Registration No. 33-43845
811-3700
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
__
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /_/
__
Pre-Effective Amendment No. _____ /_/
__
Pos/-Effective Amendment No. 35 /x/
--- __
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 36
---
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
(formerly The Laurel Tax-Free Municipal Funds)
------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
200 Park Avenue - 55th floor
New York, New York 10166
(Address of Principal Executive Office) (ZIP Code)
Registrant's Telephone Number, including area code: (800) 225-5267
John E. Pelletier
Secretary
The Dreyfus/Laurel Tax-Free
Municipal Funds
200 Park Avenue - 55th floor
New York, New York 10166
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as possible after this Post-Effective Amendment becomes effective.
It is proposed that this filing will become effective (check
appropriate box):
__ __
/X/ Immediately upon filing / / on (date) pursuant to
pursuant to paragraph (b) paragraph (b)
__ __
/_/ 60 days after filing pursuant /_/ on (date) pursuant to
to paragraph (a)(1) paragraph (a)(1)
__ _
/_/ 75 days after filing pursuant /_/ on (date) pursuant to
to paragraph (a)(2) paragraph (a)(2)
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, 1994, relating to Tax-Free
Money Fund, Tax-Free Bond Fund, Massachusetts Tax-Free Money Fund and
Massachusetts Tax-Free Bond Fund, and the period December 1, 1993 through
June 30, 1994, relating to New York Tax-Free Money Fund, New York Tax-Free
Bond Fund, California Tax-Free Money Fund and California Tax-Free Bond
Fund, was filed on August 30, 1994.
Dreyfus/Laurel Limited Term CA, MA, and NY Tax-Free Money Fund
Cross-Reference Sheet Pursuant to Rule 495(a)
---------------------------------------------
Items in
Part A of
Form
N-1A Caption Prospectus Caption
--------- ------- ------------------
1. Cover Page Cover Page
2. Synopsis Expense Summary
3. Condensed Financial Financial Highlights
Information
4. General Description of Investment Objective and
Registrant Policies; Further
Information About The
Fund
5. Management of the Fund Further Information About
The Funds; Management
6. Capital Stock and Cover Page; Investor
Other Securities Line; Distributions;
Taxes;
7. Purchase of Securities Expense Summary;
Being Offered Alternative Purchase
Methods; Special
Shareholder Services; How
to Invest in The
Dreyfus/Laurel Funds;
Distribution and Service
Plans; How to Exchange
Your Investment From One
Fund to Another;
8. Redemption or How to Redeem Shares
Repurchase
9. Pending Legal N.A.
Proceedings
Items in Statement of Additional
Part B of Information Caption
Form N-1A ----------------------
__________
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information Management of the Trust
and History
13. Investment Objectives Investment Policies
and Policies
14. Management of the Fund Management of the Trust;
Trustees and Officers of
the Trust
15. Control Persons and Management of the Trust;
Principal Holders of Miscellaneous;
Securities
16. Investment Advisory Management of the Trust;
and Other Services Investment Manager;
Shareholder Services
17. Brokerage Allocation Investment Policies;
and Other Practices Portfolio Transactions
18. Capital Stock and Description of the Trust;
Other Securities See Prospectus -- "Cover
Page"; "How to Redeem
Fund Shares"; "Further
Information About The
Funds; The Dreyfus/Laurel
Tax-Free Municipal Funds"
19. Purchase, Redemption Purchase of Shares;
and Pricing of Distribution and Service
Securities Being Plans; Redemption of
Offered Shares; Valuation of
Shares
20. Tax Status Taxes
21. Underwriters Purchase of Shares;
Distribution and Service
Plans; Amounts Expended
22. Calculation of Performance Data
Performance Data
23. Financial Statements Financial Statements
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
CONTENTS OF POST-EFFECTIVE AMENDMENT
This post-effective amendment to the registration statement of The
Dreyfus/Laurel Tax-Free Municipal Funds contains the following documents:
Facing Sheet
Cross-Reference Sheet
Contents of Post-Effective Amendment
Part A - Prospectus
- Dreyfus/Laurel Massachusetts Tax-Free Money Fund
- Dreyfus/Laurel New York Tax-Free Money Fund
- Dreyfus/Laurel California Tax-Free Money Fund
Part B - Statement of Additional Information
- Dreyfus/Laurel Massachusetts Tax-Free Money Fund
- Dreyfus/Laurel New York Tax-Free Money Fund
- Dreyfus/Laurel California Tax-Free Money Fund
Part C - Other Information
Signature Page - The Dreyfus/Laurel Tax-Free Municipal Funds
Exhibits
- -------------------------------------------------------------------------------
PROSPECTUS APRIL 10, 1995
DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND
DREYFUS/LAUREL MASSACHUSETTS TAX-FREE MONEY FUND
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND
- -------------------------------------------------------------------------------
THE DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND, DREYFUS/LAUREL
MASSACHUSETTS TAX-FREE MONEY FUND, AND DREYFUS/LAUREL NEW YORK TAX-FREE MONEY
FUND (EACH A "FUND" AND COLLECTIVELY THE "FUNDS") SEEK TO PROVIDE A HIGH
LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAXES AND STATE PERSONAL
INCOME TAXES FOR RESIDENT SHAREHOLDERS OF THE NAMED STATE TO THE EXTENT
CONSISTENT WITH THE PRESERVATION OF CAPITAL AND THE MAINTENANCE OF LIQUIDITY
BY INVESTING IN HIGH QUALITY, SHORT-TERM MUNICIPAL SECURITIES.
THIS PROSPECTUS DESCRIBES THE FUNDS OF THE DREYFUS/LAUREL TAX-FREE
MUNICIPAL FUNDS (FORMERLY THE LAUREL TAX-FREE MUNICIPAL FUNDS AND PREVIOUSLY
THE BOSTON COMPANY TAX-FREE MUNICIPAL FUNDS), A NON-DIVERSIFIED MANAGEMENT
INVESTMENT COMPANY. THIS PROSPECTUS DESCRIBES TWO CLASSES OF SHARES-INVESTOR
AND CLASS R SHARES FOR THE FUNDS (COLLECTIVELY, THE "SHARES").
SHARES OF THE FUNDS ARE SOLD WITHOUT A SALES LOAD. INVESTOR SHARES OF
THE FUNDS ARE SUBJECT TO DISTRIBUTION AND SHAREHOLDER SERVICING FEES.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING THE DREYFUS TELET
RANSFER PRIVILEGE.
THE DREYFUS CORPORATION SERVES AS THE FUNDS' INVESTMENT MANAGER. THE
DREYFUS CORPORATION IS REFERRED TO AS "DREYFUS."
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
--------------
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUNDS THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ CAREFULLY BEFORE YOU
INVEST AND RETAINED FOR FUTURE REFERENCE.
A STATEMENT OF ADDITIONAL INFORMATION ("SAI") DATED APRIL 10, 1995,
WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF
CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST
TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ("SEC") AND IS INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY,
WRITE TO THE FUNDS AT 144 GLENNCURTISS BOULEVARD, UNIONDALE, NEW YORK
11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR 666.
--------------
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
ALL MONEY MARKET FUNDS INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH EACH FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUNDS' PROSPECTUS. THE FUNDS PAY MELLON BANK, N.A.
("MELLON BANK") OR ITS AFFILIATES TO BE ITS INVESTMENT MANAGER. MELLON BANK
OR AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUNDS, SUCH
AS CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUNDS ARE
DISTRIBUTED BY PREMIER MUTUAL FUND SERVICES, INC.
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
(Continued from Page 1)
BY THIS PROSPECTUS, THE FUNDS ARE OFFERING INVESTOR SHARES AND CLASS
R SHARES. (CLASS R SHARES OF THE FUND WERE FORMERLY CALLED TRUST SHARES.)
INVESTOR SHARES AND CLASS R SHARES ARE IDENTICAL, EXCEPT AS TO THE SERVICES
OFFERED TO AND THE EXPENSES BORNE BY EACH CLASS. CLASS R SHARES ARE SOLD
PRIMARILY TO BANK TRUST DEPARTMENTS AND OTHER FINANCIAL SERVICE PROVIDERS
(INCLUDING MELLON BANK, N.A. AND ITS AFFILIATES) ("BANKS") ACTING ON BEHALF
OF CUSTOMERS HAVING A QUALIFIED TRUST OR INVESTMENT ACCOUNT OR RELATIONSHIP
AT SUCH INSTITUTION. INVESTOR SHARES ARE PRIMARILY SOLD TO RETAIL INVESTORS
BY THE FUNDS' DISTRIBUTOR AND BY BANKS, SECURITIES BROKERS OR DEALERS AND
OTHER FINANCIAL INSTITUTIONS ("AGENTS") THAT HAVE ENTERED INTO A SELLING
AGREEMENT WITH THE FUNDS' DISTRIBUTOR.
TABLE OF CONTENTS
EXPENSE SUMMARY.................................4
FINANCIAL HIGHLIGHTS............................5
DESCRIPTION OF THE FUNDS........................10
MANAGEMENT OF THE FUNDS.........................15
HOW TO BUY FUND SHARES..........................16
SHAREHOLDER SERVICES............................18
HOW TO REDEEM FUND SHARES.......................21
DISTRIBUTION PLAN (INVESTOR SHARES ONLY)........23
PERFORMANCE INFORMATION.........................24
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES........24
GENERAL INFORMATION.............................26
Page 2
[This Page Intentionally Left Blank]
Page 3
EXPENSE SUMMARY
The purpose of the following table is to assist you in understanding
the various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. Other Expenses and Total Fund Operating Expenses are based on
estimated amounts for the current fiscal year. Long-term investors in
Investor shares could pay more in 12b-1 fees than the economic equivalent of
paying the maximum front-end sales charges applicable to mutual funds sold by
members of the National Association of Securities Dealers, Inc. The
information in the table does not reflect any fee waivers or expense
reimbursement arrangements that may be in effect. Certain Agents (as defined
herein) may charge their clients direct fees for effecting transactions in
Fund shares; such fees are not reflected in the foregoing table. See
"Management of The Funds," "How to Buy Fund Shares" and "Distribution Plans
(Investor Shares Only)."
<TABLE>
<CAPTION>
The Funds INVESTOR SHARES CLASS R SHARES
--------------- --------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases................. none none
Maximum Sales Load Imposed on Reinvestments............. none none
Deferred Sales Load..................................... none none
Redemption Fee.......................................... none none
Exchange Fee............................................ none none
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fee.......................................... .35% .35%
12b-1 Fee**............................................. .25% none
Other Expenses*......................................... .00% .00%
______ _____
Total Fund Operating Expenses........................... .60% .35%
</TABLE>
<TABLE>
EXAMPLE:
You would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period: INVESTOR SHARES CLASS R SHARES
--------------- --------------
<S> <C> <C> <C>
1 Year $ 6 $ 4
3 Years $19 $ 11
5 Years $33 $ 20
10 Years $75 $ 44
</TABLE>
* Does not include fees and expenses of the non-interested Trustees
(including counsel). The investment manager is contractually required to
reduce its Management Fee in an amount equal to the
Fund's allocable portion of such fees and expenses, which are estimated to be
0.02% of the Fund's net assets. (See "Management.of the Funds.")
** See "Distribution Plan (Investor Shares only)" for a description of a
Fund's Distribution Plan for the Investor shares.
The Funds understand that banks, brokers, dealers or other financial
institutions (including Dreyfus and its affiliates) (collectively "Agents")
may charge fees to their clients who are owners of a Fund's Investor shares
for various services provided in connection with a client's account. These
fees would be in addition to any amounts received by an Agent under its
Selling Agreement ("Agreement") with Premier Mutual Fund Services, Inc.
("Premier"). The Agreement requires each Agent to disclose to its clients any
compensation payable to such Agent by Premier and any other compensation
payable by the clients for various services provided in connection with their
accounts.
- -------------------------------------------------------------------------------
THE INFORMATION CONTAINED IN THE TABLE ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR
LESS THAN THOSE SHOWN.
- -------------------------------------------------------------------------------
Page 4
FINANCIAL HIGHLIGHTS
The following tables are based upon a single Investor or Class R
share outstanding through each fiscal year (period) and should be read in
conjunction with the financial statements and related notes that appear in
each Fund's Semi-Annual Report dated December 31, 1994, which is incorporated
by reference into the SAI. The financial statements and related notes, as
well as the information in the tables below insofar as it relates to the
fiscal year (period) ended June 30, 1994, have been audited by KPMG Peat
Marwick LLP, independent auditors, whose report thereon appears in the Funds'
Annual Report. Further information about the performance of each Fund is also
included in each Fund's Annual Report, which may be obtained without charge.
The information in the tables below for the fiscal years (periods) prior to
the fiscal year (period) ended June 30, 1994, has been audited by other
independent auditors.
<TABLE>
DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
SIX MONTHS
PERIOD ENDED ENDED DECEMBER
YEAR OR PERIOD ENDED NOVEMBER 30, JUNE 30, 31, 1994###
------------------------------------------------- ----------------
1988* 1989 1990 1991 1992 1993# 1994## (UNAUDITED)
----- ----- ----- ----- ----- ----- ------ ---------
<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 0.014
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.033) (0.060) (0.056) (0.046) (0.031) (0.023) (0.012) (0.014)
----- ----- ----- ----- ----- ----- ------ ------
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% 2.41% 5.75% 4.65% 3.10% 2.41% 1.25% 1.37%
----- ----- ----- ----- ----- ----- ------ ------
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 $16,095
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%** 2.74%**
</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 of
Shares were reclassified as a single class known as the Investor shares.
The Financial Highlights for the six months ended December 31, 1994 are
based upon an Investor share outstanding. The amounts shown for the
period ended June 30, 1994 were calculated using the performance of a
Retail share outstanding from December 1, 1993 to April 3, 1994, and the
performance of an Investor share outstanding from April 4, 1994 to June
30, 1994. The Financial Highlights for the year ended November 30, 1993,
and prior periods are based upon a Retail share outstanding.
** Annualized.
*** Net investment income per share before waiver of fees and/or
reimbursement of expenses by investment adviser and/or
custodian and/or transfer agent for the period ended June 30, 1994, for
the years ended November 30, 1993, 1992, 1991, 1990, 1989, and for the
period ended November 30, 1988, were $0.010, $0.016, $0.026, $0.041,
$0.050, $0.053, and $0.028, respectively.
# The per share amounts have been calculated using the monthly
average shares method, which more appropriately
presents per share data for this period since use of the undistributed
method did not accord with results of operations.
## The Fund changed its fiscal year end to June 30. Prior to
this, the Fund's fiscal year end was November 30. Prior
to April 4, 1994, The Boston Company Advisors, Inc. served as the Fund's
investment adviser. 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 serves as the
Fund's investment manager.
+ Annualized expense ratios before voluntary waiver of fees and/or
reimbursement of expenses by investment adviser
and/or custodian and/or transfer agent for the period ended June 30,
1994, for the years ended November 30, 1993, 1992, 1991, 1990, 1989, and
for the period ended November 30, 1988 were 0.85%, 1.08%, 0.83%, 0.78%,
0.93%, 1.01%, and 1.41%, respectively.
++ Total return represents aggregate total return for the periods indicated.
Page 5
<TABLE>
DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH PERIOD.*
PERIOD SIX MONTHS
PERIOD ENDED ENDED ENDED DECEMBER
NOVEMBER 30, JUNE 30, 31, 1994###
1993*# 1994## (UNAUDITED)
------------- ------------ ---------------
<S> <C> <C> <C>
Net asset value, beginning of period...................... $1.00 $1.00 $1.00
----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income***.......................... 0.020 0.013 0.015
LESS DISTRIBUTIONS:
Distributions from net investment income.......... (0.020) (0.013) (0.015)
----- ----- -----
Net asset value, end of period............................ $1.00 $1.00 $1.00
===== ===== =====
TOTAL RETURN.............................................. 1.98% 1.31% 1.50%
----- ----- -----
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets, end of period (in 000's).............. $6,408 $9,747 $14,652
Ratio of expenses to average net assets........... 0.28%** 0.29%** 0.35%**
Ratio of net investment income to average net assets 2.13%** 2.29%** 2.99%**
</TABLE>
- --------------------------
* The Fund commenced selling Investment Class shares on February
1, 1993.Effective April 4, 1994, the Investment Class shares were
reclassified as the Trust shares. Effective October 17, 1994, the Trust
shares were redesignated Class R shares.
** Annualized.
*** Net investment income per share before waiver of fees and
reimbursement of expenses by investment adviser and/or custodian and/or
transfer agent for the periods ended June 30, 1994 and November 30, 1993
were $0.011 and $0.013, respectively.
# The per share amounts have been calculated using the monthly
average shares method, which more appropriately
presents per share data for this period since use of the undistributed
method did not accord with results of operations.
## The Fund changed its fiscal year end to June 30. Prior to
this, the Fund's fiscal year end was November 30. Prior
to April 4, 1994, The Boston Company Advisors, Inc. served as the Fund's
investment adviser. 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 serves as the
Fund's investment manager.
+ Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by investment adviser and/or custodian and/or
transfer agent for the periods ended June 30, 1994 and November 30, 1993
were 0.67% and 1.03%, respectively.
++ Total return represents aggregate total return for the periods
indicated.
Page 6
<TABLE>
DREYFUS/LAUREL MASSACHUSETTS TAX-FREE MONEY FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR.*
SIX MONTHS
ENDED
YEAR ENDED JUNE 30, 12/31/94##
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994# (UNAUDITED)
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
Beginning of year.. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income*** 0.052 0.047 0.039 0.042 0.055 0.056 0.051 0.034 0.019 0. 0.013
LESS DISTRIBUTIONS:
Distributions from
net investment income.. (0.052) (0.047) (0.039) (0.042) (0.055) (0.056) (0.051) (0.034) (0.019) (0.018) (0.013)
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
TOTAL RETURN........... 5.45% 4.69% 3.97% 4.12% 5.62% 5.56% 4.93% 3.36% 1.94% 1.83% 1.31%
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Net assets,end of year
(in 000's)......... $100,406 $111,095 $137,295 $146,592 $134,941 $159,551 $160,392 $149,679 $68,952 $86,505 $103,479
Ratios of operating expenses
to average net assets 0.55% 0.50% 0.47% 0.65% 0.67% 0.65% 0.64% 0.67% 0.68% 0.70% 0.60%**
Ratios of net
investment income
to average net assets 5.08% 4.71% 3.92% 4.25% 5.45% 5.64% 5.07% 3.38% 1.98% 1.80% 2.61%**
</TABLE>
- --------------------------------------------
* On February 1, 1993, existing shares of the Fund were designated
the Retail Class and the Fund began offering the Institutional Class and
the Investment Class of shares. Effective April 4, 1994, the Retail and
Institutional Classes were reclassified as a single class of shares known
as Investor shares. The Financial Highlights for the six months ended
December 31, 1994 are based upon an Investor share outstanding. The
amounts shown for the year ended June 30, 1994, were calculated using the
performance of a Retail share outstanding from July 1, 1993, to April 3,
1994, and the performance of an Investor share outstanding from April 4,
1994, to June 30,1994. The Financial Highlights for the year ended June
30, 1993, and prior periods are based upon a Retail share outstanding.
# Prior to April 4, 1994, The Boston Company Advisors, Inc.
served as the Fund's investment adviser. 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 serves as the
Fund's investment manager.
** Annualized.
*** Net investment income per share before waiver of fees and/or
reimbursement of expenses by investment adviser and/or custodian and/or
transfer agent for the years ended June 30, 1994, 1993, 1989, 1987, 1986,
1985 were $0.017, $0.019, $0.055, $0.038, $0.044 and $0.049,
respectively.
+ Annualized expense ratios before voluntary waiver of
fees and/or reimbursement of expenses by investment adviser and/or
custodian and/or transfer agent for the years ended June 30, 1994, 1993,
1989, 1987, 1986 and 1985 would have been 0.78%, 0.69%, 0.70%, 0.64%,
0.79% and 0.86%, respectively.
++ Total return represents aggregate total return for the periods
indicated.
Page 7
<TABLE>
DREYFUS/LAUREL MASSACHUSETTS TAX-FREE MONEY FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.(1)
SIX MONTHS
PERIOD YEAR ENDED
ENDED ENDED 12/31/94##
6/30/93* 6/30/94# (UNAUDITED)
------- --------- --------
<S> <C> <C> <C>
Net asset value, beginning of period............................... $1.00 $1.00 $1.00
----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income***....................................... 0.007 0.019 0.014
LESS DISTRIBUTIONS:
Distributions from net investment income....................... (0.007) (0.019) (0.014)
----- ----- -----
Net Asset Value, end of period..................................... $1.00 $1.00 $1.00
===== ===== =====
TOTAL RETURN....................................................... 0.73% 1.97% 1.44%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net Assets, end of period (in 000's)............................... $19,645 $19,830 $30,679
Ratios of expenses to average net assets........................... 0.57%** 0.56% 0.35%**
Ratios of net investment income to average net assets.............. 1.78%** 1.94% 2.86%**
</TABLE>
- -------------------------
(1) The Fund commenced selling Investment Class shares on February
1, 1993. Effective April 4, 1994, the Investment
Class was reclassified as the Trust shares. Effective October 17, 1994,
Trust shares were redesignated Class R shares.
* The Fund commenced selling Investment shares on February 1,
1993.
** Annualized.
***Net investment income per share before waiver of fees and
reimbursement of expenses by investment adviser and/or custodian and/or
transfer agent for the year ended June 30, 1994 and for the period ended
June 30, 1993 were $0.019 and $0.007, respectively.
+ Annualized expense ratios before voluntary waiver of fees and/or
reimbursement of expenses by investment adviser and/or custodian and/or
transfer agent for the year ended June 30, 1994 and for the period ended
June 30, 1993 would have been 0.64% and 0.62%, respectively.
++ Total return represents aggregate total return for the periods
indicated.
# Prior to April 4, 1994, The Boston Company Advisors, Inc.
served as the Fund's investment adviser. From April 4, 1994 through
October 16, 1994, Mellon Bank, N.A. served as the investment manager for
the Fund beginning April 4, 1994.
## Effective October 17, 1994, The Dreyfus Corporation serves as the
Fund's investment manager.
Page 8
<TABLE>
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND
FOR AN INVESTOR SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
SIX MONTHS
PERIOD ENDED
ENDED DECEMBER 31,
YEAR OR PERIOD ENDED NOVEMBER 30, JUNE 30 1994##
----------------------------------------------------------
1988* 1989 1990 1991 1992 1993 1994# (UNAUDITED)
----- ----- ----- ----- ----- ----- ----- -----
<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 0.011
LESS DISTRIBUTIONS:
Dividends from net investment income (0.032) (0.058) (0.054) (0.046) (0.031) (0.021) (0.012) (0.01`)
Distributions 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% 1.15%
----- ----- ----- ----- ----- ----- ----- -----
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 $6,347
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%** 2.24%**
</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 Institu
tional Classes were reclassified as a single class of shares known as
Investor shares. The Financial Highlights for the six months ended
December 31, 1994 are based upon an Investor share outstanding. The
amounts shown for the period ended June 30, 1994 were calculated using
the performance of a Retail share outstanding from December 1, 1993 to
April 3, 1994, and the performance of an Investor share outstanding from
April 4, 1994 to June 30, 1994. The Financial Highlights for the year
ended November 30, 1993 and prior periods are based upon a Retail share
outstanding.
** Annualized
***Amount represents less than $.001 per Investor share for the year ended
November 30, 1992.
****Net investment income per share before waiver of fees and reimbursement
of expenses by investment adviser and/or custodian and/or transfer agent for
the period ended June 30, 1994 and for the years ended November 30, 1993,
1992, 1991, 1990, 1989 and for the period ended November 30, 1988 were
$0.009, $0.008, $0.040, $0.047, $0.050 and $0.026, respectively.
+ Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by investment adviser and/or custodian and/or
transfer agent for the 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 adviser.
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 serves as the
Fund's investment manager.
Page 9
<TABLE>
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND
FOR A CLASS R SHARE OUTSTANDING THROUGHOUT EACH PERIOD.*
SIX MONTHS
PERIOD ENDED
PERIOD ENDED ENDED DECEMBER 31,
NOVEMBER 30, JUNE 30, 1994
1993* 1994# (UNAUDITED)
---------------- ---------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period...................... $1.00 $1.00 $1.00
----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income***.......................... 0.018 0.013 0.012
LESS DISTRIBUTIONS:
Distributions from net investment income.................. (0.018) (0.013) (0.012)
----- ----- -----
Net asset value, end of period............................ $1.00 $1.00 $1.00
===== ===== =====
TOTAL RETURN.............................................. 1.76% 1.32% 1.27%
----- ----- -----
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's).............. $7,700 $5,459 $6,052
Ratio of expenses to average net assets........... 0.26%** 0.28%** 0.35%**
Ratio of net investment income to average net assets 2.12%** 2.27%** 2.49%**
</TABLE>
- ------------------------------------------------------------
* The Fund commenced selling Investment shares on February 1,
1993. Effective April 4, 1994, the Investment Class
was reclassified as the Trust shares.Effective October 17, 1994, Trust
shares were redesignated Class R shares.
** Annualized.
***Net investment income per share before waiver of fees and
reimbursement of expenses by investment adviser and/or custodian and/or
transfer agent for the periods ended June 30, 1994 and November 30, 1993
were $0.010 and $0.007, respectively.
+ Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by investment adviser and/or custodian and/or
transfer agent for the periods ended June 30, 1994 and November 30, 1993
were 0.82% and 1.22%, respectively.
++ Total return represents aggregate total return for the periods
indicated.
+++ The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30.Prior to April 4, 1994, The Boston
Company Advisors, Inc. served as the Fund's investment adviser. 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 serves as the
Fund's investment manager.
DESCRIPTION OF THE FUNDS
GENERAL
By this Prospectus, each Fund is offering Investor shares and Class R
shares. (Class R shares of the Funds were formerly called Trust Shares.)
Investor shares and Class R shares are identical, except as to the services
offered to and the expenses borne by each Class. Class R shares are sold
primarily to bank trust departments and other financial service providers
(including Mellon Bank and its affiliates) ("Banks") acting on behalf of
customers having a qualified trust or investment account or relationship at
such institution, or to customers who have received and hold shares of a Fund
distributed to them by virtue of such an account or relationship. Investor
shares are primarily sold to retail investors by the Distributor and by
Agents that have entered into a Selling Agreement with the Distributor. If
shares of a Fund are held in an account at a Bank or with an Agent, such Bank
or Agent may require you to place all Fund purchase, exchange and redemption
orders through them. All Banks and Agents have agreed to transmit transaction
requests to each Fund's transfer agent or to the Distributor. Distributor and
shareholder servicing paid by Investor shares will cause Investor shares to
have a higher expense ratio and pay lower dividends than Class R.
INVESTMENT OBJECTIVE AND POLICIES
Each Fund seeks current income exempt from Federal income taxes and
from the state personal income taxes for resident shareholders of the named
state. Each Fund seeks to achieve its objective by investing in debt
obligations issued by the Fund's respective state (e.g., California,
Massachusetts or New
Page 10
York), and such state's political subdivisions,
municipalities, public authorities and in municipal obligations issued by
other governmental entities if, in the opinion of counsel to the respective
issuers, the interest from such obligations is excluded from gross income for
Federal income tax purposes and is exempt from state personal income taxes
for resident shareholders of the named state ("Municipal Obligations").
Under normal market conditions, each Fund attempts to invest 100%,
and will invest a minimum of 80%, of its total assets in Municipal
Obligations of such Fund's named state. When, in the opinion of Dreyfus,
adverse market conditions exist for Municipal Obligations, and a "defensive"
investment posture is warranted, each Fund may temporarily invest more than
20% of its total assets in money market instruments having maturity and
quality characteristics comparable to those (discussed below) for Municipal
Obligations, but which produce interest which is not exempt from the state
personal income taxes for resident shareholders of a Fund's named state, or
more than 20% of its total assets in such instruments which produce income
exempt from Federal, but not the state personal income taxes for resident
shareholders of a Fund's named state, or more than 20% of its total assets in
taxable obligations (including obligations the interest on which is included
in the calculation of alternative minimum tax for individuals). Periods when
a defensive posture is warranted include those periods when a Fund's monies
available for investment exceed the relevant state's Municipal Obligations
available for purchase to meet such Fund's rating, maturity and other
investment criteria. Each Fund does not anticipate that it will find it
necessary to make any investments in securities the interest from which is
not exempt from Federal income and the respective state personal income
taxes. Each Fund's policy of investing a minimum of 80% of its total assets
in Municipal Obligations of such Fund's named state is a fundamental policy
of the Fund.
Each Fund seeks a high level of current income exempt from Federal
income taxes and from the state personal income taxes for resident
shareholders of the named state, to the extent consistent with the
preservation of capital and maintenance of liquidity. A Fund pursues these
objectives by investing in a varied portfolio of high quality, short-term
Municipal Obligations of such Fund's named state.
The Municipal Obligations purchased by the Funds consist of: (1)
municipal bonds; (2) municipal notes; and (3) municipal commercial paper. The
Funds will limit their portfolio investments to securities that, at the time
of acquisition, (i) are rated in the two highest categories by at least two
nationally recognized statistical rating organizations (or by one
organization if only one organization has rated the security), (ii) if not
rated, are obligations of an issuer whose other outstanding short-term debt
obligations are so rated, or (iii) if not rated, are of comparable quality,
as determined by Dreyfus and in accordance with procedures established by the
Board of Trustees. The Funds will limit their investments to securities that
present minimal credit risk, as determined by Dreyfus under procedures
established by the Board of Trustees.
The Funds invest only in securities that have remaining maturities of
thirteen months or less at the date of purchase. Floating rate or variable
rate obligations (described below) which are payable on demand under
conditions established by the SEC, may have a stated maturity in excess of
thirteen months; these securities will be deemed to have remaining maturities
of thirteen months or less. Each Money Fund maintains a dollar-weighted
average portfolio maturity of 90 days or less and seeks to maintain a
constant NAV of $1.00, although there is no assurance it can do so on a
continuing basis.
OTHER INVESTMENT POLICIES AND RISK FACTORS.
FLOATING RATE AND VARIABLE RATE OBLIGATIONS. The Funds may purchase
floating rate and variable rate obligations. These obligations bear interest
at rates that are not fixed, but vary with changes in specified market rates
or indices. Some of these obligations may carry a demand feature that permits
the Funds to receive the par value upon demand prior to maturity. The Funds
may invest in floating rate and variable rate obligations carrying stated
maturities in excess of thirteen months at the date of purchase if these
obligations carry demand features that comply with conditions established by
the SEC. The Funds
Page 11
will limit their purchases of floating rate and variable
rate Municipal Obligations to those meeting the quality standards applicable
to such Fund. Frequently, such obligations are secured by letters of credit
or other credit support arrangements provided by banks. The quality of the
underlying creditor or the bank, as determined by Dreyfus under the
supervision of the Trustees must also be equivalent to the quality standards
applicable to the Fund. In addition, Dreyfus monitors the earning power, cash
flow and other liquidity ratios of the issuers of such obligations, as well
as the creditworthiness of the institution responsible for paying the
principal amount of the obligations under the demand feature.
The Funds may invest in participation interests purchased from banks
in floating or variable rate Municipal Obligations owned by banks.
Participation interests carry a demand feature permitting the Funds to tender
them back to the bank. Each participation is backed by an irrevocable letter
of credit or guarantee of a bank which Dreyfus under the supervision of the
Trustees has determined meets the prescribed quality standards for the Funds.
Other types of tax-exempt instruments that may become available in
the future may be purchased by the Funds as long as Dreyfus believes the
quality of these instruments meets the Fund's quality standards.
OTHER INVESTMENT COMPANIES. Each Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with its investment objective and policies and permissible under
the Investment Company Act of 1940 (the "1940 Act"), as amended. As a
shareholder of another investment company, the Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that the Fund bears directly in connection with
its own operations.
TENDER OPTION BONDS. Each Fund may invest up to 10% of the value of
its assets in tender option bonds. A tender option bond is a Municipal
Obligation (generally held pursuant to a custodial arrangement) having a
relatively long maturity and bearing interest at a fixed-rate substantially
higher than prevailing short-term tax-exempt rates, that has been coupled
with the agreement of a third party, such as a bank, broker-dealer or other
financial institution, pursuant to which such institution grants the security
holders the option, at periodic intervals, to tender their securities to the
institution and receive the face value thereof. As consideration for
providing the option, the financial institution receives periodic fees equal
to the difference between the Municipal Obligation's fixed coupon rate and
the rate, as determined by a remarketing or similar agent at or near the
commencement of such period, that would cause the securities, coupled with
the tender option, to trade at par on the date of such determination. Thus,
after payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt rate.
Dreyfus, on behalf of the Fund, will consider on an ongoing basis the
creditworthiness of the issuer of the underlying Municipal Obligation, of any
custodian and the third-party provider of the tender option. In certain
instances and for certain tender option bonds, the option may be terminable
in the event of a default in payment of principal or interest on the
underlying Municipal Obligations and for other reasons. Each Fund will not
invest more than 10% of the value of such Fund's net assets in illiquid
securities, which would include tender option bonds for which the required
notice to exercise the tender feature is more than seven days if there is no
secondary market available for these obligations.
WHEN-ISSUED SECURITIES. The Funds may purchase Municipal Obligations
on a "when-issued" basis (i.e., delivery of and payment for the Municipal
Obligations normally take place within 45 days after the date of the purchase
commitment). The payment obligation and the interest rate on such securities
are fixed at the time of the purchase commitment. Although the Funds
generally will purchase Municipal Obligations on a when-issued basis with the
intention of acquiring the securities, the Funds may sell such securities
before the settlement date. Municipal Obligations purchased on a when-issued
basis, like other investments made by the Funds, may decline or appreciate in
value prior to their actual delivery to the Funds.
CERTAIN RISK CONSIDERATIONS REGARDING THE STATE OF CALIFORNIA. On
July 15, 1994, Moody's, citing the State's deteriorating financial position,
lowered California's general obligation bond ratings
Page 12
from Aa to A1. On July
15, 1994, S&P, citing the State's deteriorating financial position, lowered
California's general obligation bond ratings from A+ to A. Investors should
be aware that certain California constitutional amendments, legislative
measures, executive orders, administrative regulations and voter initiatives
could result in certain adverse consequences affecting California's
Constitution and statutes that limit the taxing and spending authority of
California governmental entities and may impair the ability of the issuers of
some California Municipal Obligations to maintain debt service on their
obligations. Other measures affecting the taxing or spending authority of
California or its political subdivisions may be approved or enacted in the
future. Some of the significant financial considerations relating to a Fund's
investments in California Municipal Obligations are summarized in the SAI.
CERTAIN RISK CONSIDERATIONS REGARDING THE COMMONWEALTH OF
MASSACHUSETTS. The Massachusetts statutes that limit the taxing authority of
certain Massachusetts governmental entities may impair the ability of some
issuers of Massachusetts Municipal Obligations to maintain debt service on
their obligations. Some of the significant financial considerations relating
to investments in Massachusetts Municipal Obligations are summarized in the
SAI. It should be noted that the Commonwealth has experienced fiscal
difficulties in recent years, including an operating deficit in each of the
fiscal years ended June 30, 1989 through 1991. Budgeted operating funds ended
fiscal 1992, 1993 and, based on preliminary financial information, fiscal
1994 with an excess of revenues and other sources over expenditures and other
uses. Budgeted revenues and other sources to be collected in fiscal 1995 are
currently estimated by the Executive Office of Administration and Finance to
fall short of the expenditures authorized by the fiscal 1995 budget.
During the period from 1989 through 1992, Massachusetts experienced a
slowdown in certain sectors of the economy, including high technology,
construction, real estate, financial services and manufacturing. Since 1992,
employment within most of these sectors has improved as part of a general
recovery of the economy. Employment losses within the manufacturing sector
have continued, but at a slower rate than in prior years. Any significant
imbalance in tax revenues and state expenditures is likely to affect the bond
ratings and credit standing of the public authorities and municipalities
within Massachusetts, as well as of the Commonwealth itself. Any such
imbalance could adversely affect the market values and marketability of
obligations issued by such entities, and could result in payment defaults on
outstanding obligations.
CERTAIN RISK CONSIDERATIONS REGARDING THE STATE OF NEW YORK AND NEW
YORK CITY. Certain substantial issuers of New York Municipal Obligations
(including issuers whose obligations may be acquired by the Funds) have
experienced serious financial difficulties in recent years. These
difficulties have at times jeopardized the credit standing and impaired the
borrowing abilities of all New York issuers and have generally contributed to
higher interest costs for their borrowings and fewer markets for their
outstanding debt obligations. In recent years, several different issues of
municipal securities of New York State and its agencies and instrumentalities
and of New York City have been downgraded by S&P and Moody's. A recurrence of
the financial difficulties previously experienced by certain issuers of New
York Municipal Obligations could result in defaults or declines in the market
values of those issuers' existing obligations and, possibly, in the
obligations of other issuers of New York Municipal Obligations. Default by an
issuer of New York Municipal Obligations with respect to the payment of their
municipal obligations could adversely affect the market values and
marketability of all New York Municipal Obligations, and, consequently, the
NAV of a Fund's portfolio. Other considerations effecting the Funds'
investments in New York Municipal Obligations are summarized in the SAI.
LIMITING INVESTMENT RISKS AND CERTAIN RISK CONSIDERATIONS. The Funds
are subject to a number of investment limitations. Certain limitations are
matters of fundamental policy and may not be changed without the affirmative
vote of the holders of a majority of a Fund's outstanding Shares. The SAI
describes all of the Funds' fundamental and non-fundamental restrictions.
The investment objective, policies, restrictions, practices and
procedures of a Fund, unless other-
Page 13
wise specified, may be changed without
shareholder approval. If a Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether such Fund remains an appropriate investment in light of their then
current position and needs.
In order to permit the sale of the Funds' Shares in certain states,
the Funds may make commitments more restrictive than the investment policies
and restrictions described in this Prospectus and the SAI. Should a Fund
determine that any such commitment is no longer in the best interests of such
Fund, it may consider terminating sales of its Shares in the states involved.
Each Fund is classified as a "non-diversified" investment company, as
defined under the 1940 Act, and therefore, each Fund could invest all of its
assets in the obligations of a single issuer or relatively few issuers.
However, the Funds intend to conduct their operations so that each Fund will
qualify under the Internal Revenue Code of 1986 (the "Code") as a "regulated
investment company". To continue to qualify, among other requirements, each
Fund will be required to limit its investments so that, at the close of each
quarter of the taxable year, with respect to at least 50% of its total
assets, not more than 5% of such assets will be invested in the securities of
a single issuer. In addition, not more than 25% in value of each Fund's total
assets may be invested in the securities of a single issuer at the close of
each quarter of the taxable year. However, the provisions of the Code place
limits on the extent to which a Fund's portfolio may be non-diversified.
The ability of the Funds to meet their investment objectives is
subject to the ability of municipal issuers to meet their payment
obligations. In addition, the portfolio of each Fund will be affected by
general changes in interest rates which may result in increases or decreases
in the value of Fund holdings. Investors should recognize that, in periods of
declining interest rates, the yield of each Fund will tend to be somewhat
higher than prevailing market rates, and in periods of rising interest rates,
the yield of each Fund will tend to be somewhat lower. Also, when interest
rates are falling, the influx of new money to each Fund will likely be
invested in portfolio instruments producing lower yields than the balance of
that Fund's portfolio, thereby reducing the current yield of the Fund. In
periods of rising interest rates, the opposite can be expected to occur.
The Funds may invest without limit in Municipal Obligations which are
repayable out of revenue streams generated from economically related projects
or facilities or whose issuers are located in the same state. Sizable
investments in these obligations could increase risk to the Funds should any
of the related projects or facilities experience financial difficulties. To
the extent the Funds may invest in private activity bonds, each Fund may
invest only up to 5% of its total assets in bonds where payment of principal
and interest are the responsibility of a company with less than three years
operating history. Each Fund is authorized to borrow up to 10% of its total
assets for temporary or emergency purposes and to pledge its assets to the
same extent in connection with such borrowings.
MASTER/FEEDER OPTION. The Dreyfus/Laurel Tax-Free Municipal Funds may
in the future seek to achieve a Fund's investment objectives by investing all
of the Fund's assets in another investment company having the same investment
objectives and substantially the same investment policies and restrictions as
those applicable to such Fund. Shareholders of a Fund will be given at least
30 days' prior notice of any such investment. Such investment would be made
only if the trustees determine it to be in the best interest of a Fund and
their shareholders. In making that determination, the Trustees will consider,
among other things, the benefits to shareholders and/or the opportunity to
reduce costs and achieve operational efficiencies. Although the Funds believe
that the Trustees will not approve an arrangement that is likely to result in
higher costs, no assurance is given that costs will be materially reduced if
this option is implemented.
Page 14
MANAGEMENT OF THE FUNDS
INVESTMENT MANAGER. Dreyfus, located at 200 Park Avenue, New York,
New York 10166, was formed in 1947. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). As of March 31, 1995, Dreyfus managed or administered
approximately $72 billion in assets for more than 1.9 million investor
accounts nationwide.
Dreyfus serves as the Funds' investment manager. Dreyfus supervises
and assists in the overall management of the Funds' affairs under an
Investment Management Agreement with the Funds, subject to the overall
authority of the Board of Trustees of The Dreyfus/Laurel Tax-Free Municipal
Funds in accordance with Massachusetts law. Pursuant to the Investment
Management Agreement, Dreyfus provides, or arranges for one or more third
parties to provide investment advisory, administrative, custody, fund
accounting and transfer agency services to the Funds. As the Funds'
investment manager, Dreyfus manages the Funds by making investment decisions
based on the Funds' investment objective, policies and restrictions.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon
is among the twenty-five largest bank holding companies in the United States
based on total assets. Mellon's principal wholly-owned subsidiaries are
Mellon Bank, Mellon Bank (DE) National Association, Mellon Bank (MD), The
Boston Company, Inc., AFCO Credit Corporation and a number of companies known
as Mellon Financial Services Corporations. Through its subsidiaries,
including Dreyfus, Mellon managed approximately $193 billion in assets as of
December 31, 1994, including $70 billion in mutual fund assets. As of
December 31, 1994, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
approximately $659 billion in assets, including approximately $74 billion in
mutual fund assets.
Under the Investment Management Agreement, the Funds pay a fee,
computed daily and paid monthly, at the annual rate of .35% of such Funds'
average daily net assets less certain expenses described below. Dreyfus pays
all of the expenses of a Fund except brokerage fees, taxes, interest, fees
and expenses of the non-interested Trustees (including counsel fees), Rule
12b-1 fees (if applicable) and extraordinary expenses. Although Dreyfus does
not pay for the fees and expenses of the non-interested trustees (including
counsel fees), Dreyfus is contractually required to reduce its investment
management fee in an amount equal to a Fund's allocable share of such
expenses. In order to compensate Dreyfus for paying virtually all of a Fund's
expenses, each Fund's investment management fee is higher than the investment
advisory fees paid by most investment companies. Most, if not all, such
companies also pay for additional non-investment advisory expenses that are
not paid by such companies' investment adviser. From time to time, Dreyfus
may waive (either voluntarily or pursuant to applicable state limitations)
additional investment management fees payable by the Fund. For the period
from July 1, 1993 through April 3, 1994, the Dreyfus/Laurel Massachusetts
Tax-Free Money Fund paid its investment adviser, The Boston Company Advisors,
Inc. ("Boston Advisors") (an indirect wholly-owned subsidiary of Mellon Bank
Corporation), 0.39% (annualized) of the Fund's average daily net assets in
investment advisory fees (net of fees waived and expenses reimbursed), under
such Fund's previous investment advisory contract (such contract covered only
the provision of investment advisory and certain specified administrative
services). For the period from April 4, 1994 through the fiscal year ended
June 30, 1994, the Dreyfus/Laurel Massachusetts Tax-Free Money Fund paid
Mellon Bank 0.35% (annualized) of such Fund's average daily net assets in
investment management fees. For the period from December 1, 1993 through
April 3, 1994, the Dreyfus/Laurel California Tax-Free Money Fund and the
Dreyfus/Laurel New York Tax-Free Money Fund each paid its investment adviser,
Boston Advisors,
Page 15
0.00% and 0.00% (annualized), respectively, of such Fund's
average daily net assets in investment advisory fees (net of fees waived and
expenses reimbursed), under such Fund's previous investment advisory contract
(such contract covered only the provision of investment advisory and certain
specified administrative services). For the period from April 4, 1994 through
the fiscal year ended June 30, 1994, the Dreyfus/Laurel California Tax-Free
Money Fund and the Dreyfus/Laurel New York Tax-Free Money Fund each paid
Mellon Bank 0.35% and 0.35% (annualized), respectively, of such Fund's
average daily net assets in investment management fees.
For the fiscal year ended June 30, 1994, total operating expenses
(excluding Rule 12b-1 fees) (net of fees waived and expenses reimbursed) of
the Dreyfus/Laurel Massachusetts Tax-Free Money Fund were 0.60% and 0.56%
(annualized) of the Fund's average daily net assets for the Investor and
Trust Classes, respectively. For the fiscal year ended June 30, 1994, total
operating expenses (excluding Rule 12b-1 fees) (net of fees waived and
expenses reimbursed) of the Fund were 0.67% and 0.62% (annualized) of the
Fund's average daily net assets for the Investor and Trust Classes,
respectively. For the period ended June 30, 1994, total operating expenses
(excluding Rule 12b-1 fees) (net of fees waived and expenses reimbursed) of
the Dreyfus/Laurel California Tax-Free Money Fund were 0.33% and 0.29%
(annualized) of the Fund's average daily net assets for the Investor and
Trust Classes, respectively. For the period ended June 30, 1994, total
operating expenses (excluding Rule 12b-1 fees) (net of fees waived and expense
s reimbursed) of the Dreyfus/Laurel New York Tax-Free Money Fund were 0.30%
and 0.28% (annualized) of the Fund's average daily net assets for the
Investor and Trust Classes, respectively.
In addition, Investor shares may be subject to certain distribution
and service fees. See "Distribution Plan (Investor Shares only)."
Dreyfus may pay the Distributor for shareholder services from
Dreyfus' own assets, including past profits but not including the management
fee paid by the Funds. The Distributor may use part or all of such payments
to pay Agents in respect of these services.
Dreyfus is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the
case of agency transactions, financial institutions that are affiliated with
Dreyfus or Mellon Bank or that have sold shares of the Funds, if Dreyfus
believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms. From
time to time, to the extent consistent with its investment objective, policies
and restrictions, the Funds may invest in securities of companies with which
Mellon Bank has a lending relationship.
The Funds' distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"). The Distributor is located at One Exchange Place, Boston,
Massachusetts 02109. The Distributor is a wholly-owned subsidiary of
Institutional Administration Services, Inc., a provider of mutual fund
administration services, the parent company of which is Boston Institutional
Group, Inc.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND
SUB-ADMINISTRATOR--Mellon Bank (One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258) is the Funds' custodian and fund accountant. The Funds'
Transfer and Dividend Disbursing Agent is The Shareholder Services Group,
Inc. (the "Transfer Agent"), a subsidiary of First Data Corporation, One
American Express Plaza, Providence, Rhode Island 02903. Premier Mutual Fund
Services, Inc. is the Funds' sub-administrator and, pursuant to a
Sub-Administration Agreement with Dreyfus, provides various administrative
and corporate secretarial services to the Funds.
HOW TO BUY FUND SHARES
GENERAL-- Investor shares are offered to any investor and may be
purchased through the Distributor or Agents that have entered into Selling
Agreements with the Distributor.
Class R shares are sold primarily to Banks acting on behalf of
customers having a qualified trust or investment account or relationship at
such institution, or to customers who have received and hold shares of the
Fund distributed to them by virtue of such an account or relationship.
Page 16
Stock certificates are issued only upon your written request. No
certificates are issued for fractional shares. The Funds reserve the right to
reject any purchase order.
The minimum initial investment is $2,500, or $1,000 if you are a
client of an Agent which has made an aggregate minimum initial purchase for
its customers of $2,500. Subsequent investments must be at least $100. The
initial investment must be accompanied by the Fund's Account Application. For
full-time or part-time employees of Dreyfus or any of its affiliates or
subsidiaries, directors of Dreyfus, board members of a fund advised by
Dreyfus including members of the Company's board, or the spouse or minor
child of any of the foregoing, the minimum initial investment in $1,000. For
full-time or part-time employees of Dreyfus or any of its affiliates or
subsidiaries who elect to have a portion of their pay directly deposited into
their Fund account, the minimum initial investment is $50. The Funds reserve
the right to vary further the initial and subsequent investment minimum
requirements at any time.
You may purchase shares of a Fund by check or wire, or through the
Dreyfus TELETRANSFER Privilege described below. Checks should be made payable
to "The Dreyfus Family of Funds." Payments to open new accounts which are
mailed should be sent to The Dreyfus Family of Funds, P.O. Box 9387,
Providence, Rhode Island 02940-9387, together with your Account Application
indicating which Class of shares is being purchased. For subsequent
investments, your Fund account number should appear on the check and an
investment slip should be enclosed and sent to The Dreyfus Family of Funds,
P.O. Box 105, Newark, New Jersey 07101-0105. Neither initial nor subsequent
investments should be made by third party check. PURCHASE ORDERS MAY BE
DELIVERED IN PERSON ONLY TO A DREYFUS FINANCIAL CENTER. THESE ORDERS WILL BE
FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. FOR
THE LOCATION OF THE NEAREST DREYFUS FINANCIAL CENTER, PLEASE CALL ONE OF THE
TELEPHONE NUMBERS LISTED UNDER "GENERAL INFORMATION."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to Boston Safe Deposit & Trust Co., together with the
applicable Class' DDA # as shown below, for purchase of Fund shares in your
name:
DDA# 043818 Dreyfus/Laurel California Tax-Free Money Fund/Investor
shares;
DDA# 043796 Dreyfus/Laurel California Tax-Free Money Fund/Class R
shares;
DDA# 043397 Dreyfus/Laurel Massachusetts Tax-Free Money Fund/Investor
shares;
DDA# 043389 Dreyfus/Laurel Massachusetts Tax-Free Money Fund/Class R
shares;
DDA# 043419 Dreyfus/Laurel New York Tax-Free Money Fund/Investor
shares;
DDA# 043400 Dreyfus/Laurel New York Tax-Free Money Fund/Class R
shares.
The wire must include your Fund account number (for new accounts, your
Taxpayer Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of
Fund shares is by wire, you should call 1-800-645-6561 after completing your
wire payment in order to obtain your Fund account number. Please include your
Fund account number on the Funds' Account Application and promptly mail the
Account Application to the Fund, as no redemptions will be permitted until
the Account Application is received. You may obtain further information about
remitting funds in this manner from your bank. All payments should be made in
U.S. dollars and, to avoid fees and delays, should be drawn only on U.S. banks
. A charge will be imposed if any check used for investment in your account
does not clear. The Funds make available to certain large institutions the
ability to issue purchase instructions through compatible computer
facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House ("ACH") member. You must
direct the institution to transmit immediately available funds through the
ACH System to Boston Safe Deposit & Trust Co. with instructions to credit
your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS
Page 17
"4540" for Dreyfus/Laurel California Tax-Free Money Fund/Investor
shares;
"4530" for Dreyfus/Laurel California Tax-Free Money Fund/Class R
shares;
"4760" for Dreyfus/Laurel Massachusetts Tax-Free Money Fund/Investor
shares;
"4750" for Dreyfus/Laurel Massachusetts Tax-Free Money Fund/Class R
shares;
"4780" for Dreyfus/Laurel New York Tax-Free Money Fund/Investor
shares;
"4770" for Dreyfus/Laurel New York Tax-Free Money Fund/Class R
shares.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Other Distributions and
Taxes" and the Funds' Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to the Fund could
subject you to a $50 penalty imposed by the Internal Revenue Service (the
"IRS").
An investment portfolio's NAV refers to the worth of one Share. The
NAV for Investor and Class R shares of a Fund is calculated on the basis of
amortized cost, which involves initially valuing a portfolio instrument at
its cost and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest rates
on the market value of the instrument. Each Fund intends to maintain a
constant NAV of $1.00, although there is no assurance that this can be done
on a continuing basis.
The offering price of shares of the Funds is their NAV. Investments
and requests to exchange or redeem shares received by a Fund before 4 p.m.,
Eastern time, on each day that the New York Stock Exchange is open (a
"business day") are effective on, and will receive the price next determined,
that business day (except purchase orders made through the Dreyfus TELETRANSFE
R Privilege, which are effective one business day after your call). The NAV
of a Fund is calculated two times each business day, at 12 noon and 4 p.m.,
Eastern time. Investment, exchange or redemption requests received after 4
p.m., Eastern time are effective on, and receive the first share price
determined, the next business day.
DREYFUS TELETRANSFER PRIVILEGE -- You may purchase shares of a Fund
(minimum $500 and maximum $150,000 per day) by telephone if you have checked
the appropriate box and supplied the necessary information on the Funds'
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 Funds may modify or terminate this Privilege at any
time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Fund shares by telephoning
1-800-221-4060 or, if calling from overseas, 1-401-455-3306.
SHAREHOLDER SERVICES
The services and privileges described under this heading may not be
available to clients of certain Agents and some Agents may impose certain
conditions on their clients which are different from those described in this
Prospectus. You should consult your Agent in this regard.
FUND EXCHANGES
You may purchase, in exchange for shares of a Class, shares of the
same class of certain other funds managed or administered by Dreyfus, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-645-6561 to determine if
it is available and whether any conditions are imposed on its use.
To request an exchange, you or your Agent acting on your behalf must
give exchange instructions to the Transfer Agent in writing or by telephone.
Before any exchange, you must obtain and should review a copy of the current
prospectus of the fund into which the exchange is being made. Prospectuses
may be obtained by calling 1-800-645-6561. The shares being exchanged must
have a current value of at least
Page 18
$500; furthermore, when establishing a new
account by exchange, the shares being exchanged must have a value of at least
the minimum initial investment required for the fund into which the exchange
is being made. The ability to issue exchange instructions by telephone is
given to all Fund shareholders automatically, unless you check the relevant
"No" box on the Account Application, indicating that you specifically refuse
this Privilege. The Telephone Exchange Privilege may be established for an
existing account by written request, signed by all shareholders on the
account, or by a separate Shareholder Services Form, also available by
calling 1-800-645-6561. If you previously have established the Telephone
Exchange Privilege, you may telephone exchange instructions by calling
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. See "How to Redeem
Fund Shares_Procedures." Upon an exchange, the following shareholder
services and privileges, as applicable and where available, will be
automatically carried over to the fund into which the exchange is made:
Telephone Exchange Privilege, Check Redemption Privilege, Wire Redemption
Privilege, Telephone Redemption Privilege, Dreyfus TELETRANSFER Privilege and
the dividends and distributions payment option (except for Dividend Sweep)
selected by the investor.
Shares will be exchanged at the next determined NAV; however, a sales
load may be charged with respect to exchanges of Investor shares into funds
sold with a sales load. If you are exchanging Investor shares into a fund
that charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load, if the shares
of the fund from which you are exchanging were: (a) purchased with a sales
load, (b) acquired by a previous exchange from shares purchased with a sales
load, or (c) acquired through reinvestment of dividends or other
distributions paid with respect to the foregoing categories of shares. To
qualify, at the time of the exchange you must notify the Transfer Agent or
your Agent must notify the Distributor. Any such qualification is subject to
confirmation of your holdings through a check of appropriate records. See
"Shareholder Services" in the SAI. No fees currently are charged shareholders
directly in connection with exchanges, although the Fund reserves the right,
upon not less than 60 days' written notice, to charge shareholders a nominal
fee in accordance with rules promulgated by the SEC. The Funds reserve the
right to reject any exchange request in whole or in part. The availability of
fund exchanges may be modified or terminated at any time upon notice to
shareholders.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
DREYFUS AUTO-EXCHANGE PRIVILEGE
Dreyfus Auto-Exchange Privilege enables you to invest regularly (on a
semi-monthly, monthly, quarterly or annual basis), in exchange for shares of
a Fund, in shares of the same class of certain other funds in the Dreyfus
Family of Funds of which you are currently an investor. The amount you
designate, which can be expressed either in terms of a specific dollar or
share amount ($100 minimum), will be exchanged automatically on the first
and/or fifteenth day of the month according to the schedule you have
selected. Shares will be exchanged at the then-current NAV; however a sales
load may be charged with respect to exchanges of Investor shares into funds
sold with a sales load. The right to exercise this Privilege may be modified
or canceled by the Funds or the Transfer Agent. You may modify or cancel your
exercise of this Privilege at any time by mailing written notification to The
Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671.
The Funds may charge a service fee for the use of this Privilege. No such fee
currently is contemplated. The exchange of shares of one fund for shares of
another is treated for Federal income tax purposes as a sale of the shares
given in exchange by the shareholder and, therefore, an exchanging
shareholder may realize a taxable gain or loss. For more information
concerning this Privilege and the funds in the Dreyfus Family of Funds
eligible to participate in this Privilege, or to obtain a Dreyfus
Auto-Exchange Authorization Form, please call toll free 1-800-645-6561.
Page 19
DREYFUS-AUTOMATIC ASSET BUILDER
Dreyfus-AUTOMATIC Asset Builder permits you to purchase shares of a
Fund (minimum of $100 and maximum of $150,000 per transaction) at regular
intervals selected by you. Shares of a Fund are purchased by transferring
funds from the bank account designated by you. At your option, the bank
account designated by you will be debited in the specified amount, and Fund
shares will be purchased, once a month, on either the first or fifteenth day,
or twice a month, on both days. Only an account maintained at a domestic
financial institution which is an ACH member may be so designated. To
establish a Dreyfus-AUTOMATIC Asset Builder account, you must file an
authorization form with the Transfer Agent. You may obtain the necessary
authorization by calling 1-800-645-6561 from the Distributor. You may cancel
your participation in this Privilege or change the amount of purchase at any
time by mailing written notification to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671 and the notification will be
effective three business days following receipt. The Funds may modify or
terminate this Privilege at any time or charge a service fee. No such fee
currently is contemplated.
DREYFUS DIVIDEND OPTIONS
Dreyfus Dividend Sweep enables you to invest automatically dividends
or dividends and capital gain distributions, if any, paid by a Fund in shares
of the same class of certain other funds in the Dreyfus Family of Funds of
which you are an investor. Shares of the other fund will be purchased at the
then-current NAV; however, a sales load may be charged with respect to
investments in shares of a fund sold with a sales load. If you are investing
in a fund that charges a sales load, you may qualify for share prices which
do not include the sales load or which reflect a reduced sales load. See
"Shareholder Services" in the SAI. Dreyfus Dividend ACH permits you to
transfer electronically on the payment date dividends or dividends and
capital gain distributions, if any, from a Fund to a designated bank account.
Only an account maintained at a domestic financial institution which is an
ACH member may be so designated. Banks may charge a fee for this service.
For more information concerning these privileges, or to request a
Dreyfus Dividend Options Form, please call toll free 1-800-645-6561. You may
cancel these privileges by mailing written notification to The Dreyfus Family
of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. Enrollment in
or cancellation of these Privileges is effective three business days
following receipt. These Privileges are available only for existing accounts
and may not be used to open new accounts. Minimum subsequent investments do
not apply for Dreyfus Dividend Sweep. The Funds may modify or terminate these
Privileges at any time or charge a service fee. No such fee currently is
contemplated.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE
Dreyfus Government Direct Deposit Privilege enables you to purchase
shares of a Fund (minimum of $100 and maximum of $50,000 per transaction) by
having Federal salary, Social Security, or certain veterans', military or
other payments from the Federal government automatically deposited into your
Fund account. You may deposit as much of such payments as you elect. To
enroll in Dreyfus Government Direct Deposit, you must file with the Transfer
Agent a completed Direct Deposit Sign-Up Form for each type of payment that
you desire to include in this Privilege. The appropriate form may be obtained
by calling 1-800-645-6561. Death or legal incapacity will terminate your
participation in this Privilege. You may elect at any time to terminate your
participation by notifying in writing the appropriate Federal agency.
Further, the Funds may terminate your participation upon 30 days' notice to
you.
DREYFUS PAYROLL SAVINGS PLAN
Dreyfus Payroll Savings Plan permits you to purchase shares of a Fund
(minimum of $100 per transaction) automatically on a regular basis. Depending
upon the direct deposit program of your employer, you may have part or all of
your paycheck transferred to your existing Dreyfus account electronically
through the ACH system at each pay period. To establish a Dreyfus Payroll
Savings Plan account, you must file an authorization form with your
employer's payroll department. Your employer must complete the reverse side
Page 20
of the form and return it to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. You may obtain the necessary
authorization form by calling 1-800-645-6561. You may change the amount of
purchase or cancel the authorization only by written notification to your
employer. It is the sole responsibility of your employer, not the
Distributor, Dreyfus, the Funds, the Transfer Agent or any other person, to
arrange for transactions under the Dreyfus Payroll Savings Plan. The Funds
may modify or terminate this Privilege at any time or charge a service fee.
No such fee currently is contemplated.
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan permits you to request withdrawal of a
specified dollar amount (minimum of $50) on either a monthly or quarterly
basis if you have a $5,000 minimum account.
An application for the Automatic Withdrawal Plan can be obtained by
calling 1-800-645-6561. The Automatic Withdrawal Plan may be ended at any
time by the shareholder, the Fund or the Transfer Agent. Shares for which
certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.
HOW TO REDEEM FUND SHARES
GENERAL--You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Funds will redeem the shares at the
next determined NAV as described below. If you hold Fund shares of more than
one Class, any request for redemption must specify the Class of shares being
redeemed. If you fail to specify the Class of shares to be redeemed or if you
own fewer shares of the Class than specified to be redeemed, the redemption
request may be delayed until the Transfer Agent receives further instructions
from you or your Agent.
The Funds impose no charges when shares are redeemed directly through
the Distributor. Agents or other institutions may charge their clients a
nominal fee for effecting redemptions of Fund shares. Any certificates
representing Fund shares being redeemed must be submitted with the redemption
request. The value of the shares redeemed may be more or less than their
original cost, depending upon the Funds' then-current NAV.
The Funds ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the SEC. HOWEVER, IF YOU HAVE
PURCHASED FUND SHARES BY CHECK, BY THE DREYFUS TELETRANSFER PRIVILEGE OR
THROUGH DREYFUS-AUTOMATIC ASSET BUILDER AND SUBSEQUENTLY SUBMIT A WRITTEN
REDEMPTION REQUEST TO THE DREYFUS TRANSFER AGENT, THE REDEMPTION PROCEEDS
WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE
CHECK, DREYFUS TELETRANSFER PURCHASE OR DREYFUS-AUTOMATIC ASSET BUILDER
ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE
FUNDS WILL NOT HONOR REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE,
AND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO
THE DREYFUS TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER
RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK, THE DREYFUS TELETRANSFER
PURCHASE OR THE DREYFUS-AUTOMATIC ASSET BUILDER ORDER AGAINST WHICH SUCH
REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE
PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED
BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME
ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE
PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL
OWNERSHIP. Fund shares will not be redeemed until the Transfer Agent has
received your Account Application.
The Funds reserve the right to redeem your account at its option upon
not less than 45 days' written notice if the net asset value of your account
is $500 or less and remains so during the notice period.
Page 21
PROCEDURES--You may redeem shares of a Fund by using the regular
redemption procedure through the Transfer Agent, the Check Redemption
Privilege, the Wire Redemption Privilege, the Telephone Redemption Privilege
or through the Dreyfus TELETRANSFER Privilege. Other redemption procedures
may be in effect for clients of certain Agents and institutions. The Funds
make available to certain large institutions the ability to issue redemption
instructions through compatible computer facilities.
You may redeem shares of a Fund by telephone if you have checked the
appropriate box on the Funds' Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or Telephone Exchange Privilege, which is granted automatically
unless you refuse it, you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you, or a
representative of your Agent, and reasonably believed by the Transfer Agent
to be genuine. The Funds will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm
that instructions are genuine and, if it does not follow such procedures, the
Funds or the Transfer Agent may be liable for any losses due to unauthorized
or fraudulent instructions. Neither the Funds nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be
genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used.
REGULAR REDEMPTION. Under the regular redemption procedure, you may
redeem your shares by written request mailed to The Dreyfus Family of Funds,
P.O. Box 9671, Providence, Rhode Island 02940-9671. REDEMPTION REQUESTS MAY
BE DELIVERED IN PERSON ONLY TO A DREYFUS FINANCIAL CENTER. THESE REQUESTS
WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT
THEREBY. FOR THE LOCATION OF THE NEAREST FINANCIAL CENTER, PLEASE CALL THE
TELEPHONE NUMBER LISTED UNDER "GENERAL INFORMATION." Redemption requests must
be signed by each shareholder, including each owner of a joint account, and
each signature must be guaranteed. The Transfer Agent has adopted standards
and procedures pursuant to which signature-guarantees in proper form generally
will be accepted from domestic banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the New
York Stock Exchange Medallion Signature Program, the Securities Transfer
Agents Medallion Program ("STAMP"), and the Stock Exchanges Medallion
Program. For more information with respect to signature-guarantees, please
call one of the telephone numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE -- You may request on the Account
Application, Shareholder Services Form or by later written request that a
Fund provide Redemption Checks drawn on the Fund's account. Redemption Checks
may be made payable to the order of any person in the amount of $500 or more.
Redemption Checks should not be used to close your account. Redemption
Checks are free, but the Transfer Agent will impose a fee for stopping
payment of a Redemption Check upon your request or if the Transfer Agent
cannot honor the Redemption Check due to insufficient funds or other valid
reason. You should date your Redemption Checks with the current date when you
write them. Please do not postdate your Redemption Checks. If you do, the
Transfer Agent will honor, upon presentment, even if presented before the
date of the check, all postdated Redemption Checks which are dated within six
months of presentment for payment, if they are otherwise in good order.
Shares for which certificates have been issued may not be redeemed by
Redemption Check. This Privilege may be modified or terminated at any time by
the Funds or the Transfer Agent upon notice to shareholders.
Page 22
WIRE REDEMPTION PRIVILEGE. You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. To establish the Wire Redemption Privilege, you must
check the appropriate box and supply the necessary information on the Funds'
Account Application or file a Shareholder Services Form with the Transfer
Agent. You may direct that redemption proceeds be paid by check (maximum
$150,000 per day) made out to the owners of record and mailed to your
address. Redemption proceeds of less than $1,000 will be paid automatically
by check. Holders of jointly registered Fund or bank accounts may have
redemption proceeds of only up to $250,000 wired within any 30-day period.
You may telephone redemption requests by calling 1-800-221-4060 or, if
calling from overseas, 1-401-455-3306. The Funds reserve the right to refuse
any redemption request, including requests made shortly after a change of
address, and may limit the amount involved or the number of such requests.
This Privilege may be modified or terminated at any time by the Transfer
Agent or the Fund. The Funds' SAI sets forth instructions for transmitting
redemption requests by wire. Shares for which certificates have been issued,
are not eligible for this Privilege.
TELEPHONE REDEMPTION PRIVILEGE. You may redeem shares of a Fund
(maximum $150,000 per day) by telephone if you checked the appropriate box on
the Funds' Account Application or have filed a Shareholder Services Form with
the Transfer Agent. The redemption proceeds will be paid by check and mailed
to your address. You may telephone redemption instructions by calling
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. The Funds
reserve the right to refuse any request made by telephone, including requests
made shortly after a change of address, and may limit the amount involved or
the number of such requests. This Privilege may be modified or terminated at
any time by the Transfer Agent or the Funds. Shares for which certificates
have been issued, are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE. You may redeem shares of a Fund
(minimum $500 per day) by telephone if you have checked the appropriate box
and supplied the necessary information on the Funds' Account Application or
have filed a Shareholder Services Form with the Transfer Agent. The proceeds
will be transferred between your Fund account and the bank account designated
in one of these documents. Only such an account maintained in a domestic
financial institution which is an ACH member may be so designated. Redemption
proceeds will be on deposit in your account at an ACH member bank ordinarily
two days after receipt of the redemption request or, at your request, paid by
check (maximum $150,000 per day) and mailed to your address. Holders of
jointly registered Fund or bank accounts may redeem through the Dreyfus TELETR
ANSFER Privilege for transfer to their bank account only up to $250,000
within any 30-day period. The Funds reserve the right to refuse any request
made by telephone, including requests made shortly after a change of address,
and may limit the amount involved or the number of such requests. The Funds
may modify or terminate this Privilege at any time or charge a service fee
upon notice to shareholders. No such fee currently is contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Fund shares by telephoning
1-800-221-4060 or, if calling from overseas, 1-401-455-3306. Shares shares
issued in certificate form, are not eligible for this Privilege.
DISTRIBUTION PLAN (INVESTORS SHARES ONLY)
DISTRIBUTION PLAN--INVESTOR CLASS--Investor shares are subject to a
Distribution Plan adopted pursuant to Rule 12b-1 under the 1940 Act ("Rule
12b-1"). The Investor shares of each Fund bear some of the cost of selling
these Shares under the Distribution Plan (the "Plan"). The Plan allows a Fund
to spend annually up to 0.25% of its average daily net assets attributable to
Investor shares to compensate Dreyfus Service Corporation, an affiliate of
Dreyfus, for shareholder servicing activities and Premier for shareholder
servicing activities and for activities or expenses primarily intended to
result in the sale of Investor shares of a Fund. The Plan allows Premier to
make payments from the Rule 12b-1 fees it collects from a Fund to compensate
Agents that have entered into Selling Agreements ("Agreements") with
Page 23
Premier.
Under the Agreements, the Agents are obligated to provide distribution
related services with regard to a Fund and/or shareholder services to the
Agent's clients that own Investor shares of a Fund.
Potential investors should read this Prospectus in light of the terms
governing Agreements with their Agents. An Agent entitled to receive
compensation for selling and servicing the Fund's shares may receive
different compensation with respect to one class of Shares over another.
The Fund and Premier may suspend or reduce payments under the Plan at
any time, and payments are subject to the continuation of the Fund's Plan and
the Agreements described above. From time to time, the Agents, Premier and
the Fund may agree to voluntarily reduce the maximum fees payable under the
Plan. See the SAI for more details on the Plan.
PERFORMANCE INFORMATION
From time to time, a Fund may advertise the yield and tax-equivalent
yield on a class of shares. YIELD AND TAX-EQUIVALENT YIELD FIGURES ARE BASED
ON HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE.
The "yield" of a class of shares of a Fund refers to the income
generated by an investment in such class over a seven-day period identified
in the advertisement. This income is then "annualized." That is, the amount
of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly, but, when
annualized, the income earned by an investment in a class of shares in a Fund
is assumed to be reinvested. The "effective yield" will be slightly higher
than the "yield" because of the compounding effect of this assumed
reinvestment. Since yields fluctuate, yield data cannot necessarily be used
to compare an investment in a class of shares with bank deposits, savings
accounts, and similar investment alternatives which often provide an
agreed-upon or guaranteed fixed yield for a stated period of time. The
tax-equivalent yield of a Fund shows the level of taxable yield needed to
produce an after-tax equivalent to such Fund's tax-free yield. This is done
by increasing a class' yield by the amount necessary to reflect the payment
of federal income tax (and state income tax, if applicable) at a stated tax
rate.
Yield quotations will be computed separately for each class of a
Fund's shares. Because of the difference in the fees and expenses borne by
Class R shares of a Fund and Investor shares of a Fund, the yield on Class R
shares will generally be higher than the yield on Investor shares. Any fees
charged by a Bank or Agent directly to its customers' account in connection
with investments in a Fund will not be included in calculations of total
return or yield.
A Fund may compare the performance of its Investor and Class R shares
with various industry standards of performance including Lipper Analytical
Services, Inc. ratings. Performance rankings as reported in CHANGING TIMES,
BUSINESS WEEK, INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL,
IBC/DONOGHUE'S MONEY FUND REPORT, MUTUAL FUND FORECASTER, NO LOAD INVESTOR,
MONEY MAGAZINE, MORNINGSTAR MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT,
FORBES, FORTUNE, BARRON'S and similar publications may also be used in
comparing a Fund's performance. Furthermore, a Fund may quote its Investor
and Class R shares' yields in advertisements or in shareholder reports.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
Each Fund declares daily and pays monthly (on the first business day
of the following month) dividends from its net investment income, if any, and
distributes any net long-term capital gains on an annual basis. The Board of
Trustees may elect not to distribute capital gains in whole or in part to
take advantage of capital loss carryovers.
Unless you choose to receive dividend and/or capital gain
distributions in cash, your distributions will be automatically reinvested in
additional Shares of the distributing Fund at the NAV. You may change the
method of receiving distributions at any time by writing to the Funds. Checks
which are sent to shareholders who have requested distributions to be paid in
cash and which are subsequently returned by the United
Page 24
States Postal Service
as not deliverable or which remain uncashed for six months or more will be
reinvested in additional Fund shares in the shareholder's account at the then
current NAV. Subsequent Fund distributions will be automatically reinvested
in additional Fund shares in the shareholder's account.
Distributions paid by a Fund with respect to one class of shares may
be greater or less per share than those paid with respect to another class of
shares due to the different expenses of the different classes.
Shares purchased on a day on which a Fund calculates its NAV will not
begin to accrue dividends until the following business day. Except as
provided below, redemption orders effected on any particular day will receive
all dividends declared through the day of redemption. However, if immediately
available funds are received by the Transfer Agent prior to 12:00 noon,
Eastern time, you may receive the dividend declared on the day of purchase.
You will not receive the dividends declared on the day of redemption if the
redemption order is placed prior to 12:00 noon, Eastern time.
Each Fund intends to qualify for treatment as a regulated investment
company under the Code so that it will be relieved of Federal income tax on
that part of its investment company taxable income (consisting generally of
taxable net investment income and net short-term capital gain) and net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) that is distributed to its shareholders. In addition, each Fund
intends to continue to qualify to pay "exempt-interest" dividends, which
requires, among other things, that at the close of each quarter of its
taxable year at least 50% of the value of its total assets must consist of
municipal securities.
Dividends from a Fund's investment company taxable income are taxable
to you as ordinary income, to the extent of the Fund's earnings and profits.
Distributions by each Fund that are designated by it as "exempt-interest
dividends" generally may be excluded by you from your gross income.
Distributions by a Fund of net capital gain, when designated as such, are
taxable to you as long-term capital gains, regardless of the length of time
you have owned your shares.
Interest on indebtedness incurred or continued to purchase or carry
shares of a Fund will not be deductible for Federal income tax purposes to
the extent that a Fund's distributions (other than capital gains
distributions) consist of exempt-interest dividends. A Fund may invest in
"private activity bonds," the interest on which is treated as a tax
preference item for shareholders in determining their liability for the
alternative minimum tax. Proposals may be introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal securities. If such a proposal were enacted, the
availability of such securities for investment by a Fund and the value of its
portfolio would be affected. In such event, each Fund would reevaluate its
investment objective and policies.
Dividends and other distributions are taxable to you regardless of
whether they are received in cash or reinvested in additional Fund shares,
even if the value of your shares is below your cost. If you purchase shares
shortly before a taxable distribution (i.e., any distribution other than an
exempt-interest dividend paid by a Fund), you must pay income taxes on the
distribution, even though the value of your investment (plus cash received,
if any) remains the same. In addition, the share price at the time you
purchase shares may include unrealized gains in the securities held in the
Fund. If these portfolio securities are subsequently sold and the gains are
realized, they will, to the extent not offset by capital losses, be paid to
you as a capital gain distribution and will be taxable to you.
In January of each year, the Funds will send you a Form 1099-DIV
notifying you of the status for Federal income tax purposes of your
distributions for the preceding year. The Funds also will advise shareholders
of the percentage, if any, of the dividends paid by a Fund that are exempt
from Federal income tax and the portion, if any, of those dividends that is a
tax preference item for purposes of the alternative minimum tax.
Page 25
You must furnish the Funds with your taxpayer identification number
("TIN") and state whether you are subject to withholding for prior
under-reporting, certified under penalties of perjury as prescribed by the
Code and the regulations thereunder. Unless previously furnished, investments
received without such a certification will be returned. Each Fund is required
to withhold a portion of all dividends, capital gain distributions and redempt
ion proceeds payable to any individuals and certain other non-corporate
shareholders who do not provide the Fund with a correct TIN; withholding from
dividends and capital gain distributions also is required for such
shareholders who otherwise are subject to backup withholding.
In addition, in order to avoid the application of a 4% nondeductible
excise tax on certain undistributed amounts of ordinary income and capital
gains, each Fund may make an additional distribution shortly before December
31 in each year of any undistributed ordinary (taxable) income or capital
gains and expects to pay any other dividends and distributions necessary to
avoid the application of this tax.
The foregoing is only a summary of some of the important tax
considerations generally affecting each Fund and its shareholders; see the
SAI for a further discussion. There may be other federal, state or local tax
considerations applicable to a particular investor; for example, each Fund's
dividends may be wholly or partly taxable under state and/or local laws. You
therefore are urged to consult your own tax adviser.
GENERAL INFORMATION
The Dreyfus/Laurel Tax-Free Municipal Funds offers shares of
beneficial interest of separate investment portfolios without par value (each
a "fund"). The Boston Company Tax-Free Municipal Funds was organized as a
Massachusetts business trust under the laws of The Commonwealth of
Massachusetts on March 28, 1983, changed its name to the Laurel Tax-Free
Municipal Funds, and changed its name again to the Dreyfus/Laurel Tax-Free
Municipal Fund on October 17, 1994. The Dreyfus/Laurel Tax-Free Municipal
Fund is registered with the SEC as an open-end management investment company,
commonly known as a mutual fund. The Trustees have authorized shares of each
Fund be issued in two Classes_Investor and Class R.
Each share (regardless of class) has one vote. All shares of a fund
(and classes thereof) vote together as a single class, except as to any
matter for which a separate vote of any fund or class is required by the 1940
Act, and except as to any matter which affects the interests of one or more
particular funds or classes, in which case only the shareholders of the
affected funds or classes are entitled to vote, each as a separate class.
Only holders of Investor shares will be entitled to vote on matters submitted
to shareholders pertaining to the Distribution Plan relating to that Class
At March 31, 1995, Mellon Bank Corporation, the Manager's parent,
owned of record through its direct and indirect subsidiaries more than 25% of
The Dreyfus/Laurel Tax-Free Municipal Funds' outstanding voting shares, and
is deemed, under the 1940 Act, to be a controlling shareholder.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for a 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, the holders of at least 10% of the shares
outstanding and entitled to vote may require The Dreyfus/Laurel Tax-Free
Municipal Fund to hold a special meeting of shareholders for purposes of
removing a Trustee from office and for any other purpose. Fund shareholders
may remove a Trustee by the affirmative vote of two-thirds of the Fund 's
outstanding voting shares of the Dreyfus/Laurel Tax-Free Municipal Fund. 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.
Page 26
The Transfer Agent maintains a record of your ownership and will send
you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Funds at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUNDS'
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 27
Dreyfus/Laurel California Tax-Free Money Fund
Dreyfus/Laurel Massachusetts Tax-Free Money Fund
Dreyfus/Laurel New York Tax-Free Money Fund
PROSPECTUS
Registration Mark
Copy Rights 1995 Dreyfus Service Corporation
LSTTFMp1041095
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
INVESTOR AND CLASS R SHARES
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
April 10, 1995
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the prospectus of The
Dreyfus/Laurel Tax-Free Municipal Funds (the "Trust") dated April 10, 1995
(referred to herein as the "Prospectus") describing the Investor shares and
Class R shares of the Dreyfus/Laurel California Tax-Free Money Fund
(formerly the Laurel California Tax-Free Money Fund), the Dreyfus/Laurel
Massachusetts Tax-Free Money Fund (formerly the Laurel Massachusetts Tax-
Free Money Fund) and the Dreyfus/Laurel New York Tax-Free Money Fund
(formerly the Laurel New York Tax-Free Money Fund). As used in this
Statement of Additional Information, the term "Fund" or "Money Fund" refers
to each of the Dreyfus/Laurel Massachusetts Tax-Free Money Fund
("Massachusetts Tax-Free Fund"), the Dreyfus/Laurel New York Tax-Free Money
Fund ("New York Tax-Free Fund") and the Dreyfus/Laurel California Tax-Free
Money Fund ("California Tax-Free Fund") (collectively the "Funds" or the
"Money Funds"). To obtain a copy of the Prospectus, please write to the
Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or
call the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Funds' investment
manager.
Premier Mutual Fund Services, Inc. ("Premier") is the distributor of
the Funds' shares.
TABLE OF CONTENTS
Page
Management of the Trust . . . . . . . . . . . . . . . . . . . . . . . B-3
B-3
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . B-10
(see also in the Prospectus "How to Invest in The Laurel Funds")
Investment Policies . . . . . . . . . . . . . . . . . . . . . . . . . B-12
(see also in the Prospectus "Investment Objective and Policies")
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . . . . B-53
(see also in the Prospectus "How to Redeem Shares")
Shareholder Services. . . . . . . . . . . . . . . . . . . . . . . . . B-55
Valuation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . B-57
Performance Data. . . . . . . . . . . . . . . . . . . . . . . . . . . B-58
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-59
(see also in the Prospectus "Taxes")
Description of the Trust. . . . . . . . . . . . . . . . . . . . . . . B-61
(see also in the Prospectus "Investment Objective and Policies")
Principal Shareholders. . . . . . . . . . . . . . . . . . . . . . . . B-62
Custodian, Transfer Agent and Fund Accountant . . . . . . . . . . . . B-62
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . B-63
Appendix - Information about Securities Ratings . . . . . . . . . . . B-64
MANAGEMENT OF THE TRUST
The organizations that provide services to the Trust are as follows:
The Dreyfus Corporation ("Dreyfus") as investment manager ("Investment
Manager"), Mellon Bank, N.A. ("Mellon Bank") as custodian and fund
accountant, Premier Mutual Fund Services, Inc. ("Premier") as the
distributor ("Distributor") and sub-administrator ("Sub-Administrator"),
and The Shareholder Services Group, Inc. ("TSSG"), a subsidiary of First
Data Corporation as transfer agent. The functions they perform for the
Trust are discussed in the Prospectuses and in this Statement of Additional
Information.
On October 17, 1994 the name of the Trust was changed from "The Laurel
Tax-Free Municipal Funds" to "The Dreyfus/Laurel Tax-Free Municipal Funds"
and the name of each Fund was changed as indicated in the right-hand column
below:
Laurel Massachusetts Tax-Free Money Fund
Dreyfus/Laurel Massachusetts Tax-Free Money Fund
Laurel California Tax-Free Money Fund
Dreyfus/Laurel California Tax-Free Money Fund
Laurel New York Tax-Free Money Fund
Dreyfus/Laurel New York Tax-Free Money Fund
Trustees and Officers
The Trust has a Board composed of twelve Trustees which supervises the
Trust's investment activities and reviews contractual arrangements with
companies that provide the Funds with services. The following lists the
Trustees and officers and their positions with the Trust and their present
and principal occupations during the past five years. Each Trustee who is
an "interested person" of the Trust (as defined in the Investment Company
Act of 1940, as amended (the "Act")) is indicated by an asterisk. Each of
the Trustees also serves as a Director of The Dreyfus/Laurel Funds, Inc.,
and as a Trustee of The Dreyfus/Laurel Investment Series and The
Dreyfus/Laurel Funds Trust (collectively "The Dreyfus Family of Funds").
o+RUTH MARIE ADAMS. Trustee of the Trust; Professor of English and Vice
President Emeritus, Dartmouth College; Senator, United Chapters of
Phi Beta Kappa; Trustee, Woods Hole Oceanographic Institution. Age:
79 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: 76 years old. Address:
Massachusetts Business Development Corp., One Liberty Square, Boston,
Massachusetts 02109.
o*JOSEPH S. DiMARTINO. Trustee of the Company 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 the Manager
and Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of the Manager and until August
1994, the Fund's distributor. In addition, for more than five years
prior to January 1995 and until August 1994, he was Chief Operating
Officer of the Manager and from August 1994 to December 31, 1994, he was
a director of Mellon Bank Corporation. Mr. DiMartino is a director and
former Treasurer of the Muscular Dystrophy Association; a trustee of
Bucknell University; Chairman of the Board of Directors of Noel Group,
Inc. and a director of Health Plan Corporation. Age: 51 years old.
Address: 200 Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Trustee of the Trust; President and Director,
Amoskeag Company; Chairman, Howes Leather Company, Inc.; Director,
Fiduciary Trust Company; Chairman, CEO and Director, Fieldcrest-Cannon
Inc.; Director, Lumber Mutual Insurance Company; Director, Barrett
Resources, Inc. Age: 59 years old. Address: 40 Norfolk Road,
Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Trustee of the Trust; Partner, Reed, Smith, Shaw &
McClay (law firm). Age: 65 years old. Address: 204 Woodcock Drive,
Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Trustee of the Trust; Director, Chairman of the
Board and Director, Rexene Corporation; Director, Calgon Carbon
Corporation; Director, National Picture Frame Corporation; Chairman of
the Board and Director, Tetra Corporation 1991-1993; Director, Medalist
Corporation 1992-1993; From 1988-1989 Director, Rexene Corporation.
Age: 71 years old. Address: Way Hallow Road and Woodland Road,
Sewickley, Pennsylvania 15143.
o+KENNETH A. HIMMEL. Trustee of the Trust; Director, The Boston Company,
Inc. ("TBC") and Boston Safe Deposit and Trust Company; President and
Chief Executive Officer, Himmel & Co., Inc.; Vice Chairman, Sutton Place
Gourmet, Inc. and Florida Hospitality Group; Managing Partner,
Himmel/MKDG, Franklin Federal Partners, Reston Town Center Associates
and Grill 23 & Bar. Age: 47 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, 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: 46 years
old. Address: 401 Edgewater Place, Wakefield, Massachusetts 01880.
o+ROBERT D. MCBRIDE. Trustee of the Trust; Director, Chairman and CEO,
McLouth Steel; Director, Salem Corporation. Director, SMS/Concast, Inc.
(1983-1991). Age: 66 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: 79 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: 62 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224
o+ROSLYN M. WATSON. Trustee of the Trust; Principal, Watson Ventures,
Inc., prior to February, 1993; Real Estate Development Project Manager
and Vice President, The Gunwyn Company. Age: 44 years old. Address: 25
Braddock Park, Boston, Massachusetts 02116-5816.
#MARIE E. CONNOLLY. President and Treasurer of the Trust, The Laurel
Investment Series, The Laurel Funds Trust and The Laurel Funds, Inc.
(since September 1994); Vice President of the Trust, The Laurel
Investment Series, The Laurel Funds Trust and The laurel Funds, Inc.
(March 1994 to September 1994); President, Funds Distributor, Inc.
(since 1992); Treasurer, Funds Distributor, Inc. (July 1993 to April
1994); COO, Funds Distributor, Inc. (since April 1994); Director, Funds
Distributor, Inc. (since July 1992); President, COO and Director,
Premier Mutual Fund Services, Inc. (since April 1994); Senior Vice
President and Director of Financial Administration, The Boston Company
Advisors, Inc. (December 1988 to May 1993). Address: One Exchange Place,
Boston, Massachusetts 02109.
#FREDERICK C. DEY. Vice President of the Trust, The Laurel Investment
Series, The Laurel Funds Trust and The Laurel Funds, Inc. (since
September 1994); Senior Vice President, Premier Mutual Fund Services,
Inc. (since August 1994); Vice President, Funds Distributor, Inc. (since
August 1994); Fundraising Manager, Swim Across America (October 1993 to
August 1994); General Manager, Spring Industries (August 1988 to October
1993). Address: Premier Mutual Fund Services, Inc., 200 Park Avenue New
York, New York 10166.
#ERIC B. FISCHMAN. Vice President of the Trust, The Laurel Investment
Series, The Laurel Funds Trust and Laurel Funds, Inc. (since September
1994);Vice President and Associate General Counsel, Premier Mutual Fund
Services, Inc. (Since August 1994); Vice President and Associate General
Counsel, Funds Distributor, Inc. (since August 1994); Staff Attorney,
Federal Reserve Board (September 1992 to June 1994); Summer Associate,
Venture Economics (May 1991 to September 1991); Summer Associate,
Suffolk County District Attorney (June 1990 to August 1990). Address:
Premier Mutual Fund Services, Inc., 200 Park Avenue, New York, New York
10166.
LESLIE M. GAYNOR. Assistant Treasurer of the Company, The Dreyfus/Laurel
Investment Series, The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel
Tax-Free Municipal Funds (since October 1994); Assistant
Treasurer/Manager of Treasury Services, Funds Distributor, Inc. (since
July 1994); Vice President, The Boston Company, Inc. (1989 to July
1994). Address: One Exchange Place, Boston, Massachusetts 02109.
RICHARD W. HEALEY. Vice President of the Trust, The Laurel Investment
Series, The Laurel Funds Trust and The Laurel Funds, Inc. (since March
1994); Senior Vice President, Funds Distributor, Inc. (since March
1993); Vice President, The Boston Company, Inc., (March 1993 to May
1993); Vice President of Marketing, Calvert Group (1989 to March 1993);
Fidelity Investments (prior to 1989). Address: One Exchange Place,
Boston, Massachusetts 02109.
#JOHN E. PELLETIER. Vice President and Secretary of the Trust, The Laurel
Investment Series, The Laurel Funds Trust and The Laurel Funds, Inc.
(since September 1994); Senior Vice President, General Counsel and
Secretary, Funds Distributor, Inc. (since April 1994); Senior Vice
President, General Counsel and Secretary, Premier Mutual Fund Services,
Inc. (since August 1994); Counsel, The Boston Company Advisors, Inc.
(February 1992 to March 1994); Associate, Ropes & Gray (August 1990 to
February 1992); Associate, Sidley & Austin (June 1989 to August 1990).
Address: One Exchange Place, Boston, Massachusetts 02109.
_____________________________________
* "Interested person" of the Trust, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies advised
by The Dreyfus Corporation.
The officers and Trustees of the Trust as a group owned beneficially
less than 1% of the total shares of each Fund outstanding as of March 13,
1995.
No officer or employee of Premier (or of any parent or subsidiary
thereof ) receives any compensation from the Trust for serving as an
officer or Trustee of the Trust. No officer or employee of Dreyfus (or of
any parent or subsidiary thereof) serves as an officer or Trustee of the
Trust. The Dreyfus/Laurel Fund Family pays each Trustee who is not an
officer or employee of Premier or any of its affiliates $27,000 per annum
(and an additional $75,000 for the Chairman of the Board of
Directors/Trustees of The Dreyfus/Laurel Fund Family). In addition, the
Trust pays each Trustee $1,000 per joint Dreyfus/Laurel Fund Family meeting
attended, plus $750 per joint Dreyfus/Laurel Fund Family Audit Committee
meeting attended, and reimburses each Trustee for travel and out-of-pocket
expenses. For the fiscal year ended June 30, 1994, such fees for meetings
and expenses totaled $63,372 for Massachusetts Tax Free and the Municipal
Funds. For the period from December 1, 1993 to the fiscal year ended June
30, 1994, such fees for meetings and expenses totaled $9,517 for the
California Municipal, California Tax-Free, New York Municipal and New York
Tax-Free Funds.
For the fiscal year ended June 30, 1994, the aggregate amount of fees
and expenses received by each Trustee from the Company all other Funds in
the Dreyfus/Laurel 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 $ 7,339 none none $ 38,500
Francis P. Brennan @ 19,930 none none 113,500
Joseph S. DiMartino * n/a n/a n/a n/a
James M. Fitzgibbons 6,500 none none 34,750
J. Tomlinson Fort ** none none none none
Arthur L. Goeschel 624 none none 8,500
Kenneth A. Himmel 6,500 none none 34,750
Arch S. Jeffery 624 none none 8,500
Steven J. Lockwood 6,500 none none 34,750
Robert D. McBride 624 none none 8,500
John L. Propst 624 none none 8,500
John J. Sciullo 624 none none 8,500
Roslyn M. Watson 7,171 none none 37,750
_____________________________
# Amount does not include reimbursed expenses for attending Board meetings, which amounted to $6,559.21 for the
Dreyfus/Laurel Fund Family.
* Joseph S. DiMartino was not a trustee of the Company as of August 31, 1994.
** Affiliated director - not paid by funds, paid by Mellon Bank.
@ Frank Brennan is also paid $75,000 by Mellon Bank to be the Chairman of the Board.
</TABLE>
Management Arrangements
Dreyfus serves as the investment manager for the Funds pursuant to an
Investment Management Agreement with the Trust dated April 4, 1994, and
transferred from Mellon Bank, N.A. (One Mellon Bank Center, Pittsburgh, PA
15258), to Dreyfus effective October 17, 1994. Dreyfus is a wholly-owned
subsidiary of Mellon Bank. Pursuant to the Management Agreement, Dreyfus
provides, or arranges for one or more third parties to provide, investment
advisory, administrative, custody, fund accounting and transfer agency
services to each Fund. As investment manager, Dreyfus manages each Fund by
making investment decisions based on such Fund's investment objectives,
policies and restrictions. For these services, each Fund pays a fee to
Dreyfus at the rates stated in the Prospectus.
Prior to May 21, 1993, The Boston Company Advisors, Inc. ("TBC
Advisors") served as investment adviser to each Fund pursuant to a written
agreement, which was last approved by the Trustees, including a majority of
the Trustees who are not "interested persons" of the Trust, on July 22,
1992. From May 21, 1993, through April 3, 1994, Boston Advisors served as
investment adviser to each Fund pursuant to a written agreement ("TBC
Advisors Agreement"), which was last approved by the Trustees, including a
majority of the Trustees who are not "interested persons" of the Trust, on
July 21, 1993 and approved by the shareholders of each Fund of the Trust on
December 31, 1992. The TBC Advisors Agreement became effective on May 21,
1993, upon the consummation of the sale of Boston Group Holdings, Inc., the
parent company of The Boston Company, Inc. ("TBC"), to Mellon Bank
Corporation. Mellon Bank later served as investment manager to each Fund
pursuant to a written agreement ("Mellon Agreement"), which was last
approved by the Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust or Mellon Bank, on November 22, 1993,
(subject to shareholder approval) and approved by the shareholders of each
Fund of the Trust on March 29, 1994. The Mellon Agreement became effective
on April 3, 1994. TBC Advisors is a wholly-owned subsidiary of TBC, a
financial services holding company. TBC is in turn a wholly-owned
subsidiary of Mellon Bank Corporation. As stated above, Dreyfus, a wholly-
owned subsidiary of Mellon Bank, is the current Investment Manager pursuant
to a written agreement ("Management Agreement"), which was last approved by
the Trustees on October 17, 1994.
The current Management Agreement with Dreyfus provides for a "unitary
fee." Under the unitary fee structure, Dreyfus pays all expenses of each
Fund except: (i) brokerage commissions, (ii) taxes, interest, fees and
expenses of the non-interested Trustees (including counsel expenses), and
extraordinary expenses (which are expected to be minimal), and (iii) the
Rule 12b-1 fees described in this Statement of Additional Information.
Under the unitary fee, Dreyfus provides, or arranges for one or more third
parties to provide, investment advisory, administrative, custody, fund
accounting and transfer agency services to the Funds. For the provision of
such services directly, or through one or more third parties, Dreyfus
receives as full compensation for all services and facilities provided by
it, a fee computed daily and paid monthly at the annual rate set forth in
each Fund's Prospectus, applied to the average daily net assets of a Fund's
investment portfolio, less the accrued fees and expenses (including counsel
fees) of the non-interested Trustees of the Trust. Previously, the
payments to the investment manager covered merely the provision of
investment advisory services (and payment for sub-advisory services) and
certain specified administrative services. Under this previous
arrangement, each Fund also paid for additional non-investment advisory
expenses, such as custody and transfer agency services, that were not paid
by the investment adviser.
The Management Agreement will continue from year to year provided that
a majority of the Trustees who are not interested persons of the Funds and
either a majority of all Trustees or a majority of the shareholders of the
Fund approve their continuance. The Funds may terminate the Agreement,
without prior notice to Dreyfus, upon the vote of a majority of the Board
of Trustees or upon the vote of a majority of the outstanding voting
securities of the Fund on 60 days written notice to Dreyfus. Dreyfus may
terminate the Management Agreement upon written notice to the Funds. The
Management Agreement will terminate immediately and automatically upon its
assignment.
As compensation for Dreyfus's services, each Fund pays a separate fee,
based on its total average daily net assets, that is computed daily and
paid monthly. The rates at which such fees are paid are described in each
Prospectus. Dreyfus may waive all or a portion of its fees payable by any
Fund from time to time.
The following table shows the fees paid by each Fund to TBC Advisors
or Mellon (as the prior investment advisors), including any fee waivers or
expense reimbursements by TBC Advisors or Mellon Bank, during the Fund's
1992, 1993 and 1994 fiscal years:
<TABLE>
<CAPTION>
1994*(2) 1993** 1992**
Fees Fees Fees Fees Fees Fees Fees
Paid(3) Paid(4) Waived(1) Paid Waived(1) Paid Waived(1)
------- ------- --------- ---- --------- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Massachusetts Tax-Free
Fund 88,706 451,899 95,174(5) 714,501 29,313(11) 783,974 --
California Tax-Free
Fund 22,135 45,706 56,403(6) 130,006 165,734(8) 143,953 142,658
New York Tax-Free
Fund 12,400 27,444 46,447(7) 73,485 118,669(9) 66,004 81,278(10)
_______________________________
* For the fiscal year ended June 30. The California Tax-Free Fund, and the New York Tax-Free Fund each changed its fiscal
year end from November 30 to June 30.
** For the fiscal years ended June 30 for the Massachusetts Tax-Free Fund; and for the fiscal years ended November 30 for the
California Tax-Free Fund and the New York Tax-Free Fund.
(1) TBC Advisors waived all or a portion of its fees and/or reimbursed expenses of the Funds from time to time in order to
increase the Funds' net income available for distribution to shareholders.
(2) Effective April 4, 1994, Mellon Bank served as each Fund's investment manager.
(3) Fees paid to Mellon Bank for investment management services for the
period from April 4, 1994 to the fiscal year ended June 30, 1994.
(4) Fees paid to TBC Advisors for investment advisory services for the period from either July 1, 1993 (in the case of the
Massachusetts Tax-Free Fund) or December 1, 1993 (in the case of the California Tax-Free Fund and the New York Tax-
Free Fund) to April 3, 1993.
(5) Includes $41,577 reimbursement by TBC Advisors.
(6) Includes $10,697 reimbursement by TBC Advisors.
(7) Includes $22,044 reimbursement by TBC Advisors.
(8) Includes $35,728 reimbursement by TBC Advisors.
(9) Includes $45,183 reimbursement by TBC Advisors
(10) Includes $15,274 reimbursement by TBC Advisors.
(11) Amount represents a reimbursement of expenses only.
</TABLE>
Dreyfus has agreed that if in any fiscal year the aggregate expenses
of any Fund of the Trust (including fees pursuant to the Investment
Management Agreement, but excluding interest, brokerage expenses, taxes and
extraordinary items) exceed the expense limitation of any state, it will
reduce its management fees by the amount of such excess expense. Such a
fee reduction, if any, will be reconciled on a monthly basis. To the
extent these state regulations permit the exclusion of distribution
expenses (see "Distribution Plan" below), the Trust will exclude such
expenses in determining whether any reduction obligation exists. The most
restrictive state expense limitation applicable to any Fund requires a
reduction of fees in any year that such expenses exceed 2.5% of the first
$30 million of average net assets, 2.0% of the next $70 million of average
net assets and 1.5% of the remaining average net assets. A number of
factors, including the size of each Fund, will determine which of these
restrictions will be applicable to a Fund at any given time. No
reimbursement pursuant to state expense limitations was required for any of
the Funds for the fiscal year ended June 30, 1994.
PURCHASE OF FUND SHARES
The Distributor. The Distributor serves as the Funds' distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Family of Funds and
for certain other investment companies.
Dreyfus TeleTransfer Privilege--Investor Shares. Dreyfus TeleTransfer
purchase orders may be made between the hours of 8:00 a.m. and 4:00 p.m.,
New York time, on any business day that The Shareholder Services Group,
Inc., the Funds' transfer and dividend disbursing agent (the "Transfer
Agent"), and the New York Stock Exchange ("NYSE") are open. Such purchases
will be credited to the shareholder's Fund account on the next bank
business day. To qualify to use the Dreyfus TeleTransfer Privilege, the
initial payment for purchase of shares must be drawn on, and redemption
proceeds paid to, the same bank and account as are designated on the
Account Application or Shareholder Services Form on file. If the proceeds
of a particular redemption are to be wired to an account at any other bank,
the request must be in writing and signature-guaranteed. See "Redemption
of Fund Shares-- Dreyfus TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year the account is closed or during the following calendar
year, provided the information on the old Account Application is still
applicable.
Distribution Plans
The Securities and Exchange Commission ("SEC") has adopted Rule 12b-1
under the 1940 Act ("Rule") regulating the circumstances under which
investment companies such as the Trust directly or indirectly, bear the
expenses of distributing their shares. The Rule defines distribution
expenses to include expenditures for "any activity which is primarily
intended to result in the sale of fund shares." The Rule, among other
things, provides that an investment company may bear such expenses only
pursuant to a plan adopted in accordance with the Rule.
Prior Plans. Prior to April 4, 1994, the Investor Shares of each Fund
were known as either the "Retail Class" of shares or the "Institutional
Class" of shares. These two classes of shares of the Funds were
reclassified as a single class of shares (the Investor Shares) by the Board
of Trustees at a meeting held on November 22, 1993, subject to certain
approvals that were obtained from each Fund's shareholders at a meeting
held on March 29, 1994. At the November 22, 1993 Board Meeting, the
Trustees also approved a new distribution plan for the Investor Shares
(formerly a Fund's Retail and/or Institutional Class of shares) of each
Fund. Shareholders of each Fund's Retail Class of Shares and Institutional
Class of Shares approved the new distribution plans at a shareholders'
meeting held on March 14 and March 29, 1994. These new distribution plans
("Current Investor Plans") were effective on April 4, 1994.
Prior to April 4, 1994, each Fund's Retail Shares and Institutional
Shares were subject to distribution plans (the "Prior Plans") that were
adopted by the Trust under Section 12(b) of the Act and of Rule. Under the
Prior Plans, the Fund was authorized to spend up to .25% of its average
daily net assets attributable to the Retail Class on activities primarily
intended to result in the sale of such Shares, and the Fund was authorized
to spend up to .15% of its average daily net assets attributable to the
Institutional Class on activities primarily intended to result in the sale
of such Shares.
Under the distribution agreements with the prior distributor, Funds
Distributor, Inc. ("Funds Distributor") each Fund was authorized to pay, or
reimburse Funds Distributor, for distribution activities (which are the
same as those authorized by the Plans) on behalf of each Fund on a monthly
basis, provided that any payment by a Fund to Funds Distributor, together
with any other payments made by such Fund pursuant to the Prior Plan, shall
not exceed .0208% of its average daily net assets attributable to the
Retail Class for the prior month (.25% on an annualized basis) and .0125%
of its average daily net assets attributable to the Institutional Class for
the prior month (.15% on an annualized basis).
Current Plans. Distribution Plan--Investor shares. Under the Current
Investor Plan, Investor shares of a Fund may spend annually up to 0.25% of
the average of its net asset values for costs and expenses incurred in
connection with the distribution of, and shareholder servicing with respect
to, Fund shares.
The Current Investor Plan provides that a report of the amounts
expended under the Current Investor Plan, and the purposes for which such
expenditures were incurred, must be made to the Trust's Trustees for their
review at least quarterly. In addition, the Current Investor Plan provides
that it may not be amended to increase materially the costs which a Fund
may bear for distribution pursuant to the Current Investor Plan without
approval of a Fund's shareholders, and that other material amendments of
the Current Investor Plan must be approved by the vote of a majority of the
Trustees and of the Trustees who are not "interested persons" of the Trust
(as defined in the 1940 Act) and who do not have any direct or indirect
financial interest in the operation of the Current Investor Plan, cast in
person at a meeting called for the purpose of considering such amendments.
The Current Investor Plan is subject to annual approval by the entire Board
of Trustees and by the Trustees who are neither interested persons nor have
any direct or indirect financial interest in the operation of the Current
Investor Plan, by vote cast in person at a meeting called for the purpose
of voting on the Current Investor Plan. The Current Investor Plan is
terminable, as to a Fund's class of shares, at any time by vote of a
majority of the Trustees who are not interested persons and have no direct
or indirect financial interest in the operation of the Current Investor
Plan or by vote of the holders of a majority of the outstanding shares of
such class of the Fund.
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with a Fund, and in
providing services to a Fund as custodian and fund accountant, as well as
investment advisory activities of Dreyfus, may raise issues under these
provisions. Mellon Bank has been advised by counsel that its activities
contemplated under this arrangement are consistent with its statutory and
regulatory obligations.
Changes in either federal or state statutes and regulations relating
to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of such future statutes and regulations could prevent
Mellon Bank or Dreyfus from continuing to perform all or a part of the
above services for its customers and/or a Fund. If Mellon Bank or Dreyfus
were prohibited from serving a Fund in any of its present capacities the
Trustees would seek an alternative provider(s) of such services.
INVESTMENT POLICIES
The Prospectuses discuss the investment objectives of each Fund and
the policies it employs to achieve those objectives. The following
discussion supplements the description of the Funds' investment policies in
the Prospectuses.
Description of Municipal Obligations
For purposes of this Statement of Additional Information, the term
"Municipal Obligations" and "Massachusetts Municipal Obligations" shall
mean, with respect to the Massachusetts Tax-Free Fund, debt obligations
issued by the Commonwealth of Massachusetts, its political subdivisions,
municipalities and public authorities and municipal obligations issued by
other governmental entities if, in the opinion of counsel to the respective
issuers, the interest from such obligations is excluded from gross income
for Federal income tax purposes and is exempt from Federal and
Massachusetts personal income taxes. The term "Municipal Obligations" and
"California Municipal Obligations" shall mean, with respect to the
California Tax-Free Fund, debt obligations issued by the State of
California, its political subdivisions, municipalities and public
authorities and municipal obligations issued by other government entities
if, in the opinion of counsel to the respective issuers, the
interest from such obligations is exempt from Federal and California
personal income taxes. The term "Municipal Obligations" and "New York
Municipal Obligations" shall mean, with respect to the New York Tax-Free
Fund, debt obligations issued by the State of New York, its political
subdivisions, municipalities and public authorities and municipal
obligations issued by other governmental entities if, in the
opinion of counsel to the respective issuers, the interest from such
obligations is excluded from gross income for Federal income tax purposes
and is exempt from Federal and New York personal income taxes. "Municipal
Obligations" (and "Massachusetts Municipal Obligations," "California
Municipal Obligations" and "New York Municipal Obligations") include the
following:
Municipal Bonds
Municipal Bonds, which generally have a maturity of more than one year
when issued, have two principal classifications: General Obligation Bonds
and Revenue Bonds. A Private Activity Bond is a particular kind of Revenue
Bond. The classification of General Obligation Bonds, Revenue Bonds and
Private Activity Bonds are discussed below.
1. General Obligation Bonds. The proceeds of these obligations are
used to finance a wide range of public projects, including construction or
improvement of schools, highways and roads, and water and sewer systems.
General Obligation Bonds are secured by the issuer's pledge of its faith,
credit and taxing power for the payment of principal and interest.
2. Revenue Bonds. Revenue Bonds are issued to finance a wide
variety of capital projects including: electric, gas, water and sewer
systems; highways, bridges and tunnels; port and airport facilities;
colleges and universities; and hospitals. The principal security for a
Revenue Bond is generally the net revenues derived from a particular
facility, group of facilities or, in some cases, the proceeds of a special
excise or other specific revenue source. Although the principal security
behind these bonds may vary, many provide additional security in the form
of a debt service reserve fund whose money may be used to make principal
and interest payments on the issuer's obligations. Some authorities provide
further security in the form of a state's ability (without obligation) to
make up deficiencies in the debt service reserve fund.
3. Private Activity Bonds. Private Activity Bonds, which are
considered Municipal Bonds if the interest paid thereon is exempt from
Federal income tax, are issued by or on behalf of public authorities to
raise money to finance various privately operated facilities for business
and manufacturing, housing, sports and pollution control. These bonds are
also used to finance public facilities such as airports, mass transit
systems, ports and parking. The payment of the principal and interest on
such bonds is dependent solely on the ability of the facility's user to
meet its financial obligations and the pledge, if any, of real and personal
property so financed as security for such payment. As noted in the
Prospectuses and discussed below under "Taxes," interest income on these
bonds may be an item of tax preference subject to the Federal alternative
minimum tax for individuals and corporations.
Municipal Notes
Municipal Notes generally are used to provide for short-term capital
needs and generally have maturities of thirteen months or less. Municipal
Notes include:
1. Tax Anticipation Notes. Tax Anticipation Notes are issued to
finance working capital needs of municipalities. Generally, they are issued
in anticipation of various seasonal tax revenue, such as income, sales, use
and business taxes, and are payable from these specific future taxes.
2. Revenue Anticipation Notes. Revenue Anticipation Notes are
issued in expectation of receipt of other kinds of revenue, such as Federal
revenues available under the Federal Revenue Sharing Programs.
3. Bond Anticipation Notes. Bond Anticipation Notes are issued to
provide interim financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money for the repayment of
the Notes.
Municipal Commercial Paper
Issues of Municipal Commercial Paper typically represent short-term,
unsecured, negotiable promissory notes. These obligations are issued by
agencies of state and local governments to finance seasonal working capital
needs of municipalities or to provide interim construction financing and
are paid from general revenues of municipalities or are refinanced with
long-term debt. In most cases, Municipal Commercial Paper is backed by
letters of credit, lending agreements, note repurchase agreements or other
credit facility agreements offered by banks or other institutions.
Municipal Lease Obligations
Municipal leases may take the form of a lease or a certificate of
participation in a purchase contract issued by state and local government
authorities to obtain funds to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, computer equipment and
other capital assets. A lease obligation does not constitute a general
obligation of the municipality for which the municipality's taxing power is
pledged, although the lease obligation is ordinarily backed by the
municipality's covenant to budget for, appropriate and make payments due
under the lease obligation. Municipal leases have special risks not
normally associated with Municipal Bonds. These obligations frequently
contain "non-appropriation" clauses that provide that the governmental
issuer of the obligation has no obligation to make future payments under
the lease or contract unless money is appropriated for such purposes by the
legislative body on a yearly or other periodic basis. In addition to the
non-appropriation risk, municipal leases represent a type of financing that
has not yet developed the depth of marketability associated with Municipal
Bonds; moreover, although the obligations will be secured by the leased
equipment, the disposition of the equipment in the event of foreclosure
might prove difficult. For purposes of the 10% limitation on the purchase
of illiquid securities, a Fund will not consider the municipal lease
obligations or certificates of participation in municipal lease obligations
in which it invests as liquid, unless Dreyfus shall determine, based upon
such factors as the frequency of trades and quotes for the obligation, the
number of dealers willing to purchase or sell the security and the number
of other potential buyers, the willingness of dealers to undertake to make
a market in the security and the nature of marketplace trades, that a
security shall be treated as liquid for purposes of such limitation.
Obligations of issuers of Municipal Obligations are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights
and remedies of creditors. In addition, the obligations of such issuers
may become subject to laws enacted in the future by Congress, state
legislators, or referenda extending the time for payment of principal
and/or interest, or imposing other constraints upon enforcement of such
obligations or upon municipalities to levy taxes. There is also the
possibility that, as a result of litigation or other conditions, the power
or ability of any issuer to pay, when due, the principal of and interest on
its Municipal Obligations may be materially affected.
Investments in Municipal Bond Index Futures Contracts and Options on
Interest Rate Futures Contracts
The Funds may invest in municipal bond index futures contracts and
interest rate futures contracts that are traded on a domestic exchange or
board of trade. Such investments may be made by a Fund solely for the
purpose of hedging against changes in the value of its portfolio securities
due to anticipated changes in interest rates and market conditions, and not
for purposes of speculation. Further, such investments will be made only
in unusual circumstances, such as when Dreyfus anticipates an extreme
change in interest rates or market conditions.
Municipal Bond Index Futures Contracts
A municipal bond index futures contract is an agreement pursuant to
which two parties agree to take or make delivery of an amount of cash equal
to a specific dollar amount times the difference between the value of the
index at the close of the last trading day of the contract and the price
at which the index contract was originally written. No physical delivery
of the underlying municipal bonds in the index is made. Municipal bond
index futures contracts based on an index of 40 tax-exempt, long-term
municipal bonds with an original issue size of at least $50 million and a
rating of A- or higher by S&P or A or higher by Moody's which began trading
mid-1985.
The purpose of the acquisition or sale of a municipal bond index
futures contract by a Fund, as the holder of long-term municipal
securities, is to protect the Fund from fluctuations in interest rates on
tax-exempt securities without actually buying or selling long-term
municipal securities.
Unlike the purchase or sale of a Municipal Bond, no consideration is
paid or received by a Fund upon the purchase or sale of a futures contract.
Initially, a Fund will be required to deposit with the broker an amount of
cash or cash equivalents equal to approximately 10% of the contract amount
(this amount is subject to change by the board of trade on which the
contract is traded and members of such board of trade may charge a higher
amount). This amount is known as initial margin and is in the nature of a
performance bond or good faith deposit on the contract which is returned to
the Fund upon termination of the futures contract, assuming that all
contractual obligations have been satisfied. Subsequent payments, known as
variation margin, to and from the broker, will be made on a daily basis as
the price of the index fluctuates, making the long and short positions in
the futures contract more or less valuable, a process known as marking-to-
market. At any time prior to the expiration of the contract, a Fund may
elect to close the position by taking an opposite position, which will
operate to terminate the Fund's existing position in the futures contract.
There are several risks in connection with the use of a municipal bond
index futures contract as a hedging device. Successful use of municipal
bond index futures contracts by the Funds is subject to the ability of
Dreyfus to predict correctly movements in the direction of interest rates.
Such predictions involve skills and techniques which may be different from
those involved in the management of a long-term municipal bond portfolio.
In addition, there can be no assurance that there will be a correlation
between movements in the price of the municipal bond index and movements in
the price of the Municipal Bonds which are the subject of the hedge. The
degree of imperfection of correlation depends upon various circumstances,
such as variations in speculative market demand for futures contracts and
municipal securities, technical influences on futures trading, and
differences between the municipal securities being hedged and the municipal
securities underlying the municipal bond index futures contracts, in such
respects as interest rate levels, maturities and creditworthiness of
issuers. A decision of whether, when and how to hedge involves the exercise
of skill and judgment and even a well-conceived hedge may be unsuccessful
to some degree because of market behavior or unexpected trends in interest
rates.
Although the Funds intend to purchase or sell municipal bond index
futures contracts only if there is an active market for such contracts,
there is no assurance that a liquid market will exist for the contracts at
any particular time. Most domestic futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures contract prices during
a single trading day. The daily limit establishes the maximum amount the
price of a futures contract may vary either up or down from the previous
day's settlement price at the end of a trading session. Once the daily
limit has been reached in a particular contract, no trades may be made that
day at a price beyond that limit. The daily limit governs only price
movement during a particular trading day and, therefore, does not limit
potential losses because the limit may prevent the liquidation of
unfavorable positions. It is possible that futures contract prices could
move to the daily limit for several consecutive trading days with little or
no trading, thereby preventing prompt liquidation of futures positions and
subjecting some futures traders to substantial losses. In such event, it
will not be possible to close a futures position and, in the event of
adverse price movements, the Funds would be required to make daily cash
payments of variation margin. In such circumstances, an increase in the
value of the portion of the portfolio being hedged, if any, may partially
or completely offset losses on the futures contract. As described above,
however, there is no guarantee that the price of Municipal Bonds will, in
fact, correlate with the price movements in the municipal bond index
futures contract and thus provide an offset to losses on a futures
contract.
If a Fund has hedged against the possibility of an increase in
interest rates adversely affecting the value of the Municipal Bonds held in
its portfolio and rates decrease instead, the Fund will lose part or all of
the benefit of the increased value of the Municipal Bonds it has hedged
because it will have offsetting losses in its futures positions. In
addition, in such situations, if a Fund has insufficient cash, it may have
to sell securities to meet daily variation margin requirements. Such sales
of securities may, but will not necessarily, be at increased prices which
reflect the decline in interest rates. A Fund may have to sell securities
at a time when it may be disadvantageous to do so.
When the Funds purchase municipal bond index futures contracts, an
amount of cash and U.S. government securities or other high grade debt
securities equal to the market value of the futures contracts will be
deposited in a segregated account with the Funds' custodian (and/or such
other persons as appropriate) to collateralize the positions and thereby
insure that the use of such futures contracts is not leveraged. In
addition, the ability of the Funds to trade in municipal bond index futures
contracts and options on interest rate futures contracts may be materially
limited by the requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), applicable to a regulated investment company. See
"Taxes" below.
Options on Interest Rate Futures Contracts
A Fund may purchase put and call options on interest rate futures
contracts which are traded on a domestic exchange or board of trade as a
hedge against changes in interest rates, and may enter into closing
transactions with respect to such options to terminate existing positions.
A Fund will sell put and call options on interest rate futures contracts
only as part of closing sale transactions to terminate its options
positions. There is no guarantee that such closing transactions can be
effected.
Options on interest rate futures contracts, as contrasted with the
direct investment in such contracts, gives the purchaser the right, in
return for the premium paid, to assume a position in interest rate futures
contracts at a specified exercise price at any time prior to the expiration
date of the options. Upon exercise of an option, the delivery of the
futures position by the writer of the option to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
futures contract margin account, which represents the amount by which the
market price of the futures contract exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of an option
on interest rate futures contracts is limited to the premium paid for the
option (plus transaction costs). Because the value of the option is fixed
at the point of sale, there are no daily cash payments to reflect changes
in the value of the underlying contract; however, the value of the option
does change daily and that change would be reflected in the net asset value
of a Fund.
There are several risks relating to options on interest rate futures
contracts. The ability to establish and close out positions on such
options will be subject to the existence of a liquid market. In addition,
a Fund's purchase of put or call options will be based upon predictions as
to anticipated interest rate trends by Dreyfus, which could prove to be
inaccurate. Even if Dreyfus' expectations are correct there may be an
imperfect correlation between the change in the value of the options and of
a Fund's portfolio securities.
Tender Option Bonds
Each Fund may invest up to 10% of the value of its assets in tender
option bonds. A tender option bond is a Municipal Obligation (generally
held pursuant to a custodial arrangement) having a relatively long maturity
and bearing interest at a fixed rate substantially higher than prevailing
short-term tax-exempt rates, that has been coupled with the agreement of a
third party, such as a bank, broker-dealer or other financial institution,
pursuant to which such institution grants the security holders the option,
at periodic intervals, to tender their securities to the institution and
receive the face value thereof. As consideration for providing the option,
the financial institution receives periodic fees equal to the difference
between the Municipal Obligation's fixed coupon rate and the rate, as
determined by a remarketing or similar agent at or near the commencement of
such period, that would cause the securities, coupled with the tender
option, to trade at par on the date of such determination. Thus, after
payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt
rate. Dreyfus, on behalf of the Fund, will consider on an ongoing basis
the creditworthiness of the issuer of the underlying Municipal Obligation,
of any custodian and the third-party provider of the tender option. In
certain instances and for certain tender option bonds, the option may be
terminable in the event of a default in payment of principal or interest on
the underlying Municipal Obligations and for other reasons. Each Fund will
not invest more than 10% of the value of its net assets in illiquid
securities, which would include tender option bonds for which the required
notice to exercise the tender feature is more than seven days if there is
no secondary market available for these obligations.
Use of Ratings as Investment Criteria
The ratings of nationally recognized statistical rating organizations
("NRSROs") such as Standard & Poor's Ratings Group ("S&P") and Moody's
Investors Service, Inc. ("Moody's") represent the opinions of these
agencies as to the quality of Municipal Obligations which they rate. It
should be emphasized, however, that such ratings are relative and
subjective and are not absolute standards of quality. These ratings will
be used by the Funds as initial criteria for the selection of portfolio
securities, but the Funds will also rely upon the independent advice of
Dreyfus to evaluate potential investments. Among the factors which will be
considered are the long-term ability of the issuer to pay principal and
interest and general economic trends. Further information concerning the
ratings of the NRSROs and their significance is contained in the Appendix
to this Statement of Additional Information.
After being purchased by a Fund, the rating of a Municipal Obligation
may be reduced below the minimum rating required for purchase by the Fund
or the issuer of the Municipal Obligation may default on its obligations
with respect to the Municipal Obligation. In that event, the Fund will
dispose of the Municipal Obligation as soon as practicable, consistent with
achieving an orderly disposition of the Municipal Obligation, unless the
Trust's Board of Trustees determines that disposal of the Municipal
Obligation would not be in the best interest of the Fund. In addition, it
is possible that a Municipal Obligation may cease to be rated or an NRSRO
might not timely change its rating of a particular Municipal Obligation to
reflect subsequent events. Although neither event will require the sale of
such Municipal Obligation by a Fund, Dreyfus will consider such event in
determining whether the Fund should continue to hold the Municipal
Obligation. In addition, if an NRSRO changes its rating system, a Fund
will attempt to use comparable ratings as standards for its investments in
accordance with its investment objectives and policies.
Floating Rate and Variable Rate Obligations
A Fund may purchase floating rate and variable rate obligations,
including participation interests therein. Floating rate or variable rate
obligations provide that the rate of interest is set as a specific
percentage of a designated base rate (such as the prime rate at a major
commercial bank) and that the Fund can demand payment of the obligation at
par plus accrued interest. Variable rate obligations provide for a
specified periodic adjustment in the interest rate, while floating rate
obligations have an interest rate which changes whenever there is a change
in the external interest rate. Frequently such obligations are secured by
letters of credit or other credit support arrangements provided by banks.
The quality of the underlying creditor or of the bank, as the case may be,
must, as determined by Dreyfus under the supervision of the Trustees, be
equivalent to the quality standard prescribed for the Funds. The Funds are
currently permitted to purchase floating rate and variable rate obligations
with demand features in accordance with requirements established by the
Securities and Exchange Commission ("SEC"), which, among other things,
permit such instruments to be deemed to have remaining maturities of
thirteen months or less, notwithstanding that they may otherwise have a
stated maturity in excess of thirteen months.
A Fund may invest in participation interests purchased from banks in
floating rate or variable rate tax-exempt Municipal Obligations owned by
banks. A participation interest gives the purchaser an undivided interest
in the Municipal Obligation in the proportion that the Fund's participation
interest bears to the total principal amount of the Municipal Obligation,
and provides a demand feature. Each participation is backed by an
irrevocable letter of credit or guarantee of a bank (which may be the bank
issuing the participation interest, a bank issuing a confirming letter of
credit to that of the issuing bank, or a bank serving as agent of the
issuing bank with respect to the possible repurchase of the participation
interest) that Dreyfus, under the supervision of the Trustees, has
determined meets the prescribed quality standards for the Funds. A Fund
has the right to sell the instrument back to the issuing bank or draw on
the letter of credit on demand for all or any part of the Fund's
participation interest in the Municipal Obligation, plus accrued interest.
The Funds are currently permitted to invest in participation interests
when the demand provision complies with conditions established by the SEC.
Banks will retain a service and letter of credit fee and a fee for issuing
repurchase commitments in an amount equal to the excess of the interest
paid on the Municipal Obligations over the negotiated yield at which the
instruments were purchased by a Fund.
When-Issued Securities
A Fund may purchase Municipal Obligations on a when-issued basis
(i.e., for delivery beyond the normal settlement date at the stated price
and yield). The payment obligation and the interest rate that will be
received on the Municipal Obligations purchased on a when-issued basis are
each fixed at the time the buyer enters into the commitment. Although a
Fund will purchase Municipal Obligations on a when-issued basis only with
the intention of actually acquiring the securities, the Fund may sell these
securities before the settlement date if it is deemed advisable as a matter
of investment strategy.
Municipal Obligations purchased on a when-issued basis and the
securities held in the portfolio of each Fund are subject to changes in
market value based upon the public's perception of the creditworthiness of
the issuer and changes, real or anticipated, in the level of interest rates
(which will generally result in similar changes in value, i.e., both
experiencing appreciation when interest rates decline and depreciation when
interest rates rise). Therefore, to the extent a Fund remains
substantially fully invested at the same time that it has purchased
securities on a when-issued basis, there will be a greater possibility of
fluctuation in the Fund's net asset value. Purchasing Municipal
Obligations on a when-issued basis can involve a risk that the yields
available in the market when the delivery takes place may actually be
higher than those obtained in the transaction.
A separate account of each Fund consisting of cash or liquid debt
securities equal to the amount of the when-issued commitments will be
established with the Fund's custodian. When the time comes to pay for when-
issued securities, the Fund will meet its obligations from then-available
cash flow, sale of securities held in the separate account, sale of other
securities or, although it would not normally expect to do so, from the
sale of the when-issued securities themselves (which may have a value
greater or lesser than the Fund's payment obligations). Sale of securities
to meet such obligations carries with it a greater potential for the
realization of capital gains, which are not exempt from Federal income tax.
Purchase of Securities with Stand-by Commitments
Pursuant to an exemptive order issued by the SEC under the Act, a Fund
may acquire standby commitments with respect to Municipal Obligations held
in its portfolio. Under a stand-by commitment, a broker-dealer, dealer or
bank would agree to purchase, at a Fund's option, a specified Municipal
Obligation at a specified price. Stand-by commitments acquired by a Fund
may also be referred to as "put options." The amount payable to a Fund
upon its exercise of a stand-by commitment normally would be (a) the
acquisition cost of the Municipal Obligation, less any amortized market
premium or plus any amortized market or original issue discount during the
period the Fund owned the security, plus (b) all interest accrued on the
security since the last interest payment date during the period. Absent
unusual circumstances, in determining net asset value a Fund would value
the underlying Municipal Obligation at amortized cost. Accordingly, the
amount payable by the broker-dealer, dealer or bank upon exercise of a
stand-by commitment will normally be substantially the same as the
portfolio value of the underlying Municipal Obligation.
A Fund's right to exercise a stand-by commitment is unconditional and
unqualified. Although the Fund could not transfer a stand-by commitment,
the Fund could sell the underlying Municipal Obligation to a third party at
any time. It is expected that stand-by commitments generally will be
available to the Funds without the payment of any direct or indirect
consideration. The Funds may, however, pay for stand-by commitments either
separately in cash or by paying a higher price for portfolio securities
which are acquired subject to the commitment (thus reducing the yield to
maturity otherwise available for the same securities). The total amount
paid in either manner for outstanding stand-by commitments held in the
Funds' portfolios will not exceed .5 of 1% of the value of each Fund's
total assets calculated immediately after such stand-by commitment was
acquired.
The Funds intend to enter into stand-by commitments only with broker-
dealers, dealers or banks that Dreyfus believes present minimum credit
risks. A Fund's ability to exercise a stand-by commitment will depend on
the ability of the issuing institution to pay for the underlying securities
at the time the commitment is exercised. The credit of each institution
issuing a stand-by commitment to a Fund will be evaluated on an ongoing
basis by Dreyfus in accordance with procedures established by the Trustees.
The Funds intend to acquire stand-by commitments solely to facilitate
portfolio liquidity and do not intend to exercise their rights thereunder
for trading purposes. The acquisition of a stand-by commitment would not
affect the valuation or maturity of the underlying Municipal Obligation,
which will continue to be valued in accordance with the amortized cost
method. Each stand-by commitment will be valued at zero in determining net
asset value. Should a Fund pay directly or indirectly for a stand-by
commitment, its costs will be reflected as an unrealized loss for the
period during which the commitment is held by the Fund and will be
reflected in realized gain or loss when the commitment is exercised or
expires. Stand-by commitments will not affect the dollar-weighted average
maturities of the Funds' portfolios. The Funds understand that the
Internal Revenue Service has issued a revenue ruling to the effect that a
registered investment company will be treated for Federal income tax
purposes as the owner of Municipal Obligations acquired subject to stand-by
commitments and the interest on the Municipal Obligations will be tax-
exempt to the Funds.
Taxable Investments
Each Fund anticipates being as fully invested as practicable in
Municipal Obligations. Because each Fund's purpose is to provide income
exempt from Federal and state personal income tax, a Fund will invest in
taxable obligations only if and when the Trustees believe it would be in
the best interests of its shareholders to do so. Situations in which a
Fund may invest up to 20% of its total assets in taxable securities
include: (a) pending investment of proceeds of sales of shares of the Fund
or of portfolio securities, (b) pending settlement of purchases of
portfolio securities, and (c) when the Fund is attempting to maintain
liquidity for the purpose of meeting anticipated redemptions. A Fund may
temporarily invest more than 20% of its total assets in taxable securities
to maintain a "defensive" posture when, in the opinion of Dreyfus, it is
advisable to do so because of adverse market conditions affecting the
market for Municipal Obligations. A Fund may invest in only the following
kinds of taxable securities maturing in one year or less from the date of
purchase: (1) obligations of the United States Government, its agencies or
instrumentalities; (2) commercial paper rated Prime-1 by Moody's or A-1+ or
A-1 by S&P; (3) certificates of deposit of domestic banks with total assets
of $1 billion or more; and (4) repurchase agreements (instruments under
which the seller of a security agrees to repurchase the security at a
specific time and price) with respect to any securities that the Fund is
permitted to hold.
Repurchase Agreements
A Fund may enter into repurchase agreements with member banks of the
Federal Reserve System or certain non-bank dealers. Under each repurchase
agreement the selling institution will be required to maintain the value of
the securities subject to the agreement at not less than their repurchase
price. If a particular bank or non-bank dealer defaults on its obligation
to repurchase the underlying debt instrument as required by the terms of a
repurchase agreement, a Fund will incur a loss to the extent that the
proceeds it realizes on the sale of the collateral are less than the
repurchase price of the instrument. In addition, should the defaulting bank
or non-bank dealer file for bankruptcy, a Fund could incur certain costs in
establishing that it is entitled to dispose of the collateral and its
realization on the collateral may be delayed or limited. Investments in
repurchase agreements are subject to the policy prohibiting investment of
more than 10% of a Fund's assets in restricted securities, securities
without readily available market quotations and repurchase agreements
maturing in more than seven days.
As noted in the Prospectuses, each of the Funds may, on occasion,
invest in securities issued by other investment companies. These
securities will be of investment companies that determine their net asset
value per share based on the amortized cost or penny-rounding method. Such
securities will be acquired by a Fund within the limits prescribed by the
Act, which include, subject to certain exceptions, a prohibition against a
Fund's investing more than 10% of the value of its total assets in such
securities.
Special Factors Affecting the Massachusetts Tax-Free Fund
The Commonwealth of Massachusetts and certain of its cities and towns
and public bodies have experienced financial difficulties that have
adversely affected their credit standing. The prolonged effects of such
financial difficulties could adversely affect the market value of the
Massachusetts Municipal Obligations held by the Massachusetts Tax-Free
Fund. The information summarized below describes some of the more
significant factors that could affect the Fund or the ability of the
obligors to pay debt service on certain of these securities. The sources of
such information are the official statements of issuers located in the
Commonwealth of Massachusetts, as well as other publicly available
documents, and statements of public officials. The Trust has not
independently verified any of the information contained in such statements
and documents, but the Trust is not aware of facts which would render such
information inaccurate.
Fiscal Matters - General. The Commonwealth's constitution requires,
in effect, that its budget, though not necessarily its operating
expenditures and revenues, be balanced each year. In addition, the
Commonwealth has certain budgetary procedures and fiscal controls in place
that are designed to ensure that sufficient cash is available to meet the
Commonwealth's obligations, that state expenditures are consistent with
periodic allotments of annual appropriations and that funds are expended
consistent with statutory and public purposes. The General Fund, in
addition to being the Commonwealth's primary operating fund, ordinarily
functions as a residuary fund to receive otherwise unallocated revenues and
to provide monies to transfer to the funds as required. The condition of
the General Fund is generally regarded as the principal indicator of
whether the Commonwealth's operating revenues and expenses are in balance.
The other principal operating funds (the Local Aid Fund and the Highway
Fund) are customarily funded to at least a zero balance.
The Commonwealth of Massachusetts has experienced fiscal difficulties.
Operating losses in fiscal 1990, and 1991, totaled $1.251 billion and $21.2
million, respectively. During the period, fund balances in the budgeted
operating funds increased from opening balances of negative $1.104 billion
in fiscal 1990 to ending balances of positive $237.1 million in fiscal
1991, primarily due to deficit borrowings. The Commonwealth ended fiscal
1992 and 1993 with operating surpluses of $312.3 million and $13.1 million,
respectively, and statutory closing fund balances increased to $562.5
million at the end of fiscal 1993. Fiscal 1994 ended with a current
operating surplus of $18.2 million and ending fund balances of $580.7
million prior to taking into account certain revenue and expenditure
reductions based on preliminary financial information. Fiscal 1995 is
currently estimated to end with a deficiency of revenues and other sources
over expenditures and other uses of $117.4 million.
On July 10, 1994, the Governor signed into law the fiscal 1995 budget,
which, together with authorizations contained in the final fiscal 1994
appropriations bill and expected supplemental appropriations relating to
welfare and certain other programs, provides for approximately $16.482
billion in fiscal 1995 expenditures. Budgeted revenues and other sources
to be collected in fiscal 1995 are estimated by the Executive Office for
Administration and Finance to be approximately $16.364 billion.
In recent months, the rate of growth in certain tax revenue
categories, including, in particular, the income tax, has slowed. Fiscal
1994 tax revenues were approximately $87 million below the Department of
Revenue's tax revenue estimate of $10.694 billion. In September 1994, the
Secretary for Administration and Finance revised the fiscal 1995 tax
revenue estimate to $11.234 billion, a reduction of approximately $75
million from the most recent prior revenue estimate arrived at jointly with
Legislature in May 1994.
The current economic slowdown in Massachusetts has led to decreased
growth in tax revenues and to increased expenditures. Municipalities and
agencies of the Commonwealth are experiencing the same economic effects.
Moreover, they are affected by the financial condition of the Commonwealth,
because they receive substantial funding from the Commonwealth.
Limitations on Tax Revenues. In Massachusetts efforts to limit and
reduce levels of taxation have been under way for several years. Limits
were established on state tax revenues by legislation enacted on October
25, 1986, and by an initiative petition approved by the voters on November
4, 1986. The two measures are inconsistent in several respects.
Chapter 62F, which was added to the General Laws by initiative
petition in November 1986, establishes a state tax revenue growth limit for
each fiscal year equal to the average positive rate of growth in total
wages and salaries in the Commonwealth, as reported by the federal
government, during the three calendar years immediately preceding the end
of such fiscal year. Chapter 62F also requires that allowable state tax
revenues be reduced by the aggregate amount received by local governmental
units from any newly authorized or increased local option taxes or excises.
Any excess in state tax revenue collections for a given fiscal year over
the prescribed limit, as determined by the State Auditor, is to be applied
as a credit against the then current personal income tax liability of all
taxpayers in the Commonwealth in proportion to the personal income tax
liability of all taxpayers in the Commonwealth for the immediately
preceding tax year. The legislation enacted in October 1986, which added
Chapter 29B to the General Laws, also establishes an allowable state
revenue growth factor by reference to total wages and salaries in the
Commonwealth. However, rather than utilizing a three-year average wage and
salary growth rate, as used by Chapter 62F, Chapter 29B's formula utilizes
one-third of the positive percentage gain in Massachusetts wages and
salaries, as reported by the federal government, during the three calendar
years immediately preceding the end of a given fiscal year. Additionally,
unlike Chapter 62F, Chapter 29B excludes from its definition of state tax
revenues income derived from local option taxes and excises and from
revenues needed to fund debt service costs.
Tax revenues in fiscal 1989 through fiscal 1994 were lower than the
limit set by either Chapter 62F or Chapter 29B. The Executive Office for
Administration and Finance currently estimates that state tax revenues in
fiscal 1995 will not reach the limit imposed by either of these statutes.
Proposition 2 1/2. In November of 1980, voters in the Commonwealth
approved a statewide tax limitation initiative petition, commonly known as
Proposition 2 1/2, to constrain levels of property taxation and to limit the
charges and fees imposed on cities and towns by certain governmental
entities, including county governments. Proposition 2 1/2, is not a provision
of the state constitution and accordingly is subject to amendment or repeal
by the legislature. Proposition 2 1/2, as amended to date, limits the
property taxes that may be levied by any city or town in any fiscal year to
the lesser of (i) 2.5% of the full and fair cash valuation of the real
estate and personal property therein, and (ii) 2.5% over the previous
year's levy limit plus any growth in the tax base from certain new
construction and parcel subdivisions. Proposition 2 1/2 also limits any
increase in the charges and fees assessed by certain governmental entities,
including county governments, on cities and towns to the sum of (i) 2.5% of
the total charges and fees imposed in the preceding fiscal year, and (ii)
any increase in charges for services customarily provided locally or
services obtained by the city or town at its option.
Many communities have responded to the limitation imposed by
Proposition 2 1/2 through statutorily permitted overrides and exclusions.
Override activity peaked in fiscal 1991, when 182 communities attempted
votes on one of the three types of referenda questions (override of levy
limit, exclusion of debt service, or exclusion of capital expenditures) and
100 passed at least one question, adding $58.5 million to their levy
limits. In fiscal 1992, 67 of 143 communities had successful votes totaling
$31.0 million. In fiscal 1993, 83 communities attempted a vote; two-thirds
of them (56) passed questions aggregating $16.4 million. Although
Proposition 2 1/2 will continue to constrain local property tax revenues,
significant capacity exists for overrides in nearly all cities and towns.
Local Aid. During the 1980s, the Commonwealth increased payments to
its cities, towns and regional school districts ("Local Aid") to mitigate
the impact of Proposition 2 1/2 on local programs and services. In fiscal
1995 approximately 32.1% of the Commonwealth's budget is estimated to be
allocated to Local Aid. Local Aid payments to cities, towns and regional
school districts take the form of both direct and indirect assistance.
Direct Local Aid decreased from $2.961 billion in fiscal 1989 to
$2.360 billion in fiscal 1992, increased to $2.547 billion in fiscal 1993
and increased to $2.727 billion in fiscal 1994. It is estimated that fiscal
1995 expenditures for direct Local Aid will be $2.979 billion, which is an
increase of approximately 9.2% above the fiscal 1994 level. The additional
amount of indirect Local Aid provided over and above direct Local Aid was
approximately $2.069 billion in fiscal 1994. It is estimated that in fiscal
1995 approximately $2.318 billion of indirect Local Aid will also be paid.
A statute adopted by voter initiative petition to the November 1990
statewide election regulates the distribution of Local Aid to cities and
towns. The statute requires that, subject to annual appropriation, no less
than 40% of collections from personal income taxes, sales and use taxes,
corporate excise taxes and lottery fund proceeds be distributed to cities
and towns. Under the law, the Local Aid distribution to each city or town
would equal no less than 100% of the total Local Aid received for fiscal
1989. Distributions in excess of fiscal 1989 levels would be based on new
formulas that would replace the current Local Aid distribution formulas.
By its terms, the new formula would have called for a substantial increase
in direct Local Aid in fiscal 1992 and would call for such an increase in
fiscal 1993 and in subsequent years. However, Local Aid payments expressly
remain subject to annual appropriation, and fiscal 1992, fiscal 1993 and
fiscal 1994 appropriations for Local Aid did not meet, and fiscal 1995
appropriations for Local Aid do not meet, the levels set forth in the
initiative law.
Commonwealth Expenditures. From fiscal 1989 to fiscal 1990 budgeted
expenditures of the Commonwealth increased approximately 4.9% to $13.260
million. Fiscal 1991 budgeted expenditures were $13.655 billion, or a 3.0%
increase over fiscal 1990 budgeted expenditures. For fiscal 1992, budgeted
expenditures were $13.420 billion, representing a decline of 1.7% from the
level of budgeted expenditures in fiscal 1991. Fiscal 1993 budgeted
expenditures were $14.696 billion, an increase of 9.6% from fiscal 1992.
Preliminary information indicates fiscal 1994 budgeted expenditures were
$15.533 billion, an increase of 5.7% from fiscal 1993. It is estimated
that fiscal 1995 budgeted expenditures will be $16,482 billion, an increase
of 6.1% over the fiscal 1994 level. Budgeted revenues and other sources to
be collected in fiscal 1995 are estimated by the Executive Office for
Administration and Finance to be approximately $16.3 billion, prior to
taking into account certain revenue and expenditure reductions.
Commonwealth expenditures since fiscal 1990 largely reflect
significant growth in several programs and services provided by the
Commonwealth, principally Medicaid and group health insurance; public
assistance programs; debt service; pensions; and assistance to the
Massachusetts Bay Transportation Authority and regional transit
authorities.
The Commonwealth's pension systems were established on a pay-as-you-go
basis. The Commonwealth's unfunded actuarial pension liability is
significant - approximately $9.651 billion as of January 1, 1993, for state
employees and teachers and local retirement system cost-of-living
increases. The amount in the state's pension reserve, established to
address the unfunded liabilities of the two state systems, has increased
significantly in recent years due to substantial appropriations and changes
in the law relating to investment of retirement systems assets. As of
December 31, 1993, the reserve was approximately $4.124 billion.
Comprehensive pension legislation approved in 1988 committed the
Commonwealth to fund future pension liabilities currently and to amortize
the Commonwealth's accumulated unfunded liabilities over 40 years.
Other Factors. Many factors affect the financial condition of the
Commonwealth, including many social, environmental and economic conditions,
which are beyond the control of the Commonwealth. As with most urban
states, the continuation of many of the Commonwealth's programs,
particularly its human services programs, is in significant part dependent
upon continuing Federal reimbursements which have been declining.
Federal legislation in recent years has resulted in substantial
reductions in direct Federal payments and grants to states and
municipalities for programs in social service, water pollution control and
other areas. Federal reimbursements have also declined as a result of
decreased state expenditures. Further loss of Federal grants and financing
by the Commonwealth could exacerbate the economic slowdown and cause
programs to be curtailed or cause the recipients of such funding to find
other revenue sources.
Special Factors Affecting the California Tax-Free Fund
Some of the significant financial considerations relating to the
Funds' investments in California Municipal Obligations are summarized
below. This summary information is derived principally from official
statements and prospectuses relating to securities offerings of the State
of California and various local agencies in California, available as of the
date of this Statement of Additional Information and does not purport to be
a complete description of any of the considerations mentioned herein. The
accuracy and completeness of the information contained in such official
statements has not been verified independently.
Economic Factors. The Governor's 1993-1994 Budget, introduced on
January 8, 1993, proposed general fund expenditures of $37.3 billion, with
projected revenues of $39.9 billion. To balance the budget in the face of
declining revenues, the Governor proposed a series of revenue shifts from
local government, reliance on increased federal aid, and reductions in
state spending.
The Department of Finance of the State of California's May Revision of
General Fund Revenues and Expenditures (the "May Revision"), released on
May 20, 1993, projected the State would have an accumulated deficit of
about $2.75 billion by June 30, 1993 essentially unchanged from the prior
year. The Governor proposed to eliminate this deficit over an 18-month
period. Unlike previous years, the Governor's Budget and May Revision did
not calculate a "gap" to be closed, but rather set forth revenue and
expenditure forecasts and proposals designed to produce a balanced budget.
The 1993-1994 budget act (the "1993-94 Budget Act") was signed by the
Governor on June 30, 1993, along with implementing legislation. The
Governor vetoed about $71 million in spending.
The 1993-94 Budget Act is predicated on general fund revenue and
transfers estimated at $40.6 billion, $400 million below 1992-93 (and the
second consecutive year of actual decline). The principal reasons for
declining revenue are the continued weak economy and the expiration (or
repeal) of three fiscal steps taken in 1992--a half cent temporary sales
tax, a deferral or operating loss carry forwards, and repeal by initiative
of a sales tax on candy and snack foods.
The 1993-94 Budget Act also assumes special fund revenues of $11.9
billion, an increase of 2.9 percent over 1992-93.
The 1993-94 Budget Act includes general fund expenditures of $38.5
billion (a 6.3 percent reduction from projected 1992-93 expenditures of
$41.1 billion), in order to keep a balanced budget within the available
revenues. The 1993-94 Budget Act also includes special fund expenditures
of $12.1 billion, a 4.2 percent increase. The 1993-94 Budget Act reflects
the following major adjustments;
1. Changes in local government financing to shift about $2.6 billion
in property taxes from cities, counties, special districts and
redevelopment agencies to school and community college districts, thereby
reducing general fund support by an equal amount. About $2.5 billion would
be permanent, reflecting termination of the State's "bailouts" of local
governments following the property tax cuts of Preposition 13 in 1978 (See
"Constitutional, Legislative and Other Factors" below).
The property tax revenue losses for cities and counties are offset in
part by additional sales tax revenues and mandate relief. The temporary
0.5 percent sales tax has been extended through December 31, 1993, for
allocation to counties for public safety purposes.
Legislation also has been enacted to eliminate state mandates in order
to provide local governments flexibility in making their programs
responsive to local needs. Legislation provides mandate relief for local
justice systems which affect county audit requirements, court reporter
fees, and court consolidation; health and welfare relief involving advisory
boards, family planning, state audits and realignment maintenance efforts;
and relief in areas such as county welfare department self-evaluations,
noise guidelines and recycling requirements.
2. The 1993-94 Budget Act keeps K-12 Proposition 98 funding on a
cash basis at the same par-pupil level as 1992-93 by providing schools a
$609 million loan payable from future years Proposition 98 funds.
3. The 1993-94 Budget Act assumed receipt of about $692 million of
aid to the State from the federal government to offset health and welfare
costs associated with foreign immigrants living in the State, which would
reduce a like amount of general fund expenditures. About $411 million of
this amount is one-time funding. Congress ultimately appropriated only
$450 million.
4. Reductions of $600 million in health and welfare programs and
$400 million in support for higher education (partly offset by fee
increases at all three units of higher education) and various miscellaneous
cuts (totaling approximately $150 million) in State government services in
many agencies, up to 15 percent. The 1993-94 Budget Act suspended the 4
percent automatic budget reduction "trigger," as was done in 1992-93, so
cuts could be focused.
5. A 2-year suspension of the renter's tax credit ($390 million
expenditure reduction in 1993-94).
6. Miscellaneous one-time items, including deferral of payment to
the Public Employees Retirement Fund ($339 million) and a change in
accounting for debt service from accrual to cash basis, saving $107
million.
The 1993-94 Budget Act contains no general fund tax/revenue increases
other than a two year suspension of the renters' tax credit.
Administration reports during the course of the 1993-94 Fiscal Year
have indicated that while economic recovery appears to have started in the
second half of the fiscal year, recessionary conditions continued longer
than had been anticipated when the 1993-94 Budget Act was adopted.
Overall, revenues for the 1993-94 Fiscal Year were about $800 million lower
than original projections, and expenditures were about $780 million higher,
primarily because of higher health and welfare caseloads, lower property
taxes which require greater State support for K-14 education to make up the
shortfall, and lower than anticipated federal government payments for
immigration-related costs. The reports in May and June, 1994, indicated
that revenues in the second half of the 1993-94 Fiscal Year have been very
close to the projections made in the Governor's Budget of January 10, 1994,
which is consistent with a slow turnaround in the economy.
The Department of Finance's July 1994 Bulletin, including the final
June receipts, reported that June revenues were $114 million (2.5 percent)
above projection, with final end-of-year results at $377 million (about 1
percent) above the May Revision projections. Part of this result was due
to end-of-year adjustments and reconciliations. Personal income tax and
sales tax continued to track projections very well. The largest factor in
the higher than anticipated revenues was from bank and corporation taxes,
which were $140 million (18.4 percent) above projection in June. While the
higher June receipts are reflected in the actual 1993-94 Fiscal Year cash
flow results, and help the starting cash balance for the 1994-95 Fiscal
Year, the Department of Finance has not adjusted any of its revenue
projections for the 1994-95 or 1995-96 Fiscal Years.
During the 1993-94 Fiscal Year, the State implemented the deficit
retirement plan, which was part of the 1993-94 Budget Act, by issuing $1.2
billion of revenue anticipation warrants in February 1994 maturing December
21, 1994. This borrowing reduced the cash deficit at the end of the 1993-
94 Fiscal Year. Nevertheless, because of the $1.5 billion variance from
original 1993-94 Budget Act assumptions, the General Fund ended the fiscal
year at June 30, 1994 carrying forward an accumulated deficit of
approximately $2 billion.
Because of the revenue shortfall and the State's reduced internal
borrowable cash resources, in addition to the $1.2 billion of revenue
anticipation warrants issued as part of the deficit retirement plan, the
State issued an additional $2.0 billion of revenue anticipation warrants,
maturing July 26, 1994, which were needed to fund the State's obligations
and expenses through the end of the 1993-94 Fiscal Year.
On January 17, 1994, a major earthquake measuring an estimated 6.8 on
the Richter Scale struck Los Angeles. Significant property damage to
private and public facilities occurred in a four county area including
northern Los Angeles County, Ventura County, and parts of Orange and San
Bernardino Counties, which were declared as State and federal disaster
areas by January 18. Current estimates of total property damage (private
and public) are in the range of $20 billion, but these estimates are still
subject to change.
Despite such damage, on the whole, the vast majority of structures in
the areas, including large manufacturing and commercial buildings and all
modern high-rise offices, survived the earthquake with minimal or no
damage, validating the cumulative effect of strict building codes and
thorough preparation for such an emergency by the State and local agencies.
State-owned facilities, including transportation corridors and
facilities such as Interstate Highways 5 and 10 and State Highways 14, 118
and 210, sustained damage. Most of the major highways (Interstate Highways
5 and 10) have now been reopened. The campus of California State
University at Northridge (very near the epicenter) suffered an estimated
$350 million damage, resulting in temporary closure of the campus. It has
reopened using borrowed facilities elsewhere in the area and many temporary
structures. There was also some damage to the University of California at
Los Angeles and to an office building in Van Nuys (now open after a
temporary closure). Overall, except for the temporary road and bridge
closures, and CSU-Northridge, the earthquake did not and is not expected to
significantly affect State government operations.
The State in conjunction with the federal government is committed to
providing assistance to local governments, individuals and businesses
suffering damage as a result of the earthquake, as well as to provide for
the repair and replacement of State-owned facilities. The federal
government will provide substantial earthquake assistance.
The President immediately allocated some available disaster funds, and
Congress has approved additional funds for a total of at least $9.5 billion
of federal funds for earthquake relief, including assistance to homeowners
and small businesses, and costs for repair of damaged public facilities.
The Governor originally proposed that the State will have to pay about
$1.9 billion for earthquake relief costs, including a 10 percent match to
some of the federal funds, and costs for some programs not covered by the
federal aid. The Governor proposed to cover $1.05 billion of these costs
from a general obligation bond issue which was on the June 1994 ballot, but
it was not approved by the voters. The Governor subsequently announced
that the State's share for transportation projects would come from existing
Department of Transportation funds (thereby delaying other, non-earthquake
related projects), the State's share for certain other costs (including
local school building repairs) would come from reallocating existing bond
funds, and that a proposed program for homeowner and small business aid
supplemental to federal aid would have to be abandoned. Some other costs
will be borrowed from the federal government in a manner similar to that
used by the State of Florida after Hurricane Andrew; pursuant to Senate
Bill 2383, repayment will have to be addressed in 1995-96 or beyond.
The 1994-95 Fiscal Year represents the fourth consecutive year the
Governor and Legislature will be faced with a very difficult budget
environment to produce a balanced budget. Many program cuts and budgetary
adjustments have already been made in the last three years. The Governor's
budget proposal, as updated in May and June, 1994, recognized that the
accumulated deficit could not be repaid in one year, and proposed a two-
year solution. The budget proposal sets forth revenue and expenditure
forecasts and revenue and expenditure proposals which result in operating
surpluses for the budget for both 1994-95 and 1995-96, and lead to the
elimination of the accumulated budget deficit, estimated at about $2.0
billion at June 30, 1994, by June 30, 1996.
The 1994-95 Budget Act, signed by the Governor on July 8, 1994,
projects revenues and transfers of $41.9 billion, about $2.1 billion higher
than revenues in 1993-94. This reflects the Administration's forecast of
an improving economy. Also included in this figure is a projected receipt
of about $360 million from the federal government to reimburse the State's
cost of incarcerating undocumented immigrants. The State will not know how
much the federal government will actually provide until the Federal FY 1995
Budget is completed. Completion of the Federal Budget is expected by
October 1994. The Legislature took no action on a proposal in the January
Governor's Budget to undertake an expansion of the transfer to certain
programs to counties, which would also have transferred to counties 0.5% of
the State's current sales tax.
The Budget Act projects Special Fund revenues of $12.1 billion, a
decrease of 2.4% from 1993-94 estimated revenues.
The 1994-95 Budget Act projects General Fund expenditures of $40.9
billion, an increase of $1.6 billion over 1993-94. The Budget Act also
projects Special Fund expenditures of $13.7 billion, a 5.4% increase over
1993-94 estimated expenditures. The principal features of the budget Act
were the following:
1. Receipt of additional federal aid in 1994-95 of about $400
million for costs of refugee assistance and medical care for undocumented
immigrants, thereby offsetting a similar General Fund cost. The State will
not know how much of these funds it will receive until the Federal FY 1995
Budget is passed.
2. Reductions of approximately $1.1 billion in health and welfare
costs.
3. A General Fund increase of approximately $38 million in support
for the University of California and $65 million for California State
University. It is anticipated that student fees for both the U.C. and the
C.S.U. will increase up to 10%.
4. Proposition 98 funding for K-14 schools is increased by $526
million from 1993-94 levels, representing an increase for enrollment growth
and inflation. Consistent with previous budget agreements, Proposition 98
funding provides approximately $4,217 per student for K-12 schools, equal
to the level in the past three years.
5. Legislation enacted with the Budget clarifies laws passed in 1992
and 1993 which require counties and other local agencies to transfer funds
to local school districts, thereby reducing State aid. Some countries had
implemented a method of making such transfers which provided less money for
schools if there were redevelopment agency projects. The new legislation
bans this method of transfer. If all counties had implemented this method,
General Fund aid to K-12 schools would have been $300 million higher in
each of the 1994-95 and 1995-96 Fiscal Years.
6. The 1994-95 Budget Act provides funding for anticipated growth in
the State's prison inmate population, including provisions for
implementing recent legislation (the so-called "Three Strikes" law) which
requires mandatory life prison terms for certain third-time felony
offenders.
7. Additional miscellaneous cuts ($500 million) and fund transfers
($255 million) totalling in the aggregate approximately $755 million.
The 1994-95 Budget Act contains no tax increases. Under legislation
enacted for the 1993-94 Budget, the renters' tax credit was suspended for
two years (1993 and 1994). A ballot proposition to permanently restore the
renters' tax credit after this year failed at the June, 1994 election. The
Legislature enacted a further one-year suspension of the renter's tax
credit, for the 1995, saving about $390 million in the 1995-96 Fiscal Year.
The 1994-95 Budget assumes that the State will use a cash flow
borrowing program in 1994-95 which combines one-year notes and warrants.
Issuance of warrants allows the State to defer repayment of approximately
$1.0 billion of its accumulated budget deficit into the 1995-96 Fiscal
Year.
The State's cash flow management plan for the 1994-95 fiscal year
included the issuance of $4.0 billion of revenue anticipation warrants on
July 26, 1994, to mature on April 25, 1996, as part of a two-year plan to
retire the accumulated State budget deficit.
Because preparation of cash flow estimates for the 1995-96 Fiscal Year
is necessarily more imprecise than for the current fiscal year and entails
greater risks of variance from assumptions, and because the Governor's two-
year budget plan assumes receipt of a large amount of federal aid in the
1995-96 Fiscal Year for immigration-related costs which is uncertain, the
Legislature enacted a backup budget adjustment mechanism to mitigate
possible deviations from projected revenues, expenditures or internal
borrowable resources which might reduce available cash resources during the
two-year plan, so as to assure repayment of the warrants.
Pursuant to Section 12467 of the California Government Code, enacted
by Chapter 135, Statutes of 1994 (the "Budget Adjustment Law"), the State
Controller was required, on November 15, 1994, in conjunction with the
Legislative Analyst's Office, to review the cash flow projections for the
General Fund on June 30, 1995 and compare them to the projections for the
1994-95 Fiscal Year included in the Official Statement dated July 20, 1994
for the 1994 Revenue Anticipation Warrants, Series C and D. If the State
Controller's report identifies a decrease in the unused borrowable
resources on June 30, 1995 of more than $430,000,000, then the "1995 cash
shortfall" shall be the amount of the difference that exceeds $430,000,000.
On or before February 15, 1995, legislation must be enacted providing for
sufficient General Fund expenditure reductions, revenue increases, or both,
to offset said 1995 cash shortfall. If such legislation is not enacted,
within five days thereafter the Director of Finance must reduce all General
Fund appropriations for the 1994-95 Fiscal Year, except certain
appropriations required by the State Constitution and federal law (the
"Required Appropriations"), by the percentage equal to the ratio of said
1995 cash shortfall to total remaining General Fund appropriations for the
1994-95 Fiscal Year, excluding the Required Appropriations.
The Director of Finance is required to included updated cash-flow
statements for the 1994-95 and 1995-96 Fiscal Years in the May revision to
the 1995-96 Fiscal Year budget proposal. By June 1, 1995, the State
Controller must concur with these updated statements or provided a revised
estimate of the cash condition of the General Fund for the 1994-95 and the
1995-96 Fiscal Years. For the 1995-96 Fiscal Year, Chapter 135 prohibits
any external borrowing as of June 30, 1996, thereby requiring the State to
rely solely on internal borrowable resources, expenditure reductions or
revenue increases to eliminate any projected cash flow shortfall.
Commencing on October 15, 1995, the State Controller will, in
conjunction with the Legislative Analyst's Office, review the estimated
cash condition of the General Fund for the 1995-96 Fiscal Year. The "1996
cash shortfall" shall be the amount necessary to bring the balance of
unused borrowable resources on June 30, 1996 to zero. On or before
December 1, 1995, legislation must be enacted providing for sufficient
General Fund expenditure reductions, revenue increases, or both, to offset
any such 1996 cash shortfall identified by the State Controller. If such
legislation is not enacted, within five days thereafter the Director of
Finance must reduce all General Fund appropriations for the 1995-96 Fiscal
Year, except the Required Appropriations, by the percentage equal to the
ratio of said 1996 cash shortfall to total remaining General Fund
appropriations for the 1995-96 Fiscal Year, excluding the Required
Appropriations.
Constitutional, Legislative and Other Factors. Certain California
constitutional amendments, legislative measures, executive orders,
administrative regulations and voter initiatives could result in the
adverse effects described below. The following information constitutes only
a brief summary, does not purport to be a complete description, and is
based on information drawn from official statements and prospectuses
relating to securities offerings of the State of California and various
local agencies in California, available as of the date of this Statement of
Additional Information. While the Sponsors have not independently verified
such information, they have no reason to believe that such information is
not correct in all material respects.
Certain of the California Municipal Obligations in the Funds may be
obligations of issuers which rely in whole or in part on California State
revenues for payment of these obligations. Property tax revenues and a
portion of the State's general fund surplus are distributed to counties,
cities and their various taxing entities and the State assumes certain
obligations theretofore paid out of local funds. Whether and to what extent
a portion of the State's general fund will be distributed in the future to
counties, cities and their various entities, is unclear.
In 1988, California enacted legislation providing for a water's-edge
combined reporting method if an election fee was paid and other conditions
met. On October 6, 1993, California Governor Pete Wilson signed Senate
Bill 671 (Alquist) which modifies the unitary tax law by deleting the
requirements that a taxpayer electing to determine its income on a water's-
edge basis pay a fee and file a domestic disclosure spreadsheet and instead
requiring an annual information return. Significantly, the Franchise Tax
Board can no longer disregard a taxpayer's election. The Franchise Tax
Board is reported to have estimated state revenue losses from the
Legislation as growing $27 million in 1993-94 to $616 million 1992-2000,
but others, including Assembly Speaker Willie Brown, disagree with that
estimate and assert that more revenue will be generated for California,
rather than less, because of an anticipated increase in economic activity
and additional revenue generated by the incentives in the Legislation.
Certain of the California Municipal Obligations may be obligations of
issuers who rely in whole or in part on ad valorem real property taxes as a
source of revenue. On June 6, 1978, California voters approved an
amendment to the California Constitution known as Proposition 13, which
added Article XIIIA to the California Constitution. The effect of Article
XIIIA is to limit ad valorem taxes on real property and to restrict the
ability of taxing entities to increase real property tax revenues. On
November 7, 1978, California voters approved Proposition 8, and on June 3,
1986 California voters approved Proposition 46, both of which amended
Article XIIIA.
Section 1 of Article XIIIA limits the maximum ad valorem tax on real
property to 1% of full cash value (as defined in Section 2), to be
collected by the counties and apportioned according to law; provided that
the 1% limitation does not apply to ad valorem taxes or special assessments
to pay the interest and redemption charges on (i) any indebtedness approved
by the voters prior to July 1, 1978, or (ii) any bonded indebtedness for
the acquisition or improvement of real property approved on or after July
1, 1978, by two-thirds of the votes cast by the voters voting on the
proposition. Section 2 of Article XIIIA defines "full cash value" to mean
"the County Assessor's valuation of real property as shown on the 1975/76
tax bill under 'full cash value' or, thereafter, the appraised value of
real property when purchased, newly constructed, or a change in ownership
has occurred after the 1975 assessment." The full cash value may be
adjusted annually to reflect inflation at a rate not to exceed 2% per year,
or reduction in the consumer price index or comparable local data, or
reduced in the event of declining property value caused by damage,
destruction or other factors. The California State Board of Equalization
has adopted regulations, binding on county assessors, interpreting the
meaning of "change in ownership" and "new construction" for purposes of
determining full cash value of property under Article XIIIA.
Legislation enacted by the California Legislature to implement Article
XIIIA (Statutes of 1978, Chapter 292, as amended) provides that
notwithstanding any other law, local agencies may not levy any ad valorem
property tax except to pay debt service on indebtedness approved by the
voters prior to July 1, 1978, and that each county will levy the maximum
tax permitted by Article XIIIA of $4.00 per $100 assessed valuation (based
on the former practice of using 25%, instead of 100%, of full cash value as
the assessed value for tax purposes). The legislation further provided
that, for the 1978/79 fiscal year only, the tax levied by each county was
to be apportioned among all taxing agencies within the county in proportion
to their average share of taxes levied in certain previous years. The
apportionment of property taxes for fiscal years after 1978/79 has been
revised pursuant to Statutes of 1979, Chapter 282 which provides relief
funds from State moneys beginning in fiscal year 1979/80 and is designed to
provide a permanent system for sharing State taxes and budget funds with
local agencies. Under Chapter 282, cities and counties receive more of the
remaining property tax revenues collected under Proposition 13 instead of
direct State aid. School districts receive a correspondingly reduced amount
of property taxes, but receive compensation directly from the State and are
given additional relief. Chapter 282 does not affect the derivation of the
base levy ($4.00 per $100 assessed valuation) and the bonded debt tax rate.
On November 6, 1979, an initiative known as "Proposition 4" or the
"Gann Initiative" was approved by the California voters, which added
Article XIIIB to the California Constitution. Under Article XIIIB, State
and local governmental entities have an annual "appropriations limit" and
are not allowed to spend certain moneys called "appropriations subject to
limitation" in an amount higher than the "appropriations limit." Article
XIIIB does not affect the appropriation of moneys which are excluded from
the definition of "appropriations subject to limitation," including debt
service on indebtedness existing or authorized as of January 1, 1979, or
bonded indebtedness subsequently approved by the voters. In general terms,
the "appropriations limit" is required to be based on certain 1978/79
expenditures, and is to be adjusted annually to reflect changes in
consumer prices, population, and certain services provided by these
entities. Article XIIIB also provides that if these entities' revenues in
any year exceed the amounts permitted to be spent, the excess is to be
returned by revising tax rates or fee schedules over the subsequent two
years.
At the November 8, 1988 general election, California voters approved
an initiative known as Proposition 98. This initiative amends Article
XIIIB to require that (i) the California Legislature establish a prudent
state reserve fund in an amount as it shall deem reasonable and necessary
and (ii) revenues in excess of amounts permitted to be spent and which
would otherwise be returned pursuant to Article XIIIB by revision of tax
rates or fee schedules, be transferred and allocated (up to a maximum of
4%) to the State School Fund and be expended solely for purposes of
instructional improvement and accountability. No such transfer or
allocation of funds will be required if certain designated state officials
determine that annual student expenditures and class size meet certain
criteria as set forth in Proposition 98. Any funds allocated to the State
School Fund shall cause the appropriation limits established in Article
XIIIB to be annually increased for any such allocation made in the prior
year.
Proposition 98 also amends Article XVI to require that the State of
California provide a minimum level of funding for public schools and
community colleges. Commencing with the 1988-89 fiscal year, state monies
to support school districts and community college districts shall equal or
exceed the lesser of (i) an amount equaling the percentage of state general
revenue bonds for school and community college districts in fiscal year
1986-87, or (ii) an amount equal to the prior year's state general fund
proceeds of taxes appropriated under Article XIIIB plus allocated proceeds
of local taxes, after adjustment under Article XIIIB. The initiative
permits the enactment of legislation, by a two-thirds vote, to suspend the
minimum funding requirement for one year.
On June 30, 1989, the California Legislature enacted Senate
Constitutional Amendment 1, a proposed modification of the California
Constitution to alter the spending limit and the education funding
provisions of Proposition 98. Senate Constitutional Amendment 1, on the
June 5, 1990 ballot as Proposition 111, was approved by the voters and took
effect on July 1, 1990. Among a number of important provisions,
Proposition 111 recalculates spending limits for the State and for local
governments, allows greater annual increases in the limits, allows the
averaging of two years' tax revenues before requiring action regarding
excess tax revenues, reduces the amount of the funding guarantee in
recession years for school districts and community college districts (but
with a floor of 40.9% of State general fund tax revenues), removes the
provision of Proposition 98 which included excess monies transferred to
school districts and community college districts in the base calculation
for the next year, limits the amount of State tax revenue over the limit
which would be transferred to school districts and community college
districts, and exempts increased gasoline taxes and truck weight fees from
the State appropriations limit. Additionally, Proposition 111 exempts from
the State appropriations limit funding for capital outlays.
Article XIIIB, like Article XIIIA, may require further interpretation
by both the Legislature and the courts to determine its applicability to
specific situations involving the State and local taxing authorities.
Depending upon the interpretation, Article XIIIB may limit significantly a
governmental entity's ability to budget sufficient funds to meet debt
service on bonds and other obligations.
On November 4, 1986, California voters approved an initiative statute
known as Proposition 62. This initiative (i) requires that any tax for
general governmental purposes imposed by local governments be approved by
resolution or ordinance adopted by a two-thirds vote of the governmental
entity's legislative body and by a majority vote of the electorate of the
governmental entity, (ii) requires that any special tax (defined as taxes
levied for other than general governmental purposes) imposed by a local
governmental entity be approved by a two-thirds vote of the voters within
that jurisdiction, (iii) restricts the use of revenues from a special tax
to the purposes or for the service for which the special tax was imposed,
(iv) prohibits the imposition of ad valorem taxes on real property by local
governmental entities except as permitted by Article XIIIA, (v) prohibits
the imposition of transaction taxes and sales taxes on the sale of real
property by local governments, (vi) requires that any tax imposed by a
local government on or after August 1, 1985 be ratified by a majority vote
of the electorate within two years of the adoption of the initiative or be
terminated by November 15, 1988, (vii) requires that, in the event a local
government fails to comply with the provisions of this measure, a reduction
in the amount of property tax revenue allocated to such local government
occurs in an amount equal to the revenues received by such entity
attributable to the tax levied in violation of the initiative, and (viii)
permits these provisions to be amended exclusively by the voters of the
State of California.
In September 1988, the California Court of Appeal in City of
Westminster v. County of Orange, 204 Cal.App. 3d 623, 215 Cal. Rptr. 511
(Cal.Ct.App. 1988), held that Proposition 62 is unconstitutional to the
extent that it requires a general tax by a general law city, enacted on or
after August 1, 1985, and prior to the effective date of Proposition 62, to
be subject to approval by a majority of voters. The Court held that the
California Constitution prohibits the imposition of a requirement that
local tax measures be submitted to the electorate by either referendum or
initiative. It is not possible to predict the impact of this decision on
charter cities, on special taxes or on new taxes imposed after the
effective date of Proposition 62.
On November 8, 1988, California voters approved Proposition 87.
Proposition 87 amended Article XVI, Section 16, of the California
Constitution by authorizing the California Legislature to prohibit
redevelopment agencies from receiving any of the property tax revenue
raised by increased property tax rates levied to repay bonded indebtedness
of local governments which is approved by voters on or after January 1,
1989. It is not possible to predict whether the California Legislature
will enact such a prohibition nor is it possible to predict the impact of
Proposition 87 on redevelopment agencies and their ability to make payments
on outstanding debt obligations.
Certain California Municipal Obligations in the Funds may be
obligations which are payable solely from the revenues of health care
institutions. Certain provisions under California law may adversely affect
these revenues and, consequently, payment on those California Municipal
Obligations.
The Federally sponsored Medicaid program for health care services to
eligible welfare beneficiaries in California is known as the Medi-Cal
program. Historically, the Medi-Cal program has provided for a cost-based
system of reimbursement for inpatient care furnished to Medi-Cal
beneficiaries by any hospital wanting to participate in the Medi-Cal
program, provided such hospital met applicable requirements for
participation. California law now provides that the State of California
shall selectively contract with hospitals to provide acute inpatient
services to Medi-Cal patients. Medi-Cal contracts currently apply only to
acute inpatient services. Generally, such selective contracting is made on
a flat per diem payment basis for all services to Medi-Cal beneficiaries,
and generally such payment has not increased in relation to inflation,
costs or other factors. Other reductions or limitations may be imposed on
payment for services rendered to Medi-Cal beneficiaries in the future.
Under this approach, in most geographical areas of California, only
those hospitals which enter into a Medi-Cal contract with the State of
California will be paid for non-emergency acute inpatient services rendered
to Medi-Cal beneficiaries. The State may also terminate these contracts
without notice under certain circumstances and is obligated to make
contractual payments only to the extent the California legislature
appropriates adequate funding therefor.
In February 1987, the Governor of the State of California announced
that payments to Medi-Cal providers for certain services (not including
hospital acute inpatient services) would be decreased by 10% through June
1987. However, a federal district court issued a preliminary injunction
preventing application of any cuts until a trial on the merits can be held.
If the injunction is deemed to have been granted improperly, the State of
California would be entitled to recapture the payment differential for the
intended reduction period. It is not possible to predict at this time
whether any decreases will ultimately be implemented.
California enacted legislation in 1982 that authorizes private health
plans and insurers, to contract directly with hospitals for services to
beneficiaries on negotiated terms. Some insurers have introduced plans
known as "preferred provider organizations" ("PPOs"), which offer financial
incentives for subscribers who use only the hospitals which contract with
the plan. Under an exclusive provider plan, which includes most health
maintenance organizations ("HMOs"), private payors limit coverage to those
services provided by selected hospitals. Discounts offered to HMOs and PPOs
may result in payment to the contracting hospital of less than actual cost
and the volume of patients directed to a hospital under an HMO or PPO
contract may vary significantly from projections. Often, HMO or PPO
contracts are enforceable for a stated term, regardless of provider losses
or of bankruptcy of the respective HMO or PPO. It is expected that failure
to execute and maintain such PPO and HMO contracts would reduce a
hospital's patient base or gross revenues. Conversely, participation may
maintain or increase the patient base, but may result in reduced payment
and lower net income to the contracting hospitals.
Such California Municipal Obligations may also be insured by the State
of California pursuant to an insurance program implemented by the Office of
Statewide Health Planning and Development for health facility construction
loans. If a default occurs on insured California Municipal Obligations,
the State Treasurer will issue debentures payable out of a reserve fund
established under the insurance program or will pay principal and interest
on an unaccelerated basis from unappropriated State funds. At the request
of the Office of Statewide Health Planning and Development, Arthur D.
Little, Inc. prepared a study in December 1983 to evaluate the adequacy of
the reserve fund established under the insurance program and based on
certain formulations and assumptions found the reserve fund substantially
underfunded. In September of 1986, Arthur D. Little, Inc. prepared an
update of the study and concluded that an additional 10% reserve should be
established for "multi-level" facilities. For the balance of the reserve
fund, the update recommended maintaining the current reserve calculation
method. In March 1990, Arthur D. Little, Inc. prepared a further review of
the study and recommended that separate reserves continue to be established
for "multi-level" facilities at a reserve level consistent with those that
would be required by an insurance company.
Certain California Municipal Obligations in the Funds may be
obligations which are secured in whole or in part by a mortgage or deed of
trust on real property. California has five principal statutory provisions
which limit the remedies of a creditor secured by a mortgage or deed of
trust. Two limit the creditor's right to obtain a deficiency judgment, one
limitation being based on the method of foreclosure and the other on the
type of debt secured. Under the former, a deficiency judgment is barred
when the foreclosure is accomplished by means of a non-judicial trustee's
sale. Under the latter, a deficiency judgment is barred when the
foreclosed mortgage or deed of trust secures certain purchase money
obligations. Another California statute, commonly known as the "one form
of action" rule, requires creditors secured by real property to exhaust
their real property security by foreclosure before bringing a personal
action against the debtor. The fourth statutory provision limits any
deficiency judgment obtained by a creditor secured by real property
following a judicial sale of such property to the excess of the outstanding
debt over the fair value of the property at the time of the sale, thus
preventing the creditor from obtaining a large deficiency judgment against
the debtor as a result of low bids at a judicial sale. The fifth statutory
provision gives the debtor the right to redeem the real property from any
judicial foreclosure sale as to which a deficiency judgment may be ordered
against the debtor.
Upon the default of a mortgage or deed of trust with respect to
California real property, the creditor's nonjudicial foreclosure rights
under the power of sale contained in the mortgage or deed of trust are
subject to the constraints imposed by California law upon transfers of
title to real property by private power of sale. During the three-month
period beginning with the filing of a formal notice of default, the debtor
is entitled to reinstate the mortgage by making any overdue payments.
Under standard loan servicing procedures, the filing of the formal notice
of default does not occur unless at least three full monthly payments have
become due and remain unpaid. The power of sale is exercised by posting
and publishing a notice of sale for at least 20 days after expiration of
the three-month reinstatement period. Therefore, the effective minimum
period for foreclosing on a mortgage could be in excess of seven months
after the initial default. Such time delays in collections could disrupt
the flow of revenues available to an issuer for the payment of debt service
on the outstanding obligations if such defaults occur with respect to a
substantial number of mortgages or deeds of trust securing an issuer's
obligations.
In addition, a court could find that there is sufficient involvement
of the issuer in the nonjudicial sale of property securing a mortgage for
such private sale to constitute "state action," and could hold that the
private-right-of-sale proceedings violate the due process requirements of
the Federal or State Constitutions, consequently preventing an issuer from
using the nonjudicial foreclosure remedy described above.
Certain California Municipal Obligations in the Funds may be
obligations which finance the acquisition of single family home mortgages
for low and moderate income mortgagors. These obligations may be payable
solely from revenues derived from the home mortgages, and are subject to
the California statutory limitations described above applicable to
obligations secured by real property. Under California anti-deficiency
legislation, there is no personal recourse against a mortgagor of a single
family residence purchased with the loan secured by the mortgage,
regardless of whether the creditor chooses judicial or nonjudicial
foreclosure.
Under California law, mortgage loans secured by single family owner-
occupied dwellings may be prepaid at any time. Prepayment charges on such
mortgage loans may be imposed only with respect to voluntary prepayments
made during the first five years during the term of the mortgage loan, and
cannot in any event exceed six months' advance interest on the amount
prepaid in excess of 20% of the original principal amount of the mortgage
loan. This limitation could affect the flow of revenues available to an
issuer for debt service on the outstanding debt obligations which financed
such home mortgages.
Additional Considerations. With respect to Municipal Obligations
issued by the State of California and its political subdivisions, the Funds
cannot predict what legislation, if any, may be proposed in the California
State Legislature as regards the California State personal income tax
status of interest on such obligations, or which proposals, if any, might
be enacted. Such proposals, if enacted, might materially adversely affect
the availability of California Municipal Obligations for investment by the
Funds and the value of a Fund's portfolio. In such an event, the Trustees
would reevaluate the Fund's investment objective and policies and consider
changes in its structure or possible dissolution.
On December 6, 1994, Orange County, California and its Investment Pool
(the "Pool") filed for bankruptcy under Chapter 9 of the United States
Bankruptcy Code. Upon filing, all assets of the Pool were frozen.
Approximately 187 California Public entities, substantially all of which
are public agencies within the County, are investors in the Pool. Many of
the agencies have various bonds, notes or other forms of indebtedness
outstanding, and in some instances, have invested the proceeds of such
borrowings in the Pool. Additionally, such agencies have additional funds
invested in the Pool. Various representatives of the County have indicated
that the Pool expects to lose a substantial amount of its original
principal invested. Such losses could result in delays or failures of the
County as well as investors in the Pool to make scheduled debt service
payments. The Fund is unable to predict when funds may be released from
the Pool to investors, the amount of such funds, if any, and the financial
impact of the bankruptcy on the value of securities of the County, the
investors in the Pool, or the California municipal securities market
generally.
Special Factors Affecting the New York Tax-Free Fund
Some of the significant financial considerations relating to the
Fund's investment in New York Municipal Obligations are summarized below.
This summary information is not intended to be a complete description and
is principally derived from official statements relating to issues of New
York Municipal Obligations that were available prior to the date of this
Statement of Additional Information. The accuracy and completeness of the
information contained in those official statements have not been
independently verified.
General. Special risks inherent in New York Municipal Obligations
result from the financial condition of New York State, certain of its
public bodies and municipalities, and New York City. Beginning in early
1975, New York State, New York State, New York City and other state
entities faced serious financial difficulties which jeopardized the credit
standing and impaired the borrowing abilities of such entities and
contributed to high interest rates on, and lower market prices for, debt
obligations issued by them. A recurrence of such financial difficulties or
a failure of certain financial recovery programs could result in defaults
or declines in the market values of various New York Municipal Obligations
in which the Funds may invest. If there should be a default or other
financial crisis relating to New York State, New York City, a State or City
agency, or a State municipality, the market value and marketability of
outstanding New York Municipal Obligations in the Fund's portfolio and the
interest income to the Fund could be adversely affected. Moreover, the
significant slowdown in the New York and regional economy in the early
1990s added substantial uncertainty to estimates of the State's tax
revenues, which, in part, caused the State to overestimate its General Fund
tax receipts in the 1992 fiscal year by $575 million. The 1992 fiscal year
was the fourth consecutive year in which New York State incurred a cash-
basis operating deficit in the General Fund and issued deficit notes. The
State's 1993 and 994 fiscal years, however, were characterized by national
and regional economies that performed better than projected. After
reflecting a 1993 year-end deposit to the refund reserve account of $671
million, reported 1993 General Fund receipts were $45 million higher than
originally projected in April 1992. The State completed the 1994 fiscal
year with an operating surplus in the General Fund of $914 million. In
September 1994, however, New York State projected a General Fund operating
deficit of $690 million for the 1995 fiscal year.
State Economy. New York is the third most populous state in the
nation and has a relatively high level of personal wealth. The State's
economy is diverse with a comparatively large share of the nation's
finance, insurance, transportation, communications and services employment,
and a very small share of the nation's farming and mining activity. The
State has a declining proportion of its workforce engaged in manufacturing,
and an increasing proportion engaged in service industries. New York City
(the "City"), which is the most populous city in the State and nation and
is the center of the nation's largest metropolitan area, accounts for a
large portion of the State's population and personal income.
The State has historically been one of the wealthiest states in the
nation. For decades, however, the State has grown more slowly than the
nation as a whole, gradually eroding its relative economic position.
Overall economic activity declined less than that of the nation as a whole
during the 1982-83 recession. The 1990-91 recession, however, was more
severe in the State, owing to a significant retrenchment in the financial
services industry, cutbacks in defense spending, and an overbuilt real
estate market.
The unemployment rate in the State dipped below the national rate in
the second half of 1981 and remained lower until 1991. It stood at 7.7% in
1993. The total employment growth rate in the State has been below the
national average since 1984. The State's economic forecast calls for
employment to increase in 1994 and 1995. Employment growth is expected to
be moderate in 1995 when the pace of national economic growth is projected
to slacken and entire industries adjust to changing markets and the State's
economy absorbs the full impact of these developments. State per capita
personal income remains above the national average. State per capita
income for 1993 was $24,623, which is 18.3% above the 1993 national average
of $20,817. Between 1970 and 1980, the percentage by which the State's per
capita income exceeded that of the national average fell. However, total
personal income in the State rose slightly faster than the national average
in 1986 through 1989. Personal income is estimated to increase by 5.3% in
1994, and at a more moderate rate in 1995.
State Budget. The State Constitution requires the Governor to submit
to the Legislature a balanced Executive Budget which contains a complete
plan of expenditures for the ensuing fiscal year and all moneys and
revenues estimated to be available therefor, accompanied by bills
containing all proposed appropriations or reappropriations and any new or
modified revenue measures to be enacted in connection with the Executive
Budget. The entire plan constitutes the proposed State financial plan for
that fiscal year. The Governor submits to the Legislature, on at least a
quarterly basis, reports of actual receipts, revenues, disbursements,
expenditures, tax refunds and reimbursements, and repayment of advances in
form suitable for comparison with the State financial plan, together with
explanations of deviations from the State financial plan. At such time,
the Governor is required to submit any amendments to the State financial
plan necessitated by such deviations.
The Governor released the recommended Executive Budget for the
1994-95 fiscal year on January 18, 1994 and amended it on February 17, 1994
(the "Recommended 1994-95 State Financial Plan"). The Recommended 1994-95
State Financial Plan projected a balanced General Fund, with receipts and
transfers from other funds projected at $33.422 billion, including $339
million carried over from the surplus anticipated for the State's 1993-94
fiscal year. Disbursements and transfers to other funds are projected at
$33.399 billion. In addition, the financial plan included a $23 million
repayment to the State's Tax Stabilization Reserve Fund. The Division of
the Budget projected that at the close of the State's 1994-95 fiscal year,
the balance in the Tax Stabilization Reserve Fund would be $157 million.
The State's budget for the 1994-95 fiscal year was enacted by the
Legislature on June 7, 1994, more than two months after the start of the
fiscal year. Prior to adoption of the budget, the Legislature enacted
appropriations for disbursements considered to be necessary for State
operations and other purposes, including all necessary appropriations for
debt service. The State financial plan for the 1994-95 fiscal year was
formulated on June 16, 1994 and is based upon the State's budget as enacted
by the Legislature and signed into law by the Governor (the "1994-95 State
Financial Plan"). This delay in the enactment of the State's 1994-95
fiscal year budget may reduce the effectiveness of several of the actions
proposed.
The 1994-95 State Financial Plan is based on a number of assumptions
and projections. Because it is not possible to predict accurately the
occurrence of all factors that may affect the 1994-95 State Financial Plan,
actual results may differ and have differed materially in recent years,
from projections made at the outset of a fiscal year. There can be no
assurance that the State economy will not experience worse-than-predicted
results in the 1994-95 fiscal year, with corresponding material and adverse
effects on the State's projections of receipts and disbursements.
Recent Financial Results. The General Fund is the principal operating
fund of the State. It receives all State income that is not required by
law to be deposited in another fund which for the State's 1994-95 fiscal
year, is expected to comprise approximately 52% of total projected
governmental fund receipts.
The General Fund is projected to be balanced on a cash basis for the
1994-95 fiscal year. Total receipts are projected to be $34.321 billion,
an increase of $2.092 billion over total receipts in the prior fiscal year.
Total General Fund disbursements are projected to be $34.248 billion, an
increase of $2.351 billion over the total amount disbursed and transferred
in the prior fiscal year.
The State issued its first update to the GAAP-basis Financial Plan for
the State's 1994-95 fiscal year on September 1, 1994. In the September
GAAP-basis update, the Division of the Budget projected a General Fund
operating deficit of $690 million. The prior projection of the 1994-95
GAAP-basis State Financial Plan, issued in February 1994 as part of the
1994-95 Executive Budget (the "February 1994 Projection"), projected an
operating surplus in the General Fund of $7 million.
In the February 1994 projection, General Fund operating results over
the 1993-94 and 1994-95 fiscal year projection period were anticipated to
reduce the accumulated deficit by $256 million. The impact of the reported
results for the State's 1993-94 fiscal year and the revised projection of
the accumulated deficit is substantially the same. Combining the $914
million operating surplus for the State's 1993-94 fiscal year with the
projected $690 million operating deficit for the 1994-95 fiscal year
results in an anticipated $224 million reduction in the accumulated
deficit.
On July 29, 1994, the Office of the State Comptroller issued the
General Purpose Financial Statements of the State of New York for the 1993-
94 fiscal year. The Statements were prepared on GAAP-basis and were
independently audited in accordance with generally accepted auditing
standards. The State's Combined Balance Sheet as of March 31, 1994 showed
an accumulated surplus in its combined governmental funds of $370 million,
reflecting liabilities of $13.219 billion and assets of $13.589 billion.
This accumulated Governmental Funds surplus includes a $1.637 billion
accumulated deficit in the General Fund, as well as accumulated surpluses
in the Special Revenue and Debt Service fund types and a $622 million
accumulated deficit in the Capital Projects Fund type.
The State completed its 1993-94 fiscal year with a combined
Governmental Funds operating surplus of $1.051 billion, which included an
operating surplus in the General Fund of $914 million, in the Special
Revenue Funds of $149 million and in the Debt Service Funds of $23 million,
and an operating deficit in the Capital Projects Funds of $35 million.
The State reported a General Fund operating surplus of $914 million
for the 1993-94 fiscal year, as compared to an operating surplus of $2.065
billion for the prior fiscal year. The 1993-94 fiscal year surplus
reflects several major factors, including the cash basis surplus recorded
in 1993-94, the use of $671 million of the 1992-93 surplus to fund
operating expenses in Local Government Assistance Corporation, and the
accumulation of a $265 million balance in the Contingency Reserve Fund.
Revenues increased $543 million (1.7%) over prior fiscal year revenues with
the largest increase occurring in personal income taxes. Expenditures
increased $1.659 billion (5.6%) over the prior fiscal year, with the
largest increase occurring in State aid for social services programs.
The Special Revenue Funds account for State receipts from specific
sources that are legally restricted in use to specified purposes and
include all moneys received from the Federal government. Total receipts in
Special Revenue Funds are projected at $24.598 billion in the State's 1994-
95 fiscal year. Federal grants are projected to account for 75% of the
total projected receipts in Special Revenue Funds in the State's 1994-95
fiscal year.
Disbursements from Special Revenue Funds are projected to be $24.982
billion for the State's 1994-95 fiscal year. Grants to local governments
disbursed from this fund type are projected to account for 75% of
disbursements from this fund for the 1994-95 fiscal year.
The Capital Projects Funds are used to finance the acquisition and
construction of major capital facilities and to aid local government units
and Agencies in financing capital constructions. Federal grants for
capital projects, largely highway-related, are projected to account for 33%
of the $3.233 billion in total projected receipts in Capital Projects Funds
in the State's 1994-95 fiscal year. Total disbursements from Capital
Projects Funds, approximately 54% is for various transportation purposes,
including highways and mass transportation facilities; 4% is for programs
of the Department of Correctional Services and other public protection
activities; 16% is for health and mental hygiene facilities; 13% is for
environmental and recreational programs; 5% is for educational programs;
and 5% is for housing and economic development programs. The balance is
for the maintenance of State office facilities and various other capital
programs.
The Debt Service Funds serve to fulfill State debt service on long-
term general obligation State debt and other State lease/purchase and
contractual obligation financing commitments. Total receipts in Debt
Service Funds are projected to reach $2.318 billion in the State's 1994-95
fiscal year. Total disbursements from Debt Service Funds for debt service,
lease/purchase and contractual obligation financing commitments are
projected to be $2.246 billion for the 1994-95 fiscal year.
Debt Limits and Outstanding Debt. There are a number of methods by
which the State of New York may incur debt. Under the State Constitution,
the State may not, with limited exceptions for emergencies, undertake
long-term general obligation borrowing (i.e., borrowing for more than one
year) unless the borrowing is authorized in a specific amount for a single
work or purpose by the Legislature and approved by the voters. There is no
limitation on the amount of long-term general obligation debt that may be
so authorized and subsequently incurred by the State. The total amount of
long-term State general obligation debt authorized but not issued as of
December 31, 1993 was approximately $2.273 billion.
The State may undertake short-term borrowings without voter approval
(i) in anticipation of the receipt of taxes and revenues, by issuing tax
and revenue anticipation notes, and (ii) in anticipation of the receipt of
proceeds from the sale of duly authorized but unissued general obligation
bonds, by issuing bond anticipation notes. The State may also, pursuant to
specific constitutional authorization, directly guarantee certain
obligations of the State of New York's authorities and public benefit
corporations ("Authorities"). Payments of debt service on New York State
general obligation and New York State-guaranteed bonds and notes are
legally enforceable obligations of the State of New York.
The State of New York also employs two other types of long-term
financing mechanisms which are State-supported but are not general
obligations of the State: moral obligation and lease-purchase or
contractual-obligation financing.
In 1990, as part of a State fiscal reform program, legislation was
enacted creating the New York Local Government Assistance Corporation
("LGAC"), a public benefit corporation empowered to issue long-term
obligations to fund certain payments to local governments traditionally
funded through New York State's annual seasonal borrowing. The legislation
empowered LGAC to issue its bonds and notes in an amount not in excess of
$4.7 billion (exclusive of certain refunding bonds) plus certain other
amounts. Over a period of years, the issuance of those long-term
obligations, which will be amortized over no more than 30 years, is
expected to result in eliminating the need for continuing short-term
seasonal borrowing for those purposes. The legislation dedicated revenues
equal to one-quarter of the four cent State sales and use tax revenues to
pay debt service on these bonds. The legislation also imposed a cap on the
annual seasonal borrowing of the State at $4.7 billion, less net proceeds
of bonds issued by LGAC and bonds issued to provide for capitalized
interest, except in cases where the Governor and the legislative leaders
have certified both the need for additional borrowing and provided a
schedule for reducing it to the cap. If borrowing above the cap is thus
permitted in any fiscal year, it is required by law to be reduced to the
cap by the fourth fiscal year after the limit was first exceeded. As of
June 1994, LGAC had issued its bonds to provide net proceeds of $3.856
billion and has been authorized to issue its bonds to provide net proceeds
of up to an additional $315 million during the State's 1994-95 fiscal year.
In April 1993, legislation was also enacted providing for significant
changes in the long-term financing practices of the State and the
Authorities.
The Legislature passed a proposed constitutional amendment that would
permit the State, within a formula-based cap, to issue revenue bonds, which
would be debt of the State secured solely by a pledge of certain State tax
receipts (including those allocated to State funds dedicated for
transportation purposes), and not by the full faith and credit of the
State. In addition, the proposed amendment would require that State debt
be incurred only for capital projects included in a multi-year capital
financing plan and would prohibit, after its effective date, lease-purchase
and contractual-obligation financing mechanisms for State facilities.
Public hearings were held on the proposed constitutional amendment during
1993. Following these hearings, in February 1994, the Governor and the
State Comptroller recommended a revised constitutional amendment which
would further tighten the ban on lease-purchase and contractual-obligation
financing, incorporate existing lease-purchase and contractual-obligation
debt under the proposed revenue bond cap while simultaneously reducing the
size of the cap. After considering these recommendations, the Legislature
passed a revised constitutional amendment which tightens the ban, and
provides for a phase-in to a lower cap. Before the approved constitutional
amendment or any revised amendment enacted in 1994 can be presented to the
voters for their consideration, it must be passed by a separately elected
legislature. The amendment must therefore be passed by the newly elected
Legislature in 1995 prior to presentation to the voters at the earliest in
November 1995. The amendment could not become effective before January 1,
1996.
On January 13, 1992, Standard & Poor's reduced its ratings on the
State's general obligation bonds from A to A- and, in addition, reduced its
ratings on the State's moral obligation, lease purchase, guaranteed and
contractual obligation debt. Standard & Poor's also continued its
negative rating outlook assessment on State general obligation debt. On
April 26, 1993, Standard & Poor's revised the rating outlook assessment to
stable. On February 14, 1994, Standard & Poor's raised its outlook to
positive and, on February 28, 1994, confirmed its A- rating. On January 6,
1992, Moody's reduced its ratings on outstanding limited-liability State
lease purchase and contractual obligations from A to Baa1. On February 28,
1994, Moody's reconfirmed its A rating on the State's general obligation
long-term indebtedness.
The State anticipates that its capital programs will be financed, in
part, by State and public authorities borrowings in 1994-95. The State
expects to issue $374 million in general obligation bonds (including $140
million for purposes of redeeming outstanding bond anticipation notes) and
$140 million in general obligation commercial paper. The Legislature has
also authorized the issuance of up to $69 million in certificates of
participation during the State's 1994-95 fiscal year for equipment
purchases. The projection of the State regarding its borrowings for the
1994-95 fiscal year may change if circumstances require.
Principal and interest payments on general obligation bonds and
interest payments on bond anticipation notes and on tax and revenue
anticipation notes were $782.5 million for the 1993-94 fiscal year, and are
estimated to be $786.3 million for the 1994-95 fiscal year. These figures
do not include interest payable on State General Obligation Refunding Bonds
issued in July 1992 ("Refunding Bonds") to the extent that such interest
was paid from an escrow fund established with the proceeds of such
Refunding Bonds. Principal and interest payments on fixed rate and
variable rate bonds issued by LGAC were $239.4 million for the 1993-94
fiscal year, and are estimated to be $289.9 million for 1994-95. State
lease-purchase rental and contractual obligation payments for 1993-94,
including State installment payments relating to certificates of
participation, were $1.258 billion and are estimated to be $1.495 billion
in 1994-95.
Litigation. Certain litigation pending against New York State or its
officers or employees could have a substantial or long-term adverse effect
on New York State finances. Among the more significant of these cases are
those that involve (1) the validity of agreements and treaties by which
various Indian tribes transferred title to New York State of certain land
in central and upstate New York; (2) certain aspects of New York State's
Medicaid policies, including its rates, regulations and procedures; (3)
contamination in the Love Canal area of Niagara Falls; (4) action against
New York State and New York City officials alleging inadequate shelter
allowances to maintain proper housing; (5) challenges to the practice of
reimbursing certain Office of Mental Health patient care expenses from the
client's Social Security benefits; (6) alleged responsibility of New York
State officials to assist in remedying racial segregation in the City of
Yonkers; (7) challenge to the methods by which New York State reimburses
localities for the administrative costs of food stamp programs; (8) action
in which the State is a third party defendant, for injunctive or other
appropriate relief, concerning liability for the maintenance of stone
groins constructed along certain areas of Long Island's shoreline;
(9) action by school districts and their employees challenging the
constitutionality of Chapter 175 of the Laws of 1990 which deferred school
district contributions to the public retirement system and reduced by like
amount state aid to the school districts; (10) challenges by commercial
insurers, employee welfare benefit plans, and health maintenance
organizations to Section 2807-c of the Public Health Law, which imposes
13%, 11% and 9% surcharges on inpatient hospital bills and a bad debt and
charity care allowance on all hospital bills and hospital bills paid by
such entities; and (11) challenge by a long distance carrier to the
constitutionality of Tax Law Section 186-a(2-a) which restricted certain
deduction of local access service fees.
A number of cases also have been instituted against the State
challenging the constitutionality of various public authority financing
programs.
Authorities. The fiscal stability of New York State is related to the
fiscal stability of its Authorities, which generally have responsibility
for financing, constructing and operating revenue-producing public benefit
facilities. Authorities are not subject to the constitutional restrictions
on the incurrence of debt which apply to the State itself, and may issue
bonds and notes within the amounts of, and as otherwise restricted by,
their legislative authorization. As of September 30, 1993, date of the
latest data available, there were 18 Authorities that had outstanding debt
of $100 million or more. The aggregate outstanding debt, including
refunding bonds, of these 18 Authorities was $63.5 billion as of September
30, 1993, of which approximately $7.7 billion was moral obligation debt and
approximately $19.3 billion was financed under lease-purchase or
contractual-obligation financing arrangements.
Authorities are generally supported by revenues generated by the
projects financed or operated, such as fares, user fees on bridges, highway
tolls and rentals for dormitory rooms and housing. In recent years,
however, New York State has provided financial assistance through
appropriations, in some cases of a recurring nature, to certain of the 18
Authorities for operating and other expenses and, in fulfillment of its
commitments on moral obligation indebtedness or otherwise, for debt
service. This operating assistance is expected to continue to be required
in future years. As of March 31, 1994, aggregate public authority debt
outstanding as State-supported debt was $21.1 billion and as State-related
debt was $29.4 billion.
Experience has shown that if an Authority suffers serious financial
difficulties, both the ability of the State and the Authorities to obtain
financing in the public credit markets and the market price of the State's
outstanding bonds and notes may be adversely affected. The Housing Finance
Agency and the Urban Development Corporation have in the past required
substantial amounts of assistance from the State to meet debt service costs
or to pay operating expenses. Further assistance, possibly in increasing
amounts, may be required for these, or other, Authorities in the future.
In addition, certain statutory arrangements provide for State local
assistance payments otherwise payable to localities to be made under
certain circumstances to certain Authorities. The State has no obligation
to provide additional assistance to localities whose local assistance
payments have been paid to Authorities under these arrangements. However,
in the event that such local assistance payments are so diverted, the
affected localities could seek additional State funds.
New York City and Other Localities. The fiscal health of the State of
New York is closely related to the fiscal health of its localities,
particularly the City of New York, which has required and continues to
require significant financial assistance from New York State. The City's
independently audited operating results for each of its 1981 through 1993
fiscal years, which end on June 30, show a General Fund surplus reported in
accordance with GAAP. In addition, the City's financial statements for the
1993 fiscal year received an unqualified opinion from the City's
independent auditors, the eleventh consecutive year the City has received
such an opinion.
In 1975, New York City suffered a fiscal crisis that impaired the
borrowing ability of both the City and New York State. In that year the
City lost access to public credit markets. The City was not able to sell
short-term notes to the public again until 1979.
In 1975, Standard & Poor's suspended its A rating of City bonds. This
suspension remained in effect until March 1981, at which time the City
received an investment grade rating of BBB from Standard & Poor's. On July
2, 1985, Standard & Poor's revised its rating of City bonds upward to BBB+
and on November 19, 1987, to A-. On July 2, 1993, Standard & Poor's
reconfirmed its A- rating of City bonds, continued its negative rating
outlook assessment and stated that maintenance of such rating depended upon
the City's making further progress towards reducing budget gaps in the
outlying years. Moody's ratings of City bonds were revised in November
1981 from B (in effect since 1977) to Ba1, in November 1983 to Baa, in
December 1985 to Baa1, in May 1988 to A and again in February 1991 to Baa1.
New York City is heavily dependent on New York State and federal
assistance to cover insufficiencies in its revenues. There can be no
assurance that in the future federal and State assistance will enable the
City to make up its budget deficits. To help alleviate the City's financial
difficulties, the Legislature created the Municipal Assistance Corporation
("MAC") in 1975. MAC is authorized to issue bonds and notes payable from
certain stock transfer tax revenues, from the City's portion of the State
sales tax derived in the City and from State per capita aid otherwise
payable by the State to the City. Failure by the State to continue the
imposition of such taxes, the reduction of the rate of such taxes to rates
less than those in effect on July 2, 1975, failure by the State to pay
such aid revenues and the reduction of such aid revenues below a specified
level are included among the events of default in the resolutions authoriz-
ing MAC's long-term debt. The occurrence of an event of default may result
in the acceleration of the maturity of all or a portion of MAC's debt. As
of December 31, 1993, MAC had outstanding an aggregate of approximately
$5.204 billion of its bonds. MAC bonds and notes constitute general
obligations of MAC and do not constitute an enforceable obligation or debt
of either the State or the City. Under its enabling legislation, MAC's
authority to issue bonds and notes (other than refunding bonds and notes)
expired on December 31, 1984. Legislation has been passed by the
legislature which would, under certain conditions, permit MAC to issue up
to $1.465 billion of additional bonds, which are not subject to a moral
obligation provision.
Since 1975, the City's financial condition has been subject to
oversight and review by the New York State Financial Control Board (the
"Control Board") and since 1978 the City's financial statements have been
audited by independent accounting firms. To be eligible for guarantees and
assistance, the City is required during a "control period" to submit
annually for Control Board approval, and when a control period is not in
effect for Control Board review, a financial plan for the next four fiscal
years covering the City and certain agencies showing balanced budgets
determined in accordance with GAAP. New York State also established the
Office of the State Deputy Comptroller for New York City ("OSDC") to assist
the Control Board in exercising its powers and responsibilities. On June
30, 1986, the City satisfied the statutory requirements for termination of
the control period. This means that the Control Board's powers of approval
are suspended, but the Board continues to have oversight responsibilities.
On February 10, 1994, the Mayor submitted to the Control Board for its
review a mid-year modification to the 1994-1997 Financial Plan (the
"February Modification"). The February Modification projected a balanced
budget for fiscal year 1994, based upon revenues of $31.738 billion,
including a general reserve of $198 million. For fiscal years 1995, 1996
and 1997, the February Modification projected budget gaps of $2.261
billion, $3.167 billion and $3.253 billion, respectively, and assumed no
wage and salary increases beyond the expiration of current labor agreements
which expire in fiscal years 1995 and 1996. These gaps have grown since
November by about $530 million in fiscal year 1995, and $650 million and
$550 million in fiscal years 1996 and 1997, respectively, owing in large
part to lower estimates of real property tax revenues. To close the budget
gap projected for fiscal year 1995, the February Modification included a
gap-closing program that consisted of the following major elements: (i) an
agency program of $1.048 billion; (ii) fringe benefit and pension savings
of $400 million; (iii) an intergovernmental aid package of $400 million;
(iv) a workforce reduction program of $144 million; and (v) the assumption
of a $234 million surplus roll from fiscal year 1994. Implementation of
many of the gap-closing initiatives requires the cooperation of the
municipal labor unions, the City Council and the State and Federal
governments. The February Modification also included a tax reduction
program, with most of the financial impact affecting the later years of the
Plan period.
On March 1, 1994, the City's comptroller issued a report on the state
of the City's economy. The report concluded that, while the City's long
recession was over, moderate growth was the best the City can expect. The
report projected that total tax revenues for the 1994, 1995 and 1996 fiscal
years will be slightly higher than projected in the February Modification,
and that tax revenues for the 1997 fiscal year will be slightly below the
projections contained in the February Modification. The report identified
revenue risks for the 1994 through 1997 fiscal years totaling $9 million,
$134 million, $184 million and $184 million, respectively. On March 21,
1994, the comptroller issued a report on the February Modification. In the
report, the comptroller identified as risks for the 1995 fiscal year the
proposals in the February Modification that are uncertain because they
depend on actions by organizations other than City government, including
the State Legislature and municipal unions. The comptroller stated that if
none of the uncertain proposals are implemented, the total risk could be as
much as $1.15 billion to $1.53 billion. The comptroller noted that there
are a number of additional issues, the impact of which could not be
currently quantified.
On March 22, 1994, OSDC issued a report reviewing the February
Modification. The report concluded that a balanced budget is achievable
for the 1994 fiscal year. The report noted that expenditures for the 1994
fiscal year may be higher than projected by $176 million; however, the City
has initiated a program that is intended to reduce nonpersonnel costs by up
to $150 million. In addition, the report noted that the February
Modification included a general reserve of $198 million and assumed savings
of $117 million from the implementation of the proposed severance program
for the 1994 fiscal year. While the City intends to transfer $234 million
of these resources to help balance the 1995 fiscal year budget, the report
concluded that most of these resources will be needed to maintain budget
balance in the 1994 fiscal year.
With respect to each of the 1995 through 1997 fiscal years, the report
noted the potential for a budget gap of approximately $300 million greater
than shown in the February Modification. With respect to the City's $2.3
billion gap-closing program for the 1995 fiscal year, the report noted that
approximately $1.4 billion of the gap-closing initiatives must be
considered as high risk because the initiatives are outside the Mayor's
direct control to implement. The report noted that if the necessary
approvals and cooperation are not obtained from various third parties, the
City will have only a few months to develop alternative solutions.
On March 23, 1994, the staff of the Control Board issued its report on
the February Modification. The report stated that, while the February
Modification moves the City in the direction of structural balance, the
February Modification has more risks and fewer details than are desirable
and does not set forth contingency plans or other protections to assist the
City if unknown but inevitable impediments emerge. With respect to the 1994
fiscal year, the report concluded that the budget is reliably balanced.
However, for the 1995 fiscal year, the report noted that decisions will
have to be made in the next modification as to whether to continue to
include for the 1995 fiscal year revenues from proposed additional federal
and State aid, new Port Authority lease agreements and a proposed video
lottery, funds from MAC for the severance program, and savings from
employee health and pension cost reductions and tort reform. The report
noted that all of these actions, which total $1.2 billion, are outside the
Mayor's direct control and require the support of third parties. Risks
identified in the reports for the 1994 through 1997 fiscal years aggregate
$94 million, $952 million, $1.7 billion and $1.9 billion, respectively,
excluding any risk associated with the State takeover of certain Medicaid
costs, the workforce reduction program and the reduction in heath insurance
and pension costs proposed in the February Modification.
Estimates of the City's revenues and expenditures are based on
numerous assumptions and are subject to various uncertainties. If expected
federal or State aid is not forthcoming, if unforeseen developments in the
economy significantly reduce revenues derived from economically sensitive
taxes or necessitate increased expenditures for public assistance, if the
City should negotiate wage increases for its employees greater than the
amounts provided for in the City's financial plan or if other uncertainties
materialize that reduce expected revenues or increase projected
expenditures, then, to avoid operating deficits, the City may be required
to implement additional actions, including increases in taxes and
reductions in essential City services. The City might also seek additional
assistance from New York State.
The City requires certain amounts of financing for seasonal and
capital spending purposes. The City has issued $1.75 billion of notes for
seasonal financing purposes during fiscal year 1994. The City's capital
financing program projects long-term financing requirements of
approximately $17 billion for the City's fiscal years 1995 through 1998.
The major capital requirements include expenditures for the City's water
supply and sewage disposal systems, roads, bridges, mass transit, schools,
hospitals and housing. In addition to financing for new purposes, the
City and the New York City Municipal Water Finance Authority have issued
refunding bonds totalling $1.8 billion in fiscal year 1994.
Certain localities, in addition to the City, could have financial
problems leading to requests for additional New York State assistance
during the State's 1993-94 and 1994-95 fiscal years and thereafter. The
potential impact on the State of such requests by localities is not
included in the projections of the State receipts and disbursements in the
State's 1994-95 fiscal year.
Fiscal difficulties experienced by the City of Yonkers ("Yonkers")
resulted in the creation of the Financial Control Board for the City of
Yonkers (the "Yonkers Board") by New York State in 1984. The Yonkers Board
is charged with oversight of the fiscal affairs of Yonkers. Future actions
taken by the Governor or the Legislature to assist Yonkers could result in
allocation of New York State resources in amounts that cannot yet be
determined.
Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1992, the total indebtedness of
all localities in New York State was approximately $35.2 billion, of which
$19.5 billion was debt of New York City (excluding $5.9 billion in MAC
debt); a small portion (approximately $71.6 million) of the $35.2 billion
of indebtedness represented borrowing to finance budgetary deficits and was
issued pursuant to enabling New York State legislation. State law requires
the Comptroller to review and make recommendations concerning the budgets
of those local government units other than New York City authorized by
State law to issue debt to finance deficits during the period that such
deficit financing is outstanding. Seventeen localities had outstanding
indebtedness for deficit financing at the close of their fiscal year ending
in 1992.
From time to time, federal expenditure reductions could reduce, or in
some cases eliminate, federal funding of some local programs and
accordingly might impose substantial increased expenditure requirements on
affected localities. If New York State, New York City or any of the
Authorities were to suffer serious financial difficulties jeopardizing
their respective access to the public credit markets, the marketability of
notes and bonds issued by localities within New York State could be
adversely affected. Localities also face anticipated and potential
problems resulting from certain pending litigation, judicial decisions and
long-range economic trends. The longer-range problems of declining urban
population, increasing expenditures and other economic trends could
adversely affect localities and require increasing New York State
assistance in the future.
Investment Restrictions
The following are fundamental investment restrictions of each Fund.
Each Fund of the Trust may not:
1. Purchase any securities which would cause more than 25% of the
value of a Fund's total assets at the time of such purchase to be invested
in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities and state or municipal governments and their
political subdivisions are not considered members of any industry. In
addition, this limitation does not apply to investments of domestic banks,
including U.S. branches of foreign banks and foreign branches of U.S.
banks.)
2. Borrow money or issue senior securities as defined in the 1940
Act, except that (a) a Fund may borrow money in an amount not exceeding
one-third of the Fund's total assets at the time of such borrowing, and (b)
a Fund may issue multiple classes of shares. The purchase or sale of
futures contracts and related options shall not be considered to involve
the borrowing of money or issuance of senior securities.
3. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans.
For purposes of this restriction, debt instruments and repurchase
agreements shall not be treated as loans.
4. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and the later disposition of such
securities in accordance with the Fund's investment program may be deemed
an underwriting.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent a
Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage in
the real estate business or invest or deal in real estate or interests
therein).
6. Purchase or sell commodities, except that each Fund may enter
into futures contracts and related options, forward currency contracts and
other similar instruments.
Each Fund of the Trust may, notwithstanding any other fundamental
investment policy or restriction, invest all of its investable assets in
securities of a single open-end management investment company with
substantially the same fundamental investment objectives, policies, and
restrictions as the Fund.
The following are non-fundamental investment restrictions of each Fund
of the Trust:
1. The Trust will not purchase or retain the securities of any
issuer if the officers, directors or Trustees of the Trust, its advisers,
or managers owning beneficially more than one half of one percent of the
securities of each issuer together own beneficially more than five percent
of such securities.
2. No Fund will purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof the value
of such Fund's investment in securities would exceed 5% of such Fund's
total assets. For purposes of this limitation, sponsors, general partners,
guarantors and originators of underlying assets may be treated as the
issuer of a security.
3. No Fund will purchase puts, calls, straddles, spreads and any
combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities will exceed 5% of its total
assets, except that: (a) this restriction shall not apply to standby
commitments, and (b) this restriction shall not apply to a Fund's
transactions in futures contracts and related options.
4. No Fund will purchase warrants if at the time of such purchase:
(a) more than 5% of the value of such Fund's assets would be invested in
warrants, or (b) more than 2% of the value of such Fund's assets would be
invested in warrants that are not listed on the New York Stock Exchange
("NYSE") or American Stock Exchange ("AMEX") (for purposes of this
limitation, warrants acquired by a Fund in units or attached to securities
will be deemed to have no value).
5. The Funds will not invest more than 10% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, and other securities which
are not readily marketable. For purposes of this restriction, illiquid
securities shall not include commercial paper issued pursuant to Section
4(2) of the Securities Act of 1933 and securities which may be resold under
Rule 144A under the Securities Act of 1933, provided that the Board of
Trustees, or its delegate, determines that such securities are liquid based
upon the trading markets for the specific security.
6. No Fund may invest in securities of other investment companies,
except as they may be acquired as part of a merger, consolidation or
acquisition of assets and except to the extent otherwise permitted by the
1940 Act.
7. No Fund will purchase oil, gas or mineral leases (a Fund may,
however, purchase and sell the securities of companies engaged in the
exploration, development, production, refining, transporting and marketing
of oil, gas or minerals).
8. No Fund shall sell securities short, unless it owns or has the
right to obtain securities equivalent in kind and amounts to the securities
sold short, and provided that transactions in futures contracts and options
are not deemed to constitute selling securities short.
9. No Fund shall purchase securities on margin, except that a Fund
may obtain such short-term credits as are necessary for the clearance of
transactions, and provided that margin payments in connection with futures
contracts and options on futures contracts shall not constitute purchasing
securities on margin.
10. No Fund shall purchase any security while borrowings representing
more than 5% of such Fund's total assets are outstanding.
If a percentage restriction is adhered to at the time of an
investment, a later increase or decrease in such percentage resulting from
a change in the values of assets will not constitute a violation of such
restriction.
Each of the foregoing restrictions applies to each Fund unless
otherwise indicated. Under the 1940 Act, a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities
of a Fund, as defined in the 1940 Act. "Majority" means the lesser of (1)
67% or more of the shares present at a Fund's meeting, if the holders of
more than 50% of the outstanding shares of a Fund are present or
represented by proxy, or (2) more than 50% of the outstanding shares of the
Fund. Non-fundamental investments restrictions may be changed by vote of a
majority of the Trust's Board of Trustees at any time.
In order to permit the sale of the Funds' shares in certain states,
the Trust may make commitments more restrictive than the investment
restrictions described above. Accordingly, pursuant to such commitments,
the Funds have undertaken not to invest in oil, gas or other mineral
leases. In addition, the Trust has undertaken not to invest in warrants
(other than warrants acquired by the Fund as part of a unit or attached to
securities at the time of purchase) if, as a result, the investments
(valued at the lower of cost or market) would exceed 5% of the value of the
Fund's net assets or if, as a result, more than 2% of the Fund's net
assets would be invested in warrants not listed on AMEX or NYSE. Further,
the Funds have given a representation that investments will not be made in
real estate limited partnerships. Should the Trust determine that any such
commitment is no longer in the best interests of the Trust and its
shareholders, it will revoke the commitment by terminating sales of its
shares in the state involved.
Portfolio Turnover
The Trust may attempt to increase yields on investments made for the
Funds by trading to take advantage of short-term market variations.
Securities may be sold in anticipation of a rise in interest rates (market
decline) or purchased in anticipation of a decline in interest rates
(market rise) and later sold. Furthermore, a security may be sold and
another of comparable quality purchased at approximately the same time to
take advantage of what the Trust believes to be a temporary disparity in
the normal yield relationship between the two securities. These yield
disparities may occur for reasons not directly related to the investment
quality of particular issues or the general movement of interest rates,
such as changes in the overall demand for, or supply of, various types of
tax-exempt securities. The Trust's portfolio transaction policy should not
result in high brokerage commissions to the Funds, as purchases and sales
of the Funds' portfolio securities are usually effected as principal
transactions. However, to the extent a high portfolio turnover rate results
in the realization by a Fund of net short-term capital gains, such gains
when distributed will be taxable to shareholders as ordinary income.
Securities having maturities of one year or less are excluded from the
calculation.
Portfolio Transactions
Decisions to buy and sell securities for the Funds and effectuation of
securities transactions are made by Dreyfus, subject to the overall
supervision and review of the Trustees. The same personnel are also in
charge of portfolio transactions for other clients of other subsidiaries
and affiliates of Dreyfus.
Purchases and sales of portfolio securities for the Funds will
generally be transacted with the issuer or a primary market maker on a net
basis, without the payment by the Fund of any brokerage commission for such
purchases or sales. Purchases from dealers serving as primary market makers
will reflect the spread between the bid and asked prices. In selecting
dealers and in executing portfolio transactions, Dreyfus seeks, on behalf
of the Funds, the best overall terms available. In doing so, Dreyfus
considers all matters it deems relevant, including the breadth of the
market in the security, the price of the security and the financial
condition and executing capability of the dealer.
Dealers may be selected who provide brokerage and/or research services
to the Trust and/or other accounts over which Dreyfus or its affiliates
exercise investment discretion. Such services may include advice concerning
the value of securities; the advisability of investing in, purchasing or
selling securities; the availability of securities or the purchasers or
sellers of securities; furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy and
performance of accounts; and effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement).
The receipt of research from dealers may be useful to Dreyfus in rendering
investment management services to the Trust and/or its other clients; and,
conversely, such information provided by its brokers or dealers who have
executed transaction orders on behalf of other clients of Dreyfus may be
useful to Dreyfus in carrying out its obligation to the Trust.
The Funds will not purchase Municipal Obligations during the existence
of any underwriting or selling group relating thereto of which an affiliate
is a member, except to the extent permitted by the SEC. Under certain
circumstances, the Funds may be at a disadvantage because of this
limitation in comparison with other investment companies which have a
similar investment objective but are not subject to such limitations.
Dreyfus will make investment decisions for each Fund independently
from those made for its other clients, other funds and clients of other
subsidiaries of Dreyfus. On occasion, however, the same investment
decisions will be made for a Fund as for one or more of Dreyfus' clients at
about the same time. In a case in which a Fund and one of these other
clients are simultaneously engaged in the purchase or sale of the same
security, the transactions will, to the extent feasible and practicable, be
averaged as to price and allocated as to amount among the Fund and/or the
other client or clients pursuant to a formula considered equitable. In
some cases, this system could have a detrimental effect on the price or
volume of the security to be purchased or sold on behalf of the particular
Fund. In other cases, however, it is believed that coordination and the
ability to participate in volume transactions will be to the benefit of the
Funds.
REDEMPTION OF FUND SHARES
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Agent, and reasonably
believed by the Transfer Agent to be genuine. Ordinarily, a Fund will
initiate payment for shares redeemed pursuant to this Privilege on the next
business day after receipt if the Transfer Agent receives the redemption
request in proper form. Redemption proceeds will be transferred by Federal
Reserve wire only to the commercial bank account specified by the investor
on the Account Application or Shareholder Services Form. Redemption pro-
ceeds, if wired, must be in the amount of $1,000 or more and will be wired
to the investor's account at the bank of record designated in the
investor's file at the Transfer Agent, if the investor's bank is a member
of the Federal Reserve System, or to a correspondent bank if the investor's
bank is not a member. Fees ordinarily are imposed by such bank and usually
are borne by the investor. Immediate notification by the correspondent
bank to the investor's bank is necessary to avoid a delay in crediting the
funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
---------------- -----------------
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-654-
7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
Stock Certificates; Signatures. Any certificates representing shares
of a Fund to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations as well as from participants in the NYSE Medallion
Signature Program, the Securities Transfer Agents Medallion Program
("STAMP") and the Stock Exchanges Medallion Program. Guarantees must be
signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may request
additional documentation from corporations, executors, administrators,
trustees or guardians, and may accept other suitable verification
arrangements from foreign investors, such as consular verification. For
more information with respect to signature-guarantees, please call one of
the telephone numbers listed on the cover.
Dreyfus TeleTransfer Privilege. Investors should be aware that if
they have selected the Dreyfus TeleTransfer Privilege, any request for a
wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the ACH system unless more prompt transmittal specifically is
requested. Redemption proceeds will be on deposit in the investor's
account at an ACH member bank ordinarily two business days after receipt of
the redemption request. See "Purchase of Fund Shares-- Dreyfus
TeleTransfer Privilege."
Redemption Commitment. Each Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited
in amount during any 90-day period to the lesser of $250,000 or 1% of the
value of the Fund's net assets at the beginning of such period. Such
commitment is irrevocable without the prior approval of the SEC. In the
case of requests for redemption in excess of such amount, the Trustees and
executive officers of the Trust reserve the right to make payments in whole
or in part in securities or other assets in case of an emergency or any
time a cash distribution would impair the liquidity of the Fund to the
detriment of the existing shareholders. In this event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If
the recipient sold such securities, brokerage charges would be incurred.
Suspension of Redemptions. The right to redeem shares of a Fund may
be suspended or the date of payment postponed (a) for any period during
which the NYSE is closed (other than for customary weekend or holiday
closings); (b) when trading in the markets the Trust normally uses is
restricted or when an emergency exists as determined by the SEC so that
disposal of a Fund's investments or determination of its net asset value is
not reasonably practicable, or (c) for such other periods as the SEC, by
order, may permit for protection of a Fund's shareholders.
SHAREHOLDER SERVICES
Fund Exchanges. Shares of any Class of a Fund may be exchanged for
shares of the respective Class of certain other funds advised or
administered by Dreyfus. Shares of the same Class of such funds purchased
by exchange will be purchased on the basis of relative net asset value per
share as follows:
A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load and additional shares acquired through reinvestment of
dividends or other distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
E. Shares of funds subject to a contingent deferred sales charge
("CDSC") that are exchanged for shares of another fund will be
subject to the higher applicable CDSC of the two funds, and for
purposes of calculating CDSC rates and conversion periods, if any,
will be deemed to have been held since the date the shares being
exchanged were initially purchased.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their
account number.
To use this privilege, the investor's Service Agent acting on the
investor's behalf must give exchange instructions to the Transfer Agent in
writing, by wire or by telephone. Telephone exchanges may be made only if
the appropriate "YES" box has been checked on the Account Application, or a
separate signed Shareholder Services Form is on file with the Transfer
Agent. By using this privilege, the investor authorizes the Transfer Agent
to act on telephonic, telegraphic or written exchange instructions from any
person representing himself or herself to be the investor or a
representative of the investor's Service Agent, and reasonably believed by
the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for
telephone exchange.
Dreyfus Auto-Exchange Privilege. The Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of a Fund, shares
of the same Class of another fund in the Dreyfus Family of Funds. This
Privilege is available only for existing accounts. Shares will be
exchanged on the basis of relative net asset value as described above under
"Fund Exchanges." Enrollment in or modification or cancellation of this
Privilege is effective three business days following notification by the
investor. An investor will be notified if the investor's account falls
below the amount designated to be exchanged under this Privilege. In this
case, an investor's account will fall to zero unless additional investments
are made in excess of the designated amount prior to the next Dreyfus Auto-
Exchange transaction.
Fund exchanges and Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired may legally be sold. Shares may be exchanged only between
accounts having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained from the Distributor. The Fund reserves the right to reject any
exchange request in whole or in part. The Fund exchange service or Dreyfus
Auto-Exchange Privilege may be modified or terminated at any time upon
notice to shareholders.
Automatic Withdrawal. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends
and distributions, the investor's shares will be reduced and eventually may
be depleted. An Automatic Withdrawal Plan may be established by completing
the appropriate application available from the Distributor. There is a
service charge of $.50 for each withdrawal check. Automatic Withdrawal may
be terminated at any time by the investor, the Fund or the Transfer Agent.
Shares for which certificates have been issued may not be redeemed through
the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest on the payment date their dividends or dividends and capital gain
distributions, if any, from a Fund in shares of the same Class of certain
other funds in the Dreyfus Family of Funds of which the investor is a
shareholder. Shares of the same Class of other funds purchased pursuant to
this Privilege will be purchased on the basis of relative net asset value
per share as follows:
A. Dividends and distributions paid by a fund may be invested without
imposition of a sales load in shares of other funds that are
offered without a sales load.
B. Dividends and distributions paid by a fund which does not charge a
sales load may be invested in shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales
load may be invested in shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that, if
the sales load applicable to the Offered Shares exceeds the
maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
VALUATION OF SHARES
The Prospectuses describe the time at which the net asset value of
each Fund is determined for purposes of sales and redemptions. In
addition, portfolio securities held by the Funds may be actively traded in
securities markets which are open for trading on days when the Funds will
not be determining their net asset values. Accordingly, there may be
occasions when the Funds are not open for business but when the value of a
Fund's portfolio securities will be affected by such trading activity. The
holidays (as observed) on which the NYSE is closed currently are: New Years
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas.
It is the Trust's policy to use its best efforts to maintain a
constant per share price for each of these Funds equal to $1.00. The
portfolio instruments of each Fund are valued on the basis of amortized
cost. This involves valuing an instrument at its cost initially and,
thereafter, assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the
market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which the value, as determined
by amortized cost, is higher or lower than the price the Trust would
receive if it sold the instrument.
The valuation of the Money Funds' portfolio instruments based upon
their amortized cost and simultaneous maintenance of the Funds' per share
net asset value at $1.00 are permitted by a rule adopted by the SEC. Under
this rule, each Fund must maintain a dollar-weighted average portfolio
maturity of 90 days or less, purchase only instruments having remaining
maturities of thirteen months or less, and invest only in securities
determined by the Trustees to be eligible securities with minimal credit
risks at the time of their acquisition by the Fund. In accordance with the
rule, the Trustees have established procedures designed to stabilize, to
the extent reasonably practicable, each Fund's price per share as computed
for the purpose of sales and redemptions at $1.00. Such procedures include
review of each Fund's portfolio holdings by the Trustees, at such intervals
as they may deem appropriate, to determine whether the net asset value of
each Fund calculated by using available market quotations or market
equivalents deviates from $1.00 per share based on amortized cost. The rule
also provides that the extent of any deviation between the Fund's net asset
value based upon available market quotations or market equivalents and
$1.00 per share net asset value based on amortized cost must be examined by
the Trustees. In the event the Trustees determine that a deviation exists
which may result in material dilution or other unfair results to investors
or existing shareholders, pursuant to the rule they must cause the Fund to
take such corrective action as the Trustees regard as necessary and
appropriate, including: selling portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity;
withholding dividends or paying distributions from capital or capital
gains; redeeming shares in kind; or establishing a net asset value per
share by issuing available market quotations.
PERFORMANCE DATA
From time to time, the Funds may quote their yields in advertisements,
shareholder reports or other communications to shareholders. Price/yield
information is generally available by calling the Trust toll free at 1-800-
343-0573.
Each Fund may compare the performance of its Class R or Investor
shares to that of other mutual funds, relevant indices or rankings prepared
by independent services or other financial or industry publications that
monitor mutual fund performance.
Performance rankings as reported in Changing Times, Business Week,
Institutional Investor, The Wall Street Journal, Mutual Fund Forecaster, No
Load Investor, Money Magazine, Morningstar Mutual Fund Values, U.S. News
and World Report, Forbes, Fortune, Barron's, Financial Planning, Financial
Planning on Wall Street, Certified Financial Planner Today, Investment
Advisor, Kiplinger's, Smart Money and similar publications may also be used
in comparing a Fund's performance. Furthermore, a Fund may quote its Class
R or Investor shares' yields in advertisements or in shareholder reports.
Yields
The yield for a Fund is computed by: (a) determining the net change in
the value of a hypothetical pre-existing account in a Fund having a balance
of one share at the beginning of a seven-calendar-day period for which
yield is to be quoted, (b) dividing the net change by the value of the
account at the beginning of the period to obtain the base period return,
and (c) annualizing the results (i.e., multiplying the base period return
by 365/7). The net change in the value of the account reflects the value
of additional shares purchased with dividends declared on the original
share and any such additional shares, but does not include realized gains
and losses or unrealized appreciation and depreciation. In addition, each
Fund may calculate a compound effective annualized yield by adding 1 to the
base period return (calculated as described above), raising the sum to a
power equal to 365/7 and subtracting 1. A Fund's equivalent taxable yield
is computed by dividing that portion of the Fund's yield which is tax-
exempt by one minus a stated income tax rate and adding the product to that
portion, if any, of the Fund's yield that is not tax-exempt. For the
seven-day period ended June 30, 1994, the annualized current yields, the
compounded effective yields, and the equivalent taxable yields of the Funds
were as follows:
<TABLE>
<CAPTION>
7-Day Yield for Period Ended
December 31, 1994
Annualized Compounded Equivalent
Current Yield Effective Yield Taxable Yield*
------------- --------------- --------------
<S> <C> <C> <C>
Massachusetts Tax-Free
Fund
Investor shares 3.87 % 3.94 % 6.87 %
Class R shares 4.12 % 4.20 % 7.32 %
California Tax-Free
Fund
Investor shares 4.13 % 4.21 % 7.17 %
Class R shares 4.38 % 4.47 % 7.60 %
New York Tax-Free
Fund
Investor shares 3.13 % 3.18 % 5.54 %
Class R shares 3.38 % 3.43 % 5.99 %
* Example assumes a Federal marginal tax rate of 36% and, for the Massachusetts, California and New York Tax-Free Funds,
a Massachusetts marginal tax rate of 12% (combined effective rate of 43.68%), a California marginal tax rate of 10% (combined
effective rate of 42.40%), and a New York State and New York City marginal tax rate of 11.785% (combined effective rate of
43.54%), respectively.
</TABLE>
TAXES
Each Fund has satisfied, and intends to continue to satisfy, the
requirements for qualifying as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Provided that each Fund distributes at least 90% of its taxable net
investment income, including market discount and net realized short-term
capital gains, and 90% of the tax-exempt interest income (reduced by
certain expenses), each Fund, if it qualifies as a regulated investment
company, will not be liable for Federal income taxes to the extent its
taxable net investment income and capital gain net income are distributed
to its shareholders.
Because each Fund will distribute exempt-interest dividends, interest
on indebtedness incurred by a shareholder to purchase or carry Fund shares
is not deductible for Federal income tax purposes. If a shareholder
receives an exempt-interest dividend with respect to shares of a Fund and
if such shares are held by the shareholder for six months or less, then any
loss on the redemption or exchange of such shares will, to the extent of
such exempt-interest dividends, be disallowed. In addition, the Code may
require a shareholder, if he or she receives exempt-interest dividends, to
treat as taxable income a portion of certain otherwise non-taxable social
security and railroad retirement benefit payments. Furthermore, that
portion of an exempt-interest dividend paid by a Fund which represents
income from private activity bonds may not retain its tax-exempt status in
the hands of a shareholder who is a "substantial user" of a facility
financed by such bonds, or a "related person" thereof. Moreover, as noted
in the Funds' Prospectuses, some or all of a Fund's dividends may be a
specific preference item, or a component of an adjustment item, for
purposes of the Federal individual and corporate alternative minimum taxes.
In addition, the receipt of Fund dividends and distributions may affect a
foreign corporate shareholder's Federal "branch profits" tax liability and
a Subchapter S corporation shareholder's Federal "excess net passive
income" tax liability. Shareholders should consult their own tax advisers
as to whether they are (1) substantial users with respect to a facility or
related to such users within the meaning of the Code or (2) subject to a
Federal alternative minimum tax, any applicable state alternative minimum
tax, the Federal branch profits tax, or the Federal excess net passive
income tax.
Dividends derived by the Funds from tax-exempt interest are designated
as tax-exempt in the same percentage of the day's dividend as the actual
tax-exempt income earned that day. Thus, the percentage of the dividend
designated as tax-exempt may vary from day to day. Similarly, dividends
derived by the Funds from interest on relevant state Municipal Obligations
will be designated as exempt from that state's taxation in the same
percentage of the day's dividend as the actual interest on that state's
Municipal Obligations earned on that day.
Each Fund is required to withhold and remit to the U.S. Treasury 31%
of the taxable dividends paid by the Funds, the distributions paid by the
Funds and in the case of the Bond Funds the proceeds of redemptions or
exchanges of Fund shares (in excess of $10 on an annualized basis) with
respect to any non-corporate shareholder who fails to furnish or certify
his or her correct taxpayer identification number, who has been notified
that he or she is to subject to back up withholding due to underreporting
of dividend or interest income or who fails to certify that he or she has
provided a correct taxpayer identification number, and that he or she is
not subject to such withholding. An individual's tax identification number
is his or her social security number. The backup withholding tax is not an
additional tax and may be credited against a shareholder's regular Federal
income tax liability.
The foregoing is only a summary of certain tax considerations
generally affecting the Funds and their shareholders, and is not intended
as a substitute for careful tax planning. Individuals may be exempt from
state and local personal income taxes on exempt-interest income derived
from obligations of issuers located in the state in which they reside, but
are usually subject to such taxes on such dividends that are derived from
obligations of issuers located in other jurisdictions. Investors are urged
to consult their tax advisers with specific reference to their own tax
situations.
DESCRIPTION OF THE TRUST
The Trust is a non-diversified, open-end management investment company
organized as an unincorporated business trust under the laws of the
Commonwealth of Massachusetts by an Agreement and Declaration of Trust
dated March 28, 1983. On March 31, 1994 the Trust changed its name from
"The Boston Company Tax-Free Municipal Funds" to "The Laurel Tax-Free
Municipal Funds." The Trust's name was then changed from "The Laurel Tax-
Free Municipal Funds" to "The Dreyfus/Laurel Tax-Free Municipal Funds"
effective October 17, 1994.
The Trustees have authority to create an unlimited number of shares of
beneficial interest, without par value, in separate series for each class
of shares. Each series will be treated as a separate entity. Currently,
seven series have been authorized. The Trustees have authority to create
additional series at any time in the future without shareholder approval.
Each share (regardless of Class) has one vote. On each matter
submitted to a vote of the shareholders, all shares of each Fund or Class
shall vote together as a single Class, except as to any matter for which a
separate vote of any Fund or Class is required by the 1940 Act and except
as to any matter which affects the interest of a particular Fund or Class,
in which case only the holders of shares of the one or more affected Funds
or Classes shall be entitled to vote, each as a separate class.
The assets received by the Trust for the issue or sale of shares of
each Fund and all income, earnings, profits and proceeds thereof, subject
only to the rights of creditors, are specifically allocated to such Fund,
and constitute the underlying assets of such Fund. The underlying assets
of each Fund are required to be segregated on the books of account, and are
to be charged with the expenses in respect to such Fund and with a share of
the general expenses of the Trust. Any general expenses of the Trust not
readily identifiable as belonging to a particular Fund shall be allocated
by or under the direction of the Trustees in such manner as the Trustees
determine to be fair and equitable, taking into consideration, among other
things, the relative sizes of the Funds and the relative difficulty in
administering each Fund. Each share of each Fund represents an equal
proportionate interest in that Fund with each other share and is entitled
to such dividends and distributions out of the income belonging to such
Fund as are declared by the Trustees. Upon any liquidation of a Fund,
shareholders thereof are entitled to share pro rata in the net assets
belonging to that Fund available for distribution.
The Trust does not hold annual meetings of shareholders. There will
normally be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time the
Trustees then in office will call a shareholders' meeting for the election
of Trustees. Under the Act, shareholders of record of no less than two-
thirds of the outstanding shares of the Trust may remove a Trustee through
a declaration in writing or by a vote cast in person or by proxy at a
meeting called for that purpose. The Trustees are required to call a
meeting of shareholders for the purposes of voting upon the question of
removal of any Trustee when requested in writing to do so by the
shareholders of record of not less than 10% of the Trust's outstanding
shares.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Trust and requires that notice of
such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or a Trustee. The Agreement and
Declaration of Trust provides for indemnification from the Trust's property
for all losses and expenses of any shareholder held personally liable for
the obligations of the Trust. Thus, the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its
obligations, a possibility which Dreyfus believes is remote. Upon payment
of any liability incurred by a Trust, the shareholder paying such liability
will be entitled to reimbursement from the general assets of the Trust.
The Trustees intend to conduct the operations of each Fund in such a way so
as to avoid, as far as possible, ultimate liability of the shareholders
for liabilities of such Fund.
PRINCIPAL SHAREHOLDERS
As of March 31, 1995, the following companies/individuals owned
beneficially 5% or more of the Funds' outstanding shares: Boston Safe
Deposit and Trust Company ("Boston Safe") (a wholly-owned subsidiary of The
Boston Company, Inc., which is in turn a wholly-owned subsidiary of Mellon
Bank Corporation), One Cabot Road, Wellington III, Medford, MA 02155 (39%
of the Massachusetts Tax-Free Money Fund's Class R shares; 61% of the
California Tax-Free Money Fund's Class R shares; and 20% of the New York
Tax-Free Money Fund's Class R shares).
CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTANT
Mellon Bank, which is located at Mellon Bank Center, Pittsburgh, PA
15258, serves as the custodian and fund accountant. The Shareholder
Services Group, Inc. ("TSSG"), a subsidiary of First Data Corporation,
serves as the Trust's transfer agent. TSSG is located at One American
Express Plaza, Providence, Rhode Island 02903. TSSG and Mellon Bank, as
custodian, have no part in determining the investment policies of the Funds
or which securities are to be purchased or sold by a Fund. Prior to the
effectiveness of the Investment Management Agreement for its services as
custodian and fund accountant, Mellon Bank was paid an annual fee of
$30,000 per portfolio, and, for all portfolios, an annual administrative
account maintenance fee of $10,000, an annual on-line of $3,600, an asset
based fee of .02% of the first $500 million of the Trust's net assets and
.01% of net assets over $500 million, plus a specified transaction fee for
each transaction. For its services as transfer and dividend disbursing
agent, Mellon Bank was paid an annual fee of $13.00 per shareholder account
with a minimum monthly fee of $3,000 per portfolio. Mellon Bank was
reimbursed for certain out-of-pocket expenses including wire fees, and
postage, stationery and telephone expenses.
Counsel and Auditors
Kirkpatrick & Lockhart, 1800 M Street, N.W., South Lobby - 9th Floor,
Washington, D.C., 20036-5891, has passed upon the legality of the shares
offered by the Prospectuses and this Statement of Additional Information.
KPMG Peat Marwick, One Mellon Bank Center, Pittsburgh, Pennsylvania
15218, was appointed by the Board of Trustees to serve as the Funds'
independent auditors for the year ending June 30, 1994, providing audit
services including (1) examination of the annual financial statements, (2)
assistance, review and consultation in connection with the SEC and (3)
review of the annual Federal income tax return and the Pennsylvania excise
tax return filed on behalf of each Fund.
FINANCIAL STATEMENTS
The Funds' Annual Reports for the fiscal year (or period) ended June
30, 1994 and Semi-Annual Reports (unaudited) for the six months ended
December 31, 1994 accompany this Statement of Additional Information, and
the financial statements contained therein, and related notes, are
incorporated by reference herein.
APPENDIX
INFORMATION ABOUT SECURITIES RATINGS
The following are excerpts from Description of Moody's Investors'
Service, Inc. ("Moody's) municipal bond ratings. Aaa -- judged to be of
the "best quality" and are referred to as "gilt edge"; interest payments
are protected by a large or by an exceptionally stable margin and principal
is secure; Aa -- judged to be of "high quality by all standards," but as to
which margins of protection or other elements make long-term risks appear
somewhat larger than Aaa-rated Municipal Bonds; together with Aaa group
they comprise what are generally known as "high grade bonds"; A -- possess
many favorable investment attributes and are considered "upper medium grade
obligations." Factors giving security to principal and interest of A-rated
Municipal Bonds are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future; Baa --
considered as medium grade obligations; i.e., they are neither highly
protected nor poorly secured; interest payments and principal security
appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of
time.
Moody's applies the numerical modifiers 1, 2 and 3 in each generic
rating classification from Aa through Baa to indicate ranking within a
general rating category; 1 being the highest and 3 the lowest.
Description of Moody's ratings of state and municipal notes. Moody's
ratings for state and municipal notes and other short-term obligations are
designated Moody's Investment Grade ("MIG") and for variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG").
This distinction recognizes the differences between short-term credit risk
and long-term risk. Symbols used will be as follows: MIG 1/VMIG 1 --best
quality, enjoying strong protection for established cash flows of funds for
their servicing or from established and broad-based access to the market
for refinancing, or both; MIG 2/VMIG 2 -- high quality, with margins of
protection ample although not so large as in the preceding group; MIG
3/VMIG 3 --favorable quality, with all security elements accounted for but
lacking the undeniable strength of the preceding grades.
Description of Moody's commercial paper ratings. PRIME-1 ("P-1") --
judged to be of the best quality. Their short-term debt obligations carry
the smallest degree of investment risk; PRIME-2 -- indicates a strong
capacity for repayment, but to a lesser degree than 1.
Description of Standard & Poors Corporation ("S&P") Municipal Bond
ratings. AAA -- has the highest rating assigned by S&P; extremely strong
capacity to pay principal and interest; AA -- has very strong capacity to
pay interest and repay principal and differs from the higher rated issues
only in a small degree; A -- has a strong capacity to pay principal and
interest, although somewhat more susceptible to adverse changes in
circumstances and economic conditions; BBB -- regarded as having an
adequate capacity to pay principal and interest; normally exhibit adequate
protection parameters but adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
principal and interest than for bonds in the A category. Ratings may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories, except in the AAA category.
Description of S&P's ratings of municipal note issues. SP-1+ -- very
strong capacity to pay principal and interest; SP-1 --strong capacity to
pay principal and interest; SP-2 --satisfactory capacity to pay principal
and interest.
Description of S&P's commercial paper ratings. A-1+ --indicates an
overwhelming degree of safety regarding timely payment; A-1 -- indicates a
very strong degree of safety regarding timely payment; A-2 -- indicates a
strong capacity for timely payment but with a relative degree of safety not
as overwhelming as for issues designated A-1.
Description of IBCA Limited/IBCA Inc. commercial paper ratings.
Short-term obligations, including commercial paper, rated A-1+ by IBCA
Limited or its affiliate IBCA Inc. are obligations supported by the highest
capacity for timely repayment. Obligations rated A-1 have a very strong
capacity for timely repayment. Obligations rated A-2 have a strong
capacity for timely repayment, although such capacity may be susceptible to
adverse changes in business, economic or financial conditions.
Description of Fitch Investors Services, Inc. commercial paper
ratings. Fitch Investors Services, Inc. employs the rating F-1+ to
indicate issues regarded as having the strongest degree of assurance for
timely payment. The rating F-1 reflects an assurance of timely payment
only slightly less in degree than issues rated F-1+, while the rating F-2
indicates a satisfactory degree of assurance for timely payment, although
the margin of safety is not as great as indicated by the F-1+ and F-1
categories.
Description of Duff & Phelps Inc. commercial paper ratings. Duff &
Phelps Inc. employs the designation of Duff 1 with respect to top grade
commercial paper and bank money instruments. Duff 1+ indicates the highest
certainty of timely payment: short-term liquidity is clearly outstanding,
and safety is just below risk-free U.S. Treasury short-term obligations.
Duff 1-indicates high certainty of timely payment. Duff 2 indicates good
certainty of timely payment: liquidity factors and company fundamentals
are sound.
Various of the nationally recognized statistical rating organizations
("NRSROs") utilize rankings within rating categories indicated by a + or -.
The Funds, in accordance with industry practice, recognize such rankings
within categories as graduations, viewing for example S&P's rating of A-1+
and A-1 as being in S&P's highest rating category.
Description of Thomson BankWatch, Inc. ("BankWatch") commercial paper
ratings. BankWatch will assign both short-term debt ratings and issuer
ratings to the issuers it rates. BankWatch will assign a short-term rating
("TBW-1," "TBW-2," "TBW-3," or "TBW-4") to each class of debt (e.g.,
commercial paper or non-convertible debt), having a maturity of one-year or
less, issued by a holding company structure or an entity within the holding
company structure that is rated by BankWatch. Additionally, BankWatch will
assign an issuer rating ("A," "A/B," "B," "B/C," "C," "C/D," "D," "D/E,"
and "E") to each issuer that it rates.
PORTFOLIO OF INVESTMENTS
DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND
(UNAUDITED) DECEMBER 31, 1994
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 90.6%
CALIFORNIA -- 90.6%
$ 190,000 Bay Area, California, Government Associa-
tion,
5.300% due 04/01/97+ $ 190,000
600,000 California Housing Finance Authority Reve-
nue,
5.300% due 07/15/13+ 600,000
California Health Facilities Authority Rev-
enue,
400,000 (Granada Medical Project),
5.950% due 01/01/15+ 400,000
(Pooled Loan Program):
100,000 5.750% due 05/01/95+ 100,000
200,000 5.750% due 10/01/10+ 200,000
California Pollution Control Financing Au-
thority, Pollution Control Revenue:
1,150,000 (Champlin Petroleum),
4.000% due 06/01/95++ 1,150,000
600,000 (Burney Forest Products), Series A,
Project A,
5.900% due 09/01/20+++ 600,000
(South Down, Inc.):
100,000 4.350% due 02/15/98++++ 100,000
300,000 4.350% due 04/15/98++++ 300,000
400,000 Series B,
4.350% due 09/15/98++++ 400,000
1,500,000 (Southern California Edison Inc.), Series
D,
3.700% due 03/01/08++ 1,500,000
300,000 California Statewide, Community Development
Revenue,
5.625% due 08/01/19+ 300,000
600,000 Fairfield, California, Industrial Develop-
ment Authority, (R. Dakin & Co. Project),
4.400% due 12/15/02++++ 600,000
500,000 Glendale, California Revenue, Reliance De-
velopment,
4.350% due 12/01/14++++ 500,000
495,000 Healdsburg, California, Community Redevel-
opment Agency,
5.600% due 01/01/98+ 495,000
450,000 Huntington Park, California, Redevelopment
Agency,
4.000% due 08/01/15++ 449,492
100,000 Kern County, California, Certificates of
Participation, Series D,
5.350% due 08/01/06+ 100,000
1,500,000 Long Beach, California, Harbor Department
Revenue, Series A-2,
4.400% due 03/01/23++ 1,500,000
625,000 Los Angeles, California, Community Develop-
ment Agency, Multifamily Housing Revenue,
5.350% due 12/01/05++ 625,000
1,000,000 Los Angeles, California, Harbor Department
City, Series B,
3.650% due 01/12/95++ 1,000,000
1,350,000 Los Angeles County, California, Local Tax
and Revenue Anticipation Notes,
4.500% due 07/06/95++ 1,354,967
500,000 Los Angeles, California, Metropolitan
Transportation Authority, Series A,
5.400% due 07/01/20+ 500,000
100,000 Los Angeles County, California, Multifamily
Housing Authority, (Poinsettia Project),
5.750% due 07/01/19+ 100,000
2,500,000 Los Angeles County, California, (Willow-
brook Project),
5.625% due 11/01/15++ 2,500,000
1,300,000 Metropolitan Water District,
4.350% due 01/23/95++ 1,300,000
400,000 Monterey Peninsula, California, Water Man-
agment District,
5.400% due 07/01/22+ 400,000
600,000 Moorpark, California, Multifamily Revenue,
5.500% due 11/01/15++ 600,000
440,000 Ontario, California, Multifamily Housing
Authority, (Vineyard Project),
5.350% due 12/01/05+ 440,000
675,000 Rincon Del Diablo, California, Water Dis-
trict,
3.600% due 02/01/15++ 675,000
800,000 Riverside County, California, Tax and Reve-
nue Anticipation Notes,
4.250% due 06/30/95++ 802,473
500,000 Sacramento County, California, Certificates
of Participation,
5.250% due 06/01/20+ 500,000
Sacramento County, California, Multifamily
Housing Revenue,
100,000 Series A,
5.600% due 04/15/07+ 100,000
200,000 Series B,
5.600% due 04/15/07+ 200,000
1,000,000 Sacramento County, California, Municipal
Utility District,
4.150% due 02/15/95 1,000,000
1,000,000 San Diego, California, Area Local Govern-
ment, Tax and Revenue Anticipation Notes,
4.500% due 06/30/95++ 1,004,187
1,035,000 San Diego, California, Multifamily Housing
Revenue, (Market Street Square Project),
6.050% due 11/01/25+ 1,035,000
500,000 San Diego County, California, Regional
Transportation, Series B,
5.750% due 04/01/08+ 500,000
500,000 San Diego County, California, (Paseo Point
Apartments), Series A,
5.500% due 08/01/15+ 500,000
1,500,000 San Francisco, California, Housing Author-
ity, (737 Post Project), Series D,
5.250% due 12/01/07+ 1,500,000
450,000 Santa Cruz County, California, Industrial
Development Authority,
5.625% due 11/01/18+ 450,000
300,000 Simi Valley, California, Multifamily Hous-
ing Revenue,
5.500% due 06/01/10++ 300,000
1,000,000 Union City, California, Multifamily Housing
Revenue, (Sierra Green Project), Series
A,
6.000% due 10/01/07+ 1,000,000
TOTAL INVESTMENTS
(Cost $27,871,119*) 90.6% 27,871,119
OTHER ASSETS AND LIABILITIES
(NET) 9.4 2,875,500
NET ASSETS 100.0% $30,746,619
<FN>
* Aggregate cost for Federal tax purposes.
+ Variable rate demand bonds payable upon not more than seven calendar
days' notice.
++ Put bonds and notes have demand features to mature within one year.
+++ Variable daily demand notes are payable upon not more than one busi-
ness day's notice.
++++ Variable daily demand notes are payable upon not more than 30 calen-
dar days' notice. The interest rate shown reflects the rate currently
in effect.
</TABLE>
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
DREYFUS/LAUREL MASSACHUSETTS TAX-FREE MONEY FUND
(UNAUDITED) DECEMBER 31, 1994
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 99.2%
MASSACHUSETTS -- 99.2%
$1,000,000 Attleboro, Massachusetts, Bond Anticipation
Notes,
4.500% due 07/07/95 $ 1,001,488
700,000 Barre, Massachusetts, Revenue Anticipation
Notes,
3.950% due 02/01/95 700,000
110,000 Becket, Massachusetts, Bond Anticipation
Notes,
4.110% due 04/18/95 110,000
5,000,000 Boston, Massachusetts, Water & Sewer Com-
mission Revenue,
5.250% due 11/01/24+ 5,000,000
1,000,000 Brockton, Massachusetts, Bond Anticipation
Notes,
5.500% due 04/14/95 1,003,055
390,000 Brookline, Massachusetts, General Obliga-
tion Bonds,
4.250% due 01/15/95 390,242
100,000 Dighton, Massachusetts, Revenue Anticipa-
tion Notes,
4.050% due 01/26/95 100,000
2,500,000 Dracut, Massachusetts, Bond Anticipation
Notes,
3.780% due 01/13/95 2,500,000
1,215,000 Edgartown, Massachusetts, Revenue Anticipa-
tion Notes,
3.210% due 08/18/95 1,215,000
260,000 Everett, Massachusetts, Bond Anticipation
Notes,
6.000% due 10/15/95 263,509
700,000 Harvard, Massachusetts, Revenue Anticipa-
tion Notes,
4.190% due 02/17/95 700,000
1,900,000 Holyoke, Massachusetts, Pollution Control
Revenue,
5.300% due 11/01/13+ 1,900,000
185,866 Hopkinton, Massachusetts, State Aid Antici-
pation Notes,
3.280% due 01/18/95 185,866
370,000 Leicester, Massachusetts, General Obliga-
tion Bonds,
5.500% due 01/15/95 370,400
2,275,000 Marlborough, Massachusetts, Bond Anticipa-
tion Notes,
4.000% due 02/28/95 2,276,755
Massachusetts Bay Transportation Author-
ity:
4,000,000 3.850% due 03/09/95 4,000,000
3,500,000 3.250% due 03/01/14++ 3,500,000
Series A:
2,000,000 4.000% due 02/09/95 2,000,000
1,000,000 3.750% due 03/01/95 1,000,106
415,000 Series B,
4.000% due 03/01/95 415,326
5,000,000 Massachusetts Health & Educational Facili-
ties,
3.750% due 01/13/95 5,000,000
2,600,000 Massachusetts Health & Educational Facili-
ties,
Project A,
5.350% due 01/01/01+ 2,600,000
100,000 Massachusetts Health & Educational Facili-
ties,
Project A, Series C,
5.200% due 07/01/05+ 100,000
3,000,000 Massachusetts Health & Educational Facili-
ties, Series C,
5.300% due 07/01/24+ 3,000,000
7,000,000 Massachusetts Health & Educational Facili-
ties for Boston University, Series H,
Commercial Paper,
3.700% due 01/17/95 7,000,000
Massachusetts Health & Educational Facili-
ties for Capital Asset Program,
100,000 Series B,
5.200% due 07/01/05+ 100,000
2,000,000 Series D,
4.700% due 01/01/35+ 2,000,000
1,900,000 Massachusetts Health & Educational Facili-
ties for Clark University,
5.150% due 12/01/04+ 1,900,000
Massachusetts Health & Educational Facili-
ties for Harvard University,
500,000 8.500% due 10/01/95+ 515,584
1,300,000 Series I,
5.000% due 12/01/16+ 1,300,000
1,945,000 Series L,
5.000% due 08/01/17+ 1,945,000
2,100,000 3.800% due 01/12/95+ 2,100,000
1,340,000 3.800% due 02/09/95 1,340,000
Massachusetts Health & Educational Facili-
ties for Massachusetts General Hospital,
Series D:
120,000 7.625% due 07/01/07++ 122,401
825,000 7.750% due 07/01/20++ 841,504
100,000 7.200% due 07/01/01++ 102,001
2,200,000 Massachusetts Health & Educational Facili-
ties for Massachusetts Institute of Tech-
nology, Series G,
5.250% due 07/01/21+ 2,200,000
3,130,000 Massachusetts Health & Educational Facili-
ties for Newbury College, Series A,
5.250% due 11/01/18+ 3,130,000
4,700,000 Massachusetts Health & Educational Facili-
ties for Tufts University, Series E, Com-
mercial Paper,
4.000% due 08/01/03++ 4,700,000
2,100,000 Massachusetts Health & Educational Facili-
ties for Williams College,
5.900% due 08/01/14+ 2,100,000
2,500,000 Massachusetts Industrial Finance Agency for
Cabot Newburyport Ltd.,
5.750% due 01/01/99+ 2,500,000
765,000 Massachusetts Industrial Finance Agency for
Family YMCA Project,
5.500% due 06/01/09+ 765,000
Massachusetts Industrial Finance Agency:
500,000 (Beverly Enterprises),
6.150% due 04/01/09+ 500,000
2,400,000 (Chestnut Housing Apartments),
5.000% due 08/01/26+ 2,400,000
1,700,000 (Groton School Project),
5.500% due 06/01/19+ 1,700,000
2,100,000 (Hampshire College),
5.500% due 06/01/09+ 2,100,000
1,700,000 (Holyoke Water Power),
5.300% due 05/01/22+ 1,700,000
2,100,000 (New England Deaconness Hospital),
4.600% due 04/01/23+ 2,100,000
400,000 (New England Power Company Project), Se-
ries A,
3.600% due 03/01/18++ 400,000
750,000 Massachusetts Industrial Finance Agency,
Series B,
5.500% due 07/01/08+ 750,000
3,500,000 Massachusetts Industrial Finance Agency,
Refunding Revenue for Berkshire Project,
5.500% due 09/01/20+ 3,500,000
3,985,000 Massachusetts Industrial Finance Agency,
Refunding Revenue, for First Healthcare
Corporation,
5.700% due 04/01/13+ 3,985,000
500,000 Massachusetts Industrial Finance Agency,
General Obligation Bonds, (General Signal
Corporation),
5.250% due 07/01/04+ 500,000
220,000 Massachusetts Industrial Finance Agency,
Refunding Revenue, Series A,
2.350% due 07/01/96+ 220,000
2,400,000 Massachusetts Industrial Finance Agency for
Odgen Haverhill Project,
5.100% due 12/01/06+ 2,400,000
1,100,000 Massachusetts Industrial Finance Agency for
Manhasset Bay Cambridge,
5.150% due 10/01/10+ 1,100,000
Massachusetts Industrial Finance Agency for
Quamco:
2,895,000 Series A,
5.150% due 09/01/01+ 2,895,000
1,300,000 Series B,
5.150% due 09/01/01+ 1,300,000
Massachusetts Industrial Finance Agency,
Pollution Control Revenue, (New England
Power Company):
1,000,000 4.200% due 02/07/95 1,000,000
2,050,000 4.200% due 02/24/95 2,050,000
1,400,000 4.200% due 03/09/95 1,400,000
5,000,000 Massachusetts Municipal Wholesale Electric
Company, Power Supply
5.250% due 07/01/19+ 5,000,000
Massachusetts State, General Obligation
Bonds:
500,000 5.700% due 03/01/95 501,819
4,000,000 5.000% due 06/15/95 4,014,649
610,000 Massachusetts State, Special Obligation,
Series A,
4.500% due 06/01/95 612,451
900,000 Massachusetts State, Series C,
5.850% due 12/01/97+ 900,000
2,060,000 Massachusetts Water Rescource Authority,
6.700% due 04/01/95 2,076,694
750,000 New Bedford, Massachusetts, Regional Voca-
tional Technical High School
3.780% due 01/20/95 750,000
2,050,000 Norfolk, Massachusetts, Hospital Mainte-
nance,
3.900% due 06/09/95 2,050,000
1,800,000 North Andover, Massachusetts, State Aid
Anticipation Notes,
3.790% due 02/02/95 1,800,000
1,300,000 Northborough Industrial Development Revenue
For Trust Realty,
5.625% due 09/01/18+ 1,300,000
1,500,000 Northbrookfield, Massachusetts, Bond Antic-
ipation Notes,
3.930% due 03/02/95+ 1,500,000
2,000,000 Peabody, Massachusetts, Bond Anticipation
Notes,
4.030% due 03/17/95 2,000,000
600,000 Pentucket Regional School District, Revenue
Anticipation Notes,
7.000% due 02/15/95 603,101
172,500 Reading, Massachusetts, General Obligation
Bonds
2.700% due 01/13/95 172,500
105,000 Seekonk, Massachusetts, State Aid Anticipa-
tion Notes,
4.360% due 04/03/95 105,000
700,000 Spencer, Massachusetts, Revenue Anticipa-
tion Notes,
4.000% due 02/02/95 700,089
500,000 Springfield, Massachusetts, Revenue Antici-
pation Notes,
4.650% due 02/23/95 500,536
1,450,000 Wilbraham, Massachusetts, Revenue Anticipa-
tion Notes,
3.500% due 05/30/95 1,446,740
1,000,000 Worcester County, Massachusetts, Revenue
Anticipation Notes,
4.200% due 03/31/95 1,000,000
TOTAL INVESTMENTS
(Cost $133,026,816*) 99.2% 133,026,816
OTHER ASSETS AND LIABILITIES
(NET) 0.8 1,130,899
NET ASSETS 100.0% $134,157,715
<FN>
* Aggregate cost for Federal tax purposes.
+ Variable rate demand bonds payable upon not more than seven calendar
days' notice. The interest rate shown reflects the rate currently in
effect.
++ Put bonds and notes have demand features to mature within one year. The
interest rate shown reflects the rate currently in effect.
</TABLE>
See Notes to Financial Statements.
PORTFOLIO OF INVESTMENTS
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND
(UNAUDITED) DECEMBER 31, 1994
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 96.3%
NEW YORK -- 96.3%
$ 150,000 Broome County, New York, Industrial Devel-
opment Revenue,
5.250% due 12/15/03+ $ 150,000
100,000 Jefferson County, New York, Industrial De-
velopment Revenue,
3.750% due 12/01/12+++ 100,000
100,000 Metropolitan Transportation Authority, New
York,
5.150% due 07/01/21+ 100,000
300,000 Monroe County, New York, Industrial Devel-
opment Agency,
5.150% due 10/01/00+ 300,000
500,000 Monroe County, New York, Revenue Anticipa-
tion Notes,
4.250% due 02/28/95++ 500,540
200,000 Montgomery, New York, Industrial Develop-
ment Agency, (Service Merchandise),
2.900% due 12/31/24+++ 200,000
500,000 Nassau County, New York, Series B,
4.500% due 03/15/95++ 500,249
New York City, New York, Housing Develop-
ment Corporation:
200,000 5.300% due 01/01/16+ 200,000
200,000 5.750% due 12/15/24+ 200,000
500,000 New York City, New York, Housing Develop-
ment Corporation, Special Obligation 96-
A,
5.200% due 08/01/15+ 500,000
New York State Dormitory Authority Reve-
nue:
250,000 6.300% due 05/01/95++ 251,872
300,000 8.750% due 07/01/15++ 312,515
New York State Energy Research & Develop-
ment Authority, Pollution Control Reve-
nue:
300,000 4.600% due 12/01/15++ 300,000
300,000 3.500% due 10/01/29++ 300,000
500,000 3.550% due 10/01/14+ 500,000
800,000 3.650% due 02/09/95++ 800,000
250,000 4.100% due 10/15/15++ 250,000
500,000 5.450% due 11/01/23++ 500,000
100,000 New York State Housing Finance Agency,
(Liberty View Apartments),
5.500% due 11/01/05+ 100,000
New York State Job Development Authority:
225,000 3.750% due 03/01/99+++ 225,000
340,000 Series C,
3.650% due 03/01/00+ 340,000
400,000 New York State Local Assistance Corpora-
tion, Series B,
5.200% due 04/01/23+ 400,000
200,000 New York State Multi-Housing Authority,
5.150% due 11/01/02+ 200,000
New York State Power Authority, Utility
Revenue,
275,000 9.750% due 01/01/98++ 283,252
600,000 3.800% due 03/01/20++ 600,000
315,000 9.625% due 01/01/03++ 321,302
600,000 New York State Power Authority,
3.250% due 02/08/95++ 600,000
500,000 New York State, Series P, General Obliga-
tion,
3.650% due 01/24/95++ 500,000
300,000 Onondaga County, New York, Industrial De-
velopment Agency, Seymor Project,
3.900% due 06/15/97+++ 300,000
600,000 Saratoga Springs, New York, Revenue Antici-
pation
Notes, Series B,
4.750% due 06/23/95++ 600,384
500,000 Suffolk County, New York, Industrial Devel-
opment Center,
5.300% due 01/01/14+ 500,000
1,000,000 Triborough Bridge & Tunnel Authority, Se-
ries J,
7.250% due 01/01/13++ 1,000,000
TOTAL INVESTMENTS
(Cost $11,935,114*) 96.3% 11,935,114
OTHER ASSETS AND LIABILITIES
(NET) 3.7 463,717
NET ASSETS 100.0% $12,398,831
<FN>
* Aggregate cost for Federal tax purposes.
+ Variable rate demand bonds payable upon not more than seven calendar
days' notice.
++ Put bonds and notes have demand features to mature within one year.
The interest rate shown reflects the rate currently in effect.
+++ Variable rate demand notes are payable upon not more than 30 calendar
days' notice. The interest rate shown reflects the rate currently in
effect.
</TABLE>
See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
(UNAUDITED) DECEMBER 31, 1994
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
<S> <C> <C> <C>
ASSETS
Investments, at value
(Cost $27,871,119, $133,026,816 and
$11,935,114, respectively) (Note 1)
See accompanying schedules $ 27,871,119 $ 133,026,816 $ 11,935,114
Cash 723,748 98,977 13,527
Interest receivable 164,342 759,180 128,203
Receivable for Fund shares sold 3,168,341 1,134,677 976,859
TOTAL ASSETS 31,927,550 135,019,650 13,053,703
LIABILITIES
Payable for investment securities purchased 601,890 105,000 601,572
Dividends payable 78,345 374,509 9,461
Payable for Fund shares redeemed 478,972 300,498 28,180
Investment management fee payable (Note 2) 8,639 43,193 3,823
Accrued Trustees' fees and expenses (Note
2) 2,783 12,507 1,390
Distribution fee payable (Note 3) 354 2,824 174
Accrued expenses and other payables 9,948 23,404 10,272
TOTAL LIABILITIES 1,180,931 861,935 654,872
NET ASSETS $ 30,746,619 $ 134,157,715 $ 12,398,831
NET ASSETS consist of:
Undistributed net investment income $ 398 $ -- $ 211
Accumulated net realized gain/
(loss) on investments (233) (63,934) 339
Paid-in capital 30,746,454 134,221,649 12,398,281
TOTAL NET ASSETS $ 30,746,619 $ 134,157,715 $ 12,398,831
</TABLE>
See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
(UNAUDITED) DECEMBER 31, 1994
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
<S> <C> <C> <C>
NET ASSETS:
Investor Shares $ 16,095,065 $ 103,478,659 $ 6,346,651
Class R Shares $ 14,651,554 $ 30,679,056 $ 6,052,180
SHARES OUTSTANDING:
Investor Shares 16,094,989 103,532,364 6,346,355
Class R Shares 14,651,465 30,694,979 6,051,926
NET ASSET VALUE:
INVESTOR SHARES
Net assets value, offering and redemption
price per share of beneficial interest
outstanding $ 1.00 $ 1.00 $ 1.00
CLASS R SHARES
Net asset value, offering and redemption
price per share of beneficial interest
outstanding $ 1.00 $ 1.00 $ 1.00
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 (UNAUDITED)
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 429,961 $ 1,910,499 $ 179,349
EXPENSES
Investment management fee (Note 2) 42,515 196,447 20,838
Distribution fee (Note 3) 19,063 117,070 8,932
Trustees' fees and expenses (Note 2) 2,576 11,906 1,262
Total expenses 64,154 325,423 31,032
NET INVESTMENT INCOME 365,807 1,585,076 148,317
NET REALIZED GAIN
ON INVESTMENTS (Note 1)
Net realized gain on investments sold dur-
ing the period 6 -- 349
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 365,813 $ 1,585,076 $ 148,666
</TABLE>
See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 (UNAUDITED)
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
<S> <C> <C> <C>
Net investment income $ 365,807 $ 1,585,076 $ 148,317
Net realized gain on investments sold dur-
ing the period 6 -- 349
Net increase in net assets resulting from
operations 365,813 1,585,076 148,666
Distributions to shareholders from net in-
vestment income:
Investor Shares (205,534) (1,218,235) (79,710)
Class R Shares (160,274) (366,841) (68,396)
Net increase/(decrease) in net assets from
Fund share transactions (Note 4):
Investor Shares (1,074,513) 16,970,244 (1,664,723)
Class R Shares 4,905,011 10,852,373 592,967
Net increase in net assets 3,830,503 27,822,617 (1,071,196)
NET ASSETS:
Beginning of period 26,916,116 106,335,098 13,470,027
End of period (including undistributed net
investment income of $398 and $211 for
the Dreyfus/Laurel California
Tax-Free Money Fund and the Dreyfus/Lau-
rel New York Tax- Free Money Fund, re-
spectively) $ 30,746,619 $ 134,157,715 $ 12,398,831
</TABLE>
See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
FOR THE YEAR OR PERIOD ENDED JUNE 30, 1994
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND* MONEY FUND MONEY FUND*
<S> <C> <C> <C>
Net investment income $ 346,378 $ 2,167,350 $ 204,215
Net realized loss on investments sold dur-
ing the year -- (1,311) --
Net increase in net assets result from op-
erations 346,378 2,166,039 204,215
Distributions to shareholders from net in-
vestment income:
Investor Shares (198,324) (1,317,812) (124,785)
Trust Shares (118,164) (371,662) (78,946)
Institutional Shares (29,890) (477,876) (484)
Net increase/(decrease) in net assets from
Fund share transactions (Note 4):
Investor Shares (3,450,010) (21,462,072) (1,409,966)
Trust Shares 3,338,359 186,693 (2,241,040)
Net increase/(decrease)
in net assets (111,651) (21,276,690) (3,651,006)
NET ASSETS:
Beginning of year 27,027,767 127,611,788 17,121,033
End of year (including undistributed net
investment income of $399 for the Dreyfu-
s/Laurel California
Tax-Free Money Fund) $ 26,916,116 $ 106,335,098 $ 13,470,027
<FN>
* The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30.
</TABLE>
See Notes to Financial Statements.
[This Page Intentionally Left Blank]
FINANCIAL HIGHLIGHTS
DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND
Reference is made to page 5 of the Fund's Prospectus dated April 10, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS (CONTINUED)
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND
Reference is made to page 5 of the Fund's Prospectus dated April 10, 1995.
See Notes to Financial Statements.
[This Page Intentionally Left Blank]
FINANCIAL HIGHLIGHTS
DREYFUS/LAUREL MASSACHUSETTS TAX-FREE MONEY FUND
Reference is made to page 7 of the Fund's Prospectus dated April 10, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS (CONTINUED)
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
DREYFUS/LAUREL MASSACHUSETTS TAX-FREE MONEY FUND
Reference is made to page 7 of the Fund's Prospectus dated April 10, 1995.
See Notes to Financial Statements.
[This Page Intentionally Left Blank]
FINANCIAL HIGHLIGHTS
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND
Reference is made to page 9 of th Fund's Prospectus dated April 10, 1995.
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS (CONTINUED)
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND
Reference is made to page 9 of the Fund's Prospectus dated April 10, 1995.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The Dreyfus/Laurel Tax-Free Municipal Funds (the "Trust"), The Dreyfu-
s/Laurel Funds, Inc., The Dreyfus/Laurel Funds Trust and The Dreyfus/Lau-
rel Investment Series are all registered open-end investment companies
that are now part of The Dreyfus Family of Funds. The Trust is an invest-
ment company which consists of seven funds: the Dreyfus/Laurel California
Tax-Free Money Fund, the Dreyfus/Laurel Massachusetts Tax- Free Money
Fund, the Dreyfus/Laurel New York Tax-Free Money Fund (collectively, the
"Money Funds") (individually, the "Fund"), the Premier Limited Term Cali-
fornia Municipal Fund, the Premier Limited Term Massachusetts Municipal
Fund, the Premier Limited Term New York Municipal Fund and the Premier
Limited Term Municipal Fund. This report contains financial statements for
the Money Funds. The Trust is a "Massachusetts business trust" and is reg-
istered with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open- end manage-
ment investment company. Each Fund seeks current income exempt from Fed-
eral income tax and state personal income tax. The Money Funds currently
offer two classes of shares: Investor Shares and Class R Shares (effective
October 17, 1994, the Trust Shares were redesignated Class R Shares). In-
vestor Shares are sold primarily to retail investors and bear a distribu-
tion fee. Class R Shares are sold primarily to bank trust departments and
other financial service providers acting on behalf of customers having a
qualified trust or investment account or relationship at such
institutions, and bear no distribution fee. Each class of shares has iden-
tical rights and privileges, except with respect to the distribution fees
and voting rights on matters affecting a single class. The following is a
summary of significant accounting policies consistently followed by each
Fund in the preparation of its financial statements in accordance with
generally accepted accounting principles.
(A) PORTFOLIO VALUATION
The Money Funds invest only in securities that have remaining maturities
of thirteen months or less at the date of purchase. For this purpose,
floating rate or variable rate obligations, which are payable on demand,
but which may otherwise have a stated maturity in excess of thirteen
months, will be deemed to have remaining maturities of thirteen months or
less. Securities of the Money Funds are valued at amortized cost in accor-
dance with Rule 2a-7 of the 1940 Act.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains
and losses on investments sold are recorded on the identified cost basis.
Interest income is recorded on the accrual basis. Investment income and
realized and unrealized gains and losses are allocated based upon the rel-
ative average daily net assets of each class of shares.
(C) DISTRIBUTIONS TO SHAREHOLDERS
Each Fund declares distributions from net investment income on a class
level on each day the Fund is open for business and pays such distribu-
tions no later than the first business day of the next month. Each Fund
may distribute net realized capital gains on a Fund level, if any, annu-
ally or more frequently to maintain its net asset value of $1.00 per
share. Each Fund may be subject to a 4% nondeductible excise tax for cer-
tain undistributed amounts of net investment income and capital gain. Each
Fund expects to make additional distributions to avoid the application of
the excise tax. Income distributions and capital gain distributions on a
Fund level are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These differ-
ences are primarily due to differing treatments of income and gains on
various investment securities held by the Fund, timing differences and the
differing characterization of distributions made by the Fund as a whole.
(D) EXPENSE ALLOCATION
Expenses of each Fund not directly attributable to the operations of any
class of shares are prorated between the classes based upon the relative
average daily net assets of each class. Distribution expense is directly
attributable to a particular class of shares and is charged only to that
class' operations.
(E) FEDERAL INCOME TAXES
It is the policy of each Fund to qualify as a regulated investment com-
pany, if such qualification is in the best interests of its shareholders,
by complying with the requirements of the Internal Revenue Code applicable
to regulated investment companies and by distributing all of its earnings
to shareholders. Therefore, no Federal income tax provision is required.
2. INVESTMENT MANAGEMENT FEE, TRUSTEES' FEES AND OTHER RELATED PARTY
TRANSACTIONS
Effective as of October 17, 1994, the Trust's investment management agree-
ment with Mellon Bank, N.A. ("Mellon Bank") was transferred to The Dreyfus
Corporation (the "Manager"), a wholly-owned subsidiary of Mellon Bank. The
Manager provides, or arranges for one or more third parties to provide,
investment advisory, administrative, custody, fund accounting and transfer
agency services to the Trust. The Manager also directs the investments of
each Fund in accordance with its investment objective, policies and limi-
tations. For these services, each Fund is contractually obligated to pay
the Manager a fee, calculated daily and paid monthly, at the annual rate
of 0.35% of the value of that Fund's average daily net assets. Out of its
fee, the Manager pays all of the expenses of each Fund except brokerage
fees, taxes, interest, Rule 12b-1 distribution fees and expenses, fees and
expenses of non-interested Trustees (including counsel fees) and extraor-
dinary expenses. In addition, the Manager is required to reduce its fee in
an amount equal to each Fund's allocable portion of fees and expenses of
the non- interested Trustees (including counsel).
Prior to October 16, 1994, Mellon Bank served as the Trust's investment
manager pursuant to the investment management agreement described above.
From April 4, 1994 to September 23, 1994, Frank Russell Investment Manage-
ment Company (the "Administrator") served as each Fund's administrator and
provided, pursuant to an administration agreement, various administrative
and corporate secretarial services to each Fund. Mellon Bank, as invest-
ment manager, paid the Administrator's fee out of the management fee de-
scribed above.
Prior to October 17, 1994, Funds Distributor, Inc. served as distributor
of the Trust's shares. Effective as of October 17, 1994, Premier Mutual
Fund Services, Inc. ("Premier") serves as the Trust's distributor. Premier
also serves as the Trust's sub- administrator and, pursuant to a sub-
administration agreement with the Manager, provides various administrative
and corporate secretarial services to the Trust.
No officer or employee of Premier (or of any parent, subsidiary or affili-
ate thereof) receives any compensation from The Dreyfus/Laurel Funds,
Inc., The Dreyfus/Laurel Funds Trust, The Dreyfus/Laurel Tax-Free Munici-
pal Funds or The Dreyfus/Laurel Investment Series (collectively, "The
Dreyfus/Laurel Funds") for serving as an officer or Director/Trustee of
The Dreyfus/Laurel Funds. In addition, no officer or employee of the Man-
ager (or of any parent, subsidiary or affiliate thereof) serves as an of-
ficer or Director/Trustee of The Dreyfus/Laurel Funds. The Dreyfus/Laurel
Funds pays each Director/Trustee who is not an officer or employee of Pre-
mier (or of any parent, subsidiary or affiliate thereof) or of the Manager
$27,000 per annum, $1,000 for each Board meeting attended and $750 for
each Audit Committee meeting attended, and reimburse each Director/Trustee
for travel and out-of-pocket expenses.
3. DISTRIBUTION PLAN
Each Fund has adopted a distribution plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act relating to its Investor Shares. Under the Plan,
each Fund may pay annually up to 0.25% of the value of the average daily
net assets attributable to its Investor Shares to compensate Premier and
Dreyfus Service Corporation, an affiliate of the Manager, for shareholder
servicing activities and Premier for activities and expenses primarily in-
tended to result in the sale of Investor Shares. Class R Shares bear no
distribution fee.
Under its terms, the Plan shall remain in effect from year to year, pro-
vided such continuance is approved annually by a vote of a majority of the
Trustees and a majority of those Trustees who are not "interested persons"
of the Trust and who have no direct or indirect financial interest in the
operation of the Plan or in any agreement related to the Plan.
4. SHARES OF BENEFICIAL INTEREST
The Trust has the authority to issue an unlimited number of shares of ben-
eficial interest of each class in each separate series, without par value.
The Trust offers two classes of shares of the Money Funds.
The tables below summarize transactions in Fund shares for the years or
periods indicated. Because each of the Money Funds has sold shares, issued
shares as reinvestments of dividends and redeemed shares only at a con-
stant net asset value of $1.00 per share, the number of shares represented
by such sales, reinvestments and redemptions is the same as the amounts
shown below for such transactions.
DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
December 31, 1994 June 30, 1994*+#
<S> <C> <C>
INVESTOR SHARES:
Sold $ 15,561,907 $ 22,619,988
Issued as reinvestment of dividends and
distributions 202,363 225,575
Redeemed (16,838,783) (26,295,573)
Net decrease $ (1,074,513) $ (3,450,010)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
December 31, 1994## June 30, 1994*
<S> <C> <C>
CLASS R SHARES:
Sold $13,708,250 $10,968,762
Issued as reinvestment of dividends and
distributions 109,454 65,613
Redeemed (8,912,693) (7,696,016)
Net increase $ 4,905,011 $ 3,338,359
<FN>
* The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30.
+ Amounts include $8,676,000 of subscriptions, $28,427 of reinvestments
and $8,004,712 of redemptions for the Institutional Class up to April
4, 1994.
# Effective April 14, 1994 the Retail and Institutional Classes of shares
were reclassified as a single class of shares known as Investor Shares.
## On October 17, 1994, the Trust Shares were redesignated Class R Shares.
</TABLE>
DREYFUS/LAUREL MASSACHUSETTS TAX-FREE MONEY FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
December 31, 1994 June 30, 1994+#
<S> <C> <C>
INVESTOR SHARES:
Sold $ 79,880,530 $ 139,311,367
Issued as reinvestment of dividends and
distributions 925,418 1,217,369
Redeemed (63,835,704) (161,990,808)
Net increase/(decrease) $ 16,970,244 $ (21,462,072)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
December 31, 1994## June 30, 1994
<S> <C> <C>
CLASS R SHARES:
Sold $ 49,377,211 $ 66,966,216
Issued as reinvestment of dividends and
distributions 199,916 112,247
Redeemed (38,724,754) (66,891,770)
Net increase $ 10,852,373 $ 186,693
<FN>
+ Amounts include $50,504,187 of subscriptions, $63,928 of reinvestments
and $60,326,788 of redemptions for the Institutional Class up to April
4, 1994.
# Effective April 14, 1994 the Retail and Institutional Classes of shares
were reclassified as a single class of shares known as Investor Shares.
## On October 17, 1994, the Trust Shares were redesignated Class R Shares.
</TABLE>
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
December 31, 1994 June 30, 1994*+#
<S> <C> <C>
INVESTOR SHARES:
Sold $ 1,913,557 $ 4,170,313
Issued as reinvestment of dividends and
distributions 77,855 123,051
Redeemed (3,656,135) (5,703,330)
Net decrease $(1,664,723) $(1,409,966)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
December 31, 1994## June 30, 1994*
<S> <C> <C>
CLASS R SHARES:
Sold $ 4,972,872 $ 3,604,985
Issued as reinvestment of dividends and
distributions 10,575 3,922
Redeemed (4,390,480) (5,849,947)
Net increase/(decrease) $ 592,967 $(2,241,040)
<FN>
* The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30.
+ Amounts include $11,467 of subscriptions, $468 of reinvestments and
$9,120 of redemptions for the Institutional Class up to April 4, 1994.
# Effective April 14, 1994 the Retail and Institutional Classes of shares
were reclassified as a single class of shares known as Investor Shares.
## On October 17, 1994, the Trust Shares were redesignated Class R Shares.
</TABLE>
5. CAPITAL LOSS CARRYFORWARD
As of June 30, 1994, the California Tax-Free Money Fund had available for
Federal tax purposes unused capital loss carryforwards of $239 expiring in
the year 2000, the Massachusetts Tax-Free Money Fund had unused capital
loss carryforwards of $52,102 expiring in the year 2002, and the New York
Tax-Free Money Fund has unused capital loss carryforwards of $10 expiring
in the year 2001.
6. CONCENTRATION OF CREDIT
Each Fund invests primarily in debt obligations issued by the Fund's re-
spective state (i.e., California, Massachusetts, or New York) and such
state's political subdivisions, municipalities, agencies and public au-
thorities who obtain funds for various public purposes. Each Fund is more
susceptible to factors adversely affecting issuers of its respective state
municipal securities than is a municipal bond fund that is not
concentrated in these issuers to the same extent.
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 period ending December 31, 1994:
- Reports of Independent Accountants
- Portfolios of Investments
- Statements of Assets and Liabilities
- Statements of Operations
- Statements of Changes in Net Assets
- Notes to Financial Statements
(b) Exhibits:
1(a) Third Amended and Restated Master Trust Agreement filed
January 8, 1993, incorporated by reference to
Post-Effective Amendment No. 22, filed on January 29,
1993.
1(b) Amendment No. 1 to the Third Amended and Restated Master
Trust Agreement filed on May 21, 1993, incorporated by
reference to Post-Effective Amendment No. 24, filed on
June 29, 1993.
1(c) Amendment No. 2 to the Third Amended and Restated Master
Trust Agreement filed on February 7, 1994, incorporated
by reference to Post-Effective Amendment No. 29, filed on
April 1, 1994.
1(d) Amendment No. 3 to the Third Amended and Restated Master
Trust Agreement filed on March 31, 1994, incorporated by
reference to Post-Effective Amendment No. 29, filed on
April 1, 1994.
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. Filed herewith.
11(b) Consent of KPMG Peat Marwick LLP. Filed herewith.
12 Not Applicable.
13 Not Applicable.
14 Not Applicable.
15(a) Restated Distribution Plan (relating to Investor Shares
and Class A Shares) Incorporated by reference to Post-
Effective Amendment No. 33 filed on December 19, 1994.
15(b) Distribution and Service Plans (relating to Class B
Shares and Class C Shares). Filed herewith.
16 Performance Information, incorporated by reference to
Post-Effective Amendment No. 12, filed on September 1,
1988.
Other Exhibits
______________
(a) Powers of Attorney of the Trustees and Officersdated
April 5, 1995.
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
December 8, 1994:
Number of Record Holders
Title of Class Class A Investor Class Class R
-------------- ---------- -------------- -------
Dreyfus/Laurel New York Tax-Free N/A 180 110
Money Fund
Dreyfus/Laurel California Tax-Free N/A 233 57
Money Fund
Dreyfus/Laurel Massachusetts Tax-Free N/A 1,287 183
Money Fund
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.
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 Chief
Director Executive Officer:
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
- 6 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 9103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
ALVIN E. FRIEDMAN Senior Adviser to Dillon, Read & Co. 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
DAVID B. TRUMAN Educational consultant;
Director
Past President of the Russell Sage Foundation
230 Park Avenue
New York, New York 10017;
Past President of Mount Holyoke College
South Hadley, Massachusetts 01075;
Former Director:
Student Loan Marketing Association
1055 Thomas Jefferson Street, N.W.
Washington, D.C. 20006;
Former Trustee:
College Retirement Equities Fund
730 Third Avenue
New York, New York 10017
HOWARD STEIN Chairman of the Board:
Chairman of the
Board and Chief Dreyfus Acquisition Corporation*;
Executive Officer
The Dreyfus Consumer Credit Corporation*;
Dreyfus Land Development Corporation*;
- 7 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
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 Realty Advisors, Inc.+++;
Dreyfus Service Organization, Inc.*;
The Dreyfus Trust Company++;
Seven Six Seven Agency, Inc.*;
Trustee:
Corporate Property Investors
New York, New York;
JULIAN M. SMERLING None
Director
- 8 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Robert E. Riley Director:
President, Chief Dreyfus Service Corporation
Operating Officer
and Director
W. KEITH SMITH Chairman and Chief Executive Officer:
Vice Chairman of
the Board The Boston Company
One Boston Place
Boston, Massachusetts 02108
Vice Chairman of the Board:
- 9 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
LAWRENCE S. KASH Chairman, President and Chief Executive Officer:
Vice Chairman,
Distribution The Boston Advisers, Inc.
and a Director 53 State Street
Exchange Place
Boston, Massachusetts 02109
President:
The Boston Company
One Boston Place
Boston, Massachusetts 02108;
Laurel Capital Advisors
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Boston Group Holdings, Inc.
Executive Vice President
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Boston Safe Deposit & Trust
One Boston Place
Boston, Massachusetts 02108
PAUL H. SNYDER Director:
Vice President and
Chief Financial Pennsylvania Economy League
Officer Philadelphia, Pennsylvania;
Children's Crisis Treatment Center
Philadelphia, Pennsylvania;
Director and Vice President:
Financial Executives Institute
Philadelphia Chapter
Philadelphia, Pennsylvania;
- 10 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
BARBARA E. CASEY President:
Vice President,
Retirement Services Dreyfus Retirement Services;
Executive Vice President:
Boston Safe Deposit & Trust Co.
One Boston Place
Boston, Massachusetts 02108;
DIANE M. COFFEY None
Vice President,
Corporate
Communications
- 11 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
Henry D. Gottman Executive Vice President
Vice President-Retal Dreyfus Service Corporation
Sales and Service Vice President:
Dreyfsu Precious Metals
ELIE M. GENADRY President:
Vice President,
Institutioanl Sales
Institutional Services Division of Dreyfus
Service Corporation*;
Broker-Dealer Division of Dreyfus Service
Corporation*:
Group Retirement Plans Division of Dreyfus
Service Corporation;
Executive Vice President:
Dreyfus Service Corporation *:
Dreyfus Service Organization, Inc.*;
Vice President:
The Dreyfus Trust Company++;
Vice President-Sales:
The Dreyfus Trust Company (N.J.)++;
- 12 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
DANIEL C. MACLEAN Director, Vice President and Secretary:
Vice President and
General Counsel Dreyfus Previous Metals, Inc.*;
Director and Vice President:
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company (N.J.)++;
Director and Secretary:
Dreyfus Partnership Management, Inc.*;
Major Trading Corporation *;
The Truepenny Corporation+;
Director:
The Dreyfus Trust Company++;
Secretary:
Seven Six Seven Agency, Inc.*;
JEFFREY N. NACHMAN None
Vice President,
Mutual Fund Accounting
PHILIP L. TOIA Chairman of the Board and Vice President;
Vice Chairman,
Operations and Dreyfus Thrift & Commerce****;
Administration
Director:
The Dreyfus Security Savings Bank F.S.B.+;
Senior Loan Officer and Director:
The Dreyfus Trust Company++;
Vice President:
The Dreyfus Consumer Credit Corporation*;
President and Director:
Dreyfus Personal Management, Inc.*;
Director:
Dreyfus Realty Advisors, Inc.+++;
Formerly, Senior Vice President:
- 13 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
The Chase Manhattan Bank, N.A. and The Chase
Manhattan Capital Markets Corporation
One Chase Manhattan Plaza
New York, New York 10081
KATHERINE C. Formerly, Assistant Commissioner:
WICKHAM Department of Parks and Recreation of the City of
Vice President, New York
Human Resources 830 Fifth Avenue
New York, New York 10022
MAURICE BENDRIHEM Treasurer:
Controller
Dreyfus Partnership Management, Inc.*;
Dreyfus Service Organization, Inc.*;
Seven Six Seven Agency, Inc.*;
The Truepenny Corporation*;
Controller:
Dreyfus Acquisition Corporation*;
The Dreyfus Trust Company++;
The Dreyfus Trust Company (N.J.)++;
The Dreyfus Consumer Credit Corporation*;
Assistant Treasurer:
Dreyfus Precious Metals*
Formerly, Vice President-Financial Planning,
Administration and Tax:
Showtime/The Movie Channel, Inc.
1633 Broadway
New York, New York 10019
MARK N. JACOBS Secretary:
Vice President,
Fund Legal and The Dreyfus Consumer Credit Corporation*;
Compliance, and
Secretary Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.*;
Major Trading Corporation*;
- 14 -
Name and Position
with Dreyfus Other Businesses
----------------- ----------------
The Truepenny Corporation*
___________________________
* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 80 Cutter Mill Road,
Great Neck, New York 11021.
*** The address of the business so indicated is 45 Broadway, New
York, New York 10006.
**** The address of the business so indicated is Five Triad Center,
Salt Lake City, Utah 84180.
+ The address of the business so indicated is Atrium Building, 80
Route 4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
+++ The address of the business so indicated is One Rockefeller
Plaza, New York, New York 10020.
++++ The address of the business so indicated is 2 Boulevard Royal,
Luxembourg.
+++++ The address of the business so indicated is Nassau, Bahama
Islands.
Item 29. Principal Underwriter
(a) Premier Mutual Fund Services, Inc. ("Premier") currently serves
as the distributor for The Dreyfus/Laurel Tax-Free Municipal Funds.
Premier is registered with the Securities and Exchange Commission as a
broker-dealer and is a member of the National Association of Securities
Dealers, Inc. Premier is a wholly-owned subsidiary of Institutional
Administration Services. Inc., the parent company of which is Boston
Institutional Group, Inc.
Premier also currently serves as the exclusive distributor or principal
underwriter for the following investment companies:
1) Comstock Partners Strategy Fund, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC Money Market Fund, Inc.
7) Dreyfus BASIC Municipal Fund, Inc.
8) Dreyfus BASIC U.S. Government Money Market Fund
9) Dreyfus California Intermediate Municipal Bond Fund
10) Dreyfus California Tax Exempt Bond Fund, Inc.
11) Dreyfus California Tax Exempt Money Market Fund
12) Dreyfus Capital Value Fund, Inc.
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) The Dreyfus Convertible Securities Fund, Inc.
18) Dreyfus Edison Electric Index Fund, Inc.
19) Dreyfus Florida Intermediate Municipal Bond Fund
20) Dreyfus Florida Municipal Money Market Fund
21) Dreyfus Focus Funds, Inc.
22) The Dreyfus Fund Incorporated
23) Dreyfus Global Bond Fund, Inc.
24) Dreyfus Global Growth, L.P. (A Strategic Fund)
25) Dreyfus Global Investing, Inc.
26) Dreyfus GNMA Fund, Inc.
27) Dreyfus Government Cash Management
28) Dreyfus Growth and Income Fund, Inc.
29) Dreyfus Growth Opportunity Fund, Inc.
30) Dreyfus Institutional Money Market Fund
31) Dreyfus Institutional Short Term Treasury Fund
32) Dreyfus Insured Municipal Bond Fund, Inc.
33) Dreyfus Intermediate Municipal Bond Fund, Inc.
34) Dreyfus International Equity Fund, Inc.
35) Dreyfus Investors GNMA Fund
36) The Dreyfus Leverage Fund, Inc.
37) Dreyfus Life and Annuity Index Fund, Inc.
38) Dreyfus Liquid Assets, Inc.
39) Dreyfus Massachusetts Intermediate Municipal Bond Fund
40) Dreyfus Massachusetts Municipal Money Market Fund
41) Dreyfus Massachusetts Tax Exempt Bond Fund
42) Dreyfus Michigan Municipal Money Market Fund, Inc.
43) Dreyfus Money Market Instruments, Inc.
44) Dreyfus Municipal Bond Fund, Inc.
45) Dreyfus Municipal Cash Management Plus
46) Dreyfus Municipal Money Market Fund, Inc.
47) Dreyfus New Jersey Intermediate Municipal Bond Fund
48) Dreyfus New Jersey Municipal Bond Fund, Inc.
49) Dreyfus New Jersey Municipal Money Market Fund, Inc.
50) Dreyfus New Leaders Fund, Inc.
51) Dreyfus New York Insured Tax Exempt Bond Fund
52) Dreyfus New York Municipal Cash Management
53) Dreyfus New York Tax Exempt Bond Fund, Inc.
54) Dreyfus New York Tax Exempt Intermediate Bond Fund
55) Dreyfus New York Tax Exempt Money Market Fund
56) Dreyfus Ohio Municipal Money Market Fund, Inc.
57) Dreyfus 100% U.S. Treasury Intermediate Term Fund
58) Dreyfus 100% U.S. Treasury Long Term Fund
59) Dreyfus 100% U.S. Treasury Money Market Fund
60) Dreyfus 100% U.S. Treasury Short Term Fund
61) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
62) Dreyfus Short-Intermediate Government Fund
63) Dreyfus Short-Intermediate Municipal Bond Fund
64) Dreyfus Short-Term Income Fund, Inc.
65) The Dreyfus Socially Responsible Growth Fund, Inc.
66) Dreyfus Strategic Growth, L.P.
67) Dreyfus Strategic Income
68) Dreyfus Strategic Investing
69) Dreyfus Tax Exempt Cash Management
70) Dreyfus Treasury Cash Management
71) Dreyfus Treasury Prime Cash Management
72) Dreyfus Variable Investment Fund
73) Dreyfus-Wilshire Target Funds, Inc.
74) Dreyfus Worldwide Dollar Money Market Fund, Inc.
75) First Prairie Cash Management
76) First Prairie Diversified Asset Fund
77) First Prairie Money Market Fund
78) First Prairie Municipal Money Market Fund
79) First Prairie Tax Exempt Bond Fund, Inc.
80) First Prairie U.S. Government Income Fund
81) First Prairie U.S. Treasury Securities Cash Management
82) General California Municipal Bond Fund, Inc.
83) General California Municipal Money Market Fund
84) General Government Securities Money Market Fund, Inc.
85) General Money Market Fund, Inc.
86) General Municipal Bond Fund, Inc.
87) General Municipal Money Market Fund, Inc.
88) General New York Municipal Bond Fund, Inc.
89) General New York Municipal Money Market Fund
90) Pacific American Fund
91) Peoples Index Fund, Inc.
92) Peoples S&P MidCap Index Fund, Inc.
93) Premier Insured Municipal Bond Fund
94) Premier California Municipal Bond Fund
95) Premier GNMA Fund
96) Premier Growth Fund, Inc.
97) Premier Municipal Bond Fund
98) Premier New York Municipal Bond Fund
99) Premier State Municipal Bond Fund
100) The Dreyfus/Laurel Funds Trust
101) The Dreyfus/Laurel Tax-Free Municipal Funds
102) The Dreyfus/Laurel Investment Series
(b) The names of the principal executive officers of Premier together
with their respective positions with Premier and their positions and
offices with the Registrant, are set forth below.
Name and Address Position and Position and Office(s)
Office(s) with with Registrant
Premier
Marie E. Connolly* Director, President President & Treasurer
& Chief Operating
Officer
John E. Pelletier* Senior Vice Vice President &
President & General Secretary
Counsel
Joseph F. Tower, III* Senior Vice Assistant Treasurer
President & Chief
Financial Officer
John J. Pyburn** Vice President Assistant Treasurer
Jean M. O'Leary* Assistant Secretary N/A
Eric B. Fischmann** Vice President & Vice President &
Associate General Assistant Secretary
Counsel
Frederic C. Dey** Senior Vice Vice President &
President Assistant Treasurer
Ruth D. Leibert** Assistant Vice Assistant Secretary
President
Paul D. Furcinito** Assistant Vice Assistant Secretary
President
*Address: Funds Distributor, Inc., Exchange Place, Boston, MA 02109.
**Address: Premier Mutual Fund Services, Inc., 200 Park Avenue, New York,
NY 10166.
Item 30. Location of Accounts and Records
(1) The Dreyfus/Laurel Tax-Free Municipal Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
(2) Mellon Bank, N.A.
c/o The Boston Company Advisers, Inc.
4th Floor
One Exchange Place
Boston, MA 02109
(3) Mellon Bank, N.A.
c/o The Boston Company, Inc.
5th Floor
One Boston Place
Boston, MA 02108
(4) Mellon Bank, N.A.
The Park Square Building
31 St. James Avenue
Boston, MA 02116
(5) The Shareholder Services Group, Inc.
1 American Express Plaza
Providence, RI 02903
(6) Mellon Bank, N.A.
One Mellon Bank Center
39th Floor
Pittsburgh, PA 15258
(7) The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
Registrant hereby undertakes as follows:
(a) Not Applicable.
(b) Not Applicable.
(c) Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the
Registrant, The Dreyfus/Laurel Tax-Free Municipal Funds (formerly The
Laurel Tax-Free Municipal Funds), certifies that it meets all of the
requirements for effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, all in the City
of Boston, the Commonwealth of Massachusetts on the 7th day of April,
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, as
amended, this Amendment to the Registration Statement has been signed
below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
--------- ----- ----
/s/Marie E. Connolly*
--------------------------- President, Treasurer 4/7/95
Marie E. Connolly
Signature Title Date
--------- ----- ----
/s/Francis P. Brennan*
--------------------------- Trustee, 4/7/95
Francis P. Brennan Chairman of the Board
/s/Ruth Marie Adams*
-------------------------- Trustee 4/7/95
Ruth Marie Adams
/s/Joseph S. DiMartino* Trustee 4/7/95
--------------------------
Joseph S. DiMartino
/s/James M. Fitzgibbons*
------------------------ Trustee 4/7/95
James M. Fitzgibbons
/s/Kenneth A. Himmel*
________________________ Trustee 4/7/95
Kenneth A. Himmel
/s/Stephen J. Lockwood*
------------------------- Trustee 4/7/95
Stephen J. Lockwood
/s/Roslyn M. Watson*
------------------------ Trustee 4/7/95
Roslyn M. Watson
/s/J. Tomlinson Fort*
----------------------- Trustee 4/7/95
J. Tomlinson Fort
/s/Arthur L. Goeschel*
------------------------
Arthur L. Goeschel Trustee 4/7/95
/s/Arch S. Jeffery*
-------------------------
Arch S. Jeffery Trustee 4/7/95
/s/Robert D. McBride*
-------------------------
Robert D. McBride Trustee 4/7/95
/s/John L. Propst*
--------------------------
John L. Propst Trustee 4/7/95
/s/John J. Sciullo*
---------------------------
John J. Sciullo Trustee 4/7/95
* By: /s/Eric B. Fischman
__________________________
Eric B. Fischman,
Attorney-in-fact
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
The Dreyfus/Laurel Tax-Free Municipal Funds
We hereby consent to the following with respect to Post-Effective
Amendment No. 35 to the Registration Statement (File No. 33-43845) on Form
N-1A under the Securities Act of 1933, as amended, of The Dreyfus/Laurel
Tax-Free Municipal Funds (formerly The Laurel Tax-Free Municipal Funds and
previously The Boston Company Tax-Free Municipal Funds):
1. The incorporation by reference of our report dated August 11,
1993 accompanying the financial statements of the Massachusetts Tax-Free
Money Fund (a series of The Dreyfus/Laurel Tax-Free Municipal Funds) for
the year ended June 30, 1993 into the Statement of Additional Information.
2. The incorporation by reference of our report dated January 18,
1994 accompanying the financial statements of the New York Tax-Free Money
Fund (a series of The Dreyfus/Laurel Tax-Free Municipal Funds) for the year
ended November 30, 1993 into the Statement of Additional Information.
3. The incorporation by reference of our report dated January 18,
1994 accompanying the financial statements of California Tax-Free Money
Fund (a series of The Dreyfus/Laurel Tax-Free Municipal Funds) for the year
ended November 30, 1993 into the Statement of Additional Information.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
April 5, 1995
Independent Auditors' Consent
To the Board of Directors and Shareholders of
The Dreyfus/Laurel Tax-Free Municipal Funds:
We consent to the use of our reports dated July 27, 1994, included herein
and to the references to our firm under the headings "Financial
Highlights" and "Counsel and Auditors" in the Prospectuses and Statement
of Additional Information filed with the Securities and Exchange
Commission in this Post-Effective Amendment No. 35 to the Registration
Statement under the Securities Act of 1933 and in this Amendment No. 36 to
the Registration Statement under the Investment Company Act of 1940.
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
April 6, 1995
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Frederick C. Dey, Eric
B. Fischman, Ruth D. Leibert and John E. Pelletier and each of them, with
full power to act without the other, his or her true and lawful attorney-
in-fact and agent, with full power of substitution and resubstitution, for
him or her and in his or her name, place and stead, in any and all
capacities (until revoked in writing) to sign any and all amendments to
the Registration Statement for The Dreyfus/Laurel Tax-Free Municipal Funds
(including post-effective amendments and amendments thereto), and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their or his
or her substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
/s/Ruth Marie Adams /s/Arch S. Jeffery
Ruth Marie Adams, Trustee Arch S. Jeffery, Trustee
/s/Joseph S. DiMartino /s/Stephen J. Lockwood
Joseph S. DiMartino, Trustee Stephen J. Lockwood, Truste
/s/Francis P. Brennan /s/Robert D. McBride
Francis P. Brennan, Trustee Robert D. McBride, Trustee e
/s/James M. Fitzgibbons /s/John L. Propst
James M. Fitzgibbons, Trustee John L. Propst, Trustee
/s/J. Tomlinson Fort /s/John J. Sciullo
J. Tomlinson Fort, Trustee John J. Sciullo, Trustee
/s/Arthur L. Goeschel /s/Roslyn M. Watson
Arthur L. Goeschel, Trustee Roslyn M. Watson, Trustee
/s/Kenneth A. Himmel
Kenneth A. Himmel, Trustee
Dated: April 5, 1995
POWER OF ATTORNEY
The undersigned, hereby constitutes and appoints Frederick C. Dey,
Eric B. Fischman, Ruth D. Leibert and John E. Pelletier and each of them,
with full power to act without the other, her true and lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for
her and in her name, place and stead, in any and all capacities (until
revoked in writing) to sign any and all amendments to the Registration
Statement for The Dreyfus/Laurel Tax-Free Municipal Funds (including post-
effective amendments and amendments thereto), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them, full power and authority to do and
perform each and every act and thing ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
/s/Marie E. Connolly
Marie E. Connolly, President & Treasurer
Dated: April 5, 1995
