File No. 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. [ ]
Post-Effective Amendment No. 37 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 38 [ ]
(Check appropriate box or boxes.)
THE DREYFUS/LAUREL TAX FREE MUNICIPAL FUNDS
(formerly The Laurel Tax-Free Municipal Funds)
___________________________________________________
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
John E. Pelletier
Secretary
The Dreyfus/Laurel Tax-Free
Municipal Funds
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box)
immediately upon filing pursuant to paragraph (b)
----
on October 31, 1995 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
----
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,
1995, relating to Massachusetts Tax-Free Money Fund, New York
Tax-Free Money Fund and California Tax-Free Money Fund, was filed
on August 31, 1995.
Dreyfus/Laurel 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
Expense Summary
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
5(a) Management's Discussion Management's Discussion
of Fund's Performance of Fund's Performance
6 Capital Stock and Cover Page; Investor
Other Securities Line; Distribution; 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
Dreyfus/Laurel CA, MA, and NY Tax-Free Money Fund
Cross-Reference Sheet Pursuant to Rule 495(a) (Continued)
_________________________________________________
Items in
Part B of Statement of Additional
Form N-1A Information Caption
- ---------
10 Cover Page Cover
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
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 Distribuion and Service Plans;
Securities Being Offered Redemption of 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
Dreyfus/Laurel CA, MA, and NY Tax-Free Money Fund
Cross-Reference Sheet Pursuant to Rule 495(a) (Continued)
_________________________________________________
Items in
Part C of
Form N-1A
_________
23 Financial Statements Financial Statements
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under C-4
Common Control with Registrant
26 Number of Holders of Securities C-4
27 Indemnification C-4
28 Business and Other Connections of C-4
Investment Adviser
29 Principal Underwriters C-12
30 Location of Accounts and Records C-15
31 Management Services C-15
32 Undertakings C-15
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 Amendent
Part A - Prospectus
Incorporated by reference to Post-Effective Amendment Nos.
37 and 38.
Part B - Statement of Additional Information Incorporated by
reference to Post-Effective Amendment Nos. 37 and 38.
Part C- Other Information
Signature Page - The Dreyfus/Laurel Tax-Free Municipal Funds
Exhibits
- ---------------------------------------------------------------------------
PROSPECTUS OCTOBER 31, 1995
DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND
DREYFUS/LAUREL MASSACHUSETTS TAX-FREE MONEY FUND
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND
- ---------------------------------------------------------------------------
THE DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND, DREYFUS/LAUREL
MASSACHUSETTS TAX-FREE MONEY FUND AND DREYFUS/LAUREL NEW YORK TAX-FREE MONEY
FUND (EACH A "FUND" AND COLLECTIVELY THE "FUNDS") ARE SEPARATE PORTFOLIOS OF T
HE 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 KNOWN AS A MUTUAL FUND. THE
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 TWO CLASSES OF SHARES-INVESTOR AND CLASS R
SHARES FOR THE FUNDS (COLLECTIVELY, THE "SHARES").
SHARES OF THE FUNDS ARE SOLD WITHOUT A SALES LOAD. INVESTOR SHARES OF
THE FUNDS ARE SUBJECT TO DISTRIBUTION AND SHAREHOLDER SERVICING FEES.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING THE DREYFUS TELET
RANSFER PRIVILEGE.
THE DREYFUS CORPORATION SERVES AS THE FUNDS' INVESTMENT MANAGER. THE
DREYFUS CORPORATION IS REFERRED TO AS "DREYFUS."
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUNDS THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ CAREFULLY BEFORE YOU
INVEST AND RETAINED FOR FUTURE REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION ("SAI") DATED OCTOBER 31,
1995, 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 GLENNCURTISS BOULEVARD, UNIONDALE, NEW
YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR
144.
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 MONEY MARKET FUNDS 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 AN AFFILIATE OF
MELLON BANK, N.A. ("MELLON BANK") 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)
BY THIS PROSPECTUS, THE FUNDS ARE OFFERING INVESTOR SHARES AND CLASS
R SHARES. (CLASS R SHARES OF THE FUND WERE FORMERLY CALLED TRUST SHARES.)
INVESTOR SHARES AND CLASS R SHARES ARE IDENTICAL, EXCEPT AS TO THE SERVICES
OFFERED TO AND THE EXPENSES BORNE BY EACH CLASS. 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, OR TO CUSTOMERS WHO HAVE RECEIVED AND HOLD SHARES OF A FUND
DISTRIBUTED TO THEM BY VIRTUE OF SUCH AN ACCOUNT OR RELATIONSHIP. INVESTOR
SHARES ARE SOLD PRIMARILY TO RETAIL INVESTORS BY THE FUNDS' DISTRIBUTOR AND
BY BANKS, SECURITIES BROKERS OR DEALERS AND OTHER FINANCIAL INSTITUTIONS
(INCLUDING DREYFUS AND ITS AFFILIATES) (COLLECTIVELY "AGENTS") THAT HAVE
ENTERED INTO A SELLING AGREEMENT WITH THE FUNDS' DISTRIBUTOR.
TABLE OF CONTENTS
EXPENSE SUMMARY................................. 4
FINANCIAL HIGHLIGHTS............................ 5
DESCRIPTION OF THE FUNDS........................ 10
MANAGEMENT OF THE FUNDS......................... 17
HOW TO BUY FUND SHARES.......................... 19
SHAREHOLDER SERVICES............................ 20
HOW TO REDEEM FUND SHARES....................... 23
DISTRIBUTION PLAN (INVESTOR SHARES ONLY)........ 25
PERFORMANCE INFORMATION......................... 26
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES........ 27
GENERAL INFORMATION............................. 28
Page 2
<TABLE>
<CAPTION>
EXPENSE SUMMARY
INVESTOR SHARES CLASS R SHARES
---------------- ----------------
<S> <C> <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.......................................... .35% .35%
12b-1 Fee*.............................................. .25% none
Other Expenses**........................................ .00% .00%
______ _____
Total Fund Operating Expenses........................... .60% .35%
EXAMPLE:
You would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period: INVESTOR SHARES CLASS R SHARES
---------------- ----------------
1 Year $ 6 $ 4
3 Years $19 $ 11
5 Years $33 $ 20
10 Years $75 $ 44
</TABLE>
* See "Distribution Plan (Investor Shares Only)" for a description of a
Fund's Distribution Plan for the Investor 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 0.02% of each
Fund's net assets. (See "Management of the Funds.")
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. Long-term investors in Investor 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. The information in the table does not reflect any
fee waivers or expense reimbursement arrangements that may be in effect.
Certain 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 Plan (Investor Shares Only)." Certain proposals have been
submitted to each Fund's shareholders that, if approved, would result in
increases in the Fund's Management fee, the imposition of certain shareholder
transaction charges and other changes. See "Description of the Funds_Recent
Development."
- ----------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL
RETURN GREATER OR LESS THAN 5%.
- ----------------------------------------------------------------------------
The Funds understand that 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 an Agent under its Selling Agreement ("Agreement") with
Premier Mutual Fund Services, Inc. ("Premier"). The Agreement requires each
Agent to disclose to its clients any compensation payable to such Agent by
Premier and any other compensation payable by the clients for various
services provided in connection with their accounts.
Page 4
FINANCIAL HIGHLIGHTS
The following tables are based upon a single Investor 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, 1995, 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
period ended June 30, 1994 and June 30, 1995, have been audited by KPMG Peat
Marwick LLP, independent auditors, whose report thereon appears in the Funds'
Annual Reports. Further information about the performance of each Fund is
also included in each Fund's Annual Report, which may be obtained without
charge by writing to the address or calling the telephone number set forth on
the cover page of this Prospectus. The information in the tables below for
the fiscal years (periods) prior to the fiscal 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.*
PERIOD ENDED YEAR ENDED
YEAR OR PERIOD ENDED NOVEMBER 30, JUNE 30, JUNE 30
-------------------------------------------- ------------ -----------
1988 1989 1990 1991 1992 1993# 1994## 1995###
-------- ----- ------ ------ ------ ------ ------- ------
<S> <C> <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 $1.00
----- ----- ----- ----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income***.......... 0.033 0.060 0.056 0.046 0.031 0.023 0.012 0.031
LESS DISTRIBUTIONS:
Distributions from net
investment income................. (0.033) (0.060) (0.056) (0.046) (0.031) (0.023) (0.012) (0.031)
----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period...... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ====== ===== ===== ======
TOTAL RETURN++............. 3.39% 6.18% 5.75% 4.65% 3.10% 2.41% 1.25% 3.10%
----- ----- ----- ----- ----- ----- ----- -----
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's)....... $9,112 $15,745 $27,493 $27,831 $26,98 $15,490 $17,170 $15,538
Ratio of expenses to
average net assets+.......... 0.67%** 0.32% 0.32% 0.32% 0.32% 0.32% 0.47%** 0.60%
Ratio of net investment income to
average net assets.......... 4.55%** 6.02% 5.58% 4.57% 3.03% 2.40% 2.11%** 3.07%
- -------------------
* The Fund commenced operations on March 2, 1988. On February 1, 1993,
existing shares of the Fund were designated the Retail Class and the
Fund began offering the Institutional Class and Investment Class of
shares. Effective April 4, 1994, the Retail and Institutional Classes of
Shares were reclassified as a single class known as the Investor shares.
The Financial Highlights for the year ended June 30, 1995 are based upon
an Investor share outstanding. 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/or
reimbursement of expenses by the investment manager 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 net investment income 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. Prior to April 4, 1994, The
Boston Company Advisors, Inc. served as the Fund's investment manager.
From April 4, 1994 through October 16, 1994, Mellon Bank, N.A., served as
the Fund's investment manager.
### Effective October 17, 1994, The Dreyfus Corporation began serving as
the Fund's investment manager.
+ Annualized expense ratios before voluntary waiver of fees and/or
reimbursement of expenses by the investment manager 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>
Page 5
<TABLE>
<CAPTION>
DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH PERIOD.*
PERIOD YEAR
PERIOD ENDED ENDED ENDED
NOVEMBER 30, JUNE 30, JUNE 30,
1993# 1994## 1995###
------------- ------- ---------
<S> <C> <C> <C>
Net asset value, beginning of period...................... $1.00 $1.00 $1.00
----- ----- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income***.......................... 0.020 0.013 0.033
LESS DISTRIBUTIONS:
Distributions from net investment income.......... (0.020) (0.013) (0.033)
----- ----- ------
Net asset value, end of period............................ $1.00 $1.00 $1.00
===== ====== ======
TOTAL RETURN++.............................................. 1.98% 1.31% 3.35%
----- ----- ------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets, end of period (in 000's).............. $6,408 $9,747 $7,430
Ratio of expenses to average net assets+........... 0.28%** 0.29%** 0.35%
Ratio of net investment income to average net assets..... 2.13%** 2.29%** 3.32%
- -----------
* The Fund commenced selling Investment Class shares on February 1, 1993.
Effective April 4, 1994, the Investment Class shares were reclassified
as the Trust shares. Effective October 17, 1994, the Trust shares were
redesignated Class R shares. The table above is based upon an Investment
class share outstanding from February 1, 1993 to April 3, 1994 and a
Trust share outstanding from April 4, 1994 to October 16, 1994.
** Annualized.
*** Net investment income per share before waiver of fees and
reimbursement of expenses by the investment manager 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 net investment income 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. Prior to April 4, 1994, The Boston
Company Advisors, Inc. served as the Fund's investment manager. From
April 4, 1994 through October 16, 1994, Mellon Bank, N.A., served as
the Fund's investment manager.
### Effective October 17, 1994, The Dreyfus Corporation began serving as the
Fund's investment manager.
+ Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by the investment manager 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>
Page 6
<TABLE>
<CAPTION>
DREYFUS/LAUREL MASSACHUSETTS TAX-FREE MONEY FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR.*
YEAR ENDED JUNE 30,
1986 1987 1988 1989 1990 1991 1992 1993 1994# 1995##
------ ----- ---- ----- ---- ----- ---- ----- ----- -----
<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***..... 0.047 0.039 0.042 0.055 0.056 0.051 0.034 0.019 0.018 0.029
LESS DISTRIBUTIONS:
Distributions from
net investment income......... (0.047) (0.039) (0.042) (0.055) (0.056) (0.051) (0.034) (0.019) (0.018) (0.029)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
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++.................. 4.69% 3.97% 4.12% 5.62% 5.56% 4.93% 3.36% 1.94% 1.83% 2.99%
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Net assets,end of year
(in 000's)................ $111,095 $137,295 $146,592 $134,941 $159,551 $160,392 $149,679 $68,952 $86,505 $75,746
Ratios of operating expenses
to average net assets +..... 0.50% 0.47% 0.65% 0.67% 0.65% 0.64% 0.67% 0.68% 0.70% 0.60%
Ratios of net
investment income
to average net assets..... 4.71% 3.92% 4.25% 5.45% 5.64% 5.07% 3.38% 1.98% 1.80% 2.94%
- -------------------------
* The Fund commenced operations on July 27, 1983. On February 1, 1993,
existing shares of the Fund were designated the Retail Class and the Fund
began offering the Institutional Class and Investment Class of shares.
Effective April 4, 1994, the Retail and Institutional Classes were
reclassified as a single class of shares known as Investor shares. The
Financial Highlights 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 years are based upon a Retail share
outstanding.
# Prior to April 4, 1994, The Boston Company Advisors, Inc.
served as the Fund's investment manager. From April 4, 1994 through
October 16, 1994, Mellon Bank, N.A., served as the Fund's investment
manager.
## Effective October 17, 1994, The Dreyfus Corporation began serving
as the Fund's investment manager.
*** Net investment income per share before waiver of fees and/or
reimbursement of expenses by the investment manager and/or custodian
and/or transfer agent for the years ended June 30, 1994, 1993, 1989, 1987
and1986 were $0.017, $0.019, $0.055, $0.038 and $0.049, respectively.
+ Annualized expense ratios before voluntary waiver of
fees and/or reimbursement of expenses by investment manager and/or
custodian and/or transfer agent for the years ended June 30, 1994, 1993,
1989, 1987 and1986 would have been 0.78%, 0.69%, 0.70%, 0.64% and 0.79%,
respectively.
++ Total return represents aggregate total return for the periods indicated.
</TABLE>
Page 7
<TABLE>
<CAPTION>
DREYFUS/LAUREL MASSACHUSETTS TAX-FREE MONEY FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
PERIOD YEAR YEAR
ENDED ENDED ENDED
6/30/93 6/30/94# 6/30/95##
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period............................... $1.00 $1.00 $1.00
----- ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income***....................................... 0.007 0.019 0.032
LESS DISTRIBUTIONS:
Distributions from net investment income....................... (0.007) (0.019) (0.032)
----_ ------ ------
Net Asset Value, end of period..................................... $1.00 $1.00 $1.00
===== ====== =====
TOTAL RETURN++....................................................... 0.73% 1.97% 3.25%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets, end of period (in 000's)............................... $19,645 $19,830 $25,485
Ratios of expenses to average net assets+........................... 0.57%** 0.56% 0.35%
Ratios of net investment income to average net assets.............. 1.78%** 1.94% 3.19%
- -------------------
* The Fund commenced selling Investment Class shares on February 1, 1993.
Effective April 4, 1994, the Investment Class was reclassified as the
Trust shares. Effective October 17, 1994, Trust shares were redesignated
Class R shares. The table above is based upon an Investment Class share
outstanding from February 1, 1993 to April 3, 1994 and a Trust share
outstanding from April 4, 1994 to October 16, 1994.
** Annualized.
*** Net investment income per share before waiver of fees and
reimbursement of expenses by the investment manager 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 the investment manager 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.
# Prior to April 4, 1994, The Boston Company Advisors, Inc.
served as the Fund's investment manager. From April 4, 1994 through
October 16, 1994, Mellon Bank, N.A. served as the investment manager for
the Fund beginning April 4, 1994.
## Effective October 17, 1994, The Dreyfus Corporation began serving
as the Fund's investment manager.
</TABLE>
Page 8
<TABLE>
<CAPTION>
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
PERIOD YEAR
YEAR OR PERIOD ENDED NOVEMBER 30, ENDED ENDED
-------------------------------------------------- JUNE 30 JUNE 30,
1988 1989 1990 1991 1992 1993 1994# 1995##
---- ----- ----- ----- ----- ----- ------ ------
<S> <C> <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 $1.00
----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net Investment Income***..... 0.032 0.058 0.054 0.046 0.031 0.021 0.012 0.029
LESS DISTRIBUTIONS:
Dividends from net investment income... (0.032) (0.058) (0.054) (0.046) (0.031) (0.021) (0.012) (0.029)
Net asset value, end of period.... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN++............... 3.19% 5.90% 5.53% 4.65% 3.11% 2.15% 1.23% 2.95%
----- ----- ----- ----- ----- ----- ----- -----
RATIO TO AVERAGE NET ASSETS
SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).. $8,929 $14,129 $16,870 $15,989 $11,183 $9,356 $8,011 $21,739
Ratio of expenses to average net assets... 0.65%** 0.32% 0.32% 0.32% 0.32% 0.31% 0.44%** 0.60%
Ratio of net investment income
to average net assets...... 4.33%** 5.73% 5.38% 4.58% 3.08% 2.13% 2.12%** 2.97%
- -----------
* The Fund commenced operations on March 2, 1988. On February 1, 1993
existing shares of the Fund were designated the Retail Class and the Fund
began offering the Institutional Class and Investment Class of shares.
Effective April 4, 1994 the Retail and Institutional Classes were
reclassified as a single class of shares known as Investor shares. The
Financial Highlights for the year ended June 30, 1995 are based upon an
Investor share outstanding. 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 the investment manager 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 $0.009, $0.008, $0.024, $0.040, $0.047, $0.050 and
$0.026, respectively.
+ Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by the investment manager 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 0.97%, 1.29%, 1.03%, 0.93%, 1.03%, 1.10%,
and 1.42%, 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. Prior to April 4, 1994, The
Boston Company Advisors, Inc. served as the Fund's investment manager.
From April 4, 1994 through October 16, 1994, , Mellon Bank, N.A., served
as the Fund's investment manager.
## Effective October 17, 1994, The Dreyfus Corporations began serving
as the Fund's investment manager.
</TABLE>
Page 9
<TABLE>
<CAPTION>
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH PERIOD.*
PERIOD YEAR
PERIOD ENDED ENDED ENDED
NOVEMBER 30, JUNE 30, JUNE 30,
1993 1994# 1995##
------------ ------ ------
<S> <C> <C> <C>
Net asset value, beginning of period...................... $1.00 $1.00 $1.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income***.......................... 0.018 0.013 0.031
LESS DISTRIBUTIONS:
Distributions from net investment income.................. (0.018) (0.013) (0.031)
------ ------ ------
Net asset value, end of period............................ $1.00 $1.00 $1.00
====== ===== =====
TOTAL RETURN++.............................................. 1.76% 1.32% 3.21%
------ ------ ------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).............. $7,700 $5,459 $8,050
Ratio of expenses to average net assets+........... 0.26%** 0.28%** 0.35%
Ratio of net investment income to average net assets 2.12%** 2.27%** 3.22%
- -------------
* The Fund commenced selling Investment Class shares on February 1, 1993.
Effective April 4, 1994, the Investment Class was reclassified as the
Trust shares.Effective October 17, 1994, Trust shares were redesignated
Class R shares. The table above is based upon an Investment Class share
outstanding from February 1, 1993 to April 3, 1994 and a Trust share
outstanding from April 4, 1994 to October 16, 1994.
** Annualized.
*** Net investment income per share before waiver of fees and
reimbursement of expenses by the investment manager 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 the investment manager 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.Prior to April 4, 1994, The Boston
Company Advisors, Inc. served as the Fund's investment manager. From
April 4, 1994 through October 16, 1994, Mellon Bank, N.A., served as the
Fund's investment manager.
## Effective October 17, 1994, The Dreyfus Corporation began serving
as the Fund's investment manager.
</TABLE>
DESCRIPTION OF THE FUNDS
RECENT DEVELOPMENTS
At a meeting of the Board of Trustees held on July 26, 1995, the
Board approved a new Investment Management Agreement (the "New Agreement")
between The Dreyfus/Laurel Tax-Free Municipal Funds, on behalf of
Dreyfus/Laurel California Tax-Free Money Fund and Dreyfus/Laurel New York
Tax-Free Money Fund and Dreyfus providing for a fee payable to Dreyfus at the
annual rate of .45 of 1% of each such Fund's average daily net assets. The
fee payable to Dreyfus under the New Agreement would represent an increase
of .10% from the fee currently paid to Dreyfus under the existing Investment
Management Agreement, although Dreyfus has agreed that it would limit its fee
to .35 of 1% of average daily net assets for one year following the change in
the management fee. In addition, under the New Agreement, certain transaction
charges would be payable to the transfer agent for the Dreyfus/Laurel
California Tax-Free Money Fund and Dreyfus/Laurel New York Tax-Free Money
Fund out of shareholder accounts in connection with shareholders utilizing
certain services. These transaction costs would include a $5 charge for
exchanges out of the Dreyfus/Laurel California Tax-Free Money Fund and
Dreyfus/Laurel New York Tax-Free Money Fund, wire redemptions, Dreyfus
TELETRANSFER redemptions, and closeouts of shareholder accounts and a $2
charge for redemption checks ("Shareholder Transaction Costs"). Dreyfus would
continue to be responsible for arranging and paying for administrative,
custody, fund accounting, and certain transfer agency services out of its
fee under the New Agreement. Shareholders of Dreyfus/Laurel California
Tax-Free Money Fund and Dreyfus/Laurel New York Tax-Free
Page 10
Money Fund, and of each Class of each such Fund, will be asked to approve the
New Agreement at meetings to be held on or about November 15, 1995 and, if
approved, the New Agreement would become effective on or about November 20,
1995 (the "California/New York Effective Date"). Shareholders of
Dreyfus/Laurel California Tax-Free Money Fund and Dreyfus/Laurel New York
Tax-Free Money Fund prior to the Effective Date would not be subject to the
Shareholder Transaction Costs.
The Board also approved certain other changes for Dreyfus/Laurel
California Tax-Free Money Fund and Dreyfus/Laurel New York Tax-Free Money
Fund which would allow these Funds to join Dreyfus' "BASIC" Family of Money
Funds, as described below, and which are contingent upon shareholders'
approval of the New Agreement. If shareholders approve the New Agreement,
these additional changes would become effective on the California/New York
Effective Date.
The Board approved eliminating the Distribution Plan for Investor
shares and converting each such Fund into a single class fund, as well as
eliminating the availability of certain shareholder service features,
including the Dreyfus Auto-Exchange Privilege, Dreyfus-AUTOMATIC Asset
Builder, Dreyfus Dividend Options, Dreyfus Government Direct Deposit
Privilege, Dreyfus Payroll Savings Plan and the Automatic Withdrawal Plan.
The Board also approved increasing Dreyfus/Laurel California Tax-Free Money
Fund and Dreyfus/Laurel New York Tax-Free Money Fund's minimum initial and
subsequent investment requirements from $2,500 to $25,000 and from $100 to
$1,000, respectively, and the minimum balance below which accounts may be
involuntarily redeemed by these Funds from $500 to $10,000. Shareholders of
Dreyfus/Laurel California Tax-Free Money Fund and Dreyfus/Laurel New York
Tax-Free Money Fund prior to the California/New York Effective Date would not
be subject to the increased minimums.
Finally, the Board approved changing the name of Dreyfus/Laurel
California Tax-Free Money Fund to "Dreyfus BASIC California Municipal Money
Market Fund" and Dreyfus/Laurel New York Tax-Free Money Fund to "Dreyfus
BASIC New York Municipal Money Market Fund, as of the California/New York
Effective Date.
At a meeting of the Board of Trustees of the Trust held on October
25, 1995, the Board approved an Agreement and Plan of Reorganization (the
"Plan") between the Trust, on behalf of Dreyfus/Laurel Massachusetts Tax-Free
Money Fund (the "Massachusetts Tax-Free Money Fund"), and Dreyfus
Massachusetts Municipal Money Market Fund (the "Acquiring Fund"), a fund with
an investment objective substantially similar to that of the Massachusetts
Tax-Free Money Fund, whereby (a) a portion of the Massachusetts Tax-Free
Money Fund's assets equal in value to the aggregate net asset value of the
interest in such Fund held by such Fund's Investor shareholders would be
transferred to the Acquiring Fund and the Massachusetts Tax-Free Money Fund's
Investor class would be terminated, and (b) Investor class shareholders of
the Massachusetts Tax-Free Money Fund would become shareholders of the
Acquiring Fund receiving in exchange for their Investor shares, shares of the
Acquiring Fund having an aggregate net asset value equal to the aggregate
value of the assets transferred to the Acquiring Fund. The Dreyfus
Corporation ("Dreyfus") has agreed to reduce its fee or reimburse the
Acquiring Fund to ensure that its total operating expenses for one year
following the closing of the reorganization contemplated by the Plan (the
"Reorganization") do not exceed .60 of 1% of average daily net assets.
Shareholders of the Massachusetts Tax-Free Money Fund, and of each Class of
such Fund, will be asked to approve the Plan at a meeting to be held on or
about February 15, 1996, and, if approved, the Reorganization will become
effective on or about February 22, 1996 the "Massachusetts Effective Date").
Consummation of the Reorganization is not dependent upon approval by Class R
shareholders of the proposed New Investment Management Agreement, discussed
below.
At the October 25, 1995 Board meeting, the Board of Trustees of the
Trust also approved a new Massachusetts Agreement (a "Massachusetts
Agreement") between the Trust, on behalf of Massachusetts Tax-Free Money
Fund, and Dreyfus providing for a fee payable to Dreyfus at the annual rate
of .45 of 1% of such Fund's average daily net assets. The fee payable to
Dreyfus under the New
Page 11
Agreement would represent an increase of .10 of 1% from the fee currently
paid to Dreyfus under the existing Investment Management Agreement, although
Dreyfus has agreed that it would limit its fee to .35 of 1% of average daily
net assets for one year following the change in the management fee. In
addition, under the New Massachusetts Agreement certain transaction charges
would be payable to the Massachusetts Tax-Free Money Fund's transfer agent
out of shareholder accounts in connection with shareholders utilizing certain
services. These transaction costs would include a $5 charge for exchanges out
of the Massachusetts Tax-Free Money Fund, wire redemptions, Dreyfus
TELETRANSFER redemptions, and closeouts of shareholder accounts and a $2
charge for redemption checks ("Massachusetts Shareholder Transaction Costs").
Dreyfus would continue to be responsible for arranging and paying for
adminstrative, custody, fund accounting, and certain transfer agency services
out of its fee under the New Massachusetts Agreement. The proposed New
Massachusetts Agreement will be conditioned upon consummation of the
Reorganization, and thus would not affect Investor class
shareholders. Class R shareholders of the Massachusetts Tax-Free Money Fund
will be asked to approve the New Massachusetts Agreement at a meeting to be
held on or about February 15, 1996 and, if approved, the New Massachusetts
Agreement would become effective on the Massachusetts Effective Date. Class R
shareholders of the Massachusetts Tax-Free Money Fund prior to the Effective
Date would not be subject to the Massachusetts Shareholder Transaction Costs.
The Board also approved certain other changes for the Massachusetts
Tax-Free Money Fund which would allow the Fund to join Dreyfus' "BASIC"
Family of Money Funds, as described below and which are contingent upon
approval of Class R shareholders of the New Massachusetts Agreement. If Class
R shareholders approve the New Massachusetts Agreement, these additional
changes would become effective on the Massachusetts Effective Date.
The Board approved eliminating the availability of certain of the
Massachusetts Tax-Free Money Fund's shareholder service features, including
the Dreyfus Auto-Exchange Privilege, Dreyfus-AUTOMATIC Asset Builder, Dreyfus
Dividend Options, Dreyfus Government Direct Deposit Privilege, Dreyfus
Payroll Savings Plan and the Automatic Withdrawal Plan. The Board also
approved increasing the Massachusetts Tax-Free Money Fund's minimum initial
and subsequent investment requirements from $2,500 to $25,000 and from $100
to $1,000, respectively, the minimum balance below which accounts may be
involuntarily redeemed by the Fund from $500 to $10,000. Shareholders of the
Massachusetts Tax-Free Money Fund prior to the Massachusetts Effective Date
would not be subject to the increased minimums.
Finally, the Board approved changing the Massachustts Tax-Free Money
Fund's name from Dreyfus/Laurel Massachusetts Tax-Free Money Fund to "Dreyfus
BASIC Massachusetts Municipal Money Market Fund", as of the Massachusetts
Effective Date.
A Proxy Statement/Prospectus, which will describe the above
proposals, as well as the Massachusetts Tax-Free Money Fund and other
matters, will be mailed to Massachusetts Tax-Free Money Fund shareholders
prior to the meeting currently scheduled for February 15, 1996.
GENERAL
By this Prospectus, each Fund is offering Investor shares and Class R
shares. (Class R shares of the Funds were formerly called Trust Shares.)
Investor shares and Class R shares are identical, except as to the services
offered to and the expenses borne by each Class. 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, or to customers who
have received and hold shares of a Fund distributed to them by virtue of such
an account or relationship. Investor shares are sold primarily to retail
investors by the Distributor and by Agents that have entered into a Selling
Agreement with the Distributor. 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 transaction requests to each Fund's transfer agent or
to the Distributor. Distribution and shareholder
Page 12
servicing fees attributable to Investor shares will cause Investor shares to
have a higher expense ratio and pay lower dividends than Class R.
INVESTMENT OBJECTIVE AND POLICIES
Each Fund seeks to provide a higher 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. 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 Dreyfus,
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 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 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.
Each 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 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 the Funds consist of: (1)
municipal bonds; (2) municipal notes; and (3) municipal commercial paper. The
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 Dreyfus in accordance with procedures established by the
Board of Trustees. The Funds will limit their investments to securities that
present minimal credit risk, as determined by Dreyfus under procedures
established by the Board of Trustees.
The 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 Fund maintains a dollar-weighted average
portfolio maturity of 90 days or less and seeks to maintain a constant net ass
et value of $1.00 per share, although there is no assurance it can do so on a
continuing basis.
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 speci-
Page 13
fied 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 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 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 Trustees must also be equivalent to the
quality standards applicable to the Funds. 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
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.
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 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.
Dreyfus, on behalf of the Funds, 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 10% 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
Page 14
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. You
should consider carefully the special risks inherent in the Fund's investment
in California Municipal Obligations. These risks result from certain
amendments to the California Constitution and other statutes that limit the
taxing and spending authority of California governmental entities, as well as
from the general financial condition of the State of California. From mid
1990 to late 1993, the State suffered a recession with the worst economic,
fiscal and budget conditions since the 1930s. As a result, the State has
experienced recurring budget deficits for four of the five fiscal years ended
1991-92. The State had an operating surplus of approximately $109 million in
1992-93 and $836 million in 1993-94. However, at June 1994, according to
California's Department of Finance, the State's Special Fund for Economic
Uncertainties has an accumulated deficit, on a budget basis, of approximately
$1.8 billion. A further consequence of the large budget imbalances has been
that the State depleted its available cash resources and has had to use a
series of external borrowings to meet its cash needs. To meet its cash flow
needs in the 1994-95 fiscal year, the State issued, in July and August 1994,
$4.0 billion of revenue anticipation warrants and $3.0 billion of revenue
anticipation notes. As a result of the deterioration in the State's budget
and cash situation between October 1991 and July 1994, the rating on the
State's general obligation bonds was reduced by S&P from AAA to A, by Moody's
from Aaa to A1 and by Fitch from AAA to A. These and other factors may have
the effect of impairing the ability of the issuers of California Municipal
Obligations to pay interest on, or repay principal of, such Municipal
Obligations. You should obtain and review a copy of the Statement of
Additional Information which more fully sets forth these and other risk
factors. Other considerations relating to a Fund's investments in California
Municipal Obligations are summarized in the SAI.
CERTAIN RISK CONSIDERATIONS REGARDING THE COMMONWEALTH OF
MASSACHUSETTS. You should consider carefully the special risks inherent in
the Fund's investment in Massachusetts Municipal Obligations. Massachusetts'
economic difficulties and fiscal problems in the late 1980s and early 1990s
caused several rating agencies to lower their ratings of Massachusetts
Municipal Obligations. A return of persistent serious financial difficulties
could adversely affect the market values and marketability of, or result in
default in payment on, outstanding Massachusetts Municipal Obligations.
Massachusetts' expenditures for State programs and services in each of the
fiscal years 1987 through 1991 exceeded each year's current revenues. The
budgeted operating funds of Massachusetts ended fiscal years 1992, 1993 and
1994, however, with an excess of revenues and other sources over expenditures
and other uses of $312.3 million, $13.1 million and $26.8 million,
respectively. Fiscal 1994 ended with positive budgeted operating fund
balances of $589.3 million. You should obtain and review a copy of the
Statement of Additional Information which more fully sets forth these and
other risk factors. Other considerations relating to the Fund's investment in
Massachusetts Municipal Obligations are summarized in the SAI.
CERTAIN RISK CONSIDERATIONS REGARDING THE STATE OF NEW YORK AND NEW
YORK CITY. You should consider carefully the special risks inherent in
investing in New York Municipal Obligations. These risks 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 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 each Fund 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 a Fund's portfolio and the
interest income to the Fund could be adversely affected. Moreover, the
national recession
Page 15
and the significant slowdown in the New York and regional economies in the
early 1990s added substantial uncertainty to estimates of the State's tax
revenues, which, in part, caused the State to incur cash-basis operating
deficits in the General Fund and issue deficit notes during the fiscal
periods 1989 through 1992. The State's financial operations have improved,
however, during recent fiscal years. 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 and 1995 fiscal years with operating
surpluses of $914 million and $158 million, respectively. There can be no
assurance that new York will not face substantial potential budget gaps in
future years. In January 1992, Moody's lowered from A to Baa1 the ratings on
certain appropriation-backed debt of New York State and its agencies. The
State's general obligation, state guaranteed and New York State Local
Government Assistance Corporation bonds continued to be rated A by Moody's.
In January 1992, S&P lowered from A to A- its ratings of New York State
general obligation bonds and stated that it continued to assess the ratings
outlook as negative. The ratings of various agency debt, state moral
obligations, contractual obligations, lease purchase obligations and state
guarantees also were lowered. In February 1991, Moody's lowered its rating on
new York City's general obligation bonds from A to Baa1 and in July 1995, S&P
lowered its rating on such bonds from A- to BBB+. The rating changes reflect
the rating agencies' concern about the financial condition of New York State
and City, the heavy debt load of the State and City, and economic
uncertainties in the region. You should obtain and review a copy of the
Statement of Additional Information which more fully sets forth these and
other risk factors. Other considerations relating to the Fund's 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 a Fund, 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% of the 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. 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 hold-
Page 16
ings. 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
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 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.
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 August 31, 1995, Dreyfus managed or administered
approximately $80 billion in assets for more than 1.8 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 Board of Trustees of The Dreyfus/Laurel Tax-Free Municipal
Funds in accordance with Massachusetts law. Pursuant to the Investment
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 the Funds. As the Funds'
investment manager, Dreyfus manages the Funds by making investment decisions
based on the Funds' investment objective, policies and restrictions.
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 $203 billion in assets as of
June 30, 1995, including $73 bil-
Page 17
lion in mutual fund assets. As of June 30, 1995, Mellon, through various
subsidiaries, provided non-investment services, such as custodial or
administration services, for approximately $707 billion in assets, including
approximately $71 billion in mutual fund assets.
Under the Investment Management Agreement, each Fund pays a fee,
computed daily and paid monthly, at the annual rate of .35% of such Fund's
average daily net assets less certain expenses described below. Dreyfus pays
all of the expenses of a Fund 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 a Fund's allocable share of such
expenses. In order to compensate Dreyfus 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, Dreyfus
may waive (either voluntarily or pursuant to applicable state limitations)
additional investment management fees payable by the Fund. From April 4, 1994
to October 17, 1994, the Funds were advised by Mellon Bank under the
Investment Management Agreement.
For the fiscal year ended June 30, 1995, each Fund paid Mellon Bank
or Dreyfus .35% of is average daily net assets in investment management fees,
less fees and expenses of the non-interested Trustees (including counsel
fees).
For the fiscal year ended June 30, 1995, total operating expenses
(excluding Rule 12b-1 fees) of each class of each Fund were 0.35% of the
Fund's average daily net assets.
In addition, Investor shares may be subject to certain distribution
and service fees. See "Distribution Plan (Investor Shares Only)."
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 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 its investment objective, policies
and restrictions, the Funds may invest in securities of companies with which
Mellon Bank has a lending relationship.
The Funds' 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 FDI
Distribution Services, Inc., a provider of mutual fund administration
services, which in turn is a wholly-owned subsidiary of FDI Holding Inc., 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 Funds' custodian. The Funds' Transfer and Dividend
Disbursing Agent is The Shareholder Services Group, Inc. (the "Transfer
Agent"), a subsidiary of First Data Corporation, One American Express Plaza,
Providence, Rhode Island 02903. Premier Mutual Fund Services, Inc. is the
Funds' sub-administrator and, pursuant to a Sub-Administration Agreement with
Dreyfus, provides various administrative and corporate secretarial services
to the Funds.
Page 18
HOW TO BUY FUND SHARES
GENERAL_ Investor shares are offered to any investor and may be
purchased through the Distributor or Agents that have entered into Selling
Agreements with 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, or to customers who have received and hold shares of a Fund
distributed to them by virtue of such an account or relationship.
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.
The minimum initial investment is $2,500, or $1,000 if you are a
client of an Agent which has made an aggregate minimum initial purchase for
its customers of $2,500. Subsequent investments must be at least $100. The
initial investment must be accompanied by the Funds' Account Application. For
full-time or part-time employees of Dreyfus or any of its affiliates or
subsidiaries, directors of Dreyfus, board members of a fund advised by
Dreyfus 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 in $1,000. For full-time or part-time employees of Dreyfus
or any of its affiliates or subsidiaries who elect to have a portion of their
pay directly deposited into their Fund account, the minimum initial
investment is $50. The Funds reserve the right to vary further the initial
and subsequent investment minimum requirements at any time.
You may purchase shares of a Fund by check or wire, or through the
Dreyfus TELETRANSFER Privilege described below. Checks should be made payable
to "The Dreyfus Family of Funds." Payments to open new accounts which are
mailed should be sent to The Dreyfus Family of Funds, 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 The Dreyfus Family of Funds,
P.O. Box 105, Newark, New Jersey 07101-0105. Neither initial nor subsequent
investments should be made by third party check. Purchase orders may be
delivered in person only to a Dreyfus Financial Center. THESE ORDERS WILL BE
FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call the
telephone number listed under "General Information."
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 Boston Safe Deposit & Trust Co., together with the
applicable Class' DDA # as shown below, for purchase of Fund shares in your
name:
DDA# 043818 Dreyfus/Laurel California Tax-Free Money Fund/Investor
shares;
DDA# 043796 Dreyfus/Laurel California Tax-Free Money Fund/Class R
shares;
DDA# 043397 Dreyfus/Laurel Massachusetts Tax-Free Money Fund/Investor
shares;
DDA# 043389 Dreyfus/Laurel Massachusetts Tax-Free Money Fund/Class R
shares;
DDA# 043419 Dreyfus/Laurel New York Tax-Free Money Fund/Investor
shares;
DDA# 043400 Dreyfus/Laurel New York Tax-Free Money Fund/Class R
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 Funds' 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
Page 19
check used for investment in your account does not clear. The Funds make
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 Boston Safe Deposit & Trust Co. with instructions to credit
your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS
"4540" for Dreyfus/Laurel California Tax-Free Money Fund/Investor
shares;
"4530" for Dreyfus/Laurel California Tax-Free Money Fund/Class R
shares;
"4760" for Dreyfus/Laurel Massachusetts Tax-Free Money Fund/Investor
shares;
"4750" for Dreyfus/Laurel Massachusetts Tax-Free Money Fund/Class R
shares;
"4780" for Dreyfus/Laurel New York Tax-Free Money Fund/Investor
shares;
"4770" for Dreyfus/Laurel New York Tax-Free Money Fund/Class R
shares.
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").
An investment portfolio's net asset value ("NAV") refers to the worth
of one share. The NAV for Investor and Class R shares of a 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 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 offering price of shares of the Funds is their NAV. Investments
and requests to exchange or redeem shares received by a Fund before 4 p.m.,
Eastern time, on each day that the New York Stock Exchange is open (a
"business day") are effective on, and will receive the price next determined,
that business day. The NAV of a Fund is calculated two times each business
day, at 12 noon and 4 p.m., Eastern time. Investment, exchange or redemption
requests received after 4 p.m., Eastern time are effective on, and receive
the first share price determined, the next business day.
DREYFUS TELETRANSFER PRIVILEGE _ You may purchase shares of a Fund
(minimum $500 and maximum $150,000 per day) by telephone if you have checked
the appropriate box and supplied the necessary information on the Fund's
Account Application or have filed a 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. A 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 Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus 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 Agents and some Agents may impose certain
conditions on their clients which are different from those described in this
Prospectus. You should consult your 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
Page 20
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, you or your 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. 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, Check Redemption Privilege, Wire Redemption
Privilege, Telephone Redemption Privilege, Dreyfus 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 Investor shares into funds
sold with a sales load. If you are exchanging Investor 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 other
distributions paid with respect to the foregoing categories of shares. To
qualify, at the time of the exchange you must notify the Transfer Agent or
your 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 Funds reserve 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.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus 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 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 Investor shares into funds
sold with a sales load. 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 The
Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671.
The Funds may charge a service fee for the use of this Privilege.
Page 21
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 Dreyfus Family of Funds
eligible to participate in this Privilege, or to obtain a Dreyfus
Auto-Exchange Authorization Form, please call toll free 1-800-645-6561.
DREYFUS-AUTOMATIC ASSET BUILDER
Dreyfus-AUTOMATIC Asset Builder permits you to purchase shares of a
Fund (minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Shares of a Fund 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 a Dreyfus-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 from the Distributor. You may
cancel your participation in this Privilege or change the amount of purchase
at any time by mailing written notification to The Dreyfus Family of Funds,
P.O. Box 9671, Providence, Rhode Island 02940-9671 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.
DREYFUS DIVIDEND OPTIONS
Dreyfus 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 certain other funds in the Dreyfus Family of Funds of
which you are an investor. Shares of the other fund will be purchased at the
then-current NAV; however, a sales load may be charged with respect to
investments in shares of a fund sold with a sales load. If you are investing
in a fund that charges a sales load, you may qualify for share prices which
do not include the sales load or which reflect a reduced sales load. See
"Shareholder Services" in the SAI. Dreyfus 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
Dreyfus Dividend Options Form, please call toll free 1-800-645-6561. You may
cancel these privileges by mailing written notification to The Dreyfus Family
of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. Enrollment in
or cancellation of these Privileges is effective three business days
following receipt. These Privileges are available only for existing accounts
and may not be used to open new accounts. Minimum subsequent investments do
not apply for Dreyfus Dividend Sweep. The Funds may modify or terminate these
Privileges at any time or charge a service fee. No such fee currently is
contemplated.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase
shares of a Fund (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. To
enroll in Dreyfus 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.
Page 22
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase shares of a Fund
(minimum of $100 per transaction) automatically on a regular basis. Depending
upon the direct deposit program of your employer, you may have part or all of
your paycheck transferred to your existing Dreyfus account electronically
through the ACH system at each pay period. To establish a Dreyfus Payroll
Savings Plan account, you must file an authorization form with your
employer's payroll department. Your employer must complete the reverse side
of the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may change the amount of
purchase or cancel the authorization only by written notification to your
employer. It is the sole responsibility of your employer, not the
Distributor, Dreyfus, the Funds, the Transfer Agent nor any other person, to
arrange for transactions under the Dreyfus Payroll Savings Plan. The Funds
may modify or terminate this Privilege at any time or charge a service fee.
No such fee currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account.
An application for the Automatic Withdrawal Plan can be obtained 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.
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 Agent.
The Funds impose no charges when shares are redeemed directly through
the Distributor. 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 NAV.
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 DREYFUS TELETRANSFER PRIVILEGE OR
THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND SUBSEQUENTLY SUBMIT A WRITTEN
REDEMPTION REQUEST TO THE DREYFUS TRANSFER AGENT, THE REDEMPTION PROCEEDS
WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE
CHECK, DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER
ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE
FUNDS WILL NOT HONOR REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE,
AND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO
THE DREYFUS TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER
RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS TELETRANSFER
PURCHASE OR THE DREYFUS-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
Page 23
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.
Each 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.
PROCEDURES_You may redeem shares of a Fund by using the regular
redemption procedure through the Transfer Agent, the Check Redemption
Privilege, the Wire Redemption Privilege, the Telephone Redemption Privilege
or through the Dreyfus TELETRANSFER Privilege. Other redemption procedures
may be in effect for clients of certain Agents and institutions. The Funds
make available to certain large institutions the ability to issue redemption
instructions through compatible computer facilities.
You may redeem shares of a Fund 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 a telephone redemption
privilege or Telephone Exchange Privilege (which is granted automatically
unless you refuse it), 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 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 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 telephone redemption had
been used.
REGULAR REDEMPTION. Under the regular redemption procedure, you may
redeem your shares by written request mailed to The Dreyfus Family of Funds,
P.O. Box 9671, Providence, Rhode Island 02940-9671. 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.
CHECK REDEMPTION PRIVILEGE _ You may request on the Account
Application, Shareholder Services Form or by later written request that a
Fund provide Redemption Checks drawn on the Fund's account. Redemption Checks
may be made payable to the order of any person in the amount of $500 or more.
Redemption Checks should not be used to close your account. Redemption
Checks are free, but the Transfer Agent will impose a fee for stopping
payment of a Redemption Check upon your request or if the Transfer Agent
cannot honor the Redemption Check due to insufficient funds or other valid
reason. You should date your Redemption Checks with the current date when you
write them. Please do not
Page 24
postdate your Redemption Checks. If you do, the Transfer Agent will honor,
upon presentment, even if presented before the date of the check, all
postdated Redemption Checks which are dated within six months of presentment
for payment, if they are otherwise in good order. Shares for which
certificates have been issued may not be redeemed by Redemption Check. This
Privilege may be modified or terminated at any time by the Funds or the
Transfer Agent upon notice to shareholders.
WIRE REDEMPTION PRIVILEGE. You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. To establish the Wire Redemption Privilege, you must
check the appropriate box and supply the necessary information on the Funds'
Account Application or file a Shareholder Services Form with the Transfer
Agent. You may direct that redemption proceeds be paid by check (maximum
$150,000 per day) made out to the owners of record and mailed to your
address. Redemption proceeds of less than $1,000 will be paid automatically
by check. Holders of jointly registered Fund or bank accounts may have
redemption proceeds of only up to $250,000 wired within any 30-day period.
You may telephone redemption requests by calling 1-800-221-4060 or, if
calling from overseas, 1-401-455-3306. The Funds reserve the right to refuse
any redemption request, including requests made shortly after a change of
address, and may limit the amount involved or the number of such requests.
This Privilege may be modified or terminated at any time by the Transfer
Agent or the Funds. The Funds' SAI sets forth instructions for transmitting
redemption requests by wire. Shares for which certificates have been issued
are not eligible for this Privilege.
TELEPHONE REDEMPTION PRIVILEGE. You may redeem shares of a Fund
(maximum $150,000 per day) by telephone if you checked the appropriate box on
the Funds' Account Application or have filed a Shareholder Services Form with
the Transfer Agent. The redemption proceeds will be paid by check and mailed
to your address. You may telephone redemption instructions by calling
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. The Funds
reserve 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. This Privilege may be modified or terminated at
any time by the Transfer Agent or the Funds. Shares for which certificates
have been issued are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE. You may redeem shares of a Fund
(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 Dreyfus
TELETRANSFER Privilege for transfer to their bank account only up to $250,000
within any 30-day period. The Funds reserve 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.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Fund shares by telephoning
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. Shares shares
issued in certificate form are not eligible for this Privilege.
DISTRIBUTION PLAN (INVESTOR SHARES ONLY)
DISTRIBUTION PLAN_INVESTOR CLASS_Investor shares are subject to a
Distribution Plan adopted pursuant to Rule 12b-1 under the 1940 Act ("Rule
12b-1"). The Investor shares of each Fund bear
Page 25
some of the cost of selling these 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 shares to compensate Dreyfus Service
Corporation, an affiliate of Dreyfus, for shareholder servicing activities
and Premier for shareholder servicing activities and for activities or
expenses primarily intended to result in the sale of Investor shares of a
Fund. The Plan allows Premier to make payments from the Rule 12b-1 fees it
collects from a Fund to compensate Agents that have entered into Selling
Agreements ("Agreements") with Premier. Under the Agreements, the Agents are
obligated to provide distribution related services with regard to a Fund
and/or shareholder services to the Agent's clients that own Investor shares
of a Fund.
Potential investors should read this Prospectus in light of the terms
governing Agreements with their Agents. An Agent entitled to receive
compensation for selling and servicing a Fund's shares may receive different
compensation with respect to one class of shares over another.
The Funds and Premier may suspend or reduce payments under the Plan
at any time, and payments are subject to the continuation of the Funds' Plan
and the Agreements described above. From time to time, the Agents, Premier
and the Funds may agree to voluntarily reduce the maximum fees payable under
the Plan. See the SAI for more details on the Plan.
PERFORMANCE INFORMATION
From time to time, a Fund may advertise the yield and tax-equivalent
yield on a class of shares. YIELD AND TAX-EQUIVALENT YIELD FIGURES ARE BASED
ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE.
The "yield" of a class of shares of a 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 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. 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.
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 Investor shares of a Fund, the yield on Class R
shares will generally be higher than the yield on 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.
A Fund may compare the performance of its Investor 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. Furthermore, a Fund may quote its Investor
and Class R shares' yields in advertisements or in shareholder reports.
Page 26
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
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 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 Fund calculates its NAV will not
begin to accrue dividends until the following business day. Except as
provided below, redemption orders effected on any particular day will receive
all dividends declared through the day of redemption. However, if immediately
available funds are received by the Transfer Agent prior to 12:00 noon,
Eastern time, you may receive the dividend declared on the day of purchase.
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.
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
Page 27
purchase shares may include unrealized gains in the securities held in a
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 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 redempt
ion 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.
GENERAL INFORMATION
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 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 each Fund to be issued in two Classes_Investor 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 funds or classes are entitled to vote, each as a separate class.
Only holders of Investor shares will be entitled to vote on matters submitted
to shareholders pertaining to the Distribution Plan relating to that Class.
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 two-thirds of the Dreyfus/Laurel
Tax-Free Municipal Funds' outstanding voting shares. In addition, the Board
of Trustees will call a meeting of shareholders for
Page 28
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
1-800-645-6561.
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.
Page 29
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Page 30
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Page 31
DREYFUS
Dreyfus/Laurel California Tax-Free Money Fund
Dreyfus/Laurel Massachusetts Tax-Free Money Fund
Dreyfus/Laurel New York Tax-Free Money Fund
Prospectus
(LION LOGO)
Copy Rights 1995 Dreyfus Service Corporation
LSTTFMp2103195
Registration Mark
- ------------------------------------------------------------------------
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
(Lion Logo)
PROSPECTUS OCTOBER 31, 1995
- ------------------------------------------------------------------------
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 what is believed to be
the prudent risk of capital by investing in municipal obligations of the
named state 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."
You can purchase or redeem Fund shares by telephone using the
TELETRANSFER Privilege.
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.
The Statement of Additional Information ("SAI") dated October
31, 1995, 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 144.
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 AN
AFFILIATE OF MELLON BANK, N.A. ("MELLON BANK") 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 and its affiliates) ("Banks")
acting on behalf of customers having a qualified trust or investment
account or relationship at such institution. (Class R shares of each Fund
were formerly called Trust Shares.) Other differences among 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 that 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 relevant circumstances.
TABLE OF CONTENTS
Expense Summary.................................... 3
Financial Highlights............................... 4
Alternative Purchase Methods....................... 16
Description of the Funds........................... 17
Management of the Funds............................ 23
How to Buy Fund Shares............................. 25
Shareholder Services............................... 30
How to Redeem Fund Shares.......................... 33
Distribution Plans (Class A Plan and Class B and Class C Plans).. 36
Dividends, Other Distributions and Taxes........... 37
Performance Information............................ 39
General Information................................ 40
Page 2
<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 Fee(1)............................ .25% .75% .75% none
Other Expenses(2) ...................... .00% .00% .00% .00%
Total Fund Operating Expenses........... .75% 1.25% 1.25% .50%
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:
1 YEAR $ 37 $43/$133 $20/$133 $ 5
3 YEARS $ 53 $60/$403 $40 $16
5 YEARS $ 70 $79/$693 $69 $28
10 YEARS $120 $151 $151 $63
- -------------
1 See "Distribution Plans (Class A Plan and Class B and Class C Plans)" for
a description of each 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 each Fund's allocable portion
of such fees and expenses, which are estimated to be .02% of each Fund's net
assets. (See "Management of the Funds.")
3 Assuming no redemption of shares.
</TABLE>
- ----------------------------------------------------------------------------
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. 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 (as defined below)
may charge their clients direct fees for effecting transactions in Fund
shares; such fees are not reflected in the foregoing table. See "Management
of the Funds," "How to Buy Fund Shares" and "Distribution Plans (Class A Plan
and Class B and Class C Plans)."
The Company understands that banks, securities dealers ("Selected
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 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, Class C
or Class R share, where applicable, 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,
1995, 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 years (periods) ended after
June 30, 1993, for Massachusetts Municipal Fund and November 30, 1993 for
California and New York Municipal Funds have been audited by KPMG Peat
Marwick LLP, independent auditors, whose report thereon appears in the
Funds' Annual Reports. Further information about the performance of each
Fund is also included in each Fund's Annual Report, which may be obtained
without charge by writing to the address or calling the number set forth
on the cover page of this Prospectus. 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. Financial
information is not provided in connection with Class B shares of Premier
Limited Term Massachusetts and New York Municipal Funds which were not
offered as of fiscal year ended June 30, 1995.
<TABLE>
<CAPTION>
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
For a Class A share outstanding throughout each period.*
YEAR PERIOD YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
6/30/95## 6/30/94@** 11/30/93 11/30/92 11/30/91 11/30/90 11/30/89 11/30/88*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period $12.61 $13.07 $12.81 $12.53 $12.29 $12.16 $11.84 $12.00
------ ------ ------- ------- ------- ------ ------ ------
Income from investment operations:
Net investment income*** 0.59 0.34 0.67 0.70 0.73 0.73 0.76 0.47
Net realized and unrealized
gain/(loss) on investments 0.21 (0.46) 0.66 0.44 0.24 0.20 0.32 (0.16)
------ ------ ------- ------- ------- ------ ------ ------
Total from
investment operations 0.80 (0.12) 1.33 1.14 0.97 0.93 1.08 0.31
Less distributions:
Distributions from net
investment income (0.60) (0.34) (0.67) (0.70) (0.73) (0.73) (0.76) (0.47)
Distributions from net realized
capital gains (0.01) (0.00)**** (0.40) (0.16) -- (0.07) -- --
------ ------ ------- ------- ------- ------ ------ ------
Total distributions (0.61) (0.34) (1.07) (0.86) (0.73) (0.80) (0.76) (0.47)
------ ------ ------- ------- ------- ------ ------ ------
Net Asset Value,
end of period $12.80 $12.61 $13.07 $12.81 $12.53 $12.29 $12.16 $11.84
------ ------ ------- ------- ------- ------ ------ ------
Total return+++ 6.48% (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 (000's) $8,506 $10,143 $10,971 $21,831 $16,203 $12,481 $5,132 $3,202
Ratio of expenses to average
net assets + 0.75% 0.58%** 0.45% ++ 0.45% 0.45% 0.45% 0.45% 0.68%**
Ratio of net income to average
net assets 4.71% 4.51%** 5.09% 5.38% 5.84% 6.07% 6.28% 5.43%**
Porfolio turnover rate 49% 5% 38% 41% 27% 75% 59% --
- --------------------------------------------------------------------------------------------------------------------------------
Page 4 and 5
* The Fund commenced operations on March 7, 1988. On February 1, 1993
existing shares of the Fund were designated the Retail
Class and the Fund began offering the Institutional Class and Investment
Class of shares. Effective April 4, 1994 the Retail and Institutional
Classes were reclassified as a single class of shares known as the
Investor shares. Effective October 17, 1994, the Investor Class was
redesignated Class A. The Financial Highlights for the year ended June
30, 1995 are based upon a Class A share (formerly Investor shares)
outstanding. 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 years are
based upon a Retail share outstanding.
## Annualized.
*** Net investment income per share before waiver of fees and reimbursement
of expenses by the investment manager 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 $0.31, $0.67, $0.64, $0.66, $0.66, $0.59, and $0.33,
respectively.
**** Amount represents less than $0.01 per share.
Page 4
+ Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by the investment manager 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 0.95%, 1.10%, 0.93%, 1.03%, 1.03%,
1.85% and 2.33%, respectively.
++ The expense ratio excludes interest expense. The 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 and does not reflect the deduction of any applicable sales
charge.
@ 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 began serving as the
Fund's investment manager. From April 4, 1994 through October 16, 1994,
Mellon Bank, N.A. served as the Fund's investment manager. Prior to
April 4, 1994, The Boston Company Advisors, Inc. served as the Fund's
investment manager.
</TABLE>
Page 5
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
For a Class B share and a Class C share outstanding throughout the period
ended 6/30/95.*
CLASS B CLASS C
------- -------
<S> <C> <C>
Net Asset Value, beginning of period $12.28 $12.28
------ -------
Income from investment operations:
Net investment income 0.27 0.28
Net realized and unrealized gain on investments 0.53 0.52
------ -------
Total from investment operations 0.80 0.80
Less distributions:
Distributions from net investment income (0.28) (0.28)
------ -------
Net Asset Value, end of period $12.80 $12.80
======= =======
Total return +++ 6.51% 6.51%
======= =======
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 9 $ 25
Ratio of expenses to average net assets 1.25%** 1.25%**
Ratio of net investment income to average net assets 4.20%** 4.22%**
Porfolio turnover rate 49% 49%
- ------------------
* The Fund commenced selling Class B shares and Class C shares on December
28, 1994.
** Annualized.
+++ Total return represents aggregate total return for the period indicated
and does not reflect deduction of the applicable sales charge.
</TABLE>
Page 6
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
For a Class R share outstanding throughout each period.*
YEAR PERIOD PERIOD
ENDED ENDED ENDED
6/30/95 6/30/94@ 11/30/93*
------- ------- ---------
<S> <C> <C> <C>
Net Asset Value, beginning of period $12.61 $13.07 $12.96
------ ------ ------
Income from investment operations:
Net investment income*** 0.63 0.35 0.55
Net realized and unrealized gain/(loss)
on investments 0.20 (0.46) 0.52
------ ------ ------
Total from investment operations 0.83 (0.11) 1.07
Less distributions:
Distributions from net investment income (0.63) (0.35) (0.56)
Distributions from net realized capital gains (0.01) (0.00)**** (0.40)+++
------ ------ ------
Total distributions (0.64) (0.35) (0.96)
------ ------ ------
Net Asset Value, end of period $12.80 $12.61 $13.07
======= ====== ======
Total return +++ 6.75% (0.87)% 8.32%
======= ====== ======
Ratios to average net assets/supplemental
data:
Net assets, end of period (000's) $8,813 $12,235 $8,291
Ratio of expenses to average net assets + 0.50% 0.42%** 0.40%**
Ratio of net investment income to average
net assets 4.96% 4.68%** 5.04%**
Porfolio turnover rate 49% 5% 38%
- -----------------
* The Fund commenced selling Investment shares on February 1, 1993.
Effective April 4, 1994 the Investment Class was reclassified as the
Trust shares. Effective October 17, 1994 Trust shares were redesignated
Class R shares. The table above is based upon an Investment share
outstanding from February 1, 1993 to April 3, 1994 and a Trust share
outstanding from April 4, 1994 to October 16, 1994.
** Annualized.
*** Net investment income per share before waiver of fees and reimbursement
of expenses by the investment manager 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 per share.
+ Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by the investment manager 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 expense ratio excludes interest expense. The 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 began serving as the
Fund's investment manager. From April 4, 1994 through October 16, 1994,
Mellon Bank, N.A. served as the Fund's investment manager. Prior to
April 4, 1994, The Boston Company Advisors, Inc. served as the Fund's
investment manager.
</TABLE>
Page 7
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
For a Class A share outstanding throughout each period.*
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
6/30/95## 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
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period $11.74 $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*** 0.55 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 0.20 (0.36) 0.55 0.60 0.14 (0.16) 0.36 0.15 (0.04) 0.78
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment operations 0.75 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) (0.54) (0.64) (0.73) (0.73) (0.72) (0.74) (0.72) (0.72) (0.58)
Distributions from net
realized capital gains (0.04) (0.28) -- -- -- --- -- -- -- --
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (0.58) (0.82) (0.64) (0.73) (0.73) (0.72) (0.74) (0.72) (0.72) (0.58)
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value,
end of period $11.91 $11.74 $12.38 $11.83 $11.23 $11.09 $11.25 $10.89 $10.74 $10.78
------ ----- ------ ------ ------ ------ ------ ------ ------ ------
Total return 6.60% 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 (000's) $16,501 $21,27 $20,106 $20,513 $16,337 $16,093 $14,957 $14,702 $15,355 $7,708
Ratio of expenses to
average net assets 0.75% 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 4.65% 4.40% 5.30% 6.34% 6.59% 6.45% 6.70% 6.69% 6.45% 7.00%**
Porfolio turnover rate 25% 19% 60% 23% 41% 99% 93% 104% 127% 33%
- -------------------------------------------------------------------------------------------------------------------------------
* The Fund commenced operations on September 24, 1985. On February 1, 1993
existing shares of the Fund were designated the Retail Class and the
Fund began offering the Institutional Class and Investment Class of
shares. Effective April 4, 1994 the Retail and Institutional Classes
were reclassified as a single class of shares known as the Investor
shares. Effective October 17, 1994 the Investor shares were redesignated
Class A. The Financial Highlights for the year ended June 30, 1995 are
based upon a Class A share (formerly Investor shares) outstanding.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 are based upon a Retail share outstanding.
** Annualized.
*** Net investment income per share before waiver of fees and reimbursement
of expenses by investment manager 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.
Page 8
+ Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by the investment manager and/or
custodian and/or transfer agent for the years ended June 30, 1994, 1993
and 1987 and the period ended June 30, 1986 were 0.89%, 0.92%, 0.95% and
1.15%, respectively.
++ Total return represents aggregate total return for the period indicated
and does not reflect the deduction of any applicable sales charge.
## Effective October 17, 1994, The Dreyfus Corporation began serving as the
Fund's investment manager. From April 4, 1994 through October 16, 1994,
Mellon Bank, N.A. served as the Fund's investment manager. Prior to
April 4, 1994, The Boston Company Advisors, Inc. served as the Fund's
investment manager.
</TABLE>
Page 9
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
For a Class C share outstanding throughout the period.*
PERIOD
ENDED
6/30/95
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning of period $11.45
____---
Income from investment operations:
Net investment income 0.26
Net realized and unrealized gain on investments 0.45
____---
Total from investment operations 0.71
Less distributions:
Distributions from net investment income (0.25)
____---
Net Asset Value, end of period $11.91
======
Total return ++ 6.24%
======
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 18
Ratio of expenses to average net assets 1.25%**
Ratio of net investment income to average net assets 4.15%**
Porfolio turnover rate 25%
- ------------------------------------------------------------------------------------------------
* The Fund commenced selling Class C shares on December 28, 1994.
** Annualized.
++ Total return represents aggregate total return for the periods indicated
and does not reflect deduction of the applicable sales charge.
</TABLE>
Page 10
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
For a Class R share outstanding throughout each period.*
YEAR YEAR PERIOD
ENDED ENDED ENDED
6/30/95## 6/30/94## 6/30/93
-------- --------- --------
<S> <C> <C> <C>
Net Asset Value, beginning of period $11.74 $12.38 $12.08
------ ------ ------
Income from investment operations:
Net investment income*** 0.57 0.55 0.25
Net realized and unrealized gain/(loss)
on investments 0.21 (0.35) 0.29
------ ------ ------
Total from investment operations 0.78 0.20 0.54
Less distributions:
Distributions from net investment income (0.57) (0.56) (0.24)
Distributions from net realized capital gains (0.04) (0.28) --
------ ------ ------
Total distributions (0.61) (0.84) (0.24)
------ ------ ------
Net Asset Value, end of period $11.91 $11.74 $12.38
====== ======= ======
Total return ++ 6.87% 1.53% 4.53%
====== ======= ======
Ratios to average net assets/
supplemental data:
Net assets, end of period (000's) $19,700 $15,681 $9,411
Ratio of expenses to average net assets + 0.50% 0.62% 0.65%**
Ratio of net investment income to average
net assets 4.90% 4.54% 4.84%**
Porfolio turnover rate 25% 19% 60%
- ---------------------
* The Fund commenced selling Investment shares on February 1, 1993.
Effective April 4, 1994 the Investment Class was reclassified as the
Trust shares. Effective October 17, 1994 Trust shares were redesignated
Class R shares. The table above is based upon an Investment share
outstanding from February 1, 1993 to April 3, 1994 and a Trust share
outstanding from April 4, 1994 to October 16, 1994.
** Annualized.
*** Net investment income per share before waiver of fees and reimbursement
of expenses by the investment manager and/or custodian and/or transfer
agent for the year ended June 30, 1994 and period ended June 30, 1993
were $0.54 and $0.24, respectively.
+ Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by the investment manager and/or custodian
and/or transfer agent for the year ended June 30, 1994 and for the
period ended June 30, 1993 were 0.75% and 0.87%, respectively.
++ Total return represents aggregate total return for the period indicated.
## Effective October 17, 1994, The Dreyfus Corporation began serving as the
Fund's investment manager. From April 4, 1994 through October 16, 1994,
Mellon Bank, N.A. served as the Fund's investment manager. Prior to
April 4, 1994, The Boston Company Advisors, Inc. served as the Fund's
investment manager.
</TABLE>
Page 11
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
For a Class A share outstanding throughout each period.*
YEAR PERIOD YEAR YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
6/30/95## 6/30/94@## 11/30/93 11/30/92 11/30/91 11/30/90 11/30/89 11/30/88
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period $12.59 $13.04 $12.70 $12.34 $12.02 $11.90 $11.75 $12.00
------ ------ ------ ______ ------ ------ ------ ------
Income from investment operations:
Net investment income*** 0.60 0.35 0.66 0.68 0.70 0.73 0.72 0.47
Net realized and unrealized gain /(loss)
on investments 0.17 (0.45) 0.46 0.36 0.32 0.11 0.15 (0.24)
------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations 0.77 (0.10) 1.12 1.04 1.02 0.84 0.87 0.23
Less distributions:
Distributions from net
investment income (0.60) (0.35) (0.66) (0.68) (0.70) (0.72) (0.72) (0.48)
Distributions from net realized
capital gains (0.04) -- (0.12) -- -- -- -- --
Distributions in excess of net realized
capital gains (0.01) -- -- -- -- -- -- --
------ ------ ------ ------- ------ ------ ------ ------
Total distributions (0.65) (0.35) (0.78) (0.68) (0.70) (0.72) (0.72) (0.48)
------ ------ ------ ------- ------ ------ ------ ------
Net Asset Value,
end of period $12.71 $12.59 $13.04 $12.70 $12.34 $12.02 $11.90 $11.75
======= ======= ====== ====== ====== ====== ====== =====
Total return ++ 6.39% (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 (000's) $2,340 $2,922 $2,100 $5,308 $5,202 $3,959 $3,535 $2,315
Ratio of expenses to average
net assets + 0.75% 0.57%** 0.46% 0.45% 0.45% 0.45% 0.44% 0.70%**
Ratio of net investment income to
average net assets 4.83% 4.66%** 5.11% 5.43% 5.74% 6.14% 6.30% 5.54%**
Porfolio turnover rate 32% 13% 32% 0% 0% 45% 7% 74%
- --------------------
* The Fund commenced operations on March 7, 1988. On February 1, 1993
existing shares of the Fund were designated the Retail Class and the
Fund began offering the Institutional Class and Investment Class of
shares. Effective April 4, 1994 the Retail and Institutional Classes
were reclassified as a single class of shares known as the Investor
shares. Effective October 17, 1994, the Investor Class was redesignated
Class A shares. The Financial Highlights for the year ended June 30,
1995 are based upon a Class A share (formerly Investor shares)
outstanding.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 years are
based upon a Retail share outstanding.
** Annualized.
*** Net investment income per share before waiver of fees and reimbursement
of expenses by the investment manager 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 $0.28, $0.42, $0.52, $0.52, $0.59, $0.45, and $0.31,
respectively.
Page 12
+ Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by the investment manager 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 1.51%, 2.32%, 1.70%, 1.88%, 1.61%,
2.67% and 2.61%, respectively.
++ Total return represents aggregate total return for the period indicated
and does not reflect the deduction of any applicable sales charge.
@ 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 began serving as the
Fund's investment manager. From April 4, 1994 through October 16, 1994,
Mellon Bank, N.A. served as the Fund's investment manager. Prior to
April 4, 1994, The Boston Company Advisors, Inc. served as the Fund's
investment manager.
</TABLE>
Page 13
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
For a Class C share outstanding throughout the period.*
PERIOD
ENDED
6/30/95
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, beginning of period $12.21
------
Income from investment operations:
Net investment income 0.28
Net realized and unrealized gain on investments 0.49
------
Total from investment operations 0.77
Less distributions:
Distributions from net investment income (0.27)
------
Net Asset Value, end of period $12.71
======
Total return ++ 6.39%
======
Ratios to average net assets/supplemental data:
Net assets, end of period (000's) $ 68
Ratio of expenses to average net assets 1.25%**
Ratio of net investment income to average net assets 4.34%**
Porfolio turnover rate 32%
- --------------------
* The Fund commenced selling Class C Shares on December 28, 1994.
** Annualized.
++ Total return represents aggregate total return for the period indicated
and does not reflect deduction of the applicable sales charge.
</TABLE>
Page 14
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
For a Class R Share outstanding throughout each period.*
Year Period Period
Ended Ended Ended
6/30/95## 6/30/94@## 11/30/93*
-------- -------- ----------
<S> <C> <C> <C>
Net Asset Value, beginning of period $12.59 $13.04 $12.85
------ ------ ------
Income from investment operations:
Net investment income*** 0.64 0.37 0.57
Net realized and unrealized gain/(loss)
on investments 0.17 (0.45) 0.31
------ ------ ------
Total from investment operations 0.81 (0.08) 0.88
Less distributions:
Distributions from net investment income (0.64) (0.37) (0.57)
Distributions from net realized capital gains (0.04) -- (0.12)
Distributions in excess of net realized
capital gains (0.01) -- --
------ ------ ------
Total distributions (0.69) (0.37) (0.69)
------ ------ ------
Net Asset Value, end of period $12.71 $12.59 $13.04
====== ====== ======
Total return ++ 6.65% (0.67)% 6.95%
====== ====== ======
Ratios to average net assets/
supplemental data:
Net assets, end of period (000's) $2,844 $2,388 $2,542
Ratio of expenses to average net assets + 0.50% 0.29%** 0.25%**
Ratio of net investment income to average
net assets 5.08% 4.94%** 5.20%**
Porfolio turnover rate 32% 13% 32%
- -----------------
* The Fund commenced selling Investment Class shares on February 1, 1993.
Effective April 4, 1994 the Investment Class was reclassified as the
Trust shares. Effective October 17, 1994 Trust 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 October 16, 1994.
** Annualized.
*** Net investment income per share before waiver of fees and reimbursement
of expenses by the investment manager 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 the investment manager 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 began serving as the
Fund's investment manager. From April 4, 1994 through October 16, 1994,
Mellon Bank, N.A. served as the Fund's
investment manager. Prior to April 4, 1994, The Boston Company Advisors,
Inc. served as the Fund's investment manager.
</TABLE>
Page 15
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 Fund's investment portfolio. All Fund
shares are sold on a continous basis.
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 relationship at such
institution, or to customers who have received and hold shares of the
Fund distributed by virtue of such an account or relationship. Class A,
Class B and Class C shares are sold primarily to clients of Service
Agents that have entered into Selling Agreements with the Distributor.
The decision as to which Class of shares is most 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 a 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
Page 16
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 for resident shareholders of the named state,
consistent with what is believed to be the prudent risk of capital. In
addition, the Premier Limited Term New York Municipal Fund seeks to
maximize current income exempt from New York City personal income taxes.
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 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. 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 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 potentially
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.
Page 17
The taxable instruments in which each Fund is permitted to
invest under certain circumstances 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
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 Company's Board of Trustees determines 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 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
Page 18
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 Funds 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 Board of
Trustees may establish from time to time.
Page 19
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 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-
Page 20
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 Funds, 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. You should consider carefully the special risks inherent in
the Fund's investment in California Municipal Obligations. These risks
result from certain amendments to the California Constitution and other
statutes that limit the taxing and spending authority of California
governmental entities, as well as from the general financial condition of
the State of California. From mid 1990 to late 1993, the State suffered a
recession with the worst economic, fiscal and budget conditions since the
1930s. As a result, the State has experienced recurring budget deficits
for four of the five fiscal years ended 1991-92. The State had an
operating surplus of approximately $109 million in 1992-93 and $836
million in 1993-94. However, at June 1994, according to California's
Department of Finance, the State's Special Fund for Economic
Uncertainties has an accumulated deficit, on a budget basis, of
approximately $1.8 billion. A further consequence of the large budget
imbalances has been that the State depleted its available cash resources
and has had to use a series of external borrowings to meet its cash
needs. To meet its cash flow needs in the 1994-95 fiscal year, the State
issued, in July and August 1994, $4.0 billion of revenue anticipation
warrants and $3.0 billion of revenue anticipation notes. As a result of
the deterioration in the State's budget and cash situation between
October 1991 and July 1994, the rating on the State's general obligation
bonds was reduced by S&P from AAA to A, by Moody's from Aaa to A1 and by
Fitch from AAA to A. These and other factors may have the effect of
impairing the ability of the issuers of California Municipal Obligations
to pay interest on, or repay principal of, such Municipal Obligations.
You should obtain and review a copy of the Statement of Additional
Information which more fully sets forth these and other risk factors.
Other considerations relating to a Fund's investments in California
Municipal Obligations are summarized in the SAI.
CERTAIN RISK CONSIDERATIONS REGARDING THE
COMMONWEALTH OF MASSACHUSETTS. You should consider carefully the special
risks inherent in the Fund's investment in Massachusetts Municipal
Obligations. Massachusetts' economic difficulties and fiscal problems in
the late 1980s and early 1990s caused several rating agencies to lower
their ratings of Massachusetts Municipal Obligations. A return of
persistent serious financial difficulties could adversely affect the
market values and marketability of, or result in default in payment on,
outstanding Massachusetts Municipal Obligations. Massachusetts'
expenditures for State programs and services in each of the fiscal years
1987 through 1991 exceeded each year's current revenues. The budgeted
operating funds of Massachusetts ended fiscal years 1992, 1993 and 1994,
however, with an excess of revenues and other sources over expenditures
and other uses of $312.3 million, $13.1 million and $26.8 million,
respectively. Fiscal 1994 ended with positive budgeted operating fund
balances of $589.3 million. You should obtain and review a copy of the
Page 21
Statement of Additional Information which more fully sets forth these and
other risk factors. Other considerations relating to the Fund's
investment in Massachusetts Municipal Obligations are summarized in
the SAI.
CERTAIN RISK CONSIDERATIONS REGARDING THE STATE OF NEW YORK
AND NEW YORK CITY. You should consider carefully the special risks
inherent in investing in New York Municipal Obligations. These risks
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 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
each Fund 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 a Fund's portfolio and the
interest income to the Fund could be adversely affected. Moreover, the
national recession and the significant slowdown in the New York and
regional economies in the early 1990s added substantial uncertainty to
estimates of the State's tax revenues, which, in part, caused the State
to incur cash-basis operating deficits in the General Fund and issue
deficit notes during the fiscal periods 1989 through 1992. The State's
financial operations have improved, however, during recent fiscal years.
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 and
1995 fiscal years with operating surpluses of $914 million and $158
million, respectively. There can be no assurance that new York will not
face substantial potential budget gaps in future years. In January 1992,
Moody's lowered from A to Baa1 the ratings on certain appropriation-backed
debt of New York State and its agencies. The State's general obligation,
state guaranteed and New York State Local Government Assistance
Corporation bonds continued to be rated A by Moody's. In January 1992,
S&P lowered from A to A- its ratings of New York State general obligation
bonds and stated that it continued to assess the ratings outlook as
negative. The ratings of various agency debt, state moral obligations,
contractual obligations, lease purchase obligations and state guarantees
also were lowered. In February 1991, Moody's lowered its rating on new
York City's general obligation bonds from A to Baa1 and in July 1995, S&P
lowered its rating on such bonds from A- to BBB+. The rating changes
reflect the rating agencies' concern about the financial condition of New
York State and City, the heavy debt load of the State and City, and
economic uncertainties in the region. You should obtain and review a copy
of the Statement of Additional Information which more fully sets forth
these and other risk factors attendant to an investment in each of the
Funds. Other considerations relating to the Fund's 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.
Page 22
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% of the 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 August 31, 1995, Dreyfus
Page 23
managed or administered approximately $80 billion in assets for more than
1.8 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.
Kristin D. Lindquist has been employed by Dreyfus as the
portfolio manager of Premier Limited Term California Municipal Fund,
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 Deposit and
Trust Company 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 $203 billion in assets as of June 30, 1995,
including $73 billion in mutual fund assets. As of June 30, 1995, Mellon,
through various subsidiaries, provided non-investment services, such as
custodial or administration services, for approximately $707 billion in
assets, including approximately $71 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. From April 4,
1994 to October 17, 1994, the Funds were advised by Mellon Bank under the
Investment Management Agreement.
For the fiscal year ended June 30, 1995, each Fund paid
Mellon Bank or Dreyfus 0.50% of its average daily net assets in
investment management fees, less fes and expenses of the non-interested
Trustees (including counsel fees).
For the fiscal year ended June 30, 1995, total operating
expenses (excluding Rule 12b-1 fees) of each Class of each Fund were
0.50% of the Fund's average daily net assets.
Page 24
In addition, Class A, B and C shares are subject to certain
distribution and service fees. See "Distribution Plans (Class A Plan and
Class B and Class C 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.
Premier Mutual Fund Services, Inc. is each Fund's
distributor. The Distributor is located at Exchange Place, 53 State
Street, Boston, Massachusetts 02109. The Distributor is a wholly-owned
subsidiary of DFI Distribution Services, Inc., a provider of mutual fund
administration services, which in turn is a wholly-owned subsidiary of
FDI Holdings, Inc., 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, PA
15258 is each Fund's custodian. Each 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 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, or to customers who have received and
hold shares of the Fund distributed to them by virtue of such an account
or relationship. In addition, holders of Class R shares of a 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.
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 through the
TELETRANSFER Privilege described below. Checks should be made payable to
"Premier Limited Term California
Page 25
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 correspondednt bank in New York City. Immediately
available funds may be transmitted by wire to Boston Safe Deposit & Trust
Co., together with the applicable Class' DDA# as shown below, for
purchase of Fund shares in your name:
DDA# 044490 Premier Limited Term Massachusetts Municipal
Fund/Class A shares;
DDA# 044504 Premier Limited Term Massachusetts Municipal
Fund/Class B shares;
DDA# 044512 Premier Limited Term Massachusetts Municipal
Fund/Class C shares;
DDA# 043613 Premier Limited Term Massachusetts Municipal
Fund/Class R shares;
DDA# 044555 Premier Limited Term New York Municipal
Fund/Class A shares;
DDA# 044563 Premier Limited Term New York Municipal
Fund/Class B shares;
DDA# 044571 Premier Limited Term New York Municipal
Fund/Class C shares;
DDA# 043648 Premier Limited Term New York Municipal
Fund/Class R shares;
DDA# 044369 Premier Limited Term California Municipal
Fund/Class A shares;
DDA# 044377 Premier Limited Term California Municipal
Fund/Class B shares;
DDA# 044385 Premier Limited Term California Municipal
Fund/Class C shares;
DDA# 043605 Premier Limited Term California Municipal
Fund/Class R 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 the wire payment in order to obtain
your Fund account number. 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 Boston Safe Deposit & Trust Co. with
instructions to credit your Fund account.
The instructions must specify your Fund account registration
and Fund account number PRECEDED BY THE DIGITS listed below for the
applicable Fund and Class of shares:
"4280" for Premier Limited Term Massachusetts Municipal
Fund/Class A shares;
"4290" for Premier Limited Term Massachusetts Municipal
Fund/Class B shares;
"4300" for Premier Limited Term Massachusetts Municipal
Fund/Class C shares;
"4930" for Premier Limited Term Massachusetts Municipal
Fund/Class R shares;
"4340" for Premier Limited Term New York Municipal Fund/Class
A shares;
Page 26
"4350" for Premier Limited Term New York Municipal Fund/Class
B shares;
"4360" for Premier Limited Term New York Municipal Fund/Class
C shares;
"4950" for Premier Limited Term New York Municipal Fund/Class
R shares;
"4170" for Premier Limited Term California Municipal
Fund/Class A shares;
"4180" for Premier Limited Term California Municipal
Fund/Class B shares;
"4190" for Premier Limited Term California Municipal
Fund/Class C shares;
"4920" for Premier Limited Term California Municipal
Fund/Class R shares.
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.
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.
CLASS A SHARES
The public offering price of Class A shares is the NAV per
share of that Class plus a sales load as shown below:
Page 27
<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 Company's
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.
Class A shares also may be purchased at NAV, subject to
appropriate documentation, through a broker-dealer or other financial
institution with the proceeds from the redemption of shares of a
registered open-end management investment company not managed by Dreyfus
or its affiliates. The purchase of Class A shares of the Fund must be
made within 60 days of such redemption and the shareholder must have
either (i) paid an initial sales charge or a contingent deferred sales
charge or (ii) been obligated to pay at any time during the holding
period, but did not actually pay on redemption, a deferred sales charge
with respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to
appropriate documentation, by (i) qualified separate accounts maintained
by an insurance company pursuant to the laws of any State or territory of
the United States, (ii) a State, county or city or instrumentality
thereof, (iii) a charitable organization (as defined in Section 501(c)(3)
of the Code) investing $50,000 or more in Fund shares, and (iv) a
charitable remainder trust (as defined in Section 501(c)(3) of the Code).
Page 28
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
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.
Page 29
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. 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
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
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 each 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. Each 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.
Page 30
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, you may qualify for share prices which do
not include the sales load or which reflect a reduced sales load. If you
are investing in a fund 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
Page 31
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 reduc-
Page 32
tion, 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 NAV 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 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 Funds held by
you at the time of redemption. No CDSC will be imposed to the extent that
the NAV of the Class B
Page 33
shares redeemed does not exceed (i) the current NAV of Class B shares
acquired through reinvestment of dividends or other 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 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 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 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
Page 34
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, 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 (which
is granted automatically unless you refuse it), 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
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."
Page 35
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. 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
Page 36
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
Page 37
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 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
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 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.
Page 38
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.
Page 39
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.
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 two-thirds of the Company'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 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.
LTSTP2103195
- --------------------------------------------------------------------------
PREMIER LIMITED TERM MUNICIPAL FUND
(LION LOGO)
PROSPECTUS OCTOBER 31, 1995
- --------------------------------------------------------------------------
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 Fund 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.
The Statement of Additional Information ("SAI"), dated
October 31, 1995, 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 1-800-645-6561. 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 AN
AFFILIATE OF MELLON BANK, N.A. ("MELLON BANK") 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
- --------------------------------------------------------------------------
Page 1
(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, and its affiliates) ("Banks")
acting on behalf of customers having a qualified trust or investment
account or relationship at such institution. (Class R shares of the Fund
were formerly called Trust Shares.) Other differences among 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 that 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 relevant circumstances.
TABLE OF CONTENTS
Expense Summary.......................... 3
Financial Highlights..................... 4
Alternative Purchase Methods............. 9
Description of the Fund.................. 10
Management of the Fund................... 15
How to Buy Fund Shares................... 17
Shareholder Services..................... 21
How to Redeem Fund Shares................ 24
Distribution Plans (Class A Plan and
Class B and Class C Plans).......... 28
Dividends, Other Distributions and Taxes. 29
Performance Information.................. 30
General Information...................... 31
Page 2
<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 .......................... 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 $151 $151 $63
(1) See "Distributions Plans (Class A Plan and Class B and Class C Plans)"
for a description of the Fund's Distribution Plans 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 0.02% of
the Fund's net assets. (See "Management of the Fund.")
(3) Assuming no redemption of shares.
</TABLE>
- --------------------------------------------------------------------------
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. 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 (as defined below) may charge their clients direct fees
for effecting transactions in Fund shares; such fees are not reflected in
the foregoing table. See "Management of the Fund," "How to Buy Fund
Shares" and "Distribution Plan (Class A Plan and Class B and Class C
Plans)."
The Company understands that banks, securities dealers
("Selected 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, Class
B, Class C or Class R share outstanding throughout each fiscal year
(period) and should be read in conjunction with the financial statements
and related notes that appear in the Fund's Annual Report dated June 30,
1995, 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 years (periods) after June 30,
1993, have been audited by KPMG Peat Marwick LLP, independent auditors,
whose report thereon appears in the Fund's Annual Report. Further
information about the Fund's performance is contained in the Fund's Annual
Report, which may be obtained without charge by writing to the address or
calling the number set forth on the cover page of this Prospectus. 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.*
YEAR OR PERIOD ENDED JUNE 30,
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period $11.66 $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*** 0.53 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 0.19 (0.41) 0.68 0.65 0.14 (0.18) 0.67 0.13 0.17 1.06
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.72 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 (0.53) (0.54) (0.60) (0.70) (0.74) (0.77) (0.79) (0.74) (0.76) (0.59)
Distributions from net realized
capital gains (0.03) (0.54) (0.28) (0.02) ._ (0.32) (0.07) (0.02) ._ ._
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (0.56) (1.08) (0.88) (0.72) (0.74) (1.09) (0.86) (0.76) (0.76) (0.59)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, end of period $11.82 $11.66 $12.61 $12.21 $11.58 $11.44 $11.95 $11.36 $11.23 $11.06
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Return++ 6.37% 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) $21,375 $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 0.75% 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 4.59% 4.43% 4.91% 5.82% 6.43% 6.45% 6.82% 6.73% 6.58% 7.25%**
Portfolio turnover rate 61% 57% 103% 30% 54% 76% 101% 81% 241% 5%
- -------------------------
(1) The Fund commenced operations on October 1, 1985.On February 1, 1993,
existing shares of the Fund were designated the
Retail Class and the Fund began offering the Institutional Class and
Investment Class of shares.
* 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 Financial Highlights for the year ended June 30, 1995 are
based on a Class A share outstanding. The Financial Highlights 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.
** Annualized
***Net investment income per share before waiver of fees and/or
reimbursement of expenses by the investment manager 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 the investment manager
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 were1.09%, 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 began serving as
the investment manager to the Fund. From April 4, 1994 through October
16, 1994, Mellon Bank, N.A. served as the investment manager for the
Fund. Prior to April 4, 1994, The Boston Company Advisors, Inc. served as
the investment manager for the Fund.
</TABLE>
Page 5
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT THE PERIOD.
Period
Ended
6/30/95*
--------
<S> <C> <C>
Net Asset Value, beginning of period $11.21
--------
Income from investment operations:
Net investment income 0.24
Net realized and unrealized gain on investments 0.50
--------
Total from investment operations 0.74
Less distributions:
Distributions from net investment income (0.24)
--------
Net Asset Value, end of period $11.82
========
Total Return + 6.59%
========
Ratios to average net assets/Supplemental data:
Net Assets, end of period (in 000's) $ 85
Ratio of expenses to average net assets 1.25% +
Ratio of net investment income to average net assets 4.09% +
Portfolio turnover rate 61%
- -----------
* The Fund commenced selling Class B shares on December 28, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated
and does not reflect any applicable sales charge.
</TABLE>
Page 6
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT THE PERIOD.
Period
Ended
6/30/95*
--------
<S> <C> <C>
Net Asset Value, beginning of period $11.32
--------
Income from investment operations:
Net investment income 0.25
Net realized and unrealized gain on investments 0.49
--------
Total from investment operations 0.74
Less distributions:
Distributions from net investment income (0.24)
--------
Net Asset Value, end of period $11.82
=======
Total Return ++ 6.59%
=======
Ratios to average net assets/Supplemental data:
Net Assets, end of period (in 000's) $ 84
Ratio of expenses to average net assets 1.25% +
Ratio of net investment income to average net assets 4.09% +
Portfolio turnover rate 61%
- ------------
* The Fund commenced selling Class C shares on December 28, 1994.
+ Annualized.
++ Total return represents aggregate total return for the period indicated
and does not reflect any applicable sales charge.
</TABLE>
Page 7
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.
Year Year Period
Ended Ended Ended
6/30/95 6/30/94# 6/30/93
-------- -------- --------
<S> <C> <C> <C>
Net Asset Value, Beginning of year $11.66 $12.61 $12.21
-------- -------- --------
Income from investment operations:
Net investment income*** 0.56 0.58 0.25
Net Realized and unrealized gains and losses on
investments 0.19 (0.43) 0.40
-------- -------- --------
Total from investment operations 0.75 0.15 0.65
Less distributions:
Distributions from net investment income (0.56) (0.56) (0.25)
Distributions from net realized capital gains (0.03) (0.54) ._
-------- -------- --------
Total Distributions (0.59) (1.10) (0.25)
-------- -------- --------
Net Asset Value, end of year $11.82 $11.66 $12.61
-------- -------- --------
Total Return ++ 6.64% 1.08% 5.36%
-------- -------- --------
Ratios to average net assets/Supplemental data:
Net Assets, end of year (in 000's) $16,727 $12,581 $8,974
Ratio of expenses to average net assets + 0.50% 0.50% 0.68%**
Ratio of net investment income to average net assets 4.84% 4.69% 4.82%**
Portfolio turnover rate 61% 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, a Trust Class share outstanding from April 4, 1994 to October 16,
1994, and a Class R share thereafter.
** Annualized.
*** Net investment income per share before waiver of fees and/or
reimbursement of expenses by the investment manager 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 the investment manager and/or custodian
and/or transfer agent for the year ended June 30, 1994 and for the
period ended June 30, 1993 were 0.83% and 0.93%, respectively.
++ Total return represents aggregate total return for the periods
indicated.
# Effective October 17, 1994, The Dreyfus Corporation began serving as the
investment manager to the Fund. From April 4, 1994 through October 16,
1994. Mellon Bank, N.A. 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>
Page 8
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. All
Fund shares are sold on a continuous basis.
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 relationship at such
institution, or to customers who have received and hold shares of the
Fund distributed to them by virtue of such an account or relationship.
Class A, Class B and Class C shares are sold primarily to clients of
Service Agents that have entered into Selling Agreements with the
Distributor.
The decision as to which Class of shares is most 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
Page 9
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 FUND
INVESTMENT OBJECTIVE.
The Fund seeks to maximize current income exempt from Federal
income taxes consistent with the prudent risk of capital. The Fund seeks
to achieve its objective by investing in debt obligations issued by
states, cities, counties, municipalities, municipal agencies and regional
districts, with intermediate maturities and of "investment-grade" quality
the interest from which is, in the opinion of counsel to the respective
issuers, exempt from Federal income taxes ("Municipal Obligations").
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, 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 potentially
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 10
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
determines 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 11
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 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 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 12
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 Board of
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 security. 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 13
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 limitation 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 14
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 August 31, 1995, Dreyfus managed or administered
approximately $80 billion in assets for more than 1.8 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 Dreyfus as portfolio
manager of the Fund since November 14, 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
Page 15
Clarkson University in 1985, and attended the New York
University Graduate School of Business Administration for Visiting
Professionals 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 $203 billion in assets as of June 30, 1995,
including $73 billion in mutual fund assets. As of June 30, 1995, Mellon,
through various subsidiaries, provided non-investment services, such as
custodial or administration services, for approximately $707 billion in
assets, including approximately $71 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. From
April 4, 1994 to October 17, 1994, the Fund was advised by Mellon Bank
under the Investment Management Agreement. For the fiscal year ended
June 30, 1995, the Fund paid Mellon Bank or Dreyfus .50% of its average
daily net assets in investment management fees, less fees and expenses of
the non-interested Trustees (including counsel fees). For the fiscal year
ended June 30, 1995 total operating expenses (excluding Rule 12b-1 fees)
of the Fund were .50% of the Fund's average daily net assets for each
class.
In addition, Class A, B and C shares are subject to certain
distribution and service fees. See "Distribution Plans (Class A Plan and
Class B and Class C 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 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.
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 FDI Distribution
Services, Inc., a provider of mutual fund administration services,
Page 16
which in turn is a wholly-owned subsidiary of FDI Holdings,
Inc., 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 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, or to customers who have received and
hold shares of the Fund distributed to them by virtue of such an account
or relationship. 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.
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, 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 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 Boston Safe Deposit & Trust
Co., together with the applicable Class' DDA# as shown below, for
purchase of Fund shares in your name:
Page 17
DDA# 044520 Premier Limited Term Municipal Fund/Class A shares;
DDA# 044539 Premier Limited Term Municipal Fund/Class B shares;
DDA# 044547 Premier Limited Term Municipal Fund/Class C shares;
DDA# 043621 Premier Limited Term Municipal Fund/Class R 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.
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 ACH member. You must direct the
institution to transmit immediately available funds through the ACH
System to Boston Safe Deposit & Trust Co. with instructions to credit
your Fund account. The instructions must specify your fund account
registration and Fund account number PRECEDED BY THE DIGITS "4310" for
Class A shares, "4320" for Class B shares, "4330" for Class C shares and
"4940" for Class R shares.
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.
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.
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
Page 18
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 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.
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.
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 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 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 Company'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 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
Page 19
account" or a similar program under which such clients pay a
fee to such broker-dealer or other financial institution.
Class A shares also may be purchased at NAV, subject to
appropriate documentation, through a broker-dealer or the financial
institution with the proceeds form the redemption of shares of a
registered open-end management investment company not managed by Dreyfus
or its affiliates. The purchase of Class A shares of the Fund must be
made within 60 days of such redemption and the shareholder must have
either (i) paid an initial sales charge or a contingent deferred sales
charge or (ii) been obligated to pay at any time during the holding
period, but did not actually pay on redemption, a deferred sales charge
with respect to such redeemed shares.
Class A shares also may be purchased at NAV, subject to
appropriate documentation, by (i) qualified separate accounts maintained
by an insurance company pursuant to the laws of any State or territory of
the United States, (ii) a State, county or city or instrumentality
thereof, (iii) a charitable organization (as defined in Section 501(c)(3)
of the Code) investing $50,000 or more in Fund shares, and (iv) a
charitable remainder trust (as defined in Section 501(c)(3) of the Code).
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.
Page 20
TELETRANSFER PRIVILEGE -- 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
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. 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,
Page 21
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 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 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 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 22
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, you may qualify for share prices which do
not include the sales load or which reflect a reduced sales load. If you
are investing in a fund 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 23
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 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 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, THE FUND
Page 24
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 NAV 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 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 other 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 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 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
Page 25
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 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, 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 (which
is granted automatically unless you refuse it), 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 pro-
Page 26
cedures described herein. Use of these other redemption
procedures may result in your redemption request being processed at a
later time than it would have been if TELETRANSFER redemption had been
used. During the delay, the Fund's 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. 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
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
Page 27
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 for these Classes of shares. The Distributor determines the
amounts, if any, to be paid to
Page 28
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 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 29
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 30
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 and tax-equivalent
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. The tax-equivalent yield shows
the level of taxable yield needed to produce an after-tax equivalent to
the tax-free yield. This is done by measuring 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 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.
Page 31
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 and Service Plan relating to
that Class.
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 two-thirds of the Company'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 1-800-645-6561.
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.
PLT/P2103195
Page 32
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
INVESTOR AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
October 31, 1995
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the Prospectus of The
Dreyfus/Laurel Tax-Free Municipal Funds (the "Trust") dated October 31,
1995 (referred to herein as the "Prospectus") describing the Investor
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 "Fund" or "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 "Funds" or the
"Money Funds"). To obtain a copy of the Prospectus, please write to the
Funds 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
Outside the U.S. and Canada -- Call 1-516-794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Funds' investment
manager.
Premier Mutual Fund Services, Inc. ("Premier") is the distributor of
the Funds' shares.
TABLE OF CONTENTS
Page
Management of the Trust. . . . . . . . . . . . . . . . . . . . . . . .B-3
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . .B-10
(see also in the Prospectus "How to Buy Fund Shares")
Investment Policies. . . . . . . . . . . . . . . . . . . . . . . . . .B-12
(see also in the Prospectus "Investment Objective and Policies")
Redemption of Fund Shares. . . . . . . . . . . . . . . . . . . . . . .B-27
(see also in the Prospectus "How to Redeem Fund Shares")
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . .B-28
Valuation of Shares. . . . . . . . . . . . . . . . . . . . . . . . . .B-30
Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . .B-31
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-33
(see also in the Prospectus "Taxes")
Description of the Trust . . . . . . . . . . . . . . . . . . . . . . .B-34
(see also in the Prospectus "Investment Objective and Policies")
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . .B-35
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . . . . .B-36
Counsel and Independent Auditors . . . . . . . . . . . . . . . . . . .B-36
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . .B-37
Appendix A - Risk Factors - Investing in
Massachusetts Municipal Obligations. . . . . . . . . . . . . . . . .B-38
Appendix B Risk Factors - Investing in
California Municipal Obligations . . . . . . . . . . . . . . . . . .B-41
Appendix C - Risk Factors - Investing in
New York Municipal Obligations . . . . . . . . . . . . . . . . . . .B-53
Appendix D - Information about Securities Ratings . . . . . . . . . .B-67
MANAGEMENT OF THE TRUST
The organizations that provide services to the Trust are as follows:
Dreyfus as investment manager ("Investment Manager"), Mellon Bank, N.A.
("Mellon Bank") as custodian, 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
Prospectus 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:
<TABLE>
<CAPTION>
<S> <C> <C>
Laurel Massachusetts Tax-Free Money Fund Dreyfus/Laurel Massachusetts Tax-Free Money Fund
Laurel California Tax-Free Money Fund Dreyfus/Laurel California Tax-Free Money Fund
Laurel New York Tax-Free Money Fund Dreyfus/Laurel New York Tax-Free Money Fund
</TABLE>
Trustees and Officers
The Trust has a Board composed of thirteen 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/Laurel 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. Age: 80
years old. 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). Age: 78 years old. Address: Massachusetts
Business Development Corp., One Liberty Square, Boston, Massachusetts
02109.
o*JOSEPH S. DiMARTINO. Trustee of the Trust since February 1995. Since
January 1995, Mr. DiMartino has served as Chairman of the Board for
various funds in the Dreyfus Family of Funds. For more than five
years prior thereto, he was President and a director of Dreyfus and
Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus and until August
1994, the Funds' distributor. From August 1994 to December 31, 1994,
he was a director of Mellon Bank Corporation. He is Chairman of the
Board of Noel Group, Inc., a venture capital company; a trustee of
Bucknell University; and a director of the Muscular Dystrophy
Association, HealthPlan Services Corporation, Belding Heminway, Inc.,
a manufacturer and marketer of industrial threads, specialty yarns,
home furnishings and fabrics, Curtis Industries, Inc., a national
distributor of security products, chemicals and automotive and other
hardware, Simmons Outdoor Corporation and Staffing Resources, Inc.
Mr. DiMartino is also a Board member of 93 other funds in the Dreyfus
Family of Funds. He is 51 years old and his address is 200 Park
Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Trustee of the Trust; 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. Age: 60 years old.
Address: 40 Norfolk Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Trustee of the Trust; Since 1990, Partner, Reed,
Smith, Shaw & McClay (law firm). Age: 65 years old. 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, Cerex 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. Since May 1991, Mr. Goeschel
has served as a Trustee of Sewickley Valley Hospital. Age: 73 years
old. Address: Way Hollow 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. Managing Partner, Franklin Federal Partners.
Age: 49 years old. Address: Himmel and Company, Inc., 101 Federal
Street, 22nd Floor, Boston, Massachusetts 02110.
o*ARCH S. JEFFERY. Trustee of the Trust; Financial Consultant. Age: 76
years old. Address: 1817 Foxcroft Lane, Unit 306, 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. Age: 48
years old. Address: 401 Edgewater Place, Wakefield, Massachusetts
01880.
o+ROBERT D. MCBRIDE. Trustee of the Trust; Director, Chairman, McLouth
Steel; Director, Salem Corporation. Director, SMS/Concast, Inc.
(1983-1991). Age: 67 years old. 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). Age: 81 years old. 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. Age: 63 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224
o+ROSLYN M. WATSON. Trustee of the Trust; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director, Harvard
Community Health Plan, Inc.; Director, Massachusetts Electric Company;
Director, The Hymans Foundations, Inc., prior to February, 1993; Real
Estate Development Project Manager and Vice President, The Gunwyn
Company. Age: 45 years old. Address: 25 Braddock Park, Boston,
Massachusetts 02116-5816.
#MARIE E. CONNOLLY. President and Treasurer of the Trust, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Funds, Inc. (since September 1994); Vice President
of the Trust, The Dreyfus/Laurel Investment Series, The Dreyfus/Laurel
Funds Trust and 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). Age: 37 years old.
Address: One Exchange Place, Boston, Massachusetts 02109.
#FREDERICK C. DEY. Vice President of the Trust, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/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). Age: 33 years old. Address: Premier Mutual Fund Services, Inc.,
200 Park Avenue New York, New York 10166.
#ERIC B. FISCHMAN. Vice President of the Trust, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/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
County District Attorney (June 1990 to August 1990). Age: 30 years
old. Address: Premier Mutual Fund Services, Inc., 200 Park Avenue, New
York, New York 10166.
LESLIE M. GAYNOR. Assistant Treasurer of the Trust, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Funds, Inc. (since October 1994); Assistant
Treasurer/Manager of Treasury Services, Funds Distributor, Inc. (since
July 1994); Vice President, The Boston Company, Inc. (1989 to July
1994). Age: 43 years old. Address: One Exchange Place, Boston,
Massachusetts 02109.
RICHARD W. HEALEY. Vice President of the Trust, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The
Dreyfus/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). Age: 41 years old. Address: One Exchange Place, Boston,
Massachusetts 02109.
#JOHN E. PELLETIER. Vice President and Secretary of the Trust, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/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). Age: 30 years
old. 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.
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 Family of Funds 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 Family of Funds). In addition,
the Trust pays each Trustee $1,000 per joint Dreyfus/Laurel Family of Funds
meeting attended, plus $750 per joint Dreyfus/Laurel Family of Funds Audit
Committee meeting attended, and reimburses each Trustee for travel and out-
of-pocket expenses.
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 October 9,
1995.
For the fiscal year ended June 30, 1995, the aggregate amount of fees
and expenses received by each Trustee from the Trust and all other funds in
the Dreyfus Family of Funds for which such person is a Board member were as
follows:
<TABLE>
<CAPTION>
Total
Pension or Compensation from
Aggregate Retirement Benefits Estimated Annual Fund and Fund
Name of Board Compensation from Accrued as Part of Benefits Upon Complex Paid to
Member Fund# Fund's Expenses Retirement Board Member
- ---------------------- --------------------- ---------------------- ------------------- ---------------------
<S> <C> <C> <C> <C>
Ruth Marie Adams $ 2,093 none none $ 34,750
Francis P. Brennan@ 17,716 none none 110,750
Joseph S. DiMartino*** 2,156* none none 14,000**
James M. Fitzgibbons 1,968 none none 32,750
J. Tomlinson Fort*** 2,156 none none 35,750
Arthur L. Goeschel 2,093 none none 34,750
Kenneth A. Himmel 1,934 none none 32,000
Arch S. Jeffery*** 2,156 none none 35,750
Steven J. Lockwood 1,934 none none 32,000
Robert D. McBride 2,156 none none 35,750
John L. Propst 2,156 none none 35,750
John J. Sciullo 2,093 none none 34,750
Roslyn M. Watson 2,156 none none 35,750
_____________________________
# Amount does not include reimbursed expenses for attending Board meetings, which amounted to $6,559.21 for the
Dreyfus/Laurel Family of Funds.
* Estimated amount for fiscal year ended June 30, 1996.
** Estimated amount for year ending December 31, 1995.
*** Interested Trustee - not paid by funds, paid by Dreyfus.
@ Frank Brennan is also paid $75,000 by Dreyfus to be the Chairman of the Board. This amount in included in the total
compensation figure for Mr. Brennan.
</TABLE>
Management Arrangements
Dreyfus serves as the investment manager for the Funds pursuant to an
Investment Management Agreement (the "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.
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 3, 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 4, 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 the Management Agreement, which was last approved by the Trustees on
September 23, 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), 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 as to each
Fund provided that a majority of the Trustees who are not interested
persons of the Fund and either a majority of all Trustees or a majority of
the shareholders of the Fund approve its continuance. Each Fund may
terminate the Management 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 the Funds. 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; W. Keith
Smith, Vice Chairman of the Board; Robert E. Riley, President, Chief
Operating Officer and a director, Stephen E. Canter, Vice Chairman, Chief
Investment Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration; Daniel C. Maclean, Vice President and General Counsel;
Barbara E. Casey, Vice President-Dreyfus President-Dreyfus Retirement
Services; Diane M. Coffey, Vice President-Corporate Communications; Elie M.
Genadry, Vice President-Institutional Sales; Henry D. Gottman, Vice
President-Retail Sales and Service; William F. Glavin, Jr., Vice President-
Corporate Development; Andrew S. Wasser, Vice President-Information
Services; Mark N. Jacobs, Vice President-Fund Legal and Compliance and
Secretary; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting;
Katherine C. Wickham, Vice President-Corporate Human Resources; Maurice
Bendrihem, Controller; Elvira Oslapas; Assistant Secretary; Mandell L.
Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Green, Julian M.
Smerling and David B. Truman, directors.
As compensation for Dreyfus' 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) and to Dreyfus (the current
investment manager), including any fee waivers or expense reimbursements by
TBC Advisors, Mellon Bank or Dreyfus, during the Fund's 1993, 1994 and 1995
fiscal years:
<TABLE>
<CAPTION>
1995 * 1994 * (2) 1993 **
Fees Fees Fees Fees Fees Fees
Paid (11) Paid (3) Paid (4) Waived (1) Paid Waived (1)
<S> <C> <C> <C> <C> <C> <C>
Massachusetts Tax-Free $397,565 $88,706 $451,899 $95,174 (5) $714,501 $ 29,313 (10)
Fund
California Tax-Free 90,816 22,135 45,706 56,403 (6) 130,006 165,734 (8)
Fund
New York Tax-Free 48,800 12,400 27,444 46,447 (7) 73,485 118,669 (9)
Fund
_______________________________
* For the fiscal year ended June 30. The California Tax-Free Fund, and the New York Tax-Free Fund each changed its fiscal
year end from November 30 to June 30.
** For the fiscal years ended June 30 for the Massachusetts Tax-Free Fund; and for the fiscal years ended November 30 for the
California Tax-Free Fund and the New York Tax-Free 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
Massachusetts Tax-Free Fund) or December 1, 1993 (in the case of the California Tax-Free Fund and the New York Tax-
Free Fund) to April 3, 1993.
(5) Includes $41,577 reimbursement by TBC Advisors.
(6) Includes $10,697 reimbursement by TBC Advisors.
(7) Includes $22,044 reimbursement by TBC Advisors.
(8) Includes $35,728 reimbursement by TBC Advisors.
(9) Includes $45,183 reimbursement by TBC Advisors
(10) Amount represents a reimbursement of expenses only.
(11) For the fiscal year ended June 30, 1995, there were no fee waivers or expense reimbursements.
</TABLE>
Dreyfus has agreed that if in any fiscal year the aggregate expenses
of any Fund of the Trust (including fees pursuant to the 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, 1995.
PURCHASE OF FUND SHARES
The Distributor. The Distributor serves as the Funds' distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Family of Funds and
for certain other investment companies.
Dreyfus TeleTransfer Privilege. Dreyfus 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 Funds'
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 Dreyfus 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-- Dreyfus
TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year the account is closed or during the following calendar
year, provided the information on the old Account Application is still
applicable.
Distribution 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 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 Investor Plans") were effective on April 4, 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 the 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--Investor shares. Under the Current
Plan, 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, Investor shares. For the year ended June 30, 1995, the Massachusetts,
California and New York Tax-Free Money Funds paid $222,784, $38,346 and
$20,798 in distribution fees for the Investor shares, respectively.
The Current Plan provides that a report of the amounts expended under
the Current 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 Plan provides that it may not be
amended to increase materially the costs which a Fund may bear for
distribution pursuant to the Current Plan without approval of a Fund's
shareholders, and that other material amendments of the Current 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 Plan, cast in person at a meeting called for the
purpose of considering such amendments. The Current 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 Plan, by vote cast in person at a
meeting called for the purpose of voting on the Current Plan. The Current
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 Plan
or by vote of the holders of a majority of the outstanding shares of such
class of the Fund.
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.
INVESTMENT POLICIES
The Prospectus discusses the investment objectives of each Fund and
the policies it employs to achieve those objectives. The following
discussion supplements the description of the Funds' investment policies in
the Prospectus.
Description of Municipal Obligations
For purposes of this Statement of Additional Information, the term
"Municipal Obligations" and "Massachusetts Municipal Obligations" shall
mean, with respect to the 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 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 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.
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
Prospectus 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 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 10% 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.
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 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 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.
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 Fund will
not invest more than 10% 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 D
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.
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 Funds are
currently permitted to purchase floating rate and variable rate obligations
with demand features in accordance with requirements established by the
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 Funds are currently permitted to invest in participation interests
when the demand provision complies with 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 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 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 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 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 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 Funds' portfolios. The 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.
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 Prospectus, 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 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 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.
Risk Factors
Investing in Massachusetts Municipal Obligations. Investors should
consider carefully the special risks inherent in the Fund's investment in
Massachusetts Municipal Obligations. Massachusetts' economic difficulties
and fiscal problems in the late 1980s and early 1990s caused several rating
agencies to lower their ratings of Massachusetts Municipal Obligations. A
return of persistent serious financial difficulties could adversely affect
the market values and marketability of, or result in default in payment on,
outstanding Massachusetts Municipal Obligations. Massachusetts'
expenditures for State programs and services in each of the fiscal years
1987 through 1991 exceeded each year's current revenues. The budgeted
operating funds of Massachusetts ended fiscal years 1992, 1993 and 1994,
however, with an excess of revenues and other sources over expenditures and
other uses of $312.3 million, $13.1 million and $26.8 million,
respectfully. Fiscal 1994 ended with positive budgeted operating fund
balances of $589.3 million. Investors should review Appendix A which more
fully sets forth these and other risk factors.
Special Factors Affecting 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.
Risk Factors
Investing in California Municipal Obligations. Investors should
consider carefully the special risks inherent in the Fund's investment in
California Municipal Obligations. These risks result from certain
amendments to the California Constitution and other statues that limit the
taxing and spending authority of California governmental entities, as well
as from the general financial condition of the State of California. From
mid-1990 to late 1993, the State suffered a recession with the worst
economic, fiscal and budget conditions since the 1930s. As a result, the
State has experienced recurring budget deficits for four of the last five
fiscal years ended 1991-1992. The State had an operating surplus of
approximately $109 million in 1992-93 and $836 million in 1993-94.
However, at June, 1994, according to California's Department of Finance,
the State's Special Fund for Economic Uncertainties had an accumulated
deficit, on a budget basis, of approximately $1.8 billion. A further
consequence of the large budget imbalances over the last three fiscal years
has been that the State depleted its available cash resources and has had
to use a series of external borrowings to meet its cash needs. To meet its
cash flow needs in the 1994-95 fiscal year, the State issued, in July and
August 1994, $4.0 billion of revenue anticipation warrants and $3.0 billion
of revenue anticipation notes. As a result of the deterioration of the
state's budget and cash situation between October 1991 and July 1994, the
rating on the State's general obligation bonds was reduced by S&P from AAA
to A, by Moody's from Aaa to A1 and by Fitch AAA to A. These and other
factors may have the effect of impairing the ability of the issuers of
California Municipal Obligations to pay interest on, or repay principal of,
such California Municipal Obligations. Investors should review Appendix B
which sets froth additional information relating to investing in California
Municipal Obligations.
Special Factors Affecting 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.
Investing in New York Municipal Obligations. Each investor should
consider carefully the special risks inherent in the investment in New York
Municipal Obligations by each Fund. These risks result from the financial
condition of New York State and certain of its public bodies and
municipalities, including New York City. Beginning in early 1975, New York
State, New York City and other State entities faced serious financial
difficulties which jeopardized the credit standing and impaired the
borrowing abilities of such entities and contributed to high interest rates
on, and lower market prices for, debt obligations issued by them. A
recurrence of such financial difficulties or a failure of certain financial
recovery programs could result in defaults or declines in the market values
of various New York Municipal Obligations in which the Fund 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 national recession and the
significant slowdown in the New York and regional economies in the early
1990s added substantial uncertainty to estimates of the State's tax
revenues, which, in part, caused the State to incur cash-basis operating
deficits in the General Fund and issue deficit notes during the fiscal
periods 1989 through 1992. The State's financial operations have improved,
however, during recent fiscal years. 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 and 1995 fiscal years with
operating surpluses of $914 million and $158 million, respectively. There
can be no assurance that New York will not face substantial potential
budget gaps in future years. In January 1992, Moody's lowered from A to
Baa1 the ratings on certain appropriation-backed debt of New York State and
its agencies. The State's general obligation, state guaranteed and New
York State Local Government Assistance Corporation bonds continue to be
rated A by Moody's. In January 1992, S&P lowered from A to A- the ratings
of New York State general obligation bonds and stated that it continued to
assess the ratings outlook as negative. The ratings of various agency
debt, state moral obligations, contractual obligations, lease purchase
obligations and state guarantees also were lowered. In February 1991,
Moody's lowered its rating on New York City's general obligation bonds from
A to Baa1 and in July 1995, S&P lowered its rating on such bonds from A- to
BBB+. The rating changes reflect the rating agencies' concerns about the
financial condition of New York State and City, the heavy debt load of the
State and City, and economic uncertainties in the region. Investors should
review "Appendix C" which more fully sets forth these and other risk
factors.
Investment Restrictions
The following are fundamental investment restrictions of each Fund.
No Fund of the Trust may:
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
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 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. The Funds 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.
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.
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 a 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 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 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.
REDEMPTION OF 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 Agent, and reasonably
believed by the Transfer Agent to be genuine. Ordinarily, a 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 pro-
ceeds, 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 contacting 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 shares
of a Fund to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations as well as from participants in the 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.
Dreyfus TeleTransfer Privilege. Investors should be aware that if
they have selected the Dreyfus TeleTransfer Privilege, any request for a
wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the 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-- Dreyfus
TeleTransfer Privilege."
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.
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.
SHAREHOLDER SERVICES
Fund Exchanges. 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 request an exchange, 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. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless the investor checks the applicable "No" box on the Account
Application, indicating that the investor specifically refuses this
Privilege. By using the Telephone Exchange, the investor authorizes the
Transfer Agent to act on telephonic 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.
Dreyfus Auto-Exchange Privilege. The Dreyfus 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 Dreyfus Family of Funds. This
Privilege is available only for existing accounts. Shares will be
exchanged on the basis of relative net asset value as described above under
"Fund Exchanges." 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 Dreyfus Auto-
Exchange transaction.
Fund exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between
accounts having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. Each Fund reserves the right to reject
any exchange request in whole or in part. The Fund exchange service or
Dreyfus 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. There is a service charge of $.50 for each withdrawal check.
Automatic Withdrawal may be terminated at any time by the investor, the
Fund or the Transfer Agent. Shares for which certificates have been issued
may not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus 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 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 contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
VALUATION OF SHARES
The Prospectus describes 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.
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 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.
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-
645-6561.
Each Fund may compare the performance of its 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.
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
R or Investor shares' yields in advertisements or in shareholder reports.
Yields
The yield for a 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
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, 1995, the annualized current yields, the
compounded effective yields, and the equivalent taxable yields of the Funds
were as follows:
<TABLE>
<CAPTION>
7-Day Yield for Period Ended
June 30, 1995
Annualized Compounded Equivalent
Current Yield Effective Yield Taxable Yield*
<S> <C> <C> <C>
California Tax-Free
Fund
Investor shares 3.63% 3.70% 6.30%
Class R shares 3.88% 3.95% 6.74%
Massachusetts Tax-Free
Fund
Investor shares 3.42% 3.48% 6.07%
Class R shares 3.67% 3.74% 6.52%
New York Tax-Free
Fund
Investor shares 3.46% 3.52% 6.13%
Class R shares 3.71% 3.78% 6.57%
* Example assumes a Federal marginal tax rate of 36%, for the Massachusetts, California and
New York Tax-Free Funds and 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.
</TABLE>
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.
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' Prospectus, 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.
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 and the distributions paid by
the Funds (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, amended and restated December 9, 1992, and
subsequently further amended. 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, 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 1940 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 the 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.
PRINCIPAL SHAREHOLDERS
As of October 9, 1995, the following companies/individuals owned
beneficially 5% or more of the outstanding Investor Class shares of the
California Tax-Free Money Fund: California Dental Health Plan, P.O. Box
899 Tuscan, CA 92681-0899 owned 28% of the outstanding Investor Class
shares; Dental Plan Administrators, ATF Vanguard Trust, c/o California
Dental Health Plan, P.O. Box 899 Tuscan, CA 92681-0899 owned 6% of the
outstanding Investor Class shares.
As of October 9, 1995, the following companies/individuals owned
beneficially 5% or more of the outstanding Investor Class shares of the
Massachusetts Tax-Free Money Fund: Galt & Co. Attn: Sweep Funds,
NY/RO/3090 One East Avenue, Rochester, NY 14638-0001 owned 26% of the
outstanding Investor Class shares.
As of October 9, 1995, the following companies/individuals owned
beneficially 5% or more of the outstanding Investor Class shares of the New
York Tax-Free Money Fund: Citizens Realty Associates #1, 100 Route 306
Monsey, NY 10952-1838 owned 14% of the outstanding Investor Class shares;
Mitchell A. Weiner & Bev Weiner JT TEN Country Ridge Drive, Rye Brook, NY
10573-1001 owned 9% of the outstanding Investor Class shares; Jordon
Nethburn Apartment #4, 3rd Floor, 131 W. 11 Street, New York, NY 10011-8329
owned 7% of the outstanding Investor Class shares; John E. Herzog, c/o
Herzog, Heine Geduld, Inc. 6 Broadway, New York, NY 10004-1703 owned 6% of
the outstanding Investor Class shares.
As of October 9, 1995, the following companies/individuals owned
beneficially 5% of the outstanding Class R shares of the Fund. 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), P.O. Box 3198 Pittsburgh, PA 15230 owned 63% of the
outstanding Class R shares of the California Tax-Free Money Fund, 51% of
the Massachusetts Tax-Free Money Fund, and 21% of the New York Tax-Free
Money Fund.
CUSTODIAN AND TRANSFER AGENT
Mellon Bank, which is located at Mellon Bank Center, Pittsburgh, PA
15258, serves as the custodian. 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. TSSG and Mellon Bank, as custodian, have 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, 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. 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.
Counsel and Auditors
Kirkpatrick & Lockhart LLP, 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 Prospectus and this Statement of Additional
Information.
KPMG Peat Marwick LLP, 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, 1995, 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 filed on behalf
of each Fund.
FINANCIAL STATEMENTS
The Funds' Annual Reports for the fiscal year ended June 30, 1995
accompany this Statement of Additional Information, and the financial
statements contained therein, and related notes, are incorporated by
reference herein.
APPENDIX A
RISK FACTORS - INVESTING
IN MASSACHUSETTS MUNICIPAL OBLIGATIONS
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 relating to securities offerings of the
Commonwealth of Massachusetts available as of the date of this Statement of
Additional Information. While the Fund has not independently verified this
information, it has no reason to believe that such information is not
correct in all material aspects.
At the present time, the Commonwealth of Massachusetts' economy is
experiencing a modest recovery following a slow down that began in mid-
1988. Massachusetts has nonetheless undergone serious financial
difficulties in recent years that have adversely affected the
Commonwealth's credit standing. While Massachusetts had benefitted from an
annual job growth rate of approximately 2% since the early 1980s, by 1989
employment started to decline. Between 1988 and 1992, total employment in
Massachusetts declined 10.7 percent. In 1993 and 1994, however, total
employment increased by 1.6 percent and 2.2 percent, respectively.
Employment levels increased in all sectors except manufacturing. Between
1990 and 1992, the Commonwealth's unemployment rate was considerably higher
than the national average, although unemployment rates in Massachusetts
since 1993 have declined faster than the national average. As a result,
the average monthly unemployment rate in Massachusetts for 1993 was only
slightly higher than the national average (6.9 percent compared to 6.8
percent) and the unemployment rate in Massachusetts in 1994 was slightly
below the national average (6.0 percent compared to 6.1 percent).
Massachusetts' economic and fiscal difficulties of recent years appear
to have abated. While the Commonwealth's expenditures for State programs
and services in each of the fiscal years 1987 through 1991 exceeded each
year's current revenues, Massachusetts ended each of the fiscal years 1991
to 1994 and expects to end fiscal 1995 with a positive closing fund balance
in its budgeted operating funds.
Massachusetts expenditures for State government programs and services
in each of the fiscal years 1987 through 1991, inclusive, exceeded each
fiscal year's current revenues. In fiscal years 1987 and 1988, largely by
drawing on fund balances from prior years, Massachusetts ended each fiscal
year with budgetary surpluses. However, fiscal years 1989 and 1990 ended
with operating deficits of $672.5 million and $1.25 billion, respectively.
In fiscal 1991, total revenues and other sources of the budgeted
operating funds increased by 13.8% over the prior year, to $13.913 billion.
This increase was due chiefly to State tax rate increases enacted in 1990
and to a substantial federal reimbursement under the Medicaid program for
uncompensated patient care payments, as well as other factors. The
Commonwealth ended fiscal 1991 with an operating loss of $21.2 million, but
with positive closing fund balances of $237.1 million.
Budgeted revenues and other sources for fiscal 1992 were $13.728
billion, including tax revenues of $9.484 billion. Budgeted revenues and
other sources increased by approximately 0.7% from fiscal 1991 to fiscal
1992, while tax revenues increased by 5.4% for the same period.
Commonwealth expenditures and other uses were approximately $13.420
billion for fiscal 1992, which is $238.7 million or 1.7% lower than fiscal
1991 budgeted expenditures and other uses. Final fiscal 1992 budgeted
expenditures were approximately $300 million higher than the initial July
1991 estimates of budgetary expenditures. A large portion of the increase
in spending resulted from increases in certain human services programs,
including an increase of $268.7 million for the Medicaid program and $50.0
million for mental retardation consent decree requirements. Fiscal 1992
expenditures for Medicaid were $2.818 billion, or 1.9% higher than fiscal
1991. This increase compares favorably with the 19.25% average annual
growth rate of Medicaid expenditures for fiscal years 1988 through 1991.
Overall, the budgeted operating funds ended fiscal 1992 with an excess of
revenues and other sources over expenditures and other uses of $312.3
million.
The budgeted operating funds of the Commonwealth ended fiscal 1993
with a surplus of revenues and other sources over expenditures and other
uses of $13.1 million. Budgeted revenues and other sources for fiscal 1993
totaled approximately $14.710 billion, including tax revenues of $9.40
billion. Total revenues and other sources increased by approximately 6.9%
from fiscal 1992 to fiscal 1993, while tax revenues increased by 4.7% for
the same period.
Budgeted operating funds of the Commonwealth ended fiscal 1994 with a
surplus of revenues and other sources over expenditures and other uses of
$26.8 million and the aggregate ending fund balance in the budgeted
operating funds of the Commonwealth was approximately $589.3 million.
Budgeted revenues and other sources for fiscal 1994 totaled approximately
$15.55 billion, including tax revenues of $10.607 billion. Budgeted
expenditures and other uses in fiscal 1994 totaled $15.52 billion,
approximately 5.6% higher than budgeted expenditures and other uses in
fiscal 1993.
In recent years, health care related costs have risen dramatically in
Massachusetts and across the nation and the increase in the State's
Medicaid and group health insurance costs reflects this trend. In fiscal
1993, Medicaid was the largest item in Massachusetts' budget and has been
one of the fastest growing budget items. During fiscal years 1989, 1990,
1991 and 1992, Medicaid expenditures were $1.83 billion, $2.12 billion,
$2.77 billion and $2.82 billion, respectively, representing an average
annual increase of 15.4%. Expenditures for fiscal 1993 were $3.15 billion,
an 11.8% increase over fiscal 1992. Medicaid expenses in fiscal 1994 were
$3.31 billion.
Massachusetts' pension costs have risen dramatically as the State has
appropriated funds to address in part the unfunded liabilities that had
accumulated over several decades. Total pension costs increased at an
average annual rate of 7.1% from $659.7 million in fiscal 1989 to $868.2
million in fiscal 1993. Pension costs (inclusive of current benefits and
pension reserves) for fiscal 1994 were $908.9 million, an increase of 4.7%
over fiscal 1993 expenditures.
Payments for debt service on Massachusetts general obligation bonds
and notes have risen at an average annual rate of 11.6% from $649.8 million
in fiscal 1989 to $1.15 billion in fiscal 1994. Debt service payments were
$898.3 million in fiscal 1992, $1.14 billion in fiscal 1993 and $1.15
billion in fiscal 1994. In 1990, legislation was enacted which generally
imposes a 10% limit on the total appropriations in any fiscal year that may
be expended for payment of interest and principal on general obligation
debt. As of January 1, 1995, the State had approximately $9,595 billion of
long-term general obligation debt outstanding and short-term direct
obligations of the Commonwealth totalled $264 million.
Certain independent authorities and agencies within the State are
statutorily authorized to issue debt for which Massachusetts is either
directly, in whole or in part, or indirectly liable. The State's
liabilities are either in the form of (i) a direct guaranty, (ii) State
support through contract assistance payments for debt service, or (iii)
indirect obligations. The State is indirectly liable for the debt of
certain authorities through the funding of reserve funds which are pledged
as security for the authorities' debt.
In November 1980, voters in the Commonwealth approved a State-wide 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 government entities, including
county governments. The law is not a constitutional provision and
accordingly is subject to amendment or repeal by the legislature.
Proposition 2-1/2 limits the property taxes which a Massachusetts city or
town may assess in any fiscal year to the lesser of (i) 2.5% of the full
and fair cash value of 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. In addition,
Proposition 2-1/2 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. The law contains certain override provisions which require
voter approval at a general or special election. Proposition 2-1/2 also
limits any annual increase in the total assessments on cities and towns by
any county, district, authority, the Commonwealth, or any other
governmental entity. During the 1980s, Massachusetts increased payments to
the cities, towns and regional school districts ("Local Aid") to mitigate
the impact of Proposition 2-1/2 on local programs and services. In fiscal
1994, approximately 17.59% of Massachusetts' budget was allocated to Local
Aid. Direct Local Aid has dropped from a high of $2.961 billion in fiscal
1989 to $2.727 billion in fiscal 1994.
Many factors affect the financial condition of the Commonwealth and
its cities, towns and public bodies, such as social, environmental, and
economic conditions, many of which are not within the control of such
entities. As is the case with most urban States, the continuation of many
of Massachusetts' programs, particularly its human services programs, is in
significant part dependent upon continuing Federal reimbursements which
have been steadily declining. The loss of grants to Massachusetts and its
cities and towns could further slow economic development. To the extent
that such factors may exist, they could have an adverse effect on economic
conditions in Massachusetts, although what effect, if any, such factors
would have on Massachusetts' Municipal Obligations cannot be predicted.
APPENDIX B
RISK FACTORS - INVESTING
IN CALIFORNIA MUNICIPAL OBLIGATIONS
Certain California (the "State") constitutional amendments,
legislative measures, executive orders, civil actions and voter
initiatives, as well as the general financial condition of the State, could
adversely affect the ability of issuers of California Municipal Obligations
to pay interest and principal on such obligations. 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 relating to securities offerings of the State of California and
various local agencies, available as of the date of this Statement of
Additional Information. While the Fund has not independently verified such
information, it has no reason to believe that such information is not
correct in all material respects.
Recent Developments. From mid-1990 to late 1993, the State suffered a
recession with the worst economic, fiscal and budget conditions since the
1930s. Construction, manufacturing (especially aerospace), exports and
financial services, among others, were all severely affected. Job losses
have been the worst of any post-war recession. Unemployment reached 10.1%
in January 1994, but fell sharply to 7.7% in October and November 1994.
According to the State's Department of Finance, recovery from the recession
in California began in 1994.
The recession seriously affected State tax revenues, which basically
mirror economic conditions. It also has caused increased expenditures for
health and welfare programs. The State also has been facing a structural
imbalance in its budget with the largest programs supported by the General
Fund (K-12 schools and community colleges, health and welfare, and
corrections) growing at rates higher than the growth rates for the
principal revenue sources of the General Fund. As a result, the State
experienced recurring budget deficits in the late 1980s and early 1990s.
The State Controller reported that expenditures exceeded revenues for four
of the five fiscal years ending with 1991-92. The State had an operating
surplus of Approximately $109 million in 1992-93 and $836 million in 1993-
94. However, at June 30, 1994, according to the Department of Finance, the
State's Special Fund for Economic Uncertainties ("SFEU") still had a
deficit, on a budget basis, of approximately $1.8 billion.
The accumulated budget deficits over the past several years, together
with expenditures for school funding which have not been reflected in the
budget, and reduction of available internal borrowable funds, have combined
to significantly deplete the State's cash resources to pay its ongoing
expenses. In order to meet its cash needs, the State has had to rely for
several years on a series of external borrowings, including borrowings past
the end of a fiscal year. Such borrowings are expected to continue in
future fiscal years. To meet its cash flow needs in the 1994-95 fiscal
year the State issued, in July and August 1994, $4.0 billion of revenue
anticipation warrants which mature on April 25, 1996, and $3.0 billion of
revenue anticipation notes which matured on June 28, 1995.
As a result of the deterioration in the State's budget and cash
situation, the rating agencies reduced the State's credit ratings. Between
October 1991 and July 1994, the rating on the State's general obligation
bonds was reduced by S&P from "AAA" to "A," by Moody's from "Aaa" to "A1"
and by Fitch from "AAA" to "A."
The 1994-95 Fiscal Year Budget (as updated in the January 10, 1995
Governor's Budget) is projected to have $42.4 billion of General Fund
revenues and transfers and $41.7 billion of budgeted expenditures. In
addition, the 1994-95 Budget Act anticipates deferring retirement of about
$1 billion of the accumulated budget deficit to the 1995-96 fiscal year
when it is intended to be fully retired by June 30, 1996.
The Governor's Budget for 1995-96 proposes General Fund revenues and
transfers of $42.5 billion and expenditures of $41.7 billion, which would
leave a balance of approximately $92 million in the budget reserve, the
SFEU, at June 30, 1996 after repayment of the accumulated budget deficits.
The Budget proposal is based on a number of assumptions, including receipt
of $830 million from the Federal government to offset costs of undocumented
and refugee immigrants.
On December 6, 1994, Orange County, California (the "County"),
together with its pooled investment funds (the "Funds") filed for
protection under Chapter 9 of the Federal Bankruptcy Code, after reports
that the Funds had suffered significant market losses in their investments,
causing a liquidity crisis for the Funds and the County. More than 180
other public entities, most of which, but not all, are located in the
County, were also depositors in the Funds. As of mid-January 1995,
following a restructuring of most of the Funds' assets to increase their
liquidity and reduce their exposure to interest rate increases, the County
estimated the Funds' loss at about $1.69 billion, or about 23% of their
initial deposits of approximately $7.5 billion. Many of the entities which
deposited monies in the Funds, including the County, are facing cash flow
difficulties because of the bankruptcy filing and may be required to reduce
programs or capital projects. This also may effect their ability to meet
their outstanding obligations.
The State has no existing obligation with respect to any outstanding
obligations or securities of the County or any of the other participating
entities. However, in the event the County is unable to maintain county
administered State programs because of insufficient resources, it may be
necessary for the State to intervene, but the State cannot presently
predict what, if any, action may occur.
On January 17, 1994, an earthquake of the magnitude of an estimated
6.8 on the Richter Scale struck Los Angeles causing significant damage to
public and private structures and facilities. Although some individuals
and businesses suffered losses totaling in the billions of dollars, the
overall effect of the earthquake on the regional and State economy is not
expected to be serious.
State Finances. State moneys are segregated into the General Fund and
approximately 600 Special Funds. The General Fund consists of the revenues
received into the State Treasury and earnings from State investments, which
are not required by law to be credited to any other fund. The General Fund
is the principal operating fund for the majority of governmental activities
and is the depository of most major State revenue sources.
The SFEU is funded with General Fund revenues and was established to
protect the State from unforeseen reduced levels of revenues and/or
unanticipated expenditure increases. Amounts in the SFEU may be
transferred by the Controller as necessary to meet cash needs of the
General Fund. The Controller is required to return moneys so transferred
without payment of interest as soon as there are sufficient moneys in the
General Fund. For budgeting and accounting purposes, any appropriation
made from the SFEU is deemed an appropriation from the General Fund. For
year-end reporting purposes, the Controller is required to add the balance
in the SFEU to the balance in the General Fund so as to show the total
monies then available for General Fund purposes.
Inter-fund borrowing has been used for many years to meet temporary
imbalances of receipts and disbursements in the General Fund. As of June
30, 1994, the General Fund had outstanding loans in the aggregate principal
amount of $43 million to the General Fund from the SFEU and outstanding
loans in the aggregate principal amount of $5.2 billion, which consisted of
$4.0 billion of internal loans to the General Fund from the SFEU and other
Special Funds and $1.2 billion of external loans represented by the 1994
revenue anticipation warrants.
Articles XIIIA and XIIIB to the State Constitution and Other Revenue
Law Changes. Prior to 1977, revenues of the State government experienced
significant growth primarily as a result of inflation and continuous
expansion of the tax base of the State. In 1978, State voters approved an
amendment to the State Constitution known as Proposition 13, which added
Article XIIIA to the State Constitution, reducing ad valorem local property
taxes by more than 50%. In addition, Article XIIIA provides that
additional taxes may be levied by cities, counties and special districts
only upon approval of not less than a two-thirds vote of the "qualified
electors" of such district, and requires not less than a two-thirds vote of
each of the two houses of the State Legislature to enact any changes in
State taxes for the purpose of increasing revenues, whether by increased
rate or changes in methods of computation.
Primarily as a result of the reductions in local property tax revenues
received by local governments following the passage of Proposition 13, the
Legislature undertook to provide assistance to such governments by
substantially increasing expenditures from the General Fund for that
purpose beginning in the 1978-79 fiscal year. In recent years, in addition
to such increased expenditures, the indexing of personal income tax rates
(to adjust such rates for the effects of inflation), the elimination of
certain inheritance and gift taxes and the increase of exemption levels for
certain other such taxes had a moderating impact on the growth in State
revenues. In addition, the State has increased expenditures by providing a
variety of tax credits, including renters' and senior citizens' credits and
energy credits.
The State is subject to an annual "appropriations limit" imposed by
Article XIIIB of the State Constitution adopted in 1979. Article XIIIB
prohibits the State from spending "appropriations subject to limitation" in
excess of the appropriations limit imposed. "Appropriations subject to
limitations" are authorizations to spend "proceeds of taxes," which consist
of tax revenues, and certain other funds, including proceeds from
regulatory licenses, user charges or other fees to the extent that such
proceeds exceed "the cost reasonably borne by such entity in providing the
regulation, product or service." One of the exclusions from these
limitations is "debt service" (defined as "appropriations required to pay
the cost of interest and redemption charges, including the funding of any
reserve or sinking fund required in connection therewith, on indebtedness
existing or legally authorized as of January 1, 1979 or on bonded
indebtedness thereafter approved" by the voters). In addition,
appropriations required to comply with mandates of courts or the Federal
government and, pursuant to Proposition 111 enacted in June 1990,
appropriations for qualified capital outlay projects and appropriations of
revenues derived from any increase in gasoline taxes and motor vehicle
weight fees above January 1, 1990 levels are not included as appropriations
subject to limitation. In addition, a number of recent initiatives were
structured or proposed to create new tax revenues dedicated to certain
specific uses, with such new taxes expressly exempted from the Article
XIIIB limits (e.g., increased cigarette and tobacco taxes enacted by
Proposition 99 in 1988). The appropriations limit also may be exceeded in
cases of emergency. However, unless the emergency arises from civil
disturbance or natural disaster declared by the Governor, and the
appropriations are approved by two-thirds of the Legislature, the
appropriations limit for the next three years must be reduced by the amount
of the excess.
The State's appropriations limit in each year is based on the limit
for the prior year, adjusted annually for changes in California per capita
personal income and changes in population, and adjusted, when applicable,
for any transfer of financial responsibility of providing services to or
from another unit of government. The measurement of change in population
is a blended average of statewide overall population growth, and change in
attendance at local school and community college ("K-14") districts. As
amended by Proposition 111, the appropriations limit is tested over
consecutive two-year periods. Any excess of the aggregate "proceeds of
taxes" received over such two-year periods above the combined
appropriations limits for those two years is divided equally between
transfers to K-14 districts and refunds to taxpayers.
As originally enacted in 1979, the State's appropriations limit was
based on its 1978-79 fiscal year authorizations to expend proceeds of taxes
and was adjusted annually to reflect changes in cost of living and
population (using different definitions, which were modified by Proposition
111). Commencing with the 1991-92 fiscal year, the State's appropriations
limit is adjusted annually based on the actual 1986-87 limit, and as if
Proposition 111 had been in effect. The State Legislature has enacted
legislation to implement Article XIIIB which defines certain terms used in
Article XIIIB and sets forth the methods for determining the State's
appropriations limit. Government Code Section 7912 requires an estimate of
the State's appropriations limit to be included in the Governor's Budget,
and thereafter to be subject to the budget process and established in the
Budget Act.
For the 1990-91 fiscal year, the State appropriations limit was $32.7
billion, and appropriations subject to limitation were $7.51 billion under
the limit. The limit for the 1991-92 fiscal year was $34.2 billion, and
appropriations subject to limitations were $3.8 billion under the limit.
The limit for the 1992-93 fiscal year was $35.01 billion, and the
appropriations subject to limitation were $7.53 billion under the limit.
The limit for the 1993-94 fiscal year was $36.060 billion, and the
appropriations subject to limitation were $6.55 billion under the limit.
The estimated limit for the 1994-95 fiscal year is $37.55 billion, and the
appropriations subject to limitations are estimated to be $6.05 billion
under the limit.
In November 1988, State voters approved Proposition 98, which changed
State funding of public education below the university level and the
operation of the State's appropriations limit, primarily by guaranteeing K-
14 schools a minimum share of General Fund revenues. Under Proposition 98
(as modified by Proposition 111, which was enacted in June 1990), K-14
schools are guaranteed the greater of (a) 40.3% of General Fund revenues
("Test 1"), (b) the amount appropriated to K-14 schools in the prior year,
adjusted for changes in the cost of living (measured as in Article XIIIB by
reference to California per capita personal income) and enrollment ("Test
2"), or (c) a third test, which would replace the second test in any year
when the percentage growth in per capita General Fund revenues from the
prior year plus .5% is less than the percentage growth in California per
capita personal income ("Test 3"). Under "Test 3," schools would receive
the amount appropriated in the prior year adjusted for changes in
enrollment and per capita General Fund revenues, plus an additional small
adjustment factor. If "Test 3" is used in any year, the difference between
"Test 3" and "Test 2" would become a "credit" to schools which would be the
basis of payments in future years when per capita General Fund revenue
growth exceeds per capita personal income growth.
Proposition 98 permits the Legislature by two-thirds vote of both
houses, with the Governor's concurrence, to suspend the K-14 schools'
minimum funding formula for a one-year period. In the fall of 1989, the
Legislature and the Governor utilized this provision to avoid having 40.3%
of revenues generated by a special supplemental sales tax enacted for
earthquake relief go to K-14 schools. Proposition 98 also contains
provisions transferring certain State tax revenues in excess of the Article
XIIIB limit to K-14 schools.
The 1991-92 Budget Act, applying "Test 2" of Proposition 98,
appropriated approximately $18.5 billion for K-14 schools pursuant to
Proposition 98. During the course of the fiscal year, revenues proved to
be substantially below expectations. By the time the Governor's Budget was
introduced in January 1992, it became clear that per capita growth in
General Fund revenues for 1991-92 would be far smaller than the growth in
California per capita personal income and the Governor's Budget therefore
reflected a reduction in Proposition 98 funding in 1991-92 by applying
"Test 3" rather than "Test 2."
In response to the changing revenue situation and to fully fund the
Proposition 98 guarantee in both the 1991-92 and 1992-93 fiscal years
without exceeding it, the Legislature enacted several bills as part of the
1992-93 budget package which responded to the fiscal crisis in education
funding. Fiscal year 1991-92 Proposition 98 appropriations for K-14
schools were reduced by $1.083 billion. In order to not adversely impact
cash received by school districts, however, a short-term loan was
appropriated from the non-Proposition 98 State General Fund. The
Legislature then appropriated $16.6 billion to K-14 schools for 1992-93
(the minimum guaranteed by Proposition 98), but designated $1.083 billion
of this amount to "repay" the prior year loan, thereby reducing cash
outlays in 1992-93 by that amount. In addition to reducing the 1991-92
fiscal year appropriations for K-14 schools by $1.083 billion and
converting the amount to a loan (the "inter-year adjustment"), Chapter 703,
Statutes of 1992 also made an adjustment to "Test 1," based on the
additional $1.2 billion of local property taxes that were shifted to
schools and community colleges. The "Test 1" percentage changed from 40%
to 37%. Additionally, Chapter 703 contained a provision that if an
appellate court should determine that the "Test 1" recalculation or the
inter-year adjustment is unconstitutional, unenforceable or invalid,
Proposition 98 would be suspended for the 1992-93 fiscal year, with the
result that K-14 schools would receive the amount intended by the 1992-93
Budget Act compromise.
The State Controller stated in October 1992 that, because of a
drafting error in Chapter 703, he could not implement the $1.083 billion
reduction of the 1991-92 school funding appropriation, which was part of
the inter-year adjustment. The Legislature untimely enacted corrective
legislation as part of the 1993-94 Budget package to implement the $1.083
billion inter-year adjustment as originally intended.
In the 1992-93 Budget Act, a new loan of $732 million was made to K-12
schools in order to maintain per-average daily attendance ("ADA") funding
at the same level as 1991-92, at $4,187. An additional loan of $241
million was made to community college districts. These loans are to be
repaid from future Proposition 98 entitlements. (The teachers'
organization lawsuit discussed above also seeks to declare invalid the
provision making the $732 million a loan "repayable" from future years'
Proposition 98 funds. Including both State and local funds, and adjusting
for the loans and repayments, on a cash basis, total Proposition 98 K-12
funding in 1992-93 increased to $21.5 billion, 2.4% more than the amount in
1992-93 ($21.0 billion).
Based on revised State tax revenues and estimated decreased reported
pupil enrollment, the 1993-94 Budget Act projected that the 1992-93
Proposition 98 Budget Act appropriations of $16.6 billion exceeded a
revised minimum guarantee by $313 million. As a result, the 1993-94 Budget
Act reverted $25 million in 1992-93 appropriations to the General Fund.
Limiting the reversion to this amount ensures that per ADA funding for
general purposes will remain at the prior year level of $4,217 per pupil.
The 1993-94 Governor's Budget subsequently proposed deficiency funding of
$121 million for school apportionments and special education, increasing
funding per pupil in 1992-93 to $4,244. The 1993-94 Budget Act also
designated $98 million in 1992-93 appropriations toward satisfying prior
years' guarantee levels, an obligation that resulted primarily from
updating State tax revenues for 1991-92, and designates $190 million as a
loan repayable from 1993-94 funding.
The 1993-94 Budget Act projected the Proposition 98 minimum funding
level at $13.5 billion based on the "Test 3" calculation where the
guarantee is determined by the change in per capita growth in General Fund
revenues, which are projected to decrease on a year-over-year basis. This
amount also takes into account increased property taxes transferred to
school districts from other local governments.
Legislation accompanying the 1993-94 Budget Act (Chapter 66/93)
provided a new loan of $609 million to K-12 schools in order to maintain
per ADA funding at $4,217 and a loan of $178 million to community colleges.
These loans have been combined with the K-14 1992-93 loans into one loan
totalling $1.760 billion. Repayment of this loan would be from future
years' Proposition 98 entitlements, and would be conditioned on maintaining
current funding levels per pupil for K-12 schools. Chapter 66 also reduced
the "Test 1" percentage to 35% to reflect the property tax shift among
local government agencies.
The 1994-95 Budget Act appropriated $14.4 billion of Proposition 98
funds for K14 schools based on Test 2. This exceeds the minimum
Proposition 98 guarantee by $8 million to maintain K-12 funding per pupil
at $4,217. Based upon updated State revenues, growth rates and inflation
factors, the 1994-95 Budget Act appropriated an additional $286 million
within Proposition 98 for the 1993-94 fiscal year, to reflect a need in
appropriations for school districts and county offices of education, as
well as an anticipated deficiency in special education fundings. These and
other minor appropriation adjustments increase the 1993-94 Proposition 98
guarantee to $13.8 billion, which exceeds the minimum guarantee in that
year by $272 million and provides per pupil funding of $4,225.
The 1995-96 Governor's Budget adjusts the 1993-94 minimum guarantee to
reflect changes in enrollment and inflation, and 1993-94 Proposition 98
appropriations were increased to $14.1 billion, primarily to reflect
changes in the statutory continuous appropriation for apportionments. The
revised appropriations now exceed the minimum guarantee by $32 million.
This appropriation level still provides per-pupil funding of $4,225.
The 1994-95 Proposition 98 minimum guarantee also has been adjusted
for changes in factors described above, and is now calculated to be $14.9
billion. Within the minimum guarantee, the dollars per pupil have been
maintained at the prior year's level; consequently, the 1994-95 minimum
guarantee now includes a loan repayment of $135 million, and the per-pupil
funding increases to $4,231.
The 1995-96 Governor's Budget proposes to appropriate $15.9 billion of
Proposition 98 funds to K-14 to meet the guarantee level. Included within
the guarantee is a loan repayment of $379 million for the combined
outstanding loans of $1.76 billion. Funding per pupil is estimated to
increase by $61 over 1994-95 to $4,292.
Sources of Tax Revenue. The California personal income tax, which in
1992-93 contributed about 44% of General Fund revenues, is closely modeled
after the Federal income tax law. It is imposed on net taxable income
(gross income less exclusions and deductions). The tax is progressive with
rates ranging from 1% to 11%. Personal, dependent, and other credits are
allowed against the gross tax liability. In addition, taxpayers may be
subject to an alternative minimum tax ("AMT") which is much like the
Federal AMT. This is designed to ensure that excessive use of tax
preferences does not reduce taxpayers' liabilities below some minimum
level. Legislation enacted in July 1991 added two new marginal tax rates,
at 10% and 11%, effective for tax years 1991 through 1995. After 1995, the
maximum personal income tax rate is scheduled to return to 9.3%, and the
AMT rate is scheduled to drop from 8.5% to 7%.
The personal income tax is adjusted annually by the change in the
consumer price index to prevent taxpayers from being pushed into higher tax
brackets without a real increase in income.
The sales tax is imposed upon retailers for the privilege of selling
tangible personal property in California. Most retail sales and leases are
subject to the tax. However, exemptions have been provided for certain
essentials such as food for home consumption, prescription drugs, gas,
electricity and water. Sales tax accounted for about 38% of General Fund
revenue in 1992-93. Bank and corporation tax revenues comprised about 11%
of General Fund revenue in 1992-93. In 1989, Proposition 99 added a 25
cents per pack excise tax on cigarettes, and a new equivalent excise tax on
other tobacco products. Legislation enacted in 1993 added an additional 2
cents per pack for the purpose of funding breast cancer research.
General Financial Condition of the State. In the years following
enactment of the Federal Tax Reform Act of 1986, and conforming changes to
the State's tax laws, taxpayer behavior became more difficult to predict,
and the State experienced a series of fiscal years in which revenue came in
significantly higher or lower than original estimates. The 1989-90 fiscal
year ended with revenues below estimates and the SFEU was fully depleted by
June 30, 1990. This date essentially coincided with the date of the most
recent recession, and the State subsequently accumulated a budget deficit
in the SFEU approaching $2.8 billion at its peak. The State's budget
problems in recent years also have been caused by a structural imbalance
which has been identified by the current and previous Administrations. The
largest General Fund programs -- K-14 education, health, welfare and
corrections -- were increasing faster than the revenue base, driven by the
State's rapid population increases.
Starting in the 1990-91 fiscal year, each budget required multibillion
dollar actions to bring projected revenues and expenditures into balance
and to close large "budget gaps" which were identified. The Legislature
and Governor eventually agreed on significant cuts in program expenditures,
some transfers of program responsibilities and funding from the State to
local governments, revenue increases (particularly in the 1991-92 fiscal
year budget), and various one-time adjustments and accounting changes.
However, as the recession took hold and deepened after the summer of 1990,
revenues dropped sharply and expenditures for health and welfare programs
increased as job losses mounted, so that the State ended each of the 1990-
91 and 1991-92 fiscal years with an unanticipated deficit in the budget
reserve, the SFEU, as compared to projected positive balances.
As a result of the revenue shortfalls accumulating for the previous
two fiscal years, the Controller in April 1992 indicated that cash
resources (including borrowing from Special Funds) would not be sufficient
to meet all General Fund obligations due on June 30 and July 1, 1992. On
June 25, 1992, the Controller issued $475 million of 1992 Revenue
Anticipation Warrants (the "1992 Warrants") in order to provide funds to
cover all necessary payments from the General Fund at the end of the 1991-
92 fiscal year and on July 1, 1992. The 1992 Warrants were paid on July 24,
1992. In addition to the 1992 Warrants, the Controller reported that as of
June 30, 1992, the General Fund had borrowed $1.336 billion from the SFEU
and $4.699 billion from other Special Funds, using all but about $183
million of borrowable cash resources.
To balance the 1992-93 Governor's Budget, program reductions totalling
$4.365 billion and a revenue and transfer increase of $872 million were
proposed for the 1991-92 and 1992-93 fiscal years. Economic performance in
the State continued to be sluggish after the 1992-93 Governor's Budget was
prepared. By the time of the "May Revision," issued on May 20, 1992, the
Administration estimated that the 1992-93 Budget needed to address a gap of
about $7.9 billion, much of which was needed to repay the accumulated
budget deficits of the previous two years.
The severity of the budget actions needed led to a long delay in
adopting the budget. With the failure to enact a budget by July 1, 1992,
the State had no legal authority to pay many of its vendors until the
budget was passed. Starting on July 1, 1992, the Controller was required
to issue "registered warrants" in lieu of normal warrants backed by cash to
pay many State obligations. Available cash was used to pay
constitutionally mandated and priority obligations, such as debt service on
bonds and revenue anticipation warrants. Between July 1 and September 4,
1992, the Controller issued an aggregate of approximately $3.8 billion of
registered warrants payable from the General Fund, all of which were called
for redemption by September 4, 1992 following enactment of the 1992-93
Budget Act and issuance by the State of $3.3 billion of interim notes.
The Legislature enacted the 1992-93 Budget Bill on August 29, 1992,
and it was signed by the Governor on September 2, 1992. The 1992-93 Budget
Act provided for expenditures of $57.4 billion and consisted of General
Fund expenditures of $40.8 billion and Special Fund and Bond Fund
expenditures of $16.6 billion. The Department of Finance estimated a
balance in the SFEU of $28 million on June 30, 1993.
The $7.9 billion budget gap was closed primarily through cuts in the
program expenditures (principally for health and welfare programs, aid to
schools and support for higher education), together with some increases in
revenues from accelerated collections and changes in tax laws to confirm to
Federal law changes, and a variety of on-time inter-fund transfers and
deferrals. The other major component of the budget compromise was a law
requiring local governments to transfer a total of $1.3 billion to K-12
school and community college districts, thereby reducing by that amount
General Fund support for those districts under Proposition 98.
In May 1993, the Department of Finance projected that the General Fund
would end the fiscal year on June 30, 1993 with an accumulated budget
deficit of about $2.8 billion, and a negative fund balance of about $2.2
billion (the difference being certain reserves for encumbrances and school
funding costs). As a result, the State issued $5 billion of revenue
anticipation notes and warrants.
The Governor's 1993-94 Budget, introduced on January 8, 1993, proposed
General Fund expenditures of $37.3 billion, with projected revenues of
$39.9 billion. It also proposed Special Fund expenditures of $12.4 billion
and Special Fund revenues of $12.1 billion. The 1993-94 fiscal year
represented the third consecutive year the Governor and the Legislature
were faced with a very difficult budget environment, requiring revenue
actions and expenditure cuts totaling billions of dollars to produce a
balanced budget. 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 "May Revision" of the Governor's Budget, released on May 20, 1993,
indicated that the revenue projections of the January Budget Proposal were
tracking well, with the full year 1992-93 about $80 million higher than the
January projection. Personal income tax revenue was higher than projected,
sales tax was close to target, and bank and corporation taxes were lagging
behind projections. The May Revision projected the State would have an
accumulated deficit of about $2.75 billion by June 30, 1993. The Governor
proposed to eliminate this deficit over an 18-month period. He also agreed
to retain the 0.5% sales tax scheduled to expire June 30 for a six-month
period, dedicated to local public safety purposes, with a November election
to determine a permanent extension. 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 1993-94 Budget Act was signed by the Governor on June 30, 1993,
along with implementing legislation. The Governor vetoed about $71 million
in spending. With enactment of the Budget Act, the State carried out its
regular cash flow borrowing program for the fiscal year, which included the
issuance of approximately $2 billion of revenue anticipation notes that
matured on June 28, 1994.
The 1993-94 Budget Act was predicated on General Fund revenues and
transfers estimated at $40.6 billion, about $700 million higher than the
January Governor's Budget, but still about $400 million below 1992-93 (and
the second consecutive year of actual decline). The principal reasons for
declining revenues were the continued weak economy and the expiration (or
repeal) of three fiscal steps taken in 1991--a half cent temporary sales
tax, a deferral of operating loss carry forwards, and repeal by initiative
of a sales tax on candy and snack foods.
The 1993-94 Budget Act also assumed Special Fund revenues of $11.9
billion, an increase of 2.9% over 1992-93.
The 1993-94 Budget Act included General Fund expenditures of $38.5
billion (a 6.3% reduction from projected 1992-93 expenditures of $41.1
billion), in order to keep a balanced budget within the available revenues.
The Budget also included Special Fund expenditures of $12.1 billion, a 4.2%
increase.
The 1993-94 Budget Act contained 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
indicated that while economic recovery appeared 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 to
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 were very close to
the projections made in the Governor's Budget of January 10, 1994, which
was consistent with a slow turn around in the economy.
The Department of Finance's July 1994 Bulletin, which included final
June receipts, reported that June revenues were $114 million (2.5%) above
projection, with final end-of-year results at $377 million (about 1%) above
the May Revision projections. Part of this result was due to the end-of-
year adjustments and reconciliations. Personal income tax and sales tax
continued to track projections. The largest factor in the higher than
anticipated revenues was from bank and corporation taxes, which were $140
million (18.4%) above projection in June.
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 that matured
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 the original 1993-94 Budget Act assumptions, the General Fund
ended the fiscal year at June 30, 1994 carrying forward an accumulated
deficit of approximately $1.8 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
that matured July 26, 1994, which were needed to fund the State's
obligations and expenses through the end of the 1993-94 fiscal year.
The 1994-95 fiscal year represented the fourth consecutive year the
Governor and Legislature were faced with a very difficult budget
environment to produce a balanced budget. Many program cost and budgetary
adjustments had 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 set forth revenue and expenditure
forecasts and revenue and expenditure proposals which estimated 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 $1.8
billion at June 30, 1994, by June 30, 1996.
The 1994-95 Budget Act, signed by the Governor on July 8, 1994,
projected revenues and transfers of $41.9 billion, $2.1 billion higher than
revenues in 1993-94. This reflected the Administration's forecast of an
improving economy. Also included in this figure was the projected receipt
of about $360 million from the Federal government to reimburse the State's
cost of incarcerating undocumented immigrants, most of which eventually was
not received.
The 1994-95 Budget Act projected Special Fund revenues of $12.1
billion, a decrease of 2.4% from 1993-94 estimated revenues.
The 1994-95 Budget Act projected General Fund expenditures of $40.9
billion, an increase of $1.6 billion over the 1993-94 fiscal year. The
1994-95 Budget Act also projected Special Fund expenditures of $13.7
billion, a 5.4% increase over 1993-94 fiscal year estimated expenditures.
The 1994-95 Budget Act contained no tax increases. Under legislation
enacted for the 1993-94 Budget Act, the renters' tax credit was suspended
for two years (1993 and 1994). A ballot proposition to permanently restore
the renters' tax credit after 1995 failed at the June 1994 election. The
Legislature enacted a further one-year suspension of the renters' tax
credit, for 1995, saving about $390 million in the 1995-96 fiscal year.
The 1994-95 Budget Act assumed that the State would use a cash flow
borrowing program in 1994-95 which combines one-year notes and two-year
warrants, which were issued. Issuance of the warrants allows the State to
defer repayment of approximately $1.0 billion of its accumulated budget
deficit into the 1995-96 fiscal year. The Budget Adjustment Law enacted
along with the 1994-95 Budget Act is designed to ensure that the warrants
will be repaid in the 1995-96 fiscal year.
The Department of Finance Bulletin for April 1995 reported that
General Fund revenues for March 1995 were $28 million, or 1.1%, below
forecast, and that year-to-date General Fund revenues were $110 million, or
0.4%, below forecast.
Initial analysis of the Federal fiscal year 1995 budget by the
Department of Finance indicates that about $98 million was appropriated for
California to offset costs of incarceration of undocumented and refugee
immigrants, less than the $356 million which was assumed in the State's
1994-95 Budget Act.
For the first time in four years, the State enters the upcoming 1995-
96 fiscal year with strengthening revenues based on an improving economy.
On January 10, 1995, the Governor presented his 1995-96 Fiscal Year Budget
Proposal (the "Proposed Budget"). The Proposed Budget estimates General
Fund revenues and transfers of $42.5 billion (an increase of 0.2% over
1994-95). This nominal increase from 1994-95 fiscal year reflects the
Governor's realignment proposal and the first year of his tax cut proposal.
Without these two proposals, General Fund revenues would be projected at
approximately $43.8 billion, or an increase of 3.3% over 1994-95.
Expenditures are estimated at $41.7 billion (essentially unchanged from
1994-95). Special Fund revenues are estimated at $13.5 billion (10.7%
higher than 1994-95) and Special Fund expenditures are estimated at $13.8
billion (12.2% higher than 1994-95). The Proposed Budget projects that the
General Fund will end the fiscal year at June 30, 1996 with a budget
surplus in SFEU of about $92 million, or less than 1% of General Fund
expenditures, and will have repaid all of the accumulated budget deficits.
Recent Economic Trends. Revised employment data indicate that
California's recession ended in 1993, and following a period of stability,
a solid recovery is now underway. The State's unemployment rate fell
sharply last year, from 10.1% in January to 7.7% in October and November
1994. The gap between the national and California jobless rates narrowed
from 3.4 percentage points at the beginning of 1994 to an average of 2
percentage points in October and November. The number of unemployed
Californians fell by nearly 400,000 during the year, while civilian
employment increased more than 300,000 in 1994.
Other indicators, including retail sales, homebuilding activity,
existing home sales and bank lending volume all confirm the State's
recovery.
Personal income was severely affected by the Northridge Earthquake,
which reduced the first quarter 1994 figure by $22 billion at an annual
rate, reflecting the uninsured damage to residences and unincorporated
businesses. As a result, personal income growth for all of 1994 was about
4.2%. However, excluding the Northridge effects, growth would have been in
excess of 5%. Personal income is expected to grow 6.6% for 1995.
APPENDIX C
RISK FACTORS--INVESTING IN NEW YORK MUNICIPAL OBLIGATIONS
The financial condition of New York State (the "State") and certain of
its public bodies (the "Agencies") and municipalities, particularly New
York City (the "City"), could affect the market values and marketability of
New York Municipal Obligations which may be held by the Fund. 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 relating to securities offerings of the State, the City and the
Municipal Assistance Corporation for the City of New York ("MAC") available
as of the date of this Statement of Additional Information. While the Fund
has not independently verified such information, it has no reason to
believe that such information is not correct in all material respects.
A national recession commenced in mid-1990. The downturn continued
through the remainder of the 1990-91 fiscal year, and was followed by a
period of weak economic growth during the remainder of the 1991 calendar
year. For the calendar year 1992, the national economy continued to
recover, although at a rate below all post-war recoveries. The recession
was more severe in the State than in other parts of the nation, owing to a
significant retrenchment in the financial services industry, cutbacks in
defense spending, and an overbuilt real estate market. The State economy
remained in recession until 1993, when employment growth resumed. Since
early 1993, the State has gained approximately 100,000 jobs. The State's
economy is expected to continue to expand modestly during 1995, but there
will be a pronounced slow-down during the course of the year. Although
industries that export goods and services abroad are expected to benefit
from the lower dollar, growth will be slowed by government cutbacks at all
levels. On an average annual basis, employment growth will be about the
same as 1994. Both personal income and wages are expected to record
moderate gains in 1995.
The State's budget for the 1995-96 fiscal year was enacted by the
Legislature on June 7, 1995, 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 1995-96 fiscal year was
formulated on June 20, 1995 and is based on the State's budget as enacted
by the Legislature and signed into law by the Governor.
The 1995-96 budget is the first to be enacted in the administration of
the Governor, who assumed office on January 1. It is the first budget in
over half a century which proposed and, as enacted, projects an absolute
year-over-decline in General Fund disbursements. Spending for State
operations is projected to drop even more sharply, by 4.6%. Nominal
spending from all State funding sources (i.e., excluding Federal aid) is
proposed to increase by only 2.5% from the prior fiscal year, in contrast
to the prior decade when such spending growth averaged more than 6.0%
annually.
In his Executive Budget, the Governor indicated that in the 1995-96
fiscal year, the State Financial Plan, based on then-current law governing
spending and revenues, would be out of balance by almost $4.7 billion, as a
result of the projected structural deficit resulting from the ongoing
disparity between sluggish growth in receipts, the effect of prior-year tax
changes, and the rapid acceleration of spending growth; the impact of
unfunded 1994-95 initiatives, primarily for local aid programs; and the use
of one-time solutions, primarily surplus funds from the prior year, to fund
recurring spending in the 1994-95 budget. The Governor proposed additional
tax cuts, to spur economic growth and provide relief for low and middle-
income tax payers, which were larger than those ultimately adopted, and
which added $240 million to the then projected imbalance or budget gap,
bringing their total to approximately $5 billion.
This gap is projected to be closed in the 1995-96 State Financial Plan
based on the enacted budget, through a series of actions, mainly spending
reductions and cost containment measures and certain reestimates that are
expected to be recurring, but also through the use of one-time solutions.
The State Financial Plan is based upon forecasts of national and State
economic activity. Economic forecasts have frequently failed to predict
accurately the timing and magnitude of changes in the national and the
State economies. Many uncertainties exist in forecasts of both the
national and State economies, including consumer attitudes toward spending,
Federal financial and monetary policies, the availability of credit and the
condition of the world economy, which could have an adverse effect on the
State. 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.
The General Fund is projected to be balanced on a cash basis for the
1995-96 fiscal year. Total receipts and transfers from other funds are
projected to be $33.110 billion, a decrease of $48 million from total
receipts in the prior fiscal year. Total General fund disbursements and
transfers to other funds are projected to be $33.055 billion, a decrease of
$344 million from the total amount disbursed in the prior fiscal year.
There can be no assurance that the State will not face substantial
potential budget gaps in future years resulting from a significant
disparity between tax revenues projected from a lower recurring receipts
base and the spending required to maintain State programs at current
levels. To address any potential budgetary imbalance, the State may need
to take significant actions to align recurring receipts and disbursements
in future fiscal years.
On June 6, 1990, Moody's changed its ratings on all the State's
outstanding general obligation bonds from A1 to A. On March 26, 1990 and
January 13, 1992, S&P changed its ratings on all of the State's outstanding
general obligation bonds from AA- to A and from A to A-, respectively. In
February 1991, Moody's lowered its rating on the City's general obligation
bonds from A to Baa1 and in July 1995, S&P lowered its rating on such bonds
from A- to BBB+. Ratings reflect only the respective views of such
organizations, and their concerns about the financial condition of New York
State and City, the debt load of the State and City and any economic
uncertainties about the region. There is no assurance that a particular
rating will continue for any given period of time or that any such rating
will not be revised downward or withdrawn entirely if, in the judgment of
the agency originally establishing the rating, circumstances so warrant.
(1) The State, Agencies and Other Municipalities. During the mid-
1970s, some of the Agencies and municipalities (in particular, the City)
faced extraordinary financial difficulties, which affected the State's own
financial condition. These events, including a default on short-term notes
issued by the New York State Urban Development Corporation ("UDC") in
February 1975, which default was cured shortly thereafter, and a
continuation of the financial difficulties of the City, created substantial
investor resistance to securities issued by the State and by some of its
municipalities and Agencies. For a time, in late 1975 and early 1976,
these difficulties resulted in a virtual closing of public credit markets
for State and many State related securities.
In response to the financial problems confronting it, the State
developed and implemented programs for its 1977 fiscal year that included
the adoption of a balanced budget on a cash basis (a deficit of $92 million
that actually resulted was financed by issuing notes that were paid during
the first quarter of the State's 1978 fiscal year). In addition,
legislation was enacted limiting the occurrence of additional so-called
"moral obligation" and certain other Agency debt, which legislation does
not, however, apply to MAC debt.
State Financial Cash-Basis Results--General Fund. The General Fund is
the principal operating fund of the State and is used to account for all
financial transactions, except those required to be accounted for in
another fund. It is the State's largest fund and receives almost all State
taxes and other resources not dedicated to particular purposes. General
Fund moneys are also transferred to other funds, primarily to support
certain capital projects and debt service payments in other fund types.
New York State's financial operations have improved during recent
fiscal years. During the period 1989-90 through 1991-92, the State
incurred General Fund operating deficits that were closed with receipts
from the issuance of tax and revenue anticipation notes ("TRANs"). First,
the national recession, and then the lingering economic slowdown in the New
York and regional economy, resulted in repeated shortfalls in receipts and
three budget deficits. For its 1992-93, 1993-94 and 1994-95 fiscal years,
the State recorded balanced budgets on a cash basis, with substantial fund
balances in 1992-93 and 1993-94, and smaller fund balance in 1994-95, as
described below.
New York State ended its 1994-95 fiscal year with the General fund in
balance. The closing fund balance of $158 million reflects $157 million in
the Tax Stabilization Reserve Fund and $1 million in the Contingency
Reserve Fund ("CRF"). The CRF was established in State Fiscal year 1993-
94, funded partly with surplus moneys, to assist the State in financing the
1994-95 fiscal year costs of extraordinary ligation known or anticipated at
that time; the opening fund balance in State fiscal year 1994-95 was $265
million. The $241 million change in the fund balance reflects the use of
$264 million in the CRF as planned, as well as the required deposit of $23
million to the Tax Stabilization Reserve Fund. In addition, $278 million
was on deposit in the tax refund reserve account, $250 million of which was
deposited at the end of the State's 1994-95 fiscal year to continue the
process of restructuring the State's cash flow as part of the New York
Local Government Assistance Corporation ("LGAC") program.
Compared to the State Financial Plan for 1994-1995 as formulated on
June 16, 1994, reported receipts fell short of original projections by
$1.163 billion, primarily in the categories of personal income and business
taxes. Of this amount, the personal income tax accounts for $800 million,
reflecting weak estimated tax collections and lower withholding due to
reduced wage and salary growth, more severe reductions in brokerage
industry bonuses than projected earlier, and deferral of capital gains
realizations in anticipation of potential Federal tax changes. Business
taxes fell short by $373 million, primarily reflecting lower payments from
banks as substantial overpayments of 1993 liability depressed net
collections in the 1994-95 fiscal year. These shortfalls were offset by
better performance in the remaining taxes, particularly the user taxes and
fees, which exceeded projections by $210 million. Of this amount, $277
million was attributable to certain restatements for accounting treatment
purposes pertaining to the CRF and LGAC; these restatements had no impact
on balance in the General Fund.
Disbursements were also reduced from original projections by $848
million. After adjusting for the net impact of restatements relating to
the CRF and LGAC which raised disbursements by $38 million, the variance is
$886 million. Well over two-thirds of this variance is in the category of
grants to local governments, primarily reflecting the conservative nature
of the original estimates of projected costs for social services and other
programs. Lower education costs are attributable to the availability of
$110 million in additional lottery proceeds and the use of LGAC bond
proceeds.
The spending reductions also reflect $188 million in actions initiated
in January 1995 by the Governor to reduce spending to avert a potential gap
in the 1994-95 State Financial Plan. These actions included savings from a
hiring freeze, halting the development of certain services, and the
suspension of non-essential capital projects. These actions, together with
$71 million in other measures comprised the Governor's $259 million gap-
closing plan, submitted to the Legislature in connection with the 1995-96
Executive Budget.
The State ended its 1993-94 fiscal year with a balance of $1.140
billion in the tax refund reserve account, $265 million in the CRF and $134
million in its tax stabilization reserve fund. These fund balances were
primarily the result of an improving national economy, State employment
growth, tax collections that exceeded earlier projections and disbursements
that were below expectations. Deposits to the personal income tax refund
reserve have the effect of reducing reported personal income tax receipts
in the fiscal year when made and withdrawals from such reserve increase
receipts in the fiscal year when made. The balance in the tax reserve
account will be used to pay taxpayer refunds, rather than drawing from
1994-95 receipts.
Of the $1.140 billion deposited in the tax refund reserve account,
$1.026 billion was available for budgetary planning purposes in the 1994-95
fiscal year. The remaining $114 million will be redeposited in the tax
refund reserve account at the end of the State's 1994-95 fiscal year to
continue the process of restructuring the State's cash flow as part of the
LGAC program. The balance in the contingency reserve fund was reserved to
meet the cost of litigation facing the State in its 1994-95 fiscal year.
Before the deposit of $1.140 billion in the tax refund reserve
account, General Fund receipts in 1993-94 exceeded those originally
projected when the State Financial Plan for the year was formulated on
April 16, 1993 by $1.002 billion. Greater-than-expected receipts in the
personal income tax, the bank tax, the corporation franchise tax and the
estate tax accounted for most of this variance, and more than offset
weaker-than-projected collections from the sales and use tax and
miscellaneous receipts. Collections from individual taxes were affected
by various factors including changes in Federal business laws, sustained
profitability of banks, strong performance of securities firms, and higher-
than-expected consumption of tobacco products following price cuts.
The higher receipts resulted, in part, because the New York economy
performed better than forecasted. Employment growth started in the first
quarter of the State's 1993-94 year, and although this lagged the national
economic recovery, the growth in New York began earlier than forecasted.
The New York economy exhibited signs of strength in the service sector, in
construction, and in trade. Long Island, and the Mid-Hudson Valley
continued to lag the rest of the State in economic growth. Approximately
100,000 jobs are believed to have been added during the 1993-94 fiscal
year.
Disbursements and transfer from the General Fund were $303 million
below the level projected in April 1993, an amount that would have been
$423 million had the State not accelerated the payment of Medicaid
billings, which in the April 1993 State Financial Plan were planned to be
deferred into the 1994-95 fiscal year. Compared to the estimates included
in the State Financial Plan formulated in April 1993, disbursements were
lower for Medicaid, capital projects, and debt service (due to refundings).
In addition, $114 million of school and payments were funded from the
proceeds of LGAC bonds. Disbursements were higher-than-expected for
general support for public schools. The State also made the first of six
required payments to the State of Delaware related to the settlement of
Delaware's litigation against the State regarding the disposition of
abandoned property receipts.
During the 1993-94 fiscal year, the State also established and funded
the CRF as a way to assist the State in financing the cost of litigation
affecting the State. The CRF was initially funded with a transfer of $100
million attributable to the positive margin recorded in the 1992-93 fiscal
year. In addition, the State augmented this initial deposit with $132
million on debt service savings attributable to the refinancing of State
and public authority bonds during 1993-94. A year-end transfer of $36
million was also made to the CRF, which, after a disbursement for
authorized fund purposes, brought the CRF balance at the end of 1993-94 to
$265 million. This amount was $165 million higher than the amount
originally targeted for this reserve fund.
For its 1992-93 fiscal year the State had a balanced budget on a cash
basis with a positive margin of $671 million in the General Fund that was
deposited in the refund reserve account.
After reflecting a 1992-93 year-end deposit to the refund reserve
account of $671 million, reported 1992-93 General Fund receipts were $45
million higher than originally projected in April 1992. If not for that
year-end transaction, which had the effect of reducing 1992-93 receipts by
$671 million and making those receipts available in 1993-94, General Fund
receipts would have been $716 million higher than originally projected.
The favorable performance was primarily attributable to personal
income tax collections that were more than $700 million higher than
originally projected (before reflecting the refund reserve transaction).
The withholding and estimated payment components of the personal income tax
exceeded original estimates by more than $800 million combined, reflecting
both stronger economic activity, particularly at year's end, and the tax-
induced one-time acceleration of income into 1992. Modest shortfalls were
experienced in other components of the income tax.
There were large, but largely offsetting, variances in other
categories. Significantly higher-than-projected business tax collections
and the receipt of unbudgeted payments from the Medical Malpractice
Insurance Association and the New York Racing Association approximately
offset the loss of an anticipated $200 million Federal reimbursement, the
loss of certain budgeted hospital differential revenue as a result of
unfavorable court decisions, and shortfalls in certain miscellaneous
revenue sources.
Disbursements and transfers to other funds totaled $30.829 billion, an
increase of $45 million above projections in April 1992. After adjusting
for the impact of a $150 million payment from the Medical Malpractice
Insurance Association to health insurers made pursuant to legislation
passed in January 1993, actual disbursements were $105 million lower than
projected. This reduction primarily reflected higher-than-anticipated
costs for educational programs, as offset by lower costs in virtually all
other categories of spending, including Medicaid, local health programs,
agency operations, fringe benefits, capital projects and debt service.
During its 1989-90, 1990-91 and 1991-92 fiscal years, the State
incurred cash-basis operating deficits in the General Fund of $775 million,
$1.081 billion and $575 million, respectively, prior to the issuance of
short-term TRANs, owing to lower-than-projected receipts.
Other Governmental Funds. Activity in the three other governmental
funds has remained relatively stable over the last three fiscal years, with
Federally-funded programs comprising approximately two-thirds of these
funds. The most significant change in the structure of these funds has
been the redirection, beginning in the 1993-94 fiscal year, of a portion of
transportation-related revenues from the General Fund to two new dedicated
funds in the Special Revenue and Capital Projects Fund types. These
revenues totalling $676 million in the 1994-95 fiscal year were used to
support the capital programs of the Department of Transportation and the
Metropolitan Transportation Authority ("MTA").
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 $25.547 billion in the State's 1995-
96 fiscal year. Disbursements from Special Revenue Funds are projected to
be $26.002 billion for the State's 1995-96 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 24%
of the $4.170 billion in total projected receipts in Capital Projects Funds
in the State's 1995-96 fiscal year. Total disbursements for capital
projects are projected to be $4.160 billion during the State's 1995-96
fiscal year.
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 $2.409 billion in the State's 1995-96
fiscal year. Total disbursements from Debt Service Funds for debt service,
lease/purchase and contractual obligation financing commitments are
projected to be $2.506 billion for the 1994-95 fiscal year.
State Borrowing Plan. The State anticipates that its capital programs
will be financed, in part, through borrowings by the State and public
authorities in the 1995-96 fiscal year. The State expects to issue $248
million in general obligation bonds (including $70 million for purposes of
redeeming outstanding BANs) and $186 million in general obligation
commercial paper. The Legislature has also authorized the issuance of up
to $33 million in COPs during the State's 1995-96 fiscal year for equipment
purchases and $14 million for capital purposes. The projection of the
State regarding its borrowings for the 1995-96 fiscal year may change if
circumstances require.
In addition, the LGAC is authorized to provide net proceeds of up to
$529 million during the 1995-96 fiscal year to redeem notes sold in June
1995.
State Agencies. The fiscal stability of the State is related, at
least in part, to the fiscal stability of its localities and various of its
Agencies. Various Agencies have issued bonds secured, in part, by
non-binding statutory provisions for State appropriations to maintain
various debt service reserve funds established for such bonds (commonly
referred to as "moral obligation" provisions).
At September 30, 1994, there were 18 Agencies that had outstanding
debt of $100 million or more. The aggregate outstanding debt, including
refunding bonds, of these 18 Agencies was $70.3 billion as of September 30,
1994. As of March 31, 1995, aggregate Agency debt outstanding as State-
supported debt was $27.9 billion and as State-related was $36.1 billion.
Debt service on the outstanding Agency obligations normally is paid out of
revenues generated by the Agencies' projects or programs, but in recent
years the State has provided special financial assistance, in some cases on
a recurring basis, to certain Agencies for operating and other expenses and
for debt service pursuant to moral obligation indebtedness provisions or
otherwise. Additional assistance is expected to continue to be required in
future years.
Several Agencies have experienced financial difficulties in the past.
Certain Agencies continue to experience financial difficulties requiring
financial assistance from the State. Failure of the State to appropriate
necessary amounts or to take other action to permit certain Agencies to
meet their obligations could result in a default by one or more of such
Agencies. If a default were to occur, it would likely have a significant
effect on the marketability of obligations of the State and the Agencies.
These Agencies are discussed below.
The New York State Housing Finance Agency ("HFA") provides financing
for multifamily housing, State University construction, hospital and
nursing home development, and other programs. In general, HFA depends upon
mortgagors in the housing programs it finances to generate sufficient funds
from rental income, subsidies and other payments to meet their respective
mortgage repayment obligations to HFA, which provide the principal source
of funds for the payment of debt service on HFA bonds, as well as to meet
operating and maintenance costs of the projects financed. From January 1,
1976 through March 31, 1987, the State was called upon to appropriate a
total of $162.8 million to make up deficiencies in the debt service reserve
funds of HFA pursuant to moral obligation provisions. The State has not
been called upon to make such payments since the 1986-87 fiscal year and no
payments are anticipated during the 1995-96 fiscal year.
UDC has experienced, and expects to continue to experience, financial
difficulties with the housing programs it had undertaken prior to 1975,
because a substantial number of these housing program mortgagors are unable
to make full payments on their mortgage loans. Through a subsidiary, UDC
is currently attempting to increase its rate of collection by accelerating
its program of foreclosures and by entering into settlement agreements.
UDC has been, and will remain, dependent upon the State for appropriations
to meet its operating expenses. The State also has appropriated money to
assist in the curing of a default by UDC on notes which did not contain the
State's moral obligation provision.
The MTA oversees New York City's subway and bus lines by its
affiliates, the New York City Transit Authority and the Manhattan and Bronx
Surface Transit Operating Authority (collectively, the "TA"). Through
MTA's subsidiaries, the Long Island Rail Road Company, the Metro-North
Commuter Railroad Company and the Metropolitan Suburban Bus Authority, the
MTA operates certain commuter rail and bus lines in the New York
metropolitan area. In addition, the Staten Island Rapid Transit Authority,
an MTA subsidiary, operates a rapid transit line on Staten Island. Through
its affiliated agency, the Triborough Bridge and Tunnel Authority (the
"TBTA"), the MTA operates certain toll bridges and tunnels. Because fare
revenues are not sufficient to finance the mass transit portion of these
operations, the MTA has depended and will continue to depend for operating
support upon a system of State, local government and TBTA support and, to
the extent available, Federal operating assistance, including loans, grants
and subsidies. If current revenue projections are not realized and/or
operating expenses exceed current projections, the TA or commuter railroads
may be required to seek additional State assistance, raise fares or take
other actions.
Over the past several years the State has enacted several
taxes--including a surcharge on the profits of banks, insurance
corporations and general business corporations doing business in the
12-county region (the "Metropolitan Transportation Region") served by the
MTA and a special .25% regional sales and use tax--that provide additional
revenues for mass transit purposes, including assistance to the MTA. In
addition, since 1987, State law has required that the proceeds of .25%
mortgage recording tax paid on certain mortgages in the Metropolitan
Transportation Region be deposited in a special MTA fund for operating or
capital expenses. Further, in 1993, the State dedicated a portion of
certain additional State petroleum business tax receipts to fund operating
or capital assistance to the MTA. For the 1994-96 State fiscal year, total
State assistance to the MTA is estimated at approximately $1.1 billion.
A subway fire on December 28, 1990 and a subway derailment on August
28, 1991, each of which caused fatalities and many injuries, have given
rise to substantial claims for damages against both the TA and the City.
In 1981, the State Legislature authorized procedures for the adoption,
approval and amendment of a five-year plan for the capital program designed
to upgrade the performance of the MTA's transportation systems and to
supplement, replace and rehabilitate facilities and equipment, and also
granted certain additional bonding authorization therefor.
On April 5, 1993, the Legislature approved, and the Governor
subsequently signed into law, legislation authorizing a five-year $9.56
billion capital plan for the MTA for 1992-1996. The MTA has received
approval of the 1992-1996 Capital Program based on this legislation from
the MTA Capital Program Review Board (the "CPRB"), as State law requires.
This is the third five-year plan since the Legislature authorized
procedures for the adoption, approval and amendment of a five-year plan in
1981 for a capital program designed to upgrade the performance of the MTA's
transportation systems and to supplement, replace and rehabilitate
facilities and equipment. The MTA, the TBTA and the TA are collectively
authorized to issue an aggregate of $3.1 billion of bonds (net of certain
statutory exclusions) to finance a portion of the 1992-96 Capital Program.
The 1992-96 Capital Program was expected to be financed in significant part
through dedication of the State petroleum business tax receipts referred to
above. However, in December 1994 the proposed bond resolution based on
such tax receipts was not approved by the MTA Capital Program Review Board.
Further consideration of the resolution was deferred until 1995.
There can be no assurance that such governmental actions will be
taken, that sources currently identified will not be decreased or
eliminated, or that the 1992-1996 Capital Program will not be delayed or
reduced. If the MTA capital program is delayed or reduced because of
funding shortfalls or other factors, ridership and fare revenues may
decline, which could, among other things, impair the MTA's ability to meet
its operating expenses without additional State assistance.
The cities, towns, villages and school districts of the State are
political subdivisions of the State with the powers granted by the State
Constitution and statutes. As the sovereign, the State retains broad
powers and responsibilities with respect to the government, finances and
welfare of these political subdivisions, especially in education and social
services. In recent years the State has been called upon to provide added
financial assistance to certain localities.
Other Localities. Certain localities in addition to the City could
have financial problems leading to requests for additional State assistance
during the State's 1995-96 fiscal year and thereafter. The potential
impact on the State of such actions by localities is not included in the
projections of the State receipts and disbursements in the State's 1995-96
fiscal year.
Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1993, the total indebtedness of
all localities in the State, other than the City, was approximately $17.7
billion. A small portion (approximately $105 million) of this indebtedness
represented borrowing to finance budgetary deficits and was issued pursuant
to enabling State legislation. State law requires the Comptroller to
review and make recommendations concerning the budgets of those local
government units other than the City authorized by State law to issue debt
to finance deficits during the period that such deficit financing is
outstanding. Fifteen localities had outstanding indebtedness for deficit
financing at the close of their fiscal year ending in 1993.
Certain proposed Federal expenditure reductions would reduce, or in
some cases eliminate, Federal funding of some local programs and
accordingly might impose substantial increased expenditure requirements on
affected localities to increase local revenues to sustain those
expenditures. If the State, the City or any of the Agencies 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 the 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, potential problems of declining city population, increasing
expenditures and other economic trends could adversely affect localities
and require increasing State assistance in the future.
Because of significant fiscal difficulties experienced from time to
time by the City of Yonkers, a Financial Control Board was created by the
State in 1984 to oversee Yonkers' fiscal affairs. Future actions taken by
the Governor or the State Legislature to assist Yonkers in this crisis
could result in the allocation of State resources in amounts that cannot
yet be determined.
Certain litigation pending against the State or its officers or
employees could have a substantial or long-term adverse effect on State
finances. Among the more significant of these litigations are those that
involve: (i) the validity and fairness of agreements and treaties by which
various Indian tribes transferred title to the State of approximately six
million acres of land in central New York; (ii) certain aspects of the
State's Medicaid rates and regulations, including reimbursements to
providers of mandatory and optional Medicaid services; (iii) contamination
in the Love Canal area of Niagara Falls; (iv) a challenge to the State's
practice of reimbursing certain Office of Mental Health patient-care
expenses with clients' Social Security benefits; (v) a challenge to the
methods by which the State reimburses localities for the administrative
costs of food stamp programs; (vi) a challenge to the State's possession
of certain funds taken pursuant to the State's Abandoned Property law;
(vii) alleged responsibility of State officials to assist in remedying
racial segregation in the City of Yonkers; (viii) an 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; (ix) actions
challenging the constitutionality of legislation enacted during the 1990
legislative session which changed the actuarial funding methods for
determining contributions to State employee retirement systems; (x) an
action against State and City officials alleging that the present level of
shelter allowance for public assistance recipients is inadequate under
statutory standards to maintain proper housing; (xi) an action challenging
legislation enacted in 1990 which had the effect of deferring certain
employer contributions to the State Teachers' Retirement System and
reducing State aid to school districts by a like amount; (xii) a challenge
to the constitutionality of financing programs of the Thruway Authority
authorized by Chapters 166 and 410 of the Laws of 1991 (described below in
this Part); (xiii) a challenge to the constitutionality of financing
programs of the Metropolitan Transportation Authority and the Thruway
Authority authorized by Chapter 56 of the Laws of 1993 (described below in
this Part); (xiv) challenges to the delay by the State Department of Social
Services in making two one-week Medicaid payments to the service providers;
(xv) challenges by commercial insurers, employee welfare benefit plans, and
health maintenance organizations to provisions of Section 2807-c of the
Public Health Law which impose 13%, 11% and 9% surcharges on inpatient
hospital bills and a bad debt and charity care allowance on all hospital
bills paid by such entities; (xvi) challenges to the promulgation of the
State's proposed procedure to determine the eligibility for and nature of
home care services for Medicaid recipients; (xvii) a challenge to State
implementation of a program which reduces Medicaid benefits to certain
home-relief recipients; and (xviii) challenges to the rationality and
retroactive application of State regulations recelebrating nursing home
Medicaid rates.
Adverse developments or decisions in such cases could affect the
ability of the State to maintain a balanced 1994-95 State Financial Plan.
(2) New York City. In the mid-1970s, the City had large accumulated
past deficits and until recently was not able to generate sufficient tax
and other ongoing revenues to cover expenses in each fiscal year. However,
the City's operating results for the fiscal year ending June 30, 1994 were
balanced in accordance with GAAP, the twelfth consecutive year in which the
City achieved balanced operating results in accordance with GAAP. The
City's ability to maintain balanced operating results in future years is
subject to numerous contingencies and future developments.
The City's economy, whose rate of growth slowed substantially over the
past three years, is currently in recession. During the 1990 and 1991
fiscal years, as a result of the slowing economy, the City has experienced
significant shortfalls in almost all of its major tax sources and increases
in social services costs, and has been required to take actions to close
substantial budget gaps in order to maintain balanced budgets in accordance
with the Financial Plan.
In 1975, the City became unable to market its securities and entered a
period of extraordinary financial difficulties. In response to this
crisis, the State created MAC to provide financing assistance to the City
and also enacted the New York State Financial Emergency Act for the City of
New York (the "Emergency Act") which, among other things, created the
Financial Control Board (the "Control Board") to oversee the City's
financial affairs and facilitate its return to the public credit markets.
The State also established the Office of the State Deputy Comptroller
("OSDC") to assist the Control Board in exercising its powers and
responsibilities. On June 30, 1986, the Control Board's powers of approval
over the City Financial Plan were suspended pursuant to the Emergency Act.
However, the Control Board, MAC and OSDC continue to exercise various
monitoring functions relating to the City's financial condition. The City
prepares and operates under a four-year financial plan which is submitted
annually to the Control Board for review and which the City periodically
updates.
The City's independently audited operating results for each of its
fiscal years from 1981 through 1993 show a General Fund surplus reported in
accordance with GAAP. The City has eliminated the cumulative deficit in
its net General Fund position. 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 August 1993, the City adopted and submitted to the Control Board
for its review a four-year Financial Plan covering fiscal years 1994
through 1997 (the "Financial Plan"). The Financial Plan was based on the
City's fiscal year 1994 expense budget adopted June 14, 1993 as well as
certain changes incorporated subsequent to the budget adoption process. On
November 23, 1993, the City adopted and submitted to the Control Board for
its review a first quarter modification to the Financial Plan (the
"November Modification") incorporating various re-estimates of revenues and
expenditures. For fiscal year 1994, the November Modification includes
additional resources stemming primarily from the City Comptroller's fiscal
year 1993 annual audit, savings from a reduction in prior years' accrued
expenditures, and higher State and Federal aid resulting from claims by the
City for reimbursement of various social services costs. These resources
were used to fund new needs in the November Modification including higher
costs in the uniformed agencies, at the Board of Education (the "BoE") and
for certain social services, the unlikelihood of the sale of the Off-Track
Betting Corporation (the "OTB"), and lower estimates of miscellaneous and
other revenues. After taking these adjustments into account, the November
Modification projects a balanced budget for fiscal year 1994, based upon
revenues of $31,585 billion. For fiscal years 1995, 1996 and 1997, the
November Modification projects budget gaps of $1.730 billion, $2.513
billion and $2.699 billion, respectively. These gaps are higher by about
$450 million in fiscal year 1995 and by about $700 million in each of
fiscal years 1996 and 1997 than in the Financial Plan, primarily on account
of the nonrecurring value of the fiscal year 1994 revenue adjustments, the
loss of certain one-time resources funding BoE fiscal year 1994 spending
needs, and the reclassification of anticipated State aid from the baseline
revenue estimates to the gap-closing program. To offset these larger gaps,
the November Modification relies on additional City, State and other
actions.
On December 1, 1993, a three-member panel appointed by the Mayor to
address City structural budget imbalance released a report setting forth
its findings and recommendations. In its report, the panel noted that
budget imbalance is likely to be greater than the City now projects by $255
million in fiscal year 1995, rising to nearly $1.5 billion in fiscal year
1997. The report provided a number of options that the City should
consider in addressing the structural balance issue such as severe cuts in
City-funded personnel levels, increases in residential property taxes and
the sales tax, and the imposition of bridge tolls and solid waste
collection fees. The report also noted that additional State actions will
be required in many instances to allow the City to cut its budget without
grave damage to basic services.
On December 21, 1993, OSDC issued a report reviewing the November
Modification. The report noted that while the outlook for fiscal year 1994
has improved since August, it will be necessary for the City to manage its
budget aggressively in order to stay on course for budget balance this
year. For fiscal years 1995 through 1997, the report expressed concern
that the gaps identified by the City in the November Modification are the
largest as a percentage of City-fund revenues that the City has faced at
this point in the fiscal year since budget balance in accordance with GAAP
was first achieved in fiscal year 1981.
On December 21, 1993, the staff of the Control Board issued its report
on the November Modification. The report states that the plan is now more
realistic in terms of the gaps it portrays and the solutions it offers.
However, the solutions are mostly limited to fiscal year 1994 while the gap
for fiscal year 1995 has been increased by $450 million. Beginning in
fiscal year 1995, budget gaps average over $1 billion annually. Therefore,
the staff recommends that prompt action to replace many current-year one-
shots with recurring savings is critical.
On February 2, 1994, the Mayor presented to the City Council and the
Control Board a mid-year modification to the Financial Plan (the "February
Modification"). The February Modification projects a balanced budget for
fiscal year 1994, based upon revenues of $31.735 billion, including a
general reserve of $81 million. For fiscal years 1995, 1996 and 1997, the
February Modification projects gaps of $2.261 billion, $3.167 billion and
$3.253 billion, respectively, and assumes 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 includes a gap-closing program
that consists 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 work force
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 includes a tax reduction program, with most of the
financial impact affecting the later years of the Plan period.
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 the 1994 fiscal year. The City's
capital financing program projects long-term financing requirements of
approximately $17 billion for the City's fiscal years 1995 through 1998 for
the construction and rehabilitation of the City's infrastructure and other
fixed assets. The major capital requirement include expenditures for the
City's water supply system, and waste disposal systems, roads, bridges,
mass transit, schools and housing. In addition, the City and the Municipal
Water Finance Authority have issued about $1.8 billion in refunding bonds
in the 1994 fiscal year.
State Economic Trends. The State historically has 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. Statewide, urban centers have experienced significant
changes involving migration of the more affluent to the suburbs and an
influx of generally less affluent residents. Regionally, the older
Northeast cities have suffered because of the relative success that the
South and the West have had in attracting people and business. The City
has also had to face greater competition as other major cities have
developed financial and business capabilities which make them less
dependent on the specialized services traditionally available almost
exclusively in the City.
During the 1982-83 recession, overall economic activity in the State
declined less than that of the nation as a whole. However, in the calendar
years 1984 through 1991, the State's rate of economic expansion was
somewhat slower than that of the nation. In the 1990-91 recession, the
economy of the State, and that of the rest of the Northeast, was more
heavily damaged than that of the nation as a whole and has been slower to
recover. The total employment growth rate in the State has been below the
national average since 1984. The unemployment rate in the State dipped
below the national rate in the second half of 1981 and remained lower until
1991; since then, it has been higher. According to data published by the
U.S. Bureau of Economic Analysis, during the past ten years, total personal
income in the State rose slightly faster than the national average only
from 1986 through 1988.
APPENDIX D
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 Ratings Group ("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 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.
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.
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)
OCTOBER 31, 1995
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)
(collectively, the "Funds"), dated October 31, 1995, as they may be revised
from time to time. The Funds are separate portfolios of The Dreyfus/Laurel
Tax-Free Municipal Funds, a management investment company (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
Outside the U.S. and Canada -- Call 1-516-794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Funds' investment
manager.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Funds' shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies . . . . . . . . . . . . . . B-3
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . B-16
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . B-16
Federal Law Affecting Mellon Bank. . . . . . . . . . . . . . . . . . . . B-16
Trustees and Officers. . . . . . . . . . . . . . . . . . . . . . . . . . B-17
Management Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . B-21
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . . . B-24
Distribution and Service Plans . . . . . . . . . . . . . . . . . . . . . B-25
Redemption of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . . B-28
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . B-29
Determination of Net Asset Value . . . . . . . . . . . . . . . . . . . . B-32
Dividends, Other Distributions and Taxes . . . . . . . . . . . . . . . . B-32
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . B-37
Performance Information. . . . . . . . . . . . . . . . . . . . . . . . . B-39
Information About the Fund . . . . . . . . . . . . . . . . . . . . . . . B-44
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors . . . . . . . . . . . . . . . . . . . . B-45
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . B-46
Municipal Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . B-47
Appendix B Risk Factors - Investing in California Municipal Obligations. B-50
Appendix C - Risk Factors- Investing in New York Municipal Obligations . B-62
Appendix D - Information About Securities Ratings . . . . . . . . . . . B-76
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 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 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 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 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 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 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
each 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. No Fund will 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.
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 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 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.
Investing in Massachusetts Municipal Obligations. Investors should
consider carefully the special risks inherent in the Fund's investment in
Massachusetts Municipal Obligations. Massachusetts' economic difficulties and
fiscal problems in the late 1980s and early 1990s caused several rating
agencies to lower their ratings of Massachusetts Municipal Obligations. A
return of persistent serious financial difficulties could adversely affect the
market values and marketability of, or result in default in payment on,
outstanding Massachusetts Municipal Obligations. Massachusetts' expenditures
for State programs and services in each of the fiscal years 1987 through 1991
exceeded each year's current revenues. The budgeted operating funds of
Massachusetts ended fiscal years 1992, 1993 and 1994, however, with an excess
of revenues and other sources over expenditures and other uses of $312.3
million, $13.1 million and $26.8 million, respectfully. Fiscal 1994 ended with
positive budgeted operating fund balances of $589.3 million. Investors should
review Appendix A which more fully sets forth these and other risk factors.
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.
Investing in California Municipal Obligations. Investors should consider
carefully the special risks inherent in the Fund's investment in California
Municipal Obligations. These risks result from certain amendments to the
California Constitution and other statues that limit the taxing and spending
authority of California governmental entities, as well as from the general
financial condition of the State of California. From mid-1990 to late 1993,
the State suffered a recession with the worst economic, fiscal and budget
conditions since the 1930s. As a result, the State has experienced recurring
budget deficits for four of the last five fiscal years ended 1991-1992. The
State had an operating surplus of approximately $109 million in 1992-93 and
$836 million in 1993-94. However, at June, 1994, according to California's
Department of Finance, the State's Special Fund for Economic Uncertainties had
an accumulated deficit, on a budget basis, of approximately $1.8 billion. A
further consequence of the large budget imbalances over the last three fiscal
years has been that the State depleted its available cash resources and has had
to use a series of external borrowings to meet its cash needs. To meet its
cash flow needs in the 1994-95 fiscal year, the State issued, in July and
August 1994, $4.0 billion of revenue anticipation warrants and $3.0 billion of
revenue anticipation notes. As a result of the deterioration of the state's
budget and cash situation between October 1991 and July 1994, the rating on the
State's general obligation bonds was reduced by S&P from AAA to A, by Moody's
from Aaa to A1 and by Fitch AAA to A. These and other factors may have the
effect of impairing the ability of the issuers of California Municipal
Obligations to pay interest on, or repay principal of, such California
Municipal Obligations. Investors should review Appendix B which sets froth
additional information relating to investing in California Municipal
Obligations.
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.
Investing in New York Municipal Obligations. Each investor should
consider carefully the special risks inherent in the investment in New York
Municipal Obligations by each Fund. These risks result from the financial
condition of New York State and certain of its public bodies and
municipalities, including New York City. Beginning in early 1975, New York
State, New York City and other State entities faced serious financial diffi-
culties 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 Fund 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 national recession and the significant slowdown in the New York
and regional economies in the early 1990s added substantial uncertainty to
estimates of the State's tax revenues, which, in part, caused the State to
incur cash-basis operating deficits in the General Fund and issue deficit notes
during the fiscal periods 1989 through 1992. The State's financial operations
have improved, however, during recent fiscal years. 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 and 1995 fiscal years with operating
surpluses of $914 million and $158 million, respectively. There can be no
assurance that New York will not face substantial potential budget gaps in
future years. In January 1992, Moody's lowered from A to Baa1 the ratings on
certain appropriation-backed debt of New York State and its agencies. The
State's general obligation, state guaranteed and New York State Local
Government Assistance Corporation bonds continue to be rated A by Moody's. In
January 1992, S&P lowered from A to A- the ratings of New York State general
obligation bonds and stated that it continued to assess the ratings outlook as
negative. The ratings of various agency debt, state moral obligations,
contractual obligations, lease purchase obligations and state guarantees also
were lowered. In February 1991, Moody's lowered its rating on New York City's
general obligation bonds from A to Baa1 and in July 1995, S&P lowered its
rating on such bonds from A- to BBB+. The rating changes reflect the rating
agencies' concerns about the financial condition of New York State and City,
the heavy debt load of the State and City, and economic uncertainties in the
region. Investors should review "Appendix C" which more fully sets forth these
and other risk factors.
Investment Restrictions
The following are fundamental investment restrictions of each Fund. No
Fund of the Trust may:
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 at 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 5% 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 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.
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 a 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
PRINCIPAL SHAREHOLDERS
As of October 9, 1995, the following companies/individuals owned
beneficially 5% or more of the outstanding Class R shares of the Trust: 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), P.O. Box 3198 Pittsburgh, PA 15230-03198 owned 24% of the
Municipal Fund, owed 29% of the Massachusetts Municipal Fund, owned 75% of the
New York Municipal Fund and owned 24% of the California Municipal Fund. Mac &
Co. 030-823, Mellon Bank, N.A. as Nominee for Trust Custodian, P.O. Box 320,
Pittsburgh, PA 15230-0320, owned 5% of the Class R shares of the Premier
Limited Term New York Municipal Fund.
As of October 9, 1995, the following companies/individuals and
beneficially 5% or more of the outstanding Class B shares of the Premier
Limited Term Municipal Fund: David Zemelman and Philoppa S. Zemelman, 17620
Woods Edge Drive, Dallas, TX 70287 owned 64% and BHC Securities, Inc., One
Commerce Square, 2005 Market Street, Suite 1200, Philadelphia, PA 19103 owned
27% of the outstanding Class B shares of the Premier Limited Term Municipal
Fund.
As of October 9, 1995, the following companies/individuals and
beneficially 5% or more of the outstanding Class R shares of the Premier
Limited Term Municipal Fund: The Boston Safe Deposit & 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). P.O. Box 3198,
Pittsburgh, PA 15230-3198 owned 16% of the outstanding Class R shares of the
Premier Limited Term Municipal Fund.
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 thirteen 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/Laurel 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. Age:
80 years old. 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). Age: 78 years old. Address: Massachusetts
Business Development Corp., One Liberty Square, Boston, Massachusetts
02109.
o*JOSEPH S. DiMARTINO. Trustee of the Trust since February 1995. Since
January 1995, Mr. DiMartino has served as Chairman of the Board for
various funds in the Dreyfus Family of Funds. For more than five
years prior thereto, he was President and a director of Dreyfus and
Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus and until August
1994, the Funds' distributor. From August 1994 to December 31, 1994,
he was a director of Mellon Bank Corporation. He is Chairman of the
board of Noel group, Inc., a venture capital company; a trustee of
Bucknell University; and a director of the Muscular Dystrophy
Association, HealthPlan Services Corporation, Belding Heminway, Inc.,
a manufacturer and marketer of industrial threads, specialty yarns,
home furnishings and fabrics, Curtis Industries, Inc., a national
distributor of security products, chemicals and automotive and other
hardware, Simmons Outdoor Corporation and Staffing Resources, Inc.
Mr. DiMartino is also a Board member of 93 other funds in the Dreyfus
Family of Funds. Age: 51 years old. Address: 200 Park Avenue, New
York, New York 10166.
o*JAMES M. FITZGIBBONS. Trustee of the Trust; 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. Age: 60 years old.
Address: 40 Norfolk Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Trustee of the Trust; Since 1990, Partner, Reed,
Smith, Shaw & McClay (law firm). Age: 65 years old. 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. Since May 1991, Mr. Goeschel has served as Trustee of
Sewickley Valley Hospital. Age: 73 years old. Address: Way Hollow
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 Managing Partner, Franklin Federal Partners. Age:
49 years old. Address: Himmel and Company, Inc., 101 Federal Street,
22nd Floor, Boston, Massachusetts 02110.
o*ARCH S. JEFFERY. Trustee of the Trust; Financial Consultant. Age: 76
years old. Address: 1817 Foxcroft Lane, Unit 306, 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. Age: 48
years old. Address: 401 Edgewater Place, Wakefield, Massachusetts
01880.
o+ROBERT D. MCBRIDE. Trustee of the Trust; Director, Chairman, McLouth
Steel; Director, Salem Corporation. Director, SMS/Concast, Inc.
(1983-1991). Age: 67 years old. 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). Age: 81 years old. 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. Age: 63 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224
o+ROSLYN M. WATSON. Trustee of the Trust; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director Havard
Community Health Plan, Inc; Director, Massachusetts Electric Company;
Director, The Hymons Foundation, Inc., prior to February, 1993; Real
Estate Development Project Manager and Vice President, The Gunwyn
Company. Age: 45 years old. 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 and the Dreyfus/Laurel
Funds Trust (since September 1994); Vice President of the Trust, The
Dreyfus/Laurel Funds, Inc. Dreyfus/Laurel Investment Series and the
Dreyfus/Laurel Funds Trust (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). Age: 37 years old. Address: One Exchange Place, Boston,
Massachusetts 02109.
#FREDERICK C. DEY. Vice President of the Trust, The Dreyfus/Laurel Funds,
Inc., The Dreyfus/Laurel Investment Series and The Dreyfus/Laurel
Funds Trust (since September 1994); Senior Vice President, Premier
Mutual Fund Services, Inc. (since August 1994); Vice President, Funds
Distributor, Inc. (since August 1994); Fund raising Manager, Swim
Across America (October 1993 to August 1994); General Manager, Spring
Industries (August 1988 to October 1993). Age: 33 years old.
Address: Premier Mutual Fund Services, Inc., 200 Park Avenue New
York, New York 10166.
#ERIC B. FISCHMAN. Vice President of the Trust, The Dreyfus/Laurel Funds,
Inc., The Dreyfus/Laurel Investment Series and The Dreyfus/Laurel
Funds Trust (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
County District Attorney (June 1990 to August 1990). Age: 30 years
old. Address: Premier Mutual Fund Services, Inc., 200 Park Avenue,
New York, New York 10166.
LESLIE M. GAYNOR. Assistant Treasurer of Dreyfus/Laurel, The
Dreyfus/Laurel Investment Series, The Dreyfus/Laurel Funds Trust and
The Dreyfus/Laurel Tax-Free Municipal Funds (since October 1994);
Assistant Treasurer/Manager of Treasury Services, Funds Distributor,
Inc. (since July 1994); Vice President, The Boston Company, Inc. (1989
to July 1994. Age: 43 years old. Address: One Exchange Place,
Boston, Massachusetts 02109.
RICHARD W. HEALEY. Vice President of The Trust, The Dreyfus/Laurel Funds
Inc., The Dreyfus/Laurel Investment Series 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). Age: 41 years old. Address: One Exchange Place, Boston,
Massachusetts 02109.
#JOHN E. PELLETIER. Vice President and Secretary of the Trust, The
Dreyfus/Laurel Funds, Inc., The Dreyfus/Laurel Investment Series and
The Dreyfus/Laurel Funds Trust (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). Age: 30 years
old. Address: Exchange Place 53 State Street, 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 Dreyfus.
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 October 9,
1995.
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 Family of Funds 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 Family). In addition, the Trust pays each Trustee $1,000
per joint Dreyfus/Laurel Family of Board meeting attended, plus $750 per
joint Dreyfus/Laurel Family of Funds Audit Committee meeting attended, and
reimburses each Trustee for travel and out-of-pocket expenses.
For the fiscal year ended June 30, 1995, the aggregate amount of fees
and expenses received by each Trustee from the Trust and all other funds in
the Dreyfus Family of Funds for which such person is a Board member were as
follows:
<TABLE>
<CAPTION>
(5) Total
(3) Pension or Compensation from
(2) Aggregate Retirement Benefits (4) Estimated Annual Fund and Fund
(1) Name of Board Compensation from Accrued as Part of Benefits Upon Complex Paid to
Member the Trust* Fund's Expenses Retirement Board Member
<S> <C> <C> <C> <C>
Ruth Marie Adams $ 2,093 none none $ 34,750
Francis P. Brennan@ 17,716 none none 110,750
Joseph S. DiMartino*** 2,156* none none 14,000 **
James M. Fitzgibbons 1,968 none none 32,750
J. Tomlinson Fort*** 2,156 none none 35,750
Arthur L. Goeschel 2,093 none none 34,750
Kenneth A. Himmel 1,934 none none 32,000
Arch S. Jeffery*** 2,156 none none 35,750
Steven J. Lockwood 1,934 none none 32,000
Robert D. McBride 2,156 none none 35,750
John L. Propst 2,156 none none 35,750
John J. Sciullo 2,093 none none 34,750
Roslyn M. Watson 2,156 none none 35,750
____________________________
# Amount does not include reimbursed expenses for attending Board meetings, which amounted to $6,559.21 for the Dreyfus/Laurel
Family of Funds.
* Estimated amount for fiscal year ended June 30, 1996.
** Estimated amount for year ending December 31, 1995.
*** Interested Trustee - not paid by funds, paid by Dreyfus.
@ Frank Brennan is also paid $75,000 by Dreyfus to be the Chairman of the Board. This amount is included in the total
compensation figure for Mr. Brennan.
</TABLE>
MANAGEMENT ARRANGEMENTS
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectuses entitled
"Management of the Fund."
Management Agreement. Dreyfus serves as the investment manager for
the Funds 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 services to
the Funds. As investment manager, Dreyfus manages the Funds by making
investment decisions based on each 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, 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 3, 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 4, 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 the Management Agreement, which was last approved by the Trustees on
September 23, 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 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 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 as to each
Fund provided that a majority of the Trustees who are not interested
persons of the Fund and either a majority of all Trustees or a majority of
the shareholders of the Fund approve its continuance. Each Fund 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; W. Keith
Smith, Vice Chairman of the Board; Robert E. Riley, President, Chief
Operating Officer and a director, Stephen E. Canter, Vice Chairman, Chief
Investment Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration; Daniel C. Maclean, Vice President and General Counsel;
Barbara E. Casey, Vice President-Dreyfus President-Dreyfus Retirement
Services; Diane M. Coffey, Vice President-Corporate Communications; Elie M.
Genadry, Vice President-Institutional Sales; Henry D. Gottman, Vice
President-Retail Sales and Service; William F. Glavin, Jr., Vice President-
Corporate Development; Andrew S. Wasser, Vice President-Information
Services; Mark N. Jacobs, Vice President-Fund Legal and Compliance and
Secretary; Jeffrey N. Nachman, Vice President-Mutual Fund Accounting;
Katherine C. Wickham, Vice President-Corporate Human Resources; Maurice
Bendrihem, Controller; Elvira Oslapas; Assistant Secretary; Mandell L.
Berman, Frank V. Cahouet, Alvin E. Friedman, Lawrence M. Green, Julian M.
Smerling and David B. Truman, directors.
As compensation for Dreyfus' 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 Bank (as the prior investment advisors) and to Dreyfus (the asset
investment manager), including and any fee waivers or expense
reimbursements by TBC Advisors, Dreyfus or Mellon, during the Fund's 1993,
1994 and 1995 fiscal years:
<TABLE>
<CAPTION>
1995* 1994*(1)
Fees Fees Fees Fees
Paid Paid(2) Paid(3) Waived(4)
<S> <C> <C> <C> <C>
Municipal Fund $179,992 $42,914 $138,860 $120,026(5)
Massachusetts Municipal Fund 172,146 40,947 136,877 45,790(6)
California Municipal Fund 96,807 24,801 37,628 41,998(7)
New York Municipal Fund 27,290 8,038 11,467 35,815(8)
1993** 1992**
Fees Fees Fees Fees
Paid Waived(4) Paid Waived(4)
Municipal Fund $149,844 $ 33,802(9) $111,512 $ 32,657
Massachusetts Municipal Fund 125,844 43,842(10) 90,324 --
California Municipal Fund 100,024 119,522(11) 98,142 94,550
New York Municipal Fund 28,242 102,024(12) 25,624 58,959(13)
______________________________
* 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.
(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.
</TABLE>
Dreyfus has agreed that if in any fiscal year the aggregate expenses
of any Fund of the Trust (including fees pursuant to the 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 and Service Plans" 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, 1995.
PURCHASE OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectuses entitled "How to
Buy Fund Shares."
Premier Mutual Fund Services, Inc. ("Premier") (One Exchange Place,
Boston Massachusetts 02109), serves as the distributor for each of the
Funds pursuant to an agreement with each Fund Dreyfus effective October 17,
1994 (Distribution Agreement"), which is renewable annually. 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 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. 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.
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 Funds' Prospectuses 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 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 the 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 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
Funds and the holders of Class B and Class C shares.
For the year ended June 30, 1995, the distribution and service fees
were as follows:
<TABLE>
<CAPTION>
Distribution Class A Class B Class C
<S> <C> <C> <C>
California Municipal Fund $25,076 $ 13 $15
Massachusetts Municipal Fund 46,118 - 20
New York Municipal Fund 6,639 - 71
Limited Term Municipal Fund 55,917 179 57
Service Fees: Class B Class C
California Municipal Fund $ 6 $ 89
Massachusetts Municipal Fund - 10
New York Municipal Fund - 36
Limited Term Municipal Fund 89 29
Class R shares bear no service or distribution fee.
</TABLE>
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.
REDEMPTION OF FUND SHARES
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectuses 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.
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. 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."
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.
SHAREHOLDER SERVICES
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectuses 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 request an exchange, 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. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless the investor checks the applicable "NO" box on the Account
Application, indicating that the investor specifically refunds this
Privilege. By using the Telephone Exchange, 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.
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. Shares
will be exchanged on the basis of relative net asset value as described
above under "Fund Exchanges." 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.
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.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. Each Fund reserves the right to reject
any exchange request in whole or in part. Each 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. 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.
Dreyfus Dividend Sweep. Dreyfus 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.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectuses 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' Prospectuses 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 of
any of the following that are held for less than three months -- (i) secu-
rities, (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' Prospectuses. 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 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.
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 investors.
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.
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 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 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.
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 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 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, 1994
and 1995 for the Municipal Fund were 57% and 6%, respectively. The
portfolio turnover rates for the fiscal years ended June 30, 1994 and 1995
for the Massachusetts Municipal Fund were 19% and 25%, respectively. The
portfolio turnover rates for the period ended June 30, 1994 and for the
fiscal year ended June 30, 1995 for the California Municipal Fund were 5%
and 49%, respectively. The portfolio turnover rates for the period ended
June 30, 1994 and for the fiscal year ended June 30, 1995 for the New York
Municipal Fund were 13% and 32%, respectively.
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in the Funds' Prospectuses 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.
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.
<TABLE>
<CAPTION>
The Municipal Fund's average annual total return was as follows for
the period indicated:
Class A Class R
<S> <C> <C>
The one-year period beginning on
July 1, 1994 through June 30, 1995 6.37%/3.18%* 6.64%
The five-year period beginning on
July 1, 1990 through June 30, 1995 7.57 %/6.91%* --
The life of the Fund through
June 30, 1995+ 9.15 %/8.81%* 5.41%
</TABLE>
<TABLE>
<CAPTION>
The Municipal Fund's aggregate total return was as follows for the period indicated:
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
The one-year period beginning on
July 1, 1994 through June 30, 1995 6.37%/3.18%* -- -- 6.64%
The five year-period beginning on
July 1, 1990 through June 30, 1995 44.01%/39.69%* -- -- --
The life of the Fund through
June 30, 1995+ 134.73/127.69% 6.55/3.55%* 6.55/5.80% 13.57%
* The figure shows what the Municipal Fund's performance would have been in the absence of fee waivers.
+ Reflects performance from October 5, 1985 through June 30, 1995 for the Class A, shares from February 1, 1993 through June 30,
1995 for the Class R shares, and from December 28, 1994 through June 30, 1995 for Class B and C shares, respectively.
</TABLE>
<TABLE>
<CAPTION>
The Massachusetts Municipal Fund's average annual total return was as follows for the period indicated:
Class A Class R
<S> <C> <C>
The one-year period beginning on
July 1, 1994 through June 30, 1995 6.60%/3.40%* 6.87%
The five-year period beginning on
July 1, 1990 through June 30, 1995 7.65%/7.00%* --
The life of the Fund through
June 30, 1995+ 8.40%/8.07 %* 5.36%*
</TABLE>
<TABLE>
<CAPTION>
The Massachusetts Municipal Fund's aggregate total return was as follows for the period indicated:
Class A Class R Class C
<S> <C> <C> <C>
The one-year period beginning on
July 1, 1993 through June 30, 1995 6.60%/3.40%* 6.87%* --
The five-year period beginning on
July 1, 1990 through June 30, 1995 44.60%/40.26%* -- --
The life of the Fund through
June 30, 1995+ 119.92%/113.32%* 13.42%* 6.24/5.49*
* The figure shows what the Massachusetts Municipal Fund's performance would be including sales charges.
+ Reflects performance from September 24, 1985 through June 30, 1995 for the Class A shares and February 1, 1993 through June 30,
1995 for the Class R shares and December 28, 1994 through June 30, 1995 for Class C shares.
</TABLE>
<TABLE>
<CAPTION>
The California Municipal Fund's aggregate annual total return was as follows for the period indicated:
Class A Class R
<S> <C> <C>
The one-year period beginning on
July 1, 1994 through June 30, 1995 6.48%/3.29%* 6.75%*
The five-year period beginning on
July 1, 1990 through June 30, 1995 7.56%/6.91%* --
The life of the Fund through
June 30, 1995+ 7.25%/6.81%* 5.82%
</TABLE>
<TABLE>
<CAPTION>
The California Municipal Fund's aggregate total return was as follows for the period indicated:
Class A Class B Class C Class R
<S> <C> <C> <C> <C>
The one-year period beginning on
July 1, 1994 through June 30, 1995 6.48%/3.29%* -- -- 6.75%
The five-year period beginning on
July 1, 1990 through June 30, 1995 43.96%/39.66%* -- -- --
The life of the Fund through
June 30, 1995+ 66.87%/61.87%* 6.51%/3.51%* 6.51%/5.76%* 14.62%
* The figure shows what the California Municipal Fund's performance would have been in the absence of a sales charge.
+ Reflects performance from March 7, 1988 through June 30, 1995 for the Class A shares, February 1, 1993 through June 30, 1995
for the Class R shares and from December 28, 1994 through June 30, 1995 for Class B and C shares, respectively.
</TABLE>
<TABLE>
<CAPTION>
The New York Municipal Fund's average annual total return was as follows for the period indicated:
Class A Class R
<S> <C> <C>
The one-year period beginning on
July 1, 1994 through June 30, 1995 6.39%/3.20%* 6.65%
The five-year period beginning on
July 1, 1990 through June 30, 1995 7.11%/6.46%* --
The life of the Fund through
June 30, 1995+ 6.64%/6.20%* 5.31%
</TABLE>
<TABLE>
<CAPTION>
The New York Municipal Fund's aggregate total return was as follows for the period indicated:
Class A Class C Class R
<S> <C> <C> <C>
The one-year period beginning on
July 1, 1994 through June 30, 1995 6.39%/3.20%* -- 6.65%
The five-year period beginning on
July 1, 1990 through June 30, 1995 41.01%/36.78%* -- --
The life of the Fund through
June 30, 1995+ 60.04%/55.24%* 6.39%/5.64%* 13.29%
* The figure shows what the New York Municipal Fund's performance would have been including sales charges.
+ Reflects performance from March 7, 1988 through June 30, 1995 for the Class A shares, February 1, 1993 through June 30, 1995
for the Class R shares from December 28, 1994 through June 30, 1995 for Class C shares.
</TABLE>
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 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.
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, 1995 were as follows:
<TABLE>
<CAPTION>
30-Day Yield for Period Ended
June 30, 1995
Yield Equivalent Taxable Yield*
<S> <C> <C>
Municipal Fund
Class A shares 4.03% 6.30%
Class R shares 4.42% 6.91%
Class B Shares 3.65% 5.70%
Class C Shares 3.65% 5.70%
Massachusetts Municipal Fund
Class A shares 4.05% 7.19%
Class R shares 4.43% 7.87%
Class C shares 3.68% 6.54%
30-day Yield for the Period Ended
June 30, 1995
Yield Equivalent Yield*
California Municipal Fund
Class A shares 4.01% 6.96%
Class R shares 4.38% 7.60%
Class B shares 3.63% 6.30%
Class C shares 3.63% 6.30%
New York Municipal Fund
Class A shares 3.83% 6.79%
Class R shares 4.20% 7.45%
Class C shares 3.44% 6.10%
* 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.
</TABLE>
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, amended and restated December 9, 1992, and
subsequently further amended. 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 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
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 1940 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 the 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.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
Mellon Bank, One Mellon Bank Center, Pittsburgh, PA 15258, is the
Funds' custodian. 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, 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 LLP, 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, Pittsburgh, Pennsylva-
nia 15218, was appointed by the Trustees to serve as the Funds' independent
auditors for the year ending June 30, 1995, providing audit services
including (1) examination of the annual financial statements (2)
assistance, review and consultation in connection with SEC (3) and review
of the annual Federal income tax return filed on behalf of each Fund.
FINANCIAL STATEMENTS
The Funds' Annual Reports for the fiscal year ended June 30, 1995
accompany this statement of Additional Information, and the financial
statements contained therein, and related notes, are incorporated by
reference into this Statement of Additional Information.
APPENDIX A
RISK FACTORS - INVESTING
IN MASSACHUSETTS MUNICIPAL OBLIGATIONS
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 relating to securities offerings of the
Commonwealth of Massachusetts available as of the date of this Statement of
Additional Information. While the Fund has not independently verified this
information, it has no reason to believe that such information is not
correct in all material aspects.
At the present time, the Commonwealth of Massachusetts' economy is
experiencing a modest recovery following a slow down that began in mid-
1988. Massachusetts has nonetheless undergone serious financial
difficulties in recent years that have adversely affected the
Commonwealth's credit standing. While Massachusetts had benefitted from an
annual job growth rate of approximately 2% since the early 1980s, by 1989
employment started to decline. Between 1988 and 1992, total employment in
Massachusetts declined 10.7 percent. In 1993 and 1994, however, total
employment increased by 1.6 percent and 2.2 percent, respectively.
Employment levels increased in all sectors except manufacturing. Between
1990 and 1992, the Commonwealth's unemployment rate was considerably higher
than the national average, although unemployment rates in Massachusetts
since 1993 have declined faster than the national average. As a result,
the average monthly unemployment rate in Massachusetts for 1993 was only
slightly higher than the national average (6.9 percent compared to 6.8
percent) and the unemployment rate in Massachusetts in 1994 was slightly
below the national average (6.0 percent compared to 6.1 percent).
Massachusetts' economic and fiscal difficulties of recent years appear
to have abated. While the Commonwealth's expenditures for State programs
and services in each of the fiscal years 1987 through 1991 exceeded each
year's current revenues, Massachusetts ended each of the fiscal years 1991
to 1994 and expects to end fiscal 1995 with a positive closing fund balance
in its budgeted operating funds.
Massachusetts expenditures for State government programs and services
in each of the fiscal years 1987 through 1991, inclusive, exceeded each
fiscal year's current revenues. In fiscal years 1987 and 1988, largely by
drawing on fund balances from prior years, Massachusetts ended each fiscal
year with budgetary surpluses. However, fiscal years 1989 and 1990 ended
with operating deficits of $672.5 million and $1.25 billion, respectively.
In fiscal 1991, total revenues and other sources of the budgeted
operating funds increased by 13.8% over the prior year, to $13.913 billion.
This increase was due chiefly to State tax rate increases enacted in 1990
and to a substantial federal reimbursement under the Medicaid program for
uncompensated patient care payments, as well as other factors. The
Commonwealth ended fiscal 1991 with an operating loss of $21.2 million, but
with positive closing fund balances of $237.1 million.
Budgeted revenues and other sources for fiscal 1992 were $13.728
billion, including tax revenues of $9.484 billion. Budgeted revenues and
other sources increased by approximately 0.7% from fiscal 1991 to fiscal
1992, while tax revenues increased by 5.4% for the same period.
Commonwealth expenditures and other uses were approximately $13.420
billion for fiscal 1992, which is $238.7 million or 1.7% lower than fiscal
1991 budgeted expenditures and other uses. Final fiscal 1992 budgeted
expenditures were approximately $300 million higher than the initial July
1991 estimates of budgetary expenditures. A large portion of the increase
in spending resulted from increases in certain human services programs,
including an increase of $268.7 million for the Medicaid program and $50.0
million for mental retardation consent decree requirements. Fiscal 1992
expenditures for Medicaid were $2.818 billion, or 1.9% higher than fiscal
1991. This increase compares favorably with the 19.25% average annual
growth rate of Medicaid expenditures for fiscal years 1988 through 1991.
Overall, the budgeted operating funds ended fiscal 1992 with an excess of
revenues and other sources over expenditures and other uses of $312.3
million.
The budgeted operating funds of the Commonwealth ended fiscal 1993
with a surplus of revenues and other sources over expenditures and other
uses of $13.1 million. Budgeted revenues and other sources for fiscal 1993
totaled approximately $14.710 billion, including tax revenues of $9.40
billion. Total revenues and other sources increased by approximately 6.9%
from fiscal 1992 to fiscal 1993, while tax revenues increased by 4.7% for
the same period.
Budgeted operating funds of the Commonwealth ended fiscal 1994 with a
surplus of revenues and other sources over expenditures and other uses of
$26.8 million and the aggregate ending fund balance in the budgeted
operating funds of the Commonwealth was approximately $589.3 million.
Budgeted revenues and other sources for fiscal 1994 totaled approximately
$15.55 billion, including tax revenues of $10.607 billion. Budgeted
expenditures and other uses in fiscal 1994 totaled $15.52 billion,
approximately 5.6% higher than budgeted expenditures and other uses in
fiscal 1993.
In recent years, health care related costs have risen dramatically in
Massachusetts and across the nation and the increase in the State's
Medicaid and group health insurance costs reflects this trend. In fiscal
1993, Medicaid was the largest item in Massachusetts' budget and has been
one of the fastest growing budget items. During fiscal years 1989, 1990,
1991 and 1992, Medicaid expenditures were $1.83 billion, $2.12 billion,
$2.77 billion and $2.82 billion, respectively, representing an average
annual increase of 15.4%. Expenditures for fiscal 1993 were $3.15 billion,
an 11.8% increase over fiscal 1992. Medicaid expenses in fiscal 1994 were
$3.31 billion.
Massachusetts' pension costs have risen dramatically as the State has
appropriated funds to address in part the unfunded liabilities that had
accumulated over several decades. Total pension costs increased at an
average annual rate of 7.1% from $659.7 million in fiscal 1989 to $868.2
million in fiscal 1993. Pension costs (inclusive of current benefits and
pension reserves) for fiscal 1994 were $908.9 million, an increase of 4.7%
over fiscal 1993 expenditures.
Payments for debt service on Massachusetts general obligation bonds
and notes have risen at an average annual rate of 11.6% from $649.8 million
in fiscal 1989 to $1.15 billion in fiscal 1994. Debt service payments were
$898.3 million in fiscal 1992, $1.14 billion in fiscal 1993 and $1.15
billion in fiscal 1994. In 1990, legislation was enacted which generally
imposes a 10% limit on the total appropriations in any fiscal year that may
be expended for payment of interest and principal on general obligation
debt. As of January 1, 1995, the State had approximately $9,595 billion of
long-term general obligation debt outstanding and short-term direct
obligations of the Commonwealth totalled $264 million.
Certain independent authorities and agencies within the State are
statutorily authorized to issue debt for which Massachusetts is either
directly, in whole or in part, or indirectly liable. The State's
liabilities are either in the form of (i) a direct guaranty, (ii) State
support through contract assistance payments for debt service, or (iii)
indirect obligations. The State is indirectly liable for the debt of
certain authorities through the funding of reserve funds which are pledged
as security for the authorities' debt.
In November 1980, voters in the Commonwealth approved a State-wide 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 government entities, including
county governments. The law is not a constitutional provision and
accordingly is subject to amendment or repeal by the legislature.
Proposition 2-1/2 limits the property taxes which a Massachusetts city or
town may assess in any fiscal year to the lesser of (i) 2.5% of the full
and fair cash value of 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. In addition,
Proposition 2-1/2 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. The law contains certain override provisions which require
voter approval at a general or special election. Proposition 2-1/2 also
limits any annual increase in the total assessments on cities and towns by
any county, district, authority, the Commonwealth, or any other
governmental entity. During the 1980s, Massachusetts increased payments to
the cities, towns and regional school districts ("Local Aid") to mitigate
the impact of Proposition 2-1/2 on local programs and services. In fiscal
1994, approximately 17.59% of Massachusetts' budget was allocated to Local
Aid. Direct Local Aid has dropped from a high of $2.961 billion in fiscal
1989 to $2.727 billion in fiscal 1994.
Many factors affect the financial condition of the Commonwealth and
its cities, towns and public bodies, such as social, environmental, and
economic conditions, many of which are not within the control of such
entities. As is the case with most urban States, the continuation of many
of Massachusetts' programs, particularly its human services programs, is in
significant part dependent upon continuing Federal reimbursements which
have been steadily declining. The loss of grants to Massachusetts and its
cities and towns could further slow economic development. To the extent
that such factors may exist, they could have an adverse effect on economic
conditions in Massachusetts, although what effect, if any, such factors
would have on Massachusetts' Municipal Obligations cannot be predicted.
APPENDIX B
RISK FACTORS - INVESTING IN CALIFORNIA MUNICIPAL OBLIGATIONS
Certain California (the "State") constitutional amendments,
legislative measures, executive orders, civil actions and voter
initiatives, as well as the general financial condition of the State, could
adversely affect the ability of issuers of California Municipal Obligations
to pay interest and principal on such obligations. 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 relating to securities offerings of the State of California and
various local agencies, available as of the date of this Statement of
Additional Information. While the Fund has not independently verified such
information, it has no reason to believe that such information is not
correct in all material respects.
Recent Developments. From mid-1990 to late 1993, the State suffered a
recession with the worst economic, fiscal and budget conditions since the
1930s. Construction, manufacturing (especially aerospace), exports and
financial services, among others, were all severely affected. Job losses
have been the worst of any post-war recession. Unemployment reached 10.1%
in January 1994, but fell sharply to 7.7% in October and November 1994.
According to the State's Department of Finance, recovery from the recession
in California began in 1994.
The recession seriously affected State tax revenues, which basically
mirror economic conditions. It also has caused increased expenditures for
health and welfare programs. The State also has been facing a structural
imbalance in its budget with the largest programs supported by the General
Fund (K-12 schools and community colleges, health and welfare, and
corrections) growing at rates higher than the growth rates for the
principal revenue sources of the General Fund. As a result, the State
experienced recurring budget deficits in the late 1980s and early 1990s.
The State Controller reported that expenditures exceeded revenues for four
of the five fiscal years ending with 1991-92. The State had an operating
surplus of Approximately $109 million in 1992-93 and $836 million in 1993-
94. However, at June 30, 1994, according to the Department of Finance, the
State's Special Fund for Economic Uncertainties ("SFEU") still had a
deficit, on a budget basis, of approximately $1.8 billion.
The accumulated budget deficits over the past several years, together
with expenditures for school funding which have not been reflected in the
budget, and reduction of available internal borrowable funds, have combined
to significantly deplete the State's cash resources to pay its ongoing
expenses. In order to meet its cash needs, the State has had to rely for
several years on a series of external borrowings, including borrowings past
the end of a fiscal year. Such borrowings are expected to continue in
future fiscal years. To meet its cash flow needs in the 1994-95 fiscal
year the State issued, in July and August 1994, $4.0 billion of revenue
anticipation warrants which mature on April 25, 1996, and $3.0 billion of
revenue anticipation notes which matured on June 28, 1995.
As a result of the deterioration in the State's budget and cash
situation, the rating agencies reduced the State's credit ratings. Between
October 1991 and July 1994, the rating on the State's general obligation
bonds was reduced by S&P from "AAA" to "A," by Moody's from "Aaa" to "A1"
and by Fitch from "AAA" to "A."
The 1994-95 Fiscal Year Budget (as updated in the January 10, 1995
Governor's Budget) is projected to have $42.4 billion of General Fund
revenues and transfers and $41.7 billion of budgeted expenditures. In
addition, the 1994-95 Budget Act anticipates deferring retirement of about
$1 billion of the accumulated budget deficit to the 1995-96 fiscal year
when it is intended to be fully retired by June 30, 1996.
The Governor's Budget for 1995-96 proposes General Fund revenues and
transfers of $42.5 billion and expenditures of $41.7 billion, which would
leave a balance of approximately $92 million in the budget reserve, the
SFEU, at June 30, 1996 after repayment of the accumulated budget deficits.
The Budget proposal is based on a number of assumptions, including receipt
of $830 million from the Federal government to offset costs of undocumented
and refugee immigrants.
On December 6, 1994, Orange County, California (the "County"),
together with its pooled investment funds (the "Funds") filed for
protection under Chapter 9 of the Federal Bankruptcy Code, after reports
that the Funds had suffered significant market losses in their investments,
causing a liquidity crisis for the Funds and the County. More than 180
other public entities, most of which, but not all, are located in the
County, were also depositors in the Funds. As of mid-January 1995,
following a restructuring of most of the Funds' assets to increase their
liquidity and reduce their exposure to interest rate increases, the County
estimated the Funds' loss at about $1.69 billion, or about 23% of their
initial deposits of approximately $7.5 billion. Many of the entities which
deposited monies in the Funds, including the County, are facing cash flow
difficulties because of the bankruptcy filing and may be required to reduce
programs or capital projects. This also may effect their ability to meet
their outstanding obligations.
The State has no existing obligation with respect to any outstanding
obligations or securities of the County or any of the other participating
entities. However, in the event the County is unable to maintain county
administered State programs because of insufficient resources, it may be
necessary for the State to intervene, but the State cannot presently
predict what, if any, action may occur.
On January 17, 1994, an earthquake of the magnitude of an estimated
6.8 on the Richter Scale struck Los Angeles causing significant damage to
public and private structures and facilities. Although some individuals
and businesses suffered losses totaling in the billions of dollars, the
overall effect of the earthquake on the regional and State economy is not
expected to be serious.
State Finances. State moneys are segregated into the General Fund and
approximately 600 Special Funds. The General Fund consists of the revenues
received into the State Treasury and earnings from State investments, which
are not required by law to be credited to any other fund. The General Fund
is the principal operating fund for the majority of governmental activities
and is the depository of most major State revenue sources.
The SFEU is funded with General Fund revenues and was established to
protect the State from unforeseen reduced levels of revenues and/or
unanticipated expenditure increases. Amounts in the SFEU may be
transferred by the Controller as necessary to meet cash needs of the
General Fund. The Controller is required to return moneys so transferred
without payment of interest as soon as there are sufficient moneys in the
General Fund. For budgeting and accounting purposes, any appropriation
made from the SFEU is deemed an appropriation from the General Fund. For
year-end reporting purposes, the Controller is required to add the balance
in the SFEU to the balance in the General Fund so as to show the total
monies then available for General Fund purposes.
Inter-fund borrowing has been used for many years to meet temporary
imbalances of receipts and disbursements in the General Fund. As of June
30, 1994, the General Fund had outstanding loans in the aggregate principal
amount of $43 million to the General Fund from the SFEU and outstanding
loans in the aggregate principal amount of $5.2 billion, which consisted of
$4.0 billion of internal loans to the General Fund from the SFEU and other
Special Funds and $1.2 billion of external loans represented by the 1994
revenue anticipation warrants.
Articles XIIIA and XIIIB to the State Constitution and Other Revenue
Law Changes. Prior to 1977, revenues of the State government experienced
significant growth primarily as a result of inflation and continuous
expansion of the tax base of the State. In 1978, State voters approved an
amendment to the State Constitution known as Proposition 13, which added
Article XIIIA to the State Constitution, reducing ad valorem local property
taxes by more than 50%. In addition, Article XIIIA provides that
additional taxes may be levied by cities, counties and special districts
only upon approval of not less than a two-thirds vote of the "qualified
electors" of such district, and requires not less than a two-thirds vote of
each of the two houses of the State Legislature to enact any changes in
State taxes for the purpose of increasing revenues, whether by increased
rate or changes in methods of computation.
Primarily as a result of the reductions in local property tax revenues
received by local governments following the passage of Proposition 13, the
Legislature undertook to provide assistance to such governments by
substantially increasing expenditures from the General Fund for that
purpose beginning in the 1978-79 fiscal year. In recent years, in addition
to such increased expenditures, the indexing of personal income tax rates
(to adjust such rates for the effects of inflation), the elimination of
certain inheritance and gift taxes and the increase of exemption levels for
certain other such taxes had a moderating impact on the growth in State
revenues. In addition, the State has increased expenditures by providing a
variety of tax credits, including renters' and senior citizens' credits and
energy credits.
The State is subject to an annual "appropriations limit" imposed by
Article XIIIB of the State Constitution adopted in 1979. Article XIIIB
prohibits the State from spending "appropriations subject to limitation" in
excess of the appropriations limit imposed. "Appropriations subject to
limitations" are authorizations to spend "proceeds of taxes," which consist
of tax revenues, and certain other funds, including proceeds from
regulatory licenses, user charges or other fees to the extent that such
proceeds exceed "the cost reasonably borne by such entity in providing the
regulation, product or service." One of the exclusions from these
limitations is "debt service" (defined as "appropriations required to pay
the cost of interest and redemption charges, including the funding of any
reserve or sinking fund required in connection therewith, on indebtedness
existing or legally authorized as of January 1, 1979 or on bonded
indebtedness thereafter approved" by the voters). In addition,
appropriations required to comply with mandates of courts or the Federal
government and, pursuant to Proposition 111 enacted in June 1990,
appropriations for qualified capital outlay projects and appropriations of
revenues derived from any increase in gasoline taxes and motor vehicle
weight fees above January 1, 1990 levels are not included as appropriations
subject to limitation. In addition, a number of recent initiatives were
structured or proposed to create new tax revenues dedicated to certain
specific uses, with such new taxes expressly exempted from the Article
XIIIB limits (e.g., increased cigarette and tobacco taxes enacted by
Proposition 99 in 1988). The appropriations limit also may be exceeded in
cases of emergency. However, unless the emergency arises from civil
disturbance or natural disaster declared by the Governor, and the
appropriations are approved by two-thirds of the Legislature, the
appropriations limit for the next three years must be reduced by the amount
of the excess.
The State's appropriations limit in each year is based on the limit
for the prior year, adjusted annually for changes in California per capita
personal income and changes in population, and adjusted, when applicable,
for any transfer of financial responsibility of providing services to or
from another unit of government. The measurement of change in population
is a blended average of statewide overall population growth, and change in
attendance at local school and community college ("K-14") districts. As
amended by Proposition 111, the appropriations limit is tested over
consecutive two-year periods. Any excess of the aggregate "proceeds of
taxes" received over such two-year periods above the combined
appropriations limits for those two years is divided equally between
transfers to K-14 districts and refunds to taxpayers.
As originally enacted in 1979, the State's appropriations limit was
based on its 1978-79 fiscal year authorizations to expend proceeds of taxes
and was adjusted annually to reflect changes in cost of living and
population (using different definitions, which were modified by Proposition
111). Commencing with the 1991-92 fiscal year, the State's appropriations
limit is adjusted annually based on the actual 1986-87 limit, and as if
Proposition 111 had been in effect. The State Legislature has enacted
legislation to implement Article XIIIB which defines certain terms used in
Article XIIIB and sets forth the methods for determining the State's
appropriations limit. Government Code Section 7912 requires an estimate of
the State's appropriations limit to be included in the Governor's Budget,
and thereafter to be subject to the budget process and established in the
Budget Act.
For the 1990-91 fiscal year, the State appropriations limit was $32.7
billion, and appropriations subject to limitation were $7.51 billion under
the limit. The limit for the 1991-92 fiscal year was $34.2 billion, and
appropriations subject to limitations were $3.8 billion under the limit.
The limit for the 1992-93 fiscal year was $35.01 billion, and the
appropriations subject to limitation were $7.53 billion under the limit.
The limit for the 1993-94 fiscal year was $36.060 billion, and the
appropriations subject to limitation were $6.55 billion under the limit.
The estimated limit for the 1994-95 fiscal year is $37.55 billion, and the
appropriations subject to limitations are estimated to be $6.05 billion
under the limit.
In November 1988, State voters approved Proposition 98, which changed
State funding of public education below the university level and the
operation of the State's appropriations limit, primarily by guaranteeing K-
14 schools a minimum share of General Fund revenues. Under Proposition 98
(as modified by Proposition 111, which was enacted in June 1990), K-14
schools are guaranteed the greater of (a) 40.3% of General Fund revenues
("Test 1"), (b) the amount appropriated to K-14 schools in the prior year,
adjusted for changes in the cost of living (measured as in Article XIIIB by
reference to California per capita personal income) and enrollment ("Test
2"), or (c) a third test, which would replace the second test in any year
when the percentage growth in per capita General Fund revenues from the
prior year plus .5% is less than the percentage growth in California per
capita personal income ("Test 3"). Under "Test 3," schools would receive
the amount appropriated in the prior year adjusted for changes in
enrollment and per capita General Fund revenues, plus an additional small
adjustment factor. If "Test 3" is used in any year, the difference between
"Test 3" and "Test 2" would become a "credit" to schools which would be the
basis of payments in future years when per capita General Fund revenue
growth exceeds per capita personal income growth.
Proposition 98 permits the Legislature by two-thirds vote of both
houses, with the Governor's concurrence, to suspend the K-14 schools'
minimum funding formula for a one-year period. In the fall of 1989, the
Legislature and the Governor utilized this provision to avoid having 40.3%
of revenues generated by a special supplemental sales tax enacted for
earthquake relief go to K-14 schools. Proposition 98 also contains
provisions transferring certain State tax revenues in excess of the Article
XIIIB limit to K-14 schools.
The 1991-92 Budget Act, applying "Test 2" of Proposition 98,
appropriated approximately $18.5 billion for K-14 schools pursuant to
Proposition 98. During the course of the fiscal year, revenues proved to
be substantially below expectations. By the time the Governor's Budget was
introduced in January 1992, it became clear that per capita growth in
General Fund revenues for 1991-92 would be far smaller than the growth in
California per capita personal income and the Governor's Budget therefore
reflected a reduction in Proposition 98 funding in 1991-92 by applying
"Test 3" rather than "Test 2."
In response to the changing revenue situation and to fully fund the
Proposition 98 guarantee in both the 1991-92 and 1992-93 fiscal years
without exceeding it, the Legislature enacted several bills as part of the
1992-93 budget package which responded to the fiscal crisis in education
funding. Fiscal year 1991-92 Proposition 98 appropriations for K-14
schools were reduced by $1.083 billion. In order to not adversely impact
cash received by school districts, however, a short-term loan was
appropriated from the non-Proposition 98 State General Fund. The
Legislature then appropriated $16.6 billion to K-14 schools for 1992-93
(the minimum guaranteed by Proposition 98), but designated $1.083 billion
of this amount to "repay" the prior year loan, thereby reducing cash
outlays in 1992-93 by that amount. In addition to reducing the 1991-92
fiscal year appropriations for K-14 schools by $1.083 billion and
converting the amount to a loan (the "inter-year adjustment"), Chapter 703,
Statutes of 1992 also made an adjustment to "Test 1," based on the
additional $1.2 billion of local property taxes that were shifted to
schools and community colleges. The "Test 1" percentage changed from 40%
to 37%. Additionally, Chapter 703 contained a provision that if an
appellate court should determine that the "Test 1" recalculation or the
inter-year adjustment is unconstitutional, unenforceable or invalid,
Proposition 98 would be suspended for the 1992-93 fiscal year, with the
result that K-14 schools would receive the amount intended by the 1992-93
Budget Act compromise.
The State Controller stated in October 1992 that, because of a
drafting error in Chapter 703, he could not implement the $1.083 billion
reduction of the 1991-92 school funding appropriation, which was part of
the inter-year adjustment. The Legislature untimely enacted corrective
legislation as part of the 1993-94 Budget package to implement the $1.083
billion inter-year adjustment as originally intended.
In the 1992-93 Budget Act, a new loan of $732 million was made to K-12
schools in order to maintain per-average daily attendance ("ADA") funding
at the same level as 1991-92, at $4,187. An additional loan of $241
million was made to community college districts. These loans are to be
repaid from future Proposition 98 entitlements. (The teachers'
organization lawsuit discussed above also seeks to declare invalid the
provision making the $732 million a loan "repayable" from future years'
Proposition 98 funds. Including both State and local funds, and adjusting
for the loans and repayments, on a cash basis, total Proposition 98 K-12
funding in 1992-93 increased to $21.5 billion, 2.4% more than the amount in
1992-93 ($21.0 billion).
Based on revised State tax revenues and estimated decreased reported
pupil enrollment, the 1993-94 Budget Act projected that the 1992-93
Proposition 98 Budget Act appropriations of $16.6 billion exceeded a
revised minimum guarantee by $313 million. As a result, the 1993-94 Budget
Act reverted $25 million in 1992-93 appropriations to the General Fund.
Limiting the reversion to this amount ensures that per ADA funding for
general purposes will remain at the prior year level of $4,217 per pupil.
The 1993-94 Governor's Budget subsequently proposed deficiency funding of
$121 million for school apportionments and special education, increasing
funding per pupil in 1992-93 to $4,244. The 1993-94 Budget Act also
designated $98 million in 1992-93 appropriations toward satisfying prior
years' guarantee levels, an obligation that resulted primarily from
updating State tax revenues for 1991-92, and designates $190 million as a
loan repayable from 1993-94 funding.
The 1993-94 Budget Act projected the Proposition 98 minimum funding
level at $13.5 billion based on the "Test 3" calculation where the
guarantee is determined by the change in per capita growth in General Fund
revenues, which are projected to decrease on a year-over-year basis. This
amount also takes into account increased property taxes transferred to
school districts from other local governments.
Legislation accompanying the 1993-94 Budget Act (Chapter 66/93)
provided a new loan of $609 million to K-12 schools in order to maintain
per ADA funding at $4,217 and a loan of $178 million to community colleges.
These loans have been combined with the K-14 1992-93 loans into one loan
totalling $1.760 billion. Repayment of this loan would be from future
years' Proposition 98 entitlements, and would be conditioned on maintaining
current funding levels per pupil for K-12 schools. Chapter 66 also reduced
the "Test 1" percentage to 35% to reflect the property tax shift among
local government agencies.
The 1994-95 Budget Act appropriated $14.4 billion of Proposition 98
funds for K14 schools based on Test 2. This exceeds the minimum
Proposition 98 guarantee by $8 million to maintain K-12 funding per pupil
at $4,217. Based upon updated State revenues, growth rates and inflation
factors, the 1994-95 Budget Act appropriated an additional $286 million
within Proposition 98 for the 1993-94 fiscal year, to reflect a need in
appropriations for school districts and county offices of education, as
well as an anticipated deficiency in special education fundings. These and
other minor appropriation adjustments increase the 1993-94 Proposition 98
guarantee to $13.8 billion, which exceeds the minimum guarantee in that
year by $272 million and provides per pupil funding of $4,225.
The 1995-96 Governor's Budget adjusts the 1993-94 minimum guarantee to
reflect changes in enrollment and inflation, and 1993-94 Proposition 98
appropriations were increased to $14.1 billion, primarily to reflect
changes in the statutory continuous appropriation for apportionments. The
revised appropriations now exceed the minimum guarantee by $32 million.
This appropriation level still provides per-pupil funding of $4,225.
The 1994-95 Proposition 98 minimum guarantee also has been adjusted
for changes in factors described above, and is now calculated to be $14.9
billion. Within the minimum guarantee, the dollars per pupil have been
maintained at the prior year's level; consequently, the 1994-95 minimum
guarantee now includes a loan repayment of $135 million, and the per-pupil
funding increases to $4,231.
The 1995-96 Governor's Budget proposes to appropriate $15.9 billion of
Proposition 98 funds to K-14 to meet the guarantee level. Included within
the guarantee is a loan repayment of $379 million for the combined
outstanding loans of $1.76 billion. Funding per pupil is estimated to
increase by $61 over 1994-95 to $4,292.
Sources of Tax Revenue. The California personal income tax, which in
1992-93 contributed about 44% of General Fund revenues, is closely modeled
after the Federal income tax law. It is imposed on net taxable income
(gross income less exclusions and deductions). The tax is progressive with
rates ranging from 1% to 11%. Personal, dependent, and other credits are
allowed against the gross tax liability. In addition, taxpayers may be
subject to an alternative minimum tax ("AMT") which is much like the
Federal AMT. This is designed to ensure that excessive use of tax
preferences does not reduce taxpayers' liabilities below some minimum
level. Legislation enacted in July 1991 added two new marginal tax rates,
at 10% and 11%, effective for tax years 1991 through 1995. After 1995, the
maximum personal income tax rate is scheduled to return to 9.3%, and the
AMT rate is scheduled to drop from 8.5% to 7%.
The personal income tax is adjusted annually by the change in the
consumer price index to prevent taxpayers from being pushed into higher tax
brackets without a real increase in income.
The sales tax is imposed upon retailers for the privilege of selling
tangible personal property in California. Most retail sales and leases are
subject to the tax. However, exemptions have been provided for certain
essentials such as food for home consumption, prescription drugs, gas,
electricity and water. Sales tax accounted for about 38% of General Fund
revenue in 1992-93. Bank and corporation tax revenues comprised about 11%
of General Fund revenue in 1992-93. In 1989, Proposition 99 added a 25
cents per pack excise tax on cigarettes, and a new equivalent excise tax on
other tobacco products. Legislation enacted in 1993 added an additional 2
cents per pack for the purpose of funding breast cancer research.
General Financial Condition of the State. In the years following
enactment of the Federal Tax Reform Act of 1986, and conforming changes to
the State's tax laws, taxpayer behavior became more difficult to predict,
and the State experienced a series of fiscal years in which revenue came in
significantly higher or lower than original estimates. The 1989-90 fiscal
year ended with revenues below estimates and the SFEU was fully depleted by
June 30, 1990. This date essentially coincided with the date of the most
recent recession, and the State subsequently accumulated a budget deficit
in the SFEU approaching $2.8 billion at its peak. The State's budget
problems in recent years also have been caused by a structural imbalance
which has been identified by the current and previous Administrations. The
largest General Fund programs -- K-14 education, health, welfare and
corrections -- were increasing faster than the revenue base, driven by the
State's rapid population increases.
Starting in the 1990-91 fiscal year, each budget required multibillion
dollar actions to bring projected revenues and expenditures into balance
and to close large "budget gaps" which were identified. The Legislature
and Governor eventually agreed on significant cuts in program expenditures,
some transfers of program responsibilities and funding from the State to
local governments, revenue increases (particularly in the 1991-92 fiscal
year budget), and various one-time adjustments and accounting changes.
However, as the recession took hold and deepened after the summer of 1990,
revenues dropped sharply and expenditures for health and welfare programs
increased as job losses mounted, so that the State ended each of the 1990-
91 and 1991-92 fiscal years with an unanticipated deficit in the budget
reserve, the SFEU, as compared to projected positive balances.
As a result of the revenue shortfalls accumulating for the previous
two fiscal years, the Controller in April 1992 indicated that cash
resources (including borrowing from Special Funds) would not be sufficient
to meet all General Fund obligations due on June 30 and July 1, 1992. On
June 25, 1992, the Controller issued $475 million of 1992 Revenue
Anticipation Warrants (the "1992 Warrants") in order to provide funds to
cover all necessary payments from the General Fund at the end of the 1991-
92 fiscal year and on July 1, 1992. The 1992 Warrants were paid on July 24,
1992. In addition to the 1992 Warrants, the Controller reported that as of
June 30, 1992, the General Fund had borrowed $1.336 billion from the SFEU
and $4.699 billion from other Special Funds, using all but about $183
million of borrowable cash resources.
To balance the 1992-93 Governor's Budget, program reductions totalling
$4.365 billion and a revenue and transfer increase of $872 million were
proposed for the 1991-92 and 1992-93 fiscal years. Economic performance in
the State continued to be sluggish after the 1992-93 Governor's Budget was
prepared. By the time of the "May Revision," issued on May 20, 1992, the
Administration estimated that the 1992-93 Budget needed to address a gap of
about $7.9 billion, much of which was needed to repay the accumulated
budget deficits of the previous two years.
The severity of the budget actions needed led to a long delay in
adopting the budget. With the failure to enact a budget by July 1, 1992,
the State had no legal authority to pay many of its vendors until the
budget was passed. Starting on July 1, 1992, the Controller was required
to issue "registered warrants" in lieu of normal warrants backed by cash to
pay many State obligations. Available cash was used to pay
constitutionally mandated and priority obligations, such as debt service on
bonds and revenue anticipation warrants. Between July 1 and September 4,
1992, the Controller issued an aggregate of approximately $3.8 billion of
registered warrants payable from the General Fund, all of which were called
for redemption by September 4, 1992 following enactment of the 1992-93
Budget Act and issuance by the State of $3.3 billion of interim notes.
The Legislature enacted the 1992-93 Budget Bill on August 29, 1992,
and it was signed by the Governor on September 2, 1992. The 1992-93 Budget
Act provided for expenditures of $57.4 billion and consisted of General
Fund expenditures of $40.8 billion and Special Fund and Bond Fund
expenditures of $16.6 billion. The Department of Finance estimated a
balance in the SFEU of $28 million on June 30, 1993.
The $7.9 billion budget gap was closed primarily through cuts in the
program expenditures (principally for health and welfare programs, aid to
schools and support for higher education), together with some increases in
revenues from accelerated collections and changes in tax laws to confirm to
Federal law changes, and a variety of on-time inter-fund transfers and
deferrals. The other major component of the budget compromise was a law
requiring local governments to transfer a total of $1.3 billion to K-12
school and community college districts, thereby reducing by that amount
General Fund support for those districts under Proposition 98.
In May 1993, the Department of Finance projected that the General Fund
would end the fiscal year on June 30, 1993 with an accumulated budget
deficit of about $2.8 billion, and a negative fund balance of about $2.2
billion (the difference being certain reserves for encumbrances and school
funding costs). As a result, the State issued $5 billion of revenue
anticipation notes and warrants.
The Governor's 1993-94 Budget, introduced on January 8, 1993, proposed
General Fund expenditures of $37.3 billion, with projected revenues of
$39.9 billion. It also proposed Special Fund expenditures of $12.4 billion
and Special Fund revenues of $12.1 billion. The 1993-94 fiscal year
represented the third consecutive year the Governor and the Legislature
were faced with a very difficult budget environment, requiring revenue
actions and expenditure cuts totaling billions of dollars to produce a
balanced budget. 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 "May Revision" of the Governor's Budget, released on May 20, 1993,
indicated that the revenue projections of the January Budget Proposal were
tracking well, with the full year 1992-93 about $80 million higher than the
January projection. Personal income tax revenue was higher than projected,
sales tax was close to target, and bank and corporation taxes were lagging
behind projections. The May Revision projected the State would have an
accumulated deficit of about $2.75 billion by June 30, 1993. The Governor
proposed to eliminate this deficit over an 18-month period. He also agreed
to retain the 0.5% sales tax scheduled to expire June 30 for a six-month
period, dedicated to local public safety purposes, with a November election
to determine a permanent extension. 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 1993-94 Budget Act was signed by the Governor on June 30, 1993,
along with implementing legislation. The Governor vetoed about $71 million
in spending. With enactment of the Budget Act, the State carried out its
regular cash flow borrowing program for the fiscal year, which included the
issuance of approximately $2 billion of revenue anticipation notes that
matured on June 28, 1994.
The 1993-94 Budget Act was predicated on General Fund revenues and
transfers estimated at $40.6 billion, about $700 million higher than the
January Governor's Budget, but still about $400 million below 1992-93 (and
the second consecutive year of actual decline). The principal reasons for
declining revenues were the continued weak economy and the expiration (or
repeal) of three fiscal steps taken in 1991--a half cent temporary sales
tax, a deferral of operating loss carry forwards, and repeal by initiative
of a sales tax on candy and snack foods.
The 1993-94 Budget Act also assumed Special Fund revenues of $11.9
billion, an increase of 2.9% over 1992-93.
The 1993-94 Budget Act included General Fund expenditures of $38.5
billion (a 6.3% reduction from projected 1992-93 expenditures of $41.1
billion), in order to keep a balanced budget within the available revenues.
The Budget also included Special Fund expenditures of $12.1 billion, a 4.2%
increase.
The 1993-94 Budget Act contained 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
indicated that while economic recovery appeared 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 to
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 were very close to
the projections made in the Governor's Budget of January 10, 1994, which
was consistent with a slow turn around in the economy.
The Department of Finance's July 1994 Bulletin, which included final
June receipts, reported that June revenues were $114 million (2.5%) above
projection, with final end-of-year results at $377 million (about 1%) above
the May Revision projections. Part of this result was due to the end-of-
year adjustments and reconciliations. Personal income tax and sales tax
continued to track projections. The largest factor in the higher than
anticipated revenues was from bank and corporation taxes, which were $140
million (18.4%) above projection in June.
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 that matured
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 the original 1993-94 Budget Act assumptions, the General Fund
ended the fiscal year at June 30, 1994 carrying forward an accumulated
deficit of approximately $1.8 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
that matured July 26, 1994, which were needed to fund the State's
obligations and expenses through the end of the 1993-94 fiscal year.
The 1994-95 fiscal year represented the fourth consecutive year the
Governor and Legislature were faced with a very difficult budget
environment to produce a balanced budget. Many program cost and budgetary
adjustments had 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 set forth revenue and expenditure
forecasts and revenue and expenditure proposals which estimated 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 $1.8
billion at June 30, 1994, by June 30, 1996.
The 1994-95 Budget Act, signed by the Governor on July 8, 1994,
projected revenues and transfers of $41.9 billion, $2.1 billion higher than
revenues in 1993-94. This reflected the Administration's forecast of an
improving economy. Also included in this figure was the projected receipt
of about $360 million from the Federal government to reimburse the State's
cost of incarcerating undocumented immigrants, most of which eventually was
not received.
The 1994-95 Budget Act projected Special Fund revenues of $12.1
billion, a decrease of 2.4% from 1993-94 estimated revenues.
The 1994-95 Budget Act projected General Fund expenditures of $40.9
billion, an increase of $1.6 billion over the 1993-94 fiscal year. The
1994-95 Budget Act also projected Special Fund expenditures of $13.7
billion, a 5.4% increase over 1993-94 fiscal year estimated expenditures.
The 1994-95 Budget Act contained no tax increases. Under legislation
enacted for the 1993-94 Budget Act, the renters' tax credit was suspended
for two years (1993 and 1994). A ballot proposition to permanently restore
the renters' tax credit after 1995 failed at the June 1994 election. The
Legislature enacted a further one-year suspension of the renters' tax
credit, for 1995, saving about $390 million in the 1995-96 fiscal year.
The 1994-95 Budget Act assumed that the State would use a cash flow
borrowing program in 1994-95 which combines one-year notes and two-year
warrants, which were issued. Issuance of the warrants allows the State to
defer repayment of approximately $1.0 billion of its accumulated budget
deficit into the 1995-96 fiscal year. The Budget Adjustment Law enacted
along with the 1994-95 Budget Act is designed to ensure that the warrants
will be repaid in the 1995-96 fiscal year.
The Department of Finance Bulletin for April 1995 reported that
General Fund revenues for March 1995 were $28 million, or 1.1%, below
forecast, and that year-to-date General Fund revenues were $110 million, or
0.4%, below forecast.
Initial analysis of the Federal fiscal year 1995 budget by the
Department of Finance indicates that about $98 million was appropriated for
California to offset costs of incarceration of undocumented and refugee
immigrants, less than the $356 million which was assumed in the State's
1994-95 Budget Act.
For the first time in four years, the State enters the upcoming 1995-
96 fiscal year with strengthening revenues based on an improving economy.
On January 10, 1995, the Governor presented his 1995-96 Fiscal Year Budget
Proposal (the "Proposed Budget"). The Proposed Budget estimates General
Fund revenues and transfers of $42.5 billion (an increase of 0.2% over
1994-95). This nominal increase from 1994-95 fiscal year reflects the
Governor's realignment proposal and the first year of his tax cut proposal.
Without these two proposals, General Fund revenues would be projected at
approximately $43.8 billion, or an increase of 3.3% over 1994-95.
Expenditures are estimated at $41.7 billion (essentially unchanged from
1994-95). Special Fund revenues are estimated at $13.5 billion (10.7%
higher than 1994-95) and Special Fund expenditures are estimated at $13.8
billion (12.2% higher than 1994-95). The Proposed Budget projects that the
General Fund will end the fiscal year at June 30, 1996 with a budget
surplus in SFEU of about $92 million, or less than 1% of General Fund
expenditures, and will have repaid all of the accumulated budget deficits.
Recent Economic Trends. Revised employment data indicate that
California's recession ended in 1993, and following a period of stability,
a solid recovery is now underway. The State's unemployment rate fell
sharply last year, from 10.1% in January to 7.7% in October and November
1994. The gap between the national and California jobless rates narrowed
from 3.4 percentage points at the beginning of 1994 to an average of 2
percentage points in October and November. The number of unemployed
Californians fell by nearly 400,000 during the year, while civilian
employment increased more than 300,000 in 1994.
Other indicators, including retail sales, homebuilding activity,
existing home sales and bank lending volume all confirm the State's
recovery.
Personal income was severely affected by the Northridge Earthquake,
which reduced the first quarter 1994 figure by $22 billion at an annual
rate, reflecting the uninsured damage to residences and unincorporated
businesses. As a result, personal income growth for all of 1994 was about
4.2%. However, excluding the Northridge effects, growth would have been in
excess of 5%. Personal income is expected to grow 6.6% for 1995.
APPENDIX C
RISK FACTORS--INVESTING IN NEW YORK MUNICIPAL OBLIGATIONS
The financial condition of New York State (the "State") and certain of
its public bodies (the "Agencies") and municipalities, particularly New
York City (the "City"), could affect the market values and marketability of
New York Municipal Obligations which may be held by the Fund. 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 relating to securities offerings of the State, the City and the
Municipal Assistance Corporation for the City of New York ("MAC") available
as of the date of this Statement of Additional Information. While the Fund
has not independently verified such information, it has no reason to
believe that such information is not correct in all material respects.
A national recession commenced in mid-1990. The downturn continued
through the remainder of the 1990-91 fiscal year, and was followed by a
period of weak economic growth during the remainder of the 1991 calendar
year. For the calendar year 1992, the national economy continued to
recover, although at a rate below all post-war recoveries. The recession
was more severe in the State than in other parts of the nation, owing to a
significant retrenchment in the financial services industry, cutbacks in
defense spending, and an overbuilt real estate market. The State economy
remained in recession until 1993, when employment growth resumed. Since
early 1993, the State has gained approximately 100,000 jobs. The State's
economy is expected to continue to expand modestly during 1995, but there
will be a pronounced slow-down during the course of the year. Although
industries that export goods and services abroad are expected to benefit
from the lower dollar, growth will be slowed by government cutbacks at all
levels. On an average annual basis, employment growth will be about the
same as 1994. Both personal income and wages are expected to record
moderate gains in 1995.
The State's budget for the 1995-96 fiscal year was enacted by the
Legislature on June 7, 1995, 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 1995-96 fiscal year was
formulated on June 20, 1995 and is based on the State's budget as enacted
by the Legislature and signed into law by the Governor.
The 1995-96 budget is the first to be enacted in the administration of
the Governor, who assumed office on January 1. It is the first budget in
over half a century which proposed and, as enacted, projects an absolute
year-over-decline in General Fund disbursements. Spending for State
operations is projected to drop even more sharply, by 4.6%. Nominal
spending from all State funding sources (i.e., excluding Federal aid) is
proposed to increase by only 2.5% from the prior fiscal year, in contrast
to the prior decade when such spending growth averaged more than 6.0%
annually.
In his Executive Budget, the Governor indicated that in the 1995-96
fiscal year, the State Financial Plan, based on then-current law governing
spending and revenues, would be out of balance by almost $4.7 billion, as a
result of the projected structural deficit resulting from the ongoing
disparity between sluggish growth in receipts, the effect of prior-year tax
changes, and the rapid acceleration of spending growth; the impact of
unfunded 1994-95 initiatives, primarily for local aid programs; and the use
of one-time solutions, primarily surplus funds from the prior year, to fund
recurring spending in the 1994-95 budget. The Governor proposed additional
tax cuts, to spur economic growth and provide relief for low and middle-
income tax payers, which were larger than those ultimately adopted, and
which added $240 million to the then projected imbalance or budget gap,
bringing their total to approximately $5 billion.
This gap is projected to be closed in the 1995-96 State Financial Plan
based on the enacted budget, through a series of actions, mainly spending
reductions and cost containment measures and certain reestimates that are
expected to be recurring, but also through the use of one-time solutions.
The State Financial Plan is based upon forecasts of national and State
economic activity. Economic forecasts have frequently failed to predict
accurately the timing and magnitude of changes in the national and the
State economies. Many uncertainties exist in forecasts of both the
national and State economies, including consumer attitudes toward spending,
Federal financial and monetary policies, the availability of credit and the
condition of the world economy, which could have an adverse effect on the
State. 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.
The General Fund is projected to be balanced on a cash basis for the
1995-96 fiscal year. Total receipts and transfers from other funds are
projected to be $33.110 billion, a decrease of $48 million from total
receipts in the prior fiscal year. Total General fund disbursements and
transfers to other funds are projected to be $33.055 billion, a decrease of
$344 million from the total amount disbursed in the prior fiscal year.
There can be no assurance that the State will not face substantial
potential budget gaps in future years resulting from a significant
disparity between tax revenues projected from a lower recurring receipts
base and the spending required to maintain State programs at current
levels. To address any potential budgetary imbalance, the State may need
to take significant actions to align recurring receipts and disbursements
in future fiscal years.
On June 6, 1990, Moody's changed its ratings on all the State's
outstanding general obligation bonds from A1 to A. On March 26, 1990 and
January 13, 1992, S&P changed its ratings on all of the State's outstanding
general obligation bonds from AA- to A and from A to A-, respectively. In
February 1991, Moody's lowered its rating on the City's general obligation
bonds from A to Baa1 and in July 1995, S&P lowered its rating on such bonds
from A- to BBB+. Ratings reflect only the respective views of such
organizations, and their concerns about the financial condition of New York
State and City, the debt load of the State and City and any economic
uncertainties about the region. There is no assurance that a particular
rating will continue for any given period of time or that any such rating
will not be revised downward or withdrawn entirely if, in the judgment of
the agency originally establishing the rating, circumstances so warrant.
(1) The State, Agencies and Other Municipalities. During the mid-
1970s, some of the Agencies and municipalities (in particular, the City)
faced extraordinary financial difficulties, which affected the State's own
financial condition. These events, including a default on short-term notes
issued by the New York State Urban Development Corporation ("UDC") in
February 1975, which default was cured shortly thereafter, and a
continuation of the financial difficulties of the City, created substantial
investor resistance to securities issued by the State and by some of its
municipalities and Agencies. For a time, in late 1975 and early 1976,
these difficulties resulted in a virtual closing of public credit markets
for State and many State related securities.
In response to the financial problems confronting it, the State
developed and implemented programs for its 1977 fiscal year that included
the adoption of a balanced budget on a cash basis (a deficit of $92 million
that actually resulted was financed by issuing notes that were paid during
the first quarter of the State's 1978 fiscal year). In addition,
legislation was enacted limiting the occurrence of additional so-called
"moral obligation" and certain other Agency debt, which legislation does
not, however, apply to MAC debt.
State Financial Cash-Basis Results--General Fund. The General Fund is
the principal operating fund of the State and is used to account for all
financial transactions, except those required to be accounted for in
another fund. It is the State's largest fund and receives almost all State
taxes and other resources not dedicated to particular purposes. General
Fund moneys are also transferred to other funds, primarily to support
certain capital projects and debt service payments in other fund types.
New York State's financial operations have improved during recent
fiscal years. During the period 1989-90 through 1991-92, the State
incurred General Fund operating deficits that were closed with receipts
from the issuance of tax and revenue anticipation notes ("TRANs"). First,
the national recession, and then the lingering economic slowdown in the New
York and regional economy, resulted in repeated shortfalls in receipts and
three budget deficits. For its 1992-93, 1993-94 and 1994-95 fiscal years,
the State recorded balanced budgets on a cash basis, with substantial fund
balances in 1992-93 and 1993-94, and smaller fund balance in 1994-95, as
described below.
New York State ended its 1994-95 fiscal year with the General fund in
balance. The closing fund balance of $158 million reflects $157 million in
the Tax Stabilization Reserve Fund and $1 million in the Contingency
Reserve Fund ("CRF"). The CRF was established in State Fiscal year 1993-
94, funded partly with surplus moneys, to assist the State in financing the
1994-95 fiscal year costs of extraordinary ligation known or anticipated at
that time; the opening fund balance in State fiscal year 1994-95 was $265
million. The $241 million change in the fund balance reflects the use of
$264 million in the CRF as planned, as well as the required deposit of $23
million to the Tax Stabilization Reserve Fund. In addition, $278 million
was on deposit in the tax refund reserve account, $250 million of which was
deposited at the end of the State's 1994-95 fiscal year to continue the
process of restructuring the State's cash flow as part of the New York
Local Government Assistance Corporation ("LGAC") program.
Compared to the State Financial Plan for 1994-1995 as formulated on
June 16, 1994, reported receipts fell short of original projections by
$1.163 billion, primarily in the categories of personal income and business
taxes. Of this amount, the personal income tax accounts for $800 million,
reflecting weak estimated tax collections and lower withholding due to
reduced wage and salary growth, more severe reductions in brokerage
industry bonuses than projected earlier, and deferral of capital gains
realizations in anticipation of potential Federal tax changes. Business
taxes fell short by $373 million, primarily reflecting lower payments from
banks as substantial overpayments of 1993 liability depressed net
collections in the 1994-95 fiscal year. These shortfalls were offset by
better performance in the remaining taxes, particularly the user taxes and
fees, which exceeded projections by $210 million. Of this amount, $277
million was attributable to certain restatements for accounting treatment
purposes pertaining to the CRF and LGAC; these restatements had no impact
on balance in the General Fund.
Disbursements were also reduced from original projections by $848
million. After adjusting for the net impact of restatements relating to
the CRF and LGAC which raised disbursements by $38 million, the variance is
$886 million. Well over two-thirds of this variance is in the category of
grants to local governments, primarily reflecting the conservative nature
of the original estimates of projected costs for social services and other
programs. Lower education costs are attributable to the availability of
$110 million in additional lottery proceeds and the use of LGAC bond
proceeds.
The spending reductions also reflect $188 million in actions initiated
in January 1995 by the Governor to reduce spending to avert a potential gap
in the 1994-95 State Financial Plan. These actions included savings from a
hiring freeze, halting the development of certain services, and the
suspension of non-essential capital projects. These actions, together with
$71 million in other measures comprised the Governor's $259 million gap-
closing plan, submitted to the Legislature in connection with the 1995-96
Executive Budget.
The State ended its 1993-94 fiscal year with a balance of $1.140
billion in the tax refund reserve account, $265 million in the CRF and $134
million in its tax stabilization reserve fund. These fund balances were
primarily the result of an improving national economy, State employment
growth, tax collections that exceeded earlier projections and disbursements
that were below expectations. Deposits to the personal income tax refund
reserve have the effect of reducing reported personal income tax receipts
in the fiscal year when made and withdrawals from such reserve increase
receipts in the fiscal year when made. The balance in the tax reserve
account will be used to pay taxpayer refunds, rather than drawing from
1994-95 receipts.
Of the $1.140 billion deposited in the tax refund reserve account,
$1.026 billion was available for budgetary planning purposes in the 1994-95
fiscal year. The remaining $114 million will be redeposited in the tax
refund reserve account at the end of the State's 1994-95 fiscal year to
continue the process of restructuring the State's cash flow as part of the
LGAC program. The balance in the contingency reserve fund was reserved to
meet the cost of litigation facing the State in its 1994-95 fiscal year.
Before the deposit of $1.140 billion in the tax refund reserve
account, General Fund receipts in 1993-94 exceeded those originally
projected when the State Financial Plan for the year was formulated on
April 16, 1993 by $1.002 billion. Greater-than-expected receipts in the
personal income tax, the bank tax, the corporation franchise tax and the
estate tax accounted for most of this variance, and more than offset
weaker-than-projected collections from the sales and use tax and
miscellaneous receipts. Collections from individual taxes were affected
by various factors including changes in Federal business laws, sustained
profitability of banks, strong performance of securities firms, and higher-
than-expected consumption of tobacco products following price cuts.
The higher receipts resulted, in part, because the New York economy
performed better than forecasted. Employment growth started in the first
quarter of the State's 1993-94 year, and although this lagged the national
economic recovery, the growth in New York began earlier than forecasted.
The New York economy exhibited signs of strength in the service sector, in
construction, and in trade. Long Island, and the Mid-Hudson Valley
continued to lag the rest of the State in economic growth. Approximately
100,000 jobs are believed to have been added during the 1993-94 fiscal
year.
Disbursements and transfer from the General Fund were $303 million
below the level projected in April 1993, an amount that would have been
$423 million had the State not accelerated the payment of Medicaid
billings, which in the April 1993 State Financial Plan were planned to be
deferred into the 1994-95 fiscal year. Compared to the estimates included
in the State Financial Plan formulated in April 1993, disbursements were
lower for Medicaid, capital projects, and debt service (due to refundings).
In addition, $114 million of school and payments were funded from the
proceeds of LGAC bonds. Disbursements were higher-than-expected for
general support for public schools. The State also made the first of six
required payments to the State of Delaware related to the settlement of
Delaware's litigation against the State regarding the disposition of
abandoned property receipts.
During the 1993-94 fiscal year, the State also established and funded
the CRF as a way to assist the State in financing the cost of litigation
affecting the State. The CRF was initially funded with a transfer of $100
million attributable to the positive margin recorded in the 1992-93 fiscal
year. In addition, the State augmented this initial deposit with $132
million on debt service savings attributable to the refinancing of State
and public authority bonds during 1993-94. A year-end transfer of $36
million was also made to the CRF, which, after a disbursement for
authorized fund purposes, brought the CRF balance at the end of 1993-94 to
$265 million. This amount was $165 million higher than the amount
originally targeted for this reserve fund.
For its 1992-93 fiscal year the State had a balanced budget on a cash
basis with a positive margin of $671 million in the General Fund that was
deposited in the refund reserve account.
After reflecting a 1992-93 year-end deposit to the refund reserve
account of $671 million, reported 1992-93 General Fund receipts were $45
million higher than originally projected in April 1992. If not for that
year-end transaction, which had the effect of reducing 1992-93 receipts by
$671 million and making those receipts available in 1993-94, General Fund
receipts would have been $716 million higher than originally projected.
The favorable performance was primarily attributable to personal
income tax collections that were more than $700 million higher than
originally projected (before reflecting the refund reserve transaction).
The withholding and estimated payment components of the personal income tax
exceeded original estimates by more than $800 million combined, reflecting
both stronger economic activity, particularly at year's end, and the tax-
induced one-time acceleration of income into 1992. Modest shortfalls were
experienced in other components of the income tax.
There were large, but largely offsetting, variances in other
categories. Significantly higher-than-projected business tax collections
and the receipt of unbudgeted payments from the Medical Malpractice
Insurance Association and the New York Racing Association approximately
offset the loss of an anticipated $200 million Federal reimbursement, the
loss of certain budgeted hospital differential revenue as a result of
unfavorable court decisions, and shortfalls in certain miscellaneous
revenue sources.
Disbursements and transfers to other funds totaled $30.829 billion, an
increase of $45 million above projections in April 1992. After adjusting
for the impact of a $150 million payment from the Medical Malpractice
Insurance Association to health insurers made pursuant to legislation
passed in January 1993, actual disbursements were $105 million lower than
projected. This reduction primarily reflected higher-than-anticipated
costs for educational programs, as offset by lower costs in virtually all
other categories of spending, including Medicaid, local health programs,
agency operations, fringe benefits, capital projects and debt service.
During its 1989-90, 1990-91 and 1991-92 fiscal years, the State
incurred cash-basis operating deficits in the General Fund of $775 million,
$1.081 billion and $575 million, respectively, prior to the issuance of
short-term TRANs, owing to lower-than-projected receipts.
Other Governmental Funds. Activity in the three other governmental
funds has remained relatively stable over the last three fiscal years, with
Federally-funded programs comprising approximately two-thirds of these
funds. The most significant change in the structure of these funds has
been the redirection, beginning in the 1993-94 fiscal year, of a portion of
transportation-related revenues from the General Fund to two new dedicated
funds in the Special Revenue and Capital Projects Fund types. These
revenues totalling $676 million in the 1994-95 fiscal year were used to
support the capital programs of the Department of Transportation and the
Metropolitan Transportation Authority ("MTA").
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 $25.547 billion in the State's 1995-
96 fiscal year. Disbursements from Special Revenue Funds are projected to
be $26.002 billion for the State's 1995-96 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 24%
of the $4.170 billion in total projected receipts in Capital Projects Funds
in the State's 1995-96 fiscal year. Total disbursements for capital
projects are projected to be $4.160 billion during the State's 1995-96
fiscal year.
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 $2.409 billion in the State's 1995-96
fiscal year. Total disbursements from Debt Service Funds for debt service,
lease/purchase and contractual obligation financing commitments are
projected to be $2.506 billion for the 1994-95 fiscal year.
State Borrowing Plan. The State anticipates that its capital programs
will be financed, in part, through borrowings by the State and public
authorities in the 1995-96 fiscal year. The State expects to issue $248
million in general obligation bonds (including $70 million for purposes of
redeeming outstanding BANs) and $186 million in general obligation
commercial paper. The Legislature has also authorized the issuance of up
to $33 million in COPs during the State's 1995-96 fiscal year for equipment
purchases and $14 million for capital purposes. The projection of the
State regarding its borrowings for the 1995-96 fiscal year may change if
circumstances require.
In addition, the LGAC is authorized to provide net proceeds of up to
$529 million during the 1995-96 fiscal year to redeem notes sold in June
1995.
State Agencies. The fiscal stability of the State is related, at
least in part, to the fiscal stability of its localities and various of its
Agencies. Various Agencies have issued bonds secured, in part, by
non-binding statutory provisions for State appropriations to maintain
various debt service reserve funds established for such bonds (commonly
referred to as "moral obligation" provisions).
On September 30, 1994, there were 18 Agencies that had outstanding
debt of $100 million or more. The aggregate outstanding debt, including
refunding bonds, of these 18 Agencies was $70.3 billion as of September 30,
1994. As of March 31, 1995, aggregate Agency debt outstanding as State-
supported debt was $27.9 billion and as State-related was $36.1 billion.
Debt service on the outstanding Agency obligations normally is paid out of
revenues generated by the Agencies' projects or programs, but in recent
years the State has provided special financial assistance, in some cases on
a recurring basis, to certain Agencies for operating and other expenses and
for debt service pursuant to moral obligation indebtedness provisions or
otherwise. Additional assistance is expected to continue to be required in
future years.
Several Agencies have experienced financial difficulties in the past.
Certain Agencies continue to experience financial difficulties requiring
financial assistance from the State. Failure of the State to appropriate
necessary amounts or to take other action to permit certain Agencies to
meet their obligations could result in a default by one or more of such
Agencies. If a default were to occur, it would likely have a significant
effect on the marketability of obligations of the State and the Agencies.
These Agencies are discussed below.
The New York State Housing Finance Agency ("HFA") provides financing
for multifamily housing, State University construction, hospital and
nursing home development, and other programs. In general, HFA depends upon
mortgagors in the housing programs it finances to generate sufficient funds
from rental income, subsidies and other payments to meet their respective
mortgage repayment obligations to HFA, which provide the principal source
of funds for the payment of debt service on HFA bonds, as well as to meet
operating and maintenance costs of the projects financed. From January 1,
1976 through March 31, 1987, the State was called upon to appropriate a
total of $162.8 million to make up deficiencies in the debt service reserve
funds of HFA pursuant to moral obligation provisions. The State has not
been called upon to make such payments since the 1986-87 fiscal year and no
payments are anticipated during the 1995-96 fiscal year.
UDC has experienced, and expects to continue to experience, financial
difficulties with the housing programs it had undertaken prior to 1975,
because a substantial number of these housing program mortgagors are unable
to make full payments on their mortgage loans. Through a subsidiary, UDC
is currently attempting to increase its rate of collection by accelerating
its program of foreclosures and by entering into settlement agreements.
UDC has been, and will remain, dependent upon the State for appropriations
to meet its operating expenses. The State also has appropriated money to
assist in the curing of a default by UDC on notes which did not contain the
State's moral obligation provision.
The MTA oversees New York City's subway and bus lines by its
affiliates, the New York City Transit Authority and the Manhattan and Bronx
Surface Transit Operating Authority (collectively, the "TA"). Through
MTA's subsidiaries, the Long Island Rail Road Company, the Metro-North
Commuter Railroad Company and the Metropolitan Suburban Bus Authority, the
MTA operates certain commuter rail and bus lines in the New York
metropolitan area. In addition, the Staten Island Rapid Transit Authority,
an MTA subsidiary, operates a rapid transit line on Staten Island. Through
its affiliated agency, the Triborough Bridge and Tunnel Authority (the
"TBTA"), the MTA operates certain toll bridges and tunnels. Because fare
revenues are not sufficient to finance the mass transit portion of these
operations, the MTA has depended and will continue to depend for operating
support upon a system of State, local government and TBTA support and, to
the extent available, Federal operating assistance, including loans, grants
and subsidies. If current revenue projections are not realized and/or
operating expenses exceed current projections, the TA or commuter railroads
may be required to seek additional State assistance, raise fares or take
other actions.
Over the past several years the State has enacted several
taxes--including a surcharge on the profits of banks, insurance
corporations and general business corporations doing business in the
12-county region (the "Metropolitan Transportation Region") served by the
MTA and a special .25% regional sales and use tax--that provide additional
revenues for mass transit purposes, including assistance to the MTA. In
addition, since 1987, State law has required that the proceeds of .25%
mortgage recording tax paid on certain mortgages in the Metropolitan
Transportation Region be deposited in a special MTA fund for operating or
capital expenses. Further, in 1993, the State dedicated a portion of
certain additional State petroleum business tax receipts to fund operating
or capital assistance to the MTA. For the 1994-96 State fiscal year, total
State assistance to the MTA is estimated at approximately $1.1 billion.
A subway fire on December 28, 1990 and a subway derailment on August
28, 1991, each of which caused fatalities and many injuries, have given
rise to substantial claims for damages against both the TA and the City.
In 1981, the State Legislature authorized procedures for the adoption,
approval and amendment of a five-year plan for the capital program designed
to upgrade the performance of the MTA's transportation systems and to
supplement, replace and rehabilitate facilities and equipment, and also
granted certain additional bonding authorization therefor.
On April 5, 1993, the Legislature approved, and the Governor
subsequently signed into law, legislation authorizing a five-year $9.56
billion capital plan for the MTA for 1992-1996. The MTA has received
approval of the 1992-1996 Capital Program based on this legislation from
the MTA Capital Program Review Board (the "CPRB"), as State law requires.
This is the third five-year plan since the Legislature authorized
procedures for the adoption, approval and amendment of a five-year plan in
1981 for a capital program designed to upgrade the performance of the MTA's
transportation systems and to supplement, replace and rehabilitate
facilities and equipment. The MTA, the TBTA and the TA are collectively
authorized to issue an aggregate of $3.1 billion of bonds (net of certain
statutory exclusions) to finance a portion of the 1992-96 Capital Program.
The 1992-96 Capital Program was expected to be financed in significant part
through dedication of the State petroleum business tax receipts referred to
above. However, in December 1994 the proposed bond resolution based on
such tax receipts was not approved by the MTA Capital Program Review Board.
Further consideration of the resolution was deferred until 1995.
There can be no assurance that such governmental actions will be
taken, that sources currently identified will not be decreased or
eliminated, or that the 1992-1996 Capital Program will not be delayed or
reduced. If the MTA capital program is delayed or reduced because of
funding shortfalls or other factors, ridership and fare revenues may
decline, which could, among other things, impair the MTA's ability to meet
its operating expenses without additional State assistance.
The cities, towns, villages and school districts of the State are
political subdivisions of the State with the powers granted by the State
Constitution and statutes. As the sovereign, the State retains broad
powers and responsibilities with respect to the government, finances and
welfare of these political subdivisions, especially in education and social
services. In recent years the State has been called upon to provide added
financial assistance to certain localities.
Other Localities. Certain localities in addition to the City could
have financial problems leading to requests for additional State assistance
during the State's 1995-96 fiscal year and thereafter. The potential
impact on the State of such actions by localities is not included in the
projections of the State receipts and disbursements in the State's 1995-96
fiscal year.
Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1993, the total indebtedness of
all localities in the State, other than the City, was approximately $17.7
billion. A small portion (approximately $105 million) of this indebtedness
represented borrowing to finance budgetary deficits and was issued pursuant
to enabling State legislation. State law requires the Comptroller to
review and make recommendations concerning the budgets of those local
government units other than the City authorized by State law to issue debt
to finance deficits during the period that such deficit financing is
outstanding. Fifteen localities had outstanding indebtedness for deficit
financing at the close of their fiscal year ending in 1993.
Certain proposed Federal expenditure reductions would reduce, or in
some cases eliminate, Federal funding of some local programs and
accordingly might impose substantial increased expenditure requirements on
affected localities to increase local revenues to sustain those
expenditures. If the State, the City or any of the Agencies 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 the 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, potential problems of declining city population, increasing
expenditures and other economic trends could adversely affect localities
and require increasing State assistance in the future.
Because of significant fiscal difficulties experienced from time to
time by the City of Yonkers, a Financial Control Board was created by the
State in 1984 to oversee Yonkers' fiscal affairs. Future actions taken by
the Governor or the State Legislature to assist Yonkers in this crisis
could result in the allocation of State resources in amounts that cannot
yet be determined.
Certain litigation pending against the State or its officers or
employees could have a substantial or long-term adverse effect on State
finances. Among the more significant of these litigations are those that
involve: (i) the validity and fairness of agreements and treaties by which
various Indian tribes transferred title to the State of approximately six
million acres of land in central New York; (ii) certain aspects of the
State's Medicaid rates and regulations, including reimbursements to
providers of mandatory and optional Medicaid services; (iii) contamination
in the Love Canal area of Niagara Falls; (iv) a challenge to the State's
practice of reimbursing certain Office of Mental Health patient-care
expenses with clients' Social Security benefits; (v) a challenge to the
methods by which the State reimburses localities for the administrative
costs of food stamp programs; (vi) a challenge to the State's possession
of certain funds taken pursuant to the State's Abandoned Property law;
(vii) alleged responsibility of State officials to assist in remedying
racial segregation in the City of Yonkers; (viii) an 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; (ix) actions
challenging the constitutionality of legislation enacted during the 1990
legislative session which changed the actuarial funding methods for
determining contributions to State employee retirement systems; (x) an
action against State and City officials alleging that the present level of
shelter allowance for public assistance recipients is inadequate under
statutory standards to maintain proper housing; (xi) an action challenging
legislation enacted in 1990 which had the effect of deferring certain
employer contributions to the State Teachers' Retirement System and
reducing State aid to school districts by a like amount; (xii) a challenge
to the constitutionality of financing programs of the Thruway Authority
authorized by Chapters 166 and 410 of the Laws of 1991 (described below in
this Part); (xiii) a challenge to the constitutionality of financing
programs of the Metropolitan Transportation Authority and the Thruway
Authority authorized by Chapter 56 of the Laws of 1993 (described below in
this Part); (xiv) challenges to the delay by the State Department of Social
Services in making two one-week Medicaid payments to the service providers;
(xv) challenges by commercial insurers, employee welfare benefit plans, and
health maintenance organizations to provisions of Section 2807-c of the
Public Health Law which impose 13%, 11% and 9% surcharges on inpatient
hospital bills and a bad debt and charity care allowance on all hospital
bills paid by such entities; (xvi) challenges to the promulgation of the
State's proposed procedure to determine the eligibility for and nature of
home care services for Medicaid recipients; (xvii) a challenge to State
implementation of a program which reduces Medicaid benefits to certain
home-relief recipients; and (xviii) challenges to the rationality and
retroactive application of State regulations recelebrating nursing home
Medicaid rates.
Adverse developments or decisions in such cases could affect the
ability of the State to maintain a balanced 1994-95 State Financial Plan.
(2) New York City. In the mid-1970s, the City had large
accumulated past deficits and until recently was not able to generate
sufficient tax and other ongoing revenues to cover expenses in each fiscal
year. However, the City's operating results for the fiscal year ending June 30,
1994 were balanced in accordance with GAAP, the twelfth consecutive year in
which the City achieved balanced operating results in accordance with GAAP. The
City's ability to maintain balanced operating results in future years is
subject to numerous contingencies and future developments.
The City's economy, whose rate of growth slowed substantially over the
past three years, is currently in recession. During the 1990 and 1991
fiscal years, as a result of the slowing economy, the City has experienced
significant shortfalls in almost all of its major tax sources and increases
in social services costs, and has been required to take actions to close
substantial budget gaps in order to maintain balanced budgets in accordance
with the Financial Plan.
In 1975, the City became unable to market its securities and entered a
period of extraordinary financial difficulties. In response to this
crisis, the State created MAC to provide financing assistance to the City
and also enacted the New York State Financial Emergency Act for the City of
New York (the "Emergency Act") which, among other things, created the
Financial Control Board (the "Control Board") to oversee the City's
financial affairs and facilitate its return to the public credit markets.
The State also established the Office of the State Deputy Comptroller
("OSDC") to assist the Control Board in exercising its powers and
responsibilities. On June 30, 1986, the Control Board's powers of approval
over the City Financial Plan were suspended pursuant to the Emergency Act.
However, the Control Board, MAC and OSDC continue to exercise various
monitoring functions relating to the City's financial condition. The City
prepares and operates under a four-year financial plan which is submitted
annually to the Control Board for review and which the City periodically
updates.
The City's independently audited operating results for each of its
fiscal years from 1981 through 1993 show a General Fund surplus reported in
accordance with GAAP. The City has eliminated the cumulative deficit in
its net General Fund position. 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 August 1993, the City adopted and submitted to the Control Board
for its review a four-year Financial Plan covering fiscal years 1994
through 1997 (the "Financial Plan"). The Financial Plan was based on the
City's fiscal year 1994 expense budget adopted June 14, 1993 as well as
certain changes incorporated subsequent to the budget adoption process. On
November 23, 1993, the City adopted and submitted to the Control Board for
its review a first quarter modification to the Financial Plan (the
"November Modification") incorporating various re-estimates of revenues and
expenditures. For fiscal year 1994, the November Modification includes
additional resources stemming primarily from the City Comptroller's fiscal
year 1993 annual audit, savings from a reduction in prior years' accrued
expenditures, and higher State and Federal aid resulting from claims by the
City for reimbursement of various social services costs. These resources
were used to fund new needs in the November Modification including higher
costs in the uniformed agencies, at the Board of Education (the "BoE") and
for certain social services, the unlikelihood of the sale of the Off-Track
Betting Corporation (the "OTB"), and lower estimates of miscellaneous and
other revenues. After taking these adjustments into account, the November
Modification projects a balanced budget for fiscal year 1994, based upon
revenues of $31,585 billion. For fiscal years 1995, 1996 and 1997, the
November Modification projects budget gaps of $1.730 billion, $2.513
billion and $2.699 billion, respectively. These gaps are higher by about
$450 million in fiscal year 1995 and by about $700 million in each of
fiscal years 1996 and 1997 than in the Financial Plan, primarily on account
of the nonrecurring value of the fiscal year 1994 revenue adjustments, the
loss of certain one-time resources funding BoE fiscal year 1994 spending
needs, and the reclassification of anticipated State aid from the baseline
revenue estimates to the gap-closing program. To offset these larger gaps,
the November Modification relies on additional City, State and other
actions.
On December 1, 1993, a three-member panel appointed by the Mayor to
address City structural budget imbalance released a report setting forth
its findings and recommendations. In its report, the panel noted that
budget imbalance is likely to be greater than the City now projects by $255
million in fiscal year 1995, rising to nearly $1.5 billion in fiscal year
1997. The report provided a number of options that the City should
consider in addressing the structural balance issue such as severe cuts in
City-funded personnel levels, increases in residential property taxes and
the sales tax, and the imposition of bridge tolls and solid waste
collection fees. The report also noted that additional State actions will
be required in many instances to allow the City to cut its budget without
grave damage to basic services.
On December 21, 1993, OSDC issued a report reviewing the November
Modification. The report noted that while the outlook for fiscal year 1994
has improved since August, it will be necessary for the City to manage its
budget aggressively in order to stay on course for budget balance this
year. For fiscal years 1995 through 1997, the report expressed concern
that the gaps identified by the City in the November Modification are the
largest as a percentage of City-fund revenues that the City has faced at
this point in the fiscal year since budget balance in accordance with GAAP
was first achieved in fiscal year 1981.
On December 21, 1993, the staff of the Control Board issued its report
on the November Modification. The report states that the plan is now more
realistic in terms of the gaps it portrays and the solutions it offers.
However, the solutions are mostly limited to fiscal year 1994 while the gap
for fiscal year 1995 has been increased by $450 million. Beginning in
fiscal year 1995, budget gaps average over $1 billion annually. Therefore,
the staff recommends that prompt action to replace many current-year one-
shots with recurring savings is critical.
On February 2, 1994, the Mayor presented to the City Council and the
Control Board a mid-year modification to the Financial Plan (the "February
Modification"). The February Modification projects a balanced budget for
fiscal year 1994, based upon revenues of $31.735 billion, including a
general reserve of $81 million. For fiscal years 1995, 1996 and 1997, the
February Modification projects gaps of $2.261 billion, $3.167 billion and
$3.253 billion, respectively, and assumes 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 includes a gap-closing program
that consists 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 includes a tax reduction program, with most of the
financial impact affecting the later years of the Plan period.
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 the 1994 fiscal year. The City's
capital financing program projects long-term financing requirements of
approximately $17 billion for the City's fiscal years 1995 through 1998 for
the construction and rehabilitation of the City's infrastructure and other
fixed assets. The major capital requirement include expenditures for the
City's water supply system, and waste disposal systems, roads, bridges,
mass transit, schools and housing. In addition, the City and the Municipal
Water Finance Authority have issued about $1.8 billion in refunding bonds
in the 1994 fiscal year.
State Economic Trends. The State historically has 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. Statewide, urban centers have experienced significant
changes involving migration of the more affluent to the suburbs and an
influx of generally less affluent residents. Regionally, the older
Northeast cities have suffered because of the relative success that the
South and the West have had in attracting people and business. The City
has also had to face greater competition as other major cities have
developed financial and business capabilities which make them less
dependent on the specialized services traditionally available almost
exclusively in the City.
During the 1982-83 recession, overall economic activity in the State
declined less than that of the nation as a whole. However, in the calendar
years 1984 through 1991, the State's rate of economic expansion was
somewhat slower than that of the nation. In the 1990-91 recession, the
economy of the State, and that of the rest of the Northeast, was more
heavily damaged than that of the nation as a whole and has been slower to
recover. The total employment growth rate in the State has been below the
national average since 1984. The unemployment rate in the State dipped
below the national rate in the second half of 1981 and remained lower until
1991; since then, it has been higher. According to data published by the
U.S. Bureau of Economic Analysis, during the past ten years, total personal
income in the State rose slightly faster than the national average only
from 1986 through 1988.
APPENDIX D
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 Ratings Group ("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 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.
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.
PORTFOLIO OF INVESTMENTS
DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND JUNE 30, 1995
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 97.4%
CALIFORNIA -- 97.4%
$ 900,000 Anaheim, California, Multifamily Housing Reve-
nue,
4.050% due 08/01/20+ $ 900,000
California Educational Facilitiies Authority
Revenue,
200,000 8.625% due 01/01/16++ 208,165
1,200,000 9.125% due 02/01/16++ 1,256,184
100,000 California Housing Finance Authority Revenue,
3.950% due 07/15/13+ 100,000
California Health Facilities Authority Revenue:
400,000 (Granada Medical Project),
4.250% due 01/01/15+ 400,000
200,000 (Pooled Loan Program),
4.050% due 10/01/10+ 200,000
(Saint Joseph):
750,000 4.500% due 08/01/17++ 750,000
95,000 4.100% due 07/01/13+ 95,000
California Pollution Control Financing Author-
ity, Pollution Control Revenue:
1,150,000 (Champlin Petroleum),
4.550% due 06/01/03++ 1,150,000
(South Down, Inc.):
400,000 3.400% due 02/15/98++++ 400,000
300,000 3.400% due 04/15/98++++ 300,000
Series B:
200,000 (Shell Oil Co.),
4.050% due 10/01/11++++ 200,000
300,000 (Rocklin),
4.300% due 06/01/17+ 300,000
200,000 (Delano),
4.250% due 08/01/19+ 200,000
100,000 Series C, (Shell Oil Co.),
4.050% due 11/01/00+ 100,000
1,000,000 Series E, (Pacific Gas and Electricity),
4.200% due 07/13/95++++ 1,000,000
500,000 (Southern California Edison Inc.), Series D,
3.200% due 03/01/08++ 500,000
California Statewide, Community Development
Revenue:
200,000 3.850% due 08/01/19+ 200,000
675,000 3.850% due 06/01/04++ 675,000
100,000 Concord, California, Multifamily Housing Reve-
nue,
3.950% due 07/15/18+ 100,000
800,000 Contra Costa, California, Transportation Au-
thority,
3.900% due 03/01/09++ 800,000
700,000 East Bay, California, Municipal Utillity Dis-
trict,
7.000% due 03/01/08++ 729,461
490,000 Healdsburg, California, Community
Redevelopment Agency,
4.200% due 01/01/98+ 490,000
450,000 Huntington Park, California, Redevelopment
Agency,
5.100% due 08/01/15++ 449,195
300,000 Kern County, California, Certificates of Par-
ticipation, Series D,
3.900% due 08/01/06+ 300,000
1,000,000 Long Beach, California, Harbor Department Reve-
nue, Series A-2,
4.150% due 03/04/23++ 1,000,000
100,000 Los Angeles, California, Community Development
Agency, Multifamily Housing Revenue,
3.95% due 07/01/15++ 100,000
400,000 Los Angeles, California, Transportation Author-
ity, Regional Airports, Series E,
4.350% due 12/01/24+ 400,000
500,000 Los Angeles County, California, Local Tax
and Revenue Anticipation Notes,
4.500% due 07/01/96++ 503,350
1,350,000 Los Angeles, California, Local Transportation
Authority,
4.500% due 07/06/95 1,350,134
100,000 Los Angeles County, California, Multifamily
Housing Authority, (Poinsettia Project),
3.850% due 07/01/19+ 100,000
1,000,000 Metropolitan Water District,
5.000% due 04/25/96++ 1,005,956
400,000 Monterey Peninsula, California,
Water Managment District,
4.350% due 07/01/22+ 400,000
1,500,000 Northern California Power Agency,
9.750% due 07/01/08++ 1,530,001
400,000 Ontario, California, Multifamily Housing Au-
thority, (Vineyard Project),
4.050% due 12/01/05+ 400,000
400,000 Palm Springs, California, Community
Redevelopment Agency,
4.550% due 12/01/14++ 400,000
675,000 Rincon Del Diablo, California, Water District,
4.350% due 02/01/15++ 675,000
500,000 Sacramento County, California, Certificates of
Participation,
3.650% due 06/01/20+ 500,000
200,000 Sacramento County, California, Multifamily
Housing Revenue, Series A,
4.100% due 04/15/07+ 200,000
500,000 Sacramento County, California, Municipal Util-
ity District,
4.050% due 07/17/95 500,000
735,000 San Diego, California, Multifamily Housing Rev-
enue, (Market Street Square Project),
4.350% due 11/01/25+ 735,000
500,000 San Francisco, California,
Bay Area Rapid Transit Authority,
(737 Post Project), Series D
8.750% due 07/01/04++ 515,001
250,000 Santa Cruz County, California, Industrial De-
velopment Authority,
3.850% due 11/01/18+ 250,000
TOTAL INVESTMENTS
(Cost $22,367,447*) 97.4% 22,367,447
OTHER ASSETS AND LIABILITIES (NET) 2.6 600,130
NET ASSETS 100.0% $22,967,577
<FN>
* Aggregate cost for Federal tax purposes.
+ Variable rate demand bonds payable upon not more than seven calendar
days' notice. The interest rate shown reflects the rate currently in
effect.
++ Put bonds and notes have demand features to mature within one year.
+++ Variable daily demand notes are payable upon not more than one busi-
ness day's notice. The interest rate shown reflects the rate cur-
rently in effect.
++++ Variable daily demand notes are payable upon not more than 30 calen-
dar days' notice. The interest rate shown reflects the rate currently
in effect.
</TABLE>
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
DREYFUS/LAUREL MASSACHUSETTS TAX-FREE MONEY FUND JUNE 30, 1995
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 101.4%
MASSACHUSETTS -- 101.4%
$1,000,000 Attleboro, Massachusetts, Bond Anticipation
Notes,
4.500% due 07/07/95 $ 1,000,049
400,000 Auburn, Massachusetts, State Aid Anticipation
Notes,
3.850% due 08/25/95 400,000
1,700,000 Boston, Massachusetts, Water & Sewer Commission
Revenue,
4.050% due 11/01/24+ 1,700,000
3,000,000 Bristol, Massachusetts, Revenue Anticipation
Notes,
4.160% due 06/28/96 3,000,000
100,000 East Brookfield, Massachusetts, Revenue Antici-
pation Notes,
4.010% due 06/19/96 100,000
1,215,000 Edgartown, Massachusetts, Bond Anticipation
Notes,
3.210% due 08/18/95 1,215,000
260,000 Everett, Massachusetts, General Obligation
Bonds,
6.000% due 10/15/95 261,296
256,000 Farmington, Massachusetts, Bond Anticipation
Notes,
4.120% due 06/21/96 256,000
310,000 Franklin, Massachusetts, State Aid Anticipation
Notes,
3.960% due 08/31/95 310,000
1,000,000 Gloucester, Massachusetts, Bond Anticipation
Notes,
4.460% due 10/06/95 1,000,000
2,527,000 Gloucester, Massachusetts, State Aid Anticipa-
tion Notes,
4.460% due 10/06/95 2,527,000
200,000 Holyoke, Massachusetts, Pollution Control Reve-
nue,
3.950% due 11/01/13+ 200,000
Massachusetts Bay Transportation Authority:
2,500,000 3.800% due 07/12/95 2,500,000
Series A:
400,000 5.000% due 03/01/96 402,573
2,000,000 5.500% due 03/01/96 2,010,898
3,000,000 4.400% due 03/01/14++ 3,000,000
Massachusetts Health & Educational Facilities:
4,000,000 3.500% due 08/17/95 4,000,000
2,000,000 4.150% due 01/01/35+ 2,000,000
1,600,000 Project A,
4.000% due 01/01/01+ 1,600,000
1,000,000 Series A,
3.950% due 11/01/26+ 1,000,000
3,500,000 Series F,
3.950% due 07/01/24+ 3,500,000
1,150,000 (Boston University),
8.875% due 07/01/15++ 1,167,295
7,000,000 Series H,
3.550% due 12/01/15++ 7,000,000
1,000,000 (Capital Asset Program), Series B,
3.850% due 07/01/22+ 1,000,000
2,000,000 Series D,
3.900% due 08/01/14+ 2,000,000
1,070,000 (Harvard University),
3.550% due 08/01/17+ 1,070,000
300,000 Series I, 3.550% due 02/01/16+ 300,000
1,340,000 Series L, 3.000% due 01/01/24+ 1,340,000
300,000 (Massachusetts Institute of Technology),
Series G,
3.400% due 07/01/21+ 300,000
4,700,000 (Tufts University), Series E,
Commercial Paper,
3.100% due 08/01/03+ 4,700,000
Massachusetts Industrial Finance Agency:
750,000 4.100% due 03/15/04+ 750,000
2,500,000 5.250% due 09/01/11++ 2,500,000
(Berkshire Project), Refunding Revenue:
1,200,000 4.000% due 09/01/20+ 1,200,000
900,000 3.900% due 04/01/23+ 900,000
2,550,000 (Cabot Newburyport Ltd.),
4.000% due 01/01/99+ 2,550,000
1,715,000 (Chestnut Housing Apartments),
3.850% due 08/01/26+ 1,715,000
(Family YMCA Project):
2,030,000 4.000% due 06/01/09+ 2,030,000
1,700,000 4.000% due 06/01/19+ 1,700,000
900,000 (Holyoke Water Power),
3.950% due 05/01/22+ 900,000
3,985,000 (First Healthcare Corporation), Refunding Rev-
enue,
4.150% due 04/01/13+ 3,985,000
500,000 (General Signal Corporation), General
Obligation Bond,
3.900% due 07/01/04+ 500,000
1,100,000 (Manhasset Bay Cambridge),
3.7000% due 10/01/10+ 1,100,000
4,450,000 (New England Power Company), Pollution
Control Revenue,
4.200% due 10/01/22+ 4,450,000
2,200,000 (Odgen Haverhill Project),
3.900% due 12/01/06 + 2,200,000
(Quamco):
2,895,000 Series A,
3.600% due 09/01/01+ 2,895,000
1,300,000 Series B,
3.600% due 09/01/01+ 1,300,000
220,000 Refunding Revenue, Series A,
3.850% due 07/01/96+ 220,000
735,000 Series B,
3.850% due 07/01/08+ 735,000
5,000,000 Massachusetts Municipal Wholesale Electric
Company, Power Supply,
3.850% due 07/01/19+ 5,000,000
Massachusetts State, Updates:
800,000 Series B,
4.200% due 12/01/97+ 800,000
600,000 Series E,
4.200% due 12/01/97+ 600,000
5,000,000 Massachusetts Water Resource Authority,
3.050% due 08/07/95 5,000,000
1,109,500 Merrimack, Massachusetts, Bond
Anticipation Notes,
4.010% due 08/17/95 1,109,500
985,600 Mohawk Trail Regional School District, Bond An-
ticipation Notes,
4.510% due 05/17/96 985,600
1,135,000 North Andover, Massachusetts, Bond
Anticipation Notes,
5.500% due 01/11/96 1,136,429
222,000 North Brookfield, Massachusetts, Bond
Anticipation Notes,
4.970% due 09/01/95 222,000
125,000 North Middlesex, Massachusetts School
District, Bond Anticipation Notes,
4.150% due 06/13/96 125,000
Pepperell, Massachusetts, Bond
Anticipation Notes:
275,000 3.870% due 07/28/95 275,000
188,731 3.910% due 09/22/95 188,731
900,000 Spencer, Massachusetts, Revenue
Anticipation Notes,
4.300% due 11/03/95 900,000
200,000 Wayland, Massachusetts, State Aid
Anticipation Notes,
4.050% due 09/15/95 200,000
Worcester County, Massachusetts,
Bond Anticipation Notes:
2,000,000 4.010% due 08/31/95 2,000,000
1,600,000 4.950% due 01/25/96 1,600,000
TOTAL INVESTMENTS
(Cost $102,632,371*) 101.4% 102,632,371
OTHER ASSETS AND LIABILITIES (NET) (1.4) (1,401,331)
NET ASSETS 100.0% $101,231,040
<FN>
* Aggregate cost for Federal tax purposes.
+ Variable rate demand bonds payable upon not more than seven calendar
days' notice. The interest rate shown reflects the rate currently in ef-
fect.
++ Put bonds and notes have demand features to mature within one year. The
interest rate shown reflects the rate currently in effect.
</TABLE>
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND JUNE 30, 1995
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 100.1%
NEW YORK -- 91.1%
Babylon, New York, Industrial Development
Revenue:
$ 300,000 3.700% due 04/01/00+ $ 300,000
300,000 4.400% due 12/01/24+ 300,000
250,000 Broome County, New York, Industrial Development
Revenue,
4.000% due 12/15/03+ 250,000
500,000 Franklin County, New York, Industrial Develop-
ment Agency, Series A,
4.050% due 07/01/21+ 500,000
400,000 Hemstead Town, New York, Series A,
5.250% due 03/01/96 401,784
100,000 Jefferson County, New York, Industrial
Development Revenue,
4.060% due 12/01/12+++ 100,000
200,000 Metropolitan Transportation Authority,
New York,
3.750% due 07/01/21+ 200,000
300,000 Monroe County, New York, Industrial
Development Agency,
3.700% due 10/01/00+ 300,000
200,000 Montgomery, New York, Industrial Development
Agency, (Service Merchandise),
4.000% due 12/31/24+++ 200,000
700,000 New York City Municipal Water, Finance Author-
ity,
4.500% due 06/15/25+ 700,000
New York City, New York, General Obligation
Bonds:
100,000 Series A,
4.250% due 08/15/23+ 100,000
800,000 Series A-6,
4.000% due 08/01/18+ 800,000
500,000 Series A-9,
4.200% due 08/01/18+ 500,000
Series B:
200,000 4.550% due 08/15/21+ 200,000
200,000 4.500% due 10/01/21+ 200,000
200,000 Series F-3,
4.250% due 02/15/13+ 200,000
New York City, New York, Housing Development
Corporation:
500,000 3.850% due 07/01/05+ 500,000
300,000 4.000% due 02/01/07+ 300,000
500,000 3.900% due 12/15/24+ 500,000
600,000 3.8000% due 03/15/25+ 600,000
1,000,000 Special Obligation-96-A,
3.750% due 08/01/15+ 1,000,000
New York State Dormitory Authority Revenue:
1,200,000 3.900% due 07/01/15+ 1,200,000
300,000 8.750% due 07/01/15++ 306,072
New York State Energy Research & Development
Authority, Pollution Control Revenue:
700,000 3.800% due 10/01/14+++ 700,000
100,000 4.550% due 07/01/15+ 100,000
250,000 4.100% due 10/15/15++ 250,000
300,000 4.600% due 12/01/15++ 300,000
500,000 4.100% due 11/01/23+ 500,000
700,000 4.650% due 12/01/23++ 700,000
New York State Housing Finance Agency:
500,000 (Liberty),
4.000% due 11/01/05+ 500,000
500,000 (Sanai School),
4.000% due 11/01/14+ 500,000
100,000 Series PJ,
3.900% due 05/15/15+ 100,000
New York State Job Development Authority:
225,000 3.600% due 03/01/99+++ 225,000
400,000 3.650% due 03/01/00+++ 400,000
200,000 4.200% due 03/01/07+ 200,000
1,300,000 New York State Local Assistance Corporation,
Series B,
3.700% due 04/01/23+ 1,300,000
New York State Medical Care Facility:
1,050,000 Series C,
8.625% due 01/15/06++ 1,099,062
1,000,000 King Hospital Project,
8.500% due 01/15/22++ 1,046,061
New York State Power Authority, Utility Reve-
nue:
500,000 7.400% due 01/01/06++ 517,453
400,000 7.375% due 01/01/18++ 413,802
500,000 New York State, Series P, General Obligation,
4.100% due 07/18/95++ 500,000
Niagara County, New York:
400,000 General Obligation,
Series A,
4.200% due 11/15/24+ 400,000
500,000 Series 94B,
4.350% due 08/11/95 500,000
700,000 Niagara Falls, New York, Transportation Author-
ity,
4.000% due 10/01/19++ 700,000
300,000 Onondaga County, New York, Industrial
Development Agency,
Seymor Project,
3.300% due 06/15/97+++ 300,000
900,000 Saint Charles County, New York, Industrial De-
velopment Authority,
4.150% due 10/01/07+ 900,000
300,000 Saint Lawrence County, New York, Industrial De-
velopment Center,
4.000% due 05/01/25+ 300,000
700,000 Suffolk County, New York, Industrial Develop-
ment Center,
3.850% due 01/01/14+ 700,000
500,000 Suffolk County, New York, Tax Anticipation
Notes,
5.250% due 08/15/95 500,428
575,000 Tonawanda, New York,
4.210% due 12/21/95 575,369
Triborough Bridge & Tunnel Authority:
600,000 7.625% due 01/01/14++ 624,101
200,000 3.750% due 01/01/24+ 200,000
1,000,000 Wappingers, New York, Central School District,
4.125% due 06/14/96 1,004,370
306,000 West Genesee, New York, Central
School District,
4.700% due 06/01/96 307,766
600,000 Westchester County, New York,
5.000% due 12/14/95 601,321
490,000 White Plains, New York, City School District,
4.500% due 06/15/96 492,492
27,115,081
ALASKA -- 1.0%
300,000 Anchorage, Alaska, Higher Education for Pac
University,
4.500% due 07/01/17+ 300,000
PUERTO RICO -- 8.0%
Puerto Rico Commonwealth, Government
Development Bank:
600,000 3.800% due 12/01/15+ 600,000
Commercial Paper:
700,000 2.800% due 07/17/95++ 700,000
500,000 3.900% due 07/20/95++ 500,000
100,000 Puerto Rico Commonwealth, Highway and Transpor-
tation Authority,
3.800% due 07/01/99+ 100,000
200,000 Puerto Rico Commonwealth, Industrial Develop-
ment: Industrial Control,
4.050% due 12/01/15+ 200,000
300,000 Pollution Control,
4.350% due 12/01/13++ 300,262
2,400,262
TOTAL INVESTMENTS
(Cost $29,815,343*) 100.1% 29,815,343
OTHER ASSETS AND LIABILITIES (NET) (0.1) (25,877)
NET ASSETS 100.0% $29,789,466
<FN>
* Aggregate cost for Federal tax purposes.
+ Variable rate demand bonds are payable upon not more than seven calen-
dar days' notice. The interest rate shown reflects the rate currently
in effect.
++ Put bonds and notes have demand features to mature within one year.
The interest rate shown reflects the rate currently in effect.
+++ Variable rate demand notes are payable upon not more than 30 calendar
days' notice. The interest rate shown reflects the rate currently in
effect.
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF ASSETS AND LIABILITIES
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS JUNE 30, 1995
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
<S> <C> <C> <C>
ASSETS
Investments, at value
(Cost $22,367,447, $102,632,371 and
$29,815,343, respectively) (Note 1)
See accompanying schedules $22,367,447 $102,632,371 $ 29,815,343
Cash -- 13,488 177,364
Interest receivable 321,211 636,046 264,116
Receivable for Fund shares sold 1,042,363 1,559,769 89,796
TOTAL ASSETS 23,731,021 104,841,674 30,346,619
LIABILITIES
Payable for investment securities purchased 503,350 3,200,000 493,418
Dividends payable 9,772 94,261 20,038
Payable for Fund shares redeemed 216,722 212,589 22,682
Investment management fee payable (Note 2) 20,307 84,998 16,292
Due to custodian 9,353 -- --
Accrued Trustees' fees and expenses (Note 2) 758 3,381 758
Distribution fee payable (Note 3) 3,182 15,405 3,965
TOTAL LIABILITIES 763,444 3,610,634 557,153
NET ASSETS $22,967,577 $101,231,040 $ 29,789,466
NET ASSETS CONSIST OF:
ACCUMULATED NET REALIZED GAIN/
(LOSS) ON INVESTMENTS SOLD $ (233) $ (51,059) $ 339
PAID-IN CAPITAL 22,967,810 101,282,099 29,789,127
TOTAL NET ASSETS $22,967,577 $101,231,040 $ 29,789,466
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS JUNE 30, 1995
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
<S> <C> <C> <C>
NET ASSETS:
Investor Shares $ 15,537,878 $ 75,746,221 $ 21,739,314
Class R Shares $ 7,429,699 $ 25,484,819 $ 8,050,152
SHARES OUTSTANDING:
Investor Shares 15,537,767 75,797,831 21,739,067
Class R Shares 7,429,644 25,501,860 8,050,060
NET ASSET VALUE:
INVESTOR SHARES
Net asset value, offering and redemption price
per share of beneficial interest outstanding $ 1.00 $ 1.00 $ 1.00
CLASS R SHARES
Net asset value, offering and redemption price
per share of beneficial interest outstanding $ 1.00 $ 1.00 $ 1.00
</TABLE>
STATEMENTS OF OPERATIONS
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 973,443 $ 4,113,322 $ 511,298
EXPENSES
Investment management fee (Note 2) 90,816 397,565 48,800
Distribution fee (Note 3) 38,346 222,784 20,798
Trustees' fees and expenses (Note 2) 2,069 9,343 1,308
Total expenses 131,231 629,692 70,906
NET INVESTMENT INCOME 842,212 3,483,630 440,392
NET REALIZED GAIN
ON INVESTMENTS (Note 1)
Net realized gain on investments sold during
the period 6 977 349
NET INCREASE IN NET ASSETS RESULTING FROM OPER-
ATIONS $ 842,218 $ 3,484,607 $ 440,741
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
<S> <C> <C> <C>
Net investment income $ 842,212 $ 3,483,630 $ 440,392
Net realized gain on investments sold during
the year 6 977 349
Net increase in net assets resulting from oper-
ations 842,218 3,484,607 440,741
Distributions to shareholders from net invest-
ment income:
Investor shares (468,028) (2,605,776) (248,024)
Class R shares (374,184) (877,854) (192,368)
Net increase/(decrease) in net assets from Fund
share transactions (Note 4):
Investor shares (1,631,735) (10,764,289) 13,727,989
Class R shares (2,316,810) 5,659,254 2,591,101
Net increase/(decrease) in net assets (3,948,539) (5,104,058) 16,319,439
NET ASSETS:
Beginning of year 26,916,116 106,335,098 13,470,027
End of year $ 22,967,577 $ 101,231,040 $ 29,789,466
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
FOR THE YEAR OR PERIOD ENDED JUNE 30, 1994
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND* MONEY FUND MONEY FUND*
<S> <C> <C> <C>
Net investment income $ 346,378 $ 2,167,350 $ 204,215
Net realized loss on investments sold during
the year -- (1,311) --
Net increase in net assets result from opera-
tions 346,378 2,166,039 204,215
Distributions to shareholders from net invest-
ment income:
Investor Shares (198,324) (1,317,812) (124,785)
Trust Shares (118,164) (371,662) (78,946)
Institutional Shares (29,890) (477,876) (484)
Net increase/(decrease) in net assets from Fund
share transactions (Note 4):
Investor Shares (3,450,010) (21,462,072) (1,409,966)
Trust Shares 3,338,359 186,693 (2,241,040)
Net decrease in net assets (111,651) (21,276,690) (3,651,006)
NET ASSETS:
Beginning of year 27,027,767 127,611,788 17,121,033
End of year (including undistributed net in-
vestment income of $399 for the Dreyfus/Laurel
California Tax-Free Money Fund) $ 26,916,116 $ 106,335,098 $ 13,470,027
<FN>
* The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30.
</TABLE>
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
PREMIER LIMITED TERM MUNICIPAL FUND JUNE 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 1)
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 97.7%
ALABAMA -- 1.6%
$ 100,000 Birmingham, Alabama, General Obligation
Bonds,
9.800% due 10/01/15, Prerefunded 10/01/95 $ 103,250
University of Alabama, University Revenue,
275,000 5.000% due 06/01/09 253,344
285,000 5.000% due 06/01/10 260,419
617,013
ALASKA -- 0.3%
100,000 State of Alaska, Certificates of Participa-
tion,
(Rent Spring Creek Correctional Center),
Series A,
9.700% due 10/01/07, Prerefunded 10/01/95 103,250
ARIZONA -- 6.0%
1,000,000 Arizona State Transportation Board, Excise
Revenue,
7.000% due 07/01/95 1,000,000
1,250,000 Phoenix, Arizona, Refunding Revenue, Series
A,
6.250% due 07/01/16 1,301,563
2,301,563
ARKANSAS -- 1.7%
100,000 Little Rock, Arkansas, Hotel & Restaurant
Gross Receipts Tax, Refunding Bonds,
(Little Rock Convention Center),
7.625% due 01/01/05, Prerefunded 01/01/96 104,750
500,000 North Little Rock, Arkansas, Electric Ser-
vices,
6.000% due 07/01/01 533,125
637,875
CALIFORNIA -- 5.7%
1,000,000 Los Angeles, California, Convention and
Exhibition Center,
7.375% due 08/15/18, Prerefunded 08/15/99 1,123,750
1,000,000 Los Angeles, California, Transportation Au-
thority,
8.000% due 07/01/97 1,066,250
2,190,000
COLORADO -- 2.0%
750,000 Platte River Power Authority, Electric Rev-
enue,
Series B,
5.625% due 06/01/03 779,063
CONNECTICUT -- 4.2%
1,000,000 Connecticut State, General Obligation, Se-
ries B,
5.950% due 11/15/00 1,056,250
500,000 Stamford, Connecticut, General Obligation,
6.600% due 01/15/07 560,625
1,616,875
FLORIDA -- 0.3%
100,000 Dade County, Florida, Public Improvement
Bonds, Series C,
7.125% due 10/01/16 103,625
GEORGIA -- 1.5%
500,000 Fulton County, Georgia, Fulton-De Kalb Hos-
pital Authority Revenue Certificates, Se-
ries A,
7.250% due 01/01/20, Prerefunded 01/01/00 561,250
ILLINOIS -- 9.0%
1,000,000 Chicago, Illinois, Metropolitan Water Au-
thority,
7.250% due 12/01/12 1,151,250
100,000 Chicago, Illinois, Refunding Bonds, Series
B,
7.250% due 01/01/10 103,875
300,000 Chicago, Illinois, School Financing Author-
ity,
Refunding Bonds, Series B,
7.750% due 06/01/09, Prerefunded 10/01/95 315,750
1,000,000 Illinois State, Revenue Bonds,
6.750% due 06/15/06, Prerefunded 06/15/97 1,065,000
390,000 Regional Transportation Authority, Illi-
nois, Series C,
7.750% due 06/01/12 468,000
300,000 Springfield, Sangamon County, Illinois,
School District #186,
7.700% due 06/01/01 338,250
3,442,125
INDIANA -- 0.4%
100,000 Indiana State Toll Finance Authority,
Toll Road Revenue Bonds,
9.500% due 07/01/10, Prerefunded 07/01/95 102,015
50,000 Indiana Transportation Finance Authority,
Highway Revenue Bonds,
7.875% due 12/01/11, Prerefunded 12/01/98 56,313
158,328
KENTUCKY -- 2.9%
1,000,000 Kentucky State Turnpike Authority,
6.500% due 07/01/07 1,100,000
MARYLAND -- 2.8%
1,000,000 Maryland State, General Obligation, Second
Series,
7.000% due 01/01/01, Prerefunded 01/01/98 1,075,000
MASSACHUSETTS -- 2.2%
750,000 Massachusetts Bay Transportation Authority,
Revenue Bonds,
5.300% due 03/01/04 750,938
100,000 Massachusetts Health & Educational
Facilities Authority, Revenue Bonds,
(Addison Gilbert Hospital), Series B,
8.700% due 07/01/97, Prerefunded 07/01/95 102,013
852,951
MICHIGAN -- 3.2%
1,030,000 Berkley, Michigan, City School District,
General Obligation,
7.000% due 01/01/09 1,161,325
50,000 Comstock Park, Michigan, Public Schools
Revenue Bonds,
6.000% due 05/01/16, Prerefunded 05/01/99 53,375
1,214,700
NEW JERSEY -- 2.9%
500,000 Cumberland County, New Jersey, Improvement
Authority, Solid Waste Disposal Revenue,
6.000% due 01/01/01 530,000
600,000 New Jersey State Transportation Authority,
Revenue Bonds, Series A,
4.750% due 06/15/03 580,500
1,110,500
NEW MEXICO -- 0.3%
100,000 Farmington, New Mexico, Utility Systems
Revenue Bonds,
9.750% due 05/15/13, Prerefunded 05/15/96 106,750
NEW YORK -- 7.6%
200,000 New York State Dormitory Authority Revenue
Bonds, Series A,
7.125% due 05/15/09 216,750
500,000 New York State, Environmental Pollution
Control Revenue Bonds,
Series A,
7.500% due 06/15/12 561,250
1,000,000 New York State Power Authority,
Revenue Bonds,
4.800% due 01/01/05 960,000
1,000,000 New York State, Refunding Revenue, Series
B,
6.250% due 08/15/04 1,073,750
100,000 Triborough Bridge & Tunnel Authority,
New York, General Purpose Revenue Bonds,
Series P,
7.000% due 01/01/11, Prerefunded 01/01/99 110,000
2,921,750
NORTH CAROLINA -- 4.0%
North Carolina Eastern Municipal Power
Agency, Power Systems Revenue Bonds:
1,420,000 7.500% due 01/01/15, Prerefunded 01/01/97 1,515,850
5,000 8.000% due 01/01/21, Prerefunded 01/01/98 5,525
1,521,375
OHIO -- 5.8%
575,000 Columbus, Ohio, General Obligation Bonds,
Series 1,
5.250% due 09/15/05 581,469
250,000 Cuyahoga County, Ohio, Hospital Revenue Re-
funding Bonds, (Sinai Medical Center),
Series A,
8.125% due 11/15/14 269,062
625,000 Gahanna -- Jefferson City, Ohio, City
School District,
5.100% due 12/01/01 631,250
750,000 Ohio State Building Authority, Correctional
Facilities,
4.500% due 10/01/02 719,063
2,200,844
OREGON -- 2.1%
500,000 Oregon State, Department of General Ser-
vices,
Certificate of Participation, Series E,
6.600% due 09/01/98 531,250
250,000 Tri-County Metroplitan Transportation Dis-
trict,
General Obligation, Series A,
5.600% due 07/01/03 256,563
787,813
PENNSYLVANIA -- 5.8%
1,000,000 Pennsylvania State, Intergovernment Author-
ity,
Special Tax Bond,
6.800% due 06/15/22, Prerefunded 06/15/02 1,120,000
1,000,000 Somerset County, Pennsylvania,
General Authority Revenue,
6.700% due 10/15/03, Prerefunded 10/15/01 1,107,500
2,227,500
PUERTO RICO -- 1.2%
350,000 Commonwealth of Puerto Rico,
General Obligation Bonds,
6.700% due 07/01/98 373,625
100,000 Commonwealth of Puerto Rico, Industrial,
Medical and Environmental Pollution Con-
trol Facilities Financing Authority, Rev-
enue Bonds, (Hospital Project), (FHA in-
sured)+++,
9.750% due 08/01/25, Prerefunded 08/01/95 102,375
476,000
RHODE ISLAND -- 0.3%
100,000 Rhode Island State, Health & Educational
Building Corporation, Revenue Bonds,
(Rhode Island Hospital),
9.750% due 07/01/13, Prerefunded 07/01/95 102,015
TENNESSEE -- 4.3%
1,500,000 Rutherford County, Tennessee, Series A,
General Obligation,
6.500% due 05/01/06 1,642,500
TEXAS -- 10.8%
Austin, Texas, Utility System Revenue
Bonds:
100,000 10.250% due 11/15/12, Prerefunded
11/15/95 104,125
200,000 Series A,
8.000% due 11/15/16, Prerefunded 05/15/01 232,500
200,000 Bridgeport, Texas, Independent School Dis-
trict,
Revenue Bonds,
6.000% due 08/15/01 210,250
875,000 Fort Bend, Texas, Independent School Dis-
trict,
Revenue Bonds,
6.600% due 02/15/04 961,405
Lewisville, Texas, Independent School Dis-
trict,
Revenue Bonds:
650,000 7.500% due 08/15/06 762,125
600,000 7.500% due 08/15/07 707,250
100,000 Lower Colorado River, Texas, Revenue Bonds,
9.500% due 01/01/13, Prerefunded 01/01/96 104,625
100,000 San Antonio, Texas, Independent School Dis-
trict, Revenue Bonds,
8.250% due 06/15/01, Prerefunded 06/15/96 103,875
1,000,000 Tarrant County, Texas, General Obligation
Bonds,
4.700% due 07/15/05 956,250
4,142,405
VIRGINIA -- 2.7%
1,000,000 Virginia Transportation Contract, Rt. 28,
Revenue Bonds,
6.000% due 04/01/05 1,038,750
WASHINGTON -- 6.1%
100,000 Grant County, Washington, Public Utility
District No. 2, Electric Revenue Bonds,
Series C,
7.200% due 01/01/07, Prerefunded 07/01/96 103,000
1,055,000 Snohomish County, Washington, Public Util-
ity
District No. 001, Electric Refunding
Revenue Bonds, (Generation System), Se-
ries 86 A,
8.000% due 01/01/15, Prerefunded 01/01/97 1,132,805
1,000,000 Washington State, Public Power Authority,
Revenue Bonds, Series A,
7.000% due 07/01/08 1,115,000
2,350,805
TOTAL MUNICIPAL BONDS AND NOTES
(Cost $36,561,327) 37,382,625
SHORT-TERM MUNICIPAL BONDS
AND NOTES -- 4.1%
ALASKA -- 1.3%
500,000 Anchorage, Alaska, Revenue Bonds,
4.500% due 06/01/12+ 500,000
CALIFORNIA -- 1.8%
190,000 Bay Area, California, Revenue Bonds,
4.000% due 04/01/97+ 190,000
Los Angeles, California, Multifamily
Housing Revenue:
100,000 3.950% due 07/01/15+ 100,000
100,000 4.250% due 10/01/14+ 100,000
Los Angeles, California, Regional Apart-
ments:
200,000 Series B,
4.350% due 12/01/24++ 200,000
100,000 Series E,
4.350% due 12/01/24++ 100,000
690,000
MASSACHUSETTS -- 0.5%
200,000 Massachusetts State, Health Care Facili-
ties,
4.200% due 04/01/09++ 200,000
MISSOURI -- 0.5%
200,000 Perry County, Missouri, Pollution Control
Revenue,
4.150% due 03/01/02++ 200,000
TOTAL SHORT-TERM MUNICIPAL BONDS
AND NOTES
(Cost $1,590,000) 1,590,000
TOTAL INVESTMENTS
(Cost $38,151,327*) 101.8% 38,972,625
OTHER ASSETS AND LIABILITIES (NET) (1.8) (702,456)
NET ASSETS 100.0% $38,270,169
<FN>
* Aggregate cost for Federal tax purposes.
+ Variable rate demand notes are payable upon not more than seven busi-
ness days' notice. The interest rate shown reflects the rate currently
in effect.
++ Variable rate demand notes are payable upon not more than one business
day's notice. The interest rate shown reflects the rate currently in
effect.
+++ FHA -- Federal Housing Administration.
</TABLE>
See Notes to Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
PREMIER LIMITED TERM MUNICIPAL FUND JUNE 30, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Investments, at value (Cost $38,151,327)
(Note 1)
See accompanying schedule $38,972,625
Cash 64,602
Interest receivable 718,041
Receivable for Fund shares sold 2,500
TOTAL ASSETS 39,757,768
LIABILITIES:
Payable for investment securities purchased $1,371,048
Dividends payable 61,971
Investment management fee payable (Note 2) 44,988
Distribution fee payable (Note 3) 4,486
Payable for Fund shares redeemed 3,804
Accrued Trustees' fees and expenses (Note
2) 1,269
Service fee payable (Note 3) 33
TOTAL LIABILITIES 1,487,599
NET ASSETS $38,270,169
NET ASSETS consist of:
Accumulated net realized loss on securities
sold and futures contracts $(166,011)
Unrealized appreciation of investments 821,298
Paid-in capital 37,614,882
TOTAL NET ASSETS $38,270,169
NET ASSET VALUE:
CLASS A SHARES:
Net asset value and redemption price per
share ($21,374,735 / 1,808,606 shares of
beneficial interest outstanding) $11.82
Maximum offering price per share ($11.82 /
0.97) (based on maximum sales charge of
3.0% of the offering price on June 30,
1995) $12.19
CLASS B SHARES:
Net asset value and offering price per
share+ ($84,585 / 7,157 shares of benefi-
cial interest outstanding) $11.82
CLASS C SHARES:
Net asset value and offering price per
share+ ($84,158 / 7,121 shares of beneficial in-
terest outstanding) $11.82
CLASS R SHARES:
Net asset value and redemption price per
share ($16,726,691 / 1,415,419 shares of
beneficial interest outstanding) $11.82
<FN>
+ Redemption price per share is equal to net asset value less any applica-
ble contingent deferred sales charge.
</TABLE>
STATEMENT of OPERATIONS
PREMIER LIMITED TERM MUNICIPAL FUND
FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest $1,956,769
EXPENSES:
Investment management fee (Note 2) $179,992
Distribution fee (Note 3) 56,153
Trustees' fees and expenses (Note 2) 3,035
Service fee (Note 3) 118
TOTAL EXPENSES 239,298
NET INVESTMENT INCOME 1,717,471
REALIZED AND UNREALIZED GAIN/(LOSS) ON IN-
VESTMENTS (Notes 1 and 4):
Net realized gain/(loss) on:
Securities transactions (203,385)
Futures contracts 37,373
Net realized loss on investments during the
year (166,012)
Net unrealized appreciation of investments
during the year 737,035
NET REALIZED AND UNREALIZED GAIN ON INVEST-
MENTS 571,023
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $2,288,494
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
PREMIER LIMITED TERM MUNICIPAL FUND
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
6/30/95 6/30/94
<S> <C> <C>
Net investment income $1,717,471 $1,637,818
Net realized gain/(loss) on securities and
futures contracts during the year (166,012) 411,488
Net unrealized appreciation/(depreciation)
of securities and futures contracts dur-
ing the year 737,035 (1,792,658)
Net increase in net assets resulting from
operations 2,288,494 256,648
Distributions to shareholders from net in-
vestment income:
Class A (1,028,941) (1,114,200)
Class B (1,466) --
Class C (402) --
Class R (686,662) (523,618)
Distribution to shareholders from net real-
ized capital gains:
Class A (50,842) (1,093,772)
Class R (31,702) (436,684)
Net increase/(decrease) in net assets from
Fund shares transactions (Note 5):
Class A (2,612,911) 1,377,089
Class B 81,625 --
Class C 84,072 --
Class R 3,933,212 4,541,935
Net increase in net assets 1,974,477 3,007,398
NET ASSETS:
Beginning of year 36,295,692 33,288,294
End of year (including distributions in ex-
cess of net investment income of $23,994
at June 30, 1994.) $38,270,169 $36,295,692
</TABLE>
See Notes to Financial Statements
PORTFOLIO OF INVESTMENTS
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND JUNE 30, 1995
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 100.3%
CALIFORNIA -- 86.5%
$ 150,000 Anaheim, California, Electric Revenue,
6.800% due 10/01/99 $ 153,750
150,000 California Health Facilities Authority,
(Unihealth America), Series A,
7.100% due 10/01/99, Prerefunded 10/01/98 165,375
100,000 California Pollution Control Financing Author-
ity, Pollution Control Revenue, (Union Oil
Company), Project A,
7.375% due 05/15/98, Prerefunded 12/01/95 101,625
125,000 California State, Department of Water Re-
sources, Series A,
7.200% due 12/01/01 128,594
California State Public Works, Board Lease Rev-
enue:
200,000 (Corcoran Prison),
7.000% due 09/01/98 207,750
150,000 High Technology, (Berkeley Campus),
7.200% due 03/01/01 163,875
375,000 Franklin-McKinley, California, Unified Free
School District,
5.200% due 07/01/04 372,656
100,000 Long Beach, California, Redevelopment Agency,
Project A,
7.125% due 11/01/99, Prerefunded 11/01/98 110,500
125,000 Los Angeles, California, Water and Power De-
partment, Electric Revenue,
7.000% due 05/01/00 134,688
Los Angeles, California, Wastewater Systems
Revenue:
150,000 7.100% due 11/01/98 161,250
1,000,000 6.800% due 08/01/19, Prerefunded 08/01/98 1,091,250
400,000 Series B,
6.600% due 06/01/98 420,500
250,000 Series D,
6.000% due 12/01/98 262,812
200,000 Los Angeles County, California, Certificates of
Participation,
6.900% due 03/01/01 211,250
500,000 Los Angeles County, California, General Obliga-
tion Bonds, Series B,
8.000% due 07/01/00 570,625
150,000 Los Angeles County, California, Health Facili-
ties Authority, (Oliveview Medical Center),
6.800% due 03/01/98 159,750
100,000 Los Angeles County, California, (Multifamily
Housing Project), Series A
7.625% due 12/01/29 104,625
150,000 Los Angeles County, California, Transportation
Sales Tax Revenue, Series A,
6.800% due 07/01/99 161,063
835,000 Metropolitan Water District, California,
6.375% due 07/01/02 898,669
Northern California Power Agency:
1,000,000 (Geothermal Project 3-A),
9.500% due 07/01/00, Prerefunded 07/01/95 1,020,000
360,000 (Transmission Project 1-A),
6.250% due 08/15/00 380,250
520,000 Riverside County, California, Transporation Au-
thority, Series A,
6.500% due 06/01/01 567,450
Sacramento, California, Municipal Utilities
District, Electric Revenue Bonds:
500,000 6.300% due 09/01/01 537,500
100,000 Series Z,
5.850% due 07/01/00 105,000
500,000 Sacramento County, California, Sanitation Dis-
trict,
4.800% due 12/01/04 482,500
440,000 San Bernardino County, California Transporation
Authority, Series A,
6.000% due 03/01/02 464,200
600,000 San Diego, California, Redevelopment Agency,
(Center Project),
5.500% due 09/01/01 619,500
750,000 San Diego, California, Regional Transportation
Authority,
6.000% due 4/01/04 790,312
300,000 San Diego, California, Water Authority, Series
A,
6.000% due 05/01/01 313,875
500,000 San Francisco, California, Bay Area Rapid Tran-
sit, Sales Tax Revenue,
6.700% due 07/01/00 538,125
San Francisco, California, City and County, Se-
ries A:
750,000 6.000% due 11/01/03 800,625
500,000 6.375% due 11/01/06 536,250
100,000 San Mateo County, California, Sales Tax Reve-
nue, Series A,
6.200% due 06/01/99 107,125
Santa Rosa, California, Water Revenue,
Series A:
480,000 6.600% due 09/01/00, Prerefunded 09/01/99 527,400
350,000 6.200% due 09/01/03 376,250
150,000 Santa Rosa, California, Wastewater Services,
7.400% due 07/02/97 159,562
420,000 Southern California, Public Power Authority,
(South Transmission Project),
6.300% due 10/01/02 454,125
620,000 West and Central Basin Financing Authority,
6.000% due 08/01/05 645,575
15,006,231
PUERTO RICO -- 13.8%
750,000 Commonwealth of Puerto Rico, General
Obligation Bonds,
6.250% due 07/1/11 798,750
750,000 Puerto Rico, Public Buildings Revenue, Series
A,
6.250%, due 07/1/10 799,688
750,000 University of Puerto Rico, University Revenue
Bonds, Series N,
6.250% due 06/01/08 799,688
2,398,126
TOTAL MUNICIPAL BONDS AND NOTES
(Cost $16,753,726) 17,404,357
SHORT-TERM INVESTMENTS -- 2.9%
CALIFORNIA -- 2.9%
100,000 Concord California, Multifamilly Mortgage,
3.950% due 7/15/18 ++ 100,000
200,000 Los Angeles, California, Regional Airports,
Series E,
3.950% due 12/01/24 ++ 200,000
200,000 San Francisco, California, Housing,
Series 737-D,
5.250% due 12/01/07 ++ 200,000
TOTAL SHORT-TERM INVESTMENTS
(Cost $500,000) 500,000
TOTAL INVESTMENTS
(Cost $17,253,726*) 103.2% 17,904,357
OTHER ASSETS AND LIABILITIES (NET) (3.2) (551,488)
NET ASSETS 100.0% $17,352,869
</TABLE>
* Aggregate cost for Federal tax purposes.
++ Variable rate demand bonds and notes that are payable upon not more
than seven business days' notice. The interest rate shown represents
the rate currently in effect.
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND JUNE 30, 1995
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 99.7%
MASSACHUSETTS -- 84.0%
$ 200,000 Amherst, Massachusetts, General Obligation
Bonds,
6.000% due 01/15/03 $ 211,250
Boston, Massachusetts, Water and Sewer Commis-
sion, Revenue Bonds:
100,000 9.250% due 01/01/11 135,625
Series A:
160,000 7.875% due 11/01/13, Prerefunded 11/01/96 170,600
290,000 Principal Only,
7.875% due 11/01/13 307,762
675,000 Cambridge, Massachusetts, General Obligation
Bonds,
6.600% due 06/15/00 732,375
Cohasset, Massachusetts, General Obligation
Bonds:
160,000 6.700% due 11/01/98 170,600
150,000 6.900% due 11/01/00 163,875
500,000 Dedham-Westwood, Massachusets, Water and Sewer
Commission, Revenue Bonds, Series A,
6.400% due 12/01/05, Prerefunded 12/01/96 525,000
105,000 Easton, Massachusetts, General Obligation
Bonds,
6.000% due 09/15/06 109,593
550,000 Massachusetts Bay Transporation Authority,
Revenue Bonds,
5.900% due 03/01/04 579,562
Massachusetts Consolidated Loan:
Series A:
115,000 7.375% due 12/01/08, Prerefunded 12/01/98 127,938
400,000 7.625% due 06/01/08, Prerefunded 06/01/01 466,000
1,000,000 7.875% due 06/01/97 1,066,250
500,000 Series B,
7.000% due 07/01/06 560,625
135,000 Series C,
7.375% due 12/01/08, Prerefunded 12/01/98 150,187
Massachusetts Health and Educational Facilities
Authority:
750,000 8.150%, due 7/1/14, Prerefunded 07/01/99 860,625
1,490,000 Series A,
7.625%, due 7/1/18, Prerefunded 07/01/98 1,653,900
500,000 (Bay State Medical Center), Revenue Bonds, Se-
ries D,
4.750% due 07/01/03 486,250
500,000 (Beth Israel Hospital), Revenue Bonds,
7.800% due 07/01/14 539,375
100,000 (Beverly Hospital), Revenue Bonds,
9.500% due 07/01/04, Prerefunded 07/01/95 102,015
150,000 (Brandeis University), Revenue Bonds, Series
F,
(FGIC Insured),
9.000% due 10/01/15, Prerefunded 10/01/95 153,938
400,000 (Dana Farber Cancer Institute), Series F,
5.550% due 12/01/03 412,500
1,000,000 (Harvard University), Series M,
6.200% due 12/01/01 1,075,000
35,000 (Malden Hospital), Revenue Bonds, (FHA In-
sured),
9.500% due 08/01/08 35,131
500,000 (Massachusetts General Hospital), Series G,
4.750% due 07/01/03 486,875
(Massachusetts Institute of Technology), Se-
ries H:
575,000 4.800% due 07/01/05 551,281
460,000 4.900% due 07/01/06 438,150
1,000,000 (Northeastern University), Series C,
6.800% due 10/01/99 1,078,750
(South Shore Hospital), Revenue Bonds, Series
C:
350,000 7.500% due 07/01/10, Prerefunded 07/01/00 400,313
500,000 7.500% due 07/01/20, Prerefunded 07/01/00 571,875
(Wentworth Institute of Technology), Series A:
225,000 7.150% due 04/01/00 249,188
220,000 7.400% due 04/01/10, Prerefunded 04/01/00 249,425
500,000 (Williams College), Series D,
4.600% due 07/01/02 482,500
1,000,000 (Winchester Hospital), Series D,
3.750% due 07/01/95 1,000,000
170,000 (Youville Hospital), Revenue Bonds, (FHA In-
sured)+++,
9.100% due 08/01/15, Prerefunded 02/01/96 178,075
700,000 Series P,
6.500% due 11/01/04 767,375
Massachusetts Housing Finance Agency, Revenue
Bonds, Single Family:
155,000 7.900% due 12/01/01 158,488
30,000 9.500% due 12/01/16 31,050
Massachusetts Industrial Finance Agency, Reve-
nue Bonds:
(Brooks School):
260,000 5.700% due 07/01/06 259,675
275,000 5.750% due 07/01/07 273,281
290,000 5.800% due 07/01/08 286,738
305,000 5.850% due 07/01/09 303,094
1,100,000 First Mortgage,
7.800% due 10/01/09, Prerefunded 10/01/99 1,266,375
300,000 (Milton Academy),
4.900% due 09/01/04 292,500
(Museum of Science):
435,000 4.700% due 11/01/04 413,250
700,000 4.800% due 11/01/05 662,375
500,000 Massachusetts Municipal Wholesale Electric
Power Authority,
6.300% due 07/01/00 526,250
1,000,000 Massachusetts Port Authority, Revenue Bonds,
Series A,
7.000% due 07/01/00 1,090,000
500,000 Massachusetts State, Refunding Bonds, Series B,
6.500% due 8/1/08 546,875
880,000 Massachusetts State, Special Obligation Revenue
Bonds, Series A,
5.800% due 06/01/00 914,100
Massachusetts Water Pollution Authority,
(Abatement Program):
625,000 6.125% due 06/15/02 661,719
600,000 4.850% due 08/01/03 589,500
Massachusetts Water Resource Authority:
725,000 6.900% due 04/01/97 757,625
500,000 5.875% due 11/01/04 520,625
100,000 Plymouth-Carver, Massachusetts, Regional School
District, Revenue Bonds,
8.750% due 10/01/05, Prerefunded 10/01/95 104,125
1,000,000 Rockport, Massachusetts, General Obligation
Bonds,
6.900% due 12/15/07 1,090,000
1,250,000 South Eastern Massachusetts, Revenue Bonds,
Series A,
5.750% due 05/01/16 1,209,364
600,000 Springfield, Massachusetts, School Project
Loan,
Series B,
6.100% due 09/01/02 630,000
Whitman, Massachusetts, General Obligation
Bonds,
180,000 7.750% due 06/01/07, Prerefunded 06/01/98 200,700
250,000 7.750% due 06/01/08, Prerefunded 06/01/98 278,750
100,000 Yarmouth, Massachusetts, General Obligation
Bonds,
8.600% due 10/01/00 117,125
30,433,367
PUERTO RICO -- 13.5%
Commonwealth of Puerto Rico, General
Obligation Bonds:
400,000 6.700% due 07/01/98 427,000
550,000 6.500% due 7/01/03 606,375
1,050,000 6.250% due 7/01/11 1,118,250
1,000,000 Puerto Rico, Building Authority, Series A,
6.750% due 07/01/05 1,127,500
150,000 Puerto Rico, Electric Power Authority,
Revenue Bonds,
9.125% due 07/01/15, Prerefunded 07/01/95 154,521
655,000 Puerto Rico, Public Education and Health Facil-
ities Authority, Series M,
5.200% due 07/01/02 651,725
750,000 University of Puerto Rico, University Revenue
Bonds, Series N,
6.250% due 06/01/05 808,125
4,893,496
GUAM -- 2.2%
750,000 Guam, Government, Limited Obligation Highway
Bonds, Series A,
6.000% due 05/01/03 797,812
TOTAL MUNICIPAL BONDS AND NOTES
(Cost $35,272,909) 36,124,675
SHORT-TERM INVESTMENTS -- 4.2%
MASSACHUSETTS -- 4.2%
300,000 Holyoke, Massachusetts, Pollution Control Reve-
nue, Refunding Bonds, (Water Power Project),
3.950% due 11/01/13 + 300,000
Massachusetts Health and Educational Facilities
Authority:
100,000 (Harvard University), Series I,
3.550% due 02/01/16 ++ 100,000
100,000 (Massachuestts Institute of Technology), Se-
ries G,
3.400% due 07/01/21 ++ 100,000
100,000 (Wellesley College), Series B,
3.850% due 07/01/22 ++ 100,000
100,000 Massachusetts State, Industrial Finance Agency,
4.100% due 3/15/04 + 100,000
800,000 Massachusetts State, Updates, Series C,
4.200% due 12/1/97 + 800,000
TOTAL SHORT-TERM INVESTMENTS
(Cost $1,500,000) 1,500,000
TOTAL INVESTMENTS
(Cost $36,772,909*) 103.9% 37,624,675
OTHER ASSETS AND LIABILITIES (NET) (3.9) (1,405,959)
NET ASSETS 100.0% $36,218,716
</TABLE>
* Aggregate cost for Federal tax purposes.
+ Variable rate demand bonds and notes that are payable upon not more
than one business day's notice. The interest rate shown represents the
rate currently in effect.
++ Variable rate demand bonds and notes that are payable upon not more
than seven business days' notice. The interest rate shown represents
the rate currently in effect.
+++ FHA -- Federal Housing Administration.
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND JUNE 30, 1995
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 95.9%
NEW YORK -- 82.1%
$ 125,000 Albany County, New York, General Obligation
Bonds,
7.000% due 10/01/00, Prerefunded 10/01/99 $ 140,469
150,000 Amherst, New York, General Obligation Bonds,
6.200% due 04/01/02 161,438
Erie County, New York, Water Authority,
Revenue Bonds:
200,000 Series A,
7.000% due 12/01/00, Escrowed 223,750
250,000 Series B,
6.650% due 12/01/99, Escrowed 272,187
150,000 Hempstead Town, New York, General Obligation
Bonds, Series B,
6.300% due 01/01/02 161,625
100,000 Metropolitan Transportation Facilities, New
York, Series K,
7.000% due 07/01/98 107,000
100,000 Municipal Assistance Corporation, New York,
Series 68,
7.100% due 07/01/00 110,250
100,000 Nassau County, New York, Bond Anticipation
Notes, Series G,
7.000% due 07/01/02, Prerefunded 07/01/00 111,875
New York State, Dormitory Authority Revenue:
250,000 7.1250% due 05/15/17, Prerefunded 05/15/99 278,125
250,000 (Columbia University),
4.500% due 07/01/05 233,125
100,000 (Cornell University), Series A,
6.600% due 07/01/99 107,375
155,000 New York State, Housing Finance Agency,
(City University), Series A,
7.150% due 11/01/97 165,269
New York State, Medical Care Facilities Finance
Authority:
210,000 7.750% due 08/15/10, Prerefunded 02/15/00 241,500
100,000 Improvement Revenue, (Mental Health),
6.600% due 08/15/96 101,875
45,000 New York State, Mortgage Agency, Revenue Bonds,
Series AA,
7.500% due 10/01/98 47,138
100,000 New York State, Power Authority, Revenue Bonds,
4.800% due 01/01/05 96,000
200,000 New York State, Refunding Bonds, Series B,
6.250% due 08/15/04 214,750
180,000 Oyster Bay, New York, General Obligation Bonds,
7.125% due 04/15/00, Escrowed 200,025
125,000 Port Washington, New York, Unified Free
School District,
6.000% due 08/01/01 131,406
Suffolk County, New York, General Obligation
Bonds, Series B:
125,000 6.875% due 07/15/99, Prerefunded 07/15/97 134,062
150,000 7.000% due 04/01/02, Prerefunded 04/01/00 168,188
Triborough, New York, Bridge and Tunnel Author-
ity, Revenue Bonds:
200,000 7.400% due 01/01/03, Prerefunded 01/01/99 222,500
250,000 5.000% due 01/01/07 238,437
150,000 Series P,
7.000% due 01/01/11, Prerefunded 01/01/99 165,000
250,000 Westchester County, New York, General
Obligation Bonds,
6.625% due 11/01/04 281,250
4,314,619
PUERTO RICO -- 13.8%
180,000 Commonwealth of Puerto Rico, Electric Power Au-
thority, Series N,
6.400% due 07/01/99 191,925
200,000 Commonwealth of Puerto Rico, General
Obligation Bonds,
6.250% due 07/01/11 213,000
100,000 Commonwealth of Puerto Rico, Public
Improvement Bonds,
6.600% due 07/01/97 104,625
200,000 University of Puerto Rico, University Revenue
Bonds, Series N,
6.250% due 6/01/06 215,000
724,550
TOTAL MUNICIPAL BONDS AND NOTES
(Cost $4,806,898) 5,039,169
SHORT-TERM INVESTMENTS -- 1.9% (Cost $100,000)
NEW YORK -- 1.9%
100,000 New York City, New York, Municipal Water Fi-
nance Agency, Series G,
6.150% due 06/15/24+ 100,000
TOTAL INVESTMENTS
(Cost $4,906,898*) 97.8% 5,139,169
OTHER ASSETS AND LIABILITIES (NET) 2.2 113,037
NET ASSETS 100.0% $5,252,206
</TABLE>
* Aggregate cost for Federal tax purposes.
+ Variable rate demand bonds and notes that are payable upon not more than
one business day's notice. The interest rate shown represents the rate
currently in effect.
See Notes to Financial Statements.
[This Page Intentionally Left Blank]
FINANCIAL HIGHLIGHTS
DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH PERIOD*
Reference is made to Page 5 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH PERIOD*
Reference is made to Page 6 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
[This Page Intentionally Left Blank]
FINANCIAL HIGHLIGHTS
DREYFUS/LAUREL MASSACHUSETTS TAX-FREE MONEY FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR*
Reference is made to Page 7 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
DREYFUS/LAUREL MASSACHUSETTS TAX-FREE MONEY FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR*
Reference is made to Page 8 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
[This Page Intentionally Left Blank]
FINANCIAL HIGHLIGHTS
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH PERIOD*
Reference is made to Page 9 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH PERIOD*
Reference is made to Page 10 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR.*
Reference is made to Page 12 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT THE PERIOD.*
Reference is made to Page 14 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM NEW YORK MUNICIPAL FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH PERIOD.*
Reference is made to Page 15 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR.*
Reference is made to Page 8 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT THE PERIOD.*
Reference is made to Page 10 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM MASSACHUSETTS MUNICIPAL FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR.*
Reference is made to Page 11 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR.*
Reference is made to Page 4 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT THE PERIOD.*
Reference is made to Page 6 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT THE PERIOD.*
Reference is made to Page 6 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM CALIFORNIA MUNICIPAL FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH PERIOD.*
Reference is made to Page 7 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS A SHARE OUTSTANDING THROUGHOUT EACH YEAR.
Reference is made to Page 4 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS B SHARE OUTSTANDING THROUGHOUT THE PERIOD.
Reference is made to Page 6 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS C SHARE OUTSTANDING THROUGHOUT THE PERIOD.
Reference is made to Page 7 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
PREMIER LIMITED TERM MUNICIPAL FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR.*
Reference is made to Page 8 of the Fund's Prospectus dated October 31, 1995.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Dreyfus/Laurel Tax-Free Municipal Funds (the "Trust"), The Dreyfu-
s/Laurel Funds, Inc., The Dreyfus/Laurel Funds Trust and The Dreyfus/Lau-
rel Investment Series (collectively, "The Dreyfus/Laurel Funds") are all
registered open-end investment companies that are part of The Dreyfus Fam-
ily of Funds. The Trust is an investment company which consists of seven
funds: the Dreyfus/Laurel California Tax-Free Money Fund, the Dreyfus/Lau-
rel Massachusetts Tax-Free Money Fund, the Dreyfus/Laurel New York Tax-
Free Money Fund (collectively, the "Money Funds") (individually, the
"Fund"), the Premier Limited Term California Municipal Fund, the Premier
Limited Term Massachusetts Municipal Fund, the Premier Limited Term New
York Municipal Fund and the Premier Limited Term Municipal Fund. This re-
port contains financial statements for the Money Funds. The Trust is a
Massachusetts business trust and is registered with the Securities and Ex-
change Commission under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end management investment company. The Money
Funds currently offer two classes of shares: Investor shares and Class R
shares (effective October 17, 1994, the Trust shares were redesignated
Class R shares). Investor shares are sold primarily to retail investors
and bear a distribution fee. Class R shares are sold primarily to bank
trust departments and other financial service providers (including Mellon
Bank, N.A. ("Mellon Bank") and its affiliates) acting on behalf of custom-
ers having a qualified trust or investment account or relationship at such
institution, and bear no distribution fee. Each class of shares has iden-
tical rights and privileges, except with respect to the distribution fees
and voting rights on matters affecting a single class. The following is a
summary of significant accounting policies consistently followed by each
Fund in the preparation of its financial statements in accordance with
generally accepted accounting principles.
(A) PORTFOLIO VALUATION:
Portfolio securities are valued on the basis of amortized cost in accor-
dance with Rule 2a-7 of the 1940 Act. Amortized cost valuation involves
valuing an instrument at its cost initially and thereafter assuming a con-
stant amortization to maturity of any discount or premium, regardless of
the effect of fluctuating interest rates on the market value of the in-
strument.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded as of the trade date. Realized gains
and losses on investments sold are recorded on the identified cost basis.
Interest income is recorded on the accrual basis. Investment income and
realized and unrealized gains and losses are allocated based upon the rel-
ative average daily net assets of each class of shares.
(C) DISTRIBUTIONS TO SHAREHOLDERS:
Each Fund declares dividends from net investment income on a class level
on each day the Fund is open for business and pays such dividends no later
than the first business day of the next month. Each Fund may distribute
net realized capital gains on a Fund level, if any, annually or more fre-
quently to maintain its net asset value of $1.00 per share. Each Fund may
be subject to a 4.00% nondeductible excise tax for certain undistributed
amounts of net investment income and capital gain. Each Fund expects to
make additional distributions to avoid the application of the excise tax.
Income distributions and capital gain distributions on a Fund level are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatments of income and gains on various investment se-
curities held by the Fund, timing differences and the differing character-
ization of distributions made by the Fund as a whole. Permanent differ-
ences on the Massachusetts Tax-Free Money Fund incurred during the year
ended June 30, 1995, which resulted from an expiration of capital loss
carryforward have been reclassified to paid-in capital at year end.
(D) EXPENSE ALLOCATION
Expenses of each Fund not directly attributable to the operations of any
class of shares are prorated between the classes based upon the relative
average daily net assets of each class. Distribution expense is directly
attributable to a particular class of shares and is charged only to that
class' operations.
(E) FEDERAL INCOME TAXES:
It is policy of each Fund to qualify as a regulated investment company, if
such qualification is in the best interests of its shareholders, by com-
plying with the requirements of the Internal Revenue Code applicable to
regulated investment companies and by distributing all of its earnings to
shareholders. Therefore, no Federal income tax provision is required.
2. INVESTMENT MANAGEMENT FEE, TRUSTEES' FEE AND OTHER PARTY TRANSACTIONS
Effective as of October 17, 1994, the Trust's investment management agree-
ment with Mellon Bank was transferred to The Dreyfus Corporation (the
"Manager"), a wholly-owned subsidiary of Mellon Bank. The Manager pro-
vides, or arranges for one or more third parties to provide, investment
advisory, administrative, custody, fund accounting and transfer agency
services to the Trust. The Manager also directs the investments of each
Fund in accordance with its investment objective, policies and limita-
tions. For these services, each Fund is contractually obligated to pay the
Manager a fee, calculated daily and paid monthly, at the annual rate of
0.35% of the value of that Fund's average daily net assets. Out of its
fee, the Manager pays all of the expenses of each Fund except brokerage
fees, taxes, interest, Rule 12b-1 distribution fees and expenses, fees and
expenses of non-interested Trustees (including counsel fees) and extraor-
dinary expenses. In addition, the Manager is required to reduce its fee in
an amount equal to each Fund's allocable portion of fees and expenses of
the non- interested Trustees (including counsel).
Prior to October 17, 1994, Mellon Bank served as the Trust's investment
manager pursuant to the investment management agreement described above.
Prior to September 23, 1994, Frank Russell Investment Management Company
(the "Administrator") served as each Fund's administrator and provided,
pursuant to an administration agreement, various administrative and corpo-
rate secretarial services to each Fund. Mellon Bank, as investment man-
ager, paid the Administrator's fee out of the management fee described
above.
Prior to October 17, 1994, Funds Distributor, Inc. served as distributor
of the Trust's shares. Effective as of October 17, 1994, Premier Mutual
Fund Services, Inc. ("Premier") serves as the Trust's distributor. Premier
also serves as the Trust's sub-administrator and, pursuant to a sub-
administration agreement with the Manager, provides various administrative
and corporate secretarial services to the Trust.
No officer or employee of Premier (or of any parent, subsidiary or affili-
ate thereof) receives any compensation from The Dreyfus/Laurel Funds for
serving as an officer or Director or Trustee of The Dreyfus/Laurel Funds.
In addition, no officer or employee of the Manager (or of any parent, sub-
sidiary or affiliate thereof) serves as an officer or Director or Trustee
of The Dreyfus/Laurel Funds. The Dreyfus/Laurel Funds pay each Director or
Trustee who is not an officer or employee of Premier (or any parent, sub-
sidiary or affiliate thereof), or of the Manager $27,000 per annum, $1,000
for each Board meeting attended and $750 for each Audit Committee meeting
attended, and reimburse each Director or Trustee for travel and out-of-
pocket expenses.
3. DISTRIBUTION PLAN
Each Fund has adopted a distribution plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act relating to its Investor shares. Under the Plan,
each Fund may pay annually up to 0.25% of the value of the average daily
net assets attributable to its Investor shares to compensate Premier and
Dreyfus Service Corporation, an affiliate of the Manager, for shareholder
servicing activities and Premier for activities and expenses primarily in-
tended to result in the sale of Investor shares. Class R shares bear no
distribution fee.
Under its terms, the Plan shall remain in effect from year to year, pro-
vided such continuance is approved annually by a vote of a majority of the
Trustees and a majority of those Trustees who are not "interested persons"
of the Trust and who have no direct or indirect financial interest in the
operation of the Plan or in any agreement related to the Plan.
4. SHARES OF BENEFICIAL INTEREST
The Trust has the authority to issue an unlimited number of shares of ben-
eficial interest of each class in each separate series, without par value.
The Trust offers two classes of shares of the Money Funds.
The tables below summarize transactions in Fund shares for the years or
periods indicated. Because each of the Money Funds has sold shares, issued
shares as reinvestments of dividends and redeemed shares only at a con-
stant net asset value of $1.00 per share, the number of shares represented
by such sales, reinvestments and redemptions is the same as the amounts
shown below for such transactions.
DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
JUNE 30, 1995 JUNE 30, 1994*+#
<S> <C> <C>
INVESTOR SHARES:
Sold $ 32,912,720 $ 22,619,988
Issued as reinvestment of dividends and
distributions 462,650 225,575
Redeemed (35,007,105) (26,295,573)
Net decrease $ (1,631,735) $ (3,450,010)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
JUNE 30, 1995## JUNE 30, 1994*
<S> <C> <C>
CLASS R SHARES:
Sold $ 32,480,825 $10,968,762
Issued as reinvestment of dividends and
distributions 265,428 65,613
Redeemed (35,063,063) (7,696,016)
Net increase/(decrease) $ (2,316,810) $ 3,338,359
<FN>
* The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30.
+ Amounts include $8,676,000 of subscriptions, $28,427 of reinvestments
and $8,004,712 of redemptions for the Institutional Class up to April
4, 1994.
# 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 Trust shares were redesignated Class R shares.
</TABLE>
DREYFUS/LAUREL MASSACHUSETTS TAX-FREE MONEY FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1995 JUNE 30, 1994+#
<S> <C> <C>
INVESTOR SHARES:
Sold $ 130,450,064 $ 139,311,367
Issued as reinvestment of dividends and
distributions 1,980,170 1,217,369
Redeemed (143,194,523) (161,990,808)
Net decrease $ (10,764,289) $ (21,462,072)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1995## JUNE 30, 1994
<S> <C> <C>
CLASS R SHARES:
Sold $ 81,076,293 $ 66,966,216
Issued as reinvestment of dividends and
distributions 513,180 112,247
Redeemed (75,930,219) (66,891,770)
Net increase $ 5,659,254 $ 186,693
<FN>
+ Amounts include $50,504,187 of subscriptions, $63,928 of reinvestments
and $60,326,788 of redemptions for the Institutional Class up to April
4, 1994.
# 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 Trust Shares were redesignated Class R shares.
</TABLE>
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
JUNE 30, 1995 JUNE 30, 1994*+#
<S> <C> <C>
INVESTOR SHARES:
Sold $ 23,865,192 $ 4,170,313
Issued as reinvestment of dividends and
distributions 240,333 123,051
Redeemed (10,377,536) (5,703,330)
Net increase/(decrease) $ 13,727,989 $(1,409,966)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
JUNE 30, 1995## JUNE 30, 1994*
<S> <C> <C>
CLASS R SHARES:
Sold $10,336,048 $ 3,604,985
Issued as reinvestment of dividends and
distributions 44,938 3,922
Redeemed (7,789,885) (5,849,947)
Net increase/(decrease) $ 2,591,101 $(2,241,040)
<FN>
* The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30.
+ Amounts include $11,467 of subscriptions, $468 of reinvestments and
$9,120 of redemptions for the Institutional Class up to April 4, 1994.
# 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 Trust shares were redesignated Class R shares.
</TABLE>
5. CAPITAL LOSS CARRYFORWARD
As of June 30, 1995, the California Tax-Free Money Fund had available for
Federal tax purposes unused capital loss carryforwards of $233 expiring in
the year 2000, the Massachusetts Tax-Free Money Fund had unused capital
loss carryforwards of $51,059 expiring in the year 2002.
6. CONCENTRATION OF CREDIT
Each Fund invests primarily in debt obligations issued by the Fund's re-
spective state (ie. California, Massachusetts, or New York) and its polit-
ical subdivisions, municipalities, agencies and public authorities who ob-
tain funds for various public purposes. Each Fund is more susceptible to
factors adversely affecting issuers of its respective state municipal se-
curities than is a municipal bond fund that is not concentrated in these
issuers to the same extent.
INDEPENDENT AUDITORS' REPORT
KPMG
The Board of Trustees and Shareholders
The Dreyfus/Laurel Tax-Free Municipal Funds:
We have audited the accompanying statements of assets and liabilities, in-
cluding the portfolio of investments, of the California Tax-Free Money
Fund, Massachusetts Tax-Free Money Fund and New York Tax-Free Money Fund
of The Dreyfus/Laurel Tax-Free Municipal Funds (formerly the Laurel Tax-
Free Municipal Funds) as of June 30, 1995, and the related statement of
operations for the year then ended and statement of changes in net assets
and financial highlights for Investor and Class R shares for each of the
years in the two-year period then ended for the Massachusetts Tax-Free
Money Fund and for the year ended June 30, 1995 and for the period from
December 1, 1993 to June 30, 1994 for the California Tax-Free Money Fund
and New York Tax-Free Money Fund. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsi-
bility is to express an opinion on these financial statements and finan-
cial highlights based on our audits. The financial highlights presented
for each of the years or periods ended June 30, 1993 or prior for the Mas-
sachusetts Tax-Free Money Fund and for each of the years or periods ended
November 30, 1993 or prior for the California Tax-Free Money Fund and New
York Tax-Free Money Fund were audited by other auditors whose reports
thereon, dated August 11, 1993 and January 18, 1994, expressed an unquali-
fied opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and fi-
nancial highlights are free of material misstatement. An audit also in-
cludes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirma-
tion of securities owned as of June 30, 1995, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principals used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of the California Tax-Free Money Fund, Massachusetts Tax-Free Money Fund
and New York Tax-Free Money Fund of The Dreyfus/Laurel Tax-Free Municipal
Funds as of June 30, 1995, the results of their operations for the year
then ended and the change in their net assets and financial highlights for
each of the years or periods in the two-year period ended June 30, 1995 in
conformity with generally accepted accounting Principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
August 18, 1995
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) and the
Registrant's Semi Annual Report for the fiscal year ending
June 30, 1995:
- 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.
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.
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 of counsel is incorporated by reference to the
Registration Statement and to Post-Effective Amendment
Number 34 filed on December 28, 1994. Consent of Counsel is
Filed herewith.
11(a) Consent of Coopers & Lybrand L.L.P. is incorporated by
reference to Post-Effective Amendment No 36.
11(b) Consent of KPMG Peat Marwick LLP.
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). Incorporated by reference
to Post-Effective Amendment No. 33 filed on December
19, 1994.
16 Performance Information, incorporated by reference to
Post-Effective Amendment No. 12, filed on September 1, 1988.
18 Rule 18f-3 Plans dated April 26, 1995, incorporated by
reference to Post-Effect Amendment No. 36, filed on May 16,
1995.
Other Exhibits
______________
(a) Powers of Attorney of the Trustees and Officers dated April
5, 1995 are incorporated by reference to Post-Effective
Amendment No. 36.
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 Registrant as of October 9,
1995:
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class Class A Class B Class C Investor Class Class R
- -------------- ---------- ------- ------- -------------- -------
<S> <C> <C> <C> <C> <C>
Dreyfus/Laurel New York N/A N/A N/A 294 118
Tax-Free Money Fund
Dreyfus/Laurel California N/A N/A N/A 203 16
Tax-Free Money Fund
Dreyfus/Laurel Massachusetts N/A N/A N/A 1,178 173
Tax-Free Money Fund
Premier Limited Term 1,297 5 0 N/A 182
Municipal Fund
Premier Limited Term 176 2 2 N/A 49
California Municipal Fund
Premier Limited Term 377 1 2 N/A 97
Massachusetts Municipal Fund
Premier Limited Term 157 2 5 N/A 16
New York Municipal Fund
</TABLE>
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 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.
Item 28. Business and Other Connections of Investment Adviser (continued)
________ ________________________________________________________________
Officers and Directors of Investment Adviser
____________________________________________
Name and Position
with Dreyfus Other Businesses
_________________ ________________
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees of
Skillman Foundation.
Member of The Board of Vintners Intl.
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 91103;
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. Inc.
Director 535 Madison Avenue
New York, New York 10022;
Director and member of the Executive
Committee of Avnet, Inc.**
LAWRENCE M. GREENE Director:
Director Dreyfus America Fund
JULIAN M. SMERLING None
Director
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;
DAVID B. TRUMAN Former Director:
(cont'd) 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 Dreyfus Acquisition Corporation*;
Chief Executive Officer The Dreyfus Consumer Credit
Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Service Corporation*;
Chairman of the Board and Chief Executive
Officer:
Major Trading Corporation*;
Director:
Avnet, Inc.**;
Dreyfus America Fund++++;
The Dreyfus Fund International
Limited+++++;
World Balanced Fund+++;
Dreyfus Partnership Management,
Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Organization, Inc.*;
Seven Six Seven Agency, Inc.*;
Trustee:
Corporate Property Investors
New York, New York;
W. KEITH SMITH Chairman and Chief Executive Officer:
Vice Chairman of the Board The Boston Company
One Boston Place
Boston, Massachusetts 02108
Vice Chairman of the Board:
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
ROBERT E. RILEY Director:
President, Chief Dreyfus Service Corporation*;
Operating Officer, Former Executive Vice President:
and a Director Prudential Investment Corporation
751 Board Street
Newark, New Jersey 07102
STEPHEN E. CANTER Former Chairman and Chief Executive Officer:
Vice Chairman and Kleinwort Benson Investment Management
Chief Investment Officer, Americas Inc.*;
and a Director
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Director:
The Dreyfus Consumer Credit
Corporation*;
The Dreyfus Trust Company++'
Dreyfus Service Corporation*;
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
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Boston Safe Deposit & Trust
One Boston Place
Boston, Massachusetts 02108
PHILIP L. TOIA Chairman of the Board and Trust Investment
Vice Chairman-Operations Officer:
and Administration The Dreyfus Trust Company+++;
Chairman of the Board and Chief Executive
Officer:
Major Trading Corporation*;
Director:
The Dreyfus Security Savings Bank
F.S.B.+;
Dreyfus Service Corporation*;
Seven Six Seven Agency, Inc.*;
President and Director:
Dreyfus Acquisition Corporation*;
The Dreyfus Consumer Credit
Corporation*;
Dreyfus-Lincoln, Inc.*;
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Partnership Management, Inc.+;
Dreyfus Service Organization*;
The Truepenny Corporation*;
PHILIP L. TOIA Formerly, Senior Vice President:
(cont'd) The Chase Manhattan Bank, N.A. and
The Chase Manhattan Capital Markets
Corporation
One Chase Manhattan Plaza
New York, New York 10081
BARBARA E. CASEY President:
Vice President- Dreyfus Retirement Services Division;
Dreyfus Retirement Executive Vice President:
Services Boston Safe Deposit & Trust Co.
One Boston Place
Boston, Massachusetts 02108;
DIANE M. COFFEY None
Vice President-
Corporate Communications
ELIE M. GENADRY President:
Vice President- Institutional Services Division of
Dreyfus
Institutional Sales Service Corporation*;
Broker-Dealer Division of Dreyfus
Service Corporation*;
Group Retirement Plans Division of
Dreyfus Service Corporation;
Executive Vice President:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.*;
Vice President:
The Dreyfus Trust Company++;
HENRY D. GOTTMANN Executive Vice President:
Vice President-Retail Dreyfus Service Corporation*;
Sales and Service Vice President:
Dreyfus Precious Metals*;
DANIEL C. MACLEAN Director, Vice President and Secretary:
Vice President and General Dreyfus Precious Metals, Inc.*;
Counsel Director and Vice President:
The Dreyfus Consumer Credit
Corporation*;
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-Mutual Fund
Accounting
WILLIAM F. GLAVIN, JR. Senior Vice President:
Vice President-Corporate The Boston Company Advisors, Inc.
Development 53 State Street
Exchange Place
Boston, Massachusetts 02109
KATHERINE C. WICKHAM Formerly, Assistant Commissioner:
Vice President- Department of Parks and Recreation of the
Human Resources City of New York
830 Fifth Avenue
New York, New York 10022
MARK N. JACOBS Vice President, Secretary and Director:
Vice President-Fund Lion Management, Inc.*;
Legal and Compliance, Secretary:
and Secretary The Dreyfus Consumer Credit
Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.*;
Major Trading Corporation*;
The Truepenny Corporation*
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation
Services One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
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 Consumer Credit
Corporation*;
Assistant Treasurer:
Dreyfus Precious Metals*
Formerly, Vice President-Financial Planning,
Administration and Tax:
Showtime/The Movie Channel, Inc.
1633 Broadway
New York, New York 10019
ELVIRA OSLAPAS Assistant Secretary:
Assistant Secretary Dreyfus Service Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Acquisition Corporation, Inc.*;
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 Atrium Building, 80
Route 4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
+++ The address of the business so indicated is One Rockefeller Plaza,
New York, New York 10020.
++++ The address of the business so indicated is 2 Boulevard Royal,
Luxembourg.
+++++ The address of the business so indicated is Nassau, Bahama Islands.
Item 29. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) Comstock Partners Strategy Fund, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC Money Market Fund, Inc.
7) Dreyfus BASIC Municipal Fund, 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 GNMA Fund, Inc.
26) Dreyfus Government Cash Management
27) Dreyfus Growth and Income Fund, Inc.
28) Dreyfus Growth Opportunity Fund, Inc.
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Short Term Treasury Fund
31) Dreyfus Insured Municipal Bond Fund, Inc.
32) Dreyfus Intermediate Municipal Bond Fund, Inc.
33) Dreyfus International Equity Fund, Inc.
34) Dreyfus Investors GNMA Fund
35) The Dreyfus/Laurel Funds, Inc.
36) The Dreyfus/Laurel Funds Trust
37) The Dreyfus Leverage Fund, Inc.
38) Dreyfus Life and Annuity Index Fund, Inc.
39) Dreyfus LifeTime Portfolios, Inc.
40) Dreyfus Liquid Assets, Inc.
41) Dreyfus Massachusetts Intermediate Municipal Bond Fund
42) Dreyfus Massachusetts Municipal Money Market Fund
43) Dreyfus Massachusetts Tax Exempt Bond Fund
44) Dreyfus Michigan Municipal Money Market Fund, Inc.
45) Dreyfus Money Market Instruments, Inc.
46) Dreyfus Municipal Bond Fund, Inc.
47) Dreyfus Municipal Cash Management Plus
48) Dreyfus Municipal Money Market Fund, Inc.
49) Dreyfus New Jersey Intermediate Municipal Bond Fund
50) Dreyfus New Jersey Municipal Bond Fund, Inc.
51) Dreyfus New Jersey Municipal Money Market Fund, Inc.
52) Dreyfus New Leaders Fund, Inc.
53) Dreyfus New York Insured Tax Exempt Bond Fund
54) Dreyfus New York Municipal Cash Management
55) Dreyfus New York Tax Exempt Bond Fund, Inc.
56) Dreyfus New York Tax Exempt Intermediate Bond Fund
57) Dreyfus New York Tax Exempt Money Market Fund
58) Dreyfus Ohio Municipal Money Market Fund, Inc.
59) Dreyfus 100% U.S. Treasury Intermediate Term Fund
60) Dreyfus 100% U.S. Treasury Long Term Fund
61) Dreyfus 100% U.S. Treasury Money Market Fund
62) Dreyfus 100% U.S. Treasury Short Term Fund
63) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
64) Dreyfus Pennsylvania Municipal Money Market Fund
65) Dreyfus Short-Intermediate Government Fund
66) Dreyfus Short-Intermediate Municipal Bond Fund
67) Dreyfus Short-Term Income Fund, Inc.
68) The Dreyfus Socially Responsible Growth Fund, Inc.
69) Dreyfus Strategic Growth, L.P.
70) Dreyfus Strategic Income
71) Dreyfus Strategic Investing
72) Dreyfus Tax Exempt Cash Management
73) The Dreyfus Third Century Fund, Inc.
74) Dreyfus Treasury Cash Management
75) Dreyfus Treasury Prime Cash Management
76) Dreyfus Variable Investment Fund
77) Dreyfus-Wilshire Target Funds, Inc.
78) Dreyfus Worldwide Dollar Money Market Fund, Inc.
79) General California Municipal Bond Fund, Inc.
80) General California Municipal Money Market Fund
81) General Government Securities Money Market Fund, Inc.
82) General Money Market Fund, Inc.
83) General Municipal Bond Fund, Inc.
84) General Municipal Money Market Fund, Inc.
85) General New York Municipal Bond Fund, Inc.
86) General New York Municipal Money Market Fund
87) Pacifica Funds Trust -
Pacific American Money Market Portfolio
Pacific American U.S. Treasury Portfolio
88) Peoples Index Fund, Inc.
89) Peoples S&P MidCap Index Fund, Inc.
90) Premier Insured Municipal Bond Fund
91) Premier California Municipal Bond Fund
92) Premier Global Investing, Inc.
93) Premier GNMA Fund
94) Premier Growth Fund, Inc.
95) Premier Municipal Bond Fund
96) Premier New York Municipal Bond Fund
97) Premier State Municipal Bond Fund
SIGNATURES
__________
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused
thisAmendment to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York, and
State of New York on the 31st day of October, 1995.
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
BY: /s/Marie E. Connolly*
Marie E. Connolly, President
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Amendment to the Registration
Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
________________________ ______________________________ __________
/s/Marie E. Connolly* President, Treasurer 10/31/95
Marie E. Connolly
/s/Francis P. Brennan* Trustee, 10/31/95
Francis P. Brennan Chairman of the Board
/s/Ruth Marie Adams* Trustee 10/31/95
Ruth Marie Adams
/s/Joseph S. DiMartino* Trustee 10/31/95
Joseph S. DiMartino
/s/James M. Fitzgibbons* Trustee 10/31/95
James M. Fitzgibbons
/s/Kenneth A. Himmel* Trustee 10/31/95
Kenneth A. Himmel
/s/Stephen J. Lockwood* Trustee 10/31/95
Stephen J. Lockwood
/s/Roslyn M. Watson* Trustee 10/31/95
Roslyn M. Watson
/s/J. Tomlinson Fort* Trustee 10/31/95
J. Tomlinson Fort
/s/Arthur L. Goeschel* Trustee 10/31/95
Arthur L. Goeschel
/s/Arch S. Jeffery* Trustee 10/31/95
Arch S. Jeffery
/s/Robert D. McBride* Trustee 10/31/95
Robert D. McBride
/s/John L. Propst* Trustee 10/31/95
John L. Propst
*By: /s/Eric B. Fischman
Attorney-in-Fact
Consent of Independent Auditors
The Trustees
The Dreyfus/Laurel Tax-Free Municipal Funds:
We consent to the use of our reports dated August 18, 1995 included herein
and to the references to our firm under the headings "Financial Highlights"
in the prospectuses and "Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors" in the Statements of Additional
Information.
Pittsburgh, Pennsylvania
October 31, 1995
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<EXPENSES-NET> 131,231
<NET-INVESTMENT-INCOME> 842,212
<REALIZED-GAINS-CURRENT> 6
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<DISTRIBUTIONS-OF-INCOME> 374,184
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 32,480,825
<NUMBER-OF-SHARES-REDEEMED> 35,063,063
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<NET-CHANGE-IN-ASSETS> (3,948,539)
<ACCUMULATED-NII-PRIOR> 399
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<GROSS-EXPENSE> 131,231
<AVERAGE-NET-ASSETS> 26,538,764
<PER-SHARE-NAV-BEGIN> 1.00
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<NUMBER> 7
<NAME> PREMIER LIMITED TERM CALIFORNIA MUNI - CLASS A
<S> <C>
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<TABLE> <S> <C>
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<SERIES>
<NUMBER> 8
<NAME> PREMIER LIMITED TERM CALIFORNIA MUNI - CLASS B
<S> <C>
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</TABLE>
<TABLE> <S> <C>
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<SERIES>
<NUMBER> 9
<NAME> PREMIER LIMITED TERM CALIFORNIA MUNI - CLASS C
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 10
<NAME> PREMIER LIMITED TERM CALIFORNIA MUNI - CLASS R
<S> <C>
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</TABLE>
<TABLE> <S> <C>
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<SERIES>
<NUMBER> 11
<NAME> PREMIER LIMITED TERM MASS MUNI - CLASS A
<S> <C>
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<TABLE> <S> <C>
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<SERIES>
<NUMBER> 12
<NAME> PREMIER LIMITED TERM MASS MUNI - CLASS C
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 13
<NAME> PREMIER LIMITED TERM MASS MUNI - CLASS R
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 14
<NAME> PREMIER LIMITED TERM NEW YORK MUNI - CLASS A
<S> <C>
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</TABLE>
<TABLE> <S> <C>
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<SERIES>
<NUMBER> 15
<NAME> PREMIER LIMITED TERM NEW YORK MUNI - CLASS C
<S> <C>
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<TABLE> <S> <C>
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<NUMBER> 16
<NAME> PREMIER LIMITED TERM NEW YORK MUNI -CLASS R
<S> <C>
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<TABLE> <S> <C>
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<NAME> PREMIER LIMITED TERM MUNICIPAL FUND CLASS A
<S> <C>
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<TABLE> <S> <C>
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<NUMBER> 18
<NAME> PREMIER LIMITED TERM MUNICIPAL FUND CLASS B
<S> <C>
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</TABLE>
<TABLE> <S> <C>
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<SERIES>
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<NAME> PREMIER LIMITED TERM MUNICIPAL FUND CLASS C
<S> <C>
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<TABLE> <S> <C>
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<NAME> PREMIER LIMITED TERM MUNICIPAL FUND CLASS R
<S> <C>
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