traded and members of such board of trade may
charge a higher amount). 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 contract,
assuming that all contractual obligations have been satisfied. Subsequent
payments, known as variation margin, to and from the broker, will be made
on a daily basis as the price of the index 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 the
contract, a Fund may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing position in
the futures contract.
There are several risks in connection with the use of a municipal
bond index futures contract as a hedging device. Successful use of
municipal bond index futures contracts by the Funds is subject to Dreyfus'
ability to predict correctly movements in the direction of interest rates.
Such predictions involve skills and techniques which may be different from
those involved in the management of a long-term municipal bond portfolio.
In addition, there can be no assurance that there will be a correlation
between movements in the price of the municipal bond index and movements
in the price of the Municipal Bonds which are the subject of the hedge.
The degree of imperfection of correlation depends upon various
circumstances, such as variations in speculative market demand for futures
6
<PAGE>
contracts and municipal securities, technical influences on futures
trading, and differences between the municipal securities being hedged and
the municipal securities underlying the municipal bond index futures
contracts, in such respects as interest rate levels, maturities and
creditworthiness of issuers. A decision of whether, when and how to hedge
involves the exercise of skill and judgment and even a well-conceived
hedge may be unsuccessful to some degree because of market behavior or
unexpected trends in interest rates.
Although the Funds intend to purchase or sell municipal bond
index futures contracts only if there is an active market for such
contracts, there is no assurance that a liquid market will exist for the
contracts at any particular time. Most domestic futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes
the maximum amount the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading
session. Once the daily limit has been reached in a particular contract,
no trades may be made that day at a price beyond that limit. The daily
limit governs only price movement during a particular trading day and,
therefore, does not limit potential losses because the limit may prevent
the liquidation of unfavorable positions. It is possible that futures
contract prices could move to the daily limit for several consecutive
trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and subjecting some futures traders to
substantial losses. In such event, it will not be possible to close a
futures position and, in the event of adverse price movements, the Funds
would 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 partially or completely offset losses
on the futures contract. As described above, however, there is no
guarantee that the price of Municipal Bonds will, in fact, correlate with
the price movements in the municipal bond index futures contract and thus
provide an offset to losses on a futures contract.
If a Fund has hedged against the possibility of an increase in
interest rates adversely affecting the value of the Municipal Bonds held
in its portfolio and rates decrease instead, the Fund will lose part or
all of the benefit of the increased value of the Municipal Bonds it has
hedged because it will have offsetting losses in its futures positions.
In addition, in such situations, if a Fund has insufficient cash, it may
have to sell securities to meet daily variation margin requirements. Such
sales of securities may, but will not necessarily, be at increased prices
which reflect the decline in interest rates. A Fund may have to sell
securities at a time when it may be disadvantageous to do so.
When the Funds purchase municipal bond index futures contracts,
an amount of cash and U.S. government securities or other high grade debt
securities equal to the market value of the futures contracts will be
deposited in a segregated account with the Funds' custodian (and/or such
other persons as appropriate) to collateralize the positions and thereby
insure that the use of such futures contracts is not leveraged. In
7
<PAGE>
addition, the ability of the Funds to trade in municipal bond index
futures contracts and options on interest rate futures contracts may be
materially limited by the requirements of the Internal Revenue Code of
1986, as amended (the "Code"), applicable to a regulated investment
company. See "Taxes" below.
Options on Interest Rate Futures Contracts. A Fund may purchase
put and call options on interest rate futures contracts which are traded
on a domestic exchange or board of trade as a hedge against changes in
interest rates, and may enter into closing transactions with respect to
such options to terminate existing positions. A Fund will sell put and
call options on interest rate futures contracts only as part of closing
sale transactions to terminate its options positions. There is no
guarantee that such closing transactions can be effected.
Options on interest rate futures contracts, as contrasted with
the direct investment in such contracts, gives the purchaser the right, in
return for the premium paid, to assume a position in interest rate futures
contracts at a specified exercise price at any time prior to the
expiration date of the options. Upon exercise of an option, the delivery
of the futures position by the writer of the option to the holder of the
option will be accompanied by delivery of the accumulated balance in the
writer's futures contract margin account, which represents the amount by
which the market price of the futures contract exceeds, in the case of a
call, or is less than, in the case of a put, the exercise price of the
option on the futures contract. The potential loss related to the
purchase of an option on interest rate futures contracts is limited to the
premium paid for the option (plus transaction costs). Because the value of
the option is fixed at the point of sale, there are no daily cash payments
to reflect changes in the value of the underlying contract; however, the
value of the option does change daily and that change would be reflected
in the net asset value of a Fund.
There are several risks relating to options on interest rate
futures contracts. The ability to establish and close out positions on
such options will be subject to the existence of a liquid market. In
addition, a Fund's purchase of put or call options will be based upon
predictions as to anticipated interest rate trends by Dreyfus, which could
prove to be inaccurate. Even if Dreyfus' expectations are correct there
may be an imperfect correlation between the change in the value of the
options and of a Fund's portfolio securities.
Tender Option Bonds. Each Fund may invest up to 10% of the value
of its assets in 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
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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. Dreyfus, 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 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. Each ^
Fund will not invest more than 15%, of the value of its net assets in
illiquid securities, which would include tender option bonds for which the
required notice to exercise the tender feature is more than seven days if
there is no secondary market available for these obligations.
Use of Ratings as Investment Criteria. The ratings of nationally
recognized statistical rating organizations ("NRSROs") such as Standard &
Poor's Ratings Group ("S&P") and Moody's Investors Service, Inc.
("Moody's") represent the opinions of these agencies as to the quality of
Municipal Obligations which they rate. It should be emphasized, however,
that such ratings are relative and subjective and are not absolute
standards of quality. These ratings will be used by the Funds as initial
criteria for the selection of portfolio securities, but the Funds will
also rely upon the independent advice of Dreyfus to evaluate potential
investments. Among the factors which will be considered are the long-term
ability of the issuer to pay principal and interest and general economic
trends. Further information concerning the ratings of the NRSROs and
their significance is contained in the Appendix to this Statement of
Additional Information.
After being purchased by a Fund, the rating of a Municipal
Obligation may be reduced below the minimum rating required for purchase
by the Fund or the issuer of the Municipal Obligation may default on its
obligations with respect to the Municipal Obligation. In that event, the
Fund will dispose of the Municipal Obligation as soon as practicable,
consistent with achieving an orderly disposition of the Municipal
Obligation, unless the Trust's Board of Trustees determines that disposal
of the Municipal Obligation would not be in the best interest of the Fund.
In addition, it is possible that a Municipal Obligation may cease to be
rated or an NRSRO might not timely change its rating of a particular
Municipal Obligation to reflect subsequent events. Although neither event
will require the sale of such Municipal Obligation by a Fund, Dreyfus will
consider such event in determining whether the Fund should continue to
hold the Municipal Obligation. In addition, if an NRSRO changes its
rating system, a Fund will attempt to use comparable ratings as standards
for its investments in accordance with its investment objectives and
policies.
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Floating Rate and Variable Rate Obligations. A Fund may purchase
floating rate and variable rate obligations, including participation
interests therein. Floating rate or variable rate obligations provide
that the rate of interest is set as a specific percentage of a designated
base rate (such as the prime rate at a major commercial bank) and that the
Fund can demand payment of the obligation at par plus accrued interest.
Variable rate obligations provide for a specified periodic adjustment in
the interest rate, while floating rate obligations have an interest rate
which changes whenever there is a change in the external interest rate.
Frequently such obligations are secured by letters of credit or other
credit support arrangements provided by banks. The quality of the
underlying creditor or of the bank, as the case may be, must, as
determined by Dreyfus under the supervision of the Trustees, be equivalent
to the quality standard prescribed for the Funds.
^
A Fund may invest in participation interests purchased from banks
in floating rate or variable rate tax-exempt Municipal Obligations owned
by banks. A participation interest gives the purchaser an undivided
interest in the Municipal Obligation in the proportion that the Fund's
participation interest bears to the total principal amount of the
Municipal Obligation, and provides a demand feature. Each participation
is backed by an irrevocable letter of credit or guarantee of a bank (which
may be the bank issuing the participation interest, a bank issuing a
confirming letter of credit to that of the issuing bank, or a bank serving
as agent of the issuing bank with respect to the possible repurchase of
the participation interest) that Dreyfus, under the supervision of the
Trustees, has determined meets the prescribed quality standards for the
Funds. A Fund has the right to sell the instrument back to the issuing
bank or draw on the letter of credit on demand for all or any part of the
Fund's participation interest in the Municipal Obligation, plus accrued
interest.^ Banks will retain a service and letter of credit fee and a fee
for issuing repurchase commitments in an amount equal to the excess of the
interest paid on the Municipal Obligations over the negotiated yield at
which the instruments were purchased by a Fund.
When-Issued Securities. A Fund may purchase Municipal
Obligations on a when-issued basis, (i.e., for delivery beyond the normal
settlement date at the stated price and yield). The payment obligation
and the interest rate that will be received on the Municipal Obligations
purchased on a when-issued basis are each fixed at the time the buyer
enters into the commitment. Although a Fund will purchase Municipal
Obligations on a when-issued basis only with the intention of actually
acquiring the securities, the Fund may sell these securities before the
settlement date if it is deemed advisable as a matter of investment
strategy.
Municipal Obligations purchased on a when-issued basis and the
securities held in the portfolio of each Fund are subject to changes in
market value based upon the public's perception of the creditworthiness of
the issuer and changes, real or anticipated, in the level of interest
rates (which will generally result in similar changes in value, i.e., both
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experiencing appreciation when interest rates decline and depreciation
when interest rates rise). Therefore, to the extent a Fund remains
substantially fully invested at the same time that it has purchased
securities on a when-issued basis, there will be a greater possibility of
fluctuation in the Fund's net asset value. Purchasing Municipal
Obligations on a when-issued basis can involve a risk that the yields
available in the market when the delivery takes place may actually be
higher than those obtained in the transaction.
A separate account of each Fund consisting of cash or liquid debt
securities equal to the amount of the when-issued commitments will be
established with the Fund's custodian. When the time comes to pay for
when-issued securities, the Fund will meet its obligations from
then-available cash flow, sale of securities held in the separate account,
sale of other securities or, although it would not normally expect to do
so, from the sale of the when-issued securities themselves (which may have
a value greater or lesser than the Fund's payment obligations). Sale of
securities to meet such obligations carries with it a greater potential
for the realization of capital gains, which are not exempt from Federal
income tax.
^
Taxable Investments. Each Fund anticipates being as fully
invested as practicable in Municipal Obligations. Because each Fund's
purpose is to provide income exempt from Federal ^ and state personal
income taxes, a Fund will invest in taxable obligations only if and when
the Trustees believe it would be in the best interests of its shareholders
to do so. Situations in which a Fund may invest up to 20% of its total
assets in taxable securities include: (a) pending investment of proceeds
of sales of shares of the Fund or of portfolio securities, (b) pending
settlement of purchases of portfolio securities, and (c) when the Fund is
attempting to maintain liquidity for the purpose of meeting anticipated
redemptions. A Fund may temporarily invest more than 20% of its total
assets in taxable securities to maintain a "defensive" posture when, in
the opinion of Dreyfus, it is advisable to do so because of adverse market
conditions affecting the market for Municipal Obligations. A Fund may
invest in only the following kinds of taxable securities maturing in one
year or less from the date of purchase: (1) obligations of the United
States Government, its agencies or instrumentalities; (2) commercial paper
rated Prime-1 by Moody's or A-1+ or A-1 by S&P; (3) certificates of
deposit of domestic banks with total assets of $1 billion or more; and (4)
repurchase agreements (instruments under which the seller of a security
agrees to repurchase the security at a specific time and price) with
respect to any securities that the Fund is permitted to hold.
Repurchase Agreements. A Fund may enter into repurchase
agreements with member banks of the Federal Reserve System or certain
non-bank dealers. Under each repurchase agreement the selling institution
will be required to maintain the value of the securities subject to the
agreement at not less than their repurchase price. If a particular bank
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or non-bank dealer defaults on its obligation to repurchase the underlying
debt instrument as required by the terms of a repurchase agreement, a Fund
will incur a loss to the extent that the proceeds it realizes on the sale
of the collateral are less than the repurchase price of the instrument. In
addition, should the defaulting bank or non-bank dealer file for
bankruptcy, a Fund could incur certain costs in establishing that it is
entitled to dispose of the collateral and its realization on the
collateral may be delayed or limited. Investments in repurchase
agreements are subject to the policy prohibiting investment of more than
10% of a Fund's assets in restricted securities, securities without
readily available market quotations and repurchase agreements maturing in
more than seven days.
As noted in the Prospectuses, each of the Funds may, on occasion,
invest in securities issued by other investment companies. These
securities will be of investment companies that determine their net asset
value per share based on the amortized cost or penny-rounding method.
Such securities will be acquired by a Fund within the limits prescribed by
the Act, which include, subject to certain exceptions, a prohibition
against a Fund's investing more than 10% of the value of its total assets
in such securities.
Special Factors Affecting the Massachusetts Municipal Fund ^.
The Commonwealth of Massachusetts and certain of its cities and
towns and public bodies have experienced financial difficulties that have
adversely affected their credit standing. The prolonged effects of such
financial difficulties could adversely affect the market value of the
Massachusetts Municipal Obligations held by the Massachusetts Municipal ^
Fund. The information summarized below describes some of the more
significant factors that could affect the Fund or the ability of the
obligors to pay debt service on certain of these securities. The sources
of such information are the official statements of issuers located in the
Commonwealth of Massachusetts, as well as other publicly available
documents, and statements of public officials. The Trust has not
independently verified any of the information contained in such statements
and documents, but the Trust is not aware of facts which would render such
information inaccurate.
Fiscal Matters - General. The Commonwealth's constitution
requires, in effect, that its budget, though not necessarily its operating
expenditures and revenues, be balanced each year. In addition, the
Commonwealth has certain budgetary procedures and fiscal controls in place
that are designed to ensure that sufficient cash is available to meet the
Commonwealth's obligations, that state expenditures are consistent with
periodic allotments of annual appropriations and that funds are expended
consistent with statutory and public purposes. The General Fund, in
addition to being the Commonwealth's primary operating fund, ordinarily
functions as a residuary fund to receive otherwise unallocated revenues
and to provide monies to transfer to the funds as required. The condition
of the General Fund is generally regarded as the principal indicator of
whether the Commonwealth's operating revenues and expenses are in balance.
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The other principal operating funds (the Local Aid Fund and the Highway
Fund) are customarily funded to at least a zero balance.
The Commonwealth of Massachusetts has experienced fiscal
difficulties. Operating losses in fiscal 1990, and 1991, totaled $1.251
billion and $21.2 million, respectively. During the period, fund balances
in the budgeted operating funds increased from opening balances of
negative $1.104 billion in fiscal 1990 to ending balances of positive
$237.1 million in fiscal 1991, primarily due to deficit borrowings. The
Commonwealth ended fiscal 1992 and 1993 with operating surpluses of $312.3
million and $13.1 million, respectively, and statutory closing fund
balances increased to $562.5 million at the end of fiscal 1993. Fiscal
1994 ^ ended with a current operating ^ surplus of ^ $18.2 million and
ending fund balances of ^ $580.7 million prior to taking into account
certain revenue and expenditure reductions based on preliminary financial
information. Fiscal 1995 is currently estimated to end with a deficiency
of revenues and other sources over expenditures and other uses of $117.4
million.
On July 10, 1994, the Governor signed into law the fiscal 1995
budget, which, together with authorizations contained in the final fiscal
1994 appropriations bill and expected supplemental appropriations relating
to welfare and certain other programs, provides for approximately ^
$16.482 billion in fiscal 1995 expenditures. Budgeted revenues and other
sources to be collected in fiscal 1995 are estimated by the Executive
Office for Administration and Finance to be approximately ^ $16.364
billion.
In recent months, the rate of growth in certain tax revenue
categories, including, in particular, the income tax, has slowed. Fiscal
1994 tax revenues were approximately ^ $87 million below the Department of
Revenue's tax revenue estimate of $10.694 billion. ^ In September 1994,
the Secretary for Administration and Finance revised the fiscal 1995 ^ tax
revenue estimate to $11.234 billion, a reduction of approximately $75
million from the most recent prior revenue estimate arrived at jointly
with Legislature in May 1994.
The current economic slowdown in Massachusetts has led to
decreased growth in tax revenues and to increased expenditures.
Municipalities and agencies of the Commonwealth are experiencing the same
economic effects. Moreover, they are affected by the financial condition
of the Commonwealth, because they receive substantial funding from the
Commonwealth.
Limitations on Tax Revenues. In Massachusetts efforts to limit
and reduce levels of taxation have been under way for several years.
Limits were established on state tax revenues by legislation enacted on
October 25, 1986, and by an initiative petition approved by the voters on
November 4, 1986. The two measures are inconsistent in several respects.
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Chapter 62F, which was added to the General Laws by initiative
petition in November 1986, establishes a state tax revenue growth limit
for each fiscal year equal to the average positive rate of growth in total
wages and salaries in the Commonwealth, as reported by the federal
government, during the three calendar years immediately preceding the end
of such fiscal year. Chapter 62F also requires that allowable state tax
revenues be reduced by the aggregate amount received by local governmental
units from any newly authorized or increased local option taxes or
excises. Any excess in state tax revenue collections for a given fiscal
year over the prescribed limit, as determined by the State Auditor, is to
be applied as a credit against the then current personal income tax
liability of all taxpayers in the Commonwealth in proportion to the
personal income tax liability of all taxpayers in the Commonwealth for the
immediately preceding tax year. The legislation enacted in October 1986,
which added Chapter 29B to the General Laws, also establishes an allowable
state revenue growth factor by reference to total wages and salaries in
the Commonwealth. However, rather than utilizing a three-year average wage
and salary growth rate, as used by Chapter 62F, Chapter 29B's formula
utilizes one-third of the positive percentage gain in Massachusetts wages
and salaries, as reported by the federal government, during the three
calendar years immediately preceding the end of a given fiscal year.
Additionally, unlike Chapter 62F, Chapter 29B excludes from its definition
of state tax revenues income derived from local option taxes and excises
and from revenues needed to fund debt service costs.
Tax revenues in fiscal 1989 through fiscal ^ 1994 were lower than
the limit set by either Chapter 62F or Chapter 29B. The Executive Office
for Administration and Finance currently estimates that state tax revenues
in fiscal ^ 1995 will not reach the limit imposed by either of these
statutes.
Proposition 2-1/2. In November of 1980, voters in the
Commonwealth approved a statewide tax limitation initiative petition,
commonly known as Proposition 2-1/2, to constrain levels of property
taxation and to limit the charges and fees imposed on cities and towns by
certain governmental entities, including county governments. Proposition
2-1/12, is not a provision of the state constitution and accordingly is
subject to amendment or repeal by the legislature. Proposition 2-1/2, as
amended to date, limits the property taxes that may be levied by any city
or town in any fiscal year to the lesser of (i) 2.5% of the full and fair
cash valuation of the real estate and personal property therein, and (ii)
2.5% over the previous year's levy limit plus any growth in the tax base
from certain new construction and parcel subdivisions. Proposition 2-1/2
also limits any increase in the charges and fees assessed by certain
governmental entities, including county governments, on cities and towns
to the sum of (i) 2.5% of the total charges and fees imposed in the
preceding fiscal year, and (ii) any increase in charges for services
customarily provided locally or services obtained by the city or town at
its option.
Many communities have responded to the limitation imposed by
Proposition 2-1/2 through statutorily permitted overrides and exclusions.
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Override activity peaked in fiscal 1991, when 182 communities attempted
votes on one of the three types of referenda questions (override of levy
limit, exclusion of debt service, or exclusion of capital expenditures)
and 100 passed at least one question, adding $58.5 million to their levy
limits. In fiscal 1992, 67 of 143 communities had successful votes
totaling $31.0 million. In fiscal 1993, 83 communities attempted a vote;
two-thirds of them (56) passed questions aggregating $16.4 million.
Although Proposition 2-1/2 will continue to constrain local property tax
revenues, significant capacity exists for overrides in nearly all cities
and towns.
Local Aid. During the 1980s, the Commonwealth increased payments
to its cities, towns and regional school districts ("Local Aid") to
mitigate the impact of Proposition 2-1/2 on local programs and services.
In fiscal ^ 1995 approximately ^ 32.1% of the Commonwealth's budget is
estimated to be allocated to Local Aid. Local Aid payments to cities,
towns and regional school districts take the form of both direct and
indirect assistance.
Direct Local Aid decreased from $2.961 billion in fiscal 1989 to
^ $2.360 billion
^ in fiscal 1992 ^, increased to ^ $2.547 billion in fiscal 1993 and
increased to $2.727 billion in fiscal 1994. It is estimated that fiscal ^
1995 expenditures for direct Local Aid will be ^ $2.979 billion, which is
an increase of approximately ^ 9.2% above the fiscal ^ 1994 level. The
additional amount of indirect Local Aid provided over and above direct
Local Aid was approximately ^ $2.069 billion in fiscal ^ 1994. It is
estimated that in fiscal ^ 1995 approximately ^ $2.318 billion of indirect
Local Aid will also be paid.^
A statute adopted by voter initiative petition to the November
1990 statewide election regulates the distribution of Local Aid to cities
and towns. The statute requires that, subject to annual appropriation, no
less than 40% of collections from personal income taxes, sales and use
taxes, corporate excise taxes and lottery fund proceeds be distributed to
cities and towns. Under the law, the Local Aid distribution to each city
or town would equal no less than 100% of the total Local Aid received for
fiscal 1989. Distributions in excess of fiscal 1989 levels would be based
on new formulas that would replace the current Local Aid distribution
formulas. By its terms, the new formula would have called for a
substantial increase in direct Local Aid in fiscal 1992 and would call for
such an increase in fiscal 1993 and in subsequent years. However, Local
Aid payments expressly remain subject to annual appropriation, and fiscal
1992 ^, fiscal 1993 and fiscal 1994 appropriations for Local Aid did not
meet, and fiscal ^ 1995 appropriations for Local Aid do not meet, the
levels set forth in the initiative law.
Commonwealth Expenditures. From fiscal 1989 to fiscal 1990
budgeted expenditures of the Commonwealth increased approximately 4.9% to
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$13.260 million. Fiscal 1991 budgeted expenditures were $13.655 billion,
or a 3.0% increase over fiscal 1990 budgeted expenditures. For fiscal
1992, budgeted expenditures were $13.420 billion, representing a decline
of 1.7% from the level of budgeted expenditures in fiscal 1991. Fiscal
1993 budgeted expenditures were $14.696 billion, an increase of 9.6% from
fiscal 1992. ^ Preliminary information indicates fiscal 1994 budgeted
expenditures were $15.533 billion, an increase of 5.7% from fiscal 1993.
It is estimated that fiscal 1995 budgeted expenditures will be ^ $16,482
billion, an increase of ^ 6.1% over the fiscal ^ 1994 level. Budgeted
revenues and other sources to be collected in fiscal 1995 are estimated by
the Executive Office for Administration and Finance to be approximately
$16.3 billion, prior to taking into account certain revenue and
expenditure reductions.
Commonwealth expenditures since fiscal 1990 largely reflect
significant growth in several programs and services provided by the
Commonwealth, principally Medicaid and group health insurance; public
assistance programs; debt service; pensions; and assistance to the
Massachusetts Bay Transportation Authority and regional transit
authorities.
The Commonwealth's pension systems were established on a
pay-as-you-go basis. The Commonwealth's unfunded actuarial pension
liability is significant - approximately $9.651 billion as of January 1,
1993, for state employees and teachers and local retirement system
cost-of-living increases. The amount in the state's pension reserve,
established to address the unfunded liabilities of the two state systems,
has increased significantly in recent years due to substantial
appropriations and changes in the law relating to investment of retirement
systems assets. As of December 31, 1993, the reserve was approximately
$4.124 billion. Comprehensive pension legislation approved in 1988
committed the Commonwealth to fund future pension liabilities currently
and to amortize the Commonwealth's accumulated unfunded liabilities over
40 years.
Other Factors. Many factors affect the financial condition of
the Commonwealth, including many social, environmental and economic
conditions, which are beyond the control of the Commonwealth. As with
most urban states, the continuation of many of the Commonwealth's
programs, particularly its human services programs, is in significant part
dependent upon continuing Federal reimbursements which have been
declining.
Federal legislation in recent years has resulted in substantial
reductions in direct Federal payments and grants to states and
municipalities for programs in social service, water pollution control and
other areas. Federal reimbursements have also declined as a result of
decreased state expenditures. Further loss of Federal grants and financing
by the Commonwealth could exacerbate the economic slowdown and cause
programs to be curtailed or cause the recipients of such funding to find
other revenue sources.
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Special Factors Affecting the California Municipal Fund ^.
Some of the significant financial considerations relating to the
Funds' investments in California Municipal Obligations are summarized
below. This summary information is derived principally from official
statements and prospectuses relating to securities offerings of the State
of California and various local agencies in California, available as of
the date of this Statement of Additional Information and does not purport
to be a complete description of any of the considerations mentioned
herein. The accuracy and completeness of the information contained in
such official statements has not been verified independently.
Economic Factors. The Governor's 1993-1994 Budget, introduced on
January 8, 1993, proposed general fund expenditures of $37.3 billion, with
projected revenues of $39.9 billion. To balance the budget in the face of
declining revenues, the Governor proposed a series of revenue shifts from
local government, reliance on increased federal aid, and reductions in
state spending.
The Department of Finance of the State of California's May
Revision of General Fund Revenues and Expenditures (the "May Revision"),
released on May 20, 1993, projected the State would have an accumulated
deficit of about $2.75 billion by June 30, 1993 essentially unchanged from
the prior year. The Governor proposed to eliminate this deficit over an
18-month period. Unlike previous years, the Governor's Budget and May
Revision did not calculate a "gap" to be closed, but rather set forth
revenue and expenditure forecasts and proposals designed to produce a
balanced budget.
The 1993-1994 budget act (the "1993-94 Budget Act") was signed by
the Governor on June 30, 1993, along with implementing legislation. The
Governor vetoed about $71 million in spending.
The 1993-94 Budget Act is predicated on general fund revenue and
transfers estimated at $40.6 billion, $400 million below 1992-93 (and the
second consecutive year of actual decline). The principal reasons for
declining revenue are the continued weak economy and the expiration (or
repeal) of three fiscal steps taken in 1992--a half cent temporary sales
tax, a deferral or operating loss carry forwards, and repeal by initiative
of a sales tax on candy and snack foods.
The 1993-94 Budget Act also assumes special fund revenues of
$11.9 billion, an increase of 2.9 percent over 1992-93.
The 1993-94 Budget Act includes general fund expenditures of
$38.5 billion (a 6.3 percent reduction from projected 1992-93 expenditures
of $41.1 billion), in order to keep a balanced budget within the available
revenues. The 1993-94 Budget Act also includes special fund expenditures
of $12.1 billion, a 4.2 percent increase. The 1993-94 Budget Act reflects
the following major adjustments;
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<PAGE>
1. Changes in local government financing to shift about $2.6
billion in property taxes from cities, counties, special districts and
redevelopment agencies to school and community college districts, thereby
reducing general fund support by an equal amount. About $2.5 billion
would be permanent, reflecting termination of the State's "bailouts" of
local governments following the property tax cuts of Preposition 13 in
1978 (See "Constitutional, Legislative and Other Factors" below).
The property tax revenue losses for cities and counties are
offset in part by additional sales tax revenues and mandate relief. The
temporary 0.5 percent sales tax has been extended through December 31,
1993, for allocation to counties for public safety purposes.
Legislation also has been enacted to eliminate state mandates in
order to provide local governments flexibility in making their programs
responsive to local needs. Legislation provides mandate relief for local
justice systems which affect county audit requirements, court reporter
fees, and court consolidation; health and welfare relief involving
advisory boards, family planning, state audits and realignment maintenance
efforts; and relief in areas such as county welfare department
self-evaluations, noise guidelines and recycling requirements.
2. The 1993-94 Budget Act keeps K-12 Proposition 98 funding on a
cash basis at the same par-pupil level as 1992-93 by providing schools a
$609 million loan payable from future years Proposition 98 funds.
3. The 1993-94 Budget Act assumed receipt of about $692 million
of aid to the State from the federal government to offset health and
welfare costs associated with foreign immigrants living in the State,
which would reduce a like amount of general fund expenditures. About $411
million of this amount is one-time funding. Congress ultimately
appropriated only $450 million.
4. Reductions of $600 million in health and welfare programs and
$400 million in support for higher education (partly offset by fee
increases at all three units of higher education) and various
miscellaneous cuts (totaling approximately $150 million) in State
government services in many agencies, up to 15 percent. The 1993-94
Budget Act suspended the 4 percent automatic budget reduction "trigger,"
as was done in 1992-93, so cuts could be focused.
5. A 2-year suspension of the renter's tax credit ($390 million
expenditure reduction in 1993-94).
6. Miscellaneous one-time items, including deferral of payment
to the Public Employees Retirement Fund ($339 million) and a change in
accounting for debt service from accrual to cash basis, saving $107
million.
The 1993-94 Budget Act contains no general fund tax/revenue
increases other than a two year suspension of the renters' tax credit.
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<PAGE>
Administration reports during the course of the 1993-94 Fiscal
Year have indicated that while economic recovery appears to have started
in the second half of the fiscal year, recessionary conditions continued
longer than had been anticipated when the 1993-94 Budget Act was adopted.
Overall, revenues for the 1993-94 Fiscal Year were about $800 million
lower than original projections, and expenditures were about $780 million
higher, primarily because of higher health and welfare caseloads, lower
property taxes which require greater State support for K-14 education to
make up the shortfall, and lower than anticipated federal government
payments for immigration-related costs. The ^ reports ^ in May and June,
1994, indicated that revenues in the second half of the 1993-94 Fiscal
Year have been very close to the projections made in the Governor's Budget
of January 10, 1994, which is consistent with a slow turnaround in the
economy.
The Department of Finance's July 1994 Bulletin, including the
final June receipts, reported that June revenues were $114 million (2.5
percent) above projection, with final end-of-year results at $377 million
(about 1 percent) above the May Revision projections. Part of this result
was due to end-of-year adjustments and reconciliations. Personal income
tax and sales tax continued to track projections very well. The largest
factor in the higher than anticipated revenues was from bank and
corporation taxes, which were $140 million (18.4 percent) above projection
in June. While the higher June receipts are reflected in the actual
1993-94 Fiscal Year cash flow results, and help the starting cash balance
for the 1994-95 Fiscal Year, the Department of Finance has not adjusted
any of its revenue projections for the 1994-95 or 1995-96 Fiscal Years.
During the 1993-94 Fiscal Year, the State implemented the deficit
retirement plan, which was part of the 1993-94 Budget Act, by issuing $1.2
billion of revenue anticipation warrants in February 1994 maturing
December 21, 1994. This borrowing reduced the cash deficit at the end of
the 1993-94 Fiscal Year. Nevertheless, because of the $1.5 billion
variance from original 1993-94 Budget Act assumptions, the General Fund
ended the fiscal year at June 30, 1994 carrying forward an accumulated
deficit of approximately $2 billion.
Because of the revenue shortfall and the State's reduced internal
borrowable cash resources, in addition to the $1.2 billion of revenue
anticipation warrants issued as part of the deficit retirement plan, the
State issued an additional $2.0 billion of revenue anticipation warrants,
maturing July 26, 1994, which were needed to fund the State's obligations
and expenses through the end of the 1993-94 Fiscal Year.
On January 17, 1994, a major earthquake measuring an estimated
6.8 on the Richter Scale struck Los Angeles. Significant property damage
to private and public facilities occurred in a four county area including
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northern Los Angeles County, Ventura County, and parts of Orange and San
Bernardino Counties, which were declared as State and federal disaster
areas by January 18. ^ Current estimates of total property damage
(private and public) are in the range of ^ $20 billion, but these
estimates are still subject to change.
Despite such damage, on the whole, the vast majority of
structures in the areas, including large manufacturing and commercial
buildings and all modern high-rise offices, survived the earthquake with
minimal or no damage, validating the cumulative effect of strict building
codes and thorough preparation for such an emergency by the State and
local agencies.
State-owned facilities, including transportation corridors and
facilities such as Interstate Highways 5 and 10 and State Highways 14, 118
and 210, ^ sustained damage. Most of the major highways (Interstate
Highways 5 and 10) have now been reopened. The campus of California State
University ^ at Northridge (very near the epicenter) suffered an estimated
$350 million damage, resulting in temporary closure of the campus. It has
reopened using borrowed facilities elsewhere in the area and many
temporary structures. There was also some damage to the University of
California at Los Angeles ^ and to an office building in Van Nuys (now
open after a temporary closure). Overall, except for the temporary road
and bridge closures, ^ and CSU-Northridge, the earthquake did not and is
not expected ^ to significantly ^ affect State government operations.^
The State in conjunction with the federal government is committed
to providing assistance to local governments, individuals and businesses
suffering damage as a result of the earthquake, as well as to provide for
the repair and replacement of State-owned facilities. The federal
government will provide substantial earthquake assistance.
The President immediately allocated some available disaster
funds, and Congress has approved additional funds for a total of at least
$9.5 billion of federal funds for earthquake relief, including assistance
to homeowners and small businesses, and costs for repair of damaged public
facilities. The Governor ^ originally proposed that the State will have
to pay about $1.9 billion for earthquake relief costs, including a 10
percent match to some of the federal funds, and costs for some programs
not covered by the federal aid. The Governor proposed to cover $1.05
billion of these costs from a general obligation bond issue which was on
the June 1994 ballot, but it was not approved by the voters. The Governor
subsequently announced that the State's share for transportation projects
would come from existing Department of Transportation funds (thereby
delaying other, non-earthquake related projects), the State's share for
certain other costs (including local school building repairs) would come
from reallocating existing bond funds, and that a proposed program for
homeowner and small business aid supplemental to federal aid would have to
be abandoned. Some other costs will be borrowed from the federal
government in a manner similar to that used by the State of Florida after
Hurricane Andrew; pursuant to Senate Bill 2383, repayment will have to be
addressed in 1995-96 or beyond.
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The 1994-95 Fiscal Year represents the fourth consecutive year
the Governor and Legislature will be faced with a very difficult budget
environment to produce a balanced budget. Many program cuts and budgetary
adjustments have already been made in the last three years. The
Governor's budget proposal, as updated in May and June, 1994, recognized
that the accumulated deficit could not be repaid in one year, and proposed
a two-year solution. The budget proposal sets forth revenue and
expenditure forecasts and revenue and expenditure proposals which result
in operating surpluses for the budget for both 1994-95 and 1995-96, and
lead to the elimination of the accumulated budget deficit, estimated at
about $2.0 billion at June 30, 1994, by June 30, 1996.
The 1994-95 Budget Act, signed by the Governor on July 8, 1994,
projects revenues and transfers of $41.9 billion, about $2.1 billion
higher than revenues in 1993-94. This reflects the Administration's
forecast of an improving economy. Also included in this figure is a
projected receipt of about $360 million from the federal government to
reimburse the State's cost of incarcerating undocumented immigrants. The
State will not know how much the federal government will actually provide
until the Federal FY 1995 Budget is completed. Completion of the Federal
Budget is expected by October 1994. The Legislature took no action on a
proposal in the January Governor's Budget to undertake an expansion of the
transfer to certain programs to counties, which would also have
transferred to counties 0.5% of the State's current sales tax.
The Budget Act projects Special Fund revenues of $12.1 billion, a
decrease of 2.4% from 1993-94 estimated revenues.
The 1994-95 Budget Act projects General Fund expenditures of
$40.9 billion, an increase of $1.6 billion over 1993-94. The Budget Act
also projects Special Fund expenditures of $13.7 billion, a 5.4% increase
over 1993-94 estimated expenditures. The principal features of the budget
Act were the following:
1. Receipt of additional federal aid in 1994-95 of about $400
million for costs of refugee assistance and medical care for undocumented
immigrants, thereby offsetting a similar General Fund cost. The State
will not know how much of these funds it will receive until the Federal FY
1995 Budget is passed.
2. Reductions of approximately $1.1 billion in health and
welfare costs.
3. A General Fund increase of approximately $38 million in
support for the University of California and $65 million for California
State University. It is anticipated that student fees for both the U.C.
and the C.S.U. will increase up to 10%.
4. Proposition 98 funding for K-14 schools is increased by $526
million from 1993-94 levels, representing an increase for enrollment
growth and inflation. Consistent with previous budget agreements,
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Proposition 98 funding provides approximately $4,217 per student for K-12
schools, equal to the level in the past three years.
5. Legislation enacted with the Budget clarifies laws passed in
1992 and 1993 which require counties and other local agencies to transfer
funds to local school districts, thereby reducing State aid. Some
countries had implemented a method of making such transfers which provided
less money for schools if there were redevelopment agency projects. The
new legislation bans this method of transfer. If all counties had
implemented this method, General Fund aid to K-12 schools would have been
$300 million higher in each of the 1994-95 and 1995-96 Fiscal Years.
6. The 1994-95 Budget Act provides funding for anticipated
growth in the State's prison inmate population, including provisions for
implementing recent legislation (the so-called "Three Strikes" law) which
requires mandatory life prison terms for certain third-time felony
offenders.
7. Additional miscellaneous cuts ($500 million) and fund
transfers ($255 million) totalling in the aggregate approximately $755
million.
The 1994-95 Budget Act contains no tax increases. Under
legislation enacted for the 1993-94 Budget, the renters' tax credit was
suspended for two years (1993 and 1994). A ballot proposition to
permanently restore the renters' tax credit after this year failed at the
June, 1994 election. The Legislature enacted a further one-year
suspension of the renter's tax credit, for the 1995, saving about $390
million in the 1995-96 Fiscal Year.
The 1994-95 Budget assumes that the State will use a cash flow
borrowing program in 1994-95 which combines one-year notes and warrants.
Issuance of warrants allows the State to defer repayment of approximately
$1.0 billion of its accumulated budget deficit into the 1995-96 Fiscal
Year.
The State's cash flow management plan for the 1994-95 fiscal year
included the issuance of $4.0 billion of revenue anticipation warrants on
July 26, 1994, to mature on April 25, 1996, as part of a two-year plan to
retire the accumulated State budget deficit.
Because preparation of cash flow estimates for ^ the 1995-96
Fiscal Year ^ is necessarily more imprecise than for the current fiscal
year and entails greater risks of variance from assumptions, and because
the Governor's two-year budget plan assumes receipt of a large amount of
federal aid in the 1995-96 Fiscal Year for immigration-related costs which
is uncertain, the Legislature enacted a backup budget adjustment mechanism
to mitigate possible deviations from projected revenues, expenditures or
internal borrowable resources which might reduce available cash resources
during the two-year plan, so as to assure repayment of the warrants.
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Pursuant to Section 12467 of the California Government Code,
enacted by Chapter 135, Statutes of 1994 (the "Budget Adjustment Law"),
the State Controller was required, on November 15, 1994, in conjunction
with the Legislative Analyst's Office, to review the cash flow projections
for the General Fund on June 30, 1995 and compare them to the projections
for the 1994-95 Fiscal Year included in the Official Statement dated July
20, 1994 for the 1994 Revenue Anticipation Warrants, Series C and D. If
the State Controller's report identifies a decrease in the unused
borrowable resources on June 30, 1995 of more than $430,000,000, then the
"1995 cash shortfall" shall be the amount of the difference that exceeds
$430,000,000. On or before February 15, 1995, legislation must be enacted
providing for sufficient General Fund expenditure reductions, revenue
increases, or both, to offset said 1995 cash shortfall. If such
legislation is not enacted, within five days thereafter the Director of
Finance must reduce all General Fund appropriations for the 1994-95 Fiscal
Year, except certain appropriations required by the State Constitution and
federal law (the "Required Appropriations"), by the percentage equal to
the ratio of said 1995 cash shortfall to total remaining General Fund
appropriations for the 1994-95 Fiscal Year, excluding the Required
Appropriations.
The Director of Finance is required to included updated cash-flow
statements for the 1994-95 and 1995-96 Fiscal Years in the May revision to
the 1995-96 Fiscal Year budget proposal. By June 1, 1995, the State
Controller must concur with these updated statements or provided a revised
estimate of the cash condition of the General Fund for the 1994-95 and the
1995-96 Fiscal Years. For the 1995-96 Fiscal Year, Chapter 135 prohibits
any external borrowing as of June 30, 1996, thereby requiring the State to
rely solely on internal borrowable resources, expenditure reductions or
revenue increases to eliminate any projected cash flow shortfall.
Commencing on October 15, 1995, the State Controller will, in
conjunction with the Legislative Analyst's Office, review the estimated
cash condition of the General Fund for the 1995-96 Fiscal Year. The "1996
cash shortfall" shall be the amount necessary to bring the balance of
unused borrowable resources on June 30, 1996 to zero. On or before
December 1, 1995, legislation must be enacted providing for sufficient
General Fund expenditure reductions, revenue increases, or both, to offset
any such 1996 cash shortfall identified by the State Controller. If such
legislation is not enacted, within five days thereafter the Director of
Finance must reduce all General Fund appropriations for the 1995-96 Fiscal
Year, except the Required Appropriations, by the percentage equal to the
ratio of said 1996 cash shortfall to total remaining General Fund
appropriations for the 1995-96 Fiscal Year, excluding the Required
Appropriations.
Constitutional, Legislative and Other Factors. Certain
California constitutional amendments, legislative measures, executive
orders, administrative regulations and voter initiatives could result in
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the adverse effects described below. The following information constitutes
only a brief summary, does not purport to be a complete description, and
is based on information drawn from official statements and prospectuses
relating to securities offerings of the State of California and various
local agencies in California, available as of the date of this Statement
of Additional Information. While the Sponsors have not independently
verified such information, they have no reason to believe that such
information is not correct in all material respects.
Certain of the California Municipal Obligations in the Funds may
be obligations of issuers which rely in whole or in part on California
State revenues for payment of these obligations. Property tax revenues and
a portion of the State's general fund surplus are distributed to counties,
cities and their various taxing entities and the State assumes certain
obligations theretofore paid out of local funds. Whether and to what
extent a portion of the State's general fund will be distributed in the
future to counties, cities and their various entities, is unclear.
In 1988, California enacted legislation providing for a
water's-edge combined reporting method if an election fee was paid and
other conditions met. On October 6, 1993, California Governor Pete Wilson
signed Senate Bill 671 (Alquist) which modifies the unitary tax law by
deleting the requirements that a taxpayer electing to determine its income
on a water's-edge basis pay a fee and file a domestic disclosure
spreadsheet and instead requiring an annual information return.
Significantly, the Franchise Tax Board can no longer disregard a
taxpayer's election. The Franchise Tax Board is reported to have
estimated state revenue losses from the Legislation as growing $27 million
in 1993-94 to $616 million 1992-2000, but others, including Assembly
Speaker Willie Brown, disagree with that estimate and assert that more
revenue will be generated for California, rather than less, because of an
anticipated increase in economic activity and additional revenue generated
by the incentives in the Legislation.
Certain of the California Municipal Obligations may be
obligations of issuers who rely in whole or in part on ad valorem real
property taxes as a source of revenue. On June 6, 1978, California voters
approved an amendment to the California Constitution known as Proposition
13, which added Article XIIIA to the California Constitution. The effect
of Article XIIIA is to limit ad valorem taxes on real property and to
restrict the ability of taxing entities to increase real property tax
revenues. On November 7, 1978, California voters approved Proposition 8,
and on June 3, 1986 California voters approved Proposition 46, both of
which amended Article XIIIA.
Section 1 of Article XIIIA limits the maximum ad valorem tax on
real property to 1% of full cash value (as defined in Section 2), to be
collected by the counties and apportioned according to law; provided that
the 1% limitation does not apply to ad valorem taxes or special
assessments to pay the interest and redemption charges on (i) any
indebtedness approved by the voters prior to July 1, 1978, or (ii) any
bonded indebtedness for the acquisition or improvement of real property
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approved on or after July 1, 1978, by two-thirds of the votes cast by the
voters voting on the proposition. Section 2 of Article XIIIA defines "full
cash value" to mean "the County Assessor's valuation of real property as
shown on the 1975/76 tax bill under 'full cash value' or, thereafter, the
appraised value of real property when purchased, newly constructed, or a
change in ownership has occurred after the 1975 assessment." The full
cash value may be adjusted annually to reflect inflation at a rate not to
exceed 2% per year, or reduction in the consumer price index or com-
parable local data, or reduced in the event of declining property value
caused by damage, destruction or other factors. The California State Board
of Equalization has adopted regulations, binding on county assessors,
interpreting the meaning of "change in ownership" and "new construction"
for purposes of determining full cash value of property under Article
XIIIA.
Legislation enacted by the California Legislature to implement
Article XIIIA (Statutes of 1978, Chapter 292, as amended) provides that
notwithstanding any other law, local agencies may not levy any ad valorem
property tax except to pay debt service on indebtedness approved by the
voters prior to July 1, 1978, and that each county will levy the maximum
tax permitted by Article XIIIA of $4.00 per $100 assessed valuation (based
on the former practice of using 25%, instead of 100%, of full cash value
as the assessed value for tax purposes). The legislation further provided
that, for the 1978/79 fiscal year only, the tax levied by each county was
to be apportioned among all taxing agencies within the county in
proportion to their average share of taxes levied in certain previous
years. The apportionment of property taxes for fiscal years after 1978/79
has been revised pursuant to Statutes of 1979, Chapter 282 which provides
relief funds from State moneys beginning in fiscal year 1979/80 and is
designed to provide a permanent system for sharing State taxes and budget
funds with local agencies. Under Chapter 282, cities and counties receive
more of the remaining property tax revenues collected under Proposition 13
instead of direct State aid. School districts receive a correspondingly
reduced amount of property taxes, but receive compensation directly from
the State and are given additional relief. Chapter 282 does not affect
the derivation of the base levy ($4.00 per $100 assessed valuation) and
the bonded debt tax rate.
On November 6, 1979, an initiative known as "Proposition 4" or
the "Gann Initiative" was approved by the California voters, which added
Article XIIIB to the California Constitution. Under Article XIIIB, State
and local governmental entities have an annual "appropriations limit" and
are not allowed to spend certain moneys called "appropriations subject to
limitation" in an amount higher than the "appropriations limit." Article
XIIIB does not affect the appropriation of moneys which are excluded from
the definition of "appropriations subject to limitation," including debt
service on indebtedness existing or authorized as of January 1, 1979, or
bonded indebtedness subsequently approved by the voters. In general
terms, the "appropriations limit" is required to be based on certain
1978/79 expenditures, and is to be adjusted annually to reflect changes
in consumer prices, population, and certain services provided by these
entities. Article XIIIB also provides that if these entities' revenues in
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any year exceed the amounts permitted to be spent, the excess is to be
returned by revising tax rates or fee schedules over the subsequent two
years.
At the November 8, 1988 general election, California voters
approved an initiative known as Proposition 98. This initiative amends
Article XIIIB to require that (i) the California Legislature establish a
prudent state reserve fund in an amount as it shall deem reasonable and
necessary and (ii) revenues in excess of amounts permitted to be spent and
which would otherwise be returned pursuant to Article XIIIB by revision of
tax rates or fee schedules, be transferred and allocated (up to a maximum
of 4%) to the State School Fund and be expended solely for purposes of
instructional improvement and accountability. No such transfer or
allocation of funds will be required if certain designated state officials
determine that annual student expenditures and class size meet certain
criteria as set forth in Proposition 98. Any funds allocated to the State
School Fund shall cause the appropriation limits established in Article
XIIIB to be annually increased for any such allocation made in the prior
year.
Proposition 98 also amends Article XVI to require that the State
of California provide a minimum level of funding for public schools and
community colleges. Commencing with the 1988-89 fiscal year, state monies
to support school districts and community college districts shall equal or
exceed the lesser of (i) an amount equaling the percentage of state
general revenue bonds for school and community college districts in fiscal
year 1986-87, or (ii) an amount equal to the prior year's state general
fund proceeds of taxes appropriated under Article XIIIB plus allocated
proceeds of local taxes, after adjustment under Article XIIIB. The
initiative permits the enactment of legislation, by a two-thirds vote, to
suspend the minimum funding requirement for one year.
On June 30, 1989, the California Legislature enacted Senate
Constitutional Amendment 1, a proposed modification of the California
Constitution to alter the spending limit and the education funding
provisions of Proposition 98. Senate Constitutional Amendment 1, on the
June 5, 1990 ballot as Proposition 111, was approved by the voters and
took effect on July 1, 1990. Among a number of important provisions,
Proposition 111 recalculates spending limits for the State and for local
governments, allows greater annual increases in the limits, allows the
averaging of two years' tax revenues before requiring action regarding
excess tax revenues, reduces the amount of the funding guarantee in
recession years for school districts and community college districts (but
with a floor of 40.9% of State general fund tax revenues), removes the
provision of Proposition 98 which included excess monies transferred to
school districts and community college districts in the base calculation
for the next year, limits the amount of State tax revenue over the limit
which would be transferred to school districts and community college
districts, and exempts increased gasoline taxes and truck weight fees from
the State appropriations limit. Additionally, Proposition 111 exempts from
the State appropriations limit funding for capital outlays.
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Article XIIIB, like Article XIIIA, may require further
interpretation by both the Legislature and the courts to determine its
applicability to specific situations involving the State and local taxing
authorities. Depending upon the interpretation, Article XIIIB may limit
significantly a governmental entity's ability to budget sufficient funds
to meet debt service on bonds and other obligations.
On November 4, 1986, California voters approved an initiative
statute known as Proposition 62. This initiative (i) requires that any
tax for general governmental purposes imposed by local governments be
approved by resolution or ordinance adopted by a two-thirds vote of the
governmental entity's legislative body and by a majority vote of the
electorate of the governmental entity, (ii) requires that any special tax
(defined as taxes levied for other than general governmental purposes)
imposed by a local governmental entity be approved by a two-thirds vote of
the voters within that jurisdiction, (iii) restricts the use of revenues
from a special tax to the purposes or for the service for which the
special tax was imposed, (iv) prohibits the imposition of ad valorem taxes
on real property by local governmental entities except as permitted by
Article XIIIA, (v) prohibits the imposition of transaction taxes and sales
taxes on the sale of real property by local governments, (vi) requires
that any tax imposed by a local government on or after August 1, 1985 be
ratified by a majority vote of the electorate within two years of the
adoption of the initiative or be terminated by November 15, 1988, (vii)
requires that, in the event a local government fails to comply with the
provisions of this measure, a reduction in the amount of property tax
revenue allocated to such local government occurs in an amount equal to
the revenues received by such entity attributable to the tax levied in
violation of the initiative, and (viii) permits these provisions to be
amended exclusively by the voters of the State of California.
In September 1988, the California Court of Appeal in City of
Westminster v. County of Orange, 204 Cal.App. 3d 623, 215 Cal. Rptr. 511
(Cal.Ct.App. 1988), held that Proposition 62 is unconstitutional to the
extent that it requires a general tax by a general law city, enacted on or
after August 1, 1985, and prior to the effective date of Proposition 62,
to be subject to approval by a majority of voters. The Court held that
the California Constitution prohibits the imposition of a requirement
that local tax measures be submitted to the electorate by either
referendum or initiative. It is not possible to predict the impact of
this decision on charter cities, on special taxes or on new taxes imposed
after the effective date of Proposition 62.
On November 8, 1988, California voters approved Proposition 87.
Proposition 87 amended Article XVI, Section 16, of the California
Constitution by authorizing the California Legislature to prohibit
redevelopment agencies from receiving any of the property tax revenue
raised by increased property tax rates levied to repay bonded indebtedness
of local governments which is approved by voters on or after January 1,
1989. It is not possible to predict whether the California Legislature
will enact such a prohibition nor is it possible to predict the impact of
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Proposition 87 on redevelopment agencies and their ability to make
payments on outstanding debt obligations.
Certain California Municipal Obligations in the Funds may be
obligations which are payable solely from the revenues of health care
institutions. Certain provisions under California law may adversely
affect these revenues and, consequently, payment on those California
Municipal Obligations.
The Federally sponsored Medicaid program for health care services
to eligible welfare beneficiaries in California is known as the Medi-Cal
program. Historically, the Medi-Cal program has provided for a cost-based
system of reimbursement for inpatient care furnished to Medi-Cal
beneficiaries by any hospital wanting to participate in the Medi-Cal
program, provided such hospital met applicable requirements for
participation. California law now provides that the State of California
shall selectively contract with hospitals to provide acute inpatient
services to Medi-Cal patients. Medi-Cal contracts currently apply only to
acute inpatient services. Generally, such selective contracting is made on
a flat per diem payment basis for all services to Medi-Cal beneficiaries,
and generally such payment has not increased in relation to inflation,
costs or other factors. Other reductions or limitations may be imposed on
payment for services rendered to Medi-Cal beneficiaries in the future.
Under this approach, in most geographical areas of California,
only those hospitals which enter into a Medi-Cal contract with the State
of California will be paid for non-emergency acute inpatient services
rendered to Medi-Cal beneficiaries. The State may also terminate these
contracts without notice under certain circumstances and is obligated to
make contractual payments only to the extent the California legislature
appropriates adequate funding therefor.
In February 1987, the Governor of the State of California
announced that payments to Medi-Cal providers for certain services (not
including hospital acute inpatient services) would be decreased by 10%
through June 1987. However, a federal district court issued a
preliminary injunction preventing application of any cuts until a trial on
the merits can be held. If the injunction is deemed to have been granted
improperly, the State of California would be entitled to recapture the
payment differential for the intended reduction period. It is not
possible to predict at this time whether any decreases will ultimately be
implemented.
California enacted legislation in 1982 that authorizes private
health plans and insurers, to contract directly with hospitals for
services to beneficiaries on negotiated terms. Some insurers have
introduced plans known as "preferred provider organizations" ("PPOs"),
which offer financial incentives for subscribers who use only the
hospitals which contract with the plan. Under an exclusive provider plan,
which includes most health maintenance organizations ("HMOs"), private
payors limit coverage to those services provided by selected hospitals.
Discounts offered to HMOs and PPOs may result in payment to the
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contracting hospital of less than actual cost and the volume of patients
directed to a hospital under an HMO or PPO contract may vary significantly
from projections. Often, HMO or PPO contracts are enforceable for a
stated term, regardless of provider losses or of bankruptcy of the
respective HMO or PPO. It is expected that failure to execute and
maintain such PPO and HMO contracts would reduce a hospital's patient base
or gross revenues. Conversely, participation may maintain or increase the
patient base, but may result in reduced payment and lower net income to
the contracting hospitals.
Such California Municipal Obligations may also be insured by the
State of California pursuant to an insurance program implemented by the
Office of Statewide Health Planning and Development for health facility
construction loans. If a default occurs on insured California Municipal
Obligations, the State Treasurer will issue debentures payable out of a
reserve fund established under the insurance program or will pay principal
and interest on an unaccelerated basis from unappropriated State funds.
At the request of the Office of Statewide Health Planning and Development,
Arthur D. Little, Inc. prepared a study in December 1983 to evaluate the
adequacy of the reserve fund established under the insurance program and
based on certain formulations and assumptions found the reserve fund
substantially underfunded. In September of 1986, Arthur D. Little, Inc.
prepared an update of the study and concluded that an additional 10%
reserve should be established for "multi-level" facilities. For the
balance of the reserve fund, the update recommended maintaining the
current reserve calculation method. In March 1990, Arthur D. Little, Inc.
prepared a further review of the study and recommended that separate
reserves continue to be established for "multi-level" facilities at a
reserve level consistent with those that would be required by an insurance
company.
Certain California Municipal Obligations in the Funds may be
obligations which are secured in whole or in part by a mortgage or deed of
trust on real property. California has five principal statutory
provisions which limit the remedies of a creditor secured by a mortgage or
deed of trust. Two limit the creditor's right to obtain a deficiency
judgment, one limitation being based on the method of foreclosure and the
other on the type of debt secured. Under the former, a deficiency judgment
is barred when the foreclosure is accomplished by means of a non-judicial
trustee's sale. Under the latter, a deficiency judgment is barred when
the foreclosed mortgage or deed of trust secures certain purchase money
obligations. Another California statute, commonly known as the "one form
of action" rule, requires creditors secured by real property to exhaust
their real property security by foreclosure before bringing a personal
action against the debtor. The fourth statutory provision limits any
deficiency judgment obtained by a creditor secured by real property
following a judicial sale of such property to the excess of the
outstanding debt over the fair value of the property at the time of the
sale, thus preventing the creditor from obtaining a large deficiency
judgment against the debtor as a result of low bids at a judicial sale.
The fifth statutory provision gives the debtor the right to redeem the
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real property from any judicial foreclosure sale as to which a deficiency
judgment may be ordered against the debtor.
Upon the default of a mortgage or deed of trust with respect to
California real property, the creditor's nonjudicial foreclosure rights
under the power of sale contained in the mortgage or deed of trust are
subject to the constraints imposed by California law upon transfers of
title to real property by private power of sale. During the three-month
period beginning with the filing of a formal notice of default, the debtor
is entitled to reinstate the mortgage by making any overdue payments.
Under standard loan servicing procedures, the filing of the formal notice
of default does not occur unless at least three full monthly payments have
become due and remain unpaid. The power of sale is exercised by posting
and publishing a notice of sale for at least 20 days after expiration of
the three-month reinstatement period. Therefore, the effective minimum
period for foreclosing on a mortgage could be in excess of seven months
after the initial default. Such time delays in collections could disrupt
the flow of revenues available to an issuer for the payment of debt
service on the outstanding obligations if such defaults occur with respect
to a substantial number of mortgages or deeds of trust securing an
issuer's obligations.
In addition, a court could find that there is sufficient
involvement of the issuer in the nonjudicial sale of property securing a
mortgage for such private sale to constitute "state action," and could
hold that the private-right-of-sale proceedings violate the due process
requirements of the Federal or State Constitutions, consequently
preventing an issuer from using the nonjudicial foreclosure remedy
described above.
Certain California Municipal Obligations in the Funds may be
obligations which finance the acquisition of single family home mortgages
for low and moderate income mortgagors. These obligations may be payable
solely from revenues derived from the home mortgages, and are subject to
the California statutory limitations described above applicable to
obligations secured by real property. Under California anti-deficiency
legislation, there is no personal recourse against a mortgagor of a single
family residence purchased with the loan secured by the mortgage,
regardless of whether the creditor chooses judicial or nonjudicial
foreclosure.
Under California law, mortgage loans secured by single family
owner-occupied dwellings may be prepaid at any time. Prepayment charges on
such mortgage loans may be imposed only with respect to voluntary
prepayments made during the first five years during the term of the
mortgage loan, and cannot in any event exceed six months' advance interest
on the amount prepaid in excess of 20% of the original principal amount of
the mortgage loan. This limitation could affect the flow of revenues
available to an issuer for debt service on the outstanding debt
obligations which financed such home mortgages.
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Additional Considerations. With respect to Municipal Obligations
issued by the State of California and its political subdivisions, the
Funds cannot predict what legislation, if any, may be proposed in the
California State Legislature as regards the California State personal
income tax status of interest on such obligations, or which proposals, if
any, might be enacted. Such proposals, if enacted, might materially
adversely affect the availability of California Municipal Obligations for
investment by the Funds and the value of a Fund's portfolio. In such an
event, the Trustees would reevaluate the Fund's investment objective and
policies and consider changes in its structure or possible dissolution.
On December 6, 1994, Orange County, California and its Investment
Pool (the "Pool") filed for bankruptcy under Chapter 9 of the United
States Bankruptcy Code. Upon filing, all assets of the Pool were frozen.
Approximately 187 California Public entities, substantially all of which
are public agencies within the County, are investors in the Pool. Many of
the agencies have various bonds, notes or other forms of indebtedness
outstanding, and in some instances, have invested the proceeds of such
borrowings in the Pool. Additionally, such agencies have additional funds
invested in the Pool. Various representatives of the County have
indicated that the Pool expects to lose a substantial amount of its
original principal invested. Such losses could result in delays or
failures of the County as well as investors in the Pool to make scheduled
debt service payments. The Fund is unable to predict when funds may be
released from the Pool to investors, the amount of such funds, if any, and
the financial impact of the bankruptcy on the value of securities of the
County, the investors in the Pool, or the California municipal securities
market generally.
Special Factors Affecting the New York Municipal Fund ^.
Some of the significant financial considerations relating to the
Fund's investment in New York Municipal Obligations are summarized below.
This summary information is not intended to be a complete description and
is principally derived from official statements relating to issues of New
York Municipal Obligations that were available prior to the date of this
Statement of Additional Information. The accuracy and completeness of the
information contained in those official statements have not been
independently verified.
General. Special risks inherent in New York Municipal
Obligations result from the financial condition of New York State, certain
of its public bodies and municipalities, and New York City. Beginning in
early 1975, New York State, 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 Funds may invest. If there should be a default
or other financial crisis relating to New York State, New York City, a
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State or City agency, or a State municipality, the market value and
marketability of outstanding New York Municipal Obligations in the Fund's
portfolio and the interest income to the Fund could be adversely affected.
Moreover, the significant slowdown in the New York and regional economy in
the early 1990s added substantial uncertainty to estimates of the State's
tax revenues, which, in part, caused the 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 1993 and 994 fiscal years, however, were
characterized by national and regional economies that performed better
than projected. After reflecting a 1993 year-end deposit to the refund
reserve account of $671 million, reported 1993 General Fund receipts were
$45 million higher than originally projected in April 1992. The State
completed the 1994 fiscal year with an operating surplus in the General
Fund of $914 million. In September 1994, however, New York State
projected a General Fund operating deficit of $690 million for the 1995
fiscal year.
State Economy. New York is the third most populous state in the
nation and has a relatively high level of personal wealth. The State's
economy is diverse with a comparatively large share of the nation's
finance, insurance, transportation, communications and services
employment, and a ^ very small share of the nation's farming and mining
activity. The State has a declining proportion of its workforce engaged
in manufacturing, and an increasing proportion engaged in service
industries. New York City (the "City"), which is the most populous city
in the State and nation and is the center of the nation's largest
metropolitan area, accounts for a large portion of the State's population
and personal income.
The State has historically been one of the wealthiest states in
the nation. For decades, however, the State has grown more slowly than
the nation as a whole, gradually eroding its relative economic position.
^ Overall economic activity declined less than that of the nation as a
whole during the 1982-83 recession. The 1990-91 recession, however, was
more severe in the State, owing to a significant retrenchment in the
financial services industry, cutbacks in defense spending, and an
overbuilt real estate market.^
The unemployment rate in the State dipped below the national rate
in the second half of 1981 and remained lower until 1991. It stood at
7.7% in 1993. The total employment growth rate in the State has been
below the national average since 1984. The State's economic forecast
calls for employment to increase in 1994 and 1995. Employment growth is
expected to be moderate in 1995 when the pace of national economic growth
is projected to slacken and entire industries adjust to changing markets
and the State's economy absorbs the full impact of these developments.
State per capita personal income remains above the national average.
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State per capita income for 1993 was $24,623, which is 18.3% above the
1993 national average of $20,817. Between 1970 and 1980, the percentage by
which the State's per capita income exceeded that of the national average
fell. However, total personal income in the State rose slightly faster
than the national average in 1986 through 1989. Personal income is
estimated to increase by 5.3% in 1994, and at a more moderate rate in
1995.
State Budget. The State Constitution requires the Governor to
submit to the Legislature a balanced Executive Budget which contains a
complete plan of expenditures for the ensuing fiscal year and all moneys
and revenues estimated to be available therefor, accompanied by bills
containing all proposed appropriations or reappropriations and any new or
modified revenue measures to be enacted in connection with the Executive
Budget. The entire plan constitutes the proposed State financial plan for
that fiscal year. The Governor submits to the Legislature, on at least a
quarterly basis, reports of actual receipts, revenues, disbursements,
expenditures, tax refunds and reimbursements, and repayment of advances in
form suitable for comparison with the State financial plan, together with
explanations of deviations from the State financial plan. At such time,
the Governor is required to submit any amendments to the State financial
plan necessitated by such deviations.
The Governor released the recommended Executive Budget for the
1994-95 fiscal year on January 18, 1994 and amended it on February 17,
1994 (the "Recommended 1994-95 State Financial Plan"). The Recommended
1994-95 State Financial Plan projected a balanced General Fund, with
receipts and transfers from other funds projected at $33.422 billion,
including $339 million carried over from the surplus anticipated for the
State's 1993-94 fiscal year. Disbursements and transfers to other funds
are projected at $33.399 billion ^. In addition, the financial plan ^
included a $23 million repayment to the State's Tax Stabilization Reserve
Fund. The Division of the Budget ^ projected that at the close of the
State's 1994-95 fiscal year, the balance in the Tax Stabilization Reserve
Fund ^ would be $157 million.
The State's budget for the 1994-95 fiscal year was enacted by the
Legislature on June 7, 1994, more than two months after the start of the
fiscal year. Prior to adoption of the budget, the Legislature enacted
appropriations for disbursements considered to be necessary for State
operations and other purposes, including all necessary appropriations for
debt service. The State financial plan for the 1994-95 fiscal year was
formulated on June 16, 1994 and is based upon the State's budget as
enacted by the Legislature and signed into law by the Governor (the
"1994-95 State Financial Plan"). This delay in the enactment of the
State's 1994-95 fiscal year budget may reduce the effectiveness of several
of the actions proposed.
The 1994-95 State Financial Plan is based on a number of
assumptions and projections. Because it is not possible to predict
accurately the occurrence of all factors that may affect the 1994-95 State
Financial Plan, actual results may differ and have differed materially in
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recent years, from projections made at the outset of a fiscal year. There
can be no assurance that the State ^ economy will not experience
worse-than-predicted results in the 1994-95 fiscal year, with
corresponding material and adverse effects on the State's projections of
receipts and disbursements ^.
Recent Financial Results. The General Fund is the principal
operating fund of the State. It receives all State income that is not
required by law to be deposited in another fund which for the State's
1994-95 fiscal year, is expected to comprise approximately 52% of total
projected governmental fund receipts.
The General Fund is projected to be balanced on a cash basis ^
for the 1994-95 fiscal year. Total receipts ^ are projected to be $34.321
billion, an increase of $2.092 billion over total receipts in the prior
fiscal year. Total General Fund disbursements ^ are projected to be
$34.248 billion, an increase of $2.351 billion over the total amount
disbursed and transferred in the prior fiscal year.
The ^ State issued its first update to the GAAP-basis Financial
Plan for the State's 1994-95 fiscal year on September 1, 1994. In the
September GAAP-basis update, the Division of the Budget projected a
General Fund operating deficit of $690 million. The prior projection of
the 1994-95 GAAP-basis State Financial Plan, issued in February 1994 as
part of the 1994-95 Executive Budget (the "February 1994 Projection"),
projected an operating surplus in the General Fund of $7 million.
In the February 1994 projection, General Fund operating results
over the 1993-94 and 1994-95 fiscal year projection period were
anticipated to reduce the accumulated deficit by $256 million. The impact
of the reported results for the State's 1993-94 fiscal year and the
revised projection of the accumulated deficit is substantially the same.
Combining the $914 million operating surplus for the State's 1993-94
fiscal year with the projected $690 million operating deficit for the
1994-95 fiscal year results in an anticipated $224 million reduction in
the accumulated deficit.
On July 29, 1994, the Office of the State Comptroller issued the
General Purpose Financial Statements of the State of New York for the
1993-94 fiscal year. The Statements were prepared on GAAP-basis and were
independently audited in accordance with generally accepted auditing
standards. The State's Combined Balance Sheet as of March 31, 1994 showed
an accumulated surplus in its combined governmental funds of ^ $370
million ^, reflecting liabilities of ^ $13.219 billion and assets of ^
$13.589 billion. This accumulated Governmental Funds surplus includes a
$1.637 billion accumulated deficit in the General Fund, as well as
accumulated surpluses in the Special Revenue and Debt Service fund types
and a $622 million accumulated deficit in the Capital Projects Fund type.
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The State completed its 1993-94 fiscal year with a combined
Governmental Funds operating surplus of $1.051 billion, which included an
operating surplus in the General Fund of $914 million, in the Special
Revenue Funds of $149 million and in the Debt Service Funds of $23
million, and an operating deficit in the Capital Projects Funds of $35
million.
The State reported a General Fund operating surplus of $914
million for the 1993-94 fiscal year, as compared to an operating surplus
of $2.065 billion for the prior fiscal year. The 1993-94 fiscal year
surplus reflects several major factors, including the cash basis surplus
recorded in 1993-94, the use of $671 million of the 1992-93 surplus to
fund operating expenses in Local Government Assistance Corporation, and
the accumulation of a $265 million balance in the Contingency Reserve
Fund. Revenues increased $543 million (1.7%) over prior fiscal year
revenues with the largest increase occurring in personal income taxes.
Expenditures increased $1.659 billion (5.6%) over the prior fiscal year,
with the largest increase occurring in State aid for social services
programs.
The Special Revenue Funds account for State receipts from
specific sources that are legally restricted in use to specified purposes
and include all moneys received from the Federal government. Total
receipts in Special Revenue Funds are projected at $24.598 billion in the
State's 1994-95 fiscal year. Federal grants are projected to account for
75% of the total projected receipts in Special Revenue Funds in the
State's 1994-95 fiscal year.
Disbursements from Special Revenue Funds are projected to be
$24.982 billion for the State's 1994-95 fiscal year. Grants to local
governments disbursed from this fund type are projected to account for 75%
of disbursements from this fund for the 1994-95 fiscal year.
The Capital Projects Funds are used to finance the acquisition
and construction of major capital facilities and to aid local government
units and Agencies in financing capital constructions. Federal grants for
capital projects, largely highway-related, are projected to account for
33% of the $3.233 billion in total projected receipts in Capital Projects
Funds in the State's 1994-95 fiscal year. Total disbursements from
Capital Projects Funds, approximately 54% is for various transportation
purposes, including highways and mass transportation facilities; 4% is for
programs of the Department of Correctional Services and other public
protection activities; 16% is for health and mental hygiene facilities;
13% is for environmental and recreational programs; 5% is for educational
programs; and 5% is for housing and economic development programs. The
balance is for the maintenance of State office facilities and various
other capital programs.
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The Debt Service Funds serve to fulfill State debt service on
long-term general obligation State debt and other State lease/purchase and
contractual obligation financing commitments. Total receipts in Debt
Service Funds are projected to reach $2.318 billion in the State's 1994-95
fiscal year. Total disbursements from Debt Service Funds for debt
service, lease/purchase and contractual obligation financing commitments
are projected to be $2.246 billion for the 1994-95 fiscal year.
Debt Limits and Outstanding Debt. There are a number of methods
by which the State of New York may incur debt. Under the State
Constitution, the State may not, with limited exceptions for emergencies,
undertake long-term general obligation borrowing (i.e., borrowing for more
than one year) unless the borrowing is authorized in a specific amount for
a single work or purpose by the Legislature and approved by the voters.
There is no limitation on the amount of long-term general obligation debt
that may be so authorized and subsequently incurred by the State. The
total amount of long-term State general obligation debt authorized but not
issued as of December 31, 1993 was approximately $2.273 billion.
The State may undertake short-term borrowings without voter
approval (i) in anticipation of the receipt of taxes and revenues, by
issuing tax and revenue anticipation notes, and (ii) in anticipation of
the receipt of proceeds from the sale of duly authorized but unissued
general obligation bonds, by issuing bond anticipation notes. The State
may also, pursuant to specific constitutional authorization, directly
guarantee certain obligations of the State of New York's authorities and
public benefit corporations ("Authorities"). Payments of debt service on
New York State general obligation and New York State-guaranteed bonds and
notes are legally enforceable obligations of the State of New York.
The State of New York also employs two other types of long-term
financing mechanisms which are State-supported but are not general
obligations of the State: moral obligation and lease-purchase or
contractual-obligation financing.
In 1990, as part of a State fiscal reform program, legislation
was enacted creating the New York Local Government Assistance Corporation
("LGAC"), a public benefit corporation empowered to issue long-term
obligations to fund certain payments to local governments traditionally
funded through New York State's annual seasonal borrowing. The
legislation empowered LGAC to issue its bonds and notes in an amount not
in excess of $4.7 billion (exclusive of certain refunding bonds) plus
certain other amounts. Over a period of years, the issuance of those
long-term obligations, which will be amortized over no more than 30 years,
is expected to result in eliminating the need for continuing short-term
seasonal borrowing for those purposes. The legislation dedicated revenues
equal to one-quarter of the four cent State sales and use tax revenues to
pay debt service on these bonds. The legislation also imposed a cap on the
annual seasonal borrowing of the State at $4.7 billion, less net proceeds
of bonds issued by LGAC and bonds issued to provide for capitalized
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interest, except in cases where the Governor and the legislative leaders
have certified both the need for additional borrowing and provided a
schedule for reducing it to the cap. If borrowing above the cap is thus
permitted in any fiscal year, it is required by law to be reduced to the
cap by the fourth fiscal year after the limit was first exceeded. As of
June 1994, LGAC had issued its bonds to provide net proceeds of $3.856
billion and has been authorized to issue its bonds to provide net proceeds
of up to an additional $315 million during the State's 1994-95 fiscal
year.
In April 1993, legislation was also enacted providing for
significant changes in the long-term financing practices of the State and
the Authorities.
The Legislature passed a proposed constitutional amendment that
would permit the State, within a formula-based cap, to issue revenue
bonds, which would be debt of the State secured solely by a pledge of
certain State tax receipts (including those allocated to State funds
dedicated for transportation purposes), and not by the full faith and
credit of the State. In addition, the proposed amendment would require
that State debt be incurred only for capital projects included in a
multi-year capital financing plan and would prohibit, after its effective
date, lease-purchase and contractual-obligation financing mechanisms for
State facilities. Public hearings were held on the proposed
constitutional amendment during 1993. Following these hearings, in
February 1994, the Governor and the State Comptroller recommended a
revised constitutional amendment which would further tighten the ban on
lease-purchase and contractual-obligation financing, incorporate existing
lease-purchase and contractual-obligation debt under the proposed revenue
bond cap while simultaneously reducing the size of the cap. After
considering these recommendations, the Legislature passed a revised
constitutional amendment which tightens the ban, and provides for a
phase-in to a lower cap. Before the approved constitutional amendment or
any revised amendment enacted in 1994 can be presented to the voters for
their consideration, it must be passed by a separately elected
legislature. The amendment must therefore be passed by the newly elected
Legislature in 1995 prior to presentation to the voters at the earliest in
November 1995. The amendment could not become effective before January 1,
1996.
On January 13, 1992, Standard & Poor's Ratings Group ("Standard &
Poor's") reduced its ratings on the State's general obligation bonds from
A to A- and, in addition, reduced its ratings on the State's moral
obligation, lease purchase, guaranteed and contractual obligation debt.
Standard & Poor's also continued its negative rating outlook assessment
on State general obligation debt. On April 26, 1993, Standard & Poor's
revised the rating outlook assessment to stable. On February 14, 1994,
Standard & Poor's raised its outlook to positive and, on February 28,
1994, confirmed its A- rating. On January 6, 1992, Moody's Investors
Service, Inc. ("Moody's") reduced its ratings on outstanding
limited-liability State lease purchase and contractual obligations from A
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to Baa1. On February 28, 1994, Moody's reconfirmed its A rating on the
State's general obligation long-term indebtedness.
The State anticipates that its capital programs will be financed,
in part, by State and public authorities borrowings in 1994-95. The State
expects to issue $374 million in general obligation bonds (including $140
million for purposes of redeeming outstanding bond anticipation notes) and
$140 million in general obligation commercial paper. The Legislature has
also authorized the issuance of up to $69 million in certificates of
participation during the State's 1994-95 fiscal year for equipment
purchases. The projection of the State regarding its borrowings for the
1994-95 fiscal year may change if circumstances require.
Principal and interest payments on general obligation bonds and
interest payments on bond anticipation notes and on tax and revenue
anticipation notes were $782.5 million for the 1993-94 fiscal year, and
are estimated to be $786.3 million for the 1994-95 fiscal year. These
figures do not include interest payable on State General Obligation
Refunding Bonds issued in July 1992 ^("Refunding Bonds") to the extent
that such interest was paid from an escrow fund established with the
proceeds of such Refunding Bonds. Principal and interest payments on
fixed rate and variable rate bonds issued by LGAC were $239.4 million for
the 1993-94 fiscal year, and are estimated to be $289.9 million for
1994-95. State lease-purchase rental and contractual obligation payments
for 1993-94, including State installment payments relating to certificates
of participation, were $1.258 billion and are estimated to be $1.495
billion in 1994-95.
^
Litigation. Certain litigation pending against New York State or
its officers or employees could have a substantial or long-term adverse
effect on New York State finances. Among the more significant of these
cases are those that involve (1) the validity of agreements and treaties
by which various Indian tribes transferred title to New York State of
certain land in central and upstate New York; (2) certain aspects of New
York State's Medicaid policies, including its rates, regulations and
procedures; (3) contamination in the Love Canal area of Niagara Falls;
(4) action against New York State and New York City officials alleging
inadequate shelter allowances to maintain proper housing; (5) challenges
to the practice of reimbursing certain Office of Mental Health patient
care expenses from the client's Social Security benefits; (6) alleged
responsibility of New York State officials to assist in remedying racial
segregation in the City of Yonkers; (7) challenge to the methods by which
New York State reimburses localities for the administrative costs of food
stamp programs; (8) action in which the State is a third party defendant,
for injunctive or other appropriate relief, concerning liability for the
maintenance of stone groins constructed along certain areas of Long
Island's shoreline; (9) action by school districts and their employees
challenging the constitutionality of Chapter 175 of the Laws of 1990 which
deferred school district contributions to the public retirement system and
reduced by like amount state aid to the school districts; (10) challenges
by commercial insurers, employee welfare benefit plans, and health
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maintenance organizations to Section 2807-c of the Public Health Law,
which imposes 13%, 11% and 9% surcharges on inpatient hospital bills and a
bad debt and charity care allowance on all hospital bills and hospital
bills paid by such entities; and (11) challenge by a long distance carrier
to the constitutionality of Tax Law section 186-a(2-a) which restricted
certain deduction of local access service fees.
A number of cases also have ^ been instituted against the State
challenging the constitutionality of various public authority financing
programs.
^
Authorities. The fiscal stability of New York State is related
to the fiscal stability of its Authorities, which generally have
responsibility for financing, constructing and operating revenue-producing
public benefit facilities. Authorities are not subject to the
constitutional restrictions on the incurrence of debt which apply to the
State itself, and may issue bonds and notes within the amounts of, and as
otherwise restricted by, their legislative authorization. As of September
30, 1993, date of the latest data available, there were 18 Authorities
that had outstanding debt of $100 million or more. The aggregate
outstanding debt, including refunding bonds, of these 18 Authorities was
$63.5 billion as of September 30, 1993, of which approximately $7.7
billion was moral obligation debt and approximately $19.3 billion was
financed under lease-purchase or contractual-obligation financing
arrangements.
Authorities are generally supported by revenues generated by the
projects financed or operated, such as fares, user fees on bridges,
highway tolls and rentals for dormitory rooms and housing. In recent
years, however, New York State has provided financial assistance through
appropriations, in some cases of a recurring nature, to certain of the 18
Authorities for operating and other expenses and, in fulfillment of its
commitments on moral obligation indebtedness or otherwise, for debt
service. This operating assistance is expected to continue to be required
in future years. As of March 31, 1994, aggregate public authority debt
outstanding as State-supported debt was $21.1 billion and as State-related
debt was $29.4 billion.
Experience has shown that if an Authority suffers serious
financial difficulties, both the ability of the State and the Authorities
to obtain financing in the public credit markets and the market price of
the State's outstanding bonds and notes may be adversely affected. The
Housing Finance Agency and the Urban Development Corporation have in the
past required substantial amounts of assistance from the State to meet
debt service costs or to pay operating expenses. Further assistance,
possibly in increasing amounts, may be required for these, or other,
Authorities in the future. In addition, certain statutory arrangements
provide for State local assistance payments otherwise payable to
localities to be made under certain circumstances to certain Authorities.
The State has no obligation to provide additional assistance to localities
whose local assistance payments have been paid to Authorities under these
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arrangements. However, in the event that such local assistance payments
are so diverted, the affected localities could seek additional State
funds.
New York City and Other Localities. The fiscal health of the
State of New York is closely related to the fiscal health of its
localities, particularly the City of New York, which has required and
continues to require significant financial assistance from New York State.
The City's independently audited operating results for each of its 1981
through 1993 fiscal years, which end on June 30, show a General Fund
surplus reported in accordance with GAAP. In addition, the City's
financial statements for the 1993 fiscal year received an unqualified
opinion from the City's independent auditors, the eleventh consecutive
year the City has received such an opinion.
In 1975, New York City suffered a fiscal crisis that impaired the
borrowing ability of both the City and New York State. In that year the
City lost access to public credit markets. The City was not able to sell
short-term notes to the public again until 1979.
In 1975, Standard & Poor's suspended its A rating of City bonds.
This suspension remained in effect until March 1981, at which time the
City received an investment grade rating of BBB from Standard & Poor's.
On July 2, 1985, Standard & Poor's revised its rating of City bonds upward
to BBB+ and on November 19, 1987, to A-. On July 2, 1993, Standard &
Poor's reconfirmed its A- rating of City bonds, continued its negative
rating outlook assessment and stated that maintenance of such rating
depended upon the City's making further progress towards reducing budget
gaps in the outlying years. Moody's ratings of City bonds were revised in
November 1981 from B (in effect since 1977) to Ba1, in November 1983 to
Baa, in December 1985 to Baa1, in May 1988 to A and again in February 1991
to Baa1.
New York City is heavily dependent on New York State and federal
assistance to cover insufficiencies in its revenues. There can be no
assurance that in the future federal and State assistance will enable the
City to make up its budget deficits. To help alleviate the City's
financial difficulties, the Legislature created the Municipal Assistance
Corporation ("MAC") in 1975. MAC is authorized to issue bonds and notes
payable from certain stock transfer tax revenues, from the City's portion
of the State sales tax derived in the City and from State per capita aid
otherwise payable by the State to the City. Failure by the State to
continue the imposition of such taxes, the reduction of the rate of such
taxes to rates less than those in effect on July 2, 1975, failure by the
State to pay such aid revenues and the reduction of such aid revenues
below a specified level are included among the events of default in the
resolutions authorizing MAC's long-term debt. The occurrence of an event
of default may result in the acceleration of the maturity of all or a
portion of MAC's debt. As of December 31, 1993, MAC had outstanding an
aggregate of approximately $5.204 billion of its bonds. MAC bonds and
notes constitute general obligations of MAC and do not constitute an
enforceable obligation or debt of either the State or the City. Under its
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enabling legislation, MAC's authority to issue bonds and notes (other than
refunding bonds and notes) expired on December 31, 1984. Legislation has
been passed by the legislature which would, under certain conditions,
permit MAC to issue up to $1.465 billion of additional bonds, which are
not subject to a moral obligation provision.
Since 1975, the City's financial condition has been subject to
oversight and review by the New York State Financial Control Board (the
"Control Board") and since 1978 the City's financial statements have been
audited by independent accounting firms. To be eligible for guarantees
and assistance, the City is required during a "control period" to submit
annually for Control Board approval, and when a control period is not in
effect for Control Board review, a financial plan for the next four fiscal
years covering the City and certain agencies showing balanced budgets
determined in accordance with GAAP. New York State also established the
Office of the State Deputy Comptroller for New York City ("OSDC") to
assist the Control Board in exercising its powers and responsibilities.
On June 30, 1986, the City satisfied the statutory requirements for
termination of the control period. This means that the Control Board's
powers of approval are suspended, but the Board continues to have
oversight responsibilities.
On February 10, 1994, the Mayor submitted to the Control Board
for its review a mid-year modification to the 1994-1997 Financial Plan
(the "February Modification"). The February Modification projected a
balanced budget for fiscal year 1994, based upon revenues of $31.738
billion, including a general reserve of $198 million. For fiscal years
1995, 1996 and 1997, the February Modification projected budget gaps of
$2.261 billion, $3.167 billion and $3.253 billion, respectively, and
assumed no wage and salary increases beyond the expiration of current
labor agreements which expire in fiscal years 1995 and 1996. These gaps
have grown since November by about $530 million in fiscal year 1995, and
$650 million and $550 million in fiscal years 1996 and 1997, respectively,
owing in large part to lower estimates of real property tax revenues. To
close the budget gap projected for fiscal year 1995, the February
Modification included a gap-closing program that consisted of the
following major elements: (i) an agency program of $1.048 billion; (ii)
fringe benefit and pension savings of $400 million; (iii) an
intergovernmental aid package of $400 million; (iv) a workforce reduction
program of $144 million; and (v) the assumption of a $234 million surplus
roll from fiscal year 1994. Implementation of many of the gap-closing
initiatives requires the cooperation of the municipal labor unions, the
City Council and the State and Federal governments. The February
Modification also included a tax reduction program, with most of the
financial impact affecting the later years of the Plan period.
On March 1, 1994, the City's comptroller issued a report on the
state of the City's economy. The report concluded that, while the City's
long recession was over, moderate growth was the best the City can expect.
The report projected that total tax revenues for the 1994, 1995 and 1996
fiscal years will be slightly higher than projected in the February
Modification, and that tax revenues for the 1997 fiscal year will be
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slightly below the projections contained in the February Modification. The
report identified revenue risks for the 1994 through 1997 fiscal years
totaling $9 million, $134 million, $184 million and $184 million,
respectively. On March 21, 1994, the comptroller issued a report on the
February Modification. In the report, the comptroller identified as risks
for the 1995 fiscal year the proposals in the February Modification that
are uncertain because they depend on actions by organizations other than
City government, including the State Legislature and municipal unions. The
comptroller stated that if none of the uncertain proposals are
implemented, the total risk could be as much as $1.15 billion to $1.53
billion. The comptroller noted that there are a number of additional
issues, the impact of which could not be currently quantified.
On March 22, 1994, OSDC issued a report reviewing the February
Modification. The report concluded that a balanced budget is achievable
for the 1994 fiscal year. The report noted that expenditures for the 1994
fiscal year may be higher than projected by $176 million; however, the
City has initiated a program that is intended to reduce nonpersonnel costs
by up to $150 million. In addition, the report noted that the February
Modification included a general reserve of $198 million and assumed
savings of $117 million from the implementation of the proposed severance
program for the 1994 fiscal year. While the City intends to transfer $234
million of these resources to help balance the 1995 fiscal year budget,
the report concluded that most of these resources will be needed to
maintain budget balance in the 1994 fiscal year.
With respect to each of the 1995 through 1997 fiscal years, the
report noted the potential for a budget gap of approximately $300 million
greater than shown in the February Modification. With respect to the
City's $2.3 billion gap-closing program for the 1995 fiscal year, the
report noted that approximately $1.4 billion of the gap-closing
initiatives must be considered as high risk because the initiatives are
outside the Mayor's direct control to implement. The report noted that
if the necessary approvals and cooperation are not obtained from various
third parties, the City will have only a few months to develop alternative
solutions.
On March 23, 1994, the staff of the Control Board issued its
report on the February Modification. The report stated that, while the
February Modification moves the City in the direction of structural
balance, the February Modification has more risks and fewer details than
are desirable and does not set forth contingency plans or other
protections to assist the City if unknown but inevitable impediments
emerge. With respect to the 1994 fiscal year, the report concluded that
the budget is reliably balanced. However, for the 1995 fiscal year, the
report noted that decisions will have to be made in the next modification
as to whether to continue to include for the 1995 fiscal year revenues
from proposed additional federal and State aid, new Port Authority lease
agreements and a proposed video lottery, funds from MAC for the severance
program, and savings from employee health and pension cost reductions and
tort reform. The report noted that all of these actions, which total $1.2
billion, are outside the Mayor's direct control and require the support of
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third parties. Risks identified in the reports for the 1994 through 1997
fiscal years aggregate $94 million, $952 million, $1.7 billion and $1.9
billion, respectively, excluding any risk associated with the State
takeover of certain Medicaid costs, the workforce reduction program and
the reduction in heath insurance and pension costs proposed in the
February Modification.
Estimates of the City's revenues and expenditures are based on
numerous assumptions and are subject to various uncertainties. If expected
federal or State aid is not forthcoming, if unforeseen developments in the
economy significantly reduce revenues derived from economically sensitive
taxes or necessitate increased expenditures for public assistance, if the
City should negotiate wage increases for its employees greater than the
amounts provided for in the City's financial plan or if other
uncertainties materialize that reduce expected revenues or increase
projected expenditures, then, to avoid operating deficits, the City may be
required to implement additional actions, including increases in taxes and
reductions in essential City services. The City might also seek
additional assistance from New York State.
The City requires certain amounts of financing for seasonal and
capital spending purposes. The City has issued $1.75 billion of notes for
seasonal financing purposes during fiscal year 1994. The City's capital
financing program projects long-term financing requirements of
approximately $17 billion for the City's fiscal years 1995 through 1998.
The major capital requirements include expenditures for the City's water
supply and sewage disposal systems, roads, bridges, mass transit, schools,
hospitals and housing. In addition to financing for new purposes, the
City and the New York City Municipal Water Finance Authority have issued
refunding bonds totalling $1.8 billion in fiscal year 1994.
Certain localities, in addition to the City, could have financial
problems leading to requests for additional New York State assistance
during the State's 1993-94 and 1994-95 fiscal years and thereafter. The
potential impact on the State of such requests by localities is not
included in the projections of the State receipts and disbursements in the
State's 1994-95 fiscal year.
Fiscal difficulties experienced by the City of Yonkers
("Yonkers") resulted in the creation of the Financial Control Board for
the City of Yonkers (the "Yonkers Board") by New York State in 1984. The
Yonkers Board is charged with oversight of the fiscal affairs of Yonkers.
Future actions taken by the Governor or the Legislature to assist Yonkers
could result in allocation of New York State resources in amounts that
cannot yet be determined.
Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1992, the total indebtedness of
all localities in New York State was approximately $35.2 billion, of which
$19.5 billion was debt of New York City (excluding $5.9 billion in MAC
debt); a small portion (approximately $71.6 million) of the $35.2 billion
of indebtedness represented borrowing to finance budgetary deficits and
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was issued pursuant to enabling New York State legislation. State law
requires the Comptroller to review and make recommendations concerning the
budgets of those local government units other than New York City
authorized by State law to issue debt to finance deficits during the
period that such deficit financing is outstanding. Seventeen localities
had outstanding indebtedness for deficit financing at the close of their
fiscal year ending in 1992.
From time to time, federal expenditure reductions could reduce,
or in some cases eliminate, federal funding of some local programs and
accordingly might impose substantial increased expenditure requirements on
affected localities. If New York State, New York City or any of the
Authorities were to suffer serious financial difficulties jeopardizing
their respective access to the public credit markets, the marketability of
notes and bonds issued by localities within New York State could be
adversely affected. Localities also face anticipated and potential
problems resulting from certain pending litigation, judicial decisions and
long-range economic trends. The longer-range problems of declining urban
population, increasing expenditures and other economic trends could
adversely affect localities and require increasing New York State
assistance in the future.
Investment Restrictions
The following are fundamental investment restrictions of each
Fund. Each Fund of the Trust may not:
1. Purchase any securities which would cause more than 25%
of the value of a Fund's total assets at the time of such
purchase to be invested in the securities of one or more issuers
conducting their principal activities in the same industry. (For
purposes of this limitation, U.S. Government securities and state
or municipal governments and their political subdivisions are not
considered members of any industry. In addition, this limitation
does not apply to investments of domestic banks, including U.S.
branches of foreign banks and foreign branches of U.S. banks.)
2. Borrow money or issue senior securities as defined in the
1940 Act, except that (a) a Fund may borrow money in an amount
not exceeding one-third of the Fund's total assets at the time
of such borrowing, and (b) a Fund may issue multiple classes of
shares. The purchase or sale of futures contracts and related
options shall not be considered to involve the borrowing of money
or issuance of senior securities.
3. Make loans or lend securities, if as a result thereof
more than one-third of the Fund's total assets would be subject
to all such loans. For purposes of this restriction, debt
instruments and repurchase agreements shall not be treated as
loans.
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4. Underwrite securities issued by any other person, except
to the extent that the purchase of securities and the later
disposition of such securities in accordance with the Fund's
investment program may be deemed an underwriting.
5. Purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall
not prevent a Fund from investing in securities or other
instruments backed by real estate, including mortgage loans, or
securities of companies that engage in the real estate business
or invest or deal in real estate or interests therein).
6. Purchase or sell commodities, except that each Fund may
enter into futures contracts and related options, forward
currency contracts and other similar instruments.
Each Fund of the Trust may, notwithstanding any other fundamental
investment policy or restriction, invest all of its investable assets in
securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies, and
restrictions as the Fund.
The following are non-fundamental investment restrictions of each
Fund of the Trust:
1. The Trust will not purchase or retain the securities of
any issuer if the officers, directors or Trustees of the Trust,
its advisers, or managers owning beneficially more than one half
of one percent of the securities of each issuer together own
beneficially more than five percent of such securities.
2. No Fund will purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof), including their
predecessors, that have been in operation for less than three
years, if by reason thereof the value of such Fund's investment
in securities would exceed 5% of such Fund's total assets. For
purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as
the issuer of a security.
3. No Fund will purchase puts, calls, straddles, spreads and
any combination thereof if by reason thereof the value of its
aggregate investment in such classes of securities will exceed 5%
of its total assets, except that: (a) this restriction shall not
apply to standby commitments, and (b) this restriction shall not
apply to a Fund's transactions in futures contracts and related
options.
4. No Fund will purchase warrants if at the time of such
purchase: (a) more than 5% of the value of such Fund's assets
would be invested in warrants, or (b) more than 2% of the value
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of such Fund's assets would be invested in warrants that are not
listed on the New York or American Stock Exchange (for purposes
of this undertaking, warrants acquired by a Fund in units or
attached to securities will be deemed to have no value).
5. ^ No Fund will ^ invest more than 15% of the value of its
net assets in illiquid securities, including repurchase
agreements with remaining maturities in excess of seven days,
time deposits with maturities in excess of seven days, and other
securities which are not readily marketable. For purposes of
this restriction, illiquid securities shall not include
commercial paper issued pursuant to Section 4(2) of the
Securities Act of 1933 and securities which may be resold under
Rule 144A under the Securities Act of 1933, provided that the
Board of Trustees, or its delegate, determines that such
securities are liquid, based upon the trading markets for the
specific security.
6. ^ No Fund may invest in securities of other investment
companies, except as they may be acquired as part of a merger,
consolidation or acquisition of assets and except to the extent
otherwise permitted by the 1940 Act.
^ 7. No Fund will purchase oil, gas or mineral leases (a Fund
may, however, purchase and sell the securities of companies
engaged in the exploration, development, production, refining,
transporting and marketing of oil, gas or minerals).
^ 8. No Fund shall sell securities short, unless it owns or
has the right to obtain securities equivalent in kind and amounts
to the securities sold short, and provided that transactions in
futures contracts and options are not deemed to constitute
selling securities short.
^ 9. No Fund shall purchase securities on margin, except that
a Fund may obtain such short-term credits as are necessary for
the clearance of transactions, and provided that margin payments
in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
^ 10. No Fund shall purchase any security while borrowings
representing more than 5% of such Fund's total assets are
outstanding.
If a percentage restriction is adhered to at the time of an
investment, a later increase or decrease in such percentage resulting from
a change in the values of assets will not constitute a violation of such
restriction.
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Each of the foregoing restrictions applies to each Fund unless
otherwise indicated. Under the 1940 Act, a fundamental policy may not be
changed without the vote of a majority of the outstanding voting
securities of a Fund, as defined in the 1940 Act. "Majority" means the
lesser of (1) 67% or more of the shares present at a Fund's meeting, if
the holders of more than 50% of the outstanding shares of a Fund are
present or represented by proxy, or (2) more than 50% of the outstanding
shares of the Fund. Non-fundamental investments restrictions may be
changed by vote of a majority of the Trust's Board of Trustees at any
time.
In order to permit the sale of the Funds' shares in certain
states, the Trust may make commitments more restrictive than the
investment restrictions described above. Accordingly, pursuant to such
commitments, the Funds have undertaken not to invest in oil, gas or other
mineral leases. In addition, the Trust has undertaken not to invest in
warrants (other than warrants acquired by the Fund as part of a unit or
attached to securities at the time of purchase) if, as a result, the
investments (valued at the lower of cost or market) would exceed 5% of the
value of the Fund's net assets or if, as a result, more than 2% of the
Fund's net assets would be invested in warrants not listed on AMEX or
NYSE. Further, the Funds have given a representation that investments
will not be made in real estate limited partnerships. Should the Trust
determine that any such commitment is no longer in the best interests of
the Trust and its shareholders, it will revoke the commitment by
terminating sales of its shares in the state involved.
MANAGEMENT OF THE FUND
CONTROLLING SHAREHOLDERS
Mellon Bank Corporation, a Pennsylvania corporation registered as
a bank holding company under the Bank Holding Company Act of 1956, as
amended, owned of record, through its direct and indirect subsidiaries, ^
79% of the issued and outstanding voting shares of the ^ Trust, as of ^
November 30, 1994, and is, as a consequence, deemed to be a controlling
shareholder of ^ the Trust as that term is defined under the 1940 Act. The
address of Mellon Bank Corporation is: Mellon Bank Corporation, Mutual
Fund Department, 3 Mellon Bank Center, Pittsburgh, PA 15259.
PRINCIPAL SHAREHOLDERS
^ At September 22, 1994, the following companies/individuals
owned beneficially 5% or more of the Trust's outstanding shares: Boston
Safe Deposit and Trust Company ("Boston Safe") (a wholly-owned subsidiary
of The Boston Company, Inc., which is in turn a wholly-owned subsidiary of
Mellon Bank Corporation), One Cabot Road, Wellington III, Medford, MA
02155 owned 39.45% of the New York Municipal Fund. Boston Safe owned
14.03% of the California Municipal Fund. Philip Hawley, 444 South Flower
Street, Suite 2280, Los Angeles, CA 90071 owned 5.23% of the California
Municipal Fund.
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FEDERAL LAW AFFECTING MELLON BANK
The Glass-Steagall Act of 1933 prohibits national banks from
engaging in the business of underwriting, selling or distributing
securities and prohibits a member bank of the Federal Reserve System from
having certain affiliations with an entity engaged principally in that
business. The activities of Mellon Bank in informing its customers of,
and performing, investment and redemption services in connection with the
Fund, and in providing services to the Fund as custodian and fund
accountant, as well as Dreyfus' investment advisory activities, may raise
issues under these provisions. Mellon Bank has been advised by counsel
that its activities contemplated under this arrangement are consistent
with its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of such future statutes and regulations, could prevent
Mellon Bank or Dreyfus from continuing to perform all or a part of the
above services for its customers and/or a Fund. If Mellon Bank or Dreyfus
were prohibited from serving a Fund in any of its present capacities, the
Board of Trustees would seek an alternative provider(s) of such services.
TRUSTEES AND OFFICERS
The ^ Trust has a Board composed of twelve Trustees which
supervises the ^ Trust's investment activities and reviews contractual
arrangements with companies that provide the Funds with services. The
following lists the Trustees and officers and their positions with the ^
Trust and their present and principal occupations during the past five
years. ^ Each Trustee who is an "interested person" of the Trust (as
defined in the ^ Investment Company Act of 1940, as amended (the "Act"))
is indicated by an asterisk. Each of the Trustees also serves as a
Director of The Dreyfus/Laurel Funds, Inc., and as a Trustee of The
Dreyfus/Laurel Investment Series and The Dreyfus/Laurel Funds Trust
(collectively "The Dreyfus Family of Funds").
^ o + RUTH MARIE ADAMS. Trustee of the Trust; Professor of English and
Vice President ^ Emeritus, Dartmouth College; Senator, United
Chapters of Phi Beta Kappa;^ Trustee, Woods Hole Oceanographic
Institution. Address: 1026 Kendal Lyme Road, Hanover, New
Hampshire 03755.
o + FRANCIS P. BRENNAN. Chairman of the Board of Trustees and
Assistant Treasurer of the Trust; Director ^ and Chairman,
Massachusetts Business Development ^ Corp.; Director, Boston
Mutual Insurance Company; Director and Vice Chairman of the
Board, Home Owners Federal Savings ^ and Loan (prior to May
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1990). Address: Massachusetts Business Development Corp., One
Liberty Square, Boston, Massachusetts 02109.
^ o + JAMES M. FITZGIBBONS. Trustee of the Trust; President and
Director, Amoskeag Company; Chairman, Howes Leather Company,
Inc.; ^ Director, Fiduciary Trust Company^; Chairman, CEO and
Director, Fieldcrest-Cannon Inc.; Director, Lumber Mutual
Insurance Company; Director, Barrett Resources, Inc. Address: 40
Norfolk Road, Brookline, Massachusetts 02167.
^ o * J. TOMLINSON FORT. Trustee the Trust; Partner, Reed, Smith, Shaw
& McClay (law firm). Address: 204 Woodcock Drive, Pittsburgh,
Pennsylvania 15215.
o + ARTHUR L. GOESCHEL. Trustee of the Trust; Director, Chairman of
the Board and Director, Rexene Corporation; Director, Calgon
Carbon Corporation; Director, National Picture Frame Corporation;
Chairman of the Board and Director, Tetra Corporation 1991-1993;
Director, Medalist Corporation 1992-1993; From 1988-1989
Director, Rexene Corporation. Address: Way Hallow Road and
Woodland Road, Sewickley, Pennsylvania 15143.
o + KENNETH A. HIMMEL. Trustee of the Trust; Director, The Boston
Company, Inc. and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc. ^ and Florida Hospitality
Group; Managing Partner, Himmel/MKDG, Franklin Federal Partners,
Reston Town Center Associates and Grill 23 & Bar. Address:
Himmel and Company, Inc., 101 Federal Street, 22nd Floor, Boston,
Massachusetts 02110.
o + ARCH S. JEFFERY. Trustee of the Trust; Financial Consultant.
Address: 1817 Foxcroft Lane, Allison Park, Pennsylvania 15101.
o + STEPHEN J. LOCKWOOD. Trustee of the Trust; ^ President and ^
CEO, LDG Management Company ^ Inc.; CEO, LDG Reinsurance
Underwriters, SRRF Management Inc. and Medical Reinsurance
Underwriters ^ Inc. Address: 401 Edgewater Place, Wakefield,
Massachusetts 01880.
^ o + ROBERT D. MCBRIDE. Trustee of the Trust; Director, Chairman and
CEO, McLouth Steel; Director, Salem Corporation. Director,
SMS/Concast, Inc. (1983-1991). Address: 15 Waverly Lane, Grosse
Pointe Farms, Michigan 48236.
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o + JOHN L. PROPST. Trustee of the Trust; Of Counsel, Reed, Smith,
Shaw & McClay (law firm). Address: 5521 Dunmoyle Street,
Pittsburgh, Pennsylvania 15217.
o + JOHN J. SCIULLO. Trustee of the Trust; Dean Emeritus and
Professor of Law, Duquesne University Law School; Director, Urban
Redevelopment Authority of Pittsburgh. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224
o + ROSLYN M. WATSON. Trustee of the Trust; Principal, Watson
Ventures, Inc.^, prior to February, 1993^; Real Estate
Development Project Manager and Vice President, The Gunwyn
Company. Address: 25 Braddock Park, Boston, Massachusetts
02116-5816.
# MARIE ^ E. ^ CONNOLLY. President and Treasurer ^ of The
Dreyfus/Laurel Funds, Inc., The Dreyfus/Laurel Investment Series,
The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free
Municipal Funds (since September 1994); Vice President of The
Dreyfus/Laurel Funds, Inc. (March 1994 to September 1994);
President, Funds Distributor, Inc. ^(since 1992); Treasurer,
Funds Distributor, Inc. (July 1993 to April 1994); COO, Funds
Distributor, Inc. (since April 1994); Director, Funds
Distributor, Inc. (since July 1992); President, COO and Director,
Premier Mutual Fund Services,^ Inc. (since April 1994); Senior
Vice President ^ and Director of Financial Administration, The
Boston Company Advisors, Inc. ^(December 1988 to May 1993).
Address: One Exchange Place, Boston, Massachusetts 02109.
# FREDERICK C. DEY. Vice President of The Dreyfus/Laurel Funds,
Inc., The Dreyfus/Laurel Investment Series, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds
(since September 1994); Senior Vice President, Premier Mutual
Fund Services, Inc. (since August 1994); Vice President, Funds
Distributor, Inc. (since August 1994); Fundraising Manager, Swim
Across America (October 1993 to August 1994); General Manager,
Spring Industries (August 1988 to October 1993). Address: Premier
Mutual Fund Services, Inc., 200 Park Avenue New York, New York
10166.
# ERIC B. FISCHMAN. Vice President of The Dreyfus/Laurel Funds,
Inc., The Dreyfus/Laurel Investment Series, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Tax-Free Municipal Funds
(since September 1994); Vice President and Associate General
Counsel, Premier Mutual Fund Services, Inc. (Since August 1994);
Vice President and Associate General Counsel, Funds Distributor,
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Inc. (since August 1994); Staff Attorney, Federal Reserve Board
(September 1992 to June 1994); Summer Associate, Venture
Economics (May 1991 to September 1991); Summer Associate, Suffolk
County District Attorney (June 1990 to August 1990). Address:
Premier Mutual Fund Services, Inc., 200 Park Avenue, New York,
New York 10166.
RICHARD W. HEALEY. Vice President of The Dreyfus/Laurel Funds
Inc., The Dreyfus/Laurel Investment Series, The Dreyfus/Laurel
Tax-Free Municipal Funds Trust and The Dreyfus/Laurel Funds Trust
(since March 1994); Senior Vice President, Funds Distributor,
Inc. (since March 1993); Vice President, The Boston Company Inc.,
(March 1993 to May 1993); Vice President of Marketing, Calvert
Group (1989 to March 1993); Fidelity Investments (prior to 1989).
Address: One Exchange Place, Boston, Massachusetts 02109.
# JOHN E. PELLETIER. Vice President and Secretary of The
Dreyfus/Laurel Funds, Inc.; The Dreyfus/Laurel Investment Series,
The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Tax-Free
Municipal Funds (since September 1994); Senior Vice President,
General Counsel and Secretary, Funds Distributor, Inc. (since
April 1994); Senior Vice President, General Counsel and
Secretary, Premier Mutual Fund Services, Inc. (since August
1994); Counsel, The Boston Company Advisors, Inc. (February 1992
to March 1994); Associate, Ropes & Gray (August 1990 to February
1992); Associate, Sidley & Austin (June 1989 to August 1990).
Address: One Exchange Place, Boston, Massachusetts 02109.
___________________________________________________
* "Interested person" of the Trust, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by The Dreyfus Corporation.
The officers and Trustees of the Trust as a group owned
beneficially less than 1% of the total shares of each Fund outstanding as
of ^ December 1, 1994.
No officer or employee of Premier (or of any parent or subsidiary
thereof ) receives any compensation from the Trust for serving as an
officer or Trustee of the
Trust. No officer or employee of Dreyfus (or of any parent or subsidiary
thereof) serves as an officer or Trustee of the Trust. The Dreyfus/Laurel
Fund Family pays each Trustee who is not an officer or employee of Premier
or any of its affiliates $27,000 per annum (and an additional $75,000 for
the Chairman of the Board of Directors/Trustees of The Dreyfus/Laurel Fund
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<PAGE>
Family)^. In addition, the Trust pays each Trustee $1,000 per joint
Dreyfus/Laurel Fund Family meeting attended, plus $750 per joint
Dreyfus/Laurel Fund Family Audit Committee meeting attended, and
reimburses each Trustee for travel and out-of-pocket expenses. For the
fiscal year ended June 30, 1994, such fees for meetings and expenses
totaled ^ $63,372 for the Massachusetts Municipal Fund, the Municipal
Fund, and Dreyfus/Laurel Tax-Free Massachusetts Money Market Fund. For
the period from December 1, 1993 to the fiscal year ended June 30, 1994,
such fees for meetings and expenses totaled $9,517 for the California
Municipal ^ Fund, the New York Municipal Fund, Dreyfus/Laurel California
Tax-Free Money Fund, and Dreyfus/Laurel New York Tax-Free Money Fund.
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "Management
of the Fund."
Management Agreement. Dreyfus serves as the investment manager
for the Fund pursuant to an Investment Management Agreement with the ^
Trust dated April 4, 1994 ("Management Agreement"), transferred to Dreyfus
as of October 17, 1994. Pursuant to the Management Agreement, Dreyfus
provides, or arranges for one or more third parties to provide investment
advisory, administrative, custody, fund accounting and transfer agency
service to the Fund. As investment manager, Dreyfus manages the Fund by
making investment decisions based on the Fund's investment objectives,
policies and restrictions. The Management Agreement is subject to review
and approval at least annually by the Board of Trustees.
Prior to May 21, 1993, Boston Company Advisors, Inc. ("TBC
Advisors") served as investment adviser to each Fund pursuant to a written
agreement, which was last approved by the Trustees, including a majority
of the Trustees who are not "interested persons" of the Trust, on July 22,
1992. From May 21, 1993, through April 1, 1994, ^ TBC Advisors ^ served as
investment adviser to each Fund pursuant to a written agreement (" ^ TBC
Advisors Agreement"), which was last approved by the Trustees, including a
majority of the Trustees who are not "interested persons" of the Trust, on
July 21, 1993 and approved by the shareholders of each Fund of the Trust
on December 31, 1992. The ^ TBC Advisors Agreement became effective on
May 21, 1993, upon the consummation of the sale of Boston Group Holdings,
Inc., the parent company of The Boston Company, Inc. ("TBC"), to Mellon
Bank Corporation. Mellon Bank later served as investment manager to each
Fund pursuant to a written agreement ("Mellon Agreement"), which was last
approved by the Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust or Mellon Bank, on November 22, 1993,
(subject to shareholder approval) and approved by the shareholders of each
Fund of the Trust on March 29, 1994. The Mellon Agreement became
effective on April 1, 1994. ^ TBC Advisors is a wholly-owned subsidiary
of TBC, a financial services holding company. TBC is in turn a
wholly-owned subsidiary of Mellon Bank Corporation. As stated above,
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<PAGE>
Dreyfus, a wholly owned subsidiary of Mellon Bank, is the current
Investment Manager pursuant to a written agreement ("Management
Agreement"), which was last approved by the Trustees on October 17, 1994.
The current Management Agreement with Dreyfus provides for a
"unitary fee." Under the unitary fee structure, Dreyfus pays all expenses
of the Fund except: (i) brokerage commissions, (ii) taxes, interest, fees
and expenses of the non-interested Trustees (including counsel expenses),
and extraordinary expenses (which are expected to be minimal), and (iii)
the Rule 12b-1 fees described in this Statement of Additional Information.
Under the unitary fee, Dreyfus provides, or arranges for one or more third
parties to provide, investment advisory, administrative, custody, fund
accounting and transfer agency services to the Fund. For the provision of
such services directly, or through one or more third parties, Dreyfus
receives as full compensation for all services and facilities provided by
it, a fee computed daily and paid monthly at the annual rate set forth in
the Fund's Prospectus, applied to the average daily net assets of the
Fund's investment portfolio, less the accrued fees and expenses (including
counsel fees) of the non-interested Trustees of the Trust. Previously,
the payments to the investment manager covered merely the provision of
investment advisory services (and payment for sub-advisory services) and
certain specified administrative services. Under this previous
arrangement, the Fund also paid for additional non-investment advisory
expenses, such as custody and transfer agency services, that were not paid
by the investment ^ adviser.
The Management Agreement will continue from year to year provided
that a majority of the Trustees who are not interested persons of
Dreyfus/Laurel and either a majority of all Trustees or a majority of the
shareholders of the Fund approve their continuance. Dreyfus/Laurel may
terminate the Agreement, without prior notice to Dreyfus, upon the vote of
a majority of the Board of Trustees or upon the vote of a majority of the
outstanding voting securities of the Fund on 60 days written notice to
Dreyfus. Dreyfus may terminate the Management Agreement upon written
notice to Dreyfus/Laurel. The Management Agreement will terminate
immediately and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Howard Stein, Chairman of the Board and Chief Executive Officer; Julian M.
Smerling, Vice Chairman of the Board; Joseph S. DiMartino, President and a
director; W. Keith Smith, Chief Operating Officer and a director; Paul H.
Snyder, Vice President and Chief Financial Officer; Daniel C. Maclean,
Vice President and General Counsel; Barbara E. Casey. Vice
President--Retirement Services; Robert F. Dubuss, Vice President; Henry D.
Gottmann, Vice President--Retail; Elie M. Genadry, Vice
President--Wholesale; Mark N. Jacobs, Vice President--Fund Legal and
Compliance; Jeffery N. Nachman, Vice President--Mutual Fund Accounting;
Diane M. Coffey, Vice President--Corporate Communications; Jay R.
DeMartine, Vice President--Marketing; Kirk V. Stumpp, Vice President--New
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<PAGE>
Product Development; Lawrence S. Kash, Vice Chairman--Distribution; Philip
L. Toia, Vice Chairman--Operations and Administration; Katherine C.
Wickham, Vice President--Human Resources; Maurice Bendrihem, Controller;
and Mandell L. Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence M.
Greene and David B. Truman, directors.
As compensation for Dreyfus's services, each Fund pays a separate
fee, based on its total average daily net assets, that is computed daily
and paid monthly. The rates at which such fees are paid are described in
each Prospectus. Dreyfus may waive all or a portion of its fees payable
by any Fund from time to time.
The following table shows the fees paid by each Fund to ^ TBC
Advisors or Mellon (as the prior investment advisors), including and any
fee waivers or expense reimbursements by ^ TBC Advisors or Mellon, during
the Fund's 1992, 1993 and 1994 fiscal years:
54
<PAGE>
<TABLE>
<CAPTION>
1994*^(1) 1993** 1992**
------ --------- -------
<S>
<C> <C> <C> <C> <C> <C> <C>
Fees Fees Fees Fees Fees Fees Fees
Waived(4) Paid(2) Paid ^ Waived(4) Paid ^ Waived(4) Paid ^
--------- ------- ---- ----------- ---- ----------- ------ ----
Municipal Fund $42,914 $138,860 $120,026(5) $149,844 ^ $33,802(9) $111,512 $32,657^
Massachusetts 40,947 136,877 ^ 45,790(6) 125,844 ^ 43,842(10) 90,324 --^
Municipal Fund
California Municipal 24,801 37,628 ^ 41,998(7) 100,024 ^ 119,522(11) 98,142 94,550
Fund
^ 8,038 11,467 ^ 35,815(8) 28,242 ^ 102,024(12) 25,624 ^ 58,959(13)
New York Municipal
Fund
</TABLE>
-----------------
* For the fiscal year ended June 30. The California ^ Municipal ^
Fund and the New York Municipal Fund each changed its fiscal year
end from November 30 to June 30.
** For the fiscal years ended June 30 for the Municipal Fund, the
Massachusetts ^ Municipal Fund; and for the fiscal years ended
November 30 for the California ^ Municipal Fund, the New York ^
Municipal Fund.
(1) ^ Effective April 4, 1994, Mellon Bank serves as each Fund's
investment manager.
^(2) Fees paid to Mellon Bank for investment management services for
the period from April 4, 1994 to the fiscal year ended June 30,
1994.
^(3) Fees paid to ^ TBC Advisors for investment advisory services for
the period from either July 1, 1993 (in the case of the Municipal
^ Fund and the Massachusetts Municipal Fund) or December 1, 1993
(in the case of the California ^ Municipal ^ Fund and the New
York Municipal Fund) to April 3, 1993.
(4) TBC Advisors waived all or a portion of its fees and/or
reimbursed expenses of the Funds from time to time in order to
increase the Funds' net income available for distribution to
shareholders.
(5) Includes $54,702 reimbursement by ^ TBC Advisors.
(6) Includes ^ $846 reimbursement by ^ TBC Advisors.
(7) Includes ^ $4,370 reimbursement by ^ TBC Advisors.
55
<PAGE>
(8) Includes ^ $24,348 reimbursement by ^ TBC Advisors.
(9) ^ Amount represents a reimbursement ^ of expenses only.
(10) Includes ^ $12,183 reimbursement by ^ TBC Advisors.
(11) Includes ^ $19,498 reimbursement by ^ TBC Advisors.
(12) Includes ^ $73,782 reimbursement by ^ TBC Advisors.
(13) Includes ^ $33,335 reimbursement by ^ TBC Advisors.
^
56
<PAGE>
Dreyfus has agreed that if in any fiscal year the aggregate
expenses of any Fund of the Trust (including fees pursuant to the
Investment Management Agreement, but excluding interest, brokerage
expenses, taxes and extraordinary items) exceed the expense limitation of
any state, it will reduce its management fees by the amount of such excess
expense. Such a fee reduction, if any, will be reconciled on a monthly
basis. To the extent these state regulations permit the exclusion of
distribution expenses (see "Distribution Plan" below), the Trust will
exclude such expenses in determining whether any reduction obligation
exists. The most restrictive state expense limitation applicable to any
Fund requires a reduction of fees in any year that such expenses exceed
2.5% of the first $30 million of average net assets, 2.0% of the next $70
million of average net assets and 1.5% of the remaining average net
assets. A number of factors, including the size of each Fund, will
determine which of these restrictions will be applicable to a Fund at any
given time. No reimbursement pursuant to state expense limitations was
required for any of the Funds for the fiscal year ended June 30, 1994.
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled "How to Buy
Fund Shares."
Premier Mutual Fund Services (One Exchange Place, Boston
Massachusetts 02109), serves as the distributor for each of the Funds
pursuant to an agreement with Dreyfus effective October 17, 1994
(Distribution Agreement"), which is annually renewable. Shares of the
Trust are distributed on a best efforts basis by Premier in those states
where shares of the Trust are qualified for sale and Premier is
registered. Shares of the Trust are offered to the public on a continuous
basis. Premier also serves as each Fund's sub-administrator
("Sub-Administrator") pursuant to a sub-administration agreement with
Dreyfus effective October 17, 1994.
Sales Loads--Class A. The scale of sales loads applies to
purchases of Class A shares made by any "purchaser," which term includes
an individual and/or spouse purchasing securities for his, her or their
own account or for the account of any minor children, or a trustee or
other fiduciary purchasing securities for a single trust estate or a
single fiduciary account (including a pension, profit-sharing or other
employee benefit trust created pursuant to a plan qualified under Section
401 of the Internal Revenue Code of 1986, as amended ("Code") although
more than one beneficiary is involved; or a group of accounts established
by or on behalf of the employees of an employer or affiliated employers
pursuant to an employee benefit plan or other program (including accounts
established pursuant to Sections 403(b), 408(k), and 457 of the Code); or
an organized group which has been in existence for more than six months,
provided that it is not organized for the purpose of buying redeemable
securities of a registered investment company and provided that the
57
<PAGE>
purchases are made through a central administration or a single dealer, or
by other means which result in economy of sales effort or expense.
Set forth below is an example of the method of computing the
offering price of the Class A shares. The example assumes a purchase of
Class A shares aggregating less than ^ $50,000 subject to the schedule of
sales charges set forth in the Prospectus at a price based upon the net
asset value of the Class A shares.
Net Asset Value per Share ^ $12.50
Per Share Sales Charge - ^ 3.0%
of offering price (4.7% of
net asset value per share) ^ $0.39
Per Share Offering Price to
the Public ^ $12.89
TeleTransfer Privilege--All Classes, except Class R.
TeleTransfer purchase orders may be made between the hours of 8:00 a.m.
and 4:00 p.m., New York time, on any business day that The Shareholder
Services Group, Inc., the Fund's transfer and dividend disbursing agent
(the "Transfer Agent"), and the New York Stock Exchange ("NYSE") are open.
Such purchases will be credited to the shareholder's Fund account on the
next bank business day. To qualify to use the TeleTransfer Privilege, the
initial payment for purchase of shares must be drawn on, and redemption
proceeds paid to, the same bank and account as are designated on the
Account Application or Shareholder Services Form on file. If the proceeds
of a particular redemption are to be wired to an account at any other
bank, the request must be in writing and signature-guaranteed. See
"Redemption of Fund Shares--TeleTransfer Privilege--All Classes, except
Class R."
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year the account is closed or during the following calendar
year, provided the information on the old Account Application is still
applicable.
DISTRIBUTION AND SERVICE PLANS
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Distribution and Service Plans."
The Securities and Exchange Commission ("SEC") has adopted Rule
12b-1 under the 1940 Act ("Rule") regulating the circumstances under which
investment companies such as the ^ Trust may, directly or indirectly,
bear the expenses of distributing their shares. The Rule defines
distribution expenses to include expenditures for "any activity which is
58
<PAGE>
primarily intended to result in the sale of fund shares." The Rule, among
other things, provides that an investment company may bear such expenses
only pursuant to a plan adopted in accordance with the Rule.
Prior Plans
Prior to April 4, 1994, the Investor Shares (Class A) of each
Fund were known as either the "Retail Class" of shares or the
"Institutional Class" of shares. These two classes of shares of the Funds
were reclassified as a single class of shares (the Investor Shares) by the
Board of Trustees at a meeting held on November 22, 1993, subject to
certain approvals that were obtained from each Fund's shareholders at a
meeting held on March 29, 1994. At the November 22, 1993 Board Meeting,
the Trustees also approved a new distribution plan for the Investor Shares
(formerly a Fund's Retail and/or Institutional Class of shares) of each
Fund. Shareholders of each Fund's Retail Class of Shares and Institutional
Class of Shares approved the new distribution plans at a shareholders'
meeting held on March 14 and March 29, 1994. These new distribution plans
("Current A Plans") were effective on April 4, 1994. The Trust
redesignated the ^ Funds' Investor Class shares Class A shares effective
October 17, 1994.
Prior to April 4, 1994, each Fund's Retail Shares and
Institutional Shares were subject to distribution plans (the "Prior
Plans") that were adopted by the Trust under Section 12(b) of the Act and
of Rule. Under the Prior Plans, the Fund was authorized to spend up to
.25% of its average daily net assets attributable to the Retail Class on
activities primarily intended to result in the sale of such Shares, and
the Fund was authorized to spend up to .15% of its average daily net
assets attributable to the Institutional Class on activities primarily
intended to result in the sale of such Shares.
Under the distribution agreements with the prior distributor,
Funds Distributor, Inc. ("Funds Distributor") each Fund was authorized to
pay, or reimburse Funds Distributor, for distribution activities (which
are the same as those authorized by the Plans) on behalf of each Fund on a
monthly basis, provided that any payment by a Fund to Funds Distributor,
together with any other payments made by such Fund pursuant to the Prior
Plan, shall not exceed .0208% of its average daily net assets attributable
to the Retail Class for the prior month (.25% on an annualized basis) and
.0125% of its average daily net assets attributable to the Institutional
Class for the prior month (.15% on an annualized basis).
Current Plans
Distribution Plan--Class A shares. Under the Current Plan, Class
A shares of a Fund may spend annually up to 0.25% of the average of its
net asset values for costs and expenses incurred in connection with the
distribution of, and shareholder servicing with respect to, Fund shares.
The Current A Plan provides that a report of the amounts expended
under the Current A Plan, and the purposes for which such expenditures
59
<PAGE>
were incurred, must be made to the ^ Trust's Trustees for their review at
least quarterly. In addition, the Current A Plan provides that it may not
be amended to increase materially the costs which a Fund may bear for
distribution pursuant to the Current A Plan without approval of a Fund's
shareholders, and that other material amendments of the Current A Plan
must be approved by the vote of a majority of the Trustees and of the
Trustees who are not "interested persons" of the ^ Trust (as defined in
the 1940 Act) and who do not have any direct or indirect financial
interest in the operation of the Plan, cast in person at a meeting called
for the purpose of considering such amendments. The Current A Plan is
subject to annual approval by the entire Board of Trustees and by the
Trustees who are neither interested persons nor have any direct or
indirect financial interest in the operation of the Current A Plan, by
vote cast in person at a meeting called for the purpose of voting on the
Current A Plan. The Current A Plan is terminable, as to a Fund's class of
shares, at any time by vote of a majority of the Trustees who are not
interested persons and have no direct or indirect financial interest in
the operation of the Current A Plan or by vote of the holders of a
majority of the outstanding shares of such class of the Fund.
Distribution and Service Plans -- Class B and C shares. In
addition to the above described Current A Plan for Class A shares, the ^
Trust's Board of Trustees has adopted a Service Plan (the "Service Plan")
under the Rule for Class B and Class C shares, pursuant to which the Fund
pays the Distributor and Dreyfus Service Corporation for the provision of
certain services to the holders of Class B and Class C shares. The ^
Trust's Board of Trustees has also adopted a Distribution Plan pursuant to
the Rule with respect to Class B and Class C shares (the "Distribution
Plan"). The Funds' Board of Trustees believes that there is a reasonable
likelihood that the Distribution and Service Plans (the "Plans") will
benefit the Fund and the holders of Class B and Class C shares.
A quarterly report of the amounts expended under each Plan, and
the purposes for which such expenditures were incurred, must be made to
the Trustees for their review. In addition, each Plan provides that it
may not be amended to increase materially the cost which holders of
Class B or C shares may bear pursuant to the Plan without the approval of
the holders of such Classes and that other material amendments of the Plan
must be approved by the Board of Trustees and by the Trustees who are not
interested persons of the Fund and have no direct or indirect financial
interest in the operation of the Plan or in any agreements entered into in
connection with the Plan, by vote cast in person at a meeting called for
the purpose of considering such amendments. The Plan is subject to annual
approval by such vote of the Trustees cast in person at a meeting called
for the purpose of voting on the Plan. Each Plan was so approved by the
Trustees at a meeting held on September 23, 1994. Each Plan may be
terminated at any time by vote of a majority of the Trustees who are not
interested persons and have no direct or indirect financial interest in
the operation of the Plan or in any agreements entered into in connection
60
<PAGE>
with the Plan or by vote of the holders of a majority of Class B and C
shares.
^
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectus entitled "How to
Redeem Fund Shares."
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Service Agent, and
reasonably believed by the Transfer Agent to be genuine. Ordinarily, a
the Fund will initiate payment for shares redeemed pursuant to this
Privilege on the next business day after receipt if the Transfer Agent
receives the redemption request in proper form. Redemption proceeds will
be transferred by Federal Reserve wire only to the commercial bank account
specified by the investor on the Account Application or Shareholder
Services Form. Redemption proceeds, if wired, must be in the amount of
$1,000 or more and will be wired to the investor's account at the bank of
record designated in the investor's file at the Transfer Agent, if the
investor's bank is a member of the Federal Reserve System, or to a
correspondent bank if the investor's bank is not a member. Fees
ordinarily are imposed by such bank and usually are borne by the investor.
Immediate notification by the correspondent bank to the investor's bank is
necessary to avoid a delay in crediting the funds to the investor's bank
account.
Investors with access to telegraphic equipment may wire
redemption requests to the Transfer Agent by employing the following
transmittal code which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment
may have the wire transmitted by contracting a TRT Cables operator at
1-800-654-7171, toll free. Investors should advise the operator that the
above transmittal code must be used and should also inform the operator of
the Transfer Agent's answer back sign.
Stock Certificates; Signatures. Any certificates representing
Fund shares to be redeemed must be submitted with the redemption request.
61
<PAGE>
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing
agencies and savings associations as well as from participants in the NYSE
Medallion Signature Program, the Securities Transfer Agents Medallion
Program ("STAMP") and the Stock Exchanges Medallion Program. Guarantees
must be signed by an authorized signatory of the guarantor and
"Signature-Guaranteed" must appear with the signature. The Transfer Agent
may request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call one of the telephone numbers listed on the cover.
TeleTransfer Privilege--All Classes, except Class R. Investors
should be aware that if they have selected the TeleTransfer Privilege,
any request for a wire redemption will be effected as a TeleTransfer
transaction through the Automated Clearing House ("ACH") system unless
more prompt transmittal specifically is requested. Redemption proceeds
will be on deposit in the investor's account at an ACH member bank
ordinarily two business days after receipt of the redemption request. See
"Purchase of Fund Shares--TeleTransfer Privilege--All Classes, except
Class R."
Redemption Commitment. Each Fund has committed itself to pay in
cash all redemption requests by any shareholder of record of the Fund,
limited in amount during any 90-day period to the lesser of $250,000 or 1%
of the value of the Fund's net assets at the beginning of such period.
Such commitment is irrevocable without the prior approval of the SEC. In
the case of requests for redemption in excess of such amount, the Board of
Trustees reserves the right to make payments in whole or in part in
securities or other assets in case of an emergency or any time a cash
distribution would impair the liquidity of the Fund to the detriment of
the existing shareholders. In this event, the securities would be valued
in the same manner as the Funds' portfolio is valued. If the recipient
sold such securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be
suspended or the date of payment postponed (a) during any period when the
NYSE is closed (other than customary weekend and holiday closings), (b)
when trading in the markets a Fund ordinarily utilizes is restricted, or
when an emergency exists as determined by the SEC so that disposal of a
Fund's investments or determination of its net asset value is not
reasonably practicable, or (c) for such other periods as the Securities
and Exchange Commission by order may permit to protect a Fund's
shareholders.
62
<PAGE>
SHAREHOLDER SERVICES
The following information supplements and should be read in
conjunction with the section in the Fund's Prospectus entitled
"Shareholder Services."
Exchange Privilege. Shares of any Class of a Fund may be
exchanged for shares of the respective Class of certain other funds
advised or administered by Dreyfus. Shares of the same Class of such
funds purchased by exchange will be purchased on the basis of relative net
asset value per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales
load, and the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be
exchanged without a sales load for shares of other funds
sold without a sales load.
D. Shares of funds purchased with a sales load, shares of
funds acquired by a previous exchange from shares
purchased with a sales load and additional shares
acquired through reinvestment of dividends or other
distributions of any such funds (collectively referred to
herein as "Purchased Shares") may be exchanged for shares
of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load
applicable to the Offered Shares exceeds the maximum
sales load that could have been imposed in connection
with the Purchased Shares (at the time the Purchased
Shares were acquired), without giving effect to any
reduced loads, the difference will be deducted.
E. Shares of funds subject to a contingent deferred sales
charge ("CDSC") that are exchanged for shares of another
fund will be subject to the higher applicable CDSC of the
two funds, and for purposes of calculating CDSC rates and
conversion periods, if any, will be deemed to have been
held since the date the shares being exchanged were
initially purchased.
To accomplish an exchange under item D above, shareholders must
notify the Transfer Agent of their prior ownership of fund shares and
their account number.
To use this privilege, the investor's Service Agent acting on the
investor's behalf must give exchange instructions to the Transfer Agent in
writing, by wire or by telephone. Telephone exchanges may be made only if
63
<PAGE>
the appropriate "YES" box has been checked on the Account Application, or
a separate signed Shareholder Services Form is on file with the Transfer
Agent. By using this privilege, the investor authorizes the Transfer
Agent to act on telephonic, telegraphic or written exchange instructions
from any person representing himself or herself to be the investor or a
representative of the investor's Service Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for
telephone exchange.
Exchanges of Class R shares held by a retirement plan may be made
only between the investor's retirement plan account in one fund and such
investor's retirement plan account in another fund.
To establish a personal retirement plan by exchange, shares of
the fund being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made.
For Dreyfus-sponsored Keogh Plans, IRAs and SEP-IRAs with only one
participant, the minimum initial investment is $750. To exchange shares
held in Corporate Plans, 403(b)(7) Plans and IRAs set up under a
Simplified Employee Pension Plan ("SEP-IRAs") with more than one
participant, the minimum initial investment is $100 if the plan has at
least $2,500 invested among the funds in the Premier Family of Funds or
the Dreyfus Family of Funds. To exchange shares held in a personal
retirement plan account, the shares exchanged must have a current value of
at least $100.
Auto-Exchange Privilege. The Auto-Exchange Privilege permits an
investor to purchase, in exchange for shares of a Fund, shares of the same
Class of another fund in the Premier Family of Funds or the Dreyfus Family
of Funds. This privilege is available only for existing accounts. With
respect to Class R shares held by a retirement plan, exchanges may be made
only between the investor's Retirement Plan account in one fund and such
investor's retirement plan account in another fund. Shares will be
exchanged on the basis of relative net asset value as described above
under "Exchange Privilege." Enrollment in or modification or cancellation
of this privilege is effective three business days following notification
by the investor. An investor will be notified if the investor's account
falls below the amount designated to be exchanged under this privilege.
In this case, an investor's account will fall to zero unless additional
investments are made in excess of the designated amount prior to the next
Auto-Exchange transaction. Shares held under IRA and other retirement
plans are eligible for this privilege. Exchanges of IRA shares may be
made between IRA accounts and from regular accounts to IRA accounts, but
not from IRA accounts to regular accounts. With respect to all other
retirement accounts, exchanges may be made only among those accounts.
^ Fund exchanges and Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between
accounts having identical names and other identifying designations.
64
<PAGE>
Shareholder Services Forms and prospectuses of the other funds
may be obtained from the Distributor. The Fund reserves the right to
reject any exchange request in whole or in part. The ^ Fund exchange
service or Auto-Exchange Privilege may be modified or terminated at any
time upon notice to shareholders.
Automatic Withdrawal. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis. Withdrawal payments are the proceeds from sales of Fund shares,
not the yield on the shares. If withdrawal payments exceed reinvested
dividends and distributions, the investor's shares will be reduced and
eventually may be depleted. An Automatic Withdrawal Plan may be
established by completing the appropriate application available from the
Distributor. There is a service charge of $.50 for each withdrawal check.
Automatic Withdrawal may be terminated at any time by the investor, a Fund
or the Transfer Agent. Shares for which certificates have been issued may
not be redeemed through the Automatic Withdrawal Plan.
Dividend Sweep. Dividend Sweep allows investors to invest on the
payment date their dividends or dividends and capital gain distributions,
if any, from a Fund in shares of the same Class of another fund in the
Premier Family of Funds or certain other funds in the Dreyfus Family of
Funds of which the investor is a shareholder. Shares of the same Class of
other funds purchased pursuant to this privilege will be purchased on the
basis of relative net asset value per share as follows:
A. Dividends and distributions paid by a fund may be
invested without imposition of a sales load in shares of
other funds that are offered without a sales load.
B. Dividends and distributions paid by a fund which does not
charge a sales load may be invested in shares of other
funds sold with a sales load, and the applicable sales
load will be deducted.
C. Dividends and distributions paid by a fund which charges
a sales load may be invested in shares of other funds
sold with a sales load (referred to herein as "Offered
Shares"), provided that, if the sales load applicable to
the Offered Shares exceeds the maximum sales load charged
by the fund from which dividends or distributions are
being swept, without giving effect to any reduced loads,
the difference will be deducted.
D. Dividends and distributions paid by a fund may be
invested in shares of other funds that impose a CDSC and
the applicable CDSC, if any, will be imposed upon
redemption of such shares.
65
<PAGE>
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectus entitled "How to Buy
Fund Shares."
New York Stock Exchange Closings. The holidays (as observed) on
which the NYSE is closed currently are: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
The Prospectuses describe the time at which the net asset value
of each Fund is determined for purposes of sales and redemptions. In
addition, portfolio securities held by the Funds may be actively traded in
securities markets which are open for trading on days when the Funds will
not be determining their net asset values. Accordingly, there may be
occasions when the Funds are not open for business but when the value of a
Fund's portfolio securities will be affected by such trading activity.
The Funds' investments are valued by Dreyfus, after consultation
with an independent pricing service (the "Service") approved by the
Trustees. When, in the judgment of the Service, quoted bid prices for
investments are readily available and are representative of the bid side
of the market, these investments are valued at the mean between the quoted
bid prices and asked prices. Investments for which, in the judgment of
the Service, there are no readily obtainable market quotations (which may
constitute a majority of the portfolio securities) are carried at fair
value as determined by the Service. The procedures of the Service are
reviewed periodically by the officers of the Trust under the general
supervision and responsibility of the Trustees, which may replace any such
Service at any time if they determine it to be in the best interests of
the Trust to do so.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectus entitled "Dividends,
Other Distributions and Taxes."
The term "regulated investment company" does not imply the
supervision of management or investment practices or policies by any
government agency.
To qualify as a regulated investment company ("RIC"), each Fund
(1) must distribute to its shareholders each year at least 90% of its
investment company taxable income (generally consisting of net investment
income, net short-term capital gains and net gains from certain foreign
currency transactions), (2) must derive at least 90% of its annual gross
income from specified sources ("Income Requirement"), (3) must derive less
than 30% of its annual gross income from gain on the sale or disposition
66
<PAGE>
of any of the following that are held for less than three months --
(i) securities, (ii) non-foreign-currency options and futures and
(iii) foreign currencies (or foreign currency options, futures and forward
contracts) that are not directly related to a Fund's principal business of
investing in securities (or options and futures with respect thereto)
("Short-Short Limitation") -- and (4) must meet certain asset
diversification and other requirements. Accordingly, a Fund may be
restricted in the selling of securities held for less than three months.
Any dividend or other distribution paid shortly after an
investor's purchase may have the effect of reducing the net asset value of
the shares below the cost of his investment. Such a dividend or other
distribution would be a return on investment in an economic sense,
although taxable as stated in the Funds' Prospectus. In addition, the
Code provides that if a shareholder holds shares of the Fund for six
months or less and has received a capital gain distribution with respect
to those shares, any loss incurred on the sale of those shares will be
treated as a long-term capital loss to the extent of the capital gain
distribution received.
Dividends and other distributions declared by a Fund in October,
November or December of any year and payable to shareholders of record on
a date in that month any of those months are deemed to have been paid by a
Fund and received by the shareholders on December 31 of that year if the
distributions are paid by a Fund during the following January.
Accordingly, those distributions will be taxed to shareholders for the
year in which that December 31 falls.
Each Fund has satisfied, and intends to continue to satisfy, the
requirements for qualifying as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). Provided that each Fund distributes at least 90% of its taxable
net investment income, including market discount and net realized
short-term capital gains, and 90% of the tax-exempt interest income
(reduced by certain expenses), each Fund, if it qualifies as a regulated
investment company, will not be liable for Federal income taxes to the
extent its taxable net investment income and capital gain net income are
distributed to its shareholders.
Because each Fund will distribute exempt-interest dividends,
interest on indebtedness incurred by a shareholder to purchase or carry
Fund shares is not deductible for Federal income tax purposes. If a
shareholder receives an exempt-interest dividend with respect to shares of
a Fund and if such shares are held by the shareholder for six months or
less, then any loss on the redemption or exchange of such shares will, to
the extent of such exempt-interest dividends, be disallowed. In addition,
the Code may require a shareholder, if he or she receives exempt-interest
dividends, to treat as taxable income a portion of certain otherwise
non-taxable social security and railroad retirement benefit payments.
Furthermore, that portion of an exempt-interest dividend paid by a Fund
which represents income from private activity bonds may not retain its
tax-exempt status in the hands of a shareholder who is a "substantial
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<PAGE>
user" of a facility financed by such bonds, or a "related person" thereof.
Moreover, as noted in the Funds' Prospectuses, some or all of a Fund's
dividends may be a specific preference item, or a component of an
adjustment item, for purposes of the Federal individual and corporate
alternative minimum taxes. In addition, the receipt of Fund dividends and
distributions may affect a foreign corporate shareholder's Federal "branch
profits" tax liability and a Subchapter S corporation shareholder's
Federal "excess net passive income" tax liability. Shareholders should
consult their own tax advisers as to whether they are (1) substantial
users with respect to a facility or related to such users within the
meaning of the Code or (2) subject to a Federal alternative minimum tax,
any applicable state alternative minimum tax, the Federal branch profits
tax, or the Federal excess net passive income tax.
While the Funds do not expect to realize a significant amount of
net long-term capital gains, any such gains realized will be distributed
annually as described in the Funds' Prospectuses. Such distributions
("capital gain dividends"), if any, will be taxable to the shareholders as
long-term capital gains, regardless of how long a shareholder has held a
Fund's shares, and will be designated as capital gain dividends in a
written notice mailed by the Funds to the shareholders after the close of
the Funds' prior taxable year. If a shareholder receives a capital gain
dividend with respect to any share and if such share is held by the
shareholder for six months or less, then any loss (to the extent not
disallowed pursuant to the other six month rule described above) on the
sale or exchange of such share, to the extent of the capital gain
dividend, shall be treated as a long-term capital loss.
Dividends derived by the Funds from tax-exempt interest are
designated as tax-exempt in the same percentage of the day's dividend as
the actual tax-exempt income earned that day. Thus, the percentage of the
dividend designated as tax-exempt may vary from day to day. Similarly,
dividends derived by the Funds from interest on relevant state Municipal
Obligations will be designated as exempt from that state's taxation in the
same percentage of the day's dividend as the actual interest on that
state's Municipal Obligations earned on that day.
Each Fund is required to withhold and remit to the U.S. Treasury
31% of the taxable dividends paid by the Funds, the distributions paid by
the Funds and ^ the proceeds of redemptions or exchanges of Fund shares
(in excess of $10 on an annualized basis) with respect to any
non-corporate shareholder who fails to furnish or certify his or her
correct taxpayer identification number, who has been notified that he or
she is to subject to back up withholding due to underreporting of
dividend or interest income or who fails to certify that he or she has
provided a correct taxpayer identification number, and that he or she is
not subject to such withholding. An individual's tax identification
number is his or her social security number. The backup withholding tax
is not an additional tax and may be credited against a shareholder's
regular Federal income tax liability.
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<PAGE>
The foregoing is only a summary of certain tax considerations
generally affecting the Funds and their shareholders, and is not intended
as a substitute for careful tax planning. Individuals may be exempt from
state and local personal income taxes on exempt-interest income derived
from obligations of issuers located in the state in which they reside, but
are usually subject to such taxes on such dividends that are derived from
obligations of issuers located in other jurisdictions. Investors are
urged to consult their tax advisers with specific reference to their own
tax situations.
A portion of the dividends paid by a Fund, whether received in
cash or reinvested in additional Fund shares, may be eligible for the
dividends-received deduction allowed to corporations. The eligible
portion may not exceed the aggregate dividends received by a Fund from
U.S. corporations. However, dividends received by a corporate shareholder
and deducted by it pursuant to the dividends-received deduction are
subject indirectly to the alternative minimum tax.
Dividends and interest received by a Fund may be subject to
income, withholding or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield on its securities. Tax
conventions between certain countries and the United States may reduce or
eliminate these foreign taxes, however, and many foreign countries do not
impose taxes on capital gains in respect of investments by foreign invest-
ors.
Income from foreign currencies (except certain gains therefrom
that may be excluded by future regulations), and income from transactions
in options, futures and forward contracts derived by the Fund with respect
to its business of investing in securities or foreign currencies, will
qualify as permissible income under the Income Requirement. However,
income from the disposition of options and futures contracts (other than
those on foreign currencies) will be subject to the Short-Short Limitation
if they are held for less than three months. Income from the disposition
of foreign currencies, and options, futures and forward contracts thereon,
that are not directly related to a Fund's principal business of investing
in securities (or options and futures with respect to securities) also
will be subject to the Short-Short Limitation if they are held for less
than three months.
If a Fund satisfies certain requirements, any increase in value
of a position that is part of a "designated hedge" will be offset by any
decrease in value (whether realized or not) of the offsetting hedging
position during the period of the hedge for purposes of determining
whether a Fund satisfies the Short-Short Limitation. Thus, only the net
gain (if any) from the designated hedge will be included in gross income
for purposes of that limitation. Each Fund will consider whether it
should seek to qualify for this treatment for its hedging transactions.
To the extent a Fund does not so qualify, it may be forced to defer the
closing out of certain options, futures and forward contracts beyond the
time when it otherwise would be advantageous to do so, in order for such
Fund to qualify as a RIC.
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<PAGE>
Ordinarily, gains and losses realized from portfolio transactions
will be treated as capital gain and loss. However, a portion of the gain
or loss from the disposition of foreign currencies and non-U.S. dollar
denominated securities (including debt instruments, certain financial
forward, futures and option contracts and certain preferred stock) may be
treated as ordinary income or loss under Section 988 of the Code. In
addition, all or a portion of any gain realized from the sale or other
disposition of certain market discount bonds will be treated as ordinary
income. Moreover, all or a portion of the gain realized from engaging in
"conversion transactions" may be treated as ordinary income under Section
1258. "Conversion transactions" are defined to include certain forward,
futures, option and straddle transactions, transactions marketed or sold
to produce capital gains, or transactions described in Treasury
regulations to be issued in the future.
Under Section 1256 of the Code, any gain or loss realized by a
Fund from certain futures and forward contracts and options transactions
will be treated as 60% long-term capital gain or loss and 40% short-term
capital gain or loss. Gain or loss will arise upon exercise or lapse of
such contracts and options as well as from closing transactions. In
addition, any such contracts or options remaining unexercised at the end
of a Fund's taxable year will be treated as sold for their then fair
market value (a process known as "marking to market"), resulting in
additional gain or loss to the Fund characterized in the manner described
above.
Offsetting positions held by a Fund involving certain contracts
or options may constitute "straddles." "Straddles" are defined to include
"offsetting positions" in actively traded personal property. The tax
treatment of "straddles" is governed by Sections 1092 and 1258 of the
Code, which, in certain circumstances, override or modify Sections 1256
and 988. As such, all or a portion of any short-term or long-term capital
gain from certain "straddle" transactions may be recharacterized to
ordinary income. If the Fund were treated as entering into "straddles" by
reason of its engaging in certain forward contracts or options
transactions, such "straddles" would be characterized as "mixed straddles"
if the forward contracts or options transactions comprising a part of such
"straddles" were governed by Section 1256. Each Fund may make one or more
elections with respect to "mixed straddles." Depending on which election
is made, if any, the results to a Fund may differ. If no election is
made, then to the extent the "straddle" and conversion transactions rules
apply to positions established by a Fund, losses realized by a Fund will
be deferred to the extent of unrealized gain in the offsetting position.
Moreover, as a result of the "straddle" rules, short-term capital loss on
"straddle" positions may be recharacterized as long-term capital loss, and
long-term capital gains may be treated as short-term capital gains or
ordinary income.
Investment by a Fund in securities issued or acquired at a
discount (for example, zero coupon securities) or providing for deferred
interest or for payment of interest in the form of additional obligations
(for example, "pay-in-kind" or "PIK" securities) could, under special tax
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<PAGE>
rules, affect the amount, timing and character of distributions to
shareholders by causing the Fund to recognize income prior to the receipt
of cash payments. For example, a Fund could be required to take into
gross income annually a portion of the discount (or deemed discount) at
which the securities were issued and to distribute such income in order to
maintain its qualification for treatment as a RIC. In such case, the Fund
may have to dispose of securities it might otherwise have continued to
hold in order to generate cash to satisfy these distribution requirements.
If a Fund invests in an entity that is classified as a "passive
foreign investment company" ("PFIC") for federal income tax purposes, the
operation of certain provisions of the Code applying to PFICs could result
in the imposition of certain federal income taxes on the Fund. In
addition, gain realized from the sale or other disposition of PFIC
securities may be treated as ordinary income under Section 1291 of the
Code.
State and Local Taxes. Depending upon the extent of a Fund's
activities in states and localities in which its offices are maintained,
in which its agents or independent contractors are located, or in which it
is otherwise deemed to be conducting business, the Fund may be subject to
the tax laws of such states or localities. Shareholders are advised to
consult their tax advisers concerning the application of state and local
taxes.
Foreign Shareholders - U.S. Federal Income Taxation. U.S. federal
income taxation of a shareholder who, as to the United States, is a
non-resident alien individual, a foreign trust or estate, a foreign
corporation or a foreign partnership (a "foreign shareholder"), depends on
whether the income from a Fund is "effectively connected" with a U.S.
trade or business carried on by the shareholder, as discussed generally
below. Special U.S. federal income tax rules that differ from those
described below may apply to certain foreign persons who invest in the
Fund. For example, the tax consequences to a foreign shareholder entitled
to claim the benefits of an applicable tax treaty may be different from
those described below. Foreign shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them
of an investment in a Fund.
Foreign Shareholders - Income Not Effectively Connected. If the
income from a Fund is not effectively connected with a U.S. trade or
business carried on by the foreign shareholder, distributions of
investment company taxable income generally will be subject to a U.S.
federal withholding tax of 30% (or lower treaty rate) on the gross amount
of the distribution. Foreign shareholders also may be subject to U.S.
federal withholding tax on income resulting from any election by a Fund to
treat foreign taxes paid by it as paid by its shareholders (see discussion
above), but foreign shareholders will not be able to claim a credit or
deduction for the foreign taxes treated as having been paid by them.
Capital gains realized by foreign shareholders on the sale of
Fund shares and distributions to them of net capital gain, as well as
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<PAGE>
amounts retained by a Fund that are designated as undistributed capital
gains, generally will not be subject to U.S. federal income tax unless the
foreign shareholder is a non-resident alien individual and is physically
present in the United States for more than 182 days during the taxable
year. However, this rule only applies in exceptional cases, because any
individual present in the United States for more than 182 days during the
taxable year generally is treated as a resident for U.S. federal income
tax purposes on his worldwide income at the graduated rates applicable to
U.S. citizens, rather than the 30% U.S. federal withholding tax rate. In
the case of certain foreign shareholders, the Fund may be required to
withhold U.S. Federal income tax at a rate of 31% of capital gain
distributions and of the gross proceeds from a redemption of Fund shares
unless the shareholder furnishes the Fund with a certificate regarding the
shareholder's foreign status.
Foreign Shareholders - Effectively Connected Income. If income
from a Fund is effectively connected with a U.S. trade or business carried
on by a foreign shareholder, then all distributions to that shareholder
and any gains realized by that shareholder on the disposition of the Fund
shares will be subject to U.S. federal income tax at the graduated rates
applicable to U.S. citizens and domestic corporations, as the case may be.
Foreign shareholders also may be subject to the branch profits tax.
Foreign Shareholders - Estate Tax. Foreign individuals generally
are subject to U.S. federal estate tax on their U.S. situs property, such
as shares of a Fund, that they own at the time of their death. Certain
credits against that tax and relief under applicable tax treaties may be
available.
Pennsylvania Personal Property Tax Exemption. The ^ Trust has
obtained a Certificate of Authority to do business as a foreign
corporation in Pennsylvania. In the opinion of counsel, shares of the ^
Trust are exempt from Pennsylvania personal property taxes.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities for the Funds and
effectuation of securities transactions are made by Dreyfus, subject to
the overall supervision and review of the Trustees. The same personnel are
also in charge of portfolio transactions for other clients of other
subsidiaries and affiliates of Dreyfus.
Purchases and sales of portfolio securities for the Funds will
generally be transacted with the issuer or a primary market maker on a net
basis, without the payment by the Fund of any brokerage commission for
such purchases or sales. Purchases from dealers serving as primary market
makers will reflect the spread between the bid and asked prices. In
selecting dealers and in executing portfolio transactions, Dreyfus seeks,
on behalf of the Funds, the best overall terms available. In doing so,
Dreyfus considers all matters it deems relevant, including the breadth of
the market in the security, the price of the security and the financial
condition and executing capability of the dealer.^
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<PAGE>
Dealers may be selected who provide brokerage and/or research
services to the Trust and/or other accounts over which Dreyfus or its
affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing
in, purchasing or selling securities; the availability of securities or
the purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as
clearance and settlement). The receipt of research from dealers may be
useful to Dreyfus in rendering investment management services to the Trust
and/or its other clients; and, conversely, such information provided by
its brokers or dealers who have executed transaction orders on behalf of
other clients of Dreyfus may be useful to Dreyfus in carrying out its
obligation to the Trust.
The Funds will not purchase Municipal Obligations during the
existence of any underwriting or selling group relating thereto of which
an affiliate is a member, except to the extent permitted by the SEC.
Under certain circumstances, the Funds may be at a disadvantage because of
this limitation in comparison with other investment companies which have a
similar investment objective but are not subject to such limitations.
Dreyfus will make investment decisions for each Fund
independently from those made for its other clients, other funds and
clients of other subsidiaries of Dreyfus. On occasion, however, the same
investment decisions will be made for a Fund as for one or more of
Dreyfus' clients at about the same time. In a case in which a Fund and one
of these other clients are simultaneously engaged in the purchase or sale
of the same security, the transactions will, to the extent feasible and
practicable, be averaged as to price and allocated as to amount among the
Fund and/or the other client or clients pursuant to a formula considered
equitable. In some cases, this system could have a detrimental effect on
the price or volume of the security to be purchased or sold on behalf of
the particular Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be
to the benefit of the Funds.
Portfolio Turnover. The Trust may attempt to increase yields on
investments made for the Funds by trading to take advantage of short-term
market variations. Securities may be sold in anticipation of a rise in
interest rates (market decline) or purchased in anticipation of a decline
in interest rates (market rise) and later sold. Furthermore, a security
may be sold and another of comparable quality purchased at approximately
the same time to take advantage of what the Trust believes to be a
temporary disparity in the normal yield relationship between the two
securities. These yield disparities may occur for reasons not directly
related to the investment quality of particular issues or the general
movement of interest rates, such as changes in the overall demand for, or
supply of, various types of tax-exempt securities. The Trust's portfolio
73
<PAGE>
transaction policy should not result in high brokerage commissions to the
Funds, as purchases and sales of the Funds' portfolio securities are
usually effected as principal transactions. However, to the extent a high
portfolio turnover rate results in the realization by a Fund of net
short-term capital gains, such gains when distributed will be taxable to
shareholders as ordinary income. While a Fund's portfolio turnover rate
will vary from year to year, it is anticipated that the portfolio turnover
rate for the ^ Funds may exceed 100%. The turnover rate will not be a
limiting factor for these Funds, however, when the Funds deem it desirable
to sell or purchase securities. The portfolio turnover rate is the lesser
of purchases or sales of portfolio securities for the year divided by the
monthly average value of a Fund's portfolio securities. Securities having
maturities of one year or less are excluded from the calculation.
^
The portfolio turnover rates for the fiscal years ended June 30,
1993 and 1994 for the ^ Municipal Fund were 103% and 57%, respectively.
The portfolio turnover rates for the fiscal years ended June 30, 1993 and
1994 for the ^ Massachusetts Municipal Fund were 60% and 19%,
respectively.
The portfolio turnover rates for the fiscal year ended November
30, 1993 and for the period ended June 30, 1994 for the ^ California
Municipal Fund were 38% and 5%, respectively. The portfolio turnover
rates for the fiscal year ended November 30, 1993 and for the period ended
June 30, 1994 for the ^ New York Municipal Fund were 32% and 13%,
respectively.
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectus entitled
"Performance Information."
Total Return. Average annual total return is calculated by
determining the ending redeemable value of an investment purchased at net
asset value (maximum offering price in the case of Class A) per share with
a hypothetical $1,000 payment made at the beginning of the period
(assuming the reinvestment of dividends and other distributions), dividing
by the amount of the initial investment, taking the "n"th root of the
quotient (where "n" is the number of years in the period) and subtracting
1 from the result. A Class's average annual total return figures
calculated in accordance with such formula assume that in the case of
Class A the maximum sales load has been deducted from the hypothetical
initial investment at the time of purchase or in the case of Class B or C
the maximum applicable CDSC has been paid upon redemption at the end of
the period.
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<PAGE>
Total return is calculated by subtracting the amount of a Fund's
net asset value (maximum offering price in the case of Class A) per share
at the beginning of a stated period from the net asset value (maximum
offering price in the case of Class A) per share at the end of the period
(after giving effect to the reinvestment of dividends and other
distributions during the period and any applicable CDSC), and dividing the
result by the net asset value (maximum offering price in the case of Class
A) per share at the beginning of the period. Total return also may be
calculated based on the net asset value per share at the beginning of the
period instead of the maximum offering price per share at the beginning of
the period for Class A shares or without giving effect to any applicable
CDSC at the end of the period for Class B or C shares. In such cases, the
calculation would not reflect the deduction of the sales load with respect
to Class A shares or any applicable CDSC with respect to Class B or C
shares, which, if reflected would reduce the performance quoted.
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<PAGE>
The Municipal Fund's average annual total return was as follows
for the period indicated:
Class A Class R
------- --------
The one-year period beginning on
July 1, 1993 through June 30, 1994 0.96 %/0.62 %* 1.08 %/0.74 %
*
The five-year period beginning on
July 1, 1989 through June 30, 1994 7.30 %/6.95 %* --
The life of the Fund through
June 30, 1994 + 9.47 %/8.98 %* 4.56 %/4.26 %
*
The Municipal Fund's aggregate total return was as follows for
the period indicated:
Class A Class R
------- -------
The one-year period beginning on
July 1, 1993 through June 30, 1994 0.96 %/0.62 % * 1.08 ^%/0.74% *
The five-year period beginning on
July 1, 1989 through June 30, 1994 42.23 %/39.92 % * __^
The life of the Fund through
June 30, 1994 + 120.66 %/112.15 % * 6.50 %/6.05 %
*
* The figure shows what the Municipal Fund's performance would have
been in the absence of fee waivers.
+ Reflects performance from October 1, 1985 through June 30, 1994
for the Class A shares and from February 1, 1993 through June 30,
1994 for the Class R shares.
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<PAGE>
The Massachusetts Municipal Fund's average annual total return
was as follows for the period indicated:
Class A Class R
------- -------
The one-year period beginning on
July 1, 1993 through June 30, 1994 1.38 %/1.25 % * 1.53 %/1.39 % *
The five-year period beginning on
July 1, 1989 through June 30, 1994 7.36 %/7.29 % * --
The life of the Fund through
June 30, 1994 + 8.61 %/8.52 % * 4.30 %/4.15 % *
The Massachusetts Municipal Fund's aggregate total return was as
follows for the period indicated:
Class A Class R
------- -------
The one-year period beginning on
July 1, 1993 through June 30, 1994 1.38 %/1.25 % * ^ 1.53%/1.39% *
The five-year period beginning on
July 1, 1989 through June 30, 1994 42.61 %/42.18 % * --
The life of the Fund through
June 30, 1994 + 106.30 %/104.81 % * 6.12 %/5.89 % *
* The figure shows what the Massachusetts Municipal Fund's
performance would have been in the absence of fee waivers.
+ Reflects performance from September 24, 1985 through June 30,
1994 for the Class A shares and February 1, 1993 through June 30,
1994 for the Class R shares.
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<PAGE>
The California Municipal Fund's average annual total return was
as follows for the period indicated:
Class A Class R
------- -------
The one-year period beginning on
July 1, 1993 through June 30, 1994 1.80 %/1.29 % * 1.90 %/1.33 % *
The five-year period beginning on
July 1, 1989 through June 30, 1994 7.37 %/6.71 %* --
The life of the Fund through
June 30, 1994 + 7.37 %/6.52 % * 5.17 %/4.54 % *
The California Municipal Fund's aggregate total return was as
follows for the period indicated:
Class A Class ^ R
------- ---------
The one-year period beginning on
July 1, 1993 through June 30, 1994 1.80 %/1.29 % * 1.90 %/1.33 % *
The five-year period beginning on
July 1, 1989 through June 30, 1994 42.70 %/38.39 % * __
The life of the Fund through
June 30, 1994 + 56.71 %/49.0 % * 7.38 %/6.44 % *
* The figure shows what the California Municipal Fund's performance
would have been in the absence of fee waivers.
+ Reflects performance from March 7, 1988 through June 30, 1994 for
the Class A shares and February 1, 1993 through June 30, 1994 for
the Class R Shares.
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<PAGE>
The New York Municipal Fund's average annual total return was as
follows for the period indicated:
Class A Class R
------- -------
The one-year period beginning on
July 1, 1993 through June 30, 1994 1.24 %/(0.13) % * 1.46 %/0.74 % *
The five-year period beginning on
July 1, 1989 through June 30, 1994 6.99 %/5.42 %* --
The life of the Fund through
June 30, 1994 + 6.68 %/4.96 %* 4.37 %/4.26 % *
The New York Municipal Fund's aggregate total return was as
follows for the period indicated:
Class A Class R
------- -------
The one-year period beginning on
July 1, 1993 through June 30, 1994 1.27 %/(0.13) % * 1.46 %/0.74 % *
The five-year period beginning on
July 1, 1989 through June 30, 1994 40.26 %/30.21 % * __
The life of the Fund through
June 30, 1994 + 50.43 %/35.85 % * 6.23 %/6.05 % *
* The figure shows what the New York Municipal Fund's performance
would have been in the absence of fee waivers.
+ Reflects performance from March 7, 1988 through June 30, 1994 for
the Class A shares and February 1, 1993 through June 30, 1994 for
the Class R Shares.
The ^ Funds' net investment income changes in response to
fluctuations in interest rates and the expenses of the Funds.
Consequently, any given performance quotation should not be considered as
representative of the Funds' performance for any specified period in the
future.
^
For the purpose of determining the interest earned (variable "a"
in the formula) on debt obligations that were purchased by a ^ Fund at a
discount or premium, the formula generally calls for amortization of the
discount or premium; the amortization schedule will be adjusted monthly to
reflect changes in the market values of the debt obligations.
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<PAGE>
A Fund's equivalent taxable yield is computed by dividing that
portion of the Fund's yield which is tax-exempt by one minus a stated
income tax rate and adding the product to that portion, if any, of the
Fund's yield that is not tax-exempt.
The ^ Funds' 30-day yields and equivalent taxable yields for the
period ended June 30, 1994 were as follows:
30-Day Yield for Period Ended
June 30, 1994
Equivalent
Yield Taxable Yield*
----- --------------
Municipal Fund
Class A Shares 4.20 % 6.56 %
Class R Shares 4.45 % 6.95 %
Massachusetts Municipal
Fund
Class A Shares 4.20 % 7.46 %
Class R Shares 4.45 % 7.90 %
30-Day Yield for Period Ended
June 30, 1994
Equivalent
Yield Taxable Yield*
------ --------------
California Municipal
Fund
Class A Shares 4.33 % 7.52 %
Class R Shares 4.58 % 7.95 %
New York Municipal
Fund
Class A Shares 3.97 % 7.03 %
Class R Shares 4.22 % 7.47 %
* Example assumes a Federal marginal tax rate of 36% and, for the
Massachusetts, California and New York Municipal Funds, a
Massachusetts marginal tax rate of 12% (combined effective rate
of 43.68%), a California marginal tax rate of 10% (combined
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effective rate of 42.40%), and a New York State and New York City
marginal tax rate of 11.785% (combined effective rate of 43.54%),
respectively.
Investors should recognize that in periods of declining interest
rates a ^ Fund's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates a ^ Fund's yield
will tend to be somewhat lower. Also, when interest rates are falling,
the inflow of net new money to a Fund from the continuous sale of its
shares will likely be invested in portfolio instruments producing lower
yields than the balance of the Fund's portfolio, thereby reducing the
current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.
Yield information is useful in reviewing the Funds' performance,
but because yields fluctuate, such information cannot necessarily be used
to compare an investment in a Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed
or guaranteed fixed yield for a stated period of time. Shareholders should
remember that yield is a function of the kind and quality of the
instruments in the Funds' portfolios, portfolio maturity and operating
expenses and market conditions. The Funds' yields and total returns will
also be affected if Dreyfus waives its advisory fees.
INFORMATION ABOUT THE FUNDS
The following information supplements and should be read in
conjunction with the section in ^ each Fund's Prospectus entitled "General
Information."
The Trust is a non-diversified, open-end management investment
company organized as an unincorporated business trust under the laws of
the Commonwealth of Massachusetts by an Agreement and Declaration of Trust
dated March 28, 1983. On March 31, 1994 the Trust changed its name from
"The Boston Company Tax-Free Municipal Funds" to "The Laurel Tax-Free
Municipal Funds." The Trust's name was then changed from "The Laurel
Tax-Free Municipal Funds" to "The Dreyfus/Laurel Tax-Free Municipal Trust"
effective October 17, 1994.
The Trustees have authority to create an unlimited number of
shares of beneficial interest of separate series, without par value, for
each class of shares. Each series will be treated as a separate entity.
^ Currently, seven series have been authorized. The Trustees have
authority to create additional series at any time in the future without
shareholder approval.
^
Each share (regardless of Class) has one vote. On each matter
submitted to a vote of the shareholders, all shares of each Fund or Class
shall vote together as a single Class, except as to any matter for which a
separate vote of any Fund or Class is required by the 1940 Act and except
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<PAGE>
as to any matter which affects the interest of a particular Fund or Class,
in which case only the holders of shares of the one or more affected Funds
or Classes shall be entitled to vote, each as a separate class.
The assets received by the Trust for the issue or sale of shares
of each Fund and all income, earnings, profits and proceeds thereof,
subject only to the rights of creditors, are specifically allocated to
such Fund, and constitute the underlying assets of such Fund. The
underlying assets of each Fund are required to be segregated on the books
of account, and are to be charged with the expenses in respect to such
Fund and with a share of the general expenses of the Trust. Any general
expenses of the Trust not readily identifiable as belonging to a
particular Fund shall be allocated by or under the direction of the
Trustees in such manner as the Trustees determine to be fair and
equitable, taking into consideration, among other things, the relative
sizes of the Funds and the relative difficulty in administering each Fund.
Each share of each Fund represents an equal proportionate interest in that
Fund with each other share and is entitled to such dividends and
distributions out of the income belonging to such Fund as are declared by
the Trustees. Upon any liquidation of a Fund, shareholders thereof are
entitled to share pro rata in the net assets belonging to that Fund
available for distribution.
The Trust does not hold annual meetings of shareholders. There
will normally be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders, at which time
the Trustees then in office will call a shareholders' meeting for the
election of Trustees. Under the Act, shareholders of record of no less
than two-thirds of the outstanding shares of the Trust may remove a
Trustee through a declaration in writing or by a vote cast in person or by
proxy at a meeting called for that purpose. The Trustees are required to
call a meeting of shareholders for the purposes of voting upon the
question of removal of any Trustee when requested in writing to do so by
the shareholders of record of not less than 10% of the Trust's outstanding
shares.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Trust and requires that notice of
such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or a Trustee. The Agreement and
Declaration of Trust provides for indemnification from the Trust's
property for all losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability
is limited to circumstances in which the Trust itself would be unable to
meet its obligations, a possibility which Dreyfus believes is remote.
Upon payment of any liability incurred by a Trust, the shareholder paying
such liability will be entitled to reimbursement from the general assets
of the Trust. The Trustees intend to conduct the operations of each Fund
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<PAGE>
in such a way so as to avoid, as far as possible, ultimate liability of
the shareholders for liabilities of such Fund.
^
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
Mellon Bank, One Mellon Bank Center, Pittsburgh, PA
15258, is the Funds' custodian and fund accountant. The Shareholder
Services Group, Inc., a subsidiary of First Data Corporation, P.O. Box
9692, Providence, ^ RI 02940-9830, is each Fund's transfer and dividend
disbursing agent. The Shareholder Services Group, Inc. and Mellon Bank,
as custodian, have no part in determining the investment policies of a
Fund or which securities are to be purchased or sold by the Fund. Prior
to the effectiveness of the Investment Management Agreement for its
services as custodian and fund accountant, Mellon Bank was paid an annual
fee of $30,000 per portfolio, and, for all portfolios, an annual
administrative account maintenance fee of $10,000, an annual on-line fee
of $3,600, an asset-based fee of .02% of the first $500 million of ^ net
assets and .01% of net assets over $500 million, plus a specified
transaction fee for each transaction. For its services as transfer and
dividend disbursing agent, Mellon Bank was paid an annual fee of $13.00
per shareholder account, with a minimum monthly fee of $3,000 per
portfolio. Mellon Bank was reimbursed for certain out-of-pocket expenses
including wire fees, and postage, stationery and telephone expenses.
Kirkpatrick & Lockhart, 1800 M Street, N.W., South Lobby
- 9th Floor, Washington, D.C. 20036, has passed upon the legality of the
shares offered by the ^ Prospectuses and this Statement of Additional
Information.
KPMG Peat Marwick LLP, One Mellon Bank Center, Pitts-
burgh, Pennsylvania 15218, was appointed by the Trustees to serve as the
Funds' independent auditors for the year ending ^ June 30, 1994, providing
audit services including (1) examination of the annual financial state-
ments ^(2) assistance, review and consultation in connection with SEC (3)
and review of the annual ^ Federal income tax return and the Pennsylvania
excise tax return filed on behalf of each Fund.
FINANCIAL STATEMENTS
The Funds' Annual Reports for the fiscal year (or period)
ended June 30, 1994 are incorporated by reference into this Statement of
Additional Information.
83
<PAGE>
APPENDIX
INFORMATION ABOUT SECURITIES RATINGS
The following are excerpts from Description of Moody's Investors'
Service, Inc. ("Moody's) municipal bond ratings. Aaa -- judged to be of
the "best quality" and are referred to as "gilt edge"; interest payments
are protected by a large or by an exceptionally stable margin and
principal is secure; Aa -- judged to be of "high quality by all
standards," but as to which margins of protection or other elements make
long-term risks appear somewhat larger than Aaa-rated Municipal Bonds;
together with Aaa group they comprise what are generally known as "high
grade bonds"; A -- possess many favorable investment attributes and are
considered "upper medium grade obligations." Factors giving security to
principal and interest of A-rated Municipal Bonds are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future; Baa --considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured; interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time.
Moody's applies the numerical modifiers 1, 2 and 3 in each
generic rating classification from Aa through Baa to indicate ranking
within a general rating category; 1 being the highest and 3 the lowest.
Description of Moody's ratings of state and municipal notes.
Moody's ratings for state and municipal notes and other short-term
obligations are designated Moody's Investment Grade ("MIG") and for
variable rate demand obligations are designated Variable Moody's
Investment Grade ("VMIG"). This distinction recognizes the differences
between short-term credit risk and long-term risk. Symbols used will be
as follows: MIG 1/VMIG 1 --best quality, enjoying strong protection for
established cash flows of funds for their servicing or from established
and broad-based access to the market for refinancing, or both; MIG 2/VMIG
2 -- high quality, with margins of protection ample although not so large
as in the preceding group; MIG 3/VMIG 3 --favorable quality, with all
security elements accounted for but lacking the undeniable strength of the
preceding grades.
Description of Moody's commercial paper ratings. PRIME-1 ("P-1")
-- judged to be of the best quality. Their short-term debt obligations
carry the smallest degree of investment risk; PRIME-2 -- indicates a
strong capacity for repayment, but to a lesser degree than 1.
Description of Standard & Poors Corporation ("S&P") Municipal
Bond ratings. AAA -- has the highest rating assigned by S&P; extremely
strong capacity to pay principal and interest; AA -- has very strong
capacity to pay interest and repay principal and differs from the higher
rated issues only in a small degree; A -- has a strong capacity to pay
principal and interest, although somewhat more susceptible to adverse
changes in circumstances and economic conditions; BBB -- regarded as
84
<PAGE>
having an adequate capacity to pay principal and interest; normally
exhibit adequate protection parameters but adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to
pay principal and interest than for bonds in the A category. Ratings may
be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories, except in the AAA category.
Description of S&P's ratings of municipal note issues. SP-1+ --
very strong capacity to pay principal and interest; SP-1 --strong capacity
to pay principal and interest; SP-2 --satisfactory capacity to pay
principal and interest.
Description of S&P's commercial paper ratings. A-1+ --indicates
an overwhelming degree of safety regarding timely payment; A-1 --
indicates a very strong degree of safety regarding timely payment; A-2 --
indicates a strong capacity for timely payment but with a relative degree
of safety not as overwhelming as for issues designated A-1.
Description of IBCA Limited/IBCA Inc. commercial paper ratings.
Short-term obligations, including commercial paper, rated A-1+ by IBCA
Limited or its affiliate IBCA Inc. are obligations supported by the
highest capacity for timely repayment. Obligations rated A-1 have a very
strong capacity for timely repayment. Obligations rated A-2 have a strong
capacity for timely repayment, although such capacity may be susceptible
to adverse changes in business, economic or financial conditions.
Description of Fitch Investors Services, Inc. commercial paper
ratings. Fitch Investors Services, Inc. employs the rating F-1+ to
indicate issues regarded as having the strongest degree of assurance for
timely payment. The rating F-1 reflects an assurance of timely payment
only slightly less in degree than issues rated F-1+, while the rating F-2
indicates a satisfactory degree of assurance for timely payment, although
the margin of safety is not as great as indicated by the F-1+ and F-1
categories.
Description of Duff & Phelps Inc. commercial paper ratings. Duff
& Phelps Inc. employs the designation of Duff 1 with respect to top grade
commercial paper and bank money instruments. Duff ^ 1 + indicates the
highest certainty of timely payment: short-term liquidity is clearly
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations. Duff 1- indicates high certainty of timely payment. Duff 2
indicates good certainty of timely payment: liquidity factors and company
fundamentals are sound.
Various of the nationally recognized statistical rating
organizations ("NRSROs") utilize rankings within rating categories
indicated by a + or -. The Funds, in accordance with industry practice,
recognize such rankings within categories as graduations, viewing for
example S&P's rating of A-1+ and A-1 as being in S&P's highest rating
category.
85
<PAGE>
Description of Thomson BankWatch, Inc. ("BankWatch") commercial
paper ratings. BankWatch will assign both short-term debt ratings and
issuer ratings to the issuers it rates. BankWatch will assign a
short-term rating ("TBW-1," "TBW-2," "TBW-3," or "TBW-4") to each class of
debt (e.g., commercial paper or non-convertible debt), having a maturity
of one-year or less, issued by a holding company structure or an entity
within the holding company structure that is rated by BankWatch.
Additionally, BankWatch will assign an issuer rating ("A^" "A/B," " ^
B/C," "C," "C/D,^" "D/E," and "E") to each issuer that it rates.
86
<PAGE>
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
(formerly The Laurel Tax-Free Municipal Funds)
^ 200 Park Avenue
^ New York, NY 10166
1-800-548-2868
STATEMENT OF ADDITIONAL INFORMATION
December ^ 28, 1994
This Statement of Additional Information expands upon and
supplements the information contained in and should be read in conjunction
with each of the following prospectuses of The Dreyfus/Laurel Tax-Free
Municipal Funds (the "Trust") dated December ^ 28, 1994 (referred to
herein singularly as the "Prospectus" and jointly as the "Prospectuses"):
the Prospectuses describing the Class A and Class R shares of the Premier
Limited Term California Municipal Fund (formerly the Laurel California
Tax-Free Bond Fund), the Premier Limited Term Massachusetts Municipal Fund
(formerly the Laurel Massachusetts Tax-Free Bond Fund), the Premier
Limited Term New York Municipal Fund (formerly the Laurel New York
Tax-Free Bond Fund) and the Premier Limited Term Municipal Fund (formerly
the Laurel Tax-Free Bond Fund) and the Investor Class shares and Class R
shares of the Dreyfus/Laurel California Tax-Free Money Fund (formerly the
Laurel California Tax-Free Money Fund), the Dreyfus/Laurel Massachusetts
Tax-Free Money Fund (formerly the Laurel Massachusetts Tax-Free Money
Fund) and the Dreyfus/Laurel New York Tax-Free Money Fund (formerly the
Laurel New York Tax-Free Money Fund). As used in this Statement of
Additional Information, the term "Bond Fund" refers to each of the Premier
Limited Term Massachusetts Municipal Fund ("Massachusetts Municipal
Fund"), the Premier Limited Term Municipal Fund ("Municipal Fund"), the
Premier Limited Term California Municipal Fund ("California Municipal
Fund") and the Premier Limited Term New York Municipal Fund ("New York
Municipal Fund") (collectively the "Bond Funds"). The term "Money Fund"
refers to each of the Dreyfus/Laurel Massachusetts Tax-Free Money Fund
("Massachusetts Tax-Free Fund"), the Dreyfus/Laurel New York Tax-Free
Money Fund ("New York Tax-Free Fund") and the Dreyfus/Laurel California
Tax-Free Money Fund ("California Tax-Free Fund") (collectively the "Money
Funds"). Each Fund's Annual Report for the fiscal year (or period) ended
June 30, 1994, accompanies this Statement of Additional Information, and
each Fund's financial statements and related notes contained therein are
incorporated by reference into this Statement of Additional Information.
<PAGE>
TABLE OF CONTENTS
Management of the Trust 3
Investment ^ Policies 11
(see also in the Prospectus "Investment Objective and Policies")
Purchase of ^ Shares 54
(see also in the Prospectus "How to Invest in The Laurel Funds")
Redemption of ^ Shares 58
(see also in the Prospectus "How to Redeem Shares")
Valuation of ^ Shares 58
Performance ^ Data 60
^ Taxes 69
(see also in the Prospectus "Taxes")
Description of the ^ Trust 70
(see also in the Prospectus "Investment Objective and Policies")
^ Miscellaneous 72
Custodian and Fund ^ Accountant 72
Transfer ^ Agent 72
Financial ^ Statements 72
Appendix - Information about Securities ^ Ratings 73
<PAGE>
MANAGEMENT OF THE TRUST
The organizations that provide services to the Trust are as
follows: The Dreyfus Corporation ("Dreyfus") as investment manager
("Investment Manager"), Mellon Bank, N.A. ("Mellon Bank") as custodian and
fund accountant, Premier Mutual Fund Services, Inc. ("Premier") as the
distributor ("Distributor") and sub-administrator ("Sub-Administrator"),
and The Shareholder Services Group, Inc. ("TSSG"), a subsidiary of First
Data Corporation as transfer agent. The functions they perform for the
Trust are discussed in the Prospectuses and in this Statement of
Additional Information.
^ On October 17, 1994 the name of the Trust was changed from
"The Laurel Tax-Free Municipal Funds" to "The Dreyfus/Laurel Tax-Free
Municipal Funds" and the name of each Fund was changed as indicated in the
right-hand column below:
Laurel Massachusetts Tax-Free Money Dreyfus/Laurel Massachusetts
Fund Tax-Free Money Fund
Laurel Massachusetts Tax-Free Bond Premier Limited Term
Fund Massachusetts Municipal Fund
Laurel Tax-Free Bond Fund Premier Limited Term Municipal
Fund
Laurel California Tax-Free Money Dreyfus/Laurel California
Fund Tax-Free Money Fund
Laurel California Tax-Free Bond Fund Premier Limited Term California
Municipal Fund
Laurel New York Tax-Free Money Fund Dreyfus/Laurel New York Tax-Free
Money Fund
Laurel New York Tax-Free Bond Fund Premier Limited Term New York
Municipal Fund
Trustees and Officers of the Trust
The Trustees and executive officers of the Trust are listed
below. Except as indicated, each individual has held the office shown or
other offices in the same company for the last five years. Each Trustee
who is an "interested person" of the Trust (as defined in the Investment
Company Act of 1940, as amended (the "1940 Act")) is indicated by an
asterisk. Each of the Trustees also serves as a Trustee of The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Investment Series and as
a Director of The Dreyfus/Laurel Funds, Inc. (collectively "The
Dreyfus/Laurel Fund Family").
o + RUTH MARIE ADAMS. Trustee of the Trust; Professor of English and
Vice President Emeritus, Dartmouth College; Senator, United
3
<PAGE>
Chapters of Phi Beta Kappa; Trustee, Woods Hole Oceanographic
Institution. Address: 1026 Kendal Lyme Road, Hanover, New
Hampshire 03755.
o + FRANCIS P. BRENNAN. Chairman of the Board of Trustees and
Assistant Treasurer of the Trust; Director and Chairman,
Massachusetts Business Development Corp.; Director, Boston Mutual
Insurance Company; Director and Vice Chairman of the Board, Home
Owners Federal Savings and Loan (prior to May 1990). Address:
Massachusetts Business Development Corp., One Liberty Square,
Boston, Massachusetts 02109.
^
o + JAMES M. FITZGIBBONS. Trustee of the Trust; President and
Director, Amoskeag Company; Chairman, Howes Leather Company,
Inc.; Director, Fiduciary Trust Company; Chairman, CEO and
Director, Fieldcrest-Cannon Inc.; Director, Lumber Mutual
Insurance Company; Director, Barrett Resources, Inc. Address: 40
Norfolk Road, Brookline, Massachusetts 02167.
o * J. TOMLINSON FORT. Trustee of the Trust; Partner, Reed, Smith,
Shaw & McClay (law firm). Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o + ARTHUR L. GOESCHEL. Trustee of the Trust; Director, Chairman of
the Board and Director, Rexene Corporation; Director, Calgon
Carbon Corporation; Director, National Picture Frame Corporation;
Chairman of the Board and Director, Tetra Corporation 1991-1993;
Director, Medalist Corporation 1992-1993; From 1988-1989
Director, Rexene Corporation. Address: Way Hallow Road and
Woodland Road, Sewickley, Pennsylvania 15143.
^
o + KENNETH A. HIMMEL. Trustee of the Trust; Director, The Boston
Company, Inc. ("TBC") and Boston Safe Deposit and Trust Company;
President and Chief Executive Officer, Himmel & Co., Inc.; Vice
Chairman, Sutton Place Gourmet, Inc. and Florida Hospitality
Group; Managing Partner, Himmel/MKDG, Franklin Federal Partners,
Reston Town Center Associates and Grill 23 & Bar. Address:
Himmel and Company, Inc., 101 Federal Street, 22nd Floor, Boston,
Massachusetts 02110.
o + ARCH S. JEFFERY. Trustee of the Trust; Financial Consultant.
Address: 1817 Foxcroft Lane, Allison Park, Pennsylvania 15101.
o + STEPHEN J. LOCKWOOD. Trustee of the Trust; President and CEO,
LDG Management Company Inc.; CEO, LDG Reinsurance Underwriters,
SRRF Management Inc. and Medical Reinsurance Underwriters Inc.
Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o + ROBERT D. MCBRIDE. Trustee of the Trust; Director, Chairman and
CEO, McLouth Steel; Director, Salem Corporation. Director,
4
<PAGE>
SMS/Concast, Inc. (1983-1991). Address: 15 Waverly Lane, Grosse
Pointe Farms, Michigan 48236.
^
o + JOHN L. PROPST. Trustee of the Trust; Of Counsel, Reed, Smith,
Shaw & McClay (law firm). Address: 5521 Dunmoyle Street,
Pittsburgh, Pennsylvania 15217.
o + JOHN J. SCIULLO. Trustee of the Trust; Dean Emeritus and
Professor of Law, Duquesne University Law School; Director, Urban
Redevelopment Authority of Pittsburgh. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224
o + ROSLYN M. WATSON. Trustee of the Trust; Principal, Watson
Ventures, Inc., prior to February, 1993; Real Estate Development
Project Manager and Vice President, The Gunwyn Company. Address:
25 Braddock Park, Boston, Massachusetts 02116-5816.
# MARIE E. CONNOLLY. President and Treasurer of the Trust, The
Laurel Investment Series, The Laurel Funds Trust and The Laurel
Funds, Inc. (since September 1994); Vice President of the Trust,
The Laurel Investment Series, The Laurel Funds Trust and The
laurel Funds, Inc. (March 1994 to September 1994); President,
Funds Distributor, Inc. (since 1992); Treasurer, Funds
Distributor, Inc. (July 1993 to April 1994); COO, Funds
Distributor, Inc. (since April 1994); Director, Funds
Distributor, Inc. (since July 1992); President, COO and Director,
Premier Mutual Fund Services, Inc. (since April 1994); Senior
Vice President and Director of Financial Administration, The
Boston Company Advisors, Inc. (December 1988 to May 1993).
Address: One Exchange Place, Boston, Massachusetts 02109.
# FREDERICK C. DEY. Vice President of the Trust, The Laurel
Investment Series, The Laurel Funds Trust and The Laurel Funds,
Inc. (since September 1994); Senior Vice President, Premier
Mutual Fund Services, Inc. (since August 1994); Vice President,
Funds Distributor, Inc. (since August 1994); Fundraising Manager,
Swim Across America (October 1993 to August 1994); General
Manager, Spring Industries (August 1988 to October 1993).
Address: Premier Mutual Fund Services, Inc., 200 Park Avenue New
York, New York 10166.
# ERIC B. FISCHMAN. Vice President of the Trust, The Laurel
Investment Series, The Laurel Funds Trust and Laurel Funds, Inc.
(since September 1994);Vice President and Associate General
Counsel, Premier Mutual Fund Services, Inc. (Since August 1994);
Vice President and Associate General Counsel, Funds Distributor,
Inc. (since August 1994); Staff Attorney, Federal Reserve Board
(September 1992 to June 1994); Summer Associate, Venture
Economics (May 1991 to September 1991); Summer Associate, Suffolk
5
<PAGE>
County District Attorney (June 1990 to August 1990). Address:
Premier Mutual Fund Services, Inc., 200 Park Avenue, New York,
New York 10166
RICHARD W. HEALEY. Vice President of the Trust, The Laurel
Investment Series, The Laurel Funds Trust and The Laurel Funds,
Inc. (since March 1994); Senior Vice President, Funds
Distributor, Inc. (since March 1993); Vice President, The Boston
Company, Inc., (March 1993 to May 1993); Vice President of
Marketing, Calvert Group (1989 to March 1993); Fidelity
Investments (prior to 1989). Address: One Exchange Place, Boston,
Massachusetts 02109.
# JOHN E. PELLETIER. Vice President and Secretary of the Trust,
The Laurel Investment Series, The Laurel Funds Trust and The
Laurel Funds, Inc. (since September 1994); Senior Vice President,
General Counsel and Secretary, Funds Distributor, Inc. (since
April 1994); Senior Vice President, General Counsel and
Secretary, Premier Mutual Fund Services, Inc. (since August
1994); Counsel, The Boston Company Advisors, Inc. (February 1992
to March 1994); Associate, Ropes & Gray (August 1990 to February
1992); Associate, Sidley & Austin (June 1989 to August 1990).
Address: One Exchange Place, Boston, Massachusetts 02109.
_________________________________
* "Interested person" of the Trust, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by The Dreyfus Corporation.
The officers and Trustees of the Trust as a group owned
beneficially less than 1% of the total shares of each Fund outstanding as
of ^ December 1, 1994.
No officer or employee of Premier (or of any parent or subsidiary
thereof ) receives any compensation from the Trust for serving as an
officer or Trustee of the Trust. No officer or employee of Dreyfus (or of
any parent or subsidiary thereof) serves as an officer or Trustee of the
Trust. The Dreyfus/Laurel Fund Family pays each Trustee who is not an
officer or employee of Premier or any of its affiliates $27,000 per annum
(and an additional $75,000 for the Chairman of the Board of
Directors/Trustees of The Dreyfus/Laurel Fund Family)^. In addition, the
Trust pays each Trustee $1,000 per joint Dreyfus/Laurel Fund Family
meeting attended, plus $750 per joint Dreyfus/Laurel Fund Family Audit
Committee meeting attended, and reimburses each Trustee for travel and
out-of-pocket expenses. For the fiscal year ended June 30, 1994, such
fees for meetings and expenses totaled $63,372 for Massachusetts
Municipal, Massachusetts Tax Free and the Municipal Funds. For the period
6
<PAGE>
from December 1, 1993 to the fiscal year ended June 30, 1994, such fees
for meetings and expenses totaled $9,517 for the California Municipal,
California Tax-Free, New York Municipal and New York Tax-Free Funds.
Investment Manager
^ Dreyfus ^ serves as the ^ Investment Manager ^ for the Funds
pursuant to an Investment Management Agreement with the ^ Trust dated
April 4, 1994, and transferred from Mellon Bank, N.A. (One Mellon Bank
Center, Pittsburgh, PA 15258), to Dreyfus effective October 17, 1994. ^
Dreyfus ^ is a wholly-owned subsidiary of Mellon Bank. Pursuant to the
Management Agreement, Dreyfus provides, or arranges for one or more third
parties to provide, investment advisory, administrative, custody, fund
accounting and transfer agency ^ services to each Fund. As investment
manager, Dreyfus manages each Fund by making investment decisions based on
such Fund's investment objectives, policies and restrictions. For these
services, each Fund pays a fee to Dreyfus at the rates stated in the
Prospectus.
Prior to May 21, 1993, The Boston Company Advisors, Inc. ("TBC
Advisors") served as investment adviser to each Fund pursuant to a written
agreement, which was last approved by the Trustees, including a majority
of the Trustees who are not "interested persons" of the Trust, on July 22,
1992. From May 21, 1993, through April 1, 1994, ^ Boston ^ Advisors ^
served as investment adviser to each Fund pursuant to a written agreement
(" ^ TBC Advisors Agreement"), which was last approved by the Trustees,
including a majority of the Trustees who are not "interested persons" of
the Trust, on July 21, 1993 and approved by the shareholders of each Fund
of the Trust on December 31, 1992. The ^ TBC Advisors Agreement became
effective on May 21, 1993, upon the consummation of the sale of Boston
Group Holdings, Inc., the parent company of The Boston Company, Inc.
("TBC"), to Mellon Bank Corporation. Mellon Bank later served as
investment manager to each Fund pursuant to a written agreement ("Mellon
Agreement"), which was last approved by the Trustees, including a majority
of the Trustees who are not "interested persons" of the Trust or Mellon
Bank, on November 22, 1993, (subject to shareholder approval) and approved
by the shareholders of each Fund of the Trust on March 29, 1994. The
Mellon Agreement became effective on April 1, 1994. ^ TBC Advisors is a
wholly-owned subsidiary of TBC, a financial services holding company. TBC
is in turn a wholly-owned subsidiary of Mellon Bank Corporation. As
stated above, Dreyfus, a wholly-owned subsidiary of Mellon Bank, is the
current Investment Manager pursuant to a written agreement ("Management
Agreement"), which was last approved by the Trustees on October 17, 1994.
The current Management Agreement with Dreyfus provides for a
"unitary fee." Under the unitary fee structure, Dreyfus pays all expenses
of each Fund except: (i) brokerage commissions, (ii) taxes, interest,
fees and expenses of the non-interested Trustees (including counsel
expenses), and extraordinary expenses (which are expected to be minimal),
7
<PAGE>
and (iii) the Rule 12b-1 fees described in this Statement of Additional
Information. Under the unitary fee, Dreyfus provides, or arranges for one
or more third parties to provide, investment advisory, administrative,
custody, fund accounting and transfer agency services to the Funds. For
the provision of such services directly, or through one or more third
parties, Dreyfus receives as full compensation for all services and
facilities provided by it, a fee computed daily and paid monthly at the
annual rate set forth in each Fund's Prospectus, applied to the average
daily net assets of a Fund's investment portfolio, less the accrued fees
and expenses (including counsel fees) of the non-interested Trustees of
the Trust. Previously, the payments to the investment manager covered
merely the provision of investment advisory services (and payment for
sub-advisory services) and certain specified administrative services.
Under this previous arrangement, each Fund also paid for additional
non-investment advisory expenses, such as custody and transfer agency
services, that were not paid by the investment ^ adviser.
The Management Agreement will continue from year to year provided
that a majority of the Trustees who are not interested persons of
Dreyfus/Laurel and either a majority of all Trustees or a majority of the
shareholders of the Fund approve their continuance. Dreyfus/Laurel may
terminate the Agreement, without prior notice to Dreyfus, upon the vote of
a majority of the Board of Trustees or upon the vote of a majority of the
outstanding voting securities of the Fund on 60 days written notice to
Dreyfus. Dreyfus may terminate the Management Agreement upon written
notice to Dreyfus/Laurel. The Management Agreement will terminate
immediately and automatically upon its assignment.
As compensation for Dreyfus's services, each Fund pays a separate
fee, based on its total average daily net assets, that is computed daily
and paid monthly. The rates at which such fees are paid are described in
each Prospectus. Dreyfus may waive all or a portion of its fees payable
by any Fund from time to time.
The following table shows the fees paid by each Fund to ^ TBC
Advisors or Mellon (as the prior investment advisors), including any fee
waivers or expense reimbursements by ^ TBC Advisors or Mellon Bank, during
the Fund's 1992, 1993 and 1994 fiscal years:
8
<PAGE>
<TABLE>
<CAPTION>
1994*(2) 1993** 1992**
<S> <C> <C> <C> <C> <C> <C> <C>
Fees Fees Fees Fees Fees Fees Fees
Paid(3) Paid(4) Waived(1) Paid Waived(1) Paid Waived(1)
------- ------- --------- ----- --------- ---- ---------
Municipal
Fund $42,914 $138,860 $120,026(5) $149,844$33,802(19) $111,512 $32,657
Massa-
chusetts
Tax-Free
Fund 88,706 451,899 95,174(6) 714,501 29,313(19) 783,974 --
Massa-
chusetts
Municipal
Fund 40,947 136,877 45,790(7) 125,844 43,842(12) 90,324 --
Cali-
fornia
Tax-Free
Fund 22,135 45,706 56,403(8) 130,006 165,734(13) 143,953 142,658
Cali-
fornia
Municipal
Fund 24,801 37,628 41,998(9) 100,024 119,522(14) 98,142 94,550
New York
Tax-Free
Fund 12,400 27,444 46,447(10) 73,485 118,669(15) 66,004 81,278(17)
New York
Municipal
Fund 8,038 11,467 35,815(11) 28,242 102,024(16) 25,624 58,959(18)
</TABLE>
* For the fiscal year ended June 30. The California Tax-Free Fund,
the California Municipal Fund, the New York Tax-Free Fund and the
New York Municipal Fund each changed its fiscal year end from
November 30 to June 30.
** For the fiscal years ended June 30 for the Municipal Fund, the
Massachusetts Tax-Free Fund and the Massachusetts Municipal Fund;
and for the fiscal years ended November 30 for the California
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Tax-Free Fund, the California Municipal Fund, the New York
Tax-Free Fund and the New York Municipal Fund.
(1) ^ TBC Advisors waived all or a portion of its fees and/or
reimbursed expenses of the Funds from time to time in order to
increase the Funds' net income available for distribution to
shareholders.
(2) Effective April 4, 1994, Mellon Bank ^ served as each Fund's
investment manager.
(3) Fees paid to Mellon Bank for investment management services for
the period from April 4, 1994 to the fiscal year ended June 30,
1994.
(4) Fees paid to ^ TBC Advisors for investment advisory services for
the period from either July 1, 1993 (in the case of the Municipal
Fund, the Massachusetts Tax-Free Fund and the Massachusetts
Municipal Fund) or December 1, 1993 (in the case of the
California Tax-Free Fund, the California Municipal Fund, the New
York Tax-Free Fund and the New York Municipal Fund) to April 3,
1993.
(5) Includes $54,702 reimbursement by ^ TBC Advisors.
(6) Includes $41,577 reimbursement by ^ TBC Advisors.
(7) Includes $846 reimbursement by ^ TBC Advisors.
(8) Includes $10,697 reimbursement by ^ TBC Advisors.
(9) Includes $4,370 reimbursement by ^ TBC Advisors.
(10) Includes $22,044 reimbursement by ^ TBC Advisors.
(11) Includes $24,348 reimbursement by ^ TBC Advisors.
(12) Includes $12,183 reimbursement by ^ TBC Advisors.
(13) Includes $35,728 reimbursement by ^ TBC Advisors.
(14) Includes $19,498 reimbursement by ^ TBC Advisors.
(15) Includes $45,183 reimbursement by ^ TBC Advisors
(16) Includes $73,782 reimbursement by ^ TBC Advisors.
(17) Includes $15,274 reimbursement by ^ TBC Advisors.
(18) Includes $33,335 reimbursement by ^ TBC Advisors.
(19) Amount represents a reimbursement of expenses only.
Dreyfus has agreed that if in any fiscal year the aggregate
expenses of any Fund of the Trust (including fees pursuant to the
Investment Management Agreement, but excluding interest, brokerage
expenses, taxes and extraordinary items) exceed the expense limitation of
any state, it will reduce its management fees by the amount of such excess
expense. Such a fee reduction, if any, will be reconciled on a monthly
basis. To the extent these state regulations permit the exclusion of
distribution expenses (see "Distribution Plan" below), the Trust will
exclude such expenses in determining whether any reduction obligation
exists. The most restrictive state expense limitation applicable to any
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Fund requires a reduction of fees in any year that such expenses exceed
2.5% of the first $30 million of average net assets, 2.0% of the next $70
million of average net assets and 1.5% of the remaining average net
assets. A number of factors, including the size of each Fund, will
determine which of these restrictions will be applicable to a Fund at any
given time. No reimbursement pursuant to state expense limitations was
required for any of the Funds for the fiscal year ended June 30, 1994.
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from
engaging in the business of underwriting, selling or distributing
securities and prohibits a member bank of the Federal Reserve System from
having certain affiliations with an entity engaged principally in ^ that
business. The activities of Mellon Bank in informing its customers of,
and performing, investment and redemption services in connection with a ^
Fund, and in providing services to a ^ Fund as custodian and fund
accountant, as well as ^ investment advisory activities of Dreyfus, may
raise issues under these provisions. Mellon Bank has been advised by
counsel that its activities contemplated under this arrangement are
consistent with its statutory and regulatory obligations.
Changes in either federal or state statutes and regulations
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of such future statutes and regulations could prevent
Mellon Bank or Dreyfus from continuing to perform all or a part of the
above services for its customers and/or a Fund. If Mellon Bank or Dreyfus
were prohibited from serving a Fund in any of its present capacities the
Trustees would seek an alternative provider(s) of such services.
Counsel and Auditors
Kirkpatrick & Lockhart, 1800 M Street, N.W., South Lobby - 9th
Floor, Washington, D.C., 20036-5891, ^ has passed upon the legality of the
shares offered by the Prospectuses and this Statement of Additional
Information.
KPMG Peat Marwick ^, One Mellon Bank Center, Pittsburgh,
Pennsylvania 15218, ^ was appointed by the Board of Trustees to serve as
the Funds' independent auditors for the year ending June 30, 1994,
providing audit services including (1) examination of the annual financial
statements ^, (2) assistance, review and consultation in connection with
the SEC and (3) review of the annual Federal income tax return and the
Pennsylvania excise tax return filed on behalf of each Fund.
INVESTMENT POLICIES
The Prospectuses discuss the investment objectives of each Fund
and the policies it employs to achieve those objectives. The following
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discussion supplements the description of the Funds' investment policies
in the Prospectuses.
Description of Municipal Obligations
For purposes of this Statement of Additional Information, the
term "Municipal Obligations" shall mean, with respect to the Municipal
Fund, debt obligations issued by states, cities, counties, municipalities,
municipal agencies and regional districts, the interest from which is, in
the opinion of counsel to the respective issuers, exempt from Federal
income taxes. The term "Municipal Obligations" and "Massachusetts
Municipal Obligations" shall mean, with respect to the Massachusetts
Municipal Fund and Massachusetts Tax-Free Fund, debt obligations issued by
the Commonwealth of Massachusetts, its political subdivisions,
municipalities and public authorities and municipal obligations issued by
other governmental entities if, in the opinion of counsel to the
respective issuers, the interest from such obligations is excluded from
gross income for Federal income tax purposes and is exempt from Federal
and Massachusetts personal income taxes. The term "Municipal Obligations"
and "California Municipal Obligations" shall mean, with respect to the
California Municipal Fund and the California Tax-Free Fund, debt
obligations issued by the State of California, its political subdivisions,
municipalities and public authorities and municipal obligations issued by
other government entities if, in the opinion of counsel to the respective
issuers, the interest from such obligations is exempt from Federal and
California personal income taxes. The term "Municipal Obligations" and
"New York Municipal Obligations" shall mean, with respect
to the New York Municipal Fund and the New York Tax-Free Fund, debt
obligations issued by the State of New York, its political subdivisions,
municipalities and public authorities and municipal obligations issued
by other governmental entities if, in the opinion of counsel to the
respective issuers, the interest from such obligations
is excluded from gross income for Federal income tax purposes and is
exempt from Federal and New York personal income taxes. "Municipal
Obligations" (and "Massachusetts Municipal Obligations," "California
Municipal Obligations" and "New York Municipal Obligations") include the
following:
Municipal Bonds
Municipal Bonds, which generally have a maturity of more than one
year when issued, have two principal classifications: General Obligation
Bonds and Revenue Bonds. A Private Activity Bond is a particular kind of
Revenue Bond. The classification of General Obligation Bonds, Revenue
Bonds and Private Activity Bonds are discussed below.
1. General Obligation Bonds. The proceeds of these obligations
are used to finance a wide range of public projects, including
construction or improvement of schools, highways and roads, and water and
sewer systems. General Obligation Bonds are secured by the issuer's
pledge of its faith, credit and taxing power for the payment of principal
and interest.
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2. Revenue Bonds. Revenue Bonds are issued to finance a wide
variety of capital projects including: electric, gas, water and sewer
systems; highways, bridges and tunnels; port and airport facilities;
colleges and universities; and hospitals. The principal security for a
Revenue Bond is generally the net revenues derived from a particular
facility, group of facilities or, in some cases, the proceeds of a special
excise or other specific revenue source. Although the principal security
behind these bonds may vary, many provide additional security in the form
of a debt service reserve fund whose money may be used to make principal
and interest payments on the issuer's obligations. Some authorities
provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.
3. Private Activity Bonds. Private Activity Bonds, which are
considered Municipal Bonds if the interest paid thereon is exempt from
Federal income tax, are issued by or on behalf of public authorities to
raise money to finance various privately operated facilities for business
and manufacturing, housing, sports and pollution control. These bonds are
also used to finance public facilities such as airports, mass transit
systems, ports and parking. The payment of the principal and interest on
such bonds is dependent solely on the ability of the facility's user to
meet its financial obligations and the pledge, if any, of real and
personal property so financed as security for such payment. As noted in
the Prospectuses and discussed below under "Taxes," interest income on
these bonds may be an item of tax preference subject to the Federal
alternative minimum tax for individuals and corporations.
Municipal Notes
Municipal Notes generally are used to provide for short-term
capital needs and generally have maturities of thirteen months or less.
Municipal Notes include:
1. Tax Anticipation Notes. Tax Anticipation Notes are issued to
finance working capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenue, such as income,
sales, use and business taxes, and are payable from these specific future
taxes.
2. Revenue Anticipation Notes. Revenue Anticipation Notes are
issued in expectation of receipt of other kinds of revenue, such as
Federal revenues available under the Federal Revenue Sharing Programs.
3. Bond Anticipation Notes. Bond Anticipation Notes are issued
to provide interim financing until long-term financing can be arranged.
In most cases, the long-term bonds then provide the money for the
repayment of the Notes.
Municipal Commercial Paper
Issues of Municipal Commercial Paper typically represent
short-term, unsecured, negotiable promissory notes. These obligations are
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issued by agencies of state and local governments to finance seasonal
working capital needs of municipalities or to provide interim construction
financing and are paid from general revenues of municipalities or are
refinanced with long-term debt. In most cases, Municipal Commercial Paper
is backed by letters of credit, lending agreements, note repurchase
agreements or other credit facility agreements offered by banks or other
institutions.
Municipal Lease Obligations
Municipal leases may take the form of a lease or a certificate of
participation in a purchase contract issued by state and local government
authorities to obtain funds to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, computer equipment and
other capital assets. A lease obligation does not constitute a general
obligation of the municipality for which the municipality's taxing power
is pledged, although the lease obligation is ordinarily backed by the
municipality's covenant to budget for, appropriate and make payments due
under the lease obligation. Municipal leases have special risks not
normally associated with Municipal Bonds. These obligations frequently
contain "non-appropriation" clauses that provide that the governmental
issuer of the obligation has no obligation to make future payments under
the lease or contract unless money is appropriated for such purposes by
the legislative body on a yearly or other periodic basis. In addition to
the non-appropriation risk, municipal leases represent a type of financing
that has not yet developed the depth of marketability associated with
Municipal Bonds; moreover, although the obligations will be secured by the
leased equipment, the disposition of the equipment in the event of
foreclosure might prove difficult. For purposes of the 15% limitation on
the purchase of illiquid securities for a Bond Fund (10% for a Money
Fund), a Fund will not consider the municipal lease obligations or
certificates of participation in municipal lease obligations in which it
invests as liquid, unless Dreyfus shall determine, based upon such factors
as the frequency of trades and quotes for the obligation, the number of
dealers willing to purchase or sell the security and the number of other
potential buyers, the willingness of dealers to undertake to make a market
in the security and the nature of marketplace trades, that a security
shall be treated as liquid for purposes of such limitation.
Obligations of issuers of Municipal Obligations are subject to
the provisions of bankruptcy, insolvency and other laws affecting the
rights and remedies of creditors. In addition, the obligations of such
issuers may become subject to laws enacted in the future by Congress,
state legislators, or referenda extending the time for payment of
principal and/or interest, or imposing other constraints upon enforcement
of such obligations or upon municipalities to levy taxes. There is also
the possibility that, as a result of litigation or other conditions, the
power or ability of any issuer to pay, when due, the principal of and
interest on its Municipal Obligations may be materially affected.
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Investments in Municipal Bond Index Futures Contracts and Options on
Interest Rate Futures Contracts
The Funds may invest in municipal bond index futures contracts
and interest rate futures contracts that are traded on a domestic exchange
or board of trade. Such investments may be made by a Fund solely for the
purpose of hedging against changes in the value of its portfolio
securities due to anticipated changes in interest rates and market
conditions, and not for purposes of speculation. Further, such
investments will be made only in unusual circumstances, such as when
Dreyfus anticipates an extreme change in interest rates or market
conditions.
Municipal Bond Index Futures Contracts
A municipal bond index futures contract is an agreement pursuant
to which two parties agree to take or make delivery of an amount of cash
equal to a specific dollar amount times 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. No physical
delivery of the underlying municipal bonds in the index is made.
Municipal bond index futures contracts based on an index of 40 tax-exempt,
long-term municipal bonds with an original issue size of at least $50
million and a rating of A- or higher by S&P or A or higher by Moody's
which began trading mid-1985.
The purpose of the acquisition or sale of a municipal bond index
futures contract by a Fund, as the holder of long-term municipal
securities, is to protect the Fund from fluctuations in interest rates on
tax-exempt securities without actually buying or selling long-term
municipal securities.
Unlike the purchase or sale of a Municipal Bond, no consideration
is paid or received by a Fund upon the purchase or sale of a futures
contract. Initially, a Fund will be required to deposit with the broker
an amount of cash or cash equivalents equal to approximately 10% of the
contract amount (this amount is subject to change by the board of trade on
which the contract is traded and members of such board of trade may
charge a higher amount). 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 contract,
assuming that all contractual obligations have been satisfied. Subsequent
payments, known as variation margin, to and from the broker, will be made
on a daily basis as the price of the index 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 the
contract, a Fund may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing position in
the futures contract.
There are several risks in connection with the use of a municipal
bond index futures contract as a hedging device. Successful use of
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municipal bond index futures contracts by the Funds is subject to ^ the
ability of Dreyfus to predict correctly movements in the direction of
interest rates. Such predictions involve skills and techniques which may
be different from those involved in the management of a long-term
municipal bond portfolio. In addition, there can be no assurance that
there will be a correlation between movements in the price of the
municipal bond index and movements in the price of the Municipal Bonds
which are the subject of the hedge. The degree of imperfection of
correlation depends upon various circumstances, such as variations in
speculative market demand for futures contracts and municipal securities,
technical influences on futures trading, and differences between the
municipal securities being hedged and the municipal securities underlying
the municipal bond index futures contracts, in such respects as interest
rate levels, maturities and creditworthiness of issuers. A decision of
whether, when and how to hedge involves the exercise of skill and judgment
and even a well-conceived hedge may be unsuccessful to some degree because
of market behavior or unexpected trends in interest rates.
Although the Funds intend to purchase or sell municipal bond
index futures contracts only if there is an active market for such
contracts, there is no assurance that a liquid market will exist for the
contracts at any particular time. Most domestic futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes
the maximum amount the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading
session. Once the daily limit has been reached in a particular contract,
no trades may be made that day at a price beyond that limit. The daily
limit governs only price movement during a particular trading day and,
therefore, does not limit potential losses because the limit may prevent
the liquidation of unfavorable positions. It is possible that futures
contract prices could move to the daily limit for several consecutive
trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and subjecting some futures traders to
substantial losses. In such event, it will not be possible to close a
futures position and, in the event of adverse price movements, the Funds
would 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 partially or completely offset losses
on the futures contract. As described above, however, there is no
guarantee that the price of Municipal Bonds will, in fact, correlate with
the price movements in the municipal bond index futures contract and thus
provide an offset to losses on a futures contract.
If a Fund has hedged against the possibility of an increase in
interest rates adversely affecting the value of the Municipal Bonds held
in its portfolio and rates decrease instead, the Fund will lose part or
all of the benefit of the increased value of the Municipal Bonds it has
hedged because it will have offsetting losses in its futures positions.
In addition, in such situations, if a Fund has insufficient cash, it may
have to sell securities to meet daily variation margin requirements. Such
sales of securities may, but will not necessarily, be at increased prices
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which reflect the decline in interest rates. A Fund may have to sell
securities at a time when it may be disadvantageous to do so.
When the Funds purchase municipal bond index futures contracts,
an amount of cash and U.S. government securities or other high grade debt
securities equal to the market value of the futures contracts will be
deposited in a segregated account with the Funds' custodian (and/or such
other persons as appropriate) to collateralize the positions and thereby
insure that the use of such futures contracts is not leveraged. In
addition, the ability of the Funds to trade in municipal bond index
futures contracts and options on interest rate futures contracts may be
materially limited by the requirements of the Internal Revenue Code of
1986, as amended (the "Code"), applicable to a regulated investment
company. See "Taxes" below.
Options on Interest Rate Futures Contracts^
A Fund may purchase put and call options on interest rate futures
contracts which are traded on a domestic exchange or board of trade as a
hedge against changes in interest rates, and may enter into closing
transactions with respect to such options to terminate existing positions.
A Fund will sell put and call options on interest rate futures contracts
only as part of closing sale transactions to terminate its options
positions. There is no guarantee that such closing transactions can be
effected.
Options on interest rate futures contracts, as contrasted with
the direct investment in such contracts, gives the purchaser the right, in
return for the premium paid, to assume a position in interest rate futures
contracts at a specified exercise price at any time prior to the
expiration date of the options. Upon exercise of an option, the delivery
of the futures position by the writer of the option to the holder of the
option will be accompanied by delivery of the accumulated balance in the
writer's futures contract margin account, which represents the amount by
which the market price of the futures contract exceeds, in the case of a
call, or is less than, in the case of a put, the exercise price of the
option on the futures contract. The potential loss related to the
purchase of an option on interest rate futures contracts is limited to the
premium paid for the option (plus transaction costs). Because the value of
the option is fixed at the point of sale, there are no daily cash payments
to reflect changes in the value of the underlying contract; however, the
value of the option does change daily and that change would be reflected
in the net asset value of a Fund.
There are several risks relating to options on interest rate
futures contracts. The ability to establish and close out positions on
such options will be subject to the existence of a liquid market. In
addition, a Fund's purchase of put or call options will be based upon
predictions as to anticipated interest rate trends by Dreyfus, which could
prove to be inaccurate. Even if Dreyfus' expectations are correct there
may be an imperfect correlation between the change in the value of the
options and of a Fund's portfolio securities.
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Tender Option Bonds
Each Fund may invest up to 10% of the value of its assets in
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. Dreyfus, 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 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. Each Money Fund will not invest more
than 10%, and each Bond Fund will not invest more than 15%, of the value
of its net assets in illiquid securities, which would include tender
option bonds for which the required notice to exercise the tender feature
is more than seven days if there is no secondary market available for
these obligations.
Use of Ratings as Investment Criteria
The ratings of nationally recognized statistical rating
organizations ("NRSROs") such as Standard & Poor's Ratings Group ("S&P")
and Moody's Investors Service, Inc. ("Moody's") represent the opinions of
these agencies as to the quality of Municipal Obligations which they rate.
It should be emphasized, however, that such ratings are relative and
subjective and are not absolute standards of quality. These ratings will
be used by the Funds as initial criteria for the selection of portfolio
securities, but the Funds will also rely upon the independent advice of
Dreyfus to evaluate potential investments. Among the factors which will
be considered are the long-term ability of the issuer to pay principal and
interest and general economic trends. Further information concerning the
ratings of the NRSROs and their significance is contained in the Appendix
to this Statement of Additional Information.
After being purchased by a Fund, the rating of a Municipal
Obligation may be reduced below the minimum rating required for purchase
by the Fund or the issuer of the Municipal Obligation may default on its
obligations with respect to the Municipal Obligation. In that event, the
Fund will dispose of the Municipal Obligation as soon as practicable,
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consistent with achieving an orderly disposition of the Municipal
Obligation, unless the Trust's Board of Trustees determines that disposal
of the Municipal Obligation would not be in the best interest of the Fund.
In addition, it is possible that a Municipal Obligation may cease to be
rated or an NRSRO might not timely change its rating of a particular
Municipal Obligation to reflect subsequent events. Although neither event
will require the sale of such Municipal Obligation by a Fund, Dreyfus will
consider such event in determining whether the Fund should continue to
hold the Municipal Obligation. In addition, if an NRSRO changes its
rating system, a Fund will attempt to use comparable ratings as standards
for its investments in accordance with its investment objectives and
policies.
Floating Rate and Variable Rate Obligations
A Fund may purchase floating rate and variable rate obligations,
including participation interests therein. Floating rate or variable rate
obligations provide that the rate of interest is set as a specific
percentage of a designated base rate (such as the prime rate at a major
commercial bank) and that the Fund can demand payment of the obligation at
par plus accrued interest. Variable rate obligations provide for a
specified periodic adjustment in the interest rate, while floating rate
obligations have an interest rate which changes whenever there is a change
in the external interest rate. Frequently such obligations are secured by
letters of credit or other credit support arrangements provided by banks.
The quality of the underlying creditor or of the bank, as the case may be,
must, as determined by Dreyfus under the supervision of the Trustees, be
equivalent to the quality standard prescribed for the Funds. The Money
Funds are currently permitted to purchase floating rate and variable rate
obligations with demand features in accordance with requirements
established by the Securities and Exchange Commission ("SEC"), which,
among other things, permit such instruments to be deemed to have remaining
maturities of thirteen months or less, notwithstanding that they may
otherwise have a stated maturity in excess of thirteen months.
A Fund may invest in participation interests purchased from banks
in floating rate or variable rate tax-exempt Municipal Obligations owned
by banks. A participation interest gives the purchaser an undivided
interest in the Municipal Obligation in the proportion that the Fund's
participation interest bears to the total principal amount of the
Municipal Obligation, and provides a demand feature. Each participation
is backed by an irrevocable letter of credit or guarantee of a bank (which
may be the bank issuing the participation interest, a bank issuing a
confirming letter of credit to that of the issuing bank, or a bank serving
as agent of the issuing bank with respect to the possible repurchase of
the participation interest) that Dreyfus, under the supervision of the
Trustees, has determined meets the prescribed quality standards for the
Funds. A Fund has the right to sell the instrument back to the issuing
bank or draw on the letter of credit on demand for all or any part of the
Fund's participation interest in the Municipal Obligation, plus accrued
interest. The Money Funds are currently permitted to invest in
participation interests when the demand provision complies with
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conditions established by the SEC. Banks will retain a service and letter
of credit fee and a fee for issuing repurchase commitments in an amount
equal to the excess of the interest paid on the Municipal Obligations over
the negotiated yield at which the instruments were purchased by a Fund.
When-Issued Securities
A Fund may purchase Municipal Obligations on a when-issued basis
^(i.e., for delivery beyond the normal settlement date at the stated price
and yield). The payment obligation and the interest rate that will be
received on the Municipal Obligations purchased on a when-issued basis are
each fixed at the time the buyer enters into the commitment. Although a
Fund will purchase Municipal Obligations on a when-issued basis only with
the intention of actually acquiring the securities, the Fund may sell
these securities before the settlement date if it is deemed advisable as a
matter of investment strategy.
Municipal Obligations purchased on a when-issued basis and the
securities held in the portfolio of each Fund are subject to changes in
market value based upon the public's perception of the creditworthiness of
the issuer and changes, real or anticipated, in the level of interest
rates (which will generally result in similar changes in value, i.e., both
experiencing appreciation when interest rates decline and depreciation
when interest rates rise). Therefore, to the extent a Fund remains
substantially fully invested at the same time that it has purchased
securities on a when-issued basis, there will be a greater possibility of
fluctuation in the Fund's net asset value. Purchasing Municipal
Obligations on a when-issued basis can involve a risk that the yields
available in the market when the delivery takes place may actually be
higher than those obtained in the transaction.
A separate account of each Fund consisting of cash or liquid debt
securities equal to the amount of the when-issued commitments will be
established with the Fund's custodian. When the time comes to pay for
when-issued securities, the Fund will meet its obligations from
then-available cash flow, sale of securities held in the separate account,
sale of other securities or, although it would not normally expect to do
so, from the sale of the when-issued securities themselves (which may have
a value greater or lesser than the Fund's payment obligations). Sale of
securities to meet such obligations carries with it a greater potential
for the realization of capital gains, which are not exempt from Federal
income tax.
Purchase of Securities with Stand-by Commitments
Pursuant to an exemptive order issued by the SEC under the Act, a
Money Fund may acquire standby commitments with respect to Municipal
Obligations held in its portfolio. Under a stand-by commitment, a
broker-dealer, dealer or bank would agree to purchase, at a Fund's option,
a specified Municipal Obligation at a specified price. Stand-by
commitments acquired by a Fund may also be referred to as "put options."
The amount payable to a Fund upon its exercise of a stand-by commitment
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normally would be (a) the acquisition cost of the Municipal Obligation,
less any amortized market premium or plus any amortized market or original
issue discount during the period the Fund owned the security, plus (b) all
interest accrued on the security since the last interest payment date
during the period. Absent unusual circumstances, in determining net asset
value a Fund would value the underlying Municipal Obligation at amortized
cost. Accordingly, the amount payable by the broker-dealer, dealer or bank
upon exercise of a stand-by commitment will normally be substantially the
same as the portfolio value of the underlying Municipal Obligation.
A Money Fund's right to exercise a stand-by commitment is
unconditional and unqualified. Although the Fund could not transfer a
stand-by commitment, the Fund could sell the underlying Municipal
Obligation to a third party at any time. It is expected that stand-by
commitments generally will be available to the Funds without the payment
of any direct or indirect consideration. The Funds may, however, pay for
stand-by commitments either separately in cash or by paying a higher price
for portfolio securities which are acquired subject to the commitment
(thus reducing the yield to maturity otherwise available for the same
securities). The total amount paid in either manner for outstanding
stand-by commitments held in the Funds' portfolios will not exceed .5 of
1% of the value of each Fund's total assets calculated immediately after
such stand-by commitment was acquired.
The Money Funds intend to enter into stand-by commitments only
with broker-dealers, dealers or banks that Dreyfus believes present
minimum credit risks. A Fund's ability to exercise a stand-by commitment
will depend on the ability of the issuing institution to pay for the
underlying securities at the time the commitment is exercised. The credit
of each institution issuing a stand-by commitment to a Fund will be
evaluated on an ongoing basis by Dreyfus in accordance with procedures
established by the Trustees.
The Money Funds intend to acquire stand-by commitments solely to
facilitate portfolio liquidity and do not intend to exercise their rights
thereunder for trading purposes. The acquisition of a stand-by commitment
would not affect the valuation or maturity of the underlying Municipal
Obligation, which will continue to be valued in accordance with the
amortized cost method. Each stand-by commitment will be valued at zero in
determining net asset value. Should a Fund pay directly or indirectly for
a stand-by commitment, its costs will be reflected as an unrealized loss
for the period during which the commitment is held by the Fund and will be
reflected in realized gain or loss when the commitment is exercised or
expires. Stand-by commitments will not affect the dollar-weighted
average maturities of the Money Funds' portfolios. The Money Funds
understand that the Internal Revenue Service has issued a revenue ruling
to the effect that a registered investment company will be treated for
Federal income tax purposes as the owner of Municipal Obligations acquired
subject to stand-by commitments and the interest on the Municipal
Obligations will be tax-exempt to the Funds.
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Taxable Investments
Each Fund anticipates being as fully invested as practicable in
Municipal Obligations. Because each Fund's purpose is to provide income
exempt from Federal ^ and state personal income tax ^, a Fund will invest
in taxable obligations only if and when the Trustees believe it would be
in the best interests of its shareholders to do so. Situations in which a
Fund may invest up to 20% of its total assets in taxable securities
include: (a) pending investment of proceeds of sales of shares of the Fund
or of portfolio securities, (b) pending settlement of purchases of
portfolio securities, and (c) when the Fund is attempting to maintain
liquidity for the purpose of meeting anticipated redemptions. A Fund may
temporarily invest more than 20% of its total assets in taxable securities
to maintain a "defensive" posture when, in the opinion of Dreyfus, it is
advisable to do so because of adverse market conditions affecting the
market for Municipal Obligations. A Fund may invest in only the following
kinds of taxable securities maturing in one year or less from the date of
purchase: (1) obligations of the United States Government, its agencies or
instrumentalities; (2) commercial paper rated Prime-1 by Moody's or A-1+
or A-1 by S&P; (3) certificates of deposit of domestic banks with total
assets of $1 billion or more; and (4) repurchase agreements (instruments
under which the seller of a security agrees to repurchase the security at
a specific time and price) with respect to any securities that the Fund is
permitted to hold.
Repurchase Agreements
A Fund may enter into repurchase agreements with member banks of
the Federal Reserve System or certain non-bank dealers. Under each
repurchase agreement the selling institution will be required to maintain
the value of the securities subject to the agreement at not less than
their repurchase price. If a particular bank or non-bank dealer defaults
on its obligation to repurchase the underlying debt instrument as required
by the terms of a repurchase agreement, a Fund will incur a loss to the
extent that the proceeds it realizes on the sale of the collateral are
less than the repurchase price of the instrument. In addition, should the
defaulting bank or non-bank dealer file for bankruptcy, a Fund could incur
certain costs in establishing that it is entitled to dispose of the
collateral and its realization on the collateral may be delayed or
limited. Investments in repurchase agreements are subject to the policy
prohibiting investment of more than 10% of a Fund's assets in restricted
securities, securities without readily available market quotations and
repurchase agreements maturing in more than seven days.
As noted in the Prospectuses, each of the Funds may, on occasion,
invest in securities issued by other investment companies. These
securities will be of investment companies that determine their net asset
value per share based on the amortized cost or penny-rounding method.
Such securities will be acquired by a Fund within the limits prescribed by
the Act, which include, subject to certain exceptions, a prohibition
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against a Fund's investing more than 10% of the value of its total assets
in such securities.
Special Factors Affecting the Massachusetts Municipal Fund and the
Massachusetts Tax-Free Fund
The Commonwealth of Massachusetts and certain of its cities and
towns and public bodies have experienced financial difficulties that have
adversely affected their credit standing. The prolonged effects of such
financial difficulties could adversely affect the market value of the
Massachusetts Municipal Obligations held by the Massachusetts Municipal
Fund and the Massachusetts Tax-Free Fund. The information summarized
below describes some of the more significant factors that could affect the
Fund or the ability of the obligors to pay debt service on certain of
these securities. The sources of such information are the official
statements of issuers located in the Commonwealth of Massachusetts, as
well as other publicly available documents, and statements of public
officials. The Trust has not independently verified any of the
information contained in such statements and documents, but the Trust is
not aware of facts which would render such information inaccurate.
Fiscal Matters - General. The Commonwealth's constitution
requires, in effect, that its budget, though not necessarily its operating
expenditures and revenues, be balanced each year. In addition, the
Commonwealth has certain budgetary procedures and fiscal controls in place
that are designed to ensure that sufficient cash is available to meet the
Commonwealth's obligations, that state expenditures are consistent with
periodic allotments of annual appropriations and that funds are expended
consistent with statutory and public purposes. The General Fund, in
addition to being the Commonwealth's primary operating fund, ordinarily
functions as a residuary fund to receive otherwise unallocated revenues
and to provide monies to transfer to the funds as required. The condition
of the General Fund is generally regarded as the principal indicator of
whether the Commonwealth's operating revenues and expenses are in balance.
The other principal operating funds (the Local Aid Fund and the Highway
Fund) are customarily funded to at least a zero balance.
The Commonwealth of Massachusetts has experienced fiscal
difficulties. Operating losses in fiscal 1990, and 1991, totaled $1.251
billion and $21.2 million, respectively. During the period, fund balances
in the budgeted operating funds increased from opening balances of
negative $1.104 billion in fiscal 1990 to ending balances of positive
$237.1 million in fiscal 1991, primarily due to deficit borrowings. The
Commonwealth ended fiscal 1992 and 1993 with operating surpluses of $312.3
million and $13.1 million, respectively, and statutory closing fund
balances increased to $562.5 million at the end of fiscal 1993. Fiscal
1994 ^ ended with a current operating ^ surplus of ^ $18.2 million and
ending fund balances of ^ $580.7 million prior to taking into account
certain revenue and expenditure reductions based on preliminary financial
information. Fiscal 1995 is currently estimated to end with a deficiency
of revenues and other sources over expenditures and other uses of $117.4
million.
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On July 10, 1994, the Governor signed into law the fiscal 1995
budget, which, together with authorizations contained in the final fiscal
1994 appropriations bill and expected supplemental appropriations relating
to welfare and certain other programs, provides for approximately ^
$16.482 billion in fiscal 1995 expenditures. Budgeted revenues and other
sources to be collected in fiscal 1995 are estimated by the Executive
Office for Administration and Finance to be approximately ^ $16.364
billion.
In recent months, the rate of growth in certain tax revenue
categories, including, in particular, the income tax, has slowed. Fiscal
1994 tax revenues were approximately ^ $87 million below the Department of
Revenue's tax revenue estimate of $10.694 billion. ^ In September 1994,
the Secretary for Administration and Finance revised the fiscal 1995 ^ tax
revenue estimate to $11.234 billion, a reduction of approximately $75
million from the most recent prior revenue estimate arrived at jointly
with Legislature in May 1994.
The current economic slowdown in Massachusetts has led to
decreased growth in tax revenues and to increased expenditures.
Municipalities and agencies of the Commonwealth are experiencing the same
economic effects. Moreover, they are affected by the financial condition
of the Commonwealth, because they receive substantial funding from the
Commonwealth.
Limitations on Tax Revenues. In Massachusetts efforts to limit
and reduce levels of taxation have been under way for several years.
Limits were established on state tax revenues by legislation enacted on
October 25, 1986, and by an initiative petition approved by the voters on
November 4, 1986. The two measures are inconsistent in several respects.
Chapter 62F, which was added to the General Laws by initiative
petition in November 1986, establishes a state tax revenue growth limit
for each fiscal year equal to the average positive rate of growth in total
wages and salaries in the Commonwealth, as reported by the federal
government, during the three calendar years immediately preceding the end
of such fiscal year. Chapter 62F also requires that allowable state tax
revenues be reduced by the aggregate amount received by local governmental
units from any newly authorized or increased local option taxes or
excises. Any excess in state tax revenue collections for a given fiscal
year over the prescribed limit, as determined by the State Auditor, is to
be applied as a credit against the then current personal income tax
liability of all taxpayers in the Commonwealth in proportion to the
personal income tax liability of all taxpayers in the Commonwealth for the
immediately preceding tax year. The legislation enacted in October 1986,
which added Chapter 29B to the General Laws, also establishes an allowable
state revenue growth factor by reference to total wages and salaries in
the Commonwealth. However, rather than utilizing a three-year average wage
and salary growth rate, as used by Chapter 62F, Chapter 29B's formula
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utilizes one-third of the positive percentage gain in Massachusetts wages
and salaries, as reported by the federal government, during the three
calendar years immediately preceding the end of a given fiscal year.
Additionally, unlike Chapter 62F, Chapter 29B excludes from its definition
of state tax revenues income derived from local option taxes and excises
and from revenues needed to fund debt service costs.
Tax revenues in fiscal 1989 through fiscal ^ 1994 were lower than
the limit set by either Chapter 62F or Chapter 29B. The Executive Office
for Administration and Finance currently estimates that state tax revenues
in fiscal ^ 1995 will not reach the limit imposed by either of these
statutes.
Proposition 2-1/2. In November of 1980, voters in the
Commonwealth approved a statewide tax limitation initiative petition,
commonly known as Proposition 2-1/2, to constrain levels of property
taxation and to limit the charges and fees imposed on cities and towns by
certain governmental entities, including county governments. Proposition
2-1/2, is not a provision of the state constitution and accordingly is
subject to amendment or repeal by the legislature. Proposition 2-1/2, as
amended to date, limits the property taxes that may be levied by any city
or town in any fiscal year to the lesser of (i) 2.5% of the full and fair
cash valuation of the real estate and personal property therein, and (ii)
2.5% over the previous year's levy limit plus any growth in the tax base
from certain new construction and parcel subdivisions. Proposition 2-1/2
also limits any increase in the charges and fees assessed by certain
governmental entities, including county governments, on cities and towns
to the sum of (i) 2.5% of the total charges and fees imposed in the
preceding fiscal year, and (ii) any increase in charges for services
customarily provided locally or services obtained by the city or town at
its option.
Many communities have responded to the limitation imposed by
Proposition 2-1/2 through statutorily permitted overrides and exclusions.
Override activity peaked in fiscal 1991, when 182 communities attempted
votes on one of the three types of referenda questions (override of levy
limit, exclusion of debt service, or exclusion of capital expenditures)
and 100 passed at least one question, adding $58.5 million to their levy
limits. In fiscal 1992, 67 of 143 communities had successful votes
totaling $31.0 million. In fiscal 1993, 83 communities attempted a vote;
two-thirds of them (56) passed questions aggregating $16.4 million.
Although Proposition 2-1/2 will continue to constrain local property tax
revenues, significant capacity exists for overrides in nearly all cities
and towns.
Local Aid. During the 1980s, the Commonwealth increased payments
to its cities, towns and regional school districts ("Local Aid") to
mitigate the impact of Proposition 2-1/2 on local programs and services.
In fiscal ^ 1995 approximately ^ 32.1% of the Commonwealth's budget is
estimated to be allocated to Local Aid. Local Aid payments to cities,
towns and regional school districts take the form of both direct and
indirect assistance.
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Direct Local Aid decreased from $2.961 billion in fiscal 1989 to
^ $2.360 billion
^ in fiscal 1992 ^, increased to ^ $2.547 billion in fiscal 1993 and
increased to $2.727 billion in fiscal 1994. It is estimated that fiscal ^
1995 expenditures for direct Local Aid will be ^ $2.979 billion, which is
an increase of approximately ^ 9.2% above the fiscal ^ 1994 level. The
additional amount of indirect Local Aid provided over and above direct
Local Aid was approximately ^ $2.069 billion in fiscal ^ 1994. It is
estimated that in fiscal ^ 1995 approximately ^ $2.318 billion of indirect
Local Aid will also be paid.^
A statute adopted by voter initiative petition to the November
1990 statewide election regulates the distribution of Local Aid to cities
and towns. The statute requires that, subject to annual appropriation, no
less than 40% of collections from personal income taxes, sales and use
taxes, corporate excise taxes and lottery fund proceeds be distributed to
cities and towns. Under the law, the Local Aid distribution to each city
or town would equal no less than 100% of the total Local Aid received for
fiscal 1989. Distributions in excess of fiscal 1989 levels would be based
on new formulas that would replace the current Local Aid distribution
formulas. By its terms, the new formula would have called for a
substantial increase in direct Local Aid in fiscal 1992 and would call for
such an increase in fiscal 1993 and in subsequent years. However, Local
Aid payments expressly remain subject to annual appropriation, and fiscal
1992 ^, fiscal 1993 and fiscal 1994 appropriations for Local Aid did not
meet, and fiscal ^ 1995 appropriations for Local Aid do not meet, the
levels set forth in the initiative law.
Commonwealth Expenditures. From fiscal 1989 to fiscal 1990
budgeted expenditures of the Commonwealth increased approximately 4.9% to
$13.260 million. Fiscal 1991 budgeted expenditures were $13.655 billion,
or a 3.0% increase over fiscal 1990 budgeted expenditures. For fiscal
1992, budgeted expenditures were $13.420 billion, representing a decline
of 1.7% from the level of budgeted expenditures in fiscal 1991. Fiscal
1993 budgeted expenditures were $14.696 billion, an increase of 9.6% from
fiscal 1992. ^ Preliminary information indicates fiscal 1994 budgeted
expenditures were $15.533 billion, an increase of 5.7% from fiscal 1993.
It is estimated that fiscal 1995 budgeted expenditures will be ^ $16,482
billion, an increase of ^ 6.1% over the fiscal ^ 1994 level. Budgeted
revenues and other sources to be collected in fiscal 1995 are estimated by
the Executive Office for Administration and Finance to be approximately
$16.3 billion, prior to taking into account certain revenue and
expenditure reductions.
Commonwealth expenditures since fiscal 1990 largely reflect
significant growth in several programs and services provided by the
Commonwealth, principally Medicaid and group health insurance; public
assistance programs; debt service; pensions; and assistance to the
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Massachusetts Bay Transportation Authority and regional transit
authorities.
The Commonwealth's pension systems were established on a
pay-as-you-go basis. The Commonwealth's unfunded actuarial pension
liability is significant - approximately $9.651 billion as of January 1,
1993, for state employees and teachers and local retirement system
cost-of-living increases. The amount in the state's pension reserve,
established to address the unfunded liabilities of the two state systems,
has increased significantly in recent years due to substantial
appropriations and changes in the law relating to investment of retirement
systems assets. As of December 31, 1993, the reserve was approximately
$4.124 billion. Comprehensive pension legislation approved in 1988
committed the Commonwealth to fund future pension liabilities currently
and to amortize the Commonwealth's accumulated unfunded liabilities over
40 years.
Other Factors. Many factors affect the financial condition of
the Commonwealth, including many social, environmental and economic
conditions, which are beyond the control of the Commonwealth. As with
most urban states, the continuation of many of the Commonwealth's
programs, particularly its human services programs, is in significant part
dependent upon continuing Federal reimbursements which have been
declining.
Federal legislation in recent years has resulted in substantial
reductions in direct Federal payments and grants to states and
municipalities for programs in social service, water pollution control and
other areas. Federal reimbursements have also declined as a result of
decreased state expenditures. Further loss of Federal grants and financing
by the Commonwealth could exacerbate the economic slowdown and cause
programs to be curtailed or cause the recipients of such funding to find
other revenue sources.
Special Factors Affecting the California Municipal Fund and the California
Tax-Free Fund
Some of the significant financial considerations relating to the
Funds' investments in California Municipal Obligations are summarized
below. This summary information is derived principally from official
statements and prospectuses relating to securities offerings of the State
of California and various local agencies in California, available as of
the date of this Statement of Additional Information and does not purport
to be a complete description of any of the considerations mentioned
herein. The accuracy and completeness of the information contained in
such official statements has not been verified independently.
Economic Factors. The Governor's 1993-1994 Budget, introduced on
January 8, 1993, proposed general fund expenditures of $37.3 billion, with
projected revenues of $39.9 billion. To balance the budget in the face of
declining revenues, the Governor proposed a series of revenue shifts from
local government, reliance on increased federal aid, and reductions in
state spending.
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The Department of Finance of the State of California's May
Revision of General Fund Revenues and Expenditures (the "May Revision"),
released on May 20, 1993, projected the State would have an accumulated
deficit of about $2.75 billion by June 30, 1993 essentially unchanged from
the prior year. The Governor proposed to eliminate this deficit over an
18-month period. Unlike previous years, the Governor's Budget and May
Revision did not calculate a "gap" to be closed, but rather set forth
revenue and expenditure forecasts and proposals designed to produce a
balanced budget.
The 1993-1994 budget act (the "1993-94 Budget Act") was signed by
the Governor on June 30, 1993, along with implementing legislation. The
Governor vetoed about $71 million in spending.
The 1993-94 Budget Act is predicated on general fund revenue and
transfers estimated at $40.6 billion, $400 million below 1992-93 (and the
second consecutive year of actual decline). The principal reasons for
declining revenue are the continued weak economy and the expiration (or
repeal) of three fiscal steps taken in 1992--a half cent temporary sales
tax, a deferral or operating loss carry forwards, and repeal by initiative
of a sales tax on candy and snack foods.
The 1993-94 Budget Act also assumes special fund revenues of
$11.9 billion, an increase of 2.9 percent over 1992-93.
The 1993-94 Budget Act includes general fund expenditures of
$38.5 billion (a 6.3 percent reduction from projected 1992-93 expenditures
of $41.1 billion), in order to keep a balanced budget within the available
revenues. The 1993-94 Budget Act also includes special fund expenditures
of $12.1 billion, a 4.2 percent increase. The 1993-94 Budget Act reflects
the following major adjustments;
1. Changes in local government financing to shift about $2.6
billion in property taxes from cities, counties, special districts and
redevelopment agencies to school and community college districts, thereby
reducing general fund support by an equal amount. About $2.5 billion
would be permanent, reflecting termination of the State's "bailouts" of
local governments following the property tax cuts of Preposition 13 in
1978 (See "Constitutional, Legislative and Other Factors" below).
The property tax revenue losses for cities and counties are
offset in part by additional sales tax revenues and mandate relief. The
temporary 0.5 percent sales tax has been extended through December 31,
1993, for allocation to counties for public safety purposes.
Legislation also has been enacted to eliminate state mandates in
order to provide local governments flexibility in making their programs
responsive to local needs. Legislation provides mandate relief for local
justice systems which affect county audit requirements, court reporter
fees, and court consolidation; health and welfare relief involving
advisory boards, family planning, state audits and realignment maintenance
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efforts; and relief in areas such as county welfare department
self-evaluations, noise guidelines and recycling requirements.
2. The 1993-94 Budget Act keeps K-12 Proposition 98 funding on a
cash basis at the same par-pupil level as 1992-93 by providing schools a
$609 million loan payable from future years Proposition 98 funds.
3. The 1993-94 Budget Act assumed receipt of about $692 million
of aid to the State from the federal government to offset health and
welfare costs associated with foreign immigrants living in the State,
which would reduce a like amount of general fund expenditures. About $411
million of this amount is one-time funding. Congress ultimately
appropriated only $450 million.
4. Reductions of $600 million in health and welfare programs and
$400 million in support for higher education (partly offset by fee
increases at all three units of higher education) and various
miscellaneous cuts (totaling approximately $150 million) in State
government services in many agencies, up to 15 percent. The 1993-94
Budget Act suspended the 4 percent automatic budget reduction "trigger,"
as was done in 1992-93, so cuts could be focused.
5. A 2-year suspension of the renter's tax credit ($390 million
expenditure reduction in 1993-94).
6. Miscellaneous one-time items, including deferral of payment
to the Public Employees Retirement Fund ($339 million) and a change in
accounting for debt service from accrual to cash basis, saving $107
million.
The 1993-94 Budget Act contains no general fund tax/revenue
increases other than a two year suspension of the renters' tax credit.
Administration reports during the course of the 1993-94 Fiscal
Year have indicated that while economic recovery appears to have started
in the second half of the fiscal year, recessionary conditions continued
longer than had been anticipated when the 1993-94 Budget Act was adopted.
Overall, revenues for the 1993-94 Fiscal Year were about $800 million
lower than original projections, and expenditures were about $780 million
higher, primarily because of higher health and welfare caseloads, lower
property taxes which require greater State support for K-14 education to
make up the shortfall, and lower than anticipated federal government
payments for immigration-related costs. The ^ reports ^ in May and June,
1994, indicated that revenues in the second half of the 1993-94 Fiscal
Year have been very close to the projections made in the Governor's Budget
of January 10, 1994, which is consistent with a slow turnaround in the
economy.
The Department of Finance's July 1994 Bulletin, including the
final June receipts, reported that June revenues were $114 million (2.5
percent) above projection, with final end-of-year results at $377 million
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(about 1 percent) above the May Revision projections. Part of this result
was due to end-of-year adjustments and reconciliations. Personal income
tax and sales tax continued to track projections very well. The largest
factor in the higher than anticipated revenues was from bank and
corporation taxes, which were $140 million (18.4 percent) above projection
in June. While the higher June receipts are reflected in the actual
1993-94 Fiscal Year cash flow results, and help the starting cash balance
for the 1994-95 Fiscal Year, the Department of Finance has not adjusted
any of its revenue projections for the 1994-95 or 1995-96 Fiscal Years.
During the 1993-94 Fiscal Year, the State implemented the deficit
retirement plan, which was part of the 1993-94 Budget Act, by issuing $1.2
billion of revenue anticipation warrants in February 1994 maturing
December 21, 1994. This borrowing reduced the cash deficit at the end of
the 1993-94 Fiscal Year. Nevertheless, because of the $1.5 billion
variance from original 1993-94 Budget Act assumptions, the General Fund
ended the fiscal year at June 30, 1994 carrying forward an accumulated
deficit of approximately $2 billion.
Because of the revenue shortfall and the State's reduced internal
borrowable cash resources, in addition to the $1.2 billion of revenue
anticipation warrants issued as part of the deficit retirement plan, the
State issued an additional $2.0 billion of revenue anticipation warrants,
maturing July 26, 1994, which were needed to fund the State's obligations
and expenses through the end of the 1993-94 Fiscal Year.
On January 17, 1994, a major earthquake measuring an estimated
6.8 on the Richter Scale struck Los Angeles. Significant property damage
to private and public facilities occurred in a four county area including
northern Los Angeles County, Ventura County, and parts of Orange and San
Bernardino Counties, which were declared as State and federal disaster
areas by January 18. ^ Current estimates of total property damage
(private and public) are in the range of ^ $20 billion, but these
estimates are still subject to change.
Despite such damage, on the whole, the vast majority of
structures in the areas, including large manufacturing and commercial
buildings and all modern high-rise offices, survived the earthquake with
minimal or no damage, validating the cumulative effect of strict building
codes and thorough preparation for such an emergency by the State and
local agencies.
State-owned facilities, including transportation corridors and
facilities such as Interstate Highways 5 and 10 and State Highways 14, 118
and 210, ^ sustained damage. Most of the major highways (Interstate
Highways 5 and 10) have now been reopened. The campus of California State
University ^ at Northridge (very near the epicenter) suffered an estimated
$350 million damage, resulting in temporary closure of the campus. It has
reopened using borrowed facilities elsewhere in the area and many
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temporary structures. There was also some damage to the University of
California at Los Angeles ^ and to an office building in Van Nuys (now
open after a temporary closure). Overall, except for the temporary road
and bridge closures, ^ and CSU-Northridge, the earthquake did not and is
not expected ^ to significantly ^ affect State government operations.^
The State in conjunction with the federal government is committed
to providing assistance to local governments, individuals and businesses
suffering damage as a result of the earthquake, as well as to provide for
the repair and replacement of State-owned facilities. The federal
government will provide substantial earthquake assistance.
The President immediately allocated some available disaster
funds, and Congress has approved additional funds for a total of at least
$9.5 billion of federal funds for earthquake relief, including assistance
to homeowners and small businesses, and costs for repair of damaged public
facilities. The Governor ^ originally proposed that the State will have
to pay about $1.9 billion for earthquake relief costs, including a 10
percent match to some of the federal funds, and costs for some programs
not covered by the federal aid. The Governor proposed to cover $1.05
billion of these costs from a general obligation bond issue which was on
the June 1994 ballot, but it was not approved by the voters. The Governor
subsequently announced that the State's share for transportation projects
would come from existing Department of Transportation funds (thereby
delaying other, non-earthquake related projects), the State's share for
certain other costs (including local school building repairs) would come
from reallocating existing bond funds, and that a proposed program for
homeowner and small business aid supplemental to federal aid would have to
be abandoned. Some other costs will be borrowed from the federal
government in a manner similar to that used by the State of Florida after
Hurricane Andrew; pursuant to Senate Bill 2383, repayment will have to be
addressed in 1995-96 or beyond.
The 1994-95 Fiscal Year represents the fourth consecutive year
the Governor and Legislature will be faced with a very difficult budget
environment to produce a balanced budget. Many program cuts and budgetary
adjustments have already been made in the last three years. The
Governor's budget proposal, as updated in May and June, 1994, recognized
that the accumulated deficit could not be repaid in one year, and proposed
a two-year solution. The budget proposal sets forth revenue and
expenditure forecasts and revenue and expenditure proposals which result
in operating surpluses for the budget for both 1994-95 and 1995-96, and
lead to the elimination of the accumulated budget deficit, estimated at
about $2.0 billion at June 30, 1994, by June 30, 1996.
The 1994-95 Budget Act, signed by the Governor on July 8, 1994,
projects revenues and transfers of $41.9 billion, about $2.1 billion
higher than revenues in 1993-94. This reflects the Administration's
forecast of an improving economy. Also included in this figure is a
projected receipt of about $360 million from the federal government to
reimburse the State's cost of incarcerating undocumented immigrants. The
State will not know how much the federal government will actually provide
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until the Federal FY 1995 Budget is completed. Completion of the Federal
Budget is expected by October 1994. The Legislature took no action on a
proposal in the January Governor's Budget to undertake an expansion of the
transfer to certain programs to counties, which would also have
transferred to counties 0.5% of the State's current sales tax.
The Budget Act projects Special Fund revenues of $12.1 billion, a
decrease of 2.4% from 1993-94 estimated revenues.
The 1994-95 Budget Act projects General Fund expenditures of
$40.9 billion, an increase of $1.6 billion over 1993-94. The Budget Act
also projects Special Fund expenditures of $13.7 billion, a 5.4% increase
over 1993-94 estimated expenditures. The principal features of the budget
Act were the following:
1. Receipt of additional federal aid in 1994-95 of about $400
million for costs of refugee assistance and medical care for undocumented
immigrants, thereby offsetting a similar General Fund cost. The State
will not know how much of these funds it will receive until the Federal FY
1995 Budget is passed.
2. Reductions of approximately $1.1 billion in health and
welfare costs.
3. A General Fund increase of approximately $38 million in
support for the University of California and $65 million for California
State University. It is anticipated that student fees for both the U.C.
and the C.S.U. will increase up to 10%.
4. Proposition 98 funding for K-14 schools is increased by $526
million from 1993-94 levels, representing an increase for enrollment
growth and inflation. Consistent with previous budget agreements,
Proposition 98 funding provides approximately $4,217 per student for K-12
schools, equal to the level in the past three years.
5. Legislation enacted with the Budget clarifies laws passed in
1992 and 1993 which require counties and other local agencies to transfer
funds to local school districts, thereby reducing State aid. Some
countries had implemented a method of making such transfers which provided
less money for schools if there were redevelopment agency projects. The
new legislation bans this method of transfer. If all counties had
implemented this method, General Fund aid to K-12 schools would have been
$300 million higher in each of the 1994-95 and 1995-96 Fiscal Years.
6. The 1994-95 Budget Act provides funding for anticipated
growth in the State's prison inmate population, including provisions for
implementing recent legislation (the so-called "Three Strikes" law) which
requires mandatory life prison terms for certain third-time felony
offenders.
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7. Additional miscellaneous cuts ($500 million) and fund
transfers ($255 million) totalling in the aggregate approximately $755
million.
The 1994-95 Budget Act contains no tax increases. Under
legislation enacted for the 1993-94 Budget, the renters' tax credit was
suspended for two years (1993 and 1994). A ballot proposition to
permanently restore the renters' tax credit after this year failed at the
June, 1994 election. The Legislature enacted a further one-year
suspension of the renter's tax credit, for the 1995, saving about $390
million in the 1995-96 Fiscal Year.
The 1994-95 Budget assumes that the State will use a cash flow
borrowing program in 1994-95 which combines one-year notes and warrants.
Issuance of warrants allows the State to defer repayment of approximately
$1.0 billion of its accumulated budget deficit into the 1995-96 Fiscal
Year.
The State's cash flow management plan for the 1994-95 fiscal year
included the issuance of $4.0 billion of revenue anticipation warrants on
July 26, 1994, to mature on April 25, 1996, as part of a two-year plan to
retire the accumulated State budget deficit.
Because preparation of cash flow estimates for ^ the 1995-96
Fiscal Year ^ is necessarily more imprecise than for the current fiscal
year and entails greater risks of variance from assumptions, and because
the Governor's two-year budget plan assumes receipt of a large amount of
federal aid in the 1995-96 Fiscal Year for immigration-related costs which
is uncertain, the Legislature enacted a backup budget adjustment mechanism
to mitigate possible deviations from projected revenues, expenditures or
internal borrowable resources which might reduce available cash resources
during the two-year plan, so as to assure repayment of the warrants.
Pursuant to Section 12467 of the California Government Code,
enacted by Chapter 135, Statutes of 1994 (the "Budget Adjustment Law"),
the State Controller was required, on November 15, 1994, in conjunction
with the Legislative Analyst's Office, to review the cash flow projections
for the General Fund on June 30, 1995 and compare them to the projections
for the 1994-95 Fiscal Year included in the Official Statement dated July
20, 1994 for the 1994 Revenue Anticipation Warrants, Series C and D. If
the State Controller's report identifies a decrease in the unused
borrowable resources on June 30, 1995 of more than $430,000,000, then the
"1995 cash shortfall" shall be the amount of the difference that exceeds
$430,000,000. On or before February 15, 1995, legislation must be enacted
providing for sufficient General Fund expenditure reductions, revenue
increases, or both, to offset said 1995 cash shortfall. If such
legislation is not enacted, within five days thereafter the Director of
Finance must reduce all General Fund appropriations for the 1994-95 Fiscal
Year, except certain appropriations required by the State Constitution and
federal law (the "Required Appropriations"), by the percentage equal to
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the ratio of said 1995 cash shortfall to total remaining General Fund
appropriations for the 1994-95 Fiscal Year, excluding the Required
Appropriations.
The Director of Finance is required to included updated cash-flow
statements for the 1994-95 and 1995-96 Fiscal Years in the May revision to
the 1995-96 Fiscal Year budget proposal. By June 1, 1995, the State
Controller must concur with these updated statements or provided a revised
estimate of the cash condition of the General Fund for the 1994-95 and the
1995-96 Fiscal Years. For the 1995-96 Fiscal Year, Chapter 135 prohibits
any external borrowing as of June 30, 1996, thereby requiring the State to
rely solely on internal borrowable resources, expenditure reductions or
revenue increases to eliminate any projected cash flow shortfall.
Commencing on October 15, 1995, the State Controller will, in
conjunction with the Legislative Analyst's Office, review the estimated
cash condition of the General Fund for the 1995-96 Fiscal Year. The "1996
cash shortfall" shall be the amount necessary to bring the balance of
unused borrowable resources on June 30, 1996 to zero. On or before
December 1, 1995, legislation must be enacted providing for sufficient
General Fund expenditure reductions, revenue increases, or both, to offset
any such 1996 cash shortfall identified by the State Controller. If such
legislation is not enacted, within five days thereafter the Director of
Finance must reduce all General Fund appropriations for the 1995-96 Fiscal
Year, except the Required Appropriations, by the percentage equal to the
ratio of said 1996 cash shortfall to total remaining General Fund
appropriations for the 1995-96 Fiscal Year, excluding the Required
Appropriations.
Constitutional, Legislative and Other Factors. Certain
California constitutional amendments, legislative measures, executive
orders, administrative regulations and voter initiatives could result in
the adverse effects described below. The following information constitutes
only a brief summary, does not purport to be a complete description, and
is based on information drawn from official statements and prospectuses
relating to securities offerings of the State of California and various
local agencies in California, available as of the date of this Statement
of Additional Information. While the Sponsors have not independently
verified such information, they have no reason to believe that such
information is not correct in all material respects.
Certain of the California Municipal Obligations in the Funds may
be obligations of issuers which rely in whole or in part on California
State revenues for payment of these obligations. Property tax revenues and
a portion of the State's general fund surplus are distributed to counties,
cities and their various taxing entities and the State assumes certain
obligations theretofore paid out of local funds. Whether and to what
extent a portion of the State's general fund will be distributed in the
future to counties, cities and their various entities, is unclear.
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In 1988, California enacted legislation providing for a
water's-edge combined reporting method if an election fee was paid and
other conditions met. On October 6, 1993, California Governor Pete Wilson
signed Senate Bill 671 (Alquist) which modifies the unitary tax law by
deleting the requirements that a taxpayer electing to determine its income
on a water's-edge basis pay a fee and file a domestic disclosure
spreadsheet and instead requiring an annual information return.
Significantly, the Franchise Tax Board can no longer disregard a
taxpayer's election. The Franchise Tax Board is reported to have
estimated state revenue losses from the Legislation as growing $27 million
in 1993-94 to $616 million 1992-2000, but others, including Assembly
Speaker Willie Brown, disagree with that estimate and assert that more
revenue will be generated for California, rather than less, because of an
anticipated increase in economic activity and additional revenue generated
by the incentives in the Legislation.
Certain of the California Municipal Obligations may be
obligations of issuers who rely in whole or in part on ad valorem real
property taxes as a source of revenue. On June 6, 1978, California voters
approved an amendment to the California Constitution known as Proposition
13, which added Article XIIIA to the California Constitution. The effect
of Article XIIIA is to limit ad valorem taxes on real property and to
restrict the ability of taxing entities to increase real property tax
revenues. On November 7, 1978, California voters approved Proposition 8,
and on June 3, 1986 California voters approved Proposition 46, both of
which amended Article XIIIA.
Section 1 of Article XIIIA limits the maximum ad valorem tax on
real property to 1% of full cash value (as defined in Section 2), to be
collected by the counties and apportioned according to law; provided that
the 1% limitation does not apply to ad valorem taxes or special
assessments to pay the interest and redemption charges on (i) any
indebtedness approved by the voters prior to July 1, 1978, or (ii) any
bonded indebtedness for the acquisition or improvement of real property
approved on or after July 1, 1978, by two-thirds of the votes cast by the
voters voting on the proposition. Section 2 of Article XIIIA defines "full
cash value" to mean "the County Assessor's valuation of real property as
shown on the 1975/76 tax bill under 'full cash value' or, thereafter, the
appraised value of real property when purchased, newly constructed, or a
change in ownership has occurred after the 1975 assessment." The full
cash value may be adjusted annually to reflect inflation at a rate not to
exceed 2% per year, or reduction in the consumer price index or com
parable local data, or reduced in the event of declining property value
caused by damage, destruction or other factors. The California State Board
of Equalization has adopted regulations, binding on county assessors,
interpreting the meaning of "change in ownership" and "new construction"
for purposes of determining full cash value of property under Article
XIIIA.
Legislation enacted by the California Legislature to implement
Article XIIIA (Statutes of 1978, Chapter 292, as amended) provides that
notwithstanding any other law, local agencies may not levy any ad valorem
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property tax except to pay debt service on indebtedness approved by the
voters prior to July 1, 1978, and that each county will levy the maximum
tax permitted by Article XIIIA of $4.00 per $100 assessed valuation (based
on the former practice of using 25%, instead of 100%, of full cash value
as the assessed value for tax purposes). The legislation further provided
that, for the 1978/79 fiscal year only, the tax levied by each county was
to be apportioned among all taxing agencies within the county in
proportion to their average share of taxes levied in certain previous
years. The apportionment of property taxes for fiscal years after 1978/79
has been revised pursuant to Statutes of 1979, Chapter 282 which provides
relief funds from State moneys beginning in fiscal year 1979/80 and is
designed to provide a permanent system for sharing State taxes and budget
funds with local agencies. Under Chapter 282, cities and counties receive
more of the remaining property tax revenues collected under Proposition 13
instead of direct State aid. School districts receive a correspondingly
reduced amount of property taxes, but receive compensation directly from
the State and are given additional relief. Chapter 282 does not affect
the derivation of the base levy ($4.00 per $100 assessed valuation) and
the bonded debt tax rate.
On November 6, 1979, an initiative known as "Proposition 4" or
the "Gann Initiative" was approved by the California voters, which added
Article XIIIB to the California Constitution. Under Article XIIIB, State
and local governmental entities have an annual "appropriations limit" and
are not allowed to spend certain moneys called "appropriations subject to
limitation" in an amount higher than the "appropriations limit." Article
XIIIB does not affect the appropriation of moneys which are excluded from
the definition of "appropriations subject to limitation," including debt
service on indebtedness existing or authorized as of January 1, 1979, or
bonded indebtedness subsequently approved by the voters. In general
terms, the "appropriations limit" is required to be based on certain
1978/79 expenditures, and is to be adjusted annually to reflect changes
in consumer prices, population, and certain services provided by these
entities. Article XIIIB also provides that if these entities' revenues in
any year exceed the amounts permitted to be spent, the excess is to be
returned by revising tax rates or fee schedules over the subsequent two
years.
At the November 8, 1988 general election, California voters
approved an initiative known as Proposition 98. This initiative amends
Article XIIIB to require that (i) the California Legislature establish a
prudent state reserve fund in an amount as it shall deem reasonable and
necessary and (ii) revenues in excess of amounts permitted to be spent and
which would otherwise be returned pursuant to Article XIIIB by revision of
tax rates or fee schedules, be transferred and allocated (up to a maximum
of 4%) to the State School Fund and be expended solely for purposes of
instructional improvement and accountability. No such transfer or
allocation of funds will be required if certain designated state officials
determine that annual student expenditures and class size meet certain
criteria as set forth in Proposition 98. Any funds allocated to the State
School Fund shall cause the appropriation limits established in Article
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XIIIB to be annually increased for any such allocation made in the prior
year.
Proposition 98 also amends Article XVI to require that the State
of California provide a minimum level of funding for public schools and
community colleges. Commencing with the 1988-89 fiscal year, state monies
to support school districts and community college districts shall equal or
exceed the lesser of (i) an amount equaling the percentage of state
general revenue bonds for school and community college districts in fiscal
year 1986-87, or (ii) an amount equal to the prior year's state general
fund proceeds of taxes appropriated under Article XIIIB plus allocated
proceeds of local taxes, after adjustment under Article XIIIB. The
initiative permits the enactment of legislation, by a two-thirds vote, to
suspend the minimum funding requirement for one year.
On June 30, 1989, the California Legislature enacted Senate
Constitutional Amendment 1, a proposed modification of the California
Constitution to alter the spending limit and the education funding
provisions of Proposition 98. Senate Constitutional Amendment 1, on the
June 5, 1990 ballot as Proposition 111, was approved by the voters and
took effect on July 1, 1990. Among a number of important provisions,
Proposition 111 recalculates spending limits for the State and for local
governments, allows greater annual increases in the limits, allows the
averaging of two years' tax revenues before requiring action regarding
excess tax revenues, reduces the amount of the funding guarantee in
recession years for school districts and community college districts (but
with a floor of 40.9% of State general fund tax revenues), removes the
provision of Proposition 98 which included excess monies transferred to
school districts and community college districts in the base calculation
for the next year, limits the amount of State tax revenue over the limit
which would be transferred to school districts and community college
districts, and exempts increased gasoline taxes and truck weight fees from
the State appropriations limit. Additionally, Proposition 111 exempts from
the State appropriations limit funding for capital outlays.
Article XIIIB, like Article XIIIA, may require further
interpretation by both the Legislature and the courts to determine its
applicability to specific situations involving the State and local taxing
authorities. Depending upon the interpretation, Article XIIIB may limit
significantly a governmental entity's ability to budget sufficient funds
to meet debt service on bonds and other obligations.
On November 4, 1986, California voters approved an initiative
statute known as Proposition 62. This initiative (i) requires that any
tax for general governmental purposes imposed by local governments be
approved by resolution or ordinance adopted by a two-thirds vote of the
governmental entity's legislative body and by a majority vote of the
electorate of the governmental entity, (ii) requires that any special tax
(defined as taxes levied for other than general governmental purposes)
imposed by a local governmental entity be approved by a two-thirds vote of
the voters within that jurisdiction, (iii) restricts the use of revenues
from a special tax to the purposes or for the service for which the
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special tax was imposed, (iv) prohibits the imposition of ad valorem taxes
on real property by local governmental entities except as permitted by
Article XIIIA, (v) prohibits the imposition of transaction taxes and sales
taxes on the sale of real property by local governments, (vi) requires
that any tax imposed by a local government on or after August 1, 1985 be
ratified by a majority vote of the electorate within two years of the
adoption of the initiative or be terminated by November 15, 1988, (vii)
requires that, in the event a local government fails to comply with the
provisions of this measure, a reduction in the amount of property tax
revenue allocated to such local government occurs in an amount equal to
the revenues received by such entity attributable to the tax levied in
violation of the initiative, and (viii) permits these provisions to be
amended exclusively by the voters of the State of California.
In September 1988, the California Court of Appeal in City of
Westminster v. County of Orange, 204 Cal.App. 3d 623, 215 Cal. Rptr. 511
(Cal.Ct.App. 1988), held that Proposition 62 is unconstitutional to the
extent that it requires a general tax by a general law city, enacted on or
after August 1, 1985, and prior to the effective date of Proposition 62,
to be subject to approval by a majority of voters. The Court held that
the California Constitution prohibits the imposition of a requirement
that local tax measures be submitted to the electorate by either
referendum or initiative. It is not possible to predict the impact of
this decision on charter cities, on special taxes or on new taxes imposed
after the effective date of Proposition 62.
On November 8, 1988, California voters approved Proposition 87.
Proposition 87 amended Article XVI, Section 16, of the California
Constitution by authorizing the California Legislature to prohibit
redevelopment agencies from receiving any of the property tax revenue
raised by increased property tax rates levied to repay bonded indebtedness
of local governments which is approved by voters on or after January 1,
1989. It is not possible to predict whether the California Legislature
will enact such a prohibition nor is it possible to predict the impact of
Proposition 87 on redevelopment agencies and their ability to make
payments on outstanding debt obligations.
Certain California Municipal Obligations in the Funds may be
obligations which are payable solely from the revenues of health care
institutions. Certain provisions under California law may adversely
affect these revenues and, consequently, payment on those California
Municipal Obligations.
The Federally sponsored Medicaid program for health care services
to eligible welfare beneficiaries in California is known as the Medi-Cal
program. Historically, the Medi-Cal program has provided for a cost-based
system of reimbursement for inpatient care furnished to Medi-Cal
beneficiaries by any hospital wanting to participate in the Medi-Cal
program, provided such hospital met applicable requirements for
participation. California law now provides that the State of California
shall selectively contract with hospitals to provide acute inpatient
services to Medi-Cal patients. Medi-Cal contracts currently apply only to
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acute inpatient services. Generally, such selective contracting is made on
a flat per diem payment basis for all services to Medi-Cal beneficiaries,
and generally such payment has not increased in relation to inflation,
costs or other factors. Other reductions or limitations may be imposed on
payment for services rendered to Medi-Cal beneficiaries in the future.
Under this approach, in most geographical areas of California,
only those hospitals which enter into a Medi-Cal contract with the State
of California will be paid for non-emergency acute inpatient services
rendered to Medi-Cal beneficiaries. The State may also terminate these
contracts without notice under certain circumstances and is obligated to
make contractual payments only to the extent the California legislature
appropriates adequate funding therefor.
In February 1987, the Governor of the State of California
announced that payments to Medi-Cal providers for certain services (not
including hospital acute inpatient services) would be decreased by 10%
through June 1987. However, a federal district court issued a
preliminary injunction preventing application of any cuts until a trial on
the merits can be held. If the injunction is deemed to have been granted
improperly, the State of California would be entitled to recapture the
payment differential for the intended reduction period. It is not
possible to predict at this time whether any decreases will ultimately be
implemented.
California enacted legislation in 1982 that authorizes private
health plans and insurers, to contract directly with hospitals for
services to beneficiaries on negotiated terms. Some insurers have
introduced plans known as "preferred provider organizations" ("PPOs"),
which offer financial incentives for subscribers who use only the
hospitals which contract with the plan. Under an exclusive provider plan,
which includes most health maintenance organizations ("HMOs"), private
payors limit coverage to those services provided by selected hospitals.
Discounts offered to HMOs and PPOs may result in payment to the
contracting hospital of less than actual cost and the volume of patients
directed to a hospital under an HMO or PPO contract may vary significantly
from projections. Often, HMO or PPO contracts are enforceable for a
stated term, regardless of provider losses or of bankruptcy of the
respective HMO or PPO. It is expected that failure to execute and
maintain such PPO and HMO contracts would reduce a hospital's patient base
or gross revenues. Conversely, participation may maintain or increase the
patient base, but may result in reduced payment and lower net income to
the contracting hospitals.
Such California Municipal Obligations may also be insured by the
State of California pursuant to an insurance program implemented by the
Office of Statewide Health Planning and Development for health facility
construction loans. If a default occurs on insured California Municipal
Obligations, the State Treasurer will issue debentures payable out of a
reserve fund established under the insurance program or will pay principal
and interest on an unaccelerated basis from unappropriated State funds.
At the request of the Office of Statewide Health Planning and Development,
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Arthur D. Little, Inc. prepared a study in December 1983 to evaluate the
adequacy of the reserve fund established under the insurance program and
based on certain formulations and assumptions found the reserve fund
substantially underfunded. In September of 1986, Arthur D. Little, Inc.
prepared an update of the study and concluded that an additional 10%
reserve should be established for "multi-level" facilities. For the
balance of the reserve fund, the update recommended maintaining the
current reserve calculation method. In March 1990, Arthur D. Little, Inc.
prepared a further review of the study and recommended that separate
reserves continue to be established for "multi-level" facilities at a
reserve level consistent with those that would be required by an insurance
company.
Certain California Municipal Obligations in the Funds may be
obligations which are secured in whole or in part by a mortgage or deed of
trust on real property. California has five principal statutory
provisions which limit the remedies of a creditor secured by a mortgage or
deed of trust. Two limit the creditor's right to obtain a deficiency
judgment, one limitation being based on the method of foreclosure and the
other on the type of debt secured. Under the former, a deficiency judgment
is barred when the foreclosure is accomplished by means of a non-judicial
trustee's sale. Under the latter, a deficiency judgment is barred when
the foreclosed mortgage or deed of trust secures certain purchase money
obligations. Another California statute, commonly known as the "one form
of action" rule, requires creditors secured by real property to exhaust
their real property security by foreclosure before bringing a personal
action against the debtor. The fourth statutory provision limits any
deficiency judgment obtained by a creditor secured by real property
following a judicial sale of such property to the excess of the
outstanding debt over the fair value of the property at the time of the
sale, thus preventing the creditor from obtaining a large deficiency
judgment against the debtor as a result of low bids at a judicial sale.
The fifth statutory provision gives the debtor the right to redeem the
real property from any judicial foreclosure sale as to which a deficiency
judgment may be ordered against the debtor.
Upon the default of a mortgage or deed of trust with respect to
California real property, the creditor's nonjudicial foreclosure rights
under the power of sale contained in the mortgage or deed of trust are
subject to the constraints imposed by California law upon transfers of
title to real property by private power of sale. During the three-month
period beginning with the filing of a formal notice of default, the debtor
is entitled to reinstate the mortgage by making any overdue payments.
Under standard loan servicing procedures, the filing of the formal notice
of default does not occur unless at least three full monthly payments have
become due and remain unpaid. The power of sale is exercised by posting
and publishing a notice of sale for at least 20 days after expiration of
the three-month reinstatement period. Therefore, the effective minimum
period for foreclosing on a mortgage could be in excess of seven months
after the initial default. Such time delays in collections could disrupt
the flow of revenues available to an issuer for the payment of debt
service on the outstanding obligations if such defaults occur with respect
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to a substantial number of mortgages or deeds of trust securing an
issuer's obligations.
In addition, a court could find that there is sufficient
involvement of the issuer in the nonjudicial sale of property securing a
mortgage for such private sale to constitute "state action," and could
hold that the private-right-of-sale proceedings violate the due process
requirements of the Federal or State Constitutions, consequently
preventing an issuer from using the nonjudicial foreclosure remedy
described above.
Certain California Municipal Obligations in the Funds may be
obligations which finance the acquisition of single family home mortgages
for low and moderate income mortgagors. These obligations may be payable
solely from revenues derived from the home mortgages, and are subject to
the California statutory limitations described above applicable to
obligations secured by real property. Under California anti-deficiency
legislation, there is no personal recourse against a mortgagor of a single
family residence purchased with the loan secured by the mortgage,
regardless of whether the creditor chooses judicial or nonjudicial
foreclosure.
Under California law, mortgage loans secured by single family
owner-occupied dwellings may be prepaid at any time. Prepayment charges on
such mortgage loans may be imposed only with respect to voluntary
prepayments made during the first five years during the term of the
mortgage loan, and cannot in any event exceed six months' advance interest
on the amount prepaid in excess of 20% of the original principal amount of
the mortgage loan. This limitation could affect the flow of revenues
available to an issuer for debt service on the outstanding debt
obligations which financed such home mortgages.
Additional Considerations. With respect to Municipal Obligations
issued by the State of California and its political subdivisions, the
Funds cannot predict what legislation, if any, may be proposed in the
California State Legislature as regards the California State personal
income tax status of interest on such obligations, or which proposals, if
any, might be enacted. Such proposals, if enacted, might materially
adversely affect the availability of California Municipal Obligations for
investment by the Funds and the value of a Fund's portfolio. In such an
event, the Trustees would reevaluate the Fund's investment objective and
policies and consider changes in its structure or possible dissolution.
On December 6, 1994, Orange County, California and its Investment
Pool (the "Pool") filed for bankruptcy under Chapter 9 of the United
States Bankruptcy Code. Upon filing, all assets of the Pool were frozen.
Approximately 187 California Public entities, substantially all of which
are public agencies within the County, are investors in the Pool. Many of
the agencies have various bonds, notes or other forms of indebtedness
outstanding, and in some instances, have invested the proceeds of such
borrowings in the Pool. Additionally, such agencies have additional funds
invested in the Pool. Various representatives of the County have
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indicated that the Pool expects to lose a substantial amount of its
original principal invested. Such losses could result in delays or
failures of the County as well as investors in the Pool to make scheduled
debt service payments. The Fund is unable to predict when funds may be
released from the Pool to investors, the amount of such funds, if any, and
the financial impact of the bankruptcy on the value of securities of the
County, the investors in the Pool, or the California municipal securities
market generally.
Special Factors Affecting the New York Municipal Fund and the New York
Tax-Free Fund
Some of the significant financial considerations relating to the
Fund's investment in New York Municipal Obligations are summarized below.
This summary information is not intended to be a complete description and
is principally derived from official statements relating to issues of New
York Municipal Obligations that were available prior to the date of this
Statement of Additional Information. The accuracy and completeness of the
information contained in those official statements have not been
independently verified.
General. Special risks inherent in New York Municipal
Obligations result from the financial condition of New York State, certain
of its public bodies and municipalities, and New York City. Beginning in
early 1975, New York State, 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 Funds 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 Fund's
portfolio and the interest income to the Fund could be adversely affected.
Moreover, the significant slowdown in the New York and regional economy in
the early 1990s added substantial uncertainty to estimates of the State's
tax revenues, which, in part, caused the 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 1993 and 994 fiscal years, however, were
characterized by national and regional economies that performed better
than projected. After reflecting a 1993 year-end deposit to the refund
reserve account of $671 million, reported 1993 General Fund receipts were
$45 million higher than originally projected in April 1992. The State
completed the 1994 fiscal year with an operating surplus in the General
Fund of $914 million. In September 1994, however, New York State
projected a General Fund operating deficit of $690 million for the 1995
fiscal year.
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State Economy. New York is the third most populous state in the
nation and has a relatively high level of personal wealth. The State's
economy is diverse with a comparatively large share of the nation's
finance, insurance, transportation, communications and services
employment, and a ^ very small share of the nation's farming and mining
activity. The State has a declining proportion of its workforce engaged
in manufacturing, and an increasing proportion engaged in service
industries. New York City (the "City"), which is the most populous city
in the State and nation and is the center of the nation's largest
metropolitan area, accounts for a large portion of the State's population
and personal income.
The State has historically been one of the wealthiest states in
the nation. For decades, however, the State has grown more slowly than
the nation as a whole, gradually eroding its relative economic position.
^ Overall economic activity declined less than that of the nation as a
whole during the 1982-83 recession. The 1990-91 recession, however, was
more severe in the State, owing to a significant retrenchment in the
financial services industry, cutbacks in defense spending, and an
overbuilt real estate market.^
The unemployment rate in the State dipped below the national rate
in the second half of 1981 and remained lower until 1991. It stood at
7.7% in 1993. The total employment growth rate in the State has been
below the national average since 1984. The State's economic forecast
calls for employment to increase in 1994 and 1995. Employment growth is
expected to be moderate in 1995 when the pace of national economic growth
is projected to slacken and entire industries adjust to changing markets
and the State's economy absorbs the full impact of these developments.
State per capita personal income remains above the national average.
State per capita income for 1993 was $24,623, which is 18.3% above the
1993 national average of $20,817. Between 1970 and 1980, the percentage by
which the State's per capita income exceeded that of the national average
fell. However, total personal income in the State rose slightly faster
than the national average in 1986 through 1989. Personal income is
estimated to increase by 5.3% in 1994, and at a more moderate rate in
1995.
State Budget. The State Constitution requires the Governor to
submit to the Legislature a balanced Executive Budget which contains a
complete plan of expenditures for the ensuing fiscal year and all moneys
and revenues estimated to be available therefor, accompanied by bills
containing all proposed appropriations or reappropriations and any new or
modified revenue measures to be enacted in connection with the Executive
Budget. The entire plan constitutes the proposed State financial plan for
that fiscal year. The Governor submits to the Legislature, on at least a
quarterly basis, reports of actual receipts, revenues, disbursements,
expenditures, tax refunds and reimbursements, and repayment of advances in
form suitable for comparison with the State financial plan, together with
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explanations of deviations from the State financial plan. At such time,
the Governor is required to submit any amendments to the State financial
plan necessitated by such deviations.
The Governor released the recommended Executive Budget for the
1994-95 fiscal year on January 18, 1994 and amended it on February 17,
1994 (the "Recommended 1994-95 State Financial Plan"). The Recommended
1994-95 State Financial Plan projected a balanced General Fund, with
receipts and transfers from other funds projected at $33.422 billion,
including $339 million carried over from the surplus anticipated for the
State's 1993-94 fiscal year. Disbursements and transfers to other funds
are projected at $33.399 billion ^. In addition, the financial plan ^
included a $23 million repayment to the State's Tax Stabilization Reserve
Fund. The Division of the Budget ^ projected that at the close of the
State's 1994-95 fiscal year, the balance in the Tax Stabilization Reserve
Fund ^ would be $157 million.
The State's budget for the 1994-95 fiscal year was enacted by the
Legislature on June 7, 1994, more than two months after the start of the
fiscal year. Prior to adoption of the budget, the Legislature enacted
appropriations for disbursements considered to be necessary for State
operations and other purposes, including all necessary appropriations for
debt service. The State financial plan for the 1994-95 fiscal year was
formulated on June 16, 1994 and is based upon the State's budget as
enacted by the Legislature and signed into law by the Governor (the
"1994-95 State Financial Plan"). This delay in the enactment of the
State's 1994-95 fiscal year budget may reduce the effectiveness of several
of the actions proposed.
The 1994-95 State Financial Plan is based on a number of
assumptions and projections. Because it is not possible to predict
accurately the occurrence of all factors that may affect the 1994-95 State
Financial Plan, actual results may differ and have differed materially in
recent years, from projections made at the outset of a fiscal year. There
can be no assurance that the State ^ economy will not experience
worse-than-predicted results in the 1994-95 fiscal year, with
corresponding material and adverse effects on the State's projections of
receipts and disbursements ^.
Recent Financial Results. The General Fund is the principal
operating fund of the State. It receives all State income that is not
required by law to be deposited in another fund which for the State's
1994-95 fiscal year, is expected to comprise approximately 52% of total
projected governmental fund receipts.
The General Fund is projected to be balanced on a cash basis ^
for the 1994-95 fiscal year. Total receipts ^ are projected to be $34.321
billion, an increase of $2.092 billion over total receipts in the prior
fiscal year. Total General Fund disbursements ^ are projected to be
$34.248 billion, an increase of $2.351 billion over the total amount
disbursed and transferred in the prior fiscal year.
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The ^ State issued its first update to the GAAP-basis Financial
Plan for the State's 1994-95 fiscal year on September 1, 1994. In the
September GAAP-basis update, the Division of the Budget projected a
General Fund operating deficit of $690 million. The prior projection of
the 1994-95 GAAP-basis State Financial Plan, issued in February 1994 as
part of the 1994-95 Executive Budget (the "February 1994 Projection"),
projected an operating surplus in the General Fund of $7 million.
In the February 1994 projection, General Fund operating results
over the 1993-94 and 1994-95 fiscal year projection period were
anticipated to reduce the accumulated deficit by $256 million. The impact
of the reported results for the State's 1993-94 fiscal year and the
revised projection of the accumulated deficit is substantially the same.
Combining the $914 million operating surplus for the State's 1993-94
fiscal year with the projected $690 million operating deficit for the
1994-95 fiscal year results in an anticipated $224 million reduction in
the accumulated deficit.
On July 29, 1994, the Office of the State Comptroller issued the
General Purpose Financial Statements of the State of New York for the
1993-94 fiscal year. The Statements were prepared on GAAP-basis and were
independently audited in accordance with generally accepted auditing
standards. The State's Combined Balance Sheet as of March 31, 1994 showed
an accumulated surplus in its combined governmental funds of ^ $370
million ^, reflecting liabilities of ^ $13.219 billion and assets of ^
$13.589 billion. This accumulated Governmental Funds surplus includes a
$1.637 billion accumulated deficit in the General Fund, as well as
accumulated surpluses in the Special Revenue and Debt Service fund types
and a $622 million accumulated deficit in the Capital Projects Fund type.
The State completed its 1993-94 fiscal year with a combined
Governmental Funds operating surplus of $1.051 billion, which included an
operating surplus in the General Fund of $914 million, in the Special
Revenue Funds of $149 million and in the Debt Service Funds of $23
million, and an operating deficit in the Capital Projects Funds of $35
million.
The State reported a General Fund operating surplus of $914
million for the 1993-94 fiscal year, as compared to an operating surplus
of $2.065 billion for the prior fiscal year. The 1993-94 fiscal year
surplus reflects several major factors, including the cash basis surplus
recorded in 1993-94, the use of $671 million of the 1992-93 surplus to
fund operating expenses in Local Government Assistance Corporation, and
the accumulation of a $265 million balance in the Contingency Reserve
Fund. Revenues increased $543 million (1.7%) over prior fiscal year
revenues with the largest increase occurring in personal income taxes.
Expenditures increased $1.659 billion (5.6%) over the prior fiscal year,
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with the largest increase occurring in State aid for social services
programs.
The Special Revenue Funds account for State receipts from
specific sources that are legally restricted in use to specified purposes
and include all moneys received from the Federal government. Total
receipts in Special Revenue Funds are projected at $24.598 billion in the
State's 1994-95 fiscal year. Federal grants are projected to account for
75% of the total projected receipts in Special Revenue Funds in the
State's 1994-95 fiscal year.
Disbursements from Special Revenue Funds are projected to be
$24.982 billion for the State's 1994-95 fiscal year. Grants to local
governments disbursed from this fund type are projected to account for 75%
of disbursements from this fund for the 1994-95 fiscal year.
The Capital Projects Funds are used to finance the acquisition
and construction of major capital facilities and to aid local government
units and Agencies in financing capital constructions. Federal grants for
capital projects, largely highway-related, are projected to account for
33% of the $3.233 billion in total projected receipts in Capital Projects
Funds in the State's 1994-95 fiscal year. Total disbursements from
Capital Projects Funds, approximately 54% is for various transportation
purposes, including highways and mass transportation facilities; 4% is for
programs of the Department of Correctional Services and other public
protection activities; 16% is for health and mental hygiene facilities;
13% is for environmental and recreational programs; 5% is for educational
programs; and 5% is for housing and economic development programs. The
balance is for the maintenance of State office facilities and various
other capital programs.
The Debt Service Funds serve to fulfill State debt service on
long-term general obligation State debt and other State lease/purchase and
contractual obligation financing commitments. Total receipts in Debt
Service Funds are projected to reach $2.318 billion in the State's 1994-95
fiscal year. Total disbursements from Debt Service Funds for debt
service, lease/purchase and contractual obligation financing commitments
are projected to be $2.246 billion for the 1994-95 fiscal year.
Debt Limits and Outstanding Debt. There are a number of methods
by which the State of New York may incur debt. Under the State
Constitution, the State may not, with limited exceptions for emergencies,
undertake long-term general obligation borrowing (i.e., borrowing for more
than one year) unless the borrowing is authorized in a specific amount for
a single work or purpose by the Legislature and approved by the voters.
There is no limitation on the amount of long-term general obligation debt
that may be so authorized and subsequently incurred by the State. The
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total amount of long-term State general obligation debt authorized but not
issued as of December 31, 1993 was approximately $2.273 billion.
The State may undertake short-term borrowings without voter
approval (i) in anticipation of the receipt of taxes and revenues, by
issuing tax and revenue anticipation notes, and (ii) in anticipation of
the receipt of proceeds from the sale of duly authorized but unissued
general obligation bonds, by issuing bond anticipation notes. The State
may also, pursuant to specific constitutional authorization, directly
guarantee certain obligations of the State of New York's authorities and
public benefit corporations ("Authorities"). Payments of debt service on
New York State general obligation and New York State-guaranteed bonds and
notes are legally enforceable obligations of the State of New York.
The State of New York also employs two other types of long-term
financing mechanisms which are State-supported but are not general
obligations of the State: moral obligation and lease-purchase or
contractual-obligation financing.
In 1990, as part of a State fiscal reform program, legislation
was enacted creating the New York Local Government Assistance Corporation
("LGAC"), a public benefit corporation empowered to issue long-term
obligations to fund certain payments to local governments traditionally
funded through New York State's annual seasonal borrowing. The
legislation empowered LGAC to issue its bonds and notes in an amount not
in excess of $4.7 billion (exclusive of certain refunding bonds) plus
certain other amounts. Over a period of years, the issuance of those
long-term obligations, which will be amortized over no more than 30 years,
is expected to result in eliminating the need for continuing short-term
seasonal borrowing for those purposes. The legislation dedicated revenues
equal to one-quarter of the four cent State sales and use tax revenues to
pay debt service on these bonds. The legislation also imposed a cap on the
annual seasonal borrowing of the State at $4.7 billion, less net proceeds
of bonds issued by LGAC and bonds issued to provide for capitalized
interest, except in cases where the Governor and the legislative leaders
have certified both the need for additional borrowing and provided a
schedule for reducing it to the cap. If borrowing above the cap is thus
permitted in any fiscal year, it is required by law to be reduced to the
cap by the fourth fiscal year after the limit was first exceeded. As of
June 1994, LGAC had issued its bonds to provide net proceeds of $3.856
billion and has been authorized to issue its bonds to provide net proceeds
of up to an additional $315 million during the State's 1994-95 fiscal
year.
In April 1993, legislation was also enacted providing for
significant changes in the long-term financing practices of the State and
the Authorities.
The Legislature passed a proposed constitutional amendment that
would permit the State, within a formula-based cap, to issue revenue
bonds, which would be debt of the State secured solely by a pledge of
certain State tax receipts (including those allocated to State funds
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dedicated for transportation purposes), and not by the full faith and
credit of the State. In addition, the proposed amendment would require
that State debt be incurred only for capital projects included in a
multi-year capital financing plan and would prohibit, after its effective
date, lease-purchase and contractual-obligation financing mechanisms for
State facilities. Public hearings were held on the proposed
constitutional amendment during 1993. Following these hearings, in
February 1994, the Governor and the State Comptroller recommended a
revised constitutional amendment which would further tighten the ban on
lease-purchase and contractual-obligation financing, incorporate existing
lease-purchase and contractual-obligation debt under the proposed revenue
bond cap while simultaneously reducing the size of the cap. After
considering these recommendations, the Legislature passed a revised
constitutional amendment which tightens the ban, and provides for a
phase-in to a lower cap. Before the approved constitutional amendment or
any revised amendment enacted in 1994 can be presented to the voters for
their consideration, it must be passed by a separately elected
legislature. The amendment must therefore be passed by the newly elected
Legislature in 1995 prior to presentation to the voters at the earliest in
November 1995. The amendment could not become effective before January 1,
1996.
On January 13, 1992, Standard & Poor's ^ reduced its ratings on
the State's general obligation bonds from A to A- and, in addition,
reduced its ratings on the State's moral obligation, lease purchase,
guaranteed and contractual obligation debt. Standard & Poor's also
continued its negative rating outlook assessment on State general
obligation debt. On April 26, 1993, Standard & Poor's revised the rating
outlook assessment to stable. On February 14, 1994, Standard & Poor's
raised its outlook to positive and, on February 28, 1994, confirmed its A-
rating. On January 6, 1992, Moody's ^ reduced its ratings on outstanding
limited-liability State lease purchase and contractual obligations from A
to Baa1. On February 28, 1994, Moody's reconfirmed its A rating on the
State's general obligation long-term indebtedness.
The State anticipates that its capital programs will be financed,
in part, by State and public authorities borrowings in 1994-95. The State
expects to issue $374 million in general obligation bonds (including $140
million for purposes of redeeming outstanding bond anticipation notes) and
$140 million in general obligation commercial paper. The Legislature has
also authorized the issuance of up to $69 million in certificates of
participation during the State's 1994-95 fiscal year for equipment
purchases. The projection of the State regarding its borrowings for the
1994-95 fiscal year may change if circumstances require.
Principal and interest payments on general obligation bonds and
interest payments on bond anticipation notes and on tax and revenue
anticipation notes were $782.5 million for the 1993-94 fiscal year, and
are estimated to be $786.3 million for the 1994-95 fiscal year. These
figures do not include interest payable on State General Obligation
Refunding Bonds issued in July 1992 ^("Refunding Bonds") to the extent
that such interest was paid from an escrow fund established with the
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proceeds of such Refunding Bonds. Principal and interest payments on
fixed rate and variable rate bonds issued by LGAC were $239.4 million for
the 1993-94 fiscal year, and are estimated to be $289.9 million for
1994-95. State lease-purchase rental and contractual obligation payments
for 1993-94, including State installment payments relating to certificates
of participation, were $1.258 billion and are estimated to be $1.495
billion in 1994-95.
^
Litigation. Certain litigation pending against New York State or
its officers or employees could have a substantial or long-term adverse
effect on New York State finances. Among the more significant of these
cases are those that involve (1) the validity of agreements and treaties
by which various Indian tribes transferred title to New York State of
certain land in central and upstate New York; (2) certain aspects of New
York State's Medicaid policies, including its rates, regulations and
procedures; (3) contamination in the Love Canal area of Niagara Falls;
(4) action against New York State and New York City officials alleging
inadequate shelter allowances to maintain proper housing; (5) challenges
to the practice of reimbursing certain Office of Mental Health patient
care expenses from the client's Social Security benefits; (6) alleged
responsibility of New York State officials to assist in remedying racial
segregation in the City of Yonkers; (7) challenge to the methods by which
New York State reimburses localities for the administrative costs of food
stamp programs; (8) action in which the State is a third party defendant,
for injunctive or other appropriate relief, concerning liability for the
maintenance of stone groins constructed along certain areas of Long
Island's shoreline; (9) action by school districts and their employees
challenging the constitutionality of Chapter 175 of the Laws of 1990 which
deferred school district contributions to the public retirement system and
reduced by like amount state aid to the school districts; (10) challenges
by commercial insurers, employee welfare benefit plans, and health
maintenance organizations to Section 2807-c of the Public Health Law,
which imposes 13%, 11% and 9% surcharges on inpatient hospital bills and a
bad debt and charity care allowance on all hospital bills and hospital
bills paid by such entities; and (11) challenge by a long distance carrier
to the constitutionality of Tax Law section 186-a(2-a) which restricted
certain deduction of local access service fees.
A number of cases also have ^ been instituted against the State
challenging the constitutionality of various public authority financing
programs.
^
Authorities. The fiscal stability of New York State is related
to the fiscal stability of its Authorities, which generally have
responsibility for financing, constructing and operating revenue-producing
public benefit facilities. Authorities are not subject to the
constitutional restrictions on the incurrence of debt which apply to the
State itself, and may issue bonds and notes within the amounts of, and as
otherwise restricted by, their legislative authorization. As of September
30, 1993, date of the latest data available, there were 18 Authorities
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that had outstanding debt of $100 million or more. The aggregate
outstanding debt, including refunding bonds, of these 18 Authorities was
$63.5 billion as of September 30, 1993, of which approximately $7.7
billion was moral obligation debt and approximately $19.3 billion was
financed under lease-purchase or contractual-obligation financing
arrangements.
Authorities are generally supported by revenues generated by the
projects financed or operated, such as fares, user fees on bridges,
highway tolls and rentals for dormitory rooms and housing. In recent
years, however, New York State has provided financial assistance through
appropriations, in some cases of a recurring nature, to certain of the 18
Authorities for operating and other expenses and, in fulfillment of its
commitments on moral obligation indebtedness or otherwise, for debt
service. This operating assistance is expected to continue to be required
in future years. As of March 31, 1994, aggregate public authority debt
outstanding as State-supported debt was $21.1 billion and as State-related
debt was $29.4 billion.
Experience has shown that if an Authority suffers serious
financial difficulties, both the ability of the State and the Authorities
to obtain financing in the public credit markets and the market price of
the State's outstanding bonds and notes may be adversely affected. The
Housing Finance Agency and the Urban Development Corporation have in the
past required substantial amounts of assistance from the State to meet
debt service costs or to pay operating expenses. Further assistance,
possibly in increasing amounts, may be required for these, or other,
Authorities in the future. In addition, certain statutory arrangements
provide for State local assistance payments otherwise payable to
localities to be made under certain circumstances to certain Authorities.
The State has no obligation to provide additional assistance to localities
whose local assistance payments have been paid to Authorities under these
arrangements. However, in the event that such local assistance payments
are so diverted, the affected localities could seek additional State
funds.
New York City and Other Localities. The fiscal health of the
State of New York is closely related to the fiscal health of its
localities, particularly the City of New York, which has required and
continues to require significant financial assistance from New York State.
The City's independently audited operating results for each of its 1981
through 1993 fiscal years, which end on June 30, show a General Fund
surplus reported in accordance with GAAP. In addition, the City's
financial statements for the 1993 fiscal year received an unqualified
opinion from the City's independent auditors, the eleventh consecutive
year the City has received such an opinion.
In 1975, New York City suffered a fiscal crisis that impaired the
borrowing ability of both the City and New York State. In that year the
City lost access to public credit markets. The City was not able to sell
short-term notes to the public again until 1979.
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In 1975, Standard & Poor's suspended its A rating of City bonds.
This suspension remained in effect until March 1981, at which time the
City received an investment grade rating of BBB from Standard & Poor's.
On July 2, 1985, Standard & Poor's revised its rating of City bonds upward
to BBB+ and on November 19, 1987, to A-. On July 2, 1993, Standard &
Poor's reconfirmed its A- rating of City bonds, continued its negative
rating outlook assessment and stated that maintenance of such rating
depended upon the City's making further progress towards reducing budget
gaps in the outlying years. Moody's ratings of City bonds were revised in
November 1981 from B (in effect since 1977) to Ba1, in November 1983 to
Baa, in December 1985 to Baa1, in May 1988 to A and again in February 1991
to Baa1.
New York City is heavily dependent on New York State and federal
assistance to cover insufficiencies in its revenues. There can be no
assurance that in the future federal and State assistance will enable the
City to make up its budget deficits. To help alleviate the City's
financial difficulties, the Legislature created the Municipal Assistance
Corporation ("MAC") in 1975. MAC is authorized to issue bonds and notes
payable from certain stock transfer tax revenues, from the City's portion
of the State sales tax derived in the City and from State per capita aid
otherwise payable by the State to the City. Failure by the State to
continue the imposition of such taxes, the reduction of the rate of such
taxes to rates less than those in effect on July 2, 1975, failure by the
State to pay such aid revenues and the reduction of such aid revenues
below a specified level are included among the events of default in the
resolutions authorizing MAC's long-term debt. The occurrence of an event
of default may result in the acceleration of the maturity of all or a
portion of MAC's debt. As of December 31, 1993, MAC had outstanding an
aggregate of approximately $5.204 billion of its bonds. MAC bonds and
notes constitute general obligations of MAC and do not constitute an
enforceable obligation or debt of either the State or the City. Under its
enabling legislation, MAC's authority to issue bonds and notes (other than
refunding bonds and notes) expired on December 31, 1984. Legislation has
been passed by the legislature which would, under certain conditions,
permit MAC to issue up to $1.465 billion of additional bonds, which are
not subject to a moral obligation provision.
Since 1975, the City's financial condition has been subject to
oversight and review by the New York State Financial Control Board (the
"Control Board") and since 1978 the City's financial statements have been
audited by independent accounting firms. To be eligible for guarantees
and assistance, the City is required during a "control period" to submit
annually for Control Board approval, and when a control period is not in
effect for Control Board review, a financial plan for the next four fiscal
years covering the City and certain agencies showing balanced budgets
determined in accordance with GAAP. New York State also established the
Office of the State Deputy Comptroller for New York City ("OSDC") to
assist the Control Board in exercising its powers and responsibilities.
On June 30, 1986, the City satisfied the statutory requirements for
termination of the control period. This means that the Control Board's
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powers of approval are suspended, but the Board continues to have
oversight responsibilities.
On February 10, 1994, the Mayor submitted to the Control Board
for its review a mid-year modification to the 1994-1997 Financial Plan
(the "February Modification"). The February Modification projected a
balanced budget for fiscal year 1994, based upon revenues of $31.738
billion, including a general reserve of $198 million. For fiscal years
1995, 1996 and 1997, the February Modification projected budget gaps of
$2.261 billion, $3.167 billion and $3.253 billion, respectively, and
assumed no wage and salary increases beyond the expiration of current
labor agreements which expire in fiscal years 1995 and 1996. These gaps
have grown since November by about $530 million in fiscal year 1995, and
$650 million and $550 million in fiscal years 1996 and 1997, respectively,
owing in large part to lower estimates of real property tax revenues. To
close the budget gap projected for fiscal year 1995, the February
Modification included a gap-closing program that consisted of the
following major elements: (i) an agency program of $1.048 billion; (ii)
fringe benefit and pension savings of $400 million; (iii) an
intergovernmental aid package of $400 million; (iv) a workforce reduction
program of $144 million; and (v) the assumption of a $234 million surplus
roll from fiscal year 1994. Implementation of many of the gap-closing
initiatives requires the cooperation of the municipal labor unions, the
City Council and the State and Federal governments. The February
Modification also included a tax reduction program, with most of the
financial impact affecting the later years of the Plan period.
On March 1, 1994, the City's comptroller issued a report on the
state of the City's economy. The report concluded that, while the City's
long recession was over, moderate growth was the best the City can expect.
The report projected that total tax revenues for the 1994, 1995 and 1996
fiscal years will be slightly higher than projected in the February
Modification, and that tax revenues for the 1997 fiscal year will be
slightly below the projections contained in the February Modification. The
report identified revenue risks for the 1994 through 1997 fiscal years
totaling $9 million, $134 million, $184 million and $184 million,
respectively. On March 21, 1994, the comptroller issued a report on the
February Modification. In the report, the comptroller identified as risks
for the 1995 fiscal year the proposals in the February Modification that
are uncertain because they depend on actions by organizations other than
City government, including the State Legislature and municipal unions. The
comptroller stated that if none of the uncertain proposals are
implemented, the total risk could be as much as $1.15 billion to $1.53
billion. The comptroller noted that there are a number of additional
issues, the impact of which could not be currently quantified.
On March 22, 1994, OSDC issued a report reviewing the February
Modification. The report concluded that a balanced budget is achievable
for the 1994 fiscal year. The report noted that expenditures for the 1994
fiscal year may be higher than projected by $176 million; however, the
City has initiated a program that is intended to reduce nonpersonnel costs
by up to $150 million. In addition, the report noted that the February
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Modification included a general reserve of $198 million and assumed
savings of $117 million from the implementation of the proposed severance
program for the 1994 fiscal year. While the City intends to transfer $234
million of these resources to help balance the 1995 fiscal year budget,
the report concluded that most of these resources will be needed to
maintain budget balance in the 1994 fiscal year.
With respect to each of the 1995 through 1997 fiscal years, the
report noted the potential for a budget gap of approximately $300 million
greater than shown in the February Modification. With respect to the
City's $2.3 billion gap-closing program for the 1995 fiscal year, the
report noted that approximately $1.4 billion of the gap-closing
initiatives must be considered as high risk because the initiatives are
outside the Mayor's direct control to implement. The report noted that
if the necessary approvals and cooperation are not obtained from various
third parties, the City will have only a few months to develop alternative
solutions.
On March 23, 1994, the staff of the Control Board issued its
report on the February Modification. The report stated that, while the
February Modification moves the City in the direction of structural
balance, the February Modification has more risks and fewer details than
are desirable and does not set forth contingency plans or other
protections to assist the City if unknown but inevitable impediments
emerge. With respect to the 1994 fiscal year, the report concluded that
the budget is reliably balanced. However, for the 1995 fiscal year, the
report noted that decisions will have to be made in the next modification
as to whether to continue to include for the 1995 fiscal year revenues
from proposed additional federal and State aid, new Port Authority lease
agreements and a proposed video lottery, funds from MAC for the severance
program, and savings from employee health and pension cost reductions and
tort reform. The report noted that all of these actions, which total $1.2
billion, are outside the Mayor's direct control and require the support of
third parties. Risks identified in the reports for the 1994 through 1997
fiscal years aggregate $94 million, $952 million, $1.7 billion and $1.9
billion, respectively, excluding any risk associated with the State
takeover of certain Medicaid costs, the workforce reduction program and
the reduction in heath insurance and pension costs proposed in the
February Modification.
Estimates of the City's revenues and expenditures are based on
numerous assumptions and are subject to various uncertainties. If expected
federal or State aid is not forthcoming, if unforeseen developments in the
economy significantly reduce revenues derived from economically sensitive
taxes or necessitate increased expenditures for public assistance, if the
City should negotiate wage increases for its employees greater than the
amounts provided for in the City's financial plan or if other
uncertainties materialize that reduce expected revenues or increase
projected expenditures, then, to avoid operating deficits, the City may be
required to implement additional actions, including increases in taxes and
reductions in essential City services. The City might also seek
additional assistance from New York State.
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The City requires certain amounts of financing for seasonal and
capital spending purposes. The City has issued $1.75 billion of notes for
seasonal financing purposes during fiscal year 1994. The City's capital
financing program projects long-term financing requirements of
approximately $17 billion for the City's fiscal years 1995 through 1998.
The major capital requirements include expenditures for the City's water
supply and sewage disposal systems, roads, bridges, mass transit, schools,
hospitals and housing. In addition to financing for new purposes, the
City and the New York City Municipal Water Finance Authority have issued
refunding bonds totalling $1.8 billion in fiscal year 1994.
Certain localities, in addition to the City, could have financial
problems leading to requests for additional New York State assistance
during the State's 1993-94 and 1994-95 fiscal years and thereafter. The
potential impact on the State of such requests by localities is not
included in the projections of the State receipts and disbursements in the
State's 1994-95 fiscal year.
Fiscal difficulties experienced by the City of Yonkers
("Yonkers") resulted in the creation of the Financial Control Board for
the City of Yonkers (the "Yonkers Board") by New York State in 1984. The
Yonkers Board is charged with oversight of the fiscal affairs of Yonkers.
Future actions taken by the Governor or the Legislature to assist Yonkers
could result in allocation of New York State resources in amounts that
cannot yet be determined.
Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1992, the total indebtedness of
all localities in New York State was approximately $35.2 billion, of which
$19.5 billion was debt of New York City (excluding $5.9 billion in MAC
debt); a small portion (approximately $71.6 million) of the $35.2 billion
of indebtedness represented borrowing to finance budgetary deficits and
was issued pursuant to enabling New York State legislation. State law
requires the Comptroller to review and make recommendations concerning the
budgets of those local government units other than New York City
authorized by State law to issue debt to finance deficits during the
period that such deficit financing is outstanding. Seventeen localities
had outstanding indebtedness for deficit financing at the close of their
fiscal year ending in 1992.
From time to time, federal expenditure reductions could reduce,
or in some cases eliminate, federal funding of some local programs and
accordingly might impose substantial increased expenditure requirements on
affected localities. If New York State, New York City or any of the
Authorities were to suffer serious financial difficulties jeopardizing
their respective access to the public credit markets, the marketability of
notes and bonds issued by localities within New York State could be
adversely affected. Localities also face anticipated and potential
problems resulting from certain pending litigation, judicial decisions and
long-range economic trends. The longer-range problems of declining urban
population, increasing expenditures and other economic trends could
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adversely affect localities and require increasing New York State
assistance in the future.
Investment Restrictions
The following are fundamental investment restrictions of each
Fund. Each Fund of the Trust may not:
1. Purchase any securities which would cause more than 25%
of the value of a Fund's total assets at the time of such
purchase to be invested in the securities of one or more issuers
conducting their principal activities in the same industry. (For
purposes of this limitation, U.S. Government securities and state
or municipal governments and their political subdivisions are not
considered members of any industry. In addition, this limitation
does not apply to investments of domestic banks, including U.S.
branches of foreign banks and foreign branches of U.S. banks.)
2. Borrow money or issue senior securities as defined in the
1940 Act, except that (a) a Fund may borrow money in an amount
not exceeding one-third of the Fund's total assets at the time
of such borrowing, and (b) a Fund may issue multiple classes of
shares. The purchase or sale of futures contracts and related
options shall not be considered to involve the borrowing of money
or issuance of senior securities.
3. Make loans or lend securities, if as a result thereof
more than one-third of the Fund's total assets would be subject
to all such loans. For purposes of this restriction, debt
instruments and repurchase agreements shall not be treated as
loans.
4. Underwrite securities issued by any other person, except
to the extent that the purchase of securities and the later
disposition of such securities in accordance with the Fund's
investment program may be deemed an underwriting.
5. Purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall
not prevent a Fund from investing in securities or other
instruments backed by real estate, including mortgage loans, or
securities of companies that engage in the real estate business
or invest or deal in real estate or interests therein).
6. Purchase or sell commodities, except that each Fund may
enter into futures contracts and related options, forward
currency contracts and other similar instruments.
Each Fund of the Trust may, notwithstanding any other fundamental
investment policy or restriction, invest all of its investable assets in
securities of a single open-end management investment company with
55
<PAGE>
substantially the same fundamental investment objectives, policies, and
restrictions as the Fund.
The following are non-fundamental investment restrictions of each
Fund of the Trust:
1. The Trust will not purchase or retain the securities of
any issuer if the officers, directors or Trustees of the Trust,
its advisers, or managers owning beneficially more than one half
of one percent of the securities of each issuer together own
beneficially more than five percent of such securities.
2. No Fund will purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof), including their
predecessors, that have been in operation for less than three
years, if by reason thereof the value of such Fund's investment
in securities would exceed 5% of such Fund's total assets. For
purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as
the issuer of a security.
3. No Fund will purchase puts, calls, straddles, spreads and
any combination thereof if by reason thereof the value of its
aggregate investment in such classes of securities will exceed 5%
of its total assets, except that: (a) this restriction shall not
apply to standby commitments, and (b) this restriction shall not
apply to a Fund's transactions in futures contracts and related
options.
4. No Fund will purchase warrants if at the time of such
purchase: (a) more than 5% of the value of such Fund's assets
would be invested in warrants, or (b) more than 2% of the value
of such Fund's assets would be invested in warrants that are not
listed on the New York ^ Stock Exchange ("NYSE") or American
Stock Exchange ("AMEX") (for purposes of this ^ limitation,
warrants acquired by a Fund in units or attached to securities
will be deemed to have no value).
5. Each of the Bond Funds will not invest more than 15% of
the value of its net assets in illiquid securities, including
repurchase agreements with remaining maturities in excess of
seven days, time deposits with maturities in excess of seven
days, and other securities which are not readily marketable. For
purposes of this restriction, illiquid securities shall not
include commercial paper issued pursuant to Section 4(2) of the
Securities Act of 1933 and securities which may be resold under
Rule 144A under the Securities Act of 1933, provided that the
Board of Trustees, or its delegate, determines that such
securities are liquid, based upon the trading markets for the
specific security.
56
<PAGE>
6. Each of the Massachusetts Tax-Free Fund, the California
Tax-Free Fund and the New York Tax-Free Fund will not invest more
than 10% of the value of its net assets in illiquid securities,
including repurchase agreements with remaining maturities in
excess of seven days, and other securities which are not readily
marketable. For purposes of this restriction, illiquid
securities shall not include commercial paper issued pursuant to
Section 4(2) of the Securities Act of 1933 and securities which
may be resold under Rule 144A under the Securities Act of 1933,
provided that the Board of Trustees, or its delegate, determines
that such securities are liquid based upon the trading markets
for the specific security.
7. No Fund may invest in securities of other investment
companies, except as they may be acquired as part of a merger,
consolidation or acquisition of assets and except to the extent
otherwise permitted by the 1940 Act.
8. No Fund will purchase oil, gas or mineral leases (a Fund
may, however, purchase and sell the securities of companies
engaged in the exploration, development, production, refining,
transporting and marketing of oil, gas or minerals).
9. No Fund shall sell securities short, unless it owns or
has the right to obtain securities equivalent in kind and amounts
to the securities sold short, and provided that transactions in
futures contracts and options are not deemed to constitute
selling securities short.
10. No Fund shall purchase securities on margin, except that
a Fund may obtain such short-term credits as are necessary for
the clearance of transactions, and provided that margin payments
in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
11. No Fund shall purchase any security while borrowings
representing more than 5% of such Fund's total assets are
outstanding.
If a percentage restriction is adhered to at the time of an
investment, a later increase or decrease in such percentage resulting from
a change in the values of assets will not constitute a violation of such
restriction.
Each of the foregoing restrictions applies to each Fund unless
otherwise indicated. Under the 1940 Act, a fundamental policy may not be
changed without the vote of a majority of the outstanding voting
securities of a Fund, as defined in the 1940 Act. "Majority" means the
lesser of (1) 67% or more of the shares present at a Fund's meeting, if
the holders of more than 50% of the outstanding shares of a Fund are
present or represented by proxy, or (2) more than 50% of the outstanding
shares of the Fund. Non-fundamental investments restrictions may be
57
<PAGE>
changed by vote of a majority of the Trust's Board of Trustees at any
time.
In order to permit the sale of the Funds' shares in certain
states, the Trust may make commitments more restrictive than the
investment restrictions described above. Accordingly, pursuant to such
commitments, the Funds have undertaken not to invest in oil, gas or other
mineral leases. In addition, the Trust has undertaken not to invest in
warrants (other than warrants acquired by the Fund as part of a unit or
attached to securities at the time of purchase) if, as a result, the
investments (valued at the lower of cost or market) would exceed 5% of the
value of the Fund's net assets or if, as a result, more than 2% of the
Fund's net assets would be invested in warrants not listed on AMEX or
NYSE. Further, the Funds have given a representation that investments
will not be made in real estate limited partnerships. Should the Trust
determine that any such commitment is no longer in the best interests of
the Trust and its shareholders, it will revoke the commitment by
terminating sales of its shares in the state involved.
Portfolio Turnover
The Trust may attempt to increase yields on investments made for
the Funds by trading to take advantage of short-term market variations.
Securities may be sold in anticipation of a rise in interest rates (market
decline) or purchased in anticipation of a decline in interest rates
(market rise) and later sold. Furthermore, a security may be sold and
another of comparable quality purchased at approximately the same time to
take advantage of what the Trust believes to be a temporary disparity in
the normal yield relationship between the two securities. These yield
disparities may occur for reasons not directly related to the investment
quality of particular issues or the general movement of interest rates,
such as changes in the overall demand for, or supply of, various types of
tax-exempt securities. The Trust's portfolio transaction policy should
not result in high brokerage commissions to the Funds, as purchases and
sales of the Funds' portfolio securities are usually effected as principal
transactions. However, to the extent a high portfolio turnover rate
results in the realization by a Fund of net short-term capital gains, such
gains when distributed will be taxable to shareholders as ordinary income.
While a Fund's portfolio turnover rate will vary from year to year, it is
anticipated that the portfolio turnover rate for the Bond Funds may exceed
100%. The turnover rate will not be a limiting factor for these Funds,
however, when the Funds deem it desirable to sell or purchase securities.
The portfolio turnover rate is the lesser of purchases or sales of
portfolio securities for the year divided by the monthly average value of
a Fund's portfolio securities. Securities having maturities of one year
or less are excluded from the calculation.^
The portfolio turnover rates for the fiscal years ended June 30,
1993 and 1994 for the Municipal Fund were 103% and 57%, respectively. The
portfolio turnover rates for the fiscal years ended June 30, 1993 and 1994
for the Massachusetts Municipal Fund were 60% and 19%, respectively.
58
<PAGE>
The portfolio turnover rates for the fiscal year ended November
30, 1993 and for the period ended June 30, 1994 for the California
Municipal Fund were 38% and 5%, respectively. The portfolio turnover
rates for the fiscal year ended November 30, 1993 and for the period ended
June 30, 1994 for the New York Municipal Fund were 32% and 13%,
respectively.
Portfolio Transactions
Decisions to buy and sell securities for the Funds and
effectuation of securities transactions are made by Dreyfus, subject to
the overall supervision and review of the Trustees. The same personnel are
also in charge of portfolio transactions for other clients of other
subsidiaries and affiliates of Dreyfus.
Purchases and sales of portfolio securities for the Funds will
generally be transacted with the issuer or a primary market maker on a net
basis, without the payment by the Fund of any brokerage commission for
such purchases or sales. Purchases from dealers serving as primary market
makers will reflect the spread between the bid and asked prices. In
selecting dealers and in executing portfolio transactions, Dreyfus seeks,
on behalf of the Funds, the best overall terms available. In doing so,
Dreyfus considers all matters it deems relevant, including the breadth of
the market in the security, the price of the security and the financial
condition and executing capability of the dealer.^
Dealers may be selected who provide brokerage and/or research
services to the Trust and/or other accounts over which Dreyfus or its
affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing
in, purchasing or selling securities; the availability of securities or
the purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as
clearance and settlement). The receipt of research from dealers may be
useful to Dreyfus in rendering investment management services to the Trust
and/or its other clients; and, conversely, such information provided by
its brokers or dealers who have executed transaction orders on behalf of
other clients of Dreyfus may be useful to Dreyfus in carrying out its
obligation to the Trust.
The Funds will not purchase Municipal Obligations during the
existence of any underwriting or selling group relating thereto of which
an affiliate is a member, except to the extent permitted by the SEC.
Under certain circumstances, the Funds may be at a disadvantage because of
this limitation in comparison with other investment companies which have a
similar investment objective but are not subject to such limitations.
Dreyfus will make investment decisions for each Fund
independently from those made for its other clients, other funds and
clients of other subsidiaries of Dreyfus. On occasion, however, the same
investment decisions will be made for a Fund as for one or more of
59
<PAGE>
Dreyfus' clients at about the same time. In a case in which a Fund and one
of these other clients are simultaneously engaged in the purchase or sale
of the same security, the transactions will, to the extent feasible and
practicable, be averaged as to price and allocated as to amount among the
Fund and/or the other client or clients pursuant to a formula considered
equitable. In some cases, this system could have a detrimental effect on
the price or volume of the security to be purchased or sold on behalf of
the particular Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be
to the benefit of the Funds.
PURCHASE OF SHARES
Distribution and Service Plans
The Securities and Exchange Commission ("SEC") has adopted Rule
12b-1 under the 1940 Act ("Rule") regulating the circumstances under which
investment companies such as the Trust directly or indirectly, bear the
expenses of distributing their shares. The Rule defines distribution
expenses to include expenditures for "any activity which is primarily
intended to result in the sale of fund shares." The Rule, among other
things, provides that an investment company may bear such expenses only
pursuant to a plan adopted in accordance with the Rule.
Prior Plans. Prior to April 4, 1994, the Investor Shares (Class
A) of each Fund were known as either the "Retail Class" of shares or the
"Institutional Class" of shares. These two classes of shares of the Funds
were reclassified as a single class of shares (the Investor Shares) by the
Board of Trustees at a meeting held on November 22, 1993, subject to
certain approvals that were obtained from each Fund's shareholders at a
meeting held on March 29, 1994. At the November 22, 1993 Board Meeting,
the Trustees also approved a new distribution plan for the Investor Shares
(formerly a Fund's Retail and/or Institutional Class of shares) of each
Fund. Shareholders of each Fund's Retail Class of Shares and
Institutional Class of Shares approved the new distribution plans at a
shareholders' meeting held on March 14 and March 29, 1994. These new
distribution plans ("Current A/Investor Plans") were effective on April 4,
1994. The Trust redesignated the Bond Funds' Investor Class shares Class
A shares effective October 17, 1994. The Investor Class shares of the
Money Funds continue to be designated as Investor Class shares.
Prior to April 4, 1994, each Fund's Retail Shares and
Institutional Shares were subject to distribution plans (the "Prior
Plans") that were adopted by the Trust under Section 12(b) of the Act and
of Rule. Under the Prior Plans, the Fund was authorized to spend up to
.25% of its average daily net assets attributable to the Retail Class on
activities primarily intended to result in the sale of such Shares, and
the Fund was authorized to spend up to .15% of its average daily net
assets attributable to the Institutional Class on activities primarily
intended to result in the sale of such Shares.
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<PAGE>
Under the distribution agreements with the prior distributor,
Funds Distributor, Inc. ("Funds Distributor") each Fund was authorized to
pay, or reimburse Funds Distributor, for distribution activities (which
are the same as those authorized by the Plans) on behalf of each Fund on a
monthly basis, provided that any payment by a Fund to Funds Distributor,
together with any other payments made by such Fund pursuant to the Prior
Plan, shall not exceed .0208% of its average daily net assets attributable
to the Retail Class for the prior month (.25% on an annualized basis) and
.0125% of its average daily net assets attributable to the Institutional
Class for the prior month (.15% on an annualized basis).
Current Plans. Distribution Plan--Class A/Investor shares.
Under the Current A/Investor Plan, Class A or Investor shares of a Fund
may spend annually up to 0.25% of the average of its net asset values for
costs and expenses incurred in connection with the distribution of, and
shareholder servicing with respect to, Fund shares.
The Current A/Investor Plan provides that a report of the amounts
expended under the Current A/Investor Plan, and the purposes for which
such expenditures were incurred, must be made to the Trust's Trustees for
their review at least quarterly. In addition, the Current A/Investor Plan
provides that it may not be amended to increase materially the costs which
a Fund may bear for distribution pursuant to the Current A/Investor Plan
without approval of a Fund's shareholders, and that other material
amendments of the Current A/Investor Plan must be approved by the vote of
a majority of the Trustees and of the Trustees who are not "interested
persons" of the Trust (as defined in the 1940 Act) and who do not have any
direct or indirect financial interest in the operation of the Current
A/Investor Plan, cast in person at a meeting called for the purpose of
considering such amendments. The Current A/Investor Plan is subject to
annual approval by the entire Board of Trustees and by the Trustees who
are neither interested persons nor have any direct or indirect financial
interest in the operation of the Current A/Investor Plan, by vote cast in
person at a meeting called for the purpose of voting on the Current
A/Investor Plan. The Current A/Investor Plan is terminable, as to a
Fund's class of shares, at any time by vote of a majority of the Trustees
who are not interested persons and have no direct or indirect financial
interest in the operation of the Current A/Investor Plan or by vote of the
holders of a majority of the outstanding shares of such class of the Fund.
Distribution and Service Plans -- Class B and C shares (Bond
Funds only). The Fund also offers Class B and Class C shares, described
in the Prospectus, pursuant to a separate Prospectus and a separate
network associated with Dreyfus. In addition to the above described
Current A/Investor Plan for Class A and Investor shares, the Trust's Board
of Trustees has adopted a Service Plan (the "Service Plan") under the Rule
for Class B and Class C shares, pursuant to which the Fund pays the
Distributor and Dreyfus Service Corporation for the provision of certain
services to the holders of Class B and Class C shares. The Trust's Board
of Trustees has also adopted a Distribution Plan pursuant to the Rule with
respect to Class B and Class C shares (the "Distribution Plan"). The ^
Trust's Board of Trustees believes that there is a reasonable likelihood
61
<PAGE>
that the Distribution and Service Plans (the "Plans") will benefit the
Fund and the holders of Class B and Class C shares.
A quarterly report of the amounts expended under each Plan, and
the purposes for which such expenditures were incurred, must be made to
the Trustees for their review. In addition, each Plan provides that it
may not be amended to increase materially the cost which holders of
Class B or C shares may bear pursuant to the Plan without the approval of
the holders of such Classes and that other material amendments of the Plan
must be approved by the Board of Trustees and by the Trustees who are not
interested persons of the Fund and have no direct or indirect financial
interest in the operation of the Plan or in any agreements entered into in
connection with the Plan, by vote cast in person at a meeting called for
the purpose of considering such amendments. The Plan is subject to annual
approval by such vote of the Trustees cast in person at a meeting called
for the purpose of voting on the Plan. Each Plan was so approved by the
Trustees at a meeting held on September 23, 1994. Each Plan may be
terminated at any time by vote of a majority of the Trustees who are not
interested persons and have no direct or indirect financial interest in
the operation of the Plan or in any agreements entered into in connection
with the Plan or by vote of the holders of a majority of Class B and C
shares.
^
Sales Loads--Class A. The scale of sales loads applies to
purchases of the Bond Funds' Class A shares made by any "purchaser," which
term includes an individual and/or spouse purchasing securities for his,
her or their own account or for the account of any minor children, or a
trustee or other fiduciary purchasing securities for a single trust estate
or a single fiduciary account (including a pension, profit-sharing or
other employee benefit trust created pursuant to a plan qualified under
Section 401 of the Internal Revenue Code of 1986, as amended ("Code")
although more than one beneficiary is involved; or a group of accounts
established by or on behalf of the employees of an employer or affiliated
employers pursuant to an employee benefit plan or other program (including
accounts established pursuant to Sections 403(b), 408(k), and 457 of the
Code); or an organized group which has been in existence for more than six
months, provided that it is not organized for the purpose of buying
redeemable securities of a registered investment company and provided that
the purchases are made through a central administration or a single
dealer, or by other means which result in economy of sales effort or
expense.
Set forth below is an example of the method of computing the
offering price of the Class A shares. The example assumes a purchase of
Class A shares aggregating less than $50,000 subject to the schedule of
sales charges set forth in the Prospectuses at a price based upon the net
asset value of the Class A shares.
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<PAGE>
Net Asset Value per Share $12.50
Per Share Sales Charge - 3.0%
of offering price (3.1% of
net asset value per share) $0.39
Per Share Offering Price to
the Public $12.89
REDEMPTION OF SHARES
Suspension of Redemptions. The right to redeem shares of a Fund
may be suspended or the date of payment postponed (a) for any period
during which the ^ NYSE is closed (other than for customary weekend or
holiday closings); (b) when trading in the markets the Trust normally uses
is restricted or when an emergency exists as determined by the SEC so that
disposal of a Fund's investments or determination of its net asset value
is not reasonably practicable, or (c) for such other periods as the SEC,
by order, may permit for protection of a Fund's shareholders.
Redemption Commitment. Each Fund has committed itself to pay in
cash all redemption requests by any shareholder of record of the Fund,
limited in amount during any 90-day period to the lesser of $250,000 or 1%
of the value of the Fund's net assets at the beginning of such period.
Such commitment is irrevocable without the prior approval of the SEC. In
the case of requests for redemption in excess of such amount, the Trustees
and executive officers of the Trust reserve the right to make payments in
whole or in part in securities or other assets in case of an emergency or
any time a cash distribution would impair the liquidity of the Fund to the
detriment of the existing shareholders. In this event, the securities
would be valued in the same manner as the ^ Fund's portfolio is valued.
If the recipient sold such securities, brokerage charges would be
incurred.
VALUATION OF SHARES
The Prospectuses describe the time at which the net asset value
of each Fund is determined for purposes of sales and redemptions. In
addition, portfolio securities held by the Funds may be actively traded in
securities markets which are open for trading on days when the Funds will
not be determining their net asset values. Accordingly, there may be
occasions when the Funds are not open for business but when the value of a
Fund's portfolio securities will be affected by such trading activity.
The holidays (as observed) on which the ^ NYSE is closed currently are:
New Years Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas.
Money Funds. It is the Trust's policy to use its best efforts to
maintain a constant per share price for each of these Funds equal to
$1.00. The portfolio instruments of each Fund are valued on the basis of
amortized cost. This involves valuing an instrument at its cost initially
63
<PAGE>
and, thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument. While this method provides
certainty in valuation, it may result in periods during which the value,
as determined by amortized cost, is higher or lower than the price the
Trust would receive if it sold the instrument.
The valuation of the Money Funds' portfolio instruments based
upon their amortized cost and simultaneous maintenance of the Funds' per
share net asset value at $1.00 are permitted by a rule adopted by the SEC.
Under this rule, each Fund must maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase only instruments having
remaining maturities of thirteen months or less, and invest only in
securities determined by the Trustees to be eligible securities with
minimal credit risks at the time of their acquisition by the Fund. In
accordance with the rule, the Trustees have established procedures
designed to stabilize, to the extent reasonably practicable, each Fund's
price per share as computed for the purpose of sales and redemptions at
$1.00. Such procedures include review of each Fund's portfolio holdings
by the Trustees, at such intervals as they may deem appropriate, to
determine whether the net asset value of each Fund calculated by using
available market quotations or market equivalents deviates from $1.00 per
share based on amortized cost. The rule also provides that the extent of
any deviation between the Fund's net asset value based upon available
market quotations or market equivalents and $1.00 per share net asset
value based on amortized cost must be examined by the Trustees. In the
event the Trustees determine that a deviation exists which may result in
material dilution or other unfair results to investors or existing
shareholders, pursuant to the rule they must cause the Fund to take such
corrective action as the Trustees regard as necessary and appropriate,
including: selling portfolio instruments prior to maturity to realize
capital gains or losses or to shorten average portfolio maturity;
withholding dividends or paying distributions from capital or capital
gains; redeeming shares in kind; or establishing a net asset value per
share by issuing available market quotations.
Bond Funds. The Bond Funds' investments are valued by Dreyfus,
after consultation with an independent pricing service (the "Service")
approved by the Trustees. When, in the judgment of the Service, quoted bid
prices for investments are readily available and are representative of the
bid side of the market, these investments are valued at the mean between
the quoted bid prices and asked prices. Investments for which, in the
judgment of the Service, there are no readily obtainable market quotations
(which may constitute a majority of the portfolio securities) are carried
at fair value as determined by the Service. The procedures of the Service
are reviewed periodically by the officers of the Trust under the general
supervision and responsibility of the Trustees, which may replace any such
Service at any time if they determine it to be in the best interests of
the Trust to do so.
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<PAGE>
PERFORMANCE DATA
From time to time, the Funds may quote their yields in
advertisements, shareholder reports or other communications to
shareholders. Price/yield information is generally available by calling
the Trust toll free at 1-800-343-0573.
Each Fund may compare the performance of its Class A, Class R or
Investor shares to that of other mutual funds, relevant indices or
rankings prepared by independent services or other financial or industry
publications that monitor mutual fund performance. Class B or Class C
shares of the ^ Funds were not offered prior to December ^ 28, 1994.
Performance rankings as reported in CHANGING TIMES, BUSINESS
WEEK, INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL, MUTUAL FUND
FORECASTER, NO LOAD INVESTOR, MONEY MAGAZINE, MORNINGSTAR MUTUAL FUND
VALUES, U.S. NEWS AND WORLD REPORT, FORBES, FORTUNE, BARRON'S, FINANCIAL
PLANNING, FINANCIAL PLANNING ON WALL STREET, CERTIFIED FINANCIAL PLANNER
TODAY, INVESTMENT ADVISOR, ^ KIPLINGER'S, SMART MONEY and similar
publications may also be used in comparing a Fund's performance.
Furthermore, a Fund may quote its Class A, Class R or Investor shares'
yields in advertisements or in shareholder reports.
Yields
Money Funds. The yield for a Money Fund is computed by: (a)
determining the net change in the value of a hypothetical pre-existing
account in a Fund having a balance of one share at the beginning of a
seven-calendar-day period for which yield is to be quoted, (b) dividing
the net change by the value of the account at the beginning of the period
to obtain the base period return, and (c) annualizing the results (i.e.,
multiplying the base period return by 365/7). The net change in the value
of the account reflects the value of additional shares purchased with
dividends declared on the original share and any such additional shares,
but does not include realized gains and losses or unrealized appreciation
and depreciation. In addition, each Money Fund may calculate a compound
effective annualized yield by adding 1 to the base period return
(calculated as described above), raising the sum to a power equal to 365/7
and subtracting 1. A Fund's equivalent taxable yield is computed by
dividing that portion of the Fund's yield which is tax-exempt by one minus
a stated income tax rate and adding the product to that portion, if any,
of the Fund's yield that is not tax-exempt. For the seven-day period
ended June 30, 1994, the annualized current yields, the compounded
effective yields, and the equivalent taxable yields of the Money Funds
were as follows:
65
<PAGE>
7-Day Yield for Period Ended
June 30, 1994
Compounded Equivalent
Annualized Effective Taxable
Current Yield Yield Yield*
------------- ---------- ---------
Massachusetts Tax-Free
Fund
Investor shares 2.24 % 2.26 % 3.98 %
Class R shares 2.49 % 2.52 % 4.42 %
California^ Tax-Free
Fund
Investor shares 2.15 % 2.17 % 3.73 %
Class R shares 2.40 % 2.43 % 4.17 %
New York Tax-Free
Fund
Investor shares 2.00 % 2.02 % 3.54 %
Class R shares 2.25 % 2.27 % 3.99 %
* Example assumes a Federal marginal tax rate of 36% and, for the
Massachusetts, California and New York Tax-Free Funds, a Massachusetts
marginal tax rate of 12% (combined effective rate of 43.68%), a California
marginal tax rate of 10% (combined effective rate of 42.40%), and a New
York State and New York City marginal tax rate of 11.785% (combined
effective rate of 43.54%), respectively.
Bond Funds. A Bond Fund's yield is calculated according to a
formula prescribed by the SEC. The formula can be expressed as follows:
6
YIELD = 2[(a-b + 1) - 1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of
the period.
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<PAGE>
For the purpose of determining the interest earned (variable "a"
in the formula) on debt obligations that were purchased by a Bond Fund at
a discount or premium, the formula generally calls for amortization of the
discount or premium; the amortization schedule will be adjusted monthly to
reflect changes in the market values of the debt obligations.
A Fund's equivalent taxable yield is computed by dividing that
portion of the Fund's yield which is tax-exempt by one minus a stated
income tax rate and adding the product to that portion, if any, of the
Fund's yield that is not tax-exempt.
The Municipal Bond Funds' 30-day yields and equivalent taxable
yields for the period ended June 30, 1994 were as follows:
30-Day Yield for Period Ended
June 30, 1994
Equivalent
Yield Taxable Yield*
----- --------------
Municipal Fund
Class A Shares 4.20 % 6.56 %
Class R Shares 4.45 % 6.95 %
Massachusetts Municipal
Fund
Class A Shares 4.20 % 7.46 %
Class R Shares 4.45 % 7.90 %
30-Day Yield for Period Ended
June 30, 1994
Equivalent
Yield Taxable Yield*
----- --------------
California Municipal
Fund
Class A Shares 4.33 % 7.52 %
Class R Shares 4.58 % 7.95 %
New York Municipal
Fund
Class A Shares 3.97 % 7.03 %
Class R Shares 4.22 % 7.47 %
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<PAGE>
* Example assumes a Federal marginal tax rate of 36% and, for the
Massachusetts, California and New York Municipal Funds, a
Massachusetts marginal tax rate of 12% (combined effective rate
of 43.68%), a California marginal tax rate of 10% (combined
effective rate of 42.40%), and a New York State and New York City
marginal tax rate of 11.785% (combined effective rate of 43.54%),
respectively.
Investors should recognize that in periods of declining interest
rates a Bond Fund's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates a Bond Fund's yield
will tend to be somewhat lower. Also, when interest rates are falling,
the inflow of net new money to a Fund from the continuous sale of its
shares will likely be invested in portfolio instruments producing lower
yields than the balance of the Fund's portfolio, thereby reducing the
current yield of the Fund. In periods of rising interest rates, the
opposite can be expected to occur.
Yield information is useful in reviewing the Funds' performance,
but because yields fluctuate, such information cannot necessarily be used
to compare an investment in a Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed
or guaranteed fixed yield for a stated period of time. Shareholders should
remember that yield is a function of the kind and quality of the
instruments in the Funds' portfolios, portfolio maturity and operating
expenses and market conditions. The Funds' yields and total returns will
also be affected if Dreyfus waives its advisory fees.
Total Return
The Bond Funds' "average annual total return" figures described
and shown below are computed according to a formula prescribed by the SEC.
The formula can be expressed as follows:
^
P (1 + ^ T)1/n = ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = Ending Redeemable Value of a hypothetical $1,000
investment made at the beginning of the 1, 5, or 10 year
(or other) periods at the end of the 1, 5, or 10 year (or
other) period (or fractional portion thereof), assuming
reinvestment of all dividends and distributions.
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The Municipal Fund's average annual total return was as follows
for the period indicated:
Class A Class R
------- -------
The one-year period beginning on
July 1, 1993 through June 30, 1994 0.96 %/0.62 %* 1.08 %/0.74 % *
The five-year period beginning on
July 1, 1989 through June 30, 1994 7.30 %/6.95 %* --
The life of the Fund through
June 30, 1994 + 9.47 %/8.98 %* 4.56 %/4.26 % *
The Municipal Fund's aggregate total return was as follows for
the period indicated:
Class A Class R
------- -------
The one-year period beginning on
July 1, 1993 through June 30, 1994 0.96 %/0.62 % * 1.08 %/0.74% *
The five-year period beginning on
July 1, 1989 through June 30, 1994 42.23 %/39.92 % * --
The life of the Fund through
June 30, 1994 + 120.66 %/112.15 % * 6.50 %/6.05 % *
* The figure shows what the Municipal Fund's performance would have
been in the absence of fee waivers.
Reflects performance from October 1, 1985 through June 30, 1994
for the Class A shares and from February 1, 1993 through June 30,
1994 for the Class R shares.
The Massachusetts Municipal Fund's average annual total return
was as follows for the period indicated:
Class A Class R
------- --------
The one-year period beginning on
July 1, 1993 through June 30, 1994 1.38 %/1.25 % * 1.53 %/1.39 % *
The five-year period beginning on
July 1, 1989 through June 30, 1994 7.36 %/7.29 % * --
The life of the Fund through
June 30, 1994 + 8.61 %/8.52 % * 4.30 %/4.15 % *
The Massachusetts Municipal Fund's aggregate total return was as
follows for the period indicated:
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Class A Class R
------- -------
The one-year period beginning on
July 1, 1993 through June 30, 1994 1.38 %/1.25 % * 1.53 %/1.39 % *
The five-year period beginning on
July 1, 1989 through June 30, 1994 42.61 %/42.18 % * --
The life of the Fund through
June 30, 1994 + 106.30 %/104.81 % * 6.12 %/5.89 % *
* The figure shows what the Massachusetts Municipal Fund's
performance would have been in the absence of fee waivers.
+ Reflects performance from September 24, 1985 through June 30,
1994 for the Class A shares and February 1, 1993 through June 30,
1994 for the Class R shares.
The California Municipal Fund's average annual total return was
as follows for the period indicated:
Class A Class R
------- -------
The one-year period beginning on
July 1, 1993 through June 30, 1994 1.80 %/1.29 % * 1.90 %/1.33 % *
The five-year period beginning on
July 1, 1989 through June 30, 1994 7.37 %/6.71 %* --
The life of the Fund through
June 30, 1994 + 7.37 %/6.52 % * 5.17 %/4.54 % *
The California Municipal Fund's aggregate total return was as
follows for the period indicated:
Class A Class R
------- -------
The one-year period beginning on
July 1, 1993 through June 30, 1994 1.80 %/1.29 % * 1.90 %/1.33 % *
The five-year period beginning on
July 1, 1989 through June 30, 1994 42.70 %/38.39 % *
The life of the Fund through
June 30, 1994 + 56.71 %/49.0 % * 7.38 %/6.44 % *
* The figure shows what the California Municipal Fund's performance
would have been in the absence of fee waivers.
+ Reflects performance from March 7, 1988 through June 30, 1994 for
the Class A shares and February 1, 1993 through June 30, 1994 for
the Class R Shares.
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The New York Municipal Fund's average annual total return was as
follows for the period indicated:
Class A Class R
The one-year period beginning on
July 1, 1993 through June 30, 1994 1.24 %/(0.13) % * 1.46 %/0.74 % *
The five-year period beginning on
July 1, 1989 through June 30, 1994 6.99 %/5.42 %*
The life of the Fund through
June 30, 1994 + 6.68 %/4.96 %* 4.37 %/4.26 % *
The New York Municipal Fund's aggregate total return was as
follows for the period indicated:
Class A Class R
------- --------
The one-year period beginning on
July 1, 1993 through June 30, 1994 1.27 %/(0.13) % * 1.46 %/0.74 % *
The five-year period beginning on
July 1, 1989 through June 30, 1994 40.26 %/30.21 % *
The life of the Fund through
June 30, 1994 + 50.43 %/35.85 % * 6.23 %/6.05 % *
* The figure shows what the New York Municipal Fund's performance
would have been in the absence of fee waivers.
+ Reflects performance from March 7, 1988 through June 30, 1994 for
the Class A shares and February 1, 1993 through June 30, 1994 for
the Class R Shares.
The Bond Funds' net investment income changes in response to
fluctuations in interest rates and the expenses of the Funds.
Consequently, any given performance quotation should not be considered as
representative of the Funds' performance for any specified period in the
future.
TAXES
Each Fund has satisfied, and intends to continue to satisfy, the
requirements for qualifying as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). Provided that each Fund distributes at least 90% of its taxable
net investment income, including market discount and net realized
short-term capital gains, and 90% of the tax-exempt interest income
(reduced by certain expenses), each Fund, if it qualifies as a regulated
investment company, will not be liable for Federal income taxes to the
extent its taxable net investment income and capital gain net income are
distributed to its shareholders.
71
<PAGE>
Because each Fund will distribute exempt-interest dividends,
interest on indebtedness incurred by a shareholder to purchase or carry
Fund shares is not deductible for Federal income tax purposes. If a
shareholder receives an exempt-interest dividend with respect to shares of
a Fund and if such shares are held by the shareholder for six months or
less, then any loss on the redemption or exchange of such shares will, to
the extent of such exempt-interest dividends, be disallowed. In addition,
the Code may require a shareholder, if he or she receives exempt-interest
dividends, to treat as taxable income a portion of certain otherwise
non-taxable social security and railroad retirement benefit payments.
Furthermore, that portion of an exempt-interest dividend paid by a Fund
which represents income from private activity bonds may not retain its
tax-exempt status in the hands of a shareholder who is a "substantial
user" of a facility financed by such bonds, or a "related person" thereof.
Moreover, as noted in the Funds' Prospectuses, some or all of a Fund's
dividends may be a specific preference item, or a component of an
adjustment item, for purposes of the Federal individual and corporate
alternative minimum taxes. In addition, the receipt of Fund dividends and
distributions may affect a foreign corporate shareholder's Federal "branch
profits" tax liability and a Subchapter S corporation shareholder's
Federal "excess net passive income" tax liability. Shareholders should
consult their own tax advisers as to whether they are (1) substantial
users with respect to a facility or related to such users within the
meaning of the Code or (2) subject to a Federal alternative minimum tax,
any applicable state alternative minimum tax, the Federal branch profits
tax, or the Federal excess net passive income tax.
While the Bond Funds do not expect to realize a significant
amount of net long-term capital gains, any such gains realized will be
distributed annually as described in the Funds' Prospectuses. Such
distributions ("capital gain dividends"), if any, will be taxable to the
shareholders as long-term capital gains, regardless of how long a
shareholder has held a Bond Fund's shares, and will be designated as
capital gain dividends in a written notice mailed by the Bond Funds to the
shareholders after the close of the Bond Funds' prior taxable year. If a
shareholder receives a capital gain dividend with respect to any share and
if such share is held by the shareholder for six months or less, then any
loss (to the extent not disallowed pursuant to the other six month rule
described above) on the sale or exchange of such share, to the extent of
the capital gain dividend, shall be treated as a long-term capital loss.
Dividends derived by the Funds from tax-exempt interest are
designated as tax-exempt in the same percentage of the day's dividend as
the actual tax-exempt income earned that day. Thus, the percentage of the
dividend designated as tax-exempt may vary from day to day. Similarly,
dividends derived by the Funds from interest on relevant state Municipal
Obligations will be designated as exempt from that state's taxation in the
same percentage of the day's dividend as the actual interest on that
state's Municipal Obligations earned on that day.
Each Fund is required to withhold and remit to the U.S. Treasury
31% of the taxable dividends paid by the Funds, the distributions paid by
72
<PAGE>
the Funds and in the case of the Bond Funds the proceeds of redemptions or
exchanges of Fund shares (in excess of $10 on an annualized basis) with
respect to any non-corporate shareholder who fails to furnish or certify
his or her correct taxpayer identification number, who has been notified
that he or she is to subject to back up withholding due to underreporting
of dividend or interest income or who fails to certify that he or she has
provided a correct taxpayer identification number, and that he or she is
not subject to such withholding. An individual's tax identification
number is his or her social security number. The backup withholding tax
is not an additional tax and may be credited against a shareholder's
regular Federal income tax liability.
The foregoing is only a summary of certain tax considerations
generally affecting the Funds and their shareholders, and is not intended
as a substitute for careful tax planning. Individuals may be exempt from
state and local personal income taxes on exempt-interest income derived
from obligations of issuers located in the state in which they reside, but
are usually subject to such taxes on such dividends that are derived from
obligations of issuers located in other jurisdictions. Investors are
urged to consult their tax advisers with specific reference to their own
tax situations.
DESCRIPTION OF THE TRUST
The Trust is a non-diversified, open-end management investment
company organized as an unincorporated business trust under the laws of
the Commonwealth of Massachusetts by an Agreement and Declaration of Trust
dated March 28, 1983. On March 31, 1994 the Trust changed its name from
"The Boston Company Tax-Free Municipal Funds" to "The Laurel Tax-Free
Municipal Funds." The Trust's name was then changed from "The Laurel
Tax-Free Municipal Funds" to "The Dreyfus/Laurel Tax-Free Municipal ^
Funds" effective October 17, 1994.
The Trustees have authority to create an unlimited number of
shares of beneficial interest ^, without par value, in separate series for
each class of shares. Each series will be treated as a separate entity.
^ Currently, seven series have been authorized. The Trustees have
authority to create additional series at any time in the future without
shareholder approval.
^
Each share (regardless of Class) has one vote. On each matter
submitted to a vote of the shareholders, all shares of each Fund or Class
shall vote together as a single Class, except as to any matter for which a
separate vote of any Fund or Class is required by the 1940 Act and except
as to any matter which affects the interest of a particular Fund or Class,
in which case only the holders of shares of the one or more affected Funds
or Classes shall be entitled to vote, each as a separate class.
The assets received by the Trust for the issue or sale of shares
of each Fund and all income, earnings, profits and proceeds thereof,
73
<PAGE>
subject only to the rights of creditors, are specifically allocated to
such Fund, and constitute the underlying assets of such Fund. The
underlying assets of each Fund are required to be segregated on the books
of account, and are to be charged with the expenses in respect to such
Fund and with a share of the general expenses of the Trust. Any general
expenses of the Trust not readily identifiable as belonging to a
particular Fund shall be allocated by or under the direction of the
Trustees in such manner as the Trustees determine to be fair and
equitable, taking into consideration, among other things, the relative
sizes of the Funds and the relative difficulty in administering each Fund.
Each share of each Fund represents an equal proportionate interest in that
Fund with each other share and is entitled to such dividends and
distributions out of the income belonging to such Fund as are declared by
the Trustees. Upon any liquidation of a Fund, shareholders thereof are
entitled to share pro rata in the net assets belonging to that Fund
available for distribution.
The Trust does not hold annual meetings of shareholders. There
will normally be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders, at which time
the Trustees then in office will call a shareholders' meeting for the
election of Trustees. Under the Act, shareholders of record of no less
than two-thirds of the outstanding shares of the Trust may remove a
Trustee through a declaration in writing or by a vote cast in person or by
proxy at a meeting called for that purpose. The Trustees are required to
call a meeting of shareholders for the purposes of voting upon the
question of removal of any Trustee when requested in writing to do so by
the shareholders of record of not less than 10% of the Trust's outstanding
shares.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Trust and requires that notice of
such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or a Trustee. The Agreement and
Declaration of Trust provides for indemnification from the Trust's
property for all losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability
is limited to circumstances in which the Trust itself would be unable to
meet its obligations, a possibility which Dreyfus believes is remote.
Upon payment of any liability incurred by a Trust, the shareholder paying
such liability will be entitled to reimbursement from the general assets
of the Trust. The Trustees intend to conduct the operations of each Fund
in such a way so as to avoid, as far as possible, ultimate liability of
the shareholders for liabilities of such Fund.
74
<PAGE>
MISCELLANEOUS
At September 22, 1994, the following companies/individuals owned
beneficially 5% or more of the Trust's outstanding shares: Boston Safe
Deposit and Trust Company ("Boston Safe") (a wholly-owned subsidiary of
The Boston Company, Inc., which is in turn a wholly-owned subsidiary of
Mellon Bank Corporation), One Cabot Road, Wellington III, Medford, MA
02155 owned 39.45% of the New York Tax-Free Bond Fund. Jordan Netburn,
131 W. 11th Street, Apt. #4, 3rd Floor, New York, NY 10011 owned 11.51% of
the New York Tax-Free Money Fund. Boston Safe owned 14.03% of the
California Tax-Free Bond Fund and 17.18% of the California Tax-Free Money
Fund. Philip Hawley, 444 South Flower Street, Suite 2280, Los Angeles, CA
90071 owned 5.23% of the California Tax-Free Bond Fund. California Dental
Health Plan, P.O. Box 899, Tustin, CA 92681 owned 16.21% of the
California Tax-Free Money Fund. Galt & Co., One East Avenue, NY/BU 3080,
Rochester, NY 14638 owned 14.45% of the Massachusetts Tax-Free Money Fund.
Bob & Co., c/o Bank of Boston, 150 Royall Street 45-02-08, Canton, MA
02021 owned 9.82% of the Massachusetts Tax-Free Money Fund.
CUSTODIAN AND FUND ACCOUNTANT
Mellon Bank, which is located at Mellon Bank Center, Pittsburgh,
PA 15258, serves as the custodian and fund accountant of the Trust
pursuant to a Custody and Fund Accounting Agreement. Under the Custody and
Fund Accounting Agreement, the Funds' custodian holds each Fund's
portfolio securities and keeps all necessary records and documents, and
also computes the daily net asset value for each Fund. Mellon Bank, as
Custodian and Fund Accountant, has no part in determining the investment
policies of the Funds or which securities are to be purchased or sold by a
Fund.
Prior to the effectiveness of the Investment Management Agreement
for its services as custodian and fund accountant, Mellon Bank was paid an
annual fee of $30,000 per portfolio, and, for all portfolios, an annual
administrative account maintenance fee of $10,000, an annual on-line of
$3,600, an asset based fee of .02% of the first $500 million of the
Trust's net assets and .01% of net assets over $500 million, plus a
specified transaction fee for each transaction.
TRANSFER AGENT
The Shareholder Services Group, Inc. ("TSSG"), a subsidiary of
First Data Corporation, serves as the Trust's transfer agent. TSSG is
located at One American Express Plaza, Providence, Rhode Island 02903.
FINANCIAL STATEMENTS
The Funds' Annual Reports for the fiscal year (or period) ended
June 30, 1994 are incorporated by reference into this Statement of
Additional Information.
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<PAGE>
APPENDIX
INFORMATION ABOUT SECURITIES RATINGS
The following are excerpts from Description of Moody's Investors'
Service, Inc. ("Moody's) municipal bond ratings. Aaa -- judged to be of
the "best quality" and are referred to as "gilt edge"; interest payments
are protected by a large or by an exceptionally stable margin and
principal is secure; Aa -- judged to be of "high quality by all
standards," but as to which margins of protection or other elements make
long-term risks appear somewhat larger than Aaa-rated Municipal Bonds;
together with Aaa group they comprise what are generally known as "high
grade bonds"; A -- possess many favorable investment attributes and are
considered "upper medium grade obligations." Factors giving security to
principal and interest of A-rated Municipal Bonds are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future; Baa --considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured; interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time.
Moody's applies the numerical modifiers 1, 2 and 3 in each
generic rating classification from Aa through Baa to indicate ranking
within a general rating category; 1 being the highest and 3 the lowest.
Description of Moody's ratings of state and municipal notes.
Moody's ratings for state and municipal notes and other short-term
obligations are designated Moody's Investment Grade ("MIG") and for
variable rate demand obligations are designated Variable Moody's
Investment Grade ("VMIG"). This distinction recognizes the differences
between short-term credit risk and long-term risk. Symbols used will be
as follows: MIG 1/VMIG 1 --best quality, enjoying strong protection for
established cash flows of funds for their servicing or from established
and broad-based access to the market for refinancing, or both; MIG 2/VMIG
2 -- high quality, with margins of protection ample although not so large
as in the preceding group; MIG 3/VMIG 3 --favorable quality, with all
security elements accounted for but lacking the undeniable strength of the
preceding grades.
Description of Moody's commercial paper ratings. PRIME-1 ("P-1")
-- judged to be of the best quality. Their short-term debt obligations
carry the smallest degree of investment risk; PRIME-2 -- indicates a
strong capacity for repayment, but to a lesser degree than 1.
Description of Standard & Poors Corporation ("S&P") Municipal
Bond ratings. AAA -- has the highest rating assigned by S&P; extremely
strong capacity to pay principal and interest; AA -- has very strong
capacity to pay interest and repay principal and differs from the higher
rated issues only in a small degree; A -- has a strong capacity to pay
principal and interest, although somewhat more susceptible to adverse
changes in circumstances and economic conditions; BBB -- regarded as
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<PAGE>
having an adequate capacity to pay principal and interest; normally
exhibit adequate protection parameters but adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to
pay principal and interest than for bonds in the A category. Ratings may
be modified by the addition of a plus or minus sign to show relative
standing within the major rating categories, except in the AAA category.
Description of S&P's ratings of municipal note issues. SP-1+ --
very strong capacity to pay principal and interest; SP-1 --strong capacity
to pay principal and interest; SP-2 --satisfactory capacity to pay
principal and interest.
Description of S&P's commercial paper ratings. A-1+ --indicates
an overwhelming degree of safety regarding timely payment; A-1 --
indicates a very strong degree of safety regarding timely payment; A-2 --
indicates a strong capacity for timely payment but with a relative degree
of safety not as overwhelming as for issues designated A-1.
Description of IBCA Limited/IBCA Inc. commercial paper ratings.
Short-term obligations, including commercial paper, rated A-1+ by IBCA
Limited or its affiliate IBCA Inc. are obligations supported by the
highest capacity for timely repayment. Obligations rated A-1 have a very
strong capacity for timely repayment. Obligations rated A-2 have a strong
capacity for timely repayment, although such capacity may be susceptible
to adverse changes in business, economic or financial conditions.
Description of Fitch Investors Services, Inc. commercial paper
ratings. Fitch Investors Services, Inc. employs the rating F-1+ to
indicate issues regarded as having the strongest degree of assurance for
timely payment. The rating F-1 reflects an assurance of timely payment
only slightly less in degree than issues rated F-1+, while the rating F-2
indicates a satisfactory degree of assurance for timely payment, although
the margin of safety is not as great as indicated by the F-1+ and F-1
categories.
Description of Duff & Phelps Inc. commercial paper ratings. Duff
& Phelps Inc. employs the designation of Duff 1 with respect to top grade
commercial paper and bank money instruments. Duff 1+ indicates the
highest certainty of timely payment: short-term liquidity is clearly
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations. Duff 1-indicates high certainty of timely payment. Duff 2
indicates good certainty of timely payment: liquidity factors and company
fundamentals are sound.
Various of the nationally recognized statistical rating
organizations ("NRSROs") utilize rankings within rating categories
indicated by a + or -. The Funds, in accordance with industry practice,
recognize such rankings within categories as graduations, viewing for
example S&P's rating of A-1+ and A-1 as being in S&P's highest rating
category.
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Description of Thomson BankWatch, Inc. ("BankWatch") commercial
paper ratings. BankWatch will assign both short-term debt ratings and
issuer ratings to the issuers it rates. BankWatch will assign a short-term
rating ("TBW-1," "TBW-2," "TBW-3," or "TBW-4") to each class of debt
(e.g., commercial paper or non-convertible debt), having a maturity of
one-year or less, issued by a holding company structure or an entity
within the holding company structure that is rated by BankWatch.
Additionally, BankWatch will assign an issuer rating ("A," "A/B," "B,"
"B/C," "C," "C/D," "D," "D/E," and "E") to each issuer that it rates.
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THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
(formerly The Laurel Tax-Free Municipal Funds)
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
Included in Part A:
Financial Highlights for each of the periods indicated
therein.
Included in Part B:
The following are incorporated by reference to the
Registrant's Annual Report to Shareholders (filed
September 8, 1994):
- Reports of Independent Accountants
- Portfolios of Investments
- Statements of Assets and Liabilities
- Statements of Operations
- Statements of Changes in Net Assets
- Notes to Financial Statements
(b) Exhibits:
1(a) Third Amended and Restated Master Trust Agreement filed
January 8, 1993, incorporated by reference to
Post-Effective Amendment No. 22, filed on January 29,
1993.
1(b) Amendment No. 1 to the Third Amended and Restated Master
Trust Agreement filed on May 21, 1993, incorporated by
reference to Post-Effective Amendment No. 24, filed on
June 29, 1993.
1(c) Amendment No. 2 to the Third Amended and Restated Master
Trust Agreement filed on February 7, 1994, incorporated
by reference to Post-Effective Amendment No. 29, filed on
April 1, 1994.
1(d) Amendment No. 3 to the Third Amended and Restated Master
Trust Agreement filed on March 31, 1994, incorporated by
reference to Post-Effective Amendment No. 29, filed on
April 1, 1994.
<PAGE>
1(e) Amendment No. 4 to the Third Amended and Restated Master
Trust Agreement. Incorporated by reference to
Post-Effective Amendment No. 32, filed on December 13,
1994.
1(f) Amendment No. 5 to the Third Amended and Restated Master
Trust. Incorporated by reference to Post-Effective
Amendment No. 32, filed on December 13, 1994.
2 By-Laws of the Trust, incorporated by reference to the
Registrant's Registration Statement (No. 33-43845), filed
on July 3, 1985 (the "Registration Statement").
3 Not Applicable.
4 Specimen security. To be filed by amendment.
5(a) Investment Management Agreement between the Registrant
and Mellon Bank, N.A., dated April 4, 1994, incorporated
by reference to Post-Effective Amendment No. 29, filed on
April 1, 1994.
5(b) Assignment Agreement among the Registrant, Mellon Bank,
N.A. and The Dreyfus Corporation, dated as of October 17,
1994, (relating to Investment Management Agreement dated
April 4, 1994). Incorporated by reference to Post-
Effective Amendment No. 33 filed on December 19, 1994.
6 Distribution Agreement between the Registrant and Premier
Mutual Fund Services, Inc., dated as of October 17, 1994.
Incorporated by reference to Post-Effective Amendment No.
33 filed on December 19, 1994.
7 Not Applicable.
8(a) Custody and Fund Accounting Agreement between the
Registrant and Mellon Bank, N.A., dated April 4, 1994,
incorporated by reference to Post-Effective Amendment No.
29, filed on April 1, 1994.
8(b) Sub-Custodian Agreement between Mellon Bank, N.A. and
Boston Safe Deposit and Trust Company, dated April 4,
1994, incorporated by reference to Post-Effective
Amendment No. 30, filed on October 11, 1994.
8(c) Amendment to Custody and Fund Accounting Agreement, dated
August 1, 1994,incorporated by reference to
Post-Effective Amendment No. 30, filed on October 11,
1994.
<PAGE>
9(a) Transfer Agent Agreement between the Registrant and
Boston Safe Deposit and Trust Company (currently known as
The Shareholder Services Group, Inc.), incorporated by
reference to Post-Effective Amendment No. 10, filed on
February 24, 1984.
9(b) Supplement to Transfer Agent Agreement relating to the
Tax-Free Bond Fund and the Massachusetts Tax-Free Bond
Fund, dated September 3, 1985, incorporated by reference
to Post-Effective Amendment No. 9, filed on November 23,
1987.
9(c) Supplement to Transfer Agent Agreement relating to the
California Tax-Free Money Fund, the California Tax-Free
Bond Fund, the New York Tax-Free Money Fund and the New
York Tax-Free Bond Fund, dated January 28, 1988,
incorporated by reference to Post-Effective Amendment No.
10, filed on January 28, 1988.
9(d) Supplement to Transfer Agent Agreement for the
Registrant, dated June 1, 1989, incorporated by reference
to Post-Effective Amendment No. 14, filed on September 5,
1989.
9(e) Supplement to Transfer Agent Agreement for the
Registrant, dated April 4, 1994, incorporated by
reference to Post-Effective Amendment No. 30, filed on
October 11, 1994.
10 Opinion and consent of counsel. Filed herewith.
11(a) Consent of Coopers & Lybrand L.L.P. Filed herewith.
11(b) Consent of KPMG Peat Marwick LLP. Filed herewith.
12 Not Applicable.
13 Not Applicable.
14 Not Applicable.
15(a) Restated Distribution Plan (relating to Investor Shares
and Class A Shares) Incorporated by reference to Post-
Effective Amendment No. 33 filed on December 19, 1994.
15(b) Distribution and Service Plans (relating to Class B
Shares and Class C Shares). Filed herewith.
<PAGE>
16 Performance Information, incorporated by reference to
Post-Effective Amendment No. 12, filed on September 1,
1988.
Item 25. Persons Controlled by or under Common Control with
Registrant
--------------------------------------------------
Not applicable.
Item 26. Number of Holders of Securities
-------------------------------
Set forth below are the number of recordholders of
securities of each series of the
<PAGE>
Registrant as of December 8, 1994:
Number of Record Holders
Title of Class Class A Investor Class Class R
-------------- ---------- -------------- -------
Premier Limited Term New York 206 N/A 14
Municipal Fund
Dreyfus/Laurel New York Tax-Free N/A 189 111
Money Fund
Premier Limited Term California 224 N/A 55
Municipal Fund
Dreyfus/Laurel California Tax-Free N/A 248 56
Money Fund
Premier Limited Term Massachusetts 432 N/A 87
Municipal Fund
Dreyfus/Laurel Massachusetts Tax-Free N/A 1,356 168
Money Fund
Premier Limited Term Municipal Fund 1,508 N/A 89
Item 27. Indemnification
---------------
Under a provision of the Registrant's Third Amended and Restated
Master Trust Agreement ("Master Trust Agreement"), any past or present
Trustee or officer of the Registrant is indemnified to the fullest extent
permitted by law against liability and all expenses reasonably incurred by
him/her in connection with any action, suit or proceeding to which he/she
may be a party or otherwise involved by reason of his/her being or having
been a Trustee or officer of the Registrant. This provision does not
authorize indemnification when it is determined, in the manner specified
in the Master Trust Agreement, that such Trustee or officer did not act in
good faith in the reasonable belief that his/her actions were in or not
opposed to the best interests of the Registrant or acted with willful
misfeasance, bad faith, gross negligence or reckless disregard of his/her
duties. Expenses may be paid by the Registrant in advance of the final
disposition of any action, suit or proceeding upon receipt of an
undertaking by such Trustee or officer to repay such expenses to the
Registrant if it is ultimately determined that indemnification of such
expenses is not authorized under the Master Trust Agreement.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Investment Adviser -- The Dreyfus Corporation
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business consists
primarily of providing investment management services as the investment
adviser, manager and distributor for sponsored investment companies
registered under the Investment Company Act of 1940 and as an investment
<PAGE>
adviser to institutional and individual accounts. Dreyfus also serves as
sub-investment adviser to and/or administrator of other investment
companies. Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus, serves primarily as a registered broker-dealer of shares of
investment companies sponsored by Dreyfus and of other investment
companies for which Dreyfus acts as investment adviser, sub-investment
adviser or administrator. Dreyfus Management, Inc., another wholly-owned
subsidiary, provides investment management services to various pension
plans, institutions and individuals.
Officers and Directors of Investment Adviser
--------------------------------------------
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
MANDELL L. BERMAN Real estate consultant and private
Director investor
29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034
Past Chairman of the Board of Trustees
of Skillman Foundation.
Member of The Board of Vintners Intl.
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 9103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
ALVIN E. FRIEDMAN Senior Adviser to Dillon, Read & Co.
Director Inc.
<PAGE>
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
535 Madison Avenue
New York, New York 10022;
Director and member of the Executive
Committee of Avnet, Inc.**
DAVID B. TRUMAN Educational consultant;
Director
Past President of the Russell Sage
Foundation
230 Park Avenue
New York, New York 10017;
Past President of Mount Holyoke
College
South Hadley, Massachusetts 01075;
Former Director:
Student Loan Marketing Association
1055 Thomas Jefferson Street, N.W.
Washington, D.C. 20006;
Former Trustee:
College Retirement Equities Fund
730 Third Avenue
New York, New York 10017
HOWARD STEIN Chairman of the Board:
Chairman of the Board
and Chief Executive Dreyfus Acquisition Corporation*;
Officer
The Dreyfus Consumer Credit
Corporation*;
Dreyfus Land Development Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Service Corporation;
Chairman of the Board and Chief
Executive Officer:
Major Trading Corporation*;
Director:
Avnet, Inc.**;
<PAGE>
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Dreyfus America Fund++++
The Dreyfus Fund International
Limited+++++
World Balanced Fund+++
Dreyfus Partnership Management, Inc.*;
Dreyfus Personal Management, Inc. *;
Dreyfus Precious Metals, Inc.*;
Dreyfus Realty Advisors, Inc.+++;
Dreyfus Service Organization, Inc.*;
The Dreyfus Trust Company++;
Seven Six Seven Agency, Inc.*;
Trustee:
Corporate Property Investors
New York, New York;
JULIAN M. SMERLING Director and Executive Vice President:
Vice Chairman of the
Board of Directors Dreyfus Service Corporation*;
Director and Vice President:
Dreyfus Service Organization, Inc.*;
Vice Chairman and Director:
The Dreyfus Trust Company++;
The Dreyfus Trust Company (N.J.)+;
Director:
The Dreyfus Consumer Credit
Corporation*;
Dreyfus Partnership Management, Inc.*;
Seven Six Seven Agency, Inc.*
JOSEPH S. DiMARTINO Director and Chairman of the Board:
President, and Director
The Dreyfus Trust Company++;
Director and President:
<PAGE>
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Dreyfus Acquisition Corporation*;
The Dreyfus Consumer Credit
Corporation*;
Dreyfus Partnership Management, Inc.*;
The Dreyfus Trust Company (N.J.)++;
Director and Executive Vice President:
Dreyfus Service Corporation*;
Director and Vice President:
Dreyfus Service Organization, Inc.*;
Director:
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Noel Group, Inc.
667 Madison Avenue
New York, New York 10021;
Trustee:
Bucknell University
Lewisburg, Pennsylvania 17837
Vice President and former Treasurer
and Director:
National Muscular Dystrophy
Association
810 Seventh Avenue
New York, New York 10019;
President, Chief Operating Officer and
Director:
Major Trading Corporation*
KEITH SMITH Chairman and Chief Executive Officer:
Chief Operating Officer
The Boston Company
One Boston Place
Boston, Massachusetts 02108
Vice Chairman of the Board:
<PAGE>
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
PAUL H. SNYDER Director:
Vice President and
Chief Financial Officer Pennsylvania Economy League
Philadelphia, Pennsylvania;
Children's Crisis Treatment Center
Philadelphia, Pennsylvania;
Director and Vice President:
Financial Executives Institute
Philadelphia Chapter
Philadelphia, Pennsylvania;
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman, Executive Officer:
Distribution
The Boston Advisers, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
President:
The Boston Company
One Boston Place
Boston, Massachusetts 02108;
Laurel Capital Advisors
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Boston Group Holdings, Inc.
Executive Vice President
<PAGE>
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Boston Safe Deposit & Trust
One Boston Place
Boston, Massachusetts 02108
JAY R. DEMARTINE Chairman of the Board and President:
Vice President,
Marketing The Woodbury Society
16 Woodbury lane
Ogunquit, ME 03907;
Former Managing Director:
Bankers Trust Company
280 Park Avenue
New York, NY 10017;
BARBARA E. CASEY President:
Vice President, Dreyfus Retirement Services;
Retirement Services
Executive Vice President:
Boston Safe Deposit & Trust Co.
One Boston Place
Boston, Massachusetts 02108;
DIANE M. COFFEY None
Vice President,
Corporate
Communications
LAWRENCE M. GREENE Chairman of the Board:
Legal Consultant and
Director The Dreyfus Security Savings Bank,
F.S.B.
Director and Executive Vice President:
Dreyfus Service Corporation*;
Director and Vice President:
Dreyfus Acquisition Corporation*;
Dreyfus Service Organization, Inc.*;
Director:
<PAGE>
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Dreyfus-Lincoln, Inc.*;
Dreyfus Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Thrift & Commerce+++;
The Dreyfus Trust Company (N.J.)++
Seven Six Seven Agency, Inc.*;
ROBERT F. DUBUSS Director and Treasurer:
Vice President
Major Trading Corporation*;
Director and Vice President:
The Dreyfus Consumer Credit
Corporation*;
The Truepenny Corporation*;
Treasurer:
Dreyfus Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Corporation*;
Director:
The Dreyfus Trust Company++;
The Dreyfus Trust Company (N.J.)++;
Dreyfus Thrift & Commerce****
ELIE M. GENADRY President:
Vice President,
Wholesale Institutional Services Division of
Dreyfus Service Corporation*;
Broker-Dealer Division of Dreyfus
Service Corporation*:
Group Retirement Plans Division of
Dreyfus Service Corporation;
Executive Vice President:
Dreyfus Service Corporation *:
Dreyfus Service Organization, Inc.*;
<PAGE>
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Vice President:
The Dreyfus Trust Company++;
Vice President-Sales:
The Dreyfus Trust Company (N.J.)++;
DANIEL C. MACLEAN Director, Vice President and
Vice President and Secretary:
General Counsel
Dreyfus Previous Metals, Inc.*;
Director and Vice President:
The Dreyfus Consumer Credit
Corporation*;
The Dreyfus Trust Company (N.J.)++;
Director and Secretary:
Dreyfus Partnership Management, Inc.*;
Major Trading Corporation *;
The Truepenny Corporation+;
Director:
The Dreyfus Trust Company++;
Secretary:
Seven Six Seven Agency, Inc.*;
JEFFREY N. NACHMAN None
Vice President,
Fund Administration
PHILIP L. TOIA Chairman of the Board and Vice
Vice Chairman, President;
Operations and Dreyfus Thrift & Commerce****;
Administration
Director:
The Dreyfus Security Savings Bank
F.S.B.+;
Senior Loan Officer and Director:
The Dreyfus Trust Company++;
<PAGE>
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Vice President:
The Dreyfus Consumer Credit
Corporation*;
President and Director:
Dreyfus Personal Management, Inc.*;
Director:
Dreyfus Realty Advisors, Inc.+++;
Formerly, Senior Vice President:
The Chase Manhattan Bank, N.A. and The
Chase Manhattan Capital Markets
Corporation
One Chase Manhattan Plaza
New York, New York 10081
KATHERINE C. WICKHAM Formerly, Assistant Commissioner:
Vice President,
Human Resources
Department of Parks and Recreation of
the City of New York
830 Fifth Avenue
New York, New York 10022
MAURICE BENDRIHEM Treasurer:
Controller
Dreyfus Partnership Management, Inc.*;
Dreyfus Service Organization, Inc.*;
Seven Six Seven Agency, Inc.*;
The Truepenny Corporation*;
Controller:
Dreyfus Acquisition Corporation*;
The Dreyfus Trust Company++;
The Dreyfus Trust Company (N.J.)++;
The Dreyfus Consumer Credit
Corporation*;
Assistant Treasurer:
<PAGE>
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Dreyfus Precious Metals*
Formerly, Vice President-Financial
Planning, Administration and Tax:
Showtime/The Movie Channel, Inc.
1633 Broadway
New York, New York 10019
MARK N. JACOBS Secretary:
Vice President, Fund
Legal and Compliance The Dreyfus Consumer Credit
Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.*;
Major Trading Corporation*;
The Truepenny Corporation*
CHRISTINE PAVALOS Assistant Secretary:
Assistant Secretary
Dreyfus Management, Inc.*;
Dreyfus Service Corporation*;
The Truepenny Corporation*
___________________________
* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 80 Cutter Mill Road,
Great Neck, New York 11021.
*** The address of the business so indicated is 45 Broadway, New
York, New York 10006.
**** The address of the business so indicated is Five Triad Center,
Salt Lake City, Utah 84180.
+ The address of the business so indicated is Atrium Building, 80
Route 4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
+++ The address of the business so indicated is One Rockefeller
Plaza, New York, New York 10020.
++++ The address of the business so indicated is 2 Boulevard Royal,
Luxembourg.
<PAGE>
+++++ The address of the business so indicated is Nassau, Bahama
Islands.
Item 29. Principal Underwriter
(a) Premier Mutual Fund Services, Inc. ("Premier") currently serves
as the distributor for The Dreyfus/Laurel Tax-Free Municipal Funds.
Premier is registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the National Association of Securities
Dealers, Inc. Premier is a wholly-owned subsidiary of Institutional
Administration Services. Inc., the parent company of which is Boston
Institutional Group, Inc.
Premier also currently serves as the exclusive distributor or principal
underwriter for the following investment companies:
1) Comstock Partners Strategy Fund, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC Money Market Fund, Inc.
7) Dreyfus BASIC Municipal Fund, Inc.
8) Dreyfus BASIC U.S. Government Money Market Fund
9) Dreyfus California Intermediate Municipal Bond Fund
10) Dreyfus California Tax Exempt Bond Fund, Inc.
11) Dreyfus California Tax Exempt Money Market Fund
12) Dreyfus Capital Value Fund, Inc.
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) The Dreyfus Convertible Securities Fund, Inc.
18) Dreyfus Edison Electric Index Fund, Inc.
19) Dreyfus Florida Intermediate Municipal Bond Fund
20) Dreyfus Florida Municipal Money Market Fund
21) Dreyfus Focus Funds, Inc.
22) The Dreyfus Fund Incorporated
23) Dreyfus Global Bond Fund, Inc.
24) Dreyfus Global Growth, L.P. (A Strategic Fund)
25) Dreyfus Global Investing, Inc.
26) Dreyfus GNMA Fund, Inc.
27) Dreyfus Government Cash Management
28) Dreyfus Growth and Income Fund, Inc.
29) Dreyfus Growth Opportunity Fund, Inc.
30) Dreyfus Institutional Money Market Fund
31) Dreyfus Institutional Short Term Treasury Fund
32) Dreyfus Insured Municipal Bond Fund, Inc.
33) Dreyfus Intermediate Municipal Bond Fund, Inc.
<PAGE>
34) Dreyfus International Equity Fund, Inc.
35) Dreyfus Investors GNMA Fund
36) The Dreyfus Leverage Fund, Inc.
37) Dreyfus Life and Annuity Index Fund, Inc.
38) Dreyfus Liquid Assets, Inc.
39) Dreyfus Massachusetts Intermediate Municipal Bond Fund
40) Dreyfus Massachusetts Municipal Money Market Fund
41) Dreyfus Massachusetts Tax Exempt Bond Fund
42) Dreyfus Michigan Municipal Money Market Fund, Inc.
43) Dreyfus Money Market Instruments, Inc.
44) Dreyfus Municipal Bond Fund, Inc.
45) Dreyfus Municipal Cash Management Plus
46) Dreyfus Municipal Money Market Fund, Inc.
47) Dreyfus New Jersey Intermediate Municipal Bond Fund
48) Dreyfus New Jersey Municipal Bond Fund, Inc.
49) Dreyfus New Jersey Municipal Money Market Fund, Inc.
50) Dreyfus New Leaders Fund, Inc.
51) Dreyfus New York Insured Tax Exempt Bond Fund
52) Dreyfus New York Municipal Cash Management
53) Dreyfus New York Tax Exempt Bond Fund, Inc.
54) Dreyfus New York Tax Exempt Intermediate Bond Fund
55) Dreyfus New York Tax Exempt Money Market Fund
56) Dreyfus Ohio Municipal Money Market Fund, Inc.
57) Dreyfus 100% U.S. Treasury Intermediate Term Fund
58) Dreyfus 100% U.S. Treasury Long Term Fund
59) Dreyfus 100% U.S. Treasury Money Market Fund
60) Dreyfus 100% U.S. Treasury Short Term Fund
61) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
62) Dreyfus Short-Intermediate Government Fund
63) Dreyfus Short-Intermediate Municipal Bond Fund
64) Dreyfus Short-Term Income Fund, Inc.
65) The Dreyfus Socially Responsible Growth Fund, Inc.
66) Dreyfus Strategic Growth, L.P.
67) Dreyfus Strategic Income
68) Dreyfus Strategic Investing
69) Dreyfus Tax Exempt Cash Management
70) Dreyfus Treasury Cash Management
71) Dreyfus Treasury Prime Cash Management
72) Dreyfus Variable Investment Fund
73) Dreyfus-Wilshire Target Funds, Inc.
74) Dreyfus Worldwide Dollar Money Market Fund, Inc.
75) First Prairie Cash Management
76) First Prairie Diversified Asset Fund
77) First Prairie Money Market Fund
78) First Prairie Municipal Money Market Fund
79) First Prairie Tax Exempt Bond Fund, Inc.
80) First Prairie U.S. Government Income Fund
81) First Prairie U.S. Treasury Securities Cash Management
82) General California Municipal Bond Fund, Inc.
83) General California Municipal Money Market Fund
<PAGE>
84) General Government Securities Money Market Fund, Inc.
85) General Money Market Fund, Inc.
86) General Municipal Bond Fund, Inc.
87) General Municipal Money Market Fund, Inc.
88) General New York Municipal Bond Fund, Inc.
89) General New York Municipal Money Market Fund
90) Pacific American Fund
91) Peoples Index Fund, Inc.
92) Peoples S&P MidCap Index Fund, Inc.
93) Premier Insured Municipal Bond Fund
94) Premier California Municipal Bond Fund
95) Premier GNMA Fund
96) Premier Growth Fund, Inc.
97) Premier Municipal Bond Fund
98) Premier New York Municipal Bond Fund
99) Premier State Municipal Bond Fund
100) The Dreyfus/Laurel Funds Trust
101) The Dreyfus/Laurel Tax-Free Municipal Funds
102) The Dreyfus/Laurel Investment Series
(b) The names of the principal executive officers of Premier together
with their respective positions with Premier and their positions and
offices with the Registrant, are set forth below.
Name and Address Position and Position and Office(s)
Office(s) with with Registrant
Premier
Marie E. Connolly* Director, President President & Treasurer
& Chief Operating
Officer
John E. Pelletier* Senior Vice Vice President &
President & General Secretary
Counsel
Joseph F. Tower, III* Senior Vice Assistant Treasurer
President & Chief
Financial Officer
John J. Pyburn** Vice President Assistant Treasurer
Jean M. O'Leary* Assistant Secretary N/A
Eric B. Fischmann** Vice President & Vice President &
Associate General Assistant Secretary
Counsel
Frederic C. Dey** Senior Vice Vice President &
President Assistant Treasurer
<PAGE>
Ruth D. Leibert** Assistant Vice Assistant Secretary
President
Paul D. Furcinito** Assistant Vice Assistant Secretary
President
*Address: Funds Distributor, Inc., Exchange Place, Boston, MA 02109.
**Address: Premier Mutual Fund Services, Inc., 200 Park Avenue, New York,
NY 10166.
<PAGE>
Item 30. Location of Accounts and Records
(1) The Dreyfus/Laurel Tax-Free Municipal Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
(2) Mellon Bank, N.A.
c/o The Boston Company Advisers, Inc.
4th Floor
One Exchange Place
Boston, MA 02109
(3) Mellon Bank, N.A.
c/o The Boston Company, Inc.
5th Floor
One Boston Place
Boston, MA 02108
(4) Mellon Bank, N.A.
The Park Square Building
31 St. James Avenue
Boston, MA 02116
(5) The Shareholder Services Group, Inc.
1 American Express Plaza
Providence, RI 02903
(6) Mellon Bank, N.A.
One Mellon Bank Center
39th Floor
Pittsburgh, PA 15258
<PAGE>
(7) The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
Registrant hereby undertakes as follows:
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the
Registrant, The Dreyfus/Laurel Tax-Free Municipal Funds (formerly The
Laurel Tax-Free Municipal Funds), certifies that it meets all of the
requirements for effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, all in the City
of Boston, the Commonwealth of Massachusetts on the 28th day of December,
1994.
THE DREYFUS/LAUREL TAX-FREE
MUNICIPAL FUNDS
/s/ Marie E. Connolly
-----------------------------
Marie E. Connolly
President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/ Marie E. Connolly
--------------------------- President, Treasurer 12/28/94
Marie E. Connolly
Signature Title Date
--------- ----- ----
/s/ Francis P. Brennan
--------------------------- Trustee, 12/28/94
Francis P. Brennan Chairman of the Board
<PAGE>
/s/ Ruth Marie Adams
-------------------------- Trustee 12/28/94
Ruth Marie Adams
/s/ James M. Fitzgibbons
------------------------ Trustee 12/28/94
James M. Fitzgibbons
/s/ Kenneth A. Himmel
________________________ Trustee 12/28/94
Kenneth A. Himmel
/s/ Stephen J. Lockwood
------------------------- Trustee 12/28/94
Stephen J. Lockwood
/s/ Roslyn M. Watson
------------------------ Trustee 12/28/94
Roslyn M. Watson
/s/ J. Tomlinson Fort
----------------------- Trustee 12/28/94
J. Tomlinson Fort
/s/ Arthur L. Goeschel
------------------------
Arthur L. Goeschel Trustee 12/28/94
/s/ Arch S. Jeffery
------------------------- 12/28/94
Arch S. Jeffery Trustee
/s/ Robert D. McBride
------------------------- 12/28/94
Robert D. McBride Trustee
/s/ John L. Propst
--------------------------
John L. Propst Trustee 12/28/94
<PAGE>
/s/ John J. Sciullo
---------------------------
John J. Sciullo Trustee 12/28/94
<PAGE>
December 28, 1994
The Dreyfus/Laurel Tax-Free Municipal Funds
200 Park Avenue - 55th Floor
New York, New York 10166
Dear Sir or Madam:
The Dreyfus/Laurel Tax-Free Municipal Funds ("Trust") is an
unincorporated voluntary association organized under the laws of the
Commonwealth of Massachusetts on March 28, 1983. We understand that the
Trust is about to file Post-Effective Amendment No. 34 to its Registration
Statement on Form N-1A. You have requested our opinion regarding certain
matters in connection with the issuance of shares of beneficial interest
("Shares") of the Trust in the following designated Series: Premier
Limited Term Municipal Fund, Premier Limited Term California Municipal
Fund, Premier Limited Term Massachusetts Municipal Fund, Premier Limited
Term New York Municipal Fund, Dreyfus/Laurel Massachusetts Tax-Free Money
Fund, Dreyfus/Laurel New York Tax-Free Money Fund and Dreyfus/Laurel
California Tax-Free Money Fund (each, a "Series").
We have, as counsel, participated in various business and other
proceedings relating to the Trust. We have examined copies, either
certified or otherwise proved to be genuine, of minutes of meetings of its
board of trustees and other documents relating to its organization and
operation, and we are generally familiar with its affairs. Based upon the
foregoing, it is our opinion that the authorized but unissued shares of
beneficial interest of the Trust may be sold in accordance with the
Trust's Declaration of Trust and By-Laws and subject to compliance with
the Securities Act of 1933, the Investment Company Act of 1940 and
applicable state laws regulating the offer and sale of securities and,
when so sold, will be legally issued, fully paid and non-assessable.
The Trust is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders
could, under certain circumstances, be held personally liable for the
obligations of the Trust. The Declaration of Trust states that creditors
of, contractors with, and claimants against the Trust or any Series shall
look only to the assets of the Trust or the appropriate Series for
payment. It also requires that notice of such disclaimer be given in each
note, bond, contract, certificate, undertaking or instrument made or
issued by the officers or the trustees of the Trust on behalf of the
Trust. The Declaration of Trust further provides: (1) for indemnification
from the assets of the appropriate Series for all loss and expense of any
shareholder held personally liable for the obligations of the Trust or any
Series by virtue of ownership of shares of such Series; and (ii) for the
<PAGE>
The Dreyfus/Laurel Tax-Free Municipal Funds
December 28, 1994
Page 2
appropriate Series to assume the defense of any claim against the
shareholder for any act or obligation of such Series. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which the Trust or Series would be unable
to meet its obligations.
We hereby consent to the filing of this opinion in connection
with Post-Effective Amendment No. 34 which you are about to file with the
Securities and Exchange Commission and to the reference to our firm in the
Statements of Additional Information incorporated by reference into the
Series' Prospectuses.
Sincerely yours,
/s/ KIRKPATRICK & LOCKHART
KIRKPATRICK & LOCKHART
<PAGE>
Independent Auditors' Consent
-----------------------------
To the Trustees and Shareholders of
The Dreyfus/Laurel Tax-Free Municipal Funds
(formerly The Laurel Tax-Free Municipal Funds):
We consent to the use of our reports dated July 27, 1994, included herein
and to the references to our firm under the headings "Financial
Highlights" and "Other Information" in the Prospectuses and Statements of
Additional Information filed with the Securities and Exchange Commission
in this Post-Effective Amendment No. 34 to the Registration Statement
under the Securities Act of 1933 and in this Amendment No. 35 to the
Registration Statement under the Investment Company Act of 1940.
/s/ KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
December 22, 1994
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
The Laurel Tax-Free Municipal Funds:
We hereby consent to the following with respect to Post-
Effective Amendment No. 34 to the Registration Statement (File
No. 33-43845) on Form N-1A under the Securities Act of 1933, as
amended, of The Laurel Tax-Free Municipal Funds (formerly The
Boston Company Tax-Free Municipal Funds):
1. The incorporation by reference of our report dated
August 11, 1993 accompanying the financial statements
of the Massachusetts Tax-Free Money Fund and
Massachusetts Tax-Free Bond Fund (two series of The
Laurel Tax-Free Municipal Funds) for the year ended
June 30, 1993 into the Statement of Additional
Information.
2. The incorporation by reference of our report dated
August 11, 1993 accompanying the financial statements
of the Tax-Free Money Fund and Tax-Free Bond Fund (two
series of The Laurel Tax-Free Municipal Funds) for the
year ended June 30, 1993 into the Statement of
Additional Information.
3. The incorporation by reference of our report dated
January 18, 1994 accompanying the financial statements
of the New York Tax-Free Money Fund and New York Tax-
Free Bond Fund (two series of The Laurel Tax-Free
Municipal Funds) for the year ended November 30, 1993
into the Statement of Additional Information.
4. The incorporation by reference of our report dated
January 18, 1994 accompanying the financial statements
of the California Tax-Free Money Fund and California
Tax-Free Bond Fund (two series of The Laurel Tax-Free
Municipal Funds) for the year ended November 30, 1993
into the Statement of Additional Information.
/s/ COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
December 27, 1994
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER>6
<NAME>California Tax Free Money Fund Trust shares
<S> <C>
<PERIOD-TYPE> 12-MOS
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<TABLE> <S> <C>
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<SERIES>
<NUMBER>6
<NAME>California Tax Free Money Fund Investor shares
<S> <C>
<PERIOD-TYPE> 12-MOS
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME>DREYFUS/LAUREL NY TAX-FREE MONEY FUND-INVESTOR
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> JUN-30-1994
<INVESTMENTS-AT-COST> 13,080,852
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<SERIES>
[NUMBER] 5
<NAME>DREYFUS/LAUREL NY TAX-FREE MONEY FUND-TRUST
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> JUN-30-1994
[INVESTMENTS-AT-COST] 13,080,852
[INVESTMENTS-AT-VALUE] 13,080,852
[RECEIVABLES] 172,021
[ASSETS-OTHER] 3,846
[OTHER-ITEMS-ASSETS] 570,776
[TOTAL-ASSETS] 13,827,495
[PAYABLE-FOR-SECURITIES] 300,540
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[OTHER-ITEMS-LIABILITIES] 56,928
[TOTAL-LIABILITIES] 357,468
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 13,470,037
[SHARES-COMMON-STOCK] 5,458,959
[SHARES-COMMON-PRIOR] 7,699,999
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 10
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 13,470,027
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 239,665
[OTHER-INCOME] 0
[EXPENSES-NET] 35,450
[NET-INVESTMENT-INCOME] 204,215
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 204,215
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 78,946
[DISTRIBUTIONS-OF-GAINS] 0
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[NUMBER-OF-SHARES-SOLD] 3,604,985
[NUMBER-OF-SHARES-REDEEMED] 5,849,947
[SHARES-REINVESTED] 3,922
[NET-CHANGE-IN-ASSETS] (3,651,006)
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[GROSS-EXPENSE] 85,745
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[PER-SHARE-NAV-BEGIN] 1.00
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[EXPENSE-RATIO] 0.28
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[AVG-DEBT-PER-SHARE] 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> Dreyfus/Laurel Mass Tax-Free Money - Investor Sha
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> JUN-30-1994
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> Dreyfus/Laurel Mass Tax-Free Money - Trust Shares
<S> <C>
<PERIOD-TYPE> 12-MOS
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 0
<NAME> PREMIER LIMITED TERM MASS MUNI CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
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0.28
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<TABLE> <S> <C>
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<SERIES>
<NUMBER> 0
<NAME> PREMIER LIMITED TERM MASS MUNI CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> Premier Ltd Term New York Muni - Investor Shares
<S> <C>
<PERIOD-TYPE> 7-MOS
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<ACCUMULATED-GAINS-PRIOR> (16)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 19,505
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 55,612
<AVERAGE-NET-ASSETS> 6,831,740
<PER-SHARE-NAV-BEGIN> 13.04
<PER-SHARE-NII> 0.35
<PER-SHARE-GAIN-APPREC> (0.45)
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<PER-SHARE-NAV-END> 12.59
<EXPENSE-RATIO> 0.57
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> Premier Ltd Term New York Muni - Trust Shares
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> JUN-30-1994
<INVESTMENTS-AT-COST> 4,890,148
<INVESTMENTS-AT-VALUE> 5,048,057
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<OTHER-ITEMS-LIABILITIES> 41,698
<TOTAL-LIABILITIES> 41,698
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,143,772
<SHARES-COMMON-STOCK> 189,759
<SHARES-COMMON-PRIOR> 194,960
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,659
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 157,909
<NET-ASSETS> 5,310,340
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 207,519
<OTHER-INCOME> 0
<EXPENSES-NET> 18,061
<NET-INVESTMENT-INCOME> 189,458
<REALIZED-GAINS-CURRENT> 8,675
<APPREC-INCREASE-CURRENT> (252,695)
<NET-CHANGE-FROM-OPS> (54,562)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 73,607
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<NUMBER-OF-SHARES-SOLD> 80,154
<NUMBER-OF-SHARES-REDEEMED> 85,972
<SHARES-REINVESTED> 617
<NET-CHANGE-IN-ASSETS> (1,355,000)
<ACCUMULATED-NII-PRIOR> (220)
<ACCUMULATED-GAINS-PRIOR> (16)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 19,505
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 55,612
<AVERAGE-NET-ASSETS> 6,831,740
<PER-SHARE-NAV-BEGIN> 13.04
<PER-SHARE-NII> 0.37
<PER-SHARE-GAIN-APPREC> (0.45)
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<PER-SHARE-NAV-END> 12.59
<EXPENSE-RATIO> 0.29
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> PREMIER CALIFORNIA MUNICIPAL FUND CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> JUN-30-1994
<INVESTMENTS-AT-COST> 21,659,872
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<RECEIVABLES> 656,427
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<OTHER-ITEMS-LIABILITIES> 348,492
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,953,778
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<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (201)
<ACCUMULATED-NET-GAINS> 14,912
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 409,534
<NET-ASSETS> 22,378,023
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 646,607
<OTHER-INCOME> 0
<EXPENSES-NET> 63,922
<NET-INVESTMENT-INCOME> 582,685
<REALIZED-GAINS-CURRENT> 14,912
<APPREC-INCREASE-CURRENT> (827,931)
<NET-CHANGE-FROM-OPS> (230,334)
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<NUMBER-OF-SHARES-REDEEMED> 304,156
<SHARES-REINVESTED> 15,522
<NET-CHANGE-IN-ASSETS> 2,312,494
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> (1,609)
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 110,927
<AVERAGE-NET-ASSETS> 21,852,510
<PER-SHARE-NAV-BEGIN> 13.07
<PER-SHARE-NII> 0.34
<PER-SHARE-GAIN-APPREC> (0.46)
<PER-SHARE-DIVIDEND> 0.34
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<PER-SHARE-NAV-END> 12.61
<EXPENSE-RATIO> 0.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> PREMIER CALIFORNIA MUNICIPAL FUND CLASS R
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> JUN-30-1994
<INVESTMENTS-AT-COST> 21,659,872
<INVESTMENTS-AT-VALUE> 22,069,406
<RECEIVABLES> 656,427
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<TOTAL-ASSETS> 22,726,515
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<OTHER-ITEMS-LIABILITIES> 348,492
<TOTAL-LIABILITIES> 348,492
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<PAID-IN-CAPITAL-COMMON> 21,953,778
<SHARES-COMMON-STOCK> 969,894
<SHARES-COMMON-PRIOR> 634,153
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<ACCUMULATED-NET-GAINS> 14,912
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<ACCUM-APPREC-OR-DEPREC> 409,534
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<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 646,607
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<EXPENSES-NET> 63,922
<NET-INVESTMENT-INCOME> 582,685
<REALIZED-GAINS-CURRENT> 14,912
<APPREC-INCREASE-CURRENT> (827,931)
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<NET-CHANGE-IN-ASSETS> 2,312,494
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<PER-SHARE-NAV-BEGIN> 13.07
<PER-SHARE-NII> 0.35
<PER-SHARE-GAIN-APPREC> (0.46)
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME>Premier Limited Term Municipal Fund Class A Shares
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> JUN-30-1994
<INVESTMENTS-AT-COST> 35,668,050
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<PAID-IN-CAPITAL-COMMON> 36,152,879
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<EXPENSES-NET> 268,914
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<APPREC-INCREASE-CURRENT> (1,792,658)
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<GROSS-EXPENSE> 268,914
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<PER-SHARE-NII> 0.54
<PER-SHARE-GAIN-APPREC> (0.41)
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<PER-SHARE-NAV-END> 11.66
<EXPENSE-RATIO> 0.76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME>Premier Limited Term Municipal Fund Class R Shares
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> JUN-30-1994
<INVESTMENTS-AT-COST> 35,668,050
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<TOTAL-ASSETS> 36,555,020
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 36,152,879
<SHARES-COMMON-STOCK> 1,079,348
<SHARES-COMMON-PRIOR> 711,509
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (23,994)
<ACCUMULATED-NET-GAINS> 82,544
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 84,263
<NET-ASSETS> 36,295,692
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,906,732
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<EXPENSES-NET> 268,914
<NET-INVESTMENT-INCOME> 1,637,818
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<APPREC-INCREASE-CURRENT> (1,792,658)
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 523,618
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<NUMBER-OF-SHARES-SOLD> 796,221
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<SHARES-REINVESTED> 17,601
<NET-CHANGE-IN-ASSETS> 3,007,398
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,201,512
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 138,860
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 268,914
<AVERAGE-NET-ASSETS> 36,754,959
<PER-SHARE-NAV-BEGIN> 12.61
<PER-SHARE-NII> 0.58
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<PER-SHARE-NAV-END> 11.66
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
