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. 38 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 39 [ ]
(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 (date) pursuant to paragraph (b)
----
X 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 BASIC CA and NY Municipal Money Market 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 BASIC CA and NY Municipal Money Market 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 BASIC CA and NY Tax-Free Money Market 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.
38 and 39.
Part B - Statement of Additional Information Incorporated by
reference to Post-Effective Amendment Nos. 38 and 39.
Part C- Other Information
Signature Page - The Dreyfus/Laurel Tax-Free Municipal Funds
Exhibits
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PROSPECTUS FEBRUARY 29, 1996
DREYFUS BASIC CALIFORNIA MUNICIPAL MONEY MARKET FUND
- -------------------------------------------------------------------------------
THE DREYFUS BASIC CALIFORNIA MUNICIPAL MONEY MARKET FUND (FORMERLY,
THE DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND) (THE "FUND") IS A
SEPARATE, NON-DIVERSIFIED PORTFOLIO OF THE DREYFUS/LAUREL TAX-FREE MUNICIPAL
FUNDS (FORMERLY, THE LAUREL TAX-FREE MUNICIPAL FUNDS AND PREVIOUSLY, THE
BOSTON COMPANY TAX-FREE MUNICIPAL FUNDS) (THE "TRUST"), AN OPEN-END
MANAGEMENT INVESTMENT COMPANY KNOWN AS A MUTUAL FUND. THE FUND SEEKS TO
PROVIDE A HIGH LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL AND STATE OF
CALIFORNIA PERSONAL INCOME TAXES TO THE EXTENT CONSISTENT WITH THE
PRESERVATION OF CAPITAL AND THE MAINTENANCE OF LIQUIDITY BY INVESTING IN HIGH
QUALITY, SHORT-TERM MUNICIPAL SECURITIES.
SHARES OF THE FUND ARE SOLD WITHOUT A SALES LOAD.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING THE DREYFUS
TELETRANSFER PRIVILEGE.
THE DREYFUS CORPORATION SERVES AS THE FUND'S INVESTMENT MANAGER. THE
DREYFUS CORPORATION IS REFERRED TO AS "DREYFUS."
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
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 FEBRUARY 29,
1996, 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 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 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
TABLE OF CONTENTS
EXPENSE SUMMARY................................. 4
FINANCIAL HIGHLIGHTS............................ 5
DESCRIPTION OF THE FUND......................... 6
MANAGEMENT OF THE FUND.......................... 9
HOW TO BUY FUND SHARES.......................... 10
FUND EXCHANGES.................................. 12
HOW TO REDEEM FUND SHARES....................... 13
PERFORMANCE INFORMATION......................... 16
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES........ 16
GENERAL INFORMATION............................. 18
(Page 2)
[This Page Intentionally Left Blank]
(Page 3)
<TABLE>
<CAPTION>
EXPENSE SUMMARY
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Exchange Fee................................................... $5.00
Account Closeout Fee........................................... $5.00
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fee (after expense reimbursement)................... .35%
Other Expenses (after expense reimbursement)................... .00%
----------
Total Fund Operating Expenses (after expense reimbursement).... .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:
.............................................................. 1 Year $ 9
............................................................. 3 Years $ 16
............................................................. 5 Years $ 25
............................................................. 10 Years $ 49
</TABLE>
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE
OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE
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. Effective November 20, 1995, the Fund's "Investor" and "Class R"
designations were eliminated and the Fund became a single class fund. The
information in the foregoing table has been restated to reflect the
termination of the Fund's distribution plan (the "Distribution Plan") adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act"), effective as of November 20, 1995, which was attributable
only to its then existing Investor shares. Effective November 20, 1995, the
Fund adopted a new Investment Management Agreement pursuant to which it pays
Dreyfus a fee at the annual rate of .45 of 1% of the value of the Fund's
average daily net assets. Dreyfus has agreed until November 19, 1996, to
limit its fee, or to reimburse the Fund for its expenses, in order to ensure
that the Fund's total fund operating expenses do not exceed .35 of 1% of the
value of the Fund's average daily net assets. The expenses noted above,
without reimbursement, would be: Management Fees_.45%; Other Expenses_.00%;
and Total Fund Operating Expenses_.45%; and the amount of expenses that an
investor would pay, assuming redemption after one, three, five and ten years,
would be $10, $19, $30 and $62, respectively. In addition, unlike certain
other funds in the Dreyfus Family of Funds, the Fund will charge your account
$2.00 for each redemption check you write; you also will be charged $5.00 for
each wire redemption you make and a $5.00 account closeout fee. These charges
will be paid to the Fund's transfer agent. See "How to Buy Fund Shares" and
"How to Redeem Fund Shares."
(Page 4)
FINANCIAL HIGHLIGHTS
The following tables are based upon a single share outstanding
throughout each year or 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 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 Fund's Annual Report. The
information in the tables below for the years or periods prior to the fiscal
period ended June 30, 1994, has been audited by other independent auditors.
<TABLE>
<CAPTION>
DREYFUS BASIC CALIFORNIA MUNICIPAL MONEY MARKET FUND
FOR A 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% 2.40% 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 $26,987 $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 and
the Investment Class shares were reclassified as the Trust shares.
Effective October 17, 1994, the Trust shares were redesignated Class R
shares. Effective November 20, 1995, the Fund's "Investor" and "Class R"
designations were eliminated and the Fund became a single class fund
without a class designation. 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 per-
formance of a Retail share outstanding from December 1, 1993 to April 3,
1994, and the performance of an Investor share outstanding from April 4,
1994 to June 30, 1994. The Financial Highlights for the year ended
November 30, 1993, and prior periods are based upon a Retail
share outstanding. The Financial Highlights do not reflect the effect of
the termination of the Fund's Distribution Plan or the implementation of
the new Investment Management Agreement, both effective November 20,
1995. See "Management of the Fund -- Investment Manager."
** 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)
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to provide a high level of current income exempt from
Federal income taxes and State of California personal income taxes to the
extent consistent with the preservation of capital and the maintenance of
liquidity. The Fund seeks to achieve its objective by investing in debt
obligations issued by the State of California, its political subdivisions,
municipalities and 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 and State of California income tax purposes ("California Municipal
Obligations").
Under normal market conditions, the Fund attempts to invest 100%, and
will invest a minimum of 80%, of its total assets in California Municipal
Obligations. When, in the opinion of Dreyfus, adverse market conditions exist
for California Municipal Obligations, and a "defensive" investment posture is
warranted, the 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 California Municipal Obligations,
but which produce income exempt from Federal but not State of California
personal income taxes for resident shareholders of California, 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 the Fund's monies available for investment exceed the California
Municipal Obligations available for purchase to meet the Fund's rating,
maturity and other investment criteria. The 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 State of California
personal income taxes. The Fund's policy of investing a minimum of 80% of its
total assets in California Municipal Obligations is a fundamental policy of
the Fund.
The Fund pursues its objective by investing in a varied portfolio of
high quality, short-term California Municipal Obligations.
The California Municipal Obligations purchased by the Fund consist
of: (1) municipal bonds; (2) municipal notes; and (3) municipal commercial
paper. The Fund will limit its 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 Fund will limit its investments to securities that
present minimal credit risk, as determined by Dreyfus under procedures
established by the Board of Trustees.
The Fund invests 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. The Fund maintains a dollar-weighted average
portfolio maturity of 90 days or less and seeks to maintain a constant net
asset 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 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 may
invest in floating rate and variable rate obligations carrying stated
maturities in excess of thirteen months at the date of purchase if these
(Page 6)
obligations carry demand features that comply with conditions established by
the SEC. The Fund will limit its purchases of floating rate and variable rate
California 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 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 California 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 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 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.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with its investment objective and policies and permissible under
the 1940 Act. As a shareholder of another investment company, the Fund would
bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would
be in addition to the advisory and other expenses that the Fund bears
directly in connection with its own operations.
TENDER OPTION BONDS. The Fund may invest up to 10% of the value of
its assets in tender option bonds. A tender option bond is a municipal
obligation (generally held pursuant to a custodial arrangement) having a
relatively long maturity and bearing interest at a fixed-rate substantially
higher than prevailing short-term tax-exempt rates, that has been coupled
with the agreement of a third party, such as a bank, broker-dealer or other
financial institution, pursuant to which such institution grants the security
holders the option, at periodic intervals, to tender their securities to the
institution and receive the face value thereof. As consideration for
providing the option, the financial institution receives periodic fees equal
to the difference between the municipal obligation's fixed coupon rate and
the rate, as determined by a remarketing or similar agent at or near the
commencement of such period, that would cause the securities, coupled with
the tender option, to trade at par on the date of such determination. Thus,
after payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt rate.
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 obligation and for other reasons. The Fund will not
invest more than 10% of the value of the 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 Fund may purchase California Municipal
Obligations on a "when-issued" basis (i.e., delivery of and payment for the
California 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 California Municipal Obligations on
a when-issued basis with the intention of acquiring the securities, the Fund
may sell such securities before the settlement date. California 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.
(Page 7)
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 experienced recurring budget
deficits for four of its five fiscal years ended June 30, 1992. Although sub-
sequent fiscal years have produced, or are budgeted to produce, operating
surpluses, there can be no assurance that California will not face substantial
deficits in the current or future fiscal years. The rating on the State's
general obligation bonds has been reduced in the past. 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 SAI which more fully
sets forth these and other risk factors. Other considerations relating to the
Fund's investments in California Municipal Obligations are summarized in the
SAI.
LIMITING INVESTMENT RISKS AND CERTAIN RISK CONSIDERATIONS. 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 investment
restrictions.
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. If the Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current position and needs.
In order to permit the sale of the Fund's shares in certain states,
the Funds may make commitments more restrictive than the investment policies
and restrictions described in this Prospectus and the SAI. Should the Fund
determine that any such commitment is no longer in the best interests of the
Fund, it may consider terminating sales of its shares in the states involved.
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 (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% of the 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. The provisions of the Code place
limits on the extent to which the Fund's portfolio may be non-diversified.
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 Fund's yield will tend to be somewhat higher than
prevailing market rates, and in periods of rising interest rates, the Fund's
yield will tend to be somewhat lower. Also, when interest rates are falling,
the influx of new money to the Fund will likely be invested in portfolio
instruments producing lower yields than the balance of the Fund's portfolio,
thereby reducing the Fund's current yield. In periods of rising interest
rates, the opposite can be expected to occur.
The Fund may invest without limit in California Municipal Obligations
which are repayable out of revenue streams generated from economically
related projects or facilities or whose issuers are located in the State of
California. 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
(Page 8)
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.
MASTER/FEEDER OPTION. The Trust may in the future seek to achieve the
Fund's investment objective by investing all of the Fund's assets in another
investment company having the same investment objectives 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 Trustees
determine it to be in the best interest of the Fund and its shareholders. In
making that determination, the Trustees will consider, among other things,
the benefits to shareholders and/or the opportunity to reduce costs and
achieve operational efficiencies. Although the Fund believes that the
Trustees will not approve an arrangement that is likely to result in higher
costs, no assurance is given that costs will be materially reduced if this
option is implemented.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. Dreyfus, located at 200 Park Avenue, New York,
New York 10166, was formed in 1947. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). As of November 30, 1995, Dreyfus managed or administered
approximately $83 billion in assets for more than 1.7 million investor
accounts nationwide.
Dreyfus serves as the Fund's investment manager pursuant to an
Investment Management Agreement with the Fund dated November 20, 1995, (the
"Investment Management Agreement"). Prior thereto, Dreyfus provided
investment advisory services to the Fund pursuant to a prior investment
management agreement (the "Prior Management Agreement"). Under the Investment
Management Agreement, Dreyfus subject to the overall authority of the Board
of Trustees of the Trust in accordance with Massachusetts law, supervises and
assists in the overall management of the Fund's affairs. 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 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.
Under the terms of the Prior Management Agreement, which was
terminated on November 20, 1995, the Fund agreed to pay Dreyfus a fee,
computed daily and paid monthly, at the annual rate of .35% of the Fund's
average daily net assets. Under the Investment Management Agreement, the Fund
pays a fee, computed daily and paid monthly, at the annual rate of .45% of
the Fund's average daily net assets less certain expenses described below.
Dreyfus has agreed to limit its management fee, or to reimburse the Fund for
its expenses, in order to ensure that the Fund's total operating expenses do
not exceed .35% of the Fund's average daily net assets for the period from
November 20, 1995 through November 19, 1996. In addition, the Investment
Management Agreement provides that certain redemption, exchange and account
closeout charges are payable directly by the Fund's shareholders to the
Fund's transfer agent and that the fee payable by the Fund to Dreyfus is not
reduced by the amount of these charges payable to the transfer agent. Under
the Investment Management Agreement, Dreyfus pays all of the expenses of the
Fund except brokerage fees, taxes, interest, Rule 12b-1 fees (if applicable)
and extraordinary expenses. 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 Fund was advised by Mellon Bank under the Prior Management
Agreement.
For the fiscal year ended June 30, 1995, the Fund paid Mellon Bank or
Dreyfus .35% of its average daily net assets in investment management fees,
less fees and expenses of the non-interested Trustees (including counsel
fees) pursuant to the Prior Management Agreement.
(Page 9)
For the fiscal year ended June 30, 1995, total operating expenses
(excluding Rule 12b-1 fees) of the Fund were 0.35% of the Fund's average daily
net assets.
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 $209 billion in assets as of
September 30, 1995, including $80 billion in mutual fund assets. As of
September 30, 1995, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
more than $717 billion in assets, including approximately $55 billion in
mutual fund assets.
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 securities dealers or others 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.
The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"). The Distributor is located at One Exchange Place, Boston,
Massachusetts 02109. The Distributor is a wholly-owned subsidiary of 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 Fund's custodian. Dreyfus Transfer, Inc., ( One
American Express Plaza, Providence, Rhode Island 02903), a wholly-owned
subsidiary of Dreyfus, serves as the Fund's Transfer and Dividend Disbursing
Agent (the "Transfer Agent"). The Transfer Agent will receive the $5.00
exchange fee, the $5.00 account closeout fee, the $5.00 wire redemption and
Dreyfus TeleTransfer fees and the $2.00 checkwriting charge, described below.
A sufficient number of your shares will be redeemed automatically to pay
these amounts. These payments will not reduce the management fee payable by
the Fund to Dreyfus. By purchasing Fund shares, you are deemed to have
consented to this procedure. Premier Mutual Fund Services, Inc. is the Fund's
sub-administrator and, pursuant to a Sub-Administration Agreement with
Dreyfus, provides various administrative and corporate secretarial services
to the Fund.
HOW TO BUY FUND SHARES
GENERAL -- You can purchase Fund shares without a sales charge if you
purchase them directly from the Distributor; you may be charged a nominal fee
if you effect transactions in Fund shares through a securities dealer or
broker, bank or other financial institution (collectively, "Agents"). Share
certificates are issued only upon your written request. No certificates are
issued for fractional shares. It is not recommended that the Fund be used as
a vehicle for Keogh, IRA or other qualified plans. The Fund reserves the
right to reject any purchase order.
(Page 10)
The minimum initial investment is $25,000. The Fund may waive its
minimum initial investment requirement for new Fund accounts opened through
an Agent whenever Dreyfus Institutional Services Division ("DISD") determines
for the initial account opened through such Agent which is below the Fund's
minimum initial investment requirement that the existing accounts in the Fund
opened through that Agent have an average account size, or the Agent has
adequate intent and access to funds to result in maintenance of accounts in
the Fund opened through that Agent with an average account size, in an amount
equal to or in excess of $25,000. DISD will periodically review the average
size of the accounts opened through each Agent and, if necessary, to reevaluate
the Agent's intent and access to funds. DISD will discontinue the waiver as to
new accounts to be opened through an Agent if DISD determines that the average
size of accounts opened through that Agent is less than $25,000 and the Agent
does not have the requisite intent and access to funds. Subsequent investments
must be at least $1,000 (or at least $100 in the case of persons who have held
Fund shares as of November 20, 1995). The initial investment must be
accompanied by the Fund's Account Application.
You may purchase Fund shares 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. 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 and Trust Company, DDA# 043818
Dreyfus BASIC California Municipal Money Market Fund, for purchase of Fund
shares in your name. 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 Automated Clearing House ("ACH") member. You must
direct the institution to transmit immediately available funds through the
ACH System to Boston Safe Deposit and Trust Company with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS "4540."
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").
(Page 11)
NET ASSET VALUE PER SHARE ("NAV") -- An investment portfolio's NAV
refers to the worth of one share. The NAV for Fund shares, which are offered on
a continuous basis, 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. The 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 Fund shares is their NAV. Investments and
requests to exchange or redeem shares received by the 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 the 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 Fund shares
(minimum $1,000 and maximum $150,000 per day) without charge 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. The Fund may modify or terminate this Privilege
at any time or charge a service fee upon notice to shareholders. No fee is
contemplated for purchases of Fund shares pursuant to this Privilege.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452.
FUND EXCHANGES
You may purchase, in exchange for shares of the Fund, (a) shares
(however the same may be named) of other funds managed or administered by
Dreyfus which you would otherwise be eligible to purchase;
(b) shares of funds managed or administered by Dreyfus which do not have
separate share classes; and (c) shares of other funds specified from time
to time, 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. YOU WILL BE CHARGED A $5.00 FEE FOR EACH EXCHANGE YOU MAKE OUT OF THE FUND
(UNLESS YOU HAVE HELD YOUR SHARES AS OF NOVEMBER 20, 1995). This fee will be
deducted from your account and paid to the Transfer Agent.
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
1-800-645-6561 or, if calling from overseas, 516-794-5452. See "How to Redeem
Fund Shares_Procedures." Upon an exchange, the following shareholder services
and privileges, as applicable and where available,
(Page 12)
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 into funds sold with a sales
load. If you are exchanging 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 "Fund Exchanges" in the SAI. 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.
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.
YOU WILL BE CHARGED $5.00 WHEN YOU REDEEM ALL SHARES IN YOUR ACCOUNT
OR YOUR ACCOUNT IS OTHERWISE CLOSED OUT (UNLESS YOU HAVE HELD FUND SHARES AS
OF NOVEMBER 20, 1995). The fee will be deducted from your redemption proceeds
and paid to the Transfer Agent. The account closeout fee does not apply to
exchanges out of the Fund or to wire or Dreyfus TELETRANSFER redemptions, for
each of which a $5.00 fee applies. Agents may charge 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 NAV.
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 OR BY THE DREYFUS TELETRANSFER PRIVILEGE 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 OR DREYFUS TELETRANSFER PURCHASE ORDER, WHICH MAY TAKE
UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL NOT HONOR
REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE, AND WILL REJECT
REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE DREYFUS
TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER RECEIPT BY
THE TRANSFER AGENT OF THE PURCHASE CHECK OR THE DREYFUS TELETRANSFER PURCHASE
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.
(Page 13)
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if the net asset value of your account is
$10,000 or less ($500 or less in the case of Fund shareholders as of November
20, 1995) and remains at or below such amount during the notice period.
The $5.00 account closeout fee would be charged in such case.
PROCEDURES -- You may redeem Fund shares 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 Fund
makes available to certain large institutions the ability to issue redemption
instructions through compatible computer facilities.
You may redeem 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 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 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 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 the
Fund provide Redemption Checks drawn on the Fund's account. Redemption Checks
may be made payable to the order of any person in the amount of $500 or more.
Redemption Checks should not be used to close your account. Your account will
be charged $2.00 for each Redemption Check you write (unless you have held
Fund shares as of November 20, 1995). In addition, 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
(Page 14)
funds or other valid reason. The Fund may return an unpaid Redemption
Check that would draw your account balance below $5.00 and you may be subject
to extra charges. You should date your Redemption Checks with the current
date when you write them. Please do not postdate your Redemption Checks. If
you do, the Transfer Agent will honor, upon presentment, even if presented
before the date of the check, all postdated Redemption Checks which are dated
within six months of presentment for payment, if they are otherwise in good
order. Shares for which certificates have been issued may not be redeemed by
Redemption Check. This Privilege may be modified or terminated at any time by
the Fund or the Transfer Agent upon notice to 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. You will be charged a $5.00 wire redemption fee for
each wire redemption (unless you have held Fund shares as of November 20,
1995), which will be deducted from your account and paid to the Transfer
Agent. To establish the Wire Redemption Privilege, you must check the
appropriate box and supply the necessary information on the Fund's Account
Application or file a Shareholder Services Form with the Transfer Agent. 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 1-800-645-6561 or, if calling from overseas,
516-794-5452. The Fund reserves the right to refuse any redemption request,
including requests made shortly after a change of address, and may limit the
amount involved or the number of such requests. This Privilege may be
modified or terminated at any time by the Transfer Agent or the Fund. The
Fund's 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 Fund shares (maximum
$150,000 per day) by telephone if you checked the appropriate box on the
Fund's 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
1-800-645-6561 or, if calling from overseas, 1-516-794-5452. 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. This Privilege may be modified or
terminated at any time by the Transfer Agent or the Fund. Shares for which
certificates have been issued are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE. You may redeem Fund shares (minimum
$1,000 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 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 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. Your account will be
charged $5.00 for each redemption effected pursuant to this Privilege (unless
you have held Fund shares as of November 20, 1995).
(Page 15)
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452. Shares issued in
certificate form are not eligible for this Privilege.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise its yield and
tax-equivalent yield. YIELD AND TAX-EQUIVALENT YIELD FIGURES ARE BASED ON
HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. It
can be expected that these yield figures will fluctuate substantially.
The Fund's "yield" refers to the income generated by an investment in
the Fund 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 the Fund is assumed to be reinvested. The "effective yield"
will be slightly higher than the "yield" because of the compounding effect of
this assumed reinvestment. The Fund's "yield" and "effective yield" may
reflect absorbed expenses pursuant to any undertaking that may be in effect.
See "Management of the Fund." Since yields fluctuate, yield data cannot
necessarily be used to compare an investment in the Fund 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, or other
investment companies which may use a different method of computing yield. The
Fund's tax-equivalent yield shows the level of taxable yield needed to
produce an after-tax equivalent to the Fund's tax-free yield. This is done by
increasing the Fund's yield by the amount necessary to reflect the payment of
federal income tax (and state income tax, if applicable) at a stated tax
rate.
Any fees charged by an Agent directly to its customers' account in
connection with investments in the Fund will not be included in calculations
of yield.
The Fund may compare its performance 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 the Fund's performance.
Furthermore, the Fund may quote its yields in advertisements or in
shareholder reports.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund declares daily and pays monthly (on the first business day
of the following month) dividends from its net investment income, if any, and
distributes any net long-term capital gains on an annual basis. The Board of
Trustees may elect not to distribute capital gains in whole or in part to
take advantage of capital loss carryovers.
Unless you choose to receive dividend and/or capital gains
distributions in cash, your distributions will be automatically reinvested in
additional shares at NAV. You may change the method of receiving
distributions at any time by writing to the Fund. Checks which are sent to
shareholders who have requested distributions to be paid in cash and which
are 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.
Shares purchased on a day on which the 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
(Page 16)
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.
It is expected that the Fund will qualify for treatment as a
regulated investment company under the Code so that it will be relieved of
Federal income tax on that part of its investment company taxable income
(consisting generally of taxable net investment income and net short-term
capital gain) and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) that is distributed to its shareholders. In
addition, the Fund intends to continue to qualify to pay "exempt-interest"
dividends, which requires, among other things, that at the close of each
quarter of its taxable year at least 50% of the value of its total assets
must consist of municipal securities.
Dividends from the Fund's investment company taxable income are
taxable to you as ordinary income, to the extent of the Fund's earnings and
profits. Distributions by the Fund that are designated by it as
"exempt-interest dividends" generally may be excluded by you from your gross
income. Distributions by the Fund of net capital gain, when designated as
such, are taxable to you as long-term capital gains, regardless of the length
of time you have owned your shares.
Interest on indebtedness incurred or continued to purchase or carry
shares of the Fund will not be deductible for Federal income tax purposes to
the extent that the Fund's distributions (other than capital gains
distributions) consist of exempt-interest dividends. The Fund may invest in
"private activity bonds," the interest on which is treated as a tax
preference item for shareholders in determining their liability for the
alternative minimum tax. Proposals may be introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal securities. If such a proposal were enacted, the
availability of such securities for investment by the Fund and the value of
its portfolio would be affected. In such event, the Fund would reevaluate its
investment objective and policies.
Dividends and other distributions, to the extent taxable, are taxable
to you regardless of whether they are received in cash or reinvested in
additional Fund shares, even if the value of your shares is below your cost.
If you purchase shares shortly before a taxable distribution (i.e., any
distribution other than an exempt-interest dividend paid by the Fund), you
must pay income taxes on the distribution, even though the value of your
investment (plus cash received, if any) remains the same. In addition, the
share price at the time you purchase shares may include unrealized gains in
the securities held in the Fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid to you as a capital gain distribution and
will be taxable to you.
In January of each year, the Fund will send you a Form 1099-DIV
notifying you of the status for Federal income tax purposes of your
distributions for the preceding year. The Fund also will advise shareholders
of the percentage, if any, of the dividends paid by the Fund that are exempt
from Federal income tax and the portion, if any, of those dividends that is a
tax preference item for purposes of the alternative minimum tax.
You must furnish the Fund with your taxpayer identification number
("TIN") and state whether you are subject to withholding for prior
under-reporting, certified under penalties of perjury as prescribed by the
Code and the regulations thereunder. Unless previously furnished, investments
received without such a certification will be returned. The Fund is required
to withhold a portion of all dividends, capital gains distributions and
redemption proceeds payable to any individuals and certain other non-corporate
shareholders who do not provide the Fund with a correct TIN; withholding
from dividends and capital gains distributions also is required for such
shareholders who otherwise are subject to backup withholding.
In addition, in order to avoid the application of a 4% nondeductible
excise tax on certain undistributed amounts of ordinary income and capital
gains, the Fund may make an additional distribution
Page 17
shortly before December 31 in each year of any undistributed ordinary
(taxable) income or capital gains and expects to pay any other dividends and
distributions necessary to avoid the application of this tax.
The foregoing is only a summary of some of the important tax
considerations generally affecting the Fund and its shareholders; see the SAI
for a further discussion. There may be other federal, state or local tax
considerations applicable to a particular investor; for example, the Fund's
dividends may be wholly or partly taxable under state and/or local laws. You
therefore are urged to consult your own tax adviser.
GENERAL INFORMATION
The Trust offers shares of beneficial interest of separate investment
portfolios without par value (each a "fund"). The Trust 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, changed its name to the Laurel Tax-Free Municipal Funds on
March 31, 1994, and changed its name again to The Dreyfus/Laurel Tax-Free
Municipal Funds on October 17, 1994. The Trust is registered with the SEC as
an open-end management investment company, commonly known as a mutual fund.
On November 15, 1995, Fund shareholders approved the Investment
Management Agreement which replaced the Prior Management Agreement, effective
November 20, 1995. The Investment Management Agreement provides that certain
transaction charges be imposed directly on Fund shareholders. See "How to Buy
Fund Shares," "Fund Exchanges" and "How to Redeem Fund Shares." Also
effective November 20, 1995, the Fund's "Investor" and "Class R" designations
were eliminated and the Fund became a single class fund and the Fund's name
changed from Dreyfus/Laurel California Tax-Free Money Fund to Dreyfus BASIC
California Municipal Money Market Fund.
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.
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 Trust's By-Laws, the
holders of at least 10% of the shares outstanding and entitled to vote may
require the Trust to hold a special meeting of shareholders for purposes of
removing a Trustee from office and for any other purpose. Trust shareholders
may remove a Trustee by the affirmative vote of two-thirds of the Trust'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.
(Page 18)
[This Page Intentionally Left Blank]
(Page 19)
BASIC California Municipal Money Market Fund
Prospectus
Copy Rights 1996 Dreyfus Service Corporation
307/707p1022996
Registration Mark
Page 20
- -------------------------------------------------------------------------------
PROSPECTUS FEBRUARY 29, 1996
DREYFUS BASIC NEW YORK MUNICIPAL MONEY MARKET FUND
- -------------------------------------------------------------------------------
THE DREYFUS BASIC NEW YORK MUNICIPAL MONEY MARKET FUND (FORMERLY, THE
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND) (THE "FUND") IS A SEPARATE,
NON-DIVERSIFIED PORTFOLIO OF THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
(FORMERLY, THE LAUREL TAX-FREE MUNICIPAL FUNDS AND PREVIOUSLY, THE BOSTON
COMPANY TAX-FREE MUNICIPAL FUNDS (THE "TRUST")), AN OPEN-END MANAGEMENT
INVESTMENT COMPANY KNOWN AS A MUTUAL FUND. THE FUND SEEKS TO PROVIDE A HIGH
LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAXES AND NEW YORK STATE
AND NEW YORK CITY PERSONAL INCOME TAXES TO THE EXTENT CONSISTENT WITH THE
PRESERVATION OF CAPITAL AND THE MAINTENANCE OF LIQUIDITY BY INVESTING IN HIGH
QUALITY, SHORT-TERM MUNICIPAL SECURITIES.
SHARES OF THE FUNDS ARE SOLD WITHOUT A SALES LOAD.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING THE DREYFUS
TELETRANSFER PRIVILEGE.
THE DREYFUS CORPORATION SERVES AS THE FUND'S INVESTMENT MANAGER. THE
DREYFUS CORPORATION IS REFERRED TO AS "DREYFUS."
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
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 FEBRUARY 29,
1996, 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 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 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
TABLE OF CONTENTS
EXPENSE SUMMARY................................. 4
FINANCIAL HIGHLIGHTS............................ 5
DESCRIPTION OF THE FUND......................... 6
MANAGEMENT OF THE FUND.......................... 9
HOW TO BUY FUND SHARES.......................... 11
FUND EXCHANGES.................................. 12
HOW TO REDEEM FUND SHARES....................... 13
PERFORMANCE INFORMATION......................... 16
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES........ 16
GENERAL INFORMATION............................. 18
(Page 2
[This Page Intentionally Left Blank]
(Page 3)
<TABLE>
<CAPTION>
<S> <C>
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES:
Exchange Fee................................................... $5.00
Account Closeout Fee........................................... $5.00
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fee (after expense reimbursement)..................... .35%
Other Expenses (after expense reimbursement)..................... .00%
-----
Total Fund Operating Expenses(after expense reimbursement)....... .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:
1 YEAR $ 9
3 YEARS $ 16
5 YEARS $ 25
10 YEARS $ 49
</TABLE>
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESEN-
TATIVE 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 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. Effective December 8, 1995, the Fund's "Investor" and "Class R"
designations were eliminated and the Fund became a single class fund. The
information in the foregoing table has been restated to reflect the
termination of the Fund's distribution plan (the "Distribution Plan") adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act"), effective as of December 8, 1995, which was attributable
only to its then existing Investor shares. Effective December 8, 1995, the
Fund adopted a new Investment Management Agreement pursuant to which it pays
Dreyfus a fee at the annual rate of .45 of 1% of the value of the Fund's
average daily net assets. Dreyfus has agreed until December 7, 1996, to limit
its management fee, or to reimburse the Fund for its expenses, in order to
ensure that the Fund's total operating expenses do not exceed .35 of 1% of
the value of the Fund's average daily net assets. The expenses noted above,
without reimbursement, would be: Management Fees_.45%; Other Expenses_.00%;
and Total Fund Operating Expenses_.45%; and the amount of expenses that an
investor would pay, assuming redemption after one, three, five and ten years,
would be $10, $19, $30 and $62, respectively. In addition, unlike certain
other funds in the Dreyfus Family of Funds, the Fund will charge your account
$2.00 for each redemption check you write; you also will be charged $5.00 for
each wire redemption you make and a $5.00 account closeout fee. These charges
will be paid to the Fund's transfer agent. See "How to Buy Fund Shares" and
"How to Redeem Fund Shares."
(Page 4)
FINANCIAL HIGHLIGHTS
The following tables are based upon a single share outstanding
throughout each year or 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 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 Fund's Annual Report. The
information in the tables below for the years or periods prior to the fiscal
period ended June 30, 1994, has been audited by other independent auditors.
<TABLE>
<CAPTION>
DREYFUS BASIC NEW YORK MUNICIPAL MONEY MARKET FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
PERIOD YEAR
Ended 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****.. 0.032 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)
Dividends from net realized capital gains --_ --_ -_- --_ --_*** --_ --_ --_
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%
</TABLE>
* 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 re-
classified as a single class of shares known as Investor shares and the
Investment Class shares were reclassified as the Trust shares. Effective
October 17, 1994, the Trust shares were redesignated Class R shares.
Effective December 8, 1995, the Fund's "Investor" and "Class R" designa-
tions were eliminated and the Fund became a single class fund without a
class designation. 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.
The Financial Highlights do not reflect the effect of the termination of
the Fund's Distribution Plan or the implementation of the new Investment
Management Agreement, both effective December 8, 1995. See "Management of
the Fund -- Investment
Manager."
** Annualized
***Amount represents less than .001 per Investor share for the year
ended November 30, 1992.
****Net investment income per share before waiver of fees and reimbursement
of expenses by 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.
(Page 5)
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to provide a high level of current income exempt from
Federal income taxes and New York State and New York City personal income
taxes to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Fund seeks to achieve its objective by
investing in debt obligations issued by the State of New York its political
subdivisions, municipalities and 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, New York State and New York City
income tax purposes ("New York Municipal Obligations").
Under normal market conditions, the Fund attempts to invest 100%, and
will invest a minimum of 80%, of its total assets in New York Municipal
Obligations. When, in the opinion of Dreyfus, adverse market conditions exist
for New York Municipal Obligations, and a "defensive" investment posture is
warranted, the 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 New York Municipal Obligations, but
which produce income exempt from Federal but not New York State or New York
City personal income taxes for resident shareholders of New York, 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 the Fund's monies available for investment exceed the New
York Municipal Obligations available for purchase to meet the Fund's rating,
maturity and other investment criteria. The 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 New York State or New
York City personal income taxes. The Fund's policy of investing a minimum of
80% of its total assets in New York Municipal Obligations is a fundamental
policy of the Fund.
The Fund pursues its objective by investing in a varied portfolio of
high quality, short-term New York Municipal Obligations.
The New York Municipal Obligations purchased by the Fund consist of:
(1) municipal bonds; (2) municipal notes; and (3) municipal commercial paper.
The Fund will limit its 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 Fund will limit its investments to securities that
present minimal credit risk, as determined by Dreyfus under procedures
established by the Board of Trustees.
The Fund invests 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. The 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 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 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 Fund will
(Page 7)
limit its purchases of floating rate and variable rate. New York 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
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 New York 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 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 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.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with its investment objective and policies and permissible under
the 1940 Act. As a shareholder of another investment company, the Fund would
bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would
be in addition to the advisory and other expenses that the Fund bears
directly in connection with its own operations.
TENDER OPTION BONDS. The Fund may invest up to 10% of the value of
its assets in tender option bonds. A tender option bond is a municipal
obligation (generally held pursuant to a custodial arrangement) having a
relatively long maturity and bearing interest at a fixed-rate substantially
higher than prevailing short-term tax-exempt rates, that has been coupled
with the agreement of a third party, such as a bank, broker-dealer or other
financial institution, pursuant to which such institution grants the security
holders the option, at periodic intervals, to tender their securities to the
institution and receive the face value thereof. As consideration for
providing the option, the financial institution receives periodic fees equal
to the difference between the municipal obligation's fixed coupon rate and
the rate, as determined by a remarketing or similar agent at or near the
commencement of such period, that would cause the securities, coupled with
the tender option, to trade at par on the date of such determination. Thus,
after payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt rate.
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 obligation and for other reasons. The Fund will not
invest more than 10% of the value of the 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 Fund may purchase New York Municipal
Obligations on a "when-issued" basis (i.e., delivery of and payment for the
New York 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 New York Municipal Obligations on a
when-issued basis with the intention of acquiring the securities, the Fund
may sell such securities before the settlement date. New York 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.
(Page 7)
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 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 during recent fiscal years, although there can be no
assurance that new York will not face substantial budget gaps in future
years. The bond ratings of various state general obligation and agency debt,
state moral obligations, contractual obligations, lease purchase obligations
and state guarantees have been lowered in the past, reflecting 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. You should obtain and review a copy of the SAI 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 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 investment
restrictions.
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. If the Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current position and needs.
In order to permit the sale of the Fund's shares in certain states,
the Fund may make commitments more restrictive than the investment policies
and restrictions described in this Prospectus and the SAI. Should the Fund
determine that any such commitment is no longer in the best interests of the
Fund, it may consider terminating sales of its shares in the states involved.
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 (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% of the 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. The provisions of the Code place
limits on the extent to which the Fund's portfolio may be non-diversified.
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, Fund's portfolio will be affected by general changes in interest
(Page 8)
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 Fund's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates, the Fund's yield will
tend to be somewhat lower. Also, when interest rates are falling, the influx
of new money to the Fund will likely be invested in portfolio instruments
producing lower yields than the balance of the Fund's portfolio, thereby
reducing the Fund's current yield. In periods of rising interest rates, the
opposite can be expected to occur.
The Fund may invest without limit in New York Municipal Obligations
which are repayable out of revenue streams generated from economically
related projects or facilities or whose issuers are located in New York
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.
MASTER/FEEDER OPTION. The Trust may in the future seek to achieve the
Fund's investment objective by investing all of the Fund's assets in another
investment company having the same investment objectives 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 Trustees
determine it to be in the best interest of the Fund and its shareholders. In
making that determination, the Trustees will consider, among other things,
the benefits to shareholders and/or the opportunity to reduce costs and
achieve operational efficiencies. Although the Fund believes that the
Trustees will not approve an arrangement that is likely to result in higher
costs, no assurance is given that costs will be materially reduced if this
option is implemented.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. Dreyfus, located at 200 Park Avenue, New York,
New York 10166, was formed in 1947. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). As of November 30, 1995, Dreyfus managed or administered
approximately $83 billion in assets for more than 1.7 million investor
accounts nationwide.
Dreyfus serves as the Fund's investment manager pursuant to an
Investment Management Agreement with the Fund dated December 8, 1995 (the
"Investment Management Agreement"). Prior thereto, Dreyfus provided
investment advisory services to the Fund pursuant to a prior investment
management agreement (the "Prior Management Agreement"). Under the Investment
Management Agreement, Dreyfus subject to the overall authority of the Board
of Trustees of The Trust in accordance with Massachusetts law, supervises and
assists in the overall management of the Fund's affairs. 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 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.
Under the terms of the Prior Management Agreement, which was
terminated on December 8, 1995, the Fund agreed to pay Dreyfus a fee,
computed daily and paid monthly, at the annual rate of .35% of the Fund's
average daily net assets. Under the Investment Management Agreement, the Fund
pays a fee, computed daily and paid monthly, at the annual rate of .45% of
the Fund's average daily net assets less certain expenses described below.
Dreyfus has agreed to limits its management fee, or to reimburse the Fund for
its expenses, in order to ensure that the Fund's total operating expenses do
not exceed .35% of the Fund's average daily net assets for the period from
December 8, 1995 through December 7, 1996. In addition, the Investment
Management Agreement provides that certain redemption, exchange and account
closeout
(Page 9)
charges are payable directly by the Fund's shareholders to the Fund's
transfer agent and that the fee payable by the Fund to Dreyfus is not reduced
by the amount of these charges payable to the transfer agent. Under the
Investment Management Agreement, Dreyfus pays all of the expenses of the Fund
except brokerage fees, taxes, interest, Rule 12b-1 fees (if applicable) and
extraordinary expenses. 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 Fund was advised by Mellon Bank under the Prior Management
Agreement.
For the fiscal year ended June 30, 1995, the Fund paid Mellon Bank or
Dreyfus .35% of its average daily net assets in investment management fees,
less fees and expenses of the non-interested Trustees (including counsel
fees) pursuant to the Prior Management Agreement.
For the fiscal year ended June 30, 1995, total operating expenses
(excluding Rule 12b-1 fees) of the Fund were 0.35% of the Fund's average
daily net assets.
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 $209 billion in assets as of
September 30, 1995, including $80 billion in mutual fund assets. As of
September 30, 1995, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
more than $707 billion in assets, including approximately $55 billion in
mutual fund assets.
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 securities dealers or others 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.
The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"). The Distributor is located at One Exchange Place, Boston,
Massachusetts 02109. The Distributor is a wholly-owned subsidiary of 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. Dreyfus Transfer, Inc., (One
American Express Plaza, Providence, Rhode Island 02903,) a wholly-owned
subsidiary of Dreyfus, serves as the Fund's Transfer and Dividend Disbursing
Agent (the "Transfer Agent"). The Transfer Agent will receive the $5.00
exchange fee, the $5.00 account closeout fee, the $5.00 wire and Dreyfus TELET
RANSFER redemption fees and the $2.00 checkwriting charge, described below. A
sufficient number of your shares will be redeemed automatically to pay these
amounts. These payments will not reduce the management fee payable by the
Fund to Dreyfus. By purchasing Fund shares, you are deemed to have consented
to this procedure. Premier Mutual Fund Services, Inc. is the
(Page 10)
Fund's sub-administrator and, pursuant to a Sub-Administration Agreement with
Dreyfus, provides various administrative and corporate secretarial services
to the Fund.
HOW TO BUY FUND SHARES
GENERAL -- You can purchase Fund shares without a sales charge if you
purchase them directly from the Distributor; you may be charged a nominal fee
if you effect transactions in Fund shares through a securities dealer or
broker, bank or other financial institution (collectively, "Agents"). Share
certificates are issued only upon your written request. No certificates are
issued for fractional shares. It is not recommended that the Fund be used as
a vehicle for Keogh, IRA or other qualified plans. The Fund reserves the
right to reject any purchase order.
The minimum initial investment is $25,000. The Fund may waive its
minimum initial investment requirement for new Fund accounts opened through
an Agent whenever Dreyfus Institutional Services Division ("DISD") determines
for the initial account opened through such Agent which is below the Fund's
minimum initial investment requirement that the existing accounts in the Fund
opened through that Agent have an average account size, or the Agent has
adequate intent and access to funds to result in maintenance of accounts in
the Fund opened through that Agent with an average account size, in an amount
equal to or in excess of $25,000. DISD will periodically review the average
size of the accounts opened through each Agent and, if necessary, to
reevaluate the Agent's intent and access to funds. DISD will discontinue the
waiver as to new accounts to be opened through an Agent if DISD determines
that the average size of accounts opened through that Agent is less than
$25,000 and the Agent does not have the requisite intent and access to funds.
Subsequent investments must be at least $1,000 (or at least $100 in the case
of persons who have held Fund shares as of December 8, 1995). The initial
investment must be accompanied by the Fund's Account Application.
You may purchase Fund shares 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. 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 subseq
uent 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 and Trust Company, DDA # 043419
Dreyfus BASIC New York Municipal Money Market Fund, for purchase of Fund
shares in your name. 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.
(Page 11)
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 and Trust Company with instructions to credit your Fund
account. The instructions must specify your Fund account registration and Fund
account number PRECEDED BY THE DIGITS "4780".
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 PER SHARE ("NAV") -- An investment portfolio's NAV
refers to the worth of one share. The NAV for Fund shares, which are offered
on a continuous basis, 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. The 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 Fund shares is their NAV. Investments and
requests to exchange or redeem shares received by the 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 the 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 Fund shares
(minimum $1,000 and maximum $150,000 per day) without charge 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. The Fund may modify or terminate this Privilege
at any time or charge a service fee upon notice to shareholders. No fee is
contemplated for purchases of Fund shares pursuant to this Privilege.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452.
FUND EXCHANGES
You may purchase, in exchange for shares of the Fund, (a) shares
(however the same may be named), of other funds managed or administered by
Dreyfus which you would otherwise be eligible to purchase; (b) shares of
funds managed or administered by Dreyfus which do not have separate share
classes; and (c) shares of other funds specified from time to time, 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. YOU WILL
BE CHARGED A $5.00 FEE FOR EACH EXCHANGE YOU MAKE OUT OF THE FUND (UNLESS YOU
HAVE HELD FUND SHARES AS OF DECEMBER 8, 1995). This fee will be deducted from
your account and paid to the Transfer Agent.
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
(Page 12)
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 1-800-645-6561 or, if calling from overseas, 516-794-5452. 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 into funds sold with a sales
load. If you are exchanging 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 "Fund Exchanges" in the SAI. 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.
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.
YOU WILL BE CHARGED $5.00 WHEN YOU REDEEM ALL SHARES IN YOUR ACCOUNT
OR YOUR ACCOUNT IS OTHERWISE CLOSED OUT (UNLESS YOU HAVE HELD FUND SHARES AS
OF DECEMBER 8, 1995). The fee will be deducted from your redemption proceeds
and paid to the Transfer Agent. The account closeout fee does not apply to
exchanges out of the Fund or to wire or Dreyfus TELETRANSFER redemptions, for
each of which a $5.00 fee applies. Agents may charge 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 NAV.
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 OR BY THE DREYFUS TELETRANSFER PRIVILEGE 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 OR DREYFUS TELETRANSFER PURCHASE ORDER,
WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL
NOT HONOR REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE, AND WILL
REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE
(Page 13)
DREYFUS TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER
RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK OR THE DREYFUS
TELETRANSFER PURCHASE ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED.
THESE PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE
PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR
ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS
EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL
BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares
will not be redeemed until the Transfer Agent has received your Account
Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if the net asset value of your account
is $10,000 or less ($500 or less in the case of Fund shareholders as of
December 8, 1995) and remains at or below such amount during the notice
period. The $5.00 account closeout fee would be charged in such case.
PROCEDURES--You may redeem Fund shares 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 Fund
makes available to certain large institutions the ability to issue redemption
instructions through compatible computer facilities.
You may redeem 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 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 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 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.
(Page 14)
CHECK REDEMPTION PRIVILEGE _ You may request on the Account
Application, Shareholder Services Form or by later written request that the
Fund provide Redemption Checks drawn on the Fund's account. Redemption Checks
may be made payable to the order of any person in the amount of $500 or more.
Redemption Checks should not be used to close your account. Your account will
be charged $2.00 for each Redemption Check you write (unless you have held Fund
shares as of December 8, 1995). In addition, 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. The Fund may return an unpaid Redemption Check that would
draw your account balance below $5.00 and you may be subject to extra charges.
You should date your Redemption Checks with the current date when you write
them. Please do not postdate your Redemption Checks. If you do, the Transfer
Agent will honor, upon presentment, even if presented before the date of the
check, all postdated Redemption Checks which are dated within six months of
presentment for payment, if they are otherwise in good order. Shares for which
certificates have been issued may not be redeemed by Redemption Check. This
Privilege may be modified or terminated at any time by the Fund or the Transfer
Agent upon notice to 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. You will be charged a $5.00 wire redemption fee for
each wire redemption (unless you have held Fund shares as of December 8,
1995), which will be deducted from your account and paid to the Transfer
Agent. To establish the Wire Redemption Privilege, you must check the
appropriate box and supply the necessary information on the Fund's Account
Application or file a Shareholder Services Form with the Transfer Agent. 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 1-800-645-6561 or, if calling from overseas,
516-794-5452. The Fund reserves the right to refuse any redemption request,
including requests made shortly after a change of address, and may limit the
amount involved or the number of such requests. This Privilege may be
modified or terminated at any time by the Transfer Agent or the Fund. The
Fund's 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 Fund shares (maximum
$150,000 per day) by telephone if you checked the appropriate box on the
Fund's 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
1-800-645-6561 or, if calling from overseas, 1-516-794-5452. 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. This Privilege may be modified or
terminated at any time by the Transfer Agent or the Fund. Shares for which
certificates have been issued are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE. You may redeem Fund shares (minimum
$1,000 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 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
(Page 15)
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 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. Your account will be
charged $5.00 for each redemption effected pursuant to this Privilege (unless
you have held Fund shares as of December 8, 1995).
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452. Shares issued in
certificate form are not eligible for this Privilege.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise its yield and
tax-equivalent yield. YIELD AND TAX-EQUIVALENT YIELD FIGURES ARE BASED ON
HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. It
can be expected that these yield figures will fluctuate substantially.
The Fund's "yield" refers to the income generated by an investment in
the Fund's 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 the Fund is assumed to be reinvested. The "effective yield"
will be slightly higher than the "yield" because of the compounding effect of
this assumed reinvestment. The Fund's "yield" and "effective yield" may
reflect absorbed expenses pursuant to any undertaking that may be in effect.
See "Management of the Fund." Since yields fluctuate, yield data cannot
necessarily be used to compare an investment in the Fund 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, or other
investment companies which may use a different method of computing yield. The
Fund's tax-equivalent yield shows the level of taxable yield needed to
produce an after-tax equivalent to the Fund's tax-free yield. This is done by
increasing the Fund's yield by the amount necessary to reflect the payment of
federal income tax (and state income tax, if applicable) at a stated tax
rate.
Any fees charged by an Agent directly to its customers' account in
connection with investments in the Fund will not be included in calculations
of yield.
The Fund may compare its performance 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 the Fund's performance.
Furthermore, the Fund may quote its yields in advertisements or in
shareholder reports.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund declares daily and pays monthly (on the first business day
of the following month) dividends from its net investment income, if any, and
distributes any net long-term capital gains on an annual basis. The Board of
Trustees may elect not to distribute capital gains in whole or in part to
take advantage of capital loss carryovers.
Unless you choose to receive dividend and/or capital gains
distributions in cash, your distributions will be automatically reinvested in
additional Fund Shares at NAV. You may change the method of receiving
distributions at any time by writing to the Fund. Checks which are sent to
shareholders who have requested distributions to be paid in cash and which
are subsequently returned by the United States Postal Service
(Page 16)
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.
Shares purchased on a day on which the 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.
It is expected that the Fund will qualify for treatment as a
regulated investment company under the Code so that it will be relieved of
Federal income tax on that part of its investment company taxable income
(consisting generally of taxable net investment income and net short-term
capital gain) and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) that is distributed to its shareholders. In
addition, the Fund intends to continue to qualify to pay "exempt-interest"
dividends, which requires, among other things, that at the close of each
quarter of its taxable year at least 50% of the value of its total assets
must consist of municipal securities.
Dividends from the Fund's investment company taxable income are
taxable to you as ordinary income, to the extent of the Fund's earnings and
profits. Distributions by the Fund that are designated by it as
"exempt-interest dividends" generally may be excluded by you from your gross
income. Distributions by the Fund of net capital gain, when designated as
such, are taxable to you as long-term capital gains, regardless of the length
of time you have owned your shares.
Interest on indebtedness incurred or continued to purchase or carry
shares of the Fund will not be deductible for Federal income tax purposes to
the extent that the Fund's distributions (other than capital gains
distributions) consist of exempt-interest dividends. The Fund may invest in
"private activity bonds," the interest on which is treated as a tax
preference item for shareholders in determining their liability for the
alternative minimum tax. Proposals may be introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal securities. If such a proposal were enacted, the
availability of such securities for investment by the Fund and the value of
its portfolio would be affected. In such event, the Fund would reevaluate its
investment objective and policies.
Dividends and other distributions, to the extent taxable, are taxable
to you regardless of whether they are received in cash or reinvested in
additional Fund shares, even if the value of your shares is below your cost.
If you purchase shares shortly before a taxable distribution (i.e., any
distribution other than an exempt-interest dividend paid by the Fund), you
must pay income taxes on the distribution, even though the value of your
investment (plus cash received, if any) remains the same. In addition, the
share price at the time you purchase shares may include unrealized gains in
the securities held in the Fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid to you as a capital gain distribution and
will be taxable to you.
In January of each year, the Fund will send you a Form 1099-DIV
notifying you of the status for Federal income tax purposes of your
distributions for the preceding year. The Fund also will advise shareholders
of the percentage, if any, of the dividends paid by the Fund that are exempt
from Federal income tax and the portion, if any, of those dividends that is a
tax preference item for purposes of the alternative minimum tax.
You must furnish the Fund with your taxpayer identification number
("TIN") and state whether you are subject to withholding for prior
under-reporting, certified under penalties of perjury as prescribed by the
Code and the regulations thereunder. Unless previously furnished, investments
received with
(Page 17)
out such a certification will be returned. The Fund is required to withhold a
portion of all dividends, capital gains distributions and redemption proceeds
payable to any individuals and certain other non-corporate shareholders who
do not provide the Fund with a correct TIN; withholding from dividends and
capital gains distributions also is required for such shareholders who
otherwise are subject to backup withholding.
In addition, in order to avoid the application of a 4% nondeductible
excise tax on certain undistributed amounts of ordinary income and capital
gains, the Fund may make an additional distribution shortly before December
31 in each year of any undistributed ordinary (taxable) income or capital
gains and expects to pay any other dividends and distributions necessary to
avoid the application of this tax.
The foregoing is only a summary of some of the important tax
considerations generally affecting the Fund and its shareholders; see the SAI
for a further discussion. There may be other federal, state or local tax
considerations applicable to a particular investor; for example, the Fund's
dividends may be wholly or partly taxable under state and/or local laws. You
therefore are urged to consult your own tax adviser.
GENERAL INFORMATION
The Trust offers shares of beneficial interest of separate investment
portfolios without par value (each a "fund"). The Trust 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, changed its name to the Laurel Tax-Free Municipal Funds on
March 31, 1994, and changed its name again to The Dreyfus/Laurel Tax-Free
Municipal Funds on October 17, 1994. The Trust is registered with the SEC as
an open-end management investment company, commonly known as a mutual fund.
On December 6, 1995, Fund shareholders approved the Investment
Management Agreement which replaced the Prior Management Agreement, effective
December 8, 1995. The Investment Management Agreement provides that certain
transaction charges be imposed directly on Fund shareholders. See "How to Buy
Fund Shares," "Fund Exchanges" and "How to Redeem Fund Shares." Also
effective December 8, 1995, the Fund's "Investor" and "Class R" designations
were eliminated and the Fund became a single class fund and the Fund's name
changed from Dreyfus/Laurel New York Tax-Free Money Fund to Dreyfus BASICNew
York Municipal Money Market Fund.
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.
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 Trust's By-Laws, the
holders of at least 10% of the shares outstanding and entitled to vote may
require the Trust to hold a special meeting of shareholders for purposes of
removing a Trustee from office and for any other purpose. Trust shareholders
may remove a Trustee by the affirmative vote of two-thirds of the Trust'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.
(Page 18)
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
(Page 19)
BASIC New York Municipal Money Market Fund
Prospectus
Copy Rights 1996 Dreyfus Service Corporation
316/716p1022996
Registration Mark
(Page 20)
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
February 29, 1996
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 February 29,
1996 (referred to herein as the "Prospectus") describing the Dreyfus BASIC
California Municipal Money Market Fund (formerly, the Dreyfus/Laurel
California Tax-Free Money Fund) (the "Fund"). To obtain a copy of the
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call one of 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 516-794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Premier Mutual Fund Services, Inc. ("Premier") is the distributor of
the Fund's shares.
TABLE OF CONTENTS
Page
Management of the Trust . . . . . . . . . . . . . . . . . . . . . . . . B-2
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . . B-9
(see also in the Prospectus "How to Buy Fund Shares")
Investment Policies . . . . . . . . . . . . . . . . . . . . . . . . . . B-10
(see also in the Prospectus "Investment Objective and Policies")
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . B-22
(see also in the Prospectus "How to Redeem Fund Shares")
Fund Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-24
Valuation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . B-25
Performance Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-26
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-27
(see also in the Prospectus "Dividends, Other
Distributions and Taxes")
Description of the Trust. . . . . . . . . . . . . . . . . . . . . . . . B-29
(see also in the Prospectus "Investment Objective and Policies")
Principal Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . B-30
Custodian and Transfer Agent. . . . . . . . . . . . . . . . . . . . . . B-30
Counsel and Independent Auditors. . . . . . . . . . . . . . . . . . . . B-31
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . B-31
Appendix A Risk Factors - Investing in
California Municipal Obligations. . . . . . . . . . . . . . . . . . . B-32
Appendix B - Information about Securities Ratings . . . . . . . . . . . B-44
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 Dreyfus Transfer, Inc.
("Dreyfus Transfer"), a wholly-owned subsidiary of Dreyfus, as transfer
agent ("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 the Fund was changed from Laurel California Tax-Free Money
Fund to Dreyfus/Laurel California Tax-Free Money Fund. On November 20,
1995, the Fund's name changed from Dreyfus/Laurel California Tax-Free Money
Fund to Dreyfus BASIC California Municipal Money Market Fund.
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 Fund 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 Funds Trust (collectively, with the
Trust, the "Dreyfus/Laurel 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: 52 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, 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
Funds Trust and The Dreyfus/Laurel Funds, Inc. (since September 1994); Vice
President of the Trust, 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 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: One
Exchange Place, Boston, Massachusetts 02109.
#ERIC B. FISCHMAN. Vice President of the Trust, 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: 31 years old. Address: 200 Park
Avenue, New York, New York 10166.
RICHARD W. HEALEY. Vice President of the Trust, 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). 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 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). Age: 31 years old.
Address: One Exchange Place, Boston, Massachusetts 02109.
_____________________________________
* "Interested person" of the Trust, as defined in the 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, subsidiary or
affiliate 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, subsidiary or affiliate thereof) serves as an officer or
Trustee of the Trust. The Dreyfus/Laurel Funds pay each Director/Trustee
who is not an "interested person" as defined in the Act, $27,000 per annum
(and an additional $75,000 for the Chairman of the Board of
Directors/Trustees of the Dreyfus/Laurel Funds), $1,000 per joint
Dreyfus/Laurel Funds Board meeting attended, and $750 per joint
Dreyfus/Laurel Funds Audit Committee meeting attended, and reimburse each
Director/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 the Fund outstanding as of __________,
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>
Total
Pension or Estimated Compensation from
Aggregate Retirement Benefits 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 445,000**
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
Stephen 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 Funds.
* Estimated amount for fiscal year ended June 30, 1996.
** Estimated amount for year ending December 31, 1995.
*** Interested Trustee - not paid by the Fund, paid by Dreyfus.
@ Francis P. 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
Dreyfus serves as the investment manager for the Fund pursuant to an
Investment Management Agreement (the "Management Agreement") with the Trust
dated November 20, 1995. 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
the Fund. As investment manager, Dreyfus manages the Fund by making
investment decisions based on the Fund's investment objective, policies and
restrictions.
Prior to November 20, 1995, Dreyfus served as investment manager to
the Fund pursuant to the prior investment management agreement (the "Prior
Management Agreement") with the Trust dated April 4, 1994 and transferred
from Mellon Bank to Dreyfus on October 17, 1994.
Prior to May 21, 1993, The Boston Company Advisors, Inc. ("TBC
Advisors") served as investment adviser to the 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 the 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 the Fund 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 the Fund pursuant to the
Prior Management 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 the Fund on March 29, 1994.
The Prior Management 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 July 26, 1995.
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 and
extraordinary expenses (which are expected to be minimal), and (iii) Rule
12b-1 fees, as applicable. Under the unitary fee, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to
the Fund. For the provision of such services directly, or through one or
more third parties, Dreyfus receives as full compensation for all services
and facilities provided by it, a fee computed daily and paid monthly at the
annual rate of .45 of 1% of the Fund's average daily net assets, less the
accrued fees and expenses (including counsel fees) of the non-interested
Trustees of the Trust. The Management Agreement provides that certain
redemption, exchange and account closeout charges are payable directly by
the Fund's shareholders to the Fund's Transfer Agent and the fee payable by
the Fund to Dreyfus is not reduced by the amount of charges payable to the
Transfer Agent. Under the prior agreement with TBC Advisors, 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 remain in effect through November 19,
1997 and will continue thereafter from year to year 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. The 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
Fund. 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; Christopher M. Condron, 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 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. Greene, Julian M. Smerling and David B. Truman,
directors.
As compensation for Dreyfus' services, the Fund pays a fee, based on
its total average daily net assets, that is computed daily and paid monthly
at the annual rate of .45 of 1%. Dreyfus has agreed to limit its fee, or
to reimburse the Fund for expenses, to ensure that the Fund's total
operating expenses do not exceed .35 of 1% for the period from November 20,
1995 through November 19, 1996. Dreyfus may waive all or a portion of its
fees payable by the Fund from time to time.
The following table shows the fees paid by the 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, pursuant to the Fund's prior
investment advisory agreements, during the Fund's 1993, 1994 and 1995
fiscal years:
<TABLE>
1995 * 1994 * (1) 1993 **
<S> <C> <C> <C> <C> <C>
Fees Fees Fees Fees Fees Fees
Paid (2) Paid (3) Paid (4) Waived (5) Paid Waived (5)
$90,816 $22,135 $45,706 $56,403 (6) $103,006 $165,734 (7)
</TABLE>
_______________________________
* For the fiscal year ended June 30. The Fund changed its fiscal year end
from November 30 to June 30.
** For the fiscal years ended November 30.
(1) Effective April 4, 1994, Mellon Bank served as the Fund's investment
manager.
(2) For the fiscal year ended June 30, 1995, there were no fee waivers or
expense reimbursements.
(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 December 1, 1993 to April 3, 1993.
(5) TBC Advisors waived all or a portion of its fees and/or reimbursed
expenses of the Fund from time to time in order to increase the Fund's
net income available for distribution to shareholders.
(6) Includes $10,697 reimbursement by TBC Advisors.
(7) Includes $35,728 reimbursement by TBC Advisors.
Dreyfus has agreed that if in any fiscal year the aggregate expenses
of the Fund (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. The most restrictive state expense
limitation applicable to the 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
the Fund, will determine which of these restrictions will be applicable to
the Fund at any given time. No reimbursement pursuant to state expense
limitations was required for the Fund for the fiscal year ended June 30,
1995.
In addition, under a distribution plan adopted by the Fund pursuant to
Rule 12b-1 under the Act, which was terminated effective November 20, 1995,
the Fund paid Dreyfus Service Corporation, a subsidiary of Dreyfus, for
shareholder servicing, and the Distributor for shareholder servicing and
expenses permanently intended to result in the sale of Investor shares, at
the annual rate of .25% attributable to its Investor shares. For the year
ended June 30, 1995, the Fund paid $38,346 in distribution fees
attributable to its Investor shares.
PURCHASE OF FUND SHARES
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Family of Funds and
for certain other investment companies.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 P.M., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York
Stock Exchange ("NYSE") are open for business will be credited to the
shareholder's Fund account on the next bank business day following such
purchase order. Purchase orders made after 4:00 P.M., New York time, on
any business day the Transfer Agent and the NYSE are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g. when the NYSE is
not open for business), will be credited to the shareholders's Fund account
on the second bank business day following such purchase order.
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.
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, 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 the Fund. If Mellon Bank or
Dreyfus were prohibited from serving the Fund in any of its present
capacities the Trustees would seek an alternative provider(s) of such
services.
INVESTMENT POLICIES
The Prospectus discusses the Fund's investment objective and the
policies it employs to achieve that objective. The following discussion
supplements the description of the Fund's investment policies in the
Prospectus.
Description of Municipal Obligations
For purposes of this Statement of Additional Information, the term
"Municipal Obligations" and "California Municipal Obligations" shall mean
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. "Municipal
Obligations" and "California 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, the 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 the Fund upon the purchase or sale of a futures
contract. Initially, the 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,
the 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 Fund 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 Fund intends 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 Fund 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 the 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 the Fund has insufficient cash, it may
have to sell securities to meet daily variation margin requirements. Such
sales of securities may, but will not necessarily, be at increased prices
which reflect the decline in interest rates. The Fund may have to sell
securities at a time when it may be disadvantageous to do so.
When the Fund purchases 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 Fund's 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 Fund 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
The Fund may invest up to 10% of the value of its assets in tender
option bonds. A tender option bond is a Municipal Obligation (generally
held pursuant to a custodial arrangement) having a relatively long maturity
and bearing interest at a fixed rate substantially higher than prevailing
short-term tax-exempt rates, that has been coupled with the agreement of a
third party, such as a bank, broker-dealer or other financial institution,
pursuant to which such institution grants the security holders the option,
at periodic intervals, to tender their securities to the institution and
receive the face value thereof. As consideration for providing the option,
the financial institution receives periodic fees equal to the difference
between the Municipal Obligation's fixed coupon rate and the rate, as
determined by a remarketing or similar agent at or near the commencement of
such period, that would cause the securities, coupled with the tender
option, to trade at par on the date of such determination. Thus, after
payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. 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 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 ("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 Fund as initial
criteria for the selection of portfolio securities, but the Fund 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 B to this Statement of Additional
Information.
After being purchased by the 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 the 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, the 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
The 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 Fund. The Fund is
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.
The 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 Fund. The 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 Fund is 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 the Fund.
When-Issued Securities
The 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 the
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 Fund's portfolio 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 the 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.
The Fund will establish with the Fund's custodian a segregated account
consisting of cash or liquid debt securities in an amount at least equal to
the amount of its when-issued commitments. 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 segregated 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 less 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, the
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 the Fund's option, a specified
Municipal Obligation at a specified price. Stand-by commitments acquired
by the Fund may also be referred to as "put options." The amount payable
to the 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 the
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.
The 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 Fund without the payment of any direct or indirect
consideration. The Fund 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
Fund's portfolio will not exceed .5 of 1% of the value of the Fund's total
assets calculated immediately after such stand-by commitment was acquired.
The Fund intends to enter into stand-by commitments only with broker-
dealers, dealers or banks that Dreyfus believes present minimum credit
risks. The 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 the Fund will be evaluated on an ongoing
basis by Dreyfus in accordance with procedures established by the Trustees.
The Fund intends to acquire stand-by commitments solely to facilitate
portfolio liquidity and does 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 the 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
maturity of the Fund's portfolio. The Fund understands 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 Fund.
Taxable Investments
The Fund anticipates being as fully invested as practicable in
Municipal Obligations. Because the Fund's purpose is to provide income
exempt from Federal and state personal income tax, the 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 the
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. The 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. The 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 at the time of
purchase at least 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
The 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, the 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, the 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 the 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, the Fund 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 the Fund within the limits prescribed by the Act, which
include, subject to certain exceptions, a prohibition against the Fund's
investing more than 10% of the value of its total assets in such
securities.
Special Factors Affecting the Fund
Some of the significant financial considerations relating to the
Fund's 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 that were available
prior to 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 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 its five fiscal
years ended June 30, 1992. The State had operating surpluses of
approximately $109 million in 1992-93 and $917 million in 1993-94. However
at June 30, 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 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. The
1994-95 Budget Act contains a plan to retire a projected $1.025 billion
deficit in the 1995-96 fiscal year. The Department of Finance projects
that, after repaying the last of the carryover budget deficit, there will
be a positive balance of $28 million in the Special Fund for Economic
Uncertainties at June 30, 1996. 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 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 California Municipal Obligations. Investors should review
Appendix A which sets forth additional information relating to investing in
California Municipal Obligations.
Investment Restrictions
The following are fundamental investment restrictions of the Fund.
The Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the 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 Act,
except that (a) the 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) the
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
the 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 the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.
The Fund 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 the Fund:
1. The Fund 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. The Fund will not 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 the Fund's investment in securities would exceed 5% of the 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. The Fund will not 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 the Fund's
transactions in futures contracts and related options.
4. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be
invested in warrants or (b) more than 2% of the value of the 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 the Fund in units or attached to securities will be deemed to have no
value).
5. The Fund will not invest more than 10% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, and other securities which
are not readily marketable. For purposes of this restriction, illiquid
securities shall not include commercial paper issued pursuant to Section
4(2) of the Securities Act of 1933 and securities which may be resold under
Rule 144A under the Securities Act of 1933, provided that the Board of
Trustees, or its delegate, determines that such securities are liquid based
upon the trading markets for the specific security.
6. The Fund may not 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 Act.
7. The Fund will not purchase oil, gas or mineral leases (the 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. The Fund shall not 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. The Fund shall not purchase securities on margin, except that the
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. The Fund shall not purchase any security while borrowings
representing more than 5% of the 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.
Under the Act, a fundamental policy may not be changed without the
vote of a majority of the outstanding voting securities of the Fund, as
defined in the Act. "Majority" means the lesser of (1) 67% or more of the
shares present at the Fund's meeting, if the holders of more than 50% of
the outstanding shares of the Fund are present or represented by proxy, or
(2) more than 50% of the outstanding shares of the Fund. Non-fundamental
investment restrictions may be changed, without shareholder approval, by
vote of a majority of the Trust's Board of Trustees at any time.
In order to permit the sale of the Fund's shares in certain states,
the Trust may make commitments more restrictive than the investment
restrictions described above. Accordingly, pursuant to such commitments,
the Fund has undertaken not to invest in oil, gas or other mineral leases.
In addition, the Trust has undertaken not to invest in warrants (other than
warrants acquired by the Fund as part of a unit or attached to securities
at the time of purchase) if, as a result, the investments (valued at the
lower of cost or market) would exceed 5% of the value of the Fund's net
assets or if, as a result, more than 2% of the Fund's net assets would be
invested in warrants not listed on AMEX or NYSE. Further, the Fund has
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 Fund 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 Fund 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 Fund, 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 Fund 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 Fund 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 the 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 the Fund as for one or more of Dreyfus' clients
at about the same time. In a case in which the 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 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 Fund.
For the fiscal years ended June 30, 1995 and June 30, 1994, the Fund
paid no stated broker commissions.
REDEMPTION OF FUND SHARES
Check Redemption Privilege. An investor may indicate on the Account
Application or by later written request that the Fund provide Redemption
Checks ("Checks") drawn on the Fund's account. Checks will be sent only to
the registered owner(s) of the account and only to the address of record.
The Account Application, Shareholder Services Form or later written request
must be manually signed by the registered owner(s). Checks may be made
payable to the order of any person in an amount of $500 or more. When a
Check is presented to the Transfer Agent for payment, the Transfer Agent,
as the investor's agent, will cause the Fund to redeem a sufficient number
of shares in the investor's account to cover the amount of the Check and
the $2.00 charge. Dividends are earned until the Check clears. After
clearance, a copy of the Check will be returned to the investor. Investors
generally will be subject to the same rules and regulations that apply to
checking accounts, although election of this Privilege creates only a
shareholder-transfer agent relationship with the Transfer Agent.
If the amount of the Check, plus any applicable charges, is greater
than the value of the shares in an investor's account, the Check will be
returned marked insufficient funds. Checks should not be used to close an
account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Agent, and reasonably
believed by the Transfer Agent to be genuine. An investor will be charged
a $5.00 fee for each wire redemption, which will be deducted from the
investor's account and paid to the Transfer Agent. Ordinarily, 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 $5,000 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 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.
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. An investor will be charged a $5.00 fee for each
redemption effected pursuant to this Privilege, which will be deducted from
the investor's account and paid to the Transfer Agent. See "Purchase of
Fund Shares--Dreyfus TeleTransfer Privilege."
Redemption Commitment. The 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 Fund shares 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 the
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 the Fund's shareholders.
FUND EXCHANGES
Shares of other 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.
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, an investor or the investor's 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 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.
Investors will be charged a $5.00 fee for each exchange made out of the
Fund, which will be deducted from the investor's account and paid to the
Transfer Agent.
This Privilege is 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. The Fund reserves the right to reject
any exchange request in whole or in part. The Exchange service may be
modified or terminated at any time upon notice to shareholders.
VALUATION OF SHARES
The Prospectus describes the time at which the net asset value of the
Fund is determined for purposes of sales and redemptions. In addition,
portfolio securities held by the Fund may be actively traded in securities
markets which are open for trading on days when the Fund will not be
determining its net asset value. Accordingly, there may be occasions when
the Fund is not open for business but when the value of the 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 Day and Christmas Day.
It is the Trust's policy to use its best efforts to maintain the
Fund's net asset value per share ("NAV") at a constant value of $1.00. The
Fund's portfolio instruments 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 Fund's portfolio instruments based upon their
amortized cost and simultaneous maintenance of the Fund's NAV at $1.00 are
permitted by a rule adopted by the SEC. Under this rule, the 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, the Fund's NAV as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of the Fund's
portfolio holdings by the Trustees, at such intervals as they may deem
appropriate, to determine whether the NAV of the 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 NAV based upon available market quotations
or market equivalents and $1.00 NAV 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 NAV
by using available market quotations.
PERFORMANCE DATA
From time to time, the Fund may quote its yield in advertisements,
shareholder reports or other communications to shareholders. The Fund may
compare its performance 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 the Fund's performance.
Yields
The Fund's yield is computed by: (a) determining the net change in the
value of a hypothetical pre-existing account in the 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, the
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. The 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 Fund's annualized current yields,
compounded effective yields, and equivalent taxable yields for its then-
existing Investor shares and Class R shares were as follows:
<TABLE>
7-Day Yield for Period Ended
June 30, 1995
Annualized Compounded Equivalent
Current Yield Effective Yield Taxable Yield*
<S> <C> <C> <C>
Investor shares 3.63% 3.70% 6.30%
Class R shares 3.88% 3.95% 6.74%
</TABLE>
Effective November 20, 1995, the Fund's separate "Investor" and "Class
R" designations were eliminated and the Fund became a single class Fund.
For the seven-day period ended November 30, 1995, the Fund's yield was
3.4%, effective yield was 3.53% and equivalent taxable yield* was
6.02%. These yields reflect the waiver of a portion of the management
fee by Dreyfus, without which the Fund's seven-day yield, effective yield
and equivalent taxable yield* for the period ended November 30, 1995, would
have been 3.37%, 3.43% and 5.85%, respectively. See "Management of the
Fund" in the Prospectus.
* Example assumes a Federal marginal tax rate of 36% and a California
marginal tax rate of 10% (combined effective rate of 42.40%).
TAXES
The Fund intends to satisfy the requirements for qualifying as a
"regulated investment company" under Subchapter M of the Code. Provided
that the 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), the 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 the 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 the 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 the 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 Fund's Prospectus, some or all of the 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 Fund 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 Fund from interest on California Municipal Obligations will
be designated as exempt from the State of California taxation in the same
percentage of the day's dividend as the actual interest on California
Municipal Obligations earned on that day.
The Fund is required to withhold and remit to the U.S. Treasury 31% of
the taxable dividends paid by the Fund and the distributions paid by the
Fund (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 Fund and its shareholders, and is not intended as a
substitute for careful tax planning. Individuals may be exempt from
California state and local personal income taxes on exempt-interest income
derived from obligations of issuers located in California, 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 an 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. On November 20, 1995, the Fund's name was changed from
Dreyfus/Laurel California Tax-Free Money Fund to Dreyfus BASIC California
Municipal Money Market Fund.
The Trustees have authority to create an unlimited number of shares of
beneficial interest, without par value, in separate series. Each series
will be treated as a separate entity. Currently, seven series have been
authorized (each a "fund"). 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 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 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 __________________, the following companies/individuals owned
beneficially 5% or more of the outstanding shares of the Fund:
CUSTODIAN AND TRANSFER AGENT
Mellon Bank, which is located at Mellon Bank Center, Pittsburgh, PA
15258, serves as the Fund's custodian. Dreyfus Transfer, Inc., a wholly-
owned subsidiary of Dreyfus, located at One American Express Plaza,
Providence, Rhode Island 02903, is the Fund's transfer and dividend
disbursing agent. Under a transfer agency agreement with the Fund, the
Transfer Agent arranges for the maintenance of shareholder account records
for the Fund, the handling of certain communications between shareholders
and the Fund and the payment of dividends and distributions payable by the
Fund. For these services, the Transfer Agent receives a monthly fee
computed on the basis of the number of shareholder accounts it maintains
for the Fund during the month, and is reimbursed for certain out-of-pocket
expenses. Dreyfus Transfer, Inc. and Mellon Bank, as custodian, have no
part in determining the investment policies of the 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
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 INDEPENDENT AUDITORS
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C., 20036-1800, 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
Fund's 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 the Fund.
FINANCIAL STATEMENTS
The Fund's Annual Report for the fiscal year ended June 30, 1995
accompanies 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 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 $41.9 billion of General Fund
revenues and transfers and $40.9 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 $44.1 billion and expenditures of $43.4 billion, which would
leave a balance of approximately $28 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 $473 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 $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 $36.60 billion, and the
appropriations subject to limitation were $6.55 billion under the limit.
The estimated limit for the 1994-95 fiscal year is $37.53 billion, and the
appropriations subject to limitations are estimated to be $5.83 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 $18.4 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 35% of General Fund
revenue in 1993-94. Bank and corporation tax revenues comprised about 12%
of General Fund revenue in 1993-94. 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.
Reports by the Department of Finance in May, 1995 indicate that, with
economic recovery well underway in the State, General Fund revenues for the
entire 1994-95 fiscal year were above projections, and expenditures were
below projections because of slower than anticipated health/welfare
caseload growth and school enrollments. The aggregate effect improved the
budget picture by about $500 million, leaving an estimated budget deficit
of about $630 million at June 30, 1995.
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 from
9.2% in fiscal 1993 to 8.6% in fiscal 1994. The national unemployment rate
in 1994 was 6.1%. The number of employed Californians increased more than
250,000 during fiscal 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
2.8%. However, excluding the Northridge effects, growth would have been in
excess of 3%.
APPENDIX B
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 ("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 Fund, in accordance with industry practice, recognizes 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.
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
February 29, 1996
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 February 29,
1996 (referred to herein as the "Prospectus") describing the Dreyfus BASIC
New York Municipal Money Market Fund (formerly, the Dreyfus/Laurel New York
Tax-Free Money Fund) (the "Fund"). To obtain a copy of the Prospectus,
please write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New
York 11556-0144, or call one of 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 516-794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Premier Mutual Fund Services, Inc. ("Premier") is the distributor of
the Fund's shares.
TABLE OF CONTENTS
Page
----
Management of the Trust. . . . . . . . . . . . . . . . . . . . . . . .B-2
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . .B-9
(see also in the Prospectus "How to Buy Fund Shares")
Investment Policies. . . . . . . . . . . . . . . . . . . . . . . . . .B-10
(see also in the Prospectus "Investment Objective and Policies")
Redemption of Fund Shares. . . . . . . . . . . . . . . . . . . . . . .B-22
(see also in the Prospectus "How to Redeem Fund Shares")
Fund Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-24
Valuation of Shares. . . . . . . . . . . . . . . . . . . . . . . . . .B-26
Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . .B-27
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-28
(see also in the Prospectus "Dividends, Other
Distributions and Taxes")
Description of the Trust . . . . . . . . . . . . . . . . . . . . . . .B-29
(see also in the Prospectus "Investment Objective and Policies")
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . .B-30
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . . . . .B-31
Counsel and Independent Auditors . . . . . . . . . . . . . . . . . . .B-31
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . .B-31
Appendix A Risk Factors - Investing in
New York Municipal Obligations . . . . . . . . . . . . . . . . . . .B-32
Appendix B - Information about Securities Ratings. . . . . . . . . . .B-46
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 Dreyfus Transfer, Inc.
("Dreyfus Transfer"), a wholly-owned subsidiary of Dreyfus, as transfer
agent ("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 the Fund was changed from Laurel New York Tax-Free
Money Fund to Dreyfus/Laurel New York Tax-Free Money Fund. On November 20,
1995, the Fund's name changed from Dreyfus/Laurel New York Tax-Free Money
Fund to Dreyfus BASIC New York Municipal Money Market Fund.
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 Fund 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 Funds Trust (collectively, with the
Trust, the "Dreyfus/Laurel 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 Fund's 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: 52 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, 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 Funds and The Dreyfus/Laurel Funds, Inc. (since
September 1994); Vice President of the Trust, 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 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: One Exchange Place, Boston,
Massachusetts 02109.
#ERIC B. FISCHMAN. Vice President of the Trust, 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). Age: 31 years old.
Address: 200 Park Avenue, New York, New York 10166.
RICHARD W. HEALEY. Vice President of the Trust, 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). 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 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). 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, subsidiary or
affiliate 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, subsidiary, or affiliate thereof) serves as an officer or
Trustee of the Trust. The Dreyfus/Laurel Funds pay each Director/Trustee
who is not an "interested person" (as defined in the Act), $27,000 per
annum (and an additional $75,000 for the Chairman of the Board of
Directors/Trustees of the Dreyfus/Laurel Funds), $1,000 per joint
Dreyfus/Laurel Funds Board meeting attended and $750 per joint
Dreyfus/Laurel Funds Audit Committee meeting attended, and reimburse each
Director/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 the Fund outstanding as of
______________.
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 445,000**
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
Stephen 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 Funds.
* Estimated amount for fiscal year ending June 30, 1996.
** Estimated amount for year ending December 31, 1995.
*** Interested Trustee - not paid by the Fund, paid by Dreyfus.
@ Francis 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 Fund pursuant to an
Investment Management Agreement (the "Management Agreement") with the Trust
dated December 8, 1995. 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
the Fund. As investment manager, Dreyfus manages the Fund by making
investment decisions based on the Fund's investment objective, policies and
restrictions.
Prior to December 8, 1995, Dreyfus served as investment manager to the
Fund pursuant to the prior investment management agreement (the "Prior
Management Agreement") with the Trust dated April 4, 1994 and transferred
from Mellon Bank to Dreyfus on October 17, 1994.
Prior to May 21, 1993, The Boston Company Advisors, Inc. ("TBC
Advisors") served as investment adviser to the 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 the 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 the Fund 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 the Fund pursuant to the
Prior Management 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 the Fund on March 29, 1994.
The Prior Management 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 July 26, 1995.
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 and
extraordinary expenses (which are expected to be minimal), and (iii) Rule
12b-1 fees, as applicable. Under the unitary fee, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to
the Fund. For the provision of such services directly, or through one or
more third parties, Dreyfus receives as full compensation for all services
and facilities provided by it, a fee computed daily and paid monthly at the
annual rate of .45 of 1% of the Fund's average daily net assets, less the
accrued fees and expenses (including counsel fees) of the non-interested
Trustees of the Trust. The Management Agreement provides that certain
redemption, exchange and account closeout charges are payable directly by
the Fund's shareholders to the Fund's Transfer Agent and the fee payable by
the Fund to Dreyfus is not reduced by the amount of charges payable to the
Transfer Agent. Under the prior agreement with TBC Advisors, 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 remain in effect through December 7,
1997 and will continue thereafter from year to year 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. The 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
Fund. 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; Christopher M. Condron, 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. Greene, Julian M.
Smerling and David B. Truman, directors.
As compensation for Dreyfus' services, the Fund pays a fee, based on
its total average daily net assets, that is computed daily and paid monthly
at the annual rate of .45 of 1%. Dreyfus has agreed to limit its fee, or
to reimburse the Fund for expenses, to ensure that the Fund's total
operating expenses do not exceed .35 of 1% for the period from December 8,
1995 through December 7, 1996. Dreyfus may waive all or a portion of its
fees payable by the Fund from time to time.
The following table shows the fees paid by the Fund to TBC Advisors or
Mellon Bank (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, pursuant to the Fund's prior
investment advisory agreements, during the Fund's 1993, 1994 and 1995
fiscal years:
<TABLE>
<CAPTION>
1995 * 1994 * (1) 1993 **
<S> <C> <C> <C> <C>
Fees Fees Fees Fees Fees Fees
Paid (2) Paid (3) Paid (4) Waived (5) Paid Waived (5)
$48,800 $12,400 $27,444 $46,447 (6) $73,485 $118,669 (7)
_______________________________
* For the fiscal year ended June 30. The Fund changed its fiscal year end from November 30 to June 30.
** For the fiscal years ended November 30.
(1) Effective April 4, 1994, Mellon Bank served as the Fund's investment manager.
(2) For the fiscal year ended June 30, 1995, there were no fee waivers or expense reimbursements.
(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 December 1, 1993 to April 3,
1993.
(5) TBC Advisors waived all or a portion of its fees and/or reimbursed expenses of the Fund from time to time in
order to increase the Fund's net income available for distribution to shareholders.
(6) Includes $22,044 reimbursement by TBC Advisors.
(7) Included $45,183 reimbursement by TBC Advisors.
</TABLE>
Dreyfus has agreed that if in any fiscal year the aggregate expenses
of the Fund (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. The most restrictive state expense
limitation applicable to the 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
the Fund, will determine which of these restrictions will be applicable to
the Fund at any given time. No reimbursement pursuant to state expense
limitations was required for the Fund for the fiscal year ended June 30,
1995.
In addition, under a distribution plan adopted by the Fund pursuant to
Rule 12b-1 under the Act which was terminated effective December 8, 1995,
the Fund paid Dreyfus Service Corporation, a subsidiary of Dreyfus, for
shareholder servicing, and the Distributor for shareholder servicing and
expenses previously intended to result in the sale of Investor shares, at
the annual rate of .25% attributable to its Investor shares. For the year
ended June 30, 1995, the Fund paid $20,798 in distribution fees
attributable to its Investor shares.
PURCHASE OF FUND SHARES
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Family of Funds and
for certain other investment companies.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 P.M., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York
Stock Exchange ("NYSE") are open for business will be credited to the
shareholder's Fund account on the next bank business day following such
purchase order. Purchase orders made after 4:00 P.M., New York time, on
any business day the Transfer Agent and the NYSE are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g. when the NYSE is
not open for business), will be credited to the shareholders's Fund account
on the second bank business day following such purchase order.
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.
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, 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 the Fund. If Mellon Bank or
Dreyfus were prohibited from serving the 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 objective of the Fund and the
policies it employs to achieve that objective. The following discussion
supplements the description of the Fund's investment policies in the
Prospectus.
Description of Municipal Obligations
For purposes of this Statement of Additional Information, the term
"Municipal Obligations" and "New York Municipal Obligations" shall mean
debt obligations issued by the State of New York, 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 New York personal income taxes. "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, the 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 the Fund upon the purchase or sale of a futures
contract. Initially, the 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,
the 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 Fund 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 Fund intends 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 Fund 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 the 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 the Fund has insufficient cash, it may
have to sell securities to meet daily variation margin requirements. Such
sales of securities may, but will not necessarily, be at increased prices
which reflect the decline in interest rates. The Fund may have to sell
securities at a time when it may be disadvantageous to do so.
When the Fund purchases 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 Fund's 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 Fund 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
The Fund may invest up to 10% of the value of its assets in tender
option bonds. A tender option bond is a Municipal Obligation (generally
held pursuant to a custodial arrangement) having a relatively long maturity
and bearing interest at a fixed rate substantially higher than prevailing
short-term tax-exempt rates, that has been coupled with the agreement of a
third party, such as a bank, broker-dealer or other financial institution,
pursuant to which such institution grants the security holders the option,
at periodic intervals, to tender their securities to the institution and
receive the face value thereof. As consideration for providing the option,
the financial institution receives periodic fees equal to the difference
between the Municipal Obligation's fixed coupon rate and the rate, as
determined by a remarketing or similar agent at or near the commencement of
such period, that would cause the securities, coupled with the tender
option, to trade at par on the date of such determination. Thus, after
payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. 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 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 ("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 Fund as initial
criteria for the selection of portfolio securities, but the Fund 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 B to this Statement of Additional
Information.
After being purchased by the 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 the 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, the Fund will attempt to use comparable ratings as standards for
its investments in accordance with its investment objective and policies.
Floating Rate and Variable Rate Obligations
The 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 Fund. The Fund is
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.
The 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 Fund. The 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 Fund is 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 the Fund.
When-Issued Securities
The 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 the
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 Fund's portfolio 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 the 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.
The Fund will establish with the Fund's custodian a segregated account
consisting of cash or liquid debt securities in an amount at least equal to
the amount of its when-issued commitments. 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, the
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 the Fund's option, a specified
Municipal Obligation at a specified price. Stand-by commitments acquired
by the Fund may also be referred to as "put options." The amount payable
to the 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 the
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.
The 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 Fund without the payment of any direct or indirect
consideration. The Fund 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
Fund's portfolio will not exceed .5 of 1% of the value of the Fund's total
assets calculated immediately after such stand-by commitment was acquired.
The Fund intends to enter into stand-by commitments only with broker-
dealers, dealers or banks that Dreyfus believes present minimum credit
risks. The 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 the Fund will be evaluated on an ongoing
basis by Dreyfus in accordance with procedures established by the Trustees.
The Fund intends to acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its 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 the 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
maturity of the Fund's portfolio. The Fund understands 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 Fund.
Taxable Investments
The Fund anticipates being as fully invested as practicable in
Municipal Obligations. Because the Fund's purpose is to provide income
exempt from Federal and state personal income tax, the 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 the
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. The 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. The 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 at the time of
purchase at least 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
The 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, the 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, the 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 the 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, the Fund 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 the Fund within the limits prescribed by the Act, which
include, subject to certain exceptions, a prohibition against the Fund's
investing more than 10% of the value of its total assets in such
securities.
Risk Factors
Special Factors Affecting the 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 the 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. During the fiscal periods 1992
through 1995, New York recorded balanced budgets on a cash-basis. On a
GAAP-basis, the State reported a General Fund operating deficit of $1.426
billion for the 1994-95 fiscal year, as compared to an operating surplus of
$914 million in the prior fiscal year. The 1994-95 fiscal year deficit was
caused by several factors, including the use of $1.026 billion of the prior
year's cash-based surplus to fund fiscal 1995 operating expenses and the
adoption of changes in accounting methodologies by the State Comptroller.
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 A" which more fully sets forth these and other risk
factors.
Investment Restrictions
The following are fundamental investment restrictions of the Fund.
The Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the 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 Act,
except that (a) the 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) the
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
the 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 the Fund may enter into
futures contracts and related options, forward currency contracts and other
similar instruments.
The Fund 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 the Fund:
1. The Fund 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. The Fund will not 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 the Fund's investment in securities would exceed 5% of the 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. The Fund will not 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 the Fund's
transactions in futures contracts and related options.
4. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be
invested in warrants, or (b) more than 2% of the value of the 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 the Fund in units or attached to securities will be deemed to have no
value).
5. The Fund will not invest more than 10% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, and other securities which
are not readily marketable. For purposes of this restriction, illiquid
securities shall not include commercial paper issued pursuant to Section
4(2) of the Securities Act of 1933 and securities which may be resold under
Rule 144A under the Securities Act of 1933, provided that the Board of
Trustees, or its delegate, determines that such securities are liquid based
upon the trading markets for the specific security.
6. The Fund may not 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 Act.
7. The Fund will not purchase oil, gas or mineral leases (the 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. The Fund shall not 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. The Fund shall not purchase securities on margin, except that the
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. The Fund shall not purchase any security while borrowings
representing more than 5% of the 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.
Under the Act, a fundamental policy may not be changed without the
vote of a majority of the outstanding voting securities of the Fund, as
defined in the Act. "Majority" means the lesser of (1) 67% or more of the
shares present at the Fund's meeting, if the holders of more than 50% of
the outstanding shares of the 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, without shareholder approval, by
vote of a majority of the Trust's Board of Trustees at any time.
In order to permit the sale of the Fund's shares in certain states,
the Trust may make commitments more restrictive than the investment
restrictions described above. Accordingly, pursuant to such commitments,
the Fund has undertaken not to invest in oil, gas or other mineral leases.
In addition, the Fund has undertaken not to invest in warrants (other than
warrants acquired by the Fund as part of a unit or attached to securities
at the time of purchase) if, as a result, the investments (valued at the
lower of cost or market) would exceed 5% of the value of the Fund's net
assets or if, as a result, more than 2% of the Fund's net assets would be
invested in warrants not listed on AMEX or NYSE. Further, the Fund has
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 Fund and its shareholders, it
will revoke the commitment by terminating sales of the Fund's shares in the
state involved.
Portfolio Transactions
Decisions to buy and sell securities for the Fund 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 Fund 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 Fund, 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 Fund 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 Fund 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 the 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 the Fund as for one or more of Dreyfus' clients
at about the same time. In a case in which the 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 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 Fund.
For the fiscal years ended June 30, 1995 and June 30, 1994, the Fund
paid no stated brokerage commissions.
REDEMPTION OF FUND SHARES
Check Redemption Privilege. An investor may indicate on the Account
Application or by later written request that the Fund provide Redemption
Checks ("Checks") drawn on the Fund's account. Checks will be sent only to
the registered owner(s) of the account and only to the address of record.
The Account Application, Shareholder Services Form or later written request
must be manually signed by the registered owner(s). Checks may be made
payable to the order of any person in an amount of $500 or more. When a
Check is presented to the Transfer Agent for payment, the Transfer Agent,
as the investor's agent, will cause the Fund to redeem a sufficient number
of shares in the investor's account to cover the amount of the Check and
the $2.00 charge. Dividends are earned until the Check clears. After
clearance, a copy of the Check will be returned to the investor. Investors
generally will be subject to the same rules and regulations that apply to
checking accounts, although election of this Privilege creates only a
shareholder-transfer agent relationship with the Transfer Agent.
If the amount of the Check, plus any applicable charges, is greater
than the value of the shares in an investor's account, the Check will be
returned marked insufficient funds. Checks should not be used to close an
account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Agent, and reasonably
believed by the Transfer Agent to be genuine. An investor will be charged
a $5.00 fee for each wire redemption, which will be deducted from the
investor's account and paid to the Transfer Agent. Ordinarily, 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 $5,000 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 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.
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. An investor will be charged a $5.00 fee for each
redemption effected pursuant to this Privilege, which will be deducted from
the investor's account and paid to the Transfer Agent. See "Purchase of
Fund Shares-- Dreyfus TeleTransfer Privilege."
Redemption Commitment. The 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 Fund shares 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 the
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 the Fund's shareholders.
FUND EXCHANGES
Shares of other 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.
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, an investor or the investor's 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 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.
Investors will be charged a $5.00 fee for each exchange made out of the
Fund, which will be deducted from the investor's account and paid to the
Transfer Agent.
This Privilege is 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. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service may be
modified or terminated at any time upon notice to shareholders.
VALUATION OF SHARES
The Prospectus describes the time at which the net asset value of the
Fund is determined for purposes of sales and redemptions. In addition,
portfolio securities held by the Fund may be actively traded in securities
markets which are open for trading on days when the Fund will not be
determining its net asset value. Accordingly, there may be occasions when
the Fund is not open for business but when the value of the 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 Day and Christmas Day.
It is the Trust's policy to use its best efforts to maintain the
Fund's net asset value per share ("NAV") at a constant value of $1.00. The
Fund's portfolio instruments 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 Fund's portfolio instruments based upon their
amortized cost and simultaneous maintenance of the Fund's NAV at $1.00 are
permitted by a rule adopted by the SEC. Under this rule, the 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, the Fund's NAV as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of the Fund's
portfolio holdings by the Trustees, at such intervals as they may deem
appropriate, to determine whether the NAV of the Fund calculated by using
available market quotations or market equivalents deviates from $1.00 based
on amortized cost. The rule also provides that the extent of any deviation
between the Fund's NAV based upon available market quotations or market
equivalents and $1.00 NAV 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 NAV by using available
market quotations.
PERFORMANCE DATA
From time to time, the Fund may quote its yield in advertisements,
shareholder reports or other communications to shareholders. The Fund may
compare its performance 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 the Fund's performance.
Yields
The Fund's yield 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, the 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. The 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 Fund's annualized current yields,
compounded effective yields, and equivalent taxable yields for its then
existing Investor shares and Class R shares 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>
Investor shares 3.46% 3.52% 6.13%
Class R shares 3.71% 3.78% 6.57%
</TABLE>
Effective December 8, 1995, the Fund's separate "Investor" and "Class
R" designations were eliminated and the Fund became a single class Fund.
For the seven-day period ended December 18, 1995, the Fund's yield was
3.63%, effective yield was 3.70% and equivalent taxable yield* was
6.43%. These yields reflect the waiver of a portion of the management
fee by Dreyfus, without which the Fund's seven-day yield, effective yield
and equivalent taxable yield* for the period ended December 18, 1995, would
have been 3.53%, 3.59% and 6.25%, respectively. See "Management of the
Fund" in the Prospectus.
* Example assumes a Federal marginal tax rate of 36% and a New York State
and New York City marginal tax rate of 11.785% (combined effective rate
of 43.54%).
TAXES
The Fund intends to satisfy the requirements for qualifying as a
"regulated investment company" under Subchapter M of the Code. Provided
that the 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), the 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 the 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 the 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 the 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 Fund's Prospectus, some or all of the 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 Fund 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 Fund from interest on New York Municipal Obligations will be
designated as exempt from the State of New York taxation in the same
percentage of the day's dividend as the actual interest on New York
Municipal Obligations earned on that day.
The Fund is required to withhold and remit to the U.S. Treasury 31% of
the taxable dividends paid by the Fund and the distributions paid by the
Fund (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
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 Fund and its shareholders, and is not intended as a
substitute for careful tax planning. Individuals may be exempt from New
York state and local personal income taxes on exempt-interest income
derived from obligations of issuers located in New York, 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 an 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. On December 8, 1995, the Fund's name was changed from
Dreyfus/Laurel New York Tax-Free Money Fund to Dreyfus BASIC New York
Municipal Money Market Fund.
The Trustees have authority to create an unlimited number of shares of
beneficial interest, without par value, in separate series. Each series
will be treated as a separate entity. Currently, seven series have been
authorized (each a "fund"). 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 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 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 _______________, the following companies/individuals owned
beneficially 5% or more of the outstanding shares of the Fund:
CUSTODIAN AND TRANSFER AGENT
Mellon Bank, which is located at Mellon Bank Center, Pittsburgh, PA
15258, serves as the Fund's custodian. Dreyfus Transfer, Inc., a wholly-
owned subsidiary of Dreyfus, located at One American Express Plaza,
Providence, Rhode Island 02903, is the Fund's transfer and dividend
disbursing agent. Under a transfer agency agreement with the Fund, the
Transfer Agent arranges for the maintenance of shareholder account records
for the Fund, the handling of certain communications between shareholders
and the Fund and the payment of dividends and distributions payable by the
Fund. For these services, the Transfer Agent receives a monthly fee
computed on the basis of the number of shareholder accounts it maintains
for the Fund during the month, and is reimbursed for certain out-of-pocket
expenses. Dreyfus Transfer, Inc. and Mellon Bank, as custodian, have no
part in determining the investment policies of the 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
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 INDEPENDENT AUDITORS
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C., 20036-1800, 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
Fund's 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 the Fund.
FINANCIAL STATEMENTS
The Fund's Annual Report for the fiscal year ended June 30, 1995
accompanies 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 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 B
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 ("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 Fund, in accordance with industry practice, recognizes 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.
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 BASIC New York
Municipal Money Fund
Dreyfus BASIC California
Municipal Money 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****
Mellon Bank, N.A.****
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*****
Vice Chairman of the Board:
Mellon Bank Corporation****
Mellon Bank, N.A.****
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Mellon Bank Corporation****
Operating Officer The Boston Company*****
and Director Deputy Director:
Mellon Trust****
Chief Executive Officer:
The Boston Company Asset Management,
Inc.*****
President:
Boston Safe Deposit and Trust Company*****
STEPHEN E. CANTER Former Chairman and Chief Executive Officer:
Vice Chairman and Kleinwort Benson Investment Management
Chief Investment Officer, Americas Inc.*
and a Director Director:
The Dreyfus Trust Company++
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*****
Laurel Capital Advisors****
Boston Group Holdings, Inc.
Executive Vice President:
Mellon Bank, N.A.****
Boston Safe Deposit & Trust*****
PHILIP L. TOIA Chairman of the Board and Trust Investment
Vice Chairman-Operations Officer:
and Administration The Dreyfus Trust Company++;
and a Director Chairman of the Board and Chief Operating
Officer:
Major Trading Corporation*;
Director:
Dreyfus Precious Metals, Inc.*;
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, Inc.***;
The Truepenny Corporation*;
Formerly, Senior Vice President:
The Chase Manhattan Bank, N.A. and
The Chase Manhattan Capital Markets
Corporation
One Chase Manhattan Plaza
New York, New York 10081
BARBARA E. CASEY President:
Vice President- Dreyfus Retirement Services Division;
Dreyfus Retirement Executive Vice President:
Services Boston Safe Deposit & Trust Co.*****
Dreyfus Service Corporation*
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, Inc.*
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 Acquisition Corporation*;
Dreyfus Partnership Management, Inc.*;
Major Trading Corporation*;
The Truepenny Corporation+;
Director, Vice President and Treasurer:
Lion Management, Inc.*;
Director:
The Dreyfus Trust Company++;
Secretary:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.***;
Seven Six Seven Agency, Inc.*
JEFFREY N. NACHMAN None
Vice President-Mutual Fund
Accounting
WILLIAM F. GLAVIN, JR. Executive Vice President:
Vice President-Corporate Dreyfus Service Corporation*;
Development Senior Vice President:
The Boston Company Advisors, Inc.
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- Lion Management, Inc.*;
Legal and Secretary 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
MAURICE BENDRIHEM Treasurer:
Controller Dreyfus Partnership Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Organization, Inc.***;
Seven Six Seven Agency, Inc.*;
The Truepenny Corporation*;
Controller:
Dreyfus Acquisition Corporation*;
Dreyfus Service Corporation*;
The Dreyfus Trust Company++;
The Dreyfus Consumer Credit Corporation*;
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 131 Second Street, Lewes,
Delaware 19958.
**** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
***** The address of the business so indicated is One Boston Place, Boston,
Massachusetts 02108.
+ 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
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Compliance Treasurer
Officer
Joseph F. Tower, III+ Senior Vice President, Treasurer Assistant
and Chief Financial Officer Treasurer
John E. Pelletier+ Senior Vice President, General Vice President
Counsel, Secretary and Clerk and Secretary
Frederick C. Dey++ Senior Vice President Vice President
and Assistant
Treasurer
Eric B. Fischman++ Vice President and Associate Vice President
General Counsel and Assistant
Secretary
Paul Prescott+ Vice President None
Elizabeth Bachman++ Assistant Vice President Vice President
and Assistant
Secretary
Mary Nelson+ Assistant Treasurer None
John J. Pyburn++ Assistant Treasurer Assistant
Treasurer
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
________________________________
+ Principal business address is One Exchange Place, Boston, Massachusetts
02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 30. Location of Accounts and Records
________________________________
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. The Bank of New York
90 Washington Street
New York, New York 10286
3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02903-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
_______ ___________________
Not Applicable
Item 32. Undertakings
________ ____________
(1) To call a meeting of shareholders for the purpose of voting upon
the question of removal of a director or directors when
requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares of common stock and in
connection with such meeting to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940 relating to
shareholder communications.
(2) To furnish each person to whom a prospectus is delivered with a
copy of the Fund's latest Annual Report to Shareholders, upon
request and without charge.
SIGNATURES
__________
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, the Registrant, The Dreyfus/Laurel
Tax-Free Municipal Funds (formerly, The Laurel Tax-Free Municipal Funds) has
duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
and State of New York on the 29th day of December, 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 12/29/95
Marie E. Connolly
/s/Francis P. Brennan* Trustee, 12/29/95
Francis P. Brennan Chairman of the Board
/s/Ruth Marie Adams* Trustee 12/29/95
Ruth Marie Adams
/s/Joseph S. DiMartino* Trustee 12/29/95
Joseph S. DiMartino
/s/James M. Fitzgibbons* Trustee 12/29/95
James M. Fitzgibbons
/s/Kenneth A. Himmel* Trustee 12/29/95
Kenneth A. Himmel
/s/Stephen J. Lockwood* Trustee 12/29/95
Stephen J. Lockwood
/s/Roslyn M. Watson* Trustee 12/29/95
Roslyn M. Watson
/s/J. Tomlinson Fort* Trustee 12/29/95
J. Tomlinson Fort
/s/Arthur L. Goeschel* Trustee 12/29/95
Arthur L. Goeschel
/s/Arch S. Jeffery* Trustee 12/29/95
Arch S. Jeffery
/s/Robert D. McBride* Trustee 12/29/95
Robert D. McBride
/s/John L. Propst* Trustee 12/29/95
John L. Propst
/s/John Sciullo* Trustee 12/29/95
John Sciullo
*By: /s/Eric B. Fischman
Attorney-in-Fact
Independent Auditors' Consent
To the Board of Trustees and Shareholders
The Dreyfus/Laurel Tax-Free Municipal Funds:
We consent to the use of our report dated August 18, 1995 with respect
to the Dreyfus California Tax-Free Money Fund and the Dreyfus New York Tax-
Free Money Fund (two of the funds comprising "The Dreyfus/Laurel Tax-Free
Municipal Funds") incorporated by reference in each respective Prospectus
and Statement of Additional Information under the heading "Financial
Statements" and to the reference to our Firm under the heading "Financial
Highlights" in each respective Prospectus and "Counsel and Independent
Auditors" in each respective Statement of Additional Information to be
dated February 29, 1996 in amendment number 39 under the Investment Company
Act of 1940 and post-effective amendment number 38 under the Securities Act
of 1933.
[KPMG Peat Marwick LLP]
Pittsburgh, Pennsylvania
December 29, 1995
