File No. 811-3700
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 41 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 42 [ ]
(Check appropriate box or boxes.)
THE DREYFUS/LAUREL TAX FREE MUNICIPAL FUNDS
(formerly The Laurel Tax-Free Municipal Funds)
___________________________________________________
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
John E. Pelletier
Secretary
The Dreyfus/Laurel Tax-Free
Municipal Funds
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box)
X immediately upon filing pursuant to paragraph (b)
----
on (date) pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
----
The registrant has previously filed a declaration of indefinite
registration of its shares under the Securities Act of 1933
pursuant to Rule 24f-2 under the investment Company Act of 1940.
Registrant's Rule 24f-2 Notice for the fiscal year ended June 30,
1995, relating to Massachusetts Tax-Free Money Fund, New York
Tax-Free Money Fund and California Tax-Free Money Fund, was filed
on August 31, 1995.
Dreyfus BASIC CA and NY Municipal Money Market Fund
Cross-Reference Sheet Pursuant to Rule 495(a)
________________________________________________________
Items in
Part A of
Form N-1A Caption Prospectus
Caption
________ _______ __________
1 Cover Page Cover Page
Expense Summary
2 Synopsis Expense Summary
3 Condensed Financial Financial Highlights
Information
4 General Description of Investment Objective and
Registrant Policies; Further
Information About The Fund
5 Management of the Fund Further Information About
The Funds; Management
5(a) Management's Discussion Management's Discussion
of Fund's Performance of Fund's Performance
6 Capital Stock and Cover Page; Investor
Other Securities Line; Distribution; Taxes;
7 Purchase of Securities Expense Summary;
Being Offered Alternative Purchase
Methods; Special
Shareholder Services; How
to invest in The
Dreyfus/Laurel Funds;
Distribution and Service
Plans; How to Exchange
your Investment From One
Fund to Another;
8 Redemption or How to Redeem Shares
Repurchase
9 Pending Legal N.A.
Proceedings
Dreyfus BASIC CA and NY Municipal Money Market Fund
Cross-Reference Sheet Pursuant to Rule 495(a) (Continued)
________________________________________________________
Items in
Part B of Statement of Additional
Form N-1A Information Caption
- ---------
10 Cover Page Cover
11 Table of Contents Table of Contents
12 General Information Management of the Trust
and History
13 Investment Objectives Investment Policies
and Policies
14 Management of the Fund Management of the Trust;
Trustees and Officers of
the Trust
15 Control Persons and Management of the Trust;
Principal Holders of
Securities
16 Investment Advisory Management of the Trust;
and Other Services Investment Manager;
Shareholder Services
17 Brokerage Allocation Investment Policies
and Other Practices Portfolio Transactions
18 Capital Stock and Description of the Trust;
Other Securities See Prospectus -- "Cover
Page"; "How to Redeem
Fund Shares"; "Further
Information About The
Funds; The Dreyfus/Laurel Tax
Free Municipal Funds"
19 Purchase, Redemption Purchase of Shares;
and Pricing of Distribuion and Service Plans;
Securities Being Offered Redemption of Shares;
Valuation of Shares
20 Tax Status Taxes
21 Underwriters Purchase of Shares;
Distribution and
Service Plans; Amounts
Expended
22 Calculation of Performance Data
Performance Data
Dreyfus BASIC CA and NY Municipal Money Market Fund
Cross-Reference Sheet Pursuant to Rule 495(a) (Continued)
_______________________________________________________
Items in
Part C of
Form N-1A
_________
23 Financial Statements Financial Statements
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under C-4
Common Control with Registrant
26 Number of Holders of Securities C-4
27 Indemnification C-4
28 Business and Other Connections of C-4
Investment Adviser
29 Principal Underwriters C-12
30 Location of Accounts and Records C-15
31 Management Services C-15
32 Undertakings C-15
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
CONTENTS OF POST-EFFECTIVE AMENDMENT
This post-effective amendment to the registration statement of The
Dreyfus/Laurel Tax-Free Municipal Funds contains the following documents:
Facing Sheet
Cross-Reference Sheet
Contents of Post-Effective Amendent
Part A - Prospectus
Incorporated by reference to Post-Effective Amendment Nos.
39 and 40.
Part B - Statement of Additional Information Incorporated by
reference to Post-Effective Amendment Nos. 39 and 40.
Part C- Other Information
Signature Page - The Dreyfus/Laurel Tax-Free Municipal Funds
Exhibits
- -----------------------------------------------------------------------------
PROSPECTUS FEBRUARY 29, 1996
DREYFUS BASIC CALIFORNIA MUNICIPAL MONEY MARKET FUND
- -----------------------------------------------------------------------------
THE DREYFUS BASIC CALIFORNIA MUNICIPAL MONEY MARKET FUND (FORMERLY,
THE DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND) (THE "FUND") IS A
SEPARATE, NON-DIVERSIFIED PORTFOLIO OF THE DREYFUS/LAUREL TAX-FREE MUNICIPAL
FUNDS (FORMERLY, THE LAUREL TAX-FREE MUNICIPAL FUNDS AND PREVIOUSLY, THE
BOSTON COMPANY TAX-FREE MUNICIPAL FUNDS) (THE "TRUST"), AN OPEN-END
MANAGEMENT INVESTMENT COMPANY KNOWN AS A MUTUAL FUND. THE FUND SEEKS TO
PROVIDE A HIGH LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL AND STATE OF
CALIFORNIA PERSONAL INCOME TAXES TO THE EXTENT CONSISTENT WITH THE
PRESERVATION OF CAPITAL AND THE MAINTENANCE OF LIQUIDITY BY INVESTING IN HIGH
QUALITY, SHORT-TERM MUNICIPAL SECURITIES.
SHARES OF THE FUND ARE SOLD WITHOUT A SALES LOAD.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING THE DREYFUS
TELETRANSFER PRIVILEGE.
THE DREYFUS CORPORATION SERVES AS THE FUND'S INVESTMENT MANAGER. THE
DREYFUS CORPORATION IS REFERRED TO AS "DREYFUS."
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ CAREFULLY BEFORE YOU
INVEST AND RETAINED FOR FUTURE REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION ("SAI") DATED FEBRUARY 29,
1996, WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION
OF CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF
INTEREST TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ("SEC") AND IS INCORPORATED HEREIN BY REFERENCE. FOR A
FREE COPY, WRITE TO THE FUND AT 144 GLENNCURTISS BOULEVARD, UNIONDALE, NEW
YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR
144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
ALL MONEY MARKET FUNDS INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS AN AFFILIATE OF
MELLON BANK, N.A. ("MELLON BANK") TO BE ITS INVESTMENT MANAGER. MELLON BANK
OR AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUND, SUCH
AS CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUND IS
DISTRIBUTED BY PREMIER MUTUAL FUND SERVICES, INC.
- -----------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
EXPENSE SUMMARY................................. 4
FINANCIAL HIGHLIGHTS............................ 5
DESCRIPTION OF THE FUND......................... 6
MANAGEMENT OF THE FUND.......................... 9
HOW TO BUY FUND SHARES.......................... 11
FUND EXCHANGES.................................. 12
HOW TO REDEEM FUND SHARES....................... 13
PERFORMANCE INFORMATION......................... 16
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES........ 17
GENERAL INFORMATION............................. 18
Page 2
This Page Intentionally Left Blank
Page 3
<TABLE>
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C> <C>
Exchange Fee................................................... $5.00
Account Closeout Fee........................................... $5.00
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fee (after expense reimbursement)................... .35%
Other Expenses (after expense reimbursement)................... .00%
-------
Total Fund Operating Expenses (after expense reimbursement).... .35%
EXAMPLE:
You would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period:
1 YEAR $9
3 YEARS $16
5 YEARS $25
10 YEARS $49
</TABLE>
- -----------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE
OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE
FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN GREATER
OR LESS THAN 5%.
- -----------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding
the various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. Effective November 20, 1995, the Fund's "Investor" and "Class R"
designations were eliminated and the Fund became a single class fund. The
information in the foregoing table has been restated to reflect the
termination of the Fund's distribution plan (the "Distribution Plan") adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act"), effective as of November 20, 1995, which was attributable
only to its then existing Investor shares. Effective November 20, 1995, the
Fund adopted a new Investment Management Agreement pursuant to which it pays
Dreyfus a fee at the annual rate of .45 of 1% of the value of the Fund's
average daily net assets. Dreyfus has agreed until November 19, 1996, to
limit its fee, or to reimburse the Fund for its expenses, in order to ensure
that the Fund's total fund operating expenses do not exceed .35 of 1% of the
value of the Fund's average daily net assets. The expenses noted above,
without reimbursement, would be: Management Fees_.45%; Other Expenses_.00%;
and Total Fund Operating Expenses_.45%; and the amount of expenses that an
investor would pay, assuming redemption after one, three, five and ten years,
would be $10, $19, $30 and $62, respectively. In addition, unlike certain
other funds in the Dreyfus Family of Funds, the Fund will charge your account
$2.00 for each redemption check you write; you also will be charged $5.00 for
each wire redemption you make and a $5.00 account closeout fee. These charges
will be paid to the Fund's transfer agent. See "How to Buy Fund Shares" and
"How to Redeem Fund Shares."
Page 4
FINANCIAL HIGHLIGHTS
The following tables are based upon a single share outstanding
throughout each year or period and should be read in conjunction with the
financial statements and related notes that appear in the Fund's Annual
Report dated June 30, 1995, which is incorporated by reference into the SAI.
The financial statements and related notes, as well as the information in the
tables below insofar as it relates to the fiscal period or year ended June 30,
1994 and June 30, 1995, have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon appears in the Fund's Annual
Report. The information in the tables below for the years or periods prior
to the fiscal period ended June 30, 1994, has been audited by other
independent auditors.
DREYFUS BASIC CALIFORNIA MUNICIPAL MONEY MARKET FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
<TABLE>
PERIOD ENDED YEAR ENDED
YEAR OR PERIOD ENDED NOVEMBER 30, JUNE 30 JUNE 30,
----------------------------------------------------
1988 1989 1990 1991 1992 1993 1994# 1995##
------ ----- ----- ----- ----- ----- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- ----- -----
INCOME FROM INVESTMENT OPERATIONS:
Net investment income*** 0.033 0.060 0.056 0.046 0.031 0.023 0.012 0.031
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.033) (0.060) (0.056) (0.046) (0.031) (0.023) (0.012) (0.031)
----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ===== ===== ===== ====== ======
TOTAL RETURN++ 3.39% 6.18% 5.75% 4.65% 3.10% 2.41% 1.25% 3.10%
====== ====== ====== ===== ===== ===== ====== ======
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's) $9,112 $15,745 $27,493 $27,831 $26,987 $15,490 $17,170 $15,538
Ratio of expenses to
average net assets 0.67%** 0.32% 0.32% 0.32% 0.32% 0.32% 0.47%** 0.60%
Ratio of net investment income to
average net assets+ 4.55%** 6.02% 5.58% 4.57% 3.03% 2.40% 2.11%** 3.07%
- -------------------
* The Fund commenced operations on March 2, 1988. On February 1,
1993, existing shares of the Fund were designated
the Retail Class and the Fund began offering the Institutional Class and
Investment Class of shares. Effective April 4, 1994, the Retail and
Institutional Classes of Shares were reclassified as a single class known
as the Investor shares and the Investment Class shares were reclassified
as the Trust shares. Effective October 17, 1994, the Trust shares were
redesignated Class R shares. Effective November 20, 1995, the Fund's
"Investor" and "Class R" designations were eliminated and the Fund became
a single class fund without a class designation. The Financial Highlights
for the year ended June 30, 1995 are based upon an Investor share
outstanding. The amounts shown for the period ended June 30, 1994 were
calculated using the 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 Retailshare outstanding. The Financial Highlights do not
reflect the effect of the termination of the Fund's Distribution Plan or
the implementation of the new Investment Management Agreement, both
effective November 20, 1995. See "Management of the Fund -- Investment
Manager."
** Annualized.
*** Net investment income per share before waiver of fees and/or
reimbursement of expenses by the investment manager and/or
custodian and/or transfer agent for the period ended June 30, 1994, for
the years ended November 30, 1993, 1992, 1991, 1990, 1989, and for the
period ended November 30, 1988, were $0.010, $0.016, $0.026, $0.041,
$0.050, $0.053, and $0.028, respectively.
# The per share amounts have been calculated using the monthly average
shares method, which more appropriately presents per share data for this
period since use of the undistributed net investment income method did
not accord with results of operations.
## The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30. Prior to April 4, 1994, The Boston
Company Advisors, Inc. served as the Fund's investment manager. From
April 4, 1994 through October 16, 1994, Mellon Bank, N.A., served as the
Fund's investment manager.
### Effective October 17, 1994, The Dreyfus Corporation began serving as the Fund's investment manager.
+ Annualized expense ratios before voluntary waiver of fees and/or
reimbursement of expenses by the investment manager and/or custodian
and/or transfer agent for the period ended June 30, 1994, for the years
ended November 30, 1993, 1992, 1991, 1990, 1989,
and for the period ended November 30, 1988 were 0.85%, 1.08%, 0.83%,
0.78%, 0.93%, 1.01%, and 1.41%, respectively.
++ Total return represents aggregate total return for the periods
indicated.
</TABLE>
Page 5
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to provide a high level of current income exempt from
Federal income taxes and State of California personal income taxes to the
extent consistent with the preservation of capital and the maintenance of
liquidity. The Fund seeks to achieve its objective by investing in debt
obligations issued by the State of California, its political subdivisions,
municipalities and public authorities and in municipal obligations issued by
other governmental entities if, in the opinion of counsel to the respective
issuers, the interest from such obligations is excluded from gross income for
Federal and State of California income tax purposes ("California Municipal
Obligations").
Under normal market conditions, the Fund attempts to invest 100%, and
will invest a minimum of 80%, of its total assets in California Municipal
Obligations. When, in the opinion of Dreyfus, adverse market conditions exist
for California Municipal Obligations, and a "defensive" investment posture is
warranted, the Fund may temporarily invest more than 20% of its total assets
in money market instruments having maturity and quality characteristics
comparable to those (discussed below) for California Municipal Obligations,
but which produce income exempt from Federal but not State of California
personal income taxes for resident shareholders of California, or more than
20% of its total assets in taxable obligations (including obligations the
interest on which is included in the calculation of alternative minimum tax
for individuals). Periods when a defensive posture is warranted include those
periods when the Fund's monies available for investment exceed the California
Municipal Obligations available for purchase to meet the Fund's rating,
maturity and other investment criteria. The Fund does not anticipate that it
will find it necessary to make any investments in securities the interest
from which is not exempt from Federal income and the State of California
personal income taxes. The Fund's policy of investing a minimum of 80% of its
total assets in California Municipal Obligations is a fundamental policy of
the Fund.
The Fund pursues its objective by investing in a varied portfolio of
high quality, short-term California Municipal Obligations.
The California Municipal Obligations purchased by the Fund consist
of: (1) municipal bonds; (2) municipal notes; and (3) municipal commercial
paper. The Fund will limit its portfolio investments to securities that, at
the time of acquisition, (i) are rated in the two highest categories by at
least two nationally recognized statistical rating organizations (or by one
organization if only one organization has rated the security), (ii) if not
rated, are obligations of an issuer whose other outstanding short-term debt
obligations are so rated, or (iii) if not rated, are of comparable quality,
as determined by Dreyfus in accordance with procedures established by the
Board of Trustees. The Fund will limit its investments to securities that
present minimal credit risk, as determined by Dreyfus under procedures
established by the Trust's Board of Trustees.
The Fund invests only in securities that have remaining maturities of
thirteen months or less at the date of purchase. Floating rate or variable
rate obligations (described below) which are payable on demand under
conditions established by the SEC may have a stated maturity in excess of
thirteen months; these securities will be deemed to have remaining maturities
of thirteen months or less. The Fund maintains a dollar-weighted average
portfolio maturity of 90 days or less and seeks to maintain a constant net ass
et value of $1.00 per share, although there is no assurance it can do so on a
continuing basis.
OTHER INVESTMENT POLICIES AND RISK FACTORS.
FLOATING RATE AND VARIABLE RATE OBLIGATIONS. The Fund may purchase
floating rate and variable rate obligations. These obligations bear interest
at rates that are not fixed, but vary with changes in specified market rates
or indices. Some of these obligations may carry a demand feature that permits
the Fund to receive the par value upon demand prior to maturity. The Fund may
invest in floating rate and variable rate obligations carrying stated
maturities in excess of thirteen months at the date of purchase if these
Page 6
obligations carry demand features that comply with conditions established by
the SEC. The Fund will limit its purchases of floating rate and variable rate
California Municipal Obligations to those meeting the quality standards
applicable to the Fund. Frequently, such obligations are secured by letters
of credit or other credit support arrangements provided by banks. The quality
of the underlying creditor or the bank, as determined by Dreyfus under the
supervision of the Trustees, must also be equivalent to the quality standards
applicable to the Fund. In addition, Dreyfus monitors the earning power, cash
flow and other liquidity ratios of the issuers of such obligations, as well
as the creditworthiness of the institution responsible for paying the
principal amount of the obligations under the demand feature.
The Fund may invest in participation interests purchased from banks
in floating or variable rate California Municipal Obligations owned by banks.
Participation interests carry a demand feature permitting the Fund to tender
them back to the bank. Each participation is backed by an irrevocable letter
of credit or guarantee of a bank which Dreyfus under the supervision of the
Trustees has determined meets the prescribed quality standards for the Fund.
Other types of tax-exempt instruments that may become available in
the future may be purchased by the Fund as long as Dreyfus believes the
quality of these instruments meets the Fund's quality standards.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with its investment objective and policies and permissible under
the 1940 Act. As a shareholder of another investment company, the Fund would
bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would
be in addition to the advisory and other expenses that the Fund bears
directly in connection with its own operations.
TENDER OPTION BONDS. The Fund may invest up to 10% of the value of
its assets in tender option bonds. A tender option bond is a municipal
obligation (generally held pursuant to a custodial arrangement) having a
relatively long maturity and bearing interest at a fixed-rate substantially
higher than prevailing short-term tax-exempt rates, that has been coupled
with the agreement of a third party, such as a bank, broker-dealer or other
financial institution, pursuant to which such institution grants the security
holders the option, at periodic intervals, to tender their securities to the
institution and receive the face value thereof. As consideration for
providing the option, the financial institution receives periodic fees equal
to the difference between the municipal obligation's fixed coupon rate and
the rate, as determined by a remarketing or similar agent at or near the
commencement of such period, that would cause the securities, coupled with
the tender option, to trade at par on the date of such determination. Thus,
after payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt rate.
Dreyfus, on behalf of the Fund, will consider on an ongoing basis the
creditworthiness of the issuer of the underlying municipal obligation, of any
custodian and the third-party provider of the tender option. In certain
instances and for certain tender option bonds, the option may be terminable
in the event of a default in payment of principal or interest on the
underlying municipal obligation and for other reasons. The Fund will not
invest more than 10% of the value of the Fund's net assets in illiquid
securities, which would include tender option bonds for which the required
notice to exercise the tender feature is more than seven days if there is no
secondary market available for these obligations.
WHEN-ISSUED SECURITIES. The Fund may purchase California Municipal
Obligations on a "when-issued" basis (i.e., delivery of and payment for the
California Municipal Obligations normally take place within 45 days after the
date of the purchase commitment). The payment obligation and the interest
rate on such securities are fixed at the time of the purchase commitment.
Although the Fund generally will purchase California Municipal Obligations on
a when-issued basis with the intention of acquiring the securities, the Fund
may sell such securities before the settlement date. California Municipal
Obligations purchased on a when-issued basis, like other investments made by
the Fund, may decline or appreciate in value prior to their actual delivery
to the Fund.
Page 7
CERTAIN RISK CONSIDERATIONS REGARDING THE STATE OF CALIFORNIA. You
should consider carefully the special risks inherent in the Fund's investment
in California Municipal Obligations. These risks result from certain
amendments to the California Constitution and other statutes that limit the
taxing and spending authority of California governmental entities, as well as
from the general financial condition of the State of California. From
mid-1990 to late 1993, the State suffered a recession with the worst
economic, fiscal and budget conditions since the 1930s. As a result, the
State experienced recurring budget deficits for four of its five fiscal years
ended June 30, 1992. Although subsequent fiscal years have produced, or are
budgeted to produce, operating surpluses, there can be no assurance that
California will not face substantial deficits in the current or future fiscal
years. The rating on the State's general obligation bonds has been reduced in
the past. These and other factors may have the effect of impairing the
ability of the issuers of California Municipal Obligations to pay interest
on, or repay principal of, such Municipal Obligations. You should obtain and
review a copy of the SAI which more fully sets forth these and other risk
factors. Other considerations relating to the Fund's investments in California
Municipal Obligations are summarized in the SAI.
LIMITING INVESTMENT RISKS AND CERTAIN RISK CONSIDERATIONS. The Fund
is subject to a number of investment limitations. Certain limitations are
matters of fundamental policy and may not be changed without the affirmative
vote of the holders of a majority of the Fund's outstanding shares. As a
fundamental policy, the Fund may not (i) borrow money in an amount exceeding
331/3% of the Fund's total assets at the time of borrowing; (ii) make loans
or lend securities in excess of 331/3% of the Fund's total assets; (iii)
purchase, with respect to 75% of the Fund's total assets, securities of any
one issuer representing more than 5% of the Fund's total assets (other than
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities) or more than 10% of that issuer's outstanding voting
securities; and (iv) invest more than 25% of the value of the Fund's total
assets in the securities of one or more issuers conducting their principal
activities in the same industry; provided that there shall be no such
limitation on investments in obligations of the U.S. Government, state and
municipal governments and their political subdivisions or investments in
domestic banks, including U.S. branches of foreign banks and foreign branches
of U.S. banks. The SAI describes all of the Fund's fundamental and
non-fundamental investment restrictions.
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. If the Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current position and needs.
In order to permit the sale of the Fund's shares in certain states,
the Funds may make commitments more restrictive than the investment policies
and restrictions described in this Prospectus and the SAI. Should the Fund
determine that any such commitment is no longer in the best interests of the
Fund, it may consider terminating sales of its shares in the states involved.
The Fund is classified as a "non-diversified" investment company, as
defined under the 1940 Act, and therefore, the Fund could invest all of its
assets in the obligations of a single issuer or relatively few issuers.
However, the Fund intends to conduct its operations so that it will qualify
under the Internal Revenue Code of 1986 (the "Code") as a "regulated
investment company." To continue to qualify, among other requirements, the
Fund will be required to limit its investments so that, at the close of each
quarter of the taxable year, with respect to at least 50% of its total
assets, not more than 5% of such assets will be invested in the securities of
a single issuer. In addition, not more than 25% of the value of the Fund's
total assets may be invested in the securities of a single issuer at the
close of each quarter of the taxable year. The provisions of the Code place
limits on the extent to which the Fund's portfolio may be non-diversified.
The ability of the Fund to meet its investment objective is subject
to the ability of municipal issuers to meet their payment obligations. In
addition, the Fund's portfolio will be affected by general changes in
interest rates which may result in increases or decreases in the value of
Fund holdings. Investors should rec-
Page 8
ognize that, in periods of declining interest rates, the Fund's yield will
tend to be somewhat higher than prevailing market rates, and in periods of
rising interest rates, the Fund's yield will tend to be somewhat lower. Also,
when interest rates are falling, the influx of new money to the Fund will
likely be invested in portfolio instruments producing lower yields than the
balance of the Fund's portfolio, thereby reducing the Fund's current yield.
In periods of rising interest rates, the opposite can be expected to occur.
The Fund may invest without limit in California Municipal Obligations
which are repayable out of revenue streams generated from economically
related projects or facilities or whose issuers are located in the State of
California. Sizable investments in these obligations could increase risk to
the Fund should any of the related projects or facilities experience
financial difficulties. To the extent the Fund may invest in private activity
bonds, the Fund may invest only up to 5% of its total assets in bonds where
payment of principal and interest are the responsibility of a company with
less than three years operating history.
MASTER/FEEDER OPTION. The Trust may in the future seek to achieve the
Fund's investment objective by investing all of the Fund's assets in another
investment company having the same investment objectives and substantially
the same investment policies and restrictions as those applicable to the
Fund. Shareholders of the Fund will be given at least 30 days' prior notice
of any such investment. Such investment would be made only if the Trustees
determine it to be in the best interest of the Fund and its shareholders. In
making that determination, the Trustees will consider, among other things,
the benefits to shareholders and/or the opportunity to reduce costs and
achieve operational efficiencies. Although the Fund believes that the
Trustees will not approve an arrangement that is likely to result in higher
costs, no assurance is given that costs will be materially reduced if this
option is implemented.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. Dreyfus, located at 200 Park Avenue, New York,
New York 10166, was formed in 1947. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). As of January 31, 1996, Dreyfus managed or administered
approximately $82 billion in assets for more than 1.7 million investor
accounts nationwide.
Dreyfus serves as the Fund's investment manager pursuant to an
Investment Management Agreement with the Fund dated November 20, 1995, (the
"Investment Management Agreement"). Prior thereto, Dreyfus provided
investment advisory services to the Fund pursuant to a prior investment
management agreement (the "Prior Management Agreement"). Under the Investment
Management Agreement, Dreyfus subject to the overall authority of the Board
of Trustees of the Trust in accordance with Massachusetts law, supervises and
assists in the overall management of the Fund's affairs. Pursuant to the
Investment Management Agreement, Dreyfus provides, or arranges for one or
more third parties to provide, investment advisory, administrative, custody,
fund accounting and transfer agency services to the Fund. As the Fund's
investment manager, Dreyfus manages the Fund by making investment decisions
based on the Fund's investment objective, policies and restrictions.
Under the terms of the Prior Management Agreement, which was
terminated on November 20, 1995, the Fund agreed to pay Dreyfus a fee,
computed daily and paid monthly, at the annual rate of .35% of the Fund's
average daily net assets. Under the Investment Management Agreement, the Fund
pays a fee, computed daily and paid monthly, at the annual rate of .45% of
the Fund's average daily net assets less certain expenses described below.
Dreyfus has agreed to limit its management fee, or to reimburse the Fund for
its expenses, in order to ensure that the Fund's total operating expenses do
not exceed .35% of the Fund's average daily net assets for the period from
November 20, 1995 through November 19, 1996. In addition, the Investment
Management Agreement provides that certain redemption, exchange and account
closeout charges are payable directly by the Fund's shareholders to the
Fund's transfer agent and that the fee payable by the Fund to Dreyfus is not
reduced by the amount of these charges payable to the transfer
Page 9
agent. Under the Investment Management Agreement, Dreyfus pays all of the
expenses of the Fund except brokerage fees, taxes, interest, Rule 12b-1 fees
(if applicable) and extraordinary expenses. From time to time, Dreyfus may
waive (either voluntarily or pursuant to applicable state limitations)
additional investment management fees payable by the Fund. From April 4,
1994 to October 17, 1994, the Fund was advised by Mellon Bank under the Prior
Management Agreement.
For the fiscal year ended June 30, 1995, the Fund paid Mellon Bank or
Dreyfus .35% of its average daily net assets in investment management fees,
less fees and expenses of the non-interested Trustees (including counsel
fees) pursuant to the Prior Management Agreement.
For the fiscal year ended June 30, 1995, total operating expenses
(excluding Rule 12b-1 fees) of the Fund were 0.35% of the Fund's average
daily net assets.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon
is among the twenty-five largest bank holding companies in the United States
based on total assets. Mellon's principal wholly-owned subsidiaries are
Mellon Bank, Mellon Bank (DE) National Association, Mellon Bank (MD), The
Boston Company, Inc., AFCO Credit Corporation and a number of companies known
as Mellon Financial Services Corporations. Through its subsidiaries,
including Dreyfus, Mellon managed approximately $233 billion in assets as of
December 31, 1995, including $81 billion in mutual fund assets. As of
December 31, 1995, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
more than $786 billion in assets, including approximately $60 billion in
mutual fund assets.
In allocating brokerage transactions for the Fund, Dreyfus seeks to
obtain the best execution of orders at the most favorable net price. Subject
to this determination, Dreyfus may consider, among other things, the receipt
of research services and/or the sale of shares of the Fund or other funds
managed, advised or administered by Dreyfus as factors in the selection of
broker-dealers to execute portfolio transactions for the Fund. See "Portfolio
Transactions" in the SAI.
Dreyfus may pay the distributor for shareholder services from
Dreyfus' own assets, including past profits but not including the management
fee paid by the Fund. The distributor may use part or all of such payments to
pay securities dealers or others in respect of these services.
Dreyfus is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the
case of agency transactions, financial institutions that are affiliated with
Dreyfus or Mellon Bank or that have sold shares of the Fund, if Dreyfus
believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms. From
time to time, to the extent consistent with its investment objective,
policies and restrictions, the Fund may invest in securities of companies
with which Mellon Bank has a lending relationship.
DISTRIBUTOR. The Fund's distributor is Premier Mutual Fund Services,
Inc. (the "Distributor"). The Distributor is located at One Exchange Place,
Boston, Massachusetts 02109. The Distributor is a wholly-owned subsidiary of
FDI Distribution Services, Inc., a provider of mutual fund administration
services, which in turn is a wholly-owned subsidiary of FDI Holding Inc., the
parent company of which is Boston Institutional Group, Inc.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND
SUB-ADMINISTRATOR. Mellon Bank (One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258) is the Fund's custodian. Dreyfus Transfer, Inc., (One
American Express Plaza, Providence, Rhode Island 02903), a wholly-owned
subsidiary of Dreyfus, serves as the Fund's transfer and dividend disbursing
agent (the "Transfer Agent"). The Transfer Agent will receive the $5.00
exchange fee, the $5.00 account closeout fee, the $5.00 wire redemption and
Dreyfus TeleTransfer fees and the $2.00 checkwriting charge, described below.
A sufficient number of your shares will be redeemed automatically to pay
these amounts. These payments will
Page 10
not reduce the management fee payable by the Fund to Dreyfus. By purchasing
Fund shares, you are deemed to have consented to this procedure. Premier
Mutual Fund Services, Inc. is the Fund's sub-administrator and, pursuant to
a Sub-Administration Agreement with Dreyfus, provides various administrative
and corporate secretarial services to the Fund.
HOW TO BUY FUND SHARES
GENERAL. You can purchase Fund shares without a sales charge if you purchase
them directly from the Distributor; you may be charged a nominal fee if you
effect transactions in Fund shares through a securities dealer or broker,
bank or other financial institution (collectively, "Agents"). Share
certificates are issued only upon your written request. No certificates are
issued for fractional shares. It is not recommended that the Fund be used as
a vehicle for Keogh, IRA or other qualified plans. The Fund reserves the
right to reject any purchase order.
The minimum initial investment is $25,000. The Fund may waive its
minimum initial investment requirement for new Fund accounts opened through
an Agent whenever Dreyfus Institutional Services Division ("DISD") determines
for the initial account opened through such Agent which is below the Fund's
minimum initial investment requirement that the existing accounts in the Fund
opened through that Agent have an average account size, or the Agent has
adequate intent and access to funds to result in maintenance of accounts in
the Fund opened through that Agent with an average account size, in an amount
equal to or in excess of $25,000. DISD will periodically review the average
size of the accounts opened through each Agent and, if necessary, to
reevaluate the Agent's intent and access to funds. DISD will discontinue the
waiver as to new accounts to be opened through an Agent if DISD determines
that the average size of accounts opened through that Agent is less than
$25,000 and the Agent does not have the requisite intent and access to funds.
Subsequent investments must be at least $1,000 (or at least $100 in the case
of persons who have held Fund shares as of November 20, 1995). The initial
investment must be accompanied by the Fund's Account Application.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds." Payments to open new accounts which are mailed
should be sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence,
Rhode Island 02940-9387, together with your Account Application. For
subsequent investments, your Fund account number should appear on the check
and an investment slip should be enclosed and sent to The Dreyfus Family of
Funds, P.O. Box 105, Newark, New Jersey 07101-0105. Neither initial nor subseq
uent investments should be made by third party check. Purchase orders may be
delivered in person only to a Dreyfus Financial Center. THESE ORDERS WILL BE
FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call the
telephone number listed under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to Boston Safe Deposit and Trust Company, DDA# 043818
Dreyfus BASIC California Municipal Money Market Fund, for purchase of Fund
shares in your name. The wire must include your Fund account number (for new
accounts, your Taxpayer Identification Number ("TIN") should be included
instead), account registration and dealer number, if applicable. If your
initial purchase of Fund shares is by wire, you should call 1-800-645-6561
after completing your wire payment in order to obtain your Fund account
number. Please include your Fund account number on the Fund's Account
Application and promptly mail the Account Application to the Fund, as no
redemptions will be permitted until the Account Application is received. You
may obtain further information about remitting funds in this manner from your
bank. All payments should be made in U.S. dollars and, to avoid fees and
delays, should be drawn
Page 11
only on U.S. banks. A charge will be imposed if any check used for investment
in your account does not clear. The Fund makes available to certain large
institutions the ability to issue purchase instructions through compatible
computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House ("ACH") member. You must
direct the institution to transmit immediately available funds through the
ACH System to Boston Safe Deposit and Trust Company with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS "4540."
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Other Distributions and
Taxes" and the Fund's Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to the Fund could
subject you to a $50 penalty imposed by the Internal Revenue Service (the
"IRS").
NET ASSET VALUE PER SHARE ("NAV"). An investment portfolio's NAV
refers to the worth of one share. The NAV for Fund shares, which are offered
on a continuous basis, is calculated on the basis of amortized cost, which
involves initially valuing a portfolio instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. The Fund intends to maintain a constant NAV of $1.00,
although there is no assurance that this can be done on a continuing basis.
The offering price of Fund shares is their NAV. Investments and
requests to exchange or redeem shares received by the Fund before 4 p.m.,
Eastern time, on each day that the New York Stock Exchange is open (a
"business day") are effective on, and will receive the price next determined,
that business day. The NAV of the Fund is calculated two times each business
day, at 12 noon and 4 p.m., Eastern time. Investment, exchange or redemption
requests received after 4 p.m., Eastern time are effective on, and receive
the first share price determined, the next business day.
DREYFUS TELETRANSFER PRIVILEGE. You may purchase Fund shares (minimum
$1,000 and maximum $150,000 per day) without charge by telephone if you have
checked the appropriate box and supplied the necessary information on the
Fund's Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The proceeds will be transferred between the bank account
designated in one of these documents and your Fund account. Only a bank
account maintained in a domestic financial institution which is an ACH member
may be so designated. The Fund may modify or terminate this Privilege at any
time or charge a service fee upon notice to shareholders. No fee is
contemplated for purchases of Fund shares pursuant to this Privilege.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452.
FUND EXCHANGES
You may purchase, in exchange for shares of the Fund, (a) shares
(however the same may be named) of other funds managed or administered by
Dreyfus which you would otherwise be eligible to purchase;
(b) shares of funds managed or administered by Dreyfus which do not have
separate share classes; and (c) shares of other funds specified from time to
time, to the extent such shares are offered for sale in your state of
residence. These funds have different investment objectives which may be of
interest to you. If you desire to use this service, please call
1-800-645-6561 to determine if it is available and whether any conditions are
imposed on its use. YOU WILL BE CHARGED A $5.00 FEE FOR EACH EXCHANGE YOU MAKE
OUT OF THE FUND (UNLESS YOU HAVE HELD FUND SHARES AS OF NOVEMBER 20, 1995).
This fee will be deducted from your account and paid to the Transfer Agent.
Page 12
To request an exchange, you or your Agent acting on your behalf must
give exchange instructions to the Transfer Agent in writing or by telephone.
Before any exchange, you must obtain and should review a copy of the current
prospectus of the fund into which the exchange is being made. Prospectuses
may be obtained by calling 1-800-645-6561. The shares being exchanged must
have a current value of at least $500; furthermore, when establishing a new
account by exchange, the shares being exchanged must have a value of at least
the minimum initial investment required for the fund into which the exchange
is being made. The ability to issue exchange instructions by telephone is
given to all Fund shareholders automatically, unless you check the relevant
"No" box on the Account Application, indicating that you specifically refuse
this Privilege. The Telephone Exchange Privilege may be established for an
existing account by written request, signed by all shareholders on the
account, or by a separate Shareholder Services Form, also available by
calling 1-800-645-6561. If you previously have established the Telephone
Exchange Privilege, you may telephone exchange instructions by calling
1-800-645-6561 or, if calling from overseas, 516-794-5452. See "How to Redeem
Fund Shares_Procedures." Upon an exchange, the following shareholder services
and privileges, as applicable and where available, will be automatically
carried over to the fund into which the exchange is made: Telephone Exchange
Privilege, Check Redemption Privilege, Wire Redemption Privilege, Telephone
Redemption Privilege, Dreyfus TELETRANSFER Privilege and the dividends and
distributions payment option (except for Dividend Sweep) selected by the
investor.
Shares will be exchanged at the next determined NAV; however, a sales
load may be charged with respect to exchanges into funds sold with a sales
load. If you are exchanging into a fund that charges a sales load, you may
qualify for share prices which do not include the sales load or which reflect
a reduced sales load, if the shares of the fund from which you are exchanging
were: (a) purchased with a sales load, (b) acquired by a previous exchange
from shares purchased with a sales load, or (c) acquired through reinvestment
of dividends or other distributions paid with respect to the foregoing
categories of shares. To qualify, at the time of the exchange you must notify
the Transfer Agent or your Agent must notify the Distributor. Any such
qualification is subject to confirmation of your holdings through a check of
appropriate records. See "Fund Exchanges" in the SAI. The Fund reserves the
right to reject any exchange request in whole or in part. The availability of
fund exchanges may be modified or terminated at any time upon notice to
shareholders.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
HOW TO REDEEM FUND SHARES
GENERAL. You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined NAV as described below.
YOU WILL BE CHARGED $5.00 WHEN YOU REDEEM ALL SHARES IN YOUR ACCOUNT
OR YOUR ACCOUNT IS OTHERWISE CLOSED OUT (UNLESS YOU HAVE HELD FUND SHARES AS
OF NOVEMBER 20, 1995). The fee will be deducted from your redemption proceeds
and paid to the Transfer Agent. The account closeout fee does not apply to
exchanges out of the Fund or to wire or Dreyfus TELETRANSFER redemptions, for
each of which a $5.00 fee applies. Agents may charge a nominal fee for
effecting redemptions of Fund shares. Any certificates representing Fund
shares being redeemed must be submitted with the redemption request. The
value of the shares redeemed may be more or less than their original cost,
depending upon the Fund's then current NAV.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the SEC.
Page 13
HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK OR BY THE DREYFUS
TELETRANSFER PRIVILEGE AND SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST
TO THE TRANSFER AGENT, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU
PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE CHECK OR DREYFUS TELETRANSFER
PURCHASE ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION,
THE FUND WILL NOT HONOR REDEMPTION CHECKS UNDER THE CHECK REDEMPTION
PRIVILEGE, AND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR
PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS
DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK OR THE DREYFUS
TELETRANSFER PURCHASE ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED.
THESE PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT,
OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO
COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE,
DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED
TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be
redeemed until the Transfer Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if the net asset value of your account
is $10,000 or less ($500 or less in the case of Fund shareholders as of
November 20, 1995) and remains at or below such amount during the notice
period. The $5.00 account closeout fee would be charged in such case.
PROCEDURES. You may redeem Fund shares by using the regular
redemption procedure through the Transfer Agent, the Check Redemption
Privilege, the Wire Redemption Privilege, the Telephone Redemption Privilege
or through the Dreyfus TELETRANSFER Privilege. Other redemption procedures
may be in effect for clients of certain Agents and institutions. The Fund
makes available to certain large institutions the ability to issue redemption
instructions through compatible computer facilities.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or Telephone Exchange Privilege (which is granted automatically
unless you refuse it), you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you, or a
representative of your Agent, and reasonably believed by the Transfer Agent
to be genuine. The Fund will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm
that instructions are genuine and, if it does not follow such procedures, the
Fund or the Transfer Agent may be liable for any losses due to unauthorized
or fraudulent instructions. Neither the Fund nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be
genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used.
REGULAR REDEMPTION. Under the regular redemption procedure, you may
redeem your shares by written request mailed to The Dreyfus Family of Funds,
P.O. Box 9671, Providence, Rhode Island 02940-9671. Redemption requests may
be delivered in person only to a Dreyfus Financial Center. THESE REQUESTS
WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT
THEREBY. For the location of the nearest financial center, please call the
telephone number listed under "General Information." Redemption requests must
be signed by each shareholder, including each owner of a joint account, and
each signature must be guaranteed. The Transfer Agent has adopted standards
and procedures pursuant to which signature-guarantees in proper form
generally will be accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
Page 14
clearing agencies and savings associations, as well as from participants in
the New York Stock Exchange Medallion Signature Program, the Securities
Transfer Agents Medallion Program ("STAMP"), and the Stock Exchanges
Medallion Program. For more information with respect to signature-guarantees,
please call the telephone number listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE. You may request on the Account
Application, Shareholder Services Form or by later written request that the
Fund provide Redemption Checks drawn on the Fund's account. Redemption Checks
may be made payable to the order of any person in the amount of $500 or more.
Redemption Checks should not be used to close your account. Your account will
be charged $2.00 for each Redemption Check you write (unless you have held
Fund shares as of November 20, 1995). In addition, the Transfer Agent will
impose a fee for stopping payment of a Redemption Check upon your request or
if the Transfer Agent cannot honor the Redemption Check due to insufficient
funds or other valid reason. The Fund may return an unpaid Redemption Check
that would draw your account balance below $5.00 and you may be subject to
extra charges. You should date your Redemption Checks with the current date
when you write them. Please do not postdate your Redemption Checks. If you
do, the Transfer Agent will honor, upon presentment, even if presented before
the date of the check, all postdated Redemption Checks which are dated within
six months of presentment for payment, if they are otherwise in good order.
Shares for which certificates have been issued may not be redeemed by
Redemption Check. This Privilege may be modified or terminated at any time by
the Fund or the Transfer Agent upon notice to shareholders.
WIRE REDEMPTION PRIVILEGE. You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. You will be charged a $5.00 wire redemption fee for
each wire redemption (unless you have held Fund shares as of November 20,
1995), which will be deducted from your account and paid to the Transfer
Agent. To establish the Wire Redemption Privilege, you must check the
appropriate box and supply the necessary information on the Fund's Account
Application or file a Shareholder Services Form with the Transfer Agent. You
may direct that redemption proceeds be paid by check (maximum $150,000 per
day) made out to the owners of record and mailed to your address. Redemption
proceeds of less than $1,000 will be paid automatically by check. Holders of
jointly registered Fund or bank accounts may have redemption proceeds of only
up to $250,000 wired within any 30-day period. You may telephone redemption
requests by calling 1-800-645-6561 or, if calling from overseas,
516-794-5452. The Fund reserves the right to refuse any redemption request,
including requests made shortly after a change of address, and may limit the
amount involved or the number of such requests. This Privilege may be
modified or terminated at any time by the Transfer Agent or the Fund. The
Fund's SAI sets forth instructions for transmitting redemption requests by
wire. Shares for which certificates have been issued are not eligible for
this Privilege.
TELEPHONE REDEMPTION PRIVILEGE. You may redeem Fund shares (maximum
$150,000 per day) by telephone if you checked the appropriate box on the
Fund's Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The redemption proceeds will be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if calling from overseas, 516-794-5452. The Fund reserves
the right to refuse any request made by telephone, including requests made
shortly after a change of address, and may limit the amount involved or the
number of such requests. This Privilege may be modified or terminated at any
time by the Transfer Agent or the Fund. Shares for which certificates have
been issued are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE. You may redeem Fund shares (minimum
$1,000 per day) by telephone if you have checked the appropriate box and
supplied the necessary information on
Page 15
the Fund's Account Application or have filed a Shareholder Services Form with
the Transfer Agent. The proceeds will be transferred between your Fund account
and the bank account designated in one of these documents. Only such an
account maintained in a domestic financial institution which is an ACH member
may be so designated. Redemption proceeds will be on deposit in your account
at an ACH member bank ordinarily two days after receipt of the redemption
request or, at your request, paid by check (maximum $150,000 per day) and
mailed to your address. Holders of jointly registered Fund or bank accounts
may redeem through the Dreyfus TELETRANSFER Privilege for transfer to their
bank account only up to $250,000 within any 30-day period. The Fund reserves
the right to refuse any request made by telephone, including requests made
shortly after a change of address, and may limit the amount involved or the
number of such requests. The Fund may modify or terminate this Privilege at
any time. Your account will be charged $5.00 for each redemption effected
pursuant to this Privilege (unless you have held Fund shares as of
November 20, 1995).
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452. Shares issued in
certificate form are not eligible for this Privilege.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise its yield and
tax-equivalent yield. YIELD AND TAX-EQUIVALENT YIELD FIGURES ARE BASED ON
HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. It
can be expected that these yield figures will fluctuate substantially.
The Fund's "yield" refers to the income generated by an investment in
the Fund over a seven-day period identified in the advertisement. This income
is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a
52-week period and is shown as a percentage of the investment. The "effective
yield" is calculated similarly, but, when annualized, the income earned by an
investment in the Fund is assumed to be reinvested. The "effective yield"
will be slightly higher than the "yield" because of the compounding effect of
this assumed reinvestment. The Fund's "yield" and "effective yield" may
reflect absorbed expenses pursuant to any undertaking that may be in effect.
See "Management of the Fund." Since yields fluctuate, yield data cannot
necessarily be used to compare an investment in the Fund with bank deposits,
savings accounts, and similar investment alternatives which often provide an
agreed-upon or guaranteed fixed yield for a stated period of time, or other
investment companies which may use a different method of computing yield. The
Fund's tax-equivalent yield shows the level of taxable yield needed to
produce an after-tax equivalent to the Fund's tax-free yield. This is done by
increasing the Fund's yield by the amount necessary to reflect the payment of
federal income tax (and state income tax, if applicable) at a stated tax
rate.
Any fees charged by an Agent directly to its customers' account in
connection with investments in the Fund will not be included in calculations
of yield.
The Fund may compare its performance with various industry standards
of performance including Lipper Analytical Services, Inc. ratings.
Performance rankings as reported in CHANGING TIMES, BUSINESS WEEK,
INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL, IBC/DONOGHUE'S MONEY FUND
REPORT, MUTUAL FUND FORECASTER, NO LOAD INVESTOR, MONEY MAGAZINE, MORNINGSTAR
MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT, FORBES, FORTUNE, BARRON'S and
similar publications may also be used in comparing the Fund's performance.
Furthermore, the Fund may quote its yields in advertisements or in
shareholder reports.
Page 16
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund declares daily and pays monthly (on the first business day
of the following month) dividends from its net investment income, if any, and
distributes any net long-term capital gains on an annual basis. The Board of
Trustees may elect not to distribute capital gains in whole or in part to
take advantage of capital loss carryovers.
Unless you choose to receive dividend and/or capital gains
distributions in cash, your distributions will be automatically reinvested in
additional shares at NAV. You may change the method of receiving
distributions at any time by writing to the Fund. Checks which are sent to
shareholders who have requested distributions to be paid in cash and which
are subsequently returned by the United States Postal Service as not
deliverable or which remain uncashed for six months or more will be
reinvested in additional Fund shares in the shareholder's account at the then
current NAV. Subsequent Fund distributions will be automatically reinvested
in additional Fund shares in the shareholder's account.
Shares purchased on a day on which the Fund calculates its NAV will
not begin to accrue dividends until the following business day. Except as
provided below, redemption orders effected on any particular day will receive
all dividends declared through the day of redemption. However, if immediately
available funds are received by the Transfer Agent prior to 12:00 noon,
Eastern time, you may receive the dividend declared on the day of purchase.
You will not receive the dividends declared on the day of redemption if the
redemption order is placed prior to 12:00 noon, Eastern time.
It is expected that the Fund will qualify for treatment as a
regulated investment company under the Code so that it will be relieved of
Federal income tax on that part of its investment company taxable income
(consisting generally of taxable net investment income and net short-term
capital gain) and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) that is distributed to its shareholders. In
addition, the Fund intends to continue to qualify to pay "exempt-interest"
dividends, which requires, among other things, that at the close of each
quarter of its taxable year at least 50% of the value of its total assets
must consist of municipal securities.
Dividends from the Fund's investment company taxable income are
taxable to you as ordinary income, to the extent of the Fund's earnings and
profits. Distributions by the Fund that are designated by it as
"exempt-interest dividends" generally may be excluded by you from your gross
income. Distributions by the Fund of net capital gain, when designated as
such, are taxable to you as long-term capital gains, regardless of the length
of time you have owned your shares.
Interest on indebtedness incurred or continued to purchase or carry
shares of the Fund will not be deductible for Federal income tax purposes to
the extent that the Fund's distributions (other than capital gains
distributions) consist of exempt-interest dividends. The Fund may invest in
"private activity bonds," the interest on which is treated as a tax
preference item for shareholders in determining their liability for the
alternative minimum tax. Proposals may be introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal securities. If such a proposal were enacted, the
availability of such securities for investment by the Fund and the value of
its portfolio would be affected. In such event, the Fund would reevaluate its
investment objective and policies.
Dividends and other distributions, to the extent taxable, are taxable
to you regardless of whether they are received in cash or reinvested in
additional Fund shares, even if the value of your shares is below your cost.
If you purchase shares shortly before a taxable distribution (i.e., any
distribution other than an exempt-interest dividend paid by the Fund), you
must pay income taxes on the distribution, even though the value of your
investment (plus cash received, if any) remains the same. In addition, the
share price at the time you purchase shares may include unrealized gains in
the securities held in the Fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the
Page 17
extent not offset by capital losses, be paid to you as a capital gain
distribution and will be taxable to you.
In January of each year, the Fund will send you a Form 1099-DIV
notifying you of the status for Federal income tax purposes of your
distributions for the preceding year. The Fund also will advise shareholders
of the percentage, if any, of the dividends paid by the Fund that are exempt
from Federal income tax and the portion, if any, of those dividends that is a
tax preference item for purposes of the alternative minimum tax.
You must furnish the Fund with your taxpayer identification number
("TIN") and state whether you are subject to withholding for prior
under-reporting, certified under penalties of perjury as prescribed by the
Code and the regulations thereunder. Unless previously furnished, investments
received without such a certification will be returned. The Fund is required
to withhold a portion of all dividends, capital gains distributions and
redemption proceeds payable to any individuals and certain other non-corporate
shareholders who do not provide the Fund with a correct TIN; withholding
from dividends and capital gains distributions also is required for such
shareholders who otherwise are subject to backup withholding.
In addition, in order to avoid the application of a 4% nondeductible
excise tax on certain undistributed amounts of ordinary income and capital
gains, the Fund may make an additional distribution shortly before December
31 in each year of any undistributed ordinary (taxable) income or capital
gains and expects to pay any other dividends and distributions necessary to
avoid the application of this tax.
The foregoing is only a summary of some of the important tax
considerations generally affecting the Fund and its shareholders; see the SAI
for a further discussion. There may be other federal, state or local tax
considerations applicable to a particular investor; for example, the Fund's
dividends may be wholly or partly taxable under state and/or local laws. You
therefore are urged to consult your own tax adviser.
GENERAL INFORMATION
The Trust offers shares of beneficial interest of separate investment
portfolios without par value (each a "fund"). The Trust was organized as a
Massachusetts business trust under the laws of The Commonwealth of
Massachusetts on March 28, 1983 under the name The Boston Company Tax-Free
Municipal Funds, changed its name to The Laurel Tax-Free Municipal Funds on
March 31, 1994, and changed its name again to The Dreyfus/Laurel Tax-Free
Municipal Funds on October 17, 1994. The Trust is registered with the SEC as
an open-end management investment company, commonly known as a mutual fund.
On November 15, 1995, Fund shareholders approved the Investment
Management Agreement which replaced the Prior Management Agreement, effective
November 20, 1995. The Investment Management Agreement provides that certain
transaction charges be imposed directly on Fund shareholders. See "How to Buy
Fund Shares," "Fund Exchanges" and "How to Redeem Fund Shares." Also
effective November 20, 1995, the Fund's "Investor" and "Class R" designations
were eliminated and the Fund became a single class fund and the Fund's name
changed from Dreyfus/Laurel California Tax-Free Money Fund to Dreyfus BASIC
California Municipal Money Market Fund.
Each share (regardless of class) has one vote. All shares of all
funds (and classes thereof) vote together as a single class, except as to any
matter for which a separate vote of any fund or class is required by the 1940
Act, and except as to any matter which affects the interests of one or more
particular funds or classes, in which case only the shareholders of the
affected funds or classes are entitled to vote, each as a separate class.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Trustees or the
appointment of auditors. However, pursuant to the Trust's By-Laws, the
holders of at least 10% of the shares outstanding and entitled to vote may
require the Trust to hold a special meeting
Page 18
of shareholders for purposes of removing a Trustee from office and for any
other purpose. Trust shareholders may remove a Trustee by the affirmative
vote of two-thirds of the Trust's outstanding voting shares. In addition,
the Board of Trustees will call a meeting of shareholders for the purpose of
electing Trustees if, at any time, less than a majority of the Trustees then
holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and will send
you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 19
DREYFUS
BASIC California Municipal Money Market Fund
Prospectus
(LION LOGO)
Copy Rights 1996 Dreyfus Service Corporation
307/707p022996
Registration Mark
______________________________________________________________________________
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
FEBRUARY 29, 1996
______________________________________________________________________________
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the Prospectus of The
Dreyfus/Laurel Tax-Free Municipal Funds (the "Trust") dated February 29,
1996 (referred to herein as the "Prospectus") describing the Dreyfus BASIC
California Municipal Money Market Fund (formerly, the Dreyfus/Laurel
California Tax-Free Money Fund) (the "Fund"). To obtain a copy of the
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call one of the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. and Canada -- Call 516-794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Premier Mutual Fund Services, Inc. ("Premier") is the distributor of
the Fund's shares.
TABLE OF CONTENTS
Page
Management of the Trust . . . . . . . . . . . . . . . . . . . . . . . . .B-2
Purchase of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . . .B-10
(see also in the Prospectus "How to Buy Fund Shares")
Investment Policies . . . . . . . . . . . . . . . . . . . . . . . . . . .B-11
(see also in the Prospectus "Investment Objective and Policies")
Redemption of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . .B-24
(see also in the Prospectus "How to Redeem Fund Shares")
Fund Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-26
Valuation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . .B-27
Performance Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-28
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .B-29
(see also in the Prospectus "Dividends, Other
Distributions and Taxes")
Description of the Trust. . . . . . . . . . . . . . . . . . . . . . . . .B-30
(see also in the Prospectus "Investment Objective and Policies")
Principal Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . .B-31
Custodian and Transfer Agent. . . . . . . . . . . . . . . . . . . . . . .B-32
Counsel and Independent Auditors. . . . . . . . . . . . . . . . . . . . .B-32
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . .B-32
Appendix A Risk Factors - Investing in
California Municipal Obligations. . . . . . . . . . . . . . . . . . . .B-33
Appendix B - Information about Securities Ratings . . . . . . . . . . . .B-45
MANAGEMENT OF THE TRUST
The organizations that provide services to the Trust are as follows:
Dreyfus as investment manager ("Investment Manager"), Mellon Bank, N.A.
("Mellon Bank") as custodian, Premier as the distributor ("Distributor")
and sub-administrator ("Sub-Administrator"), and Dreyfus Transfer, Inc.
("Dreyfus Transfer"), a wholly-owned subsidiary of Dreyfus, as transfer
agent ("Transfer Agent"). The functions they perform for the Trust are
discussed in the Prospectus and in this Statement of Additional
Information.
On October 17, 1994, the name of the Trust was changed from "The
Laurel Tax-Free Municipal Funds" to "The Dreyfus/Laurel Tax-Free Municipal
Funds" and the name of the Fund was changed from Laurel California Tax-
Free Money Fund to Dreyfus/Laurel California Tax-Free Money Fund. On
November 20, 1995, the Fund's name changed from Dreyfus/Laurel California
Tax-Free Money Fund to Dreyfus BASIC California Municipal Money Market
Fund.
Trustees and Officers
The Trust has a Board composed of twelve Trustees which supervises
the Trust's investment activities and reviews contractual arrangements
with companies that provide the Fund with services. The following lists
the Trustees and officers and their positions with the Trust and their
present and principal occupations during the past five years. Each
Trustee who is an "interested person" of the Trust (as defined in the
Investment Company Act of 1940, as amended (the "Act")) is indicated by an
asterisk. Each of the Trustees also serves as a Director of The
Dreyfus/Laurel Funds, Inc. and as a Trustee of The Dreyfus/Laurel Funds
Trust (collectively, with the Trust, the "Dreyfus/Laurel Funds").
o+RUTH MARIE ADAMS. Trustee of the Trust; Professor of English and Vice
President Emeritus, Dartmouth College; Senator, United Chapters of
Phi Beta Kappa; Trustee, Woods Hole Oceanographic Institution. Age:
80 years old. Address: 1026 Kendal Lyme Road, Hanover, New Hampshire
03755.
o+FRANCIS P. BRENNAN. Chairman of the Board of Trustees and Assistant
Treasurer of the Trust; Director and Chairman, Massachusetts Business
Development Corp.; Director, Boston Mutual Insurance Company;
Director and Vice Chairman of the Board, Home Owners Federal Savings
and Loan (prior to May 1990). Age: 78 years old. Address:
Massachusetts Business Development Corp., One Liberty Square, Boston,
Massachusetts 02109.
o*JOSEPH S. DiMARTINO. Trustee of the Trust since February 1995. Since
January 1995, Mr. DiMartino has served as Chairman of the Board for
various funds in the Dreyfus Family of Funds. For more than five
years prior thereto, he was President and a director of Dreyfus and
Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus. From August 1994
to December 31, 1994, he was a director of Mellon Bank Corporation.
He is Chairman of the Board of Noel Group, Inc., a trustee of
Bucknell University; and a director of the Muscular Dystrophy
Association, HealthPlan Services Corporation, Belding Heminway, Inc.,
Custis Industries, Inc., Simmons Outdoor Corporation and Staffing
Resources, Inc. Mr. DiMartino is also a Board member of 93 other
funds in the Dreyfus Family of Funds. Age: 52 years old. Address:
200 Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Trustee of the Trust; Chairman, Howes Leather
Company, Inc.; Director, Fiduciary Trust Company; Chairman, CEO and
Director, Fieldcrest-Cannon Inc.; Director, Lumber Mutual Insurance
Company; Director, Barrett Resources, Inc. Age: 60 years old.
Address: 40 Norfolk Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Trustee of the Trust; Since 1990, Partner, Reed,
Smith, Shaw & McClay (law firm). Age: 65 years old. Address: 204
Woodcock Drive, Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Trustee of the Trust; Director, Chairman of the
Board and Director, Rexene Corporation; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; Director, National Picture
Frame Corporation; Chairman of the Board and Director, Tetra
Corporation 1991-1993; Director, Medalist Corporation 1992-1993; From
1988-1989 Director, Rexene Corporation. Since May 1991, Mr. Goeschel
has served as a Trustee of Sewickley Valley Hospital. Age: 73 years
old. Address: Way Hollow Road and Woodland Road, Sewickley,
Pennsylvania 15143.
o+KENNETH A. HIMMEL. Trustee of the Trust; Director, The Boston Company,
Inc. ("TBC") and Boston Safe Deposit and Trust Company; President and
Chief Executive Officer, Himmel & Co., Inc.; Vice Chairman, Sutton
Place Gourmet, Inc. Managing Partner, Franklin Federal Partners.
Age: 49 years old. Address: Himmel and Company, Inc., 101 Federal
Street, 22nd Floor, Boston, Massachusetts 02110.
o*ARCH S. JEFFERY. Trustee of the Trust; Financial Consultant. Age: 76
years old. Address: 1817 Foxcroft Lane, Unit 306, Allison Park,
Pennsylvania 15101.
o+STEPHEN J. LOCKWOOD. Trustee of the Trust; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc. Age: 48
years old. Address: 401 Edgewater Place, Wakefield, Massachusetts
01880.
o+ROBERT D. MCBRIDE. Trustee of the Trust; Director, Chairman, McLouth
Steel; Director, Salem Corporation. Director, SMS/Concast, Inc.
(1983-1991). Age: 67 years old. Address: 15 Waverly Lane, Grosse
Pointe Farms, Michigan 48236.
o+JOHN J. SCIULLO. Trustee of the Trust; Dean Emeritus and Professor of
Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh. Age: 63 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224.
o+ROSLYN M. WATSON. Trustee of the Trust; Principal, Watson Ventures,
nc.; Director, American Express Centurion Bank; Director, Harvard
Community Health Plan, Inc.; Director, Massachusetts Electric
Company; Director, The Hymans Foundations, Inc., prior to February,
1993; Real Estate Development Project Manager and Vice President, The
Gunwyn Company. Age: 45 years old. Address: 25 Braddock Park,
Boston, Massachusetts 02116-5816.
# ELIZABETH BACHMAN. Vice President and Assistant Secretary of the
Company, The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds,
Inc. (since January 1996); Counsel, Premier Mutual Fund Services,
Inc. Prior to September 1995, she was enrolled at the Fordham
University School of Law and received her J.D. in May 1995. Prior to
September 1992, she was an Assistant at the National Association for
Public Interest Law. Age: 26 years old. Address: 200 Park Avenue,
New York, New York 10166.
#MARIE E. CONNOLLY. President and Treasurer of the Trust, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc. (since
September 1994); Vice President of the Trust, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Funds, Inc. (March 1994 to
September 1994); President, Funds Distributor, Inc. (since 1992);
Treasurer, Funds Distributor, Inc. (July 1993 to April 1994); COO,
Funds Distributor, Inc. (since April 1994); Director, Funds
Distributor, Inc. (since July 1992); President, COO and Director,
Premier Mutual Fund Services, Inc. (since April 1994); Senior Vice
President and Director of Financial Administration, The Boston
Company Advisors, Inc. (December 1988 to May 1993). Age: 37 years
old. Address: One Exchange Place, Boston, Massachusetts 02109.
#FREDERICK C. DEY. Vice President of the Trust, The Dreyfus/Laurel Funds
Trust and The Dreyfus/Laurel Funds, Inc. (since September 1994);
Senior Vice President, Premier Mutual Fund Services, Inc. (since
August 1994); Vice President, Funds Distributor, Inc. (since August
1994); Fundraising Manager, Swim Across America (October 1993 to
August 1994); General Manager, Spring Industries (August 1988 to
October 1993). Age: 33 years old. Address: One Exchange Place,
Boston, Massachusetts 02109.
#ERIC B. FISCHMAN. Vice President and Assistant Secretary (since January
1996) of the Trust, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Funds, Inc.; Vice President and Associate General
Counsel, Premier Mutual Fund Services, Inc. (since August 1994); Vice
President and Associate General Counsel, Funds Distributor, Inc.
(since August 1994); Staff Attorney, Federal Reserve Board (September
1992 to June 1994); Summer Associate, Venture Economics (May 1991 to
September 1991); Summer Associate, Suffolk County District Attorney
(June 1990 to August 1990). Age: 31 years old. Address: 200 Park
Avenue, New York, New York 10166.
RICHARD W. HEALEY. Vice President of the Trust, The Dreyfus/Laurel Funds
Trust and The Dreyfus/Laurel Funds, Inc. (since March 1994); Senior
Vice President, Funds Distributor, Inc. (since March 1993); Vice
President, The Boston Company, Inc., (March 1993 to May 1993); Vice
President of Marketing, Calvert Group (1989 to March 1993). Age: 41
years old. Address: One Exchange Place, Boston, Massachusetts 02109.
# MARGARET PARDO. Assistant Secretary of the Company, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Funds, Inc. (since January 1996);
Paralegal, Premier Mutual Fund Services, Inc. Prior to April 1995,
she was a Medical Coordination Officer at ORBIS International. Prior
to June 1992, she worked as a Program Coordinator at Physicians World
Communications Group. Age: 27 years old. Address: 200 Park Avenue,
New York, New York 10166.
#JOHN E. PELLETIER. Vice President and Secretary of the Trust, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc. (since
September 1994); Senior Vice President, General Counsel and
Secretary, Funds Distributor, Inc. (since April 1994); Senior Vice
President, General Counsel and Secretary, Premier Mutual Fund
Services, Inc. (since August 1994); Counsel, The Boston Company
Advisors, Inc. (February 1992 to March 1994); Associate, Ropes & Gray
(August 1990 to February 1992). Age: 31 years old. Address: One
Exchange Place, Boston, Massachusetts 02109.
# JOHN J. PYBURN. Assistant Treasurer of the Trust, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Funds, Inc. (since January 1996);
Vice President of Premier Mutual Fund Services, Inc. and an officer
of other investment companies advised or administered by Dreyfus.
From 1984 to July 1994, he was Assistant Vice President in the Mutual
Fund Accounting Department of Dreyfus. Age: 61 years old. Address:
200 Park Avenue, New York, New York 10166.
JOSEPH F. TOWER, III. Assistant Treasurer of the Trust, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc. (since
January 1996); Senior Vice President, Treasurer and Chief Financial
Officer of Premier Mutual Fund Services, Inc. and an officer of other
investment companies advised or administered by Dreyfus. From July
1988 to August 1994, he was employed by The Boston Company, Inc.
where he held various management positions in the Corporate Finance
and Treasury areas. Age: 33 years old. Address: 200 Park Avenue,
New York, New York 10166.
_____________________________________
* "Interested person" of the Trust, as defined in the Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies advised
by The Dreyfus Corporation.
No officer or employee of Premier (or of any parent, subsidiary or
affiliate thereof ) receives any compensation from the Trust for serving
as an officer or Trustee of the Trust. No officer or employee of Dreyfus
(or of any parent, subsidiary or affiliate thereof) serves as an officer
or Trustee of the Trust. The Dreyfus/Laurel Funds pay each
Director/Trustee who is not an "interested person" as defined in the Act,
$27,000 per annum (and an additional $75,000 for the Chairman of the Board
of Directors/Trustees of the Dreyfus/Laurel Funds), $1,000 per joint
Dreyfus/Laurel Funds Board meeting attended, and $750 per joint
Dreyfus/Laurel Funds Audit Committee meeting attended, and reimburse each
Director/Trustee for travel and out-of-pocket expenses.
The officers and Trustees of the Trust as a group owned beneficially
less than 1% of the total shares of the Fund outstanding as of January 31,
1996.
For the fiscal year ended June 30, 1995, the aggregate amount of fees
and expenses received by each current Trustee from the Trust and all other
funds in the Dreyfus Family of Funds for which such person is a Board
member were as follows:
<TABLE>
<CAPTION>
Total
Pension or Compensation from
Aggregate Retirement Benefits Estimated Annual the Trust and Fund
Name of Board Compensation from Accrued as Part of Benefits Upon Complex Paid to
Member the Trust# Fund's Expenses Retirement Board Member
------------- ----------------- -------------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Ruth Marie Adams $ 2,093 none none $ 34,750
Francis P. Brennan@ 6,642 none none 110,750
Joseph S. DiMartino** none none none 448,618*
James M. Fitzgibbons 2,031 none none 33,750
J. Tomlinson Fort** none none none none
Arthur L. Goeschel 2,093 none none 34,750
Kenneth A. Himmel 1,996 none none 33,000
Arch S. Jeffery** none none none none
Stephen J. Lockwood 1,934 none none 32,000
Robert D. McBride 2,156 none none 35,750
John J. Sciullo 2,093 none none 34,750
Roslyn M. Watson 2,156 none none 35,750
_____________________________
# Amounts required to be paid by the Trust directly to the non-interested Trustees
that would be applied to offset a portion of the management fee payable to Dreyfus,
are in part paid directly by Dreyfus to the non-interested Trustees. Amount does
not include reimbursed expenses for attending Board meetings, which amounted to
$1,192 for the Dreyfus/Laurel Funds.
* Estimated amount for fiscal year ended June 30, 1995.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch Jeffery are paid directly by
Dreyfus for serving as Board members of the Trust and the funds in the
Dreyfus/Laurel Funds. For the fiscal year ended June 30, 1995, the aggregate
amount of fees and expenses received by Joseph S. DiMartino, J. Tomlinson Fort and
Arch Jeffery from Dreyfus for serving as a Board member of the Trust were $1,792,
$2,156 and $2,156, respectively and for serving as a Board member of all funds in
the Dreyfus/Laurel Funds (including the Trust) were $14,000, $35,750 and $35,750,
respectively. In addition, Dreyfus reimbursed Messrs. DiMartino, Fort and Jeffery
a total of $136 for expenses attributable to the Trust's Board meetings ($136 is
not included in $1,192 above).
@ The compensation of Francis P. Brennan includes $75,000 by Dreyfus to be the
Chairman of the Board.
</TABLE>
Management Arrangements
Dreyfus serves as the investment manager for the Fund pursuant to an
Investment Management Agreement (the "Management Agreement") with the
Trust dated November 20, 1995. Dreyfus is a wholly-owned subsidiary of
Mellon Bank. Pursuant to the Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to
the Fund. As investment manager, Dreyfus manages the Fund by making
investment decisions based on the Fund's investment objective, policies
and restrictions.
Prior to November 20, 1995, Dreyfus served as investment manager to
the Fund pursuant to the prior investment management agreement (the "Prior
Management Agreement") with the Trust dated April 4, 1994 and transferred
from Mellon Bank to Dreyfus on October 17, 1994.
Prior to May 21, 1993, The Boston Company Advisors, Inc. ("TBC
Advisors") served as investment adviser to the Fund pursuant to a written
agreement, which was last approved by the Trustees, including a majority
of the Trustees who are not "interested persons" of the Trust, on July 22,
1992. From May 21, 1993 through April 3, 1994, TBC Advisors served as
investment adviser to the Fund pursuant to a written agreement ("TBC
Advisors Agreement"), which was last approved by the Trustees, including a
majority of the Trustees who are not "interested persons" of the Trust, on
July 21, 1993 and approved by the shareholders of the Fund on December 31,
1992. The TBC Advisors Agreement became effective on May 21, 1993, upon
the consummation of the sale of Boston Group Holdings, Inc., the parent
company of The Boston Company, Inc. ("TBC"), to Mellon Bank Corporation.
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. Mellon Bank later served as investment manager to the Fund
pursuant to the Prior Management Agreement, which was last approved by the
Trustees, including a majority of the Trustees who are not "interested
persons" of the Trust or Mellon Bank, on November 22, 1993 (subject to
shareholder approval) and approved by the shareholders of the Fund on
March 29, 1994. The Prior Management Agreement became effective on April
4, 1994. As stated above, Dreyfus, a wholly-owned subsidiary of Mellon
Bank, is the current investment manager pursuant to the Management
Agreement, which was last approved by the Trustees on July 26, 1995.
The current Management Agreement with Dreyfus provides for a "unitary
fee." Under the unitary fee structure, Dreyfus pays all expenses of the
Fund except: (i) brokerage commissions, (ii) taxes, interest and
extraordinary expenses (which are expected to be minimal), and (iii) Rule
12b-1 fees, as applicable. Under the unitary fee, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to
the Fund. For the provision of such services directly, or through one or
more third parties, Dreyfus receives as full compensation for all services
and facilities provided by it, a fee computed daily and paid monthly at
the annual rate of .45 of 1% of the Fund's average daily net assets, less
the accrued fees and expenses (including counsel fees) of the non-
interested Trustees of the Trust. The Management Agreement provides that
certain redemption, exchange and account closeout charges are payable
directly by the Fund's shareholders to the Fund's Transfer Agent and the
fee payable by the Fund to Dreyfus is not reduced by the amount of charges
payable to the Transfer Agent. Under the prior agreement with TBC
Advisors, the payments to the investment manager covered merely the
provision of investment advisory services (and payment for sub-advisory
services) and certain specified administrative services. Under this
previous arrangement, the Fund also paid for additional non-investment
advisory expenses, such as custody and transfer agency services, that were
not paid by the investment adviser.
The Management Agreement will remain in effect through November 19,
1997 and will continue thereafter from year to year provided that a
majority of the Trustees who are not interested persons of the Fund and
either a majority of all Trustees or a majority of the shareholders of the
Fund approve its continuance. The Fund may terminate the Management
Agreement, without prior notice to Dreyfus, upon the vote of a majority of
the Board of Trustees or upon the vote of a majority of the outstanding
voting securities of the Fund on 60 days written notice to Dreyfus.
Dreyfus may terminate the Management Agreement upon 60 days' written
notice to the Fund. The Management Agreement will terminate immediately
and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board; Christopher M. Condron, President,
Chief Operating Officer and a director, Stephen E. Canter, Vice Chairman,
Chief Investment Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration and a director; Barbara E. Casey, Vice President-Dreyfus
President-Dreyfus Retirement Services; Diane M. Coffey, Vice President-
Corporate Communications; Elie M. Genadry, Vice President-Institutional
Sales; William T. Sandalls, Jr., Senior Vice President, Chief Financial
Officer and a director; William F. Glavin, Jr., Vice President-Corporate
Development; Andrew S. Wasser, Vice President-Information Services; Mark
N. Jacobs, Vice President-Fund Legal and Compliance and Secretary; Jeffrey
N. Nachman, Vice President-Mutual Fund Accounting; Maurice Bendrihem,
Controller; Elvira Oslapas; Assistant Secretary; Mandell L. Berman, Frank
V. Cahouet, Alvin E. Friedman, Lawrence M. Greene and Julian M. Smerling
directors.
As compensation for Dreyfus' services, the Fund pays a fee, based on
its total average daily net assets, that is computed daily and paid
monthly at the annual rate of .45 of 1%. Dreyfus has agreed to limit its
fee, or to reimburse the Fund for expenses, to ensure that the Fund's
total operating expenses do not exceed .35 of 1% for the period from
November 20, 1995 through November 19, 1996. In addition, Dreyfus may
waive all or a portion of its fees payable by the Fund from time to time.
The following table shows the fees paid by the Fund to TBC Advisors
or Mellon (as the prior investment advisors) and to Dreyfus (the current
investment manager), including any fee waivers or expense reimbursements
by TBC Advisors, Mellon Bank or Dreyfus, pursuant to the Fund's prior
investment advisory agreements, during the Fund's 1993, 1994 and 1995
fiscal years:
<TABLE>
<CAPTION>
1995 * 1994 * (1) 1993 **
------ ---------- --------
<S> <C> <C> <C> <C> <C>
Fees Fees Fees Fees Fees Fees
Paid (2) Waived (3) Paid (4) Waived (5) Paid Waived (5)
-------- ---------- -------- ---------- ---- ----------
$90,816 $22,135 $45,706 $56,403 (6) $103,006 $165,734 (7)
_______________________________
* For the fiscal year ended June 30. The Fund changed its fiscal year end from
November 30 to June 30.
** For the fiscal years ended November 30.
(1) Effective April 4, 1994, Mellon Bank served as the Fund's investment manager.
(2) For the fiscal year ended June 30, 1995, there were no fee waivers or expense
reimbursements.
(3) Fees paid to Mellon Bank for investment management services for the period from
April 4, 1994 to the fiscal year ended June 30, 1994.
(4) Fees paid to TBC Advisors for investment advisory services for the period from
December 1, 1993 to April 3, 1993.
(5) TBC Advisors waived all or a portion of its fees and/or reimbursed expenses of the
Fund from time to time in order to increase the Fund's net income available for
distribution to shareholders.
(6) Includes $10,697 reimbursement by TBC Advisors.
(7) Includes $35,728 reimbursement by TBC Advisors.
</TABLE>
Dreyfus has agreed that if in any fiscal year the aggregate expenses
of the Fund (including fees pursuant to the Management Agreement, but
excluding interest, brokerage expenses, taxes and extraordinary items)
exceed the expense limitation of any state, it will reduce its management
fees by the amount of such excess expense. Such a fee reduction, if any,
will be reconciled on a monthly basis. The most restrictive state expense
limitation applicable to the Fund requires a reduction of fees in any year
that such expenses exceed 2.5% of the first $30 million of average net
assets, 2.0% of the next $70 million of average net assets and 1.5% of the
remaining average net assets. A number of factors, including the size of
the Fund, will determine which of these restrictions will be applicable to
the Fund at any given time. No reimbursement pursuant to state expense
limitations was required for the Fund for the fiscal year ended June 30,
1995.
In addition, under a distribution plan adopted by the Fund pursuant
to Rule 12b-1 under the Act, which was terminated effective November 20,
1995, the Fund paid Dreyfus Service Corporation, a subsidiary of Dreyfus,
for shareholder servicing, and the Distributor for shareholder servicing
and expenses permanently intended to result in the sale of Investor
shares, at the annual rate of .25% attributable to its Investor shares.
For the year ended June 30, 1995, the Fund paid $38,346 in distribution
fees attributable to its Investor shares.
PURCHASE OF FUND SHARES
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor
also acts as distributor for the other funds in the Dreyfus Family of
Funds and for certain other investment companies.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 P.M., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York
Stock Exchange ("NYSE") are open for business will be credited to the
shareholder's Fund account on the next bank business day following such
purchase order. Purchase orders made after 4:00 P.M., New York time, on
any business day the Transfer Agent and the NYSE are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g. when the NYSE is
not open for business), will be credited to the shareholders's Fund
account on the second bank business day following such purchase order.
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year the account is closed or during the following calendar
year, provided the information on the old Account Application is still
applicable.
In-Kind Purchases. If the following conditions are satisfied, the
Fund may at its discretion, permit the purchase of shares through an "in-
kind" exchange of securities. Any securities exchanged must meet the
investment objective, policies and limitations of the Fund, must have a
readily ascertainable market value, must be liquid and must not be subject
to restrictions on resale. The market value of any securities exchanged,
plus any cash, must be at least equal to $25,000. Shares purchased in
exchange for securities generally cannot be redeemed for fifteen days
following the exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAV of the
Shares purchased and securities exchanged. Securities accepted by the
Fund will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to the Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the
securities become the property of the Fund, along with the securities.
For further information about "in-kind" purchases, call 1-800-645-6561.
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with the Fund, and in
providing services to the Fund as custodian, as well as investment
advisory activities of Dreyfus, may raise issues under these provisions.
Mellon Bank has been advised by counsel that its activities contemplated
under this arrangement are consistent with its statutory and regulatory
obligations.
Changes in either federal or state statutes and regulations relating
to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of such future statutes and regulations could prevent
Mellon Bank or Dreyfus from continuing to perform all or a part of the
above services for its customers and/or the Fund. If Mellon Bank or
Dreyfus were prohibited from serving the Fund in any of its present
capacities the Trustees would seek an alternative provider(s) of such
services.
INVESTMENT POLICIES
The Prospectus discusses the Fund's investment objective and the
policies it employs to achieve that objective. The following discussion
supplements the description of the Fund's investment policies in the
Prospectus.
Description of Municipal Obligations
For purposes of this Statement of Additional Information, the term
"Municipal Obligations" and "California Municipal Obligations" shall mean
debt obligations issued by the State of California, its political
subdivisions, municipalities and public authorities and municipal
obligations issued by other government entities if, in the opinion of
counsel to the respective issuers, the interest from such obligations is
exempt from Federal and California personal income taxes. "Municipal
Obligations" and "California Municipal Obligations" include the following:
Municipal Bonds
Municipal Bonds, which generally have a maturity of more than one
year when issued, have two principal classifications: General Obligation
Bonds and Revenue Bonds. A Private Activity Bond is a particular kind of
Revenue Bond. The classification of General Obligation Bonds, Revenue
Bonds and Private Activity Bonds are discussed below.
1. General Obligation Bonds. The proceeds of these obligations are
used to finance a wide range of public projects, including construction or
improvement of schools, highways and roads, and water and sewer systems.
General Obligation Bonds are secured by the issuer's pledge of its faith,
credit and taxing power for the payment of principal and interest.
2. Revenue Bonds. Revenue Bonds are issued to finance a wide
variety of capital projects including: electric, gas, water and sewer
systems; highways, bridges and tunnels; port and airport facilities;
colleges and universities; and hospitals. The principal security for a
Revenue Bond is generally the net revenues derived from a particular
facility, group of facilities or, in some cases, the proceeds of a special
excise or other specific revenue source. Although the principal security
behind these bonds may vary, many provide additional security in the form
of a debt service reserve fund whose money may be used to make principal
and interest payments on the issuer's obligations. Some authorities
provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.
3. Private Activity Bonds. Private Activity Bonds, which are
considered Municipal Bonds if the interest paid thereon is exempt from
Federal income tax, are issued by or on behalf of public authorities to
raise money to finance various privately operated facilities for business
and manufacturing, housing, sports and pollution control. These bonds are
also used to finance public facilities such as airports, mass transit
systems, ports and parking. The payment of the principal and interest on
such bonds is dependent solely on the ability of the facility's user to
meet its financial obligations and the pledge, if any, of real and
personal property so financed as security for such payment. As noted in
the Prospectus and discussed below under "Taxes," interest income on
these bonds may be an item of tax preference subject to the Federal
alternative minimum tax for individuals and corporations.
Municipal Notes
Municipal Notes generally are used to provide for short-term capital
needs and generally have maturities of thirteen months or less. Municipal
Notes include:
1. Tax Anticipation Notes. Tax Anticipation Notes are issued to
finance working capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenue, such as income,
sales, use and business taxes, and are payable from these specific future
taxes.
2. Revenue Anticipation Notes. Revenue Anticipation Notes are
issued in expectation of receipt of other kinds of revenue, such as
federal revenues available under the Federal Revenue Sharing Programs.
3. Bond Anticipation Notes. Bond Anticipation Notes are issued to
provide interim financing until long-term financing can be arranged. In
most cases, the long-term bonds then provide the money for the repayment
of the Notes.
Municipal Commercial Paper
Issues of Municipal Commercial Paper typically represent short-term,
unsecured, negotiable promissory notes. These obligations are issued by
agencies of state and local governments to finance seasonal working
capital needs of municipalities or to provide interim construction
financing and are paid from general revenues of municipalities or are
refinanced with long-term debt. In most cases, Municipal Commercial Paper
is backed by letters of credit, lending agreements, note repurchase
agreements or other credit facility agreements offered by banks or other
institutions.
Municipal Lease Obligations
Municipal leases may take the form of a lease or a certificate of
participation in a purchase contract issued by state and local government
authorities to obtain funds to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, computer equipment and
other capital assets. A lease obligation does not constitute a general
obligation of the municipality for which the municipality's taxing power
is pledged, although the lease obligation is ordinarily backed by the
municipality's covenant to budget for, appropriate and make payments due
under the lease obligation. Municipal leases have special risks not
normally associated with Municipal Bonds. These obligations frequently
contain "non-appropriation" clauses that provide that the governmental
issuer of the obligation has no obligation to make future payments under
the lease or contract unless money is appropriated for such purposes by
the legislative body on a yearly or other periodic basis. In addition to
the non-appropriation risk, municipal leases represent a type of financing
that has not yet developed the depth of marketability associated with
Municipal Bonds; moreover, although the obligations will be secured by the
leased equipment, the disposition of the equipment in the event of
foreclosure might prove difficult. For purposes of the 10% limitation on
the purchase of illiquid securities, the Fund will not consider the
municipal lease obligations or certificates of participation in municipal
lease obligations in which it invests as liquid, unless Dreyfus shall
determine, based upon such factors as the frequency of trades and quotes
for the obligation, the number of dealers willing to purchase or sell the
security and the number of other potential buyers, the willingness of
dealers to undertake to make a market in the security and the nature of
marketplace trades, that a security shall be treated as liquid for
purposes of such limitation.
Obligations of issuers of Municipal Obligations are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights
and remedies of creditors. In addition, the obligations of such issuers
may become subject to laws enacted in the future by Congress, state
legislators, or referenda extending the time for payment of principal
and/or interest, or imposing other constraints upon enforcement of such
obligations or upon municipalities to levy taxes. There is also the
possibility that, as a result of litigation or other conditions, the power
or ability of any issuer to pay, when due, the principal of and interest
on its Municipal Obligations may be materially affected.
Unlike the purchase or sale of a Municipal Bond, no consideration is
paid or received by the Fund upon the purchase or sale of a futures
contract. Initially, the Fund will be required to deposit with the broker
an amount of cash or cash equivalents equal to approximately 10% of the
contract amount (this amount is subject to change by the board of trade on
which the contract is traded and members of such board of trade may
charge a higher amount). This amount is known as initial margin and is in
the nature of a performance bond or good faith deposit on the contract
which is returned to the Fund upon termination of the futures contract,
assuming that all contractual obligations have been satisfied. Subsequent
payments, known as variation margin, to and from the broker, will be made
on a daily basis as the price of the index fluctuates, making the long and
short positions in the futures contract more or less valuable, a process
known as marking-to-market. At any time prior to the expiration of the
contract, the Fund may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing position in
the futures contract.
There are several risks in connection with the use of a municipal
bond index futures contract as a hedging device. Successful use of
municipal bond index futures contracts by the Fund is subject to the
ability of Dreyfus to predict correctly movements in the direction of
interest rates. Such predictions involve skills and techniques which may
be different from those involved in the management of a long-term
municipal bond portfolio. In addition, there can be no assurance that
there will be a correlation between movements in the price of the
municipal bond index and movements in the price of the Municipal Bonds
which are the subject of the hedge. The degree of imperfection of
correlation depends upon various circumstances, such as variations in
speculative market demand for futures contracts and municipal securities,
technical influences on futures trading, and differences between the
municipal securities being hedged and the municipal securities underlying
the municipal bond index futures contracts, in such respects as interest
rate levels, maturities and creditworthiness of issuers. A decision of
whether, when and how to hedge involves the exercise of skill and judgment
and even a well-conceived hedge may be unsuccessful to some degree because
of market behavior or unexpected trends in interest rates.
Although the Fund intends to purchase or sell municipal bond index
futures contracts only if there is an active market for such contracts,
there is no assurance that a liquid market will exist for the contracts at
any particular time. Most domestic futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures contract prices
during a single trading day. The daily limit establishes the maximum
amount the price of a futures contract may vary either up or down from the
previous day's settlement price at the end of a trading session. Once the
daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and, therefore, does not
limit potential losses because the limit may prevent the liquidation of
unfavorable positions. It is possible that futures contract prices could
move to the daily limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions
and subjecting some futures traders to substantial losses. In such event,
it will not be possible to close a futures position and, in the event of
adverse price movements, the Fund would be required to make daily cash
payments of variation margin. In such circumstances, an increase in the
value of the portion of the portfolio being hedged, if any, may partially
or completely offset losses on the futures contract. As described above,
however, there is no guarantee that the price of Municipal Bonds will, in
fact, correlate with the price movements in the municipal bond index
futures contract and thus provide an offset to losses on a futures
contract.
If the Fund has hedged against the possibility of an increase in
interest rates adversely affecting the value of the Municipal Bonds held
in its portfolio and rates decrease instead, the Fund will lose part or
all of the benefit of the increased value of the Municipal Bonds it has
hedged because it will have offsetting losses in its futures positions.
In addition, in such situations, if the Fund has insufficient cash, it may
have to sell securities to meet daily variation margin requirements. Such
sales of securities may, but will not necessarily, be at increased prices
which reflect the decline in interest rates. The Fund may have to sell
securities at a time when it may be disadvantageous to do so.
When the Fund purchases municipal bond index futures contracts, an
amount of cash and U.S. government securities or other high grade debt
securities equal to the market value of the futures contracts will be
deposited in a segregated account with the Fund's custodian (and/or such
other persons as appropriate) to collateralize the positions and thereby
insure that the use of such futures contracts is not leveraged. In
addition, the ability of the Fund to trade in municipal bond index futures
contracts and options on interest rate futures contracts may be materially
limited by the requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), applicable to a regulated investment company. See
"Taxes" below.
Tender Option Bonds
The Fund may invest up to 10% of the value of its assets in tender
option bonds. A tender option bond is a Municipal Obligation (generally
held pursuant to a custodial arrangement) having a relatively long
maturity and bearing interest at a fixed rate substantially higher than
prevailing short-term tax-exempt rates, that has been coupled with the
agreement of a third party, such as a bank, broker-dealer or other
financial institution, pursuant to which such institution grants the
security holders the option, at periodic intervals, to tender their
securities to the institution and receive the face value thereof. As
consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the Municipal Obligation's
fixed coupon rate and the rate, as determined by a remarketing or similar
agent at or near the commencement of such period, that would cause the
securities, coupled with the tender option, to trade at par on the date of
such determination. Thus, after payment of this fee, the security holder
effectively holds a demand obligation that bears interest at the
prevailing short-term tax-exempt rate. Dreyfus, on behalf of the Fund,
will consider on an ongoing basis the creditworthiness of the issuer of
the underlying Municipal Obligation, of any custodian and the third-party
provider of the tender option. In certain instances and for certain
tender option bonds, the option may be terminable in the event of a
default in payment of principal or interest on the underlying Municipal
Obligations and for other reasons. The Fund will not invest more than 10%
of the value of its net assets in illiquid securities, which would include
tender option bonds for which the required notice to exercise the tender
feature is more than seven days if there is no secondary market available
for these obligations.
Use of Ratings as Investment Criteria
The ratings of nationally recognized statistical rating organizations
("NRSROs") such as Standard & Poor's ("S&P") and Moody's Investors
Service, Inc. ("Moody's") represent the opinions of these agencies as to
the quality of Municipal Obligations which they rate. It should be
emphasized, however, that such ratings are relative and subjective and are
not absolute standards of quality. These ratings will be used by the Fund
as initial criteria for the selection of portfolio securities, but the
Fund will also rely upon the independent advice of Dreyfus to evaluate
potential investments. Among the factors which will be considered are the
long-term ability of the issuer to pay principal and interest and general
economic trends. Further information concerning the ratings of the NRSROs
and their significance is contained in the Appendix B to this Statement of
Additional Information.
After being purchased by the Fund, the rating of a Municipal
Obligation may be reduced below the minimum rating required for purchase
by the Fund or the issuer of the Municipal Obligation may default on its
obligations with respect to the Municipal Obligation. In that event, the
Fund will dispose of the Municipal Obligation as soon as practicable,
consistent with achieving an orderly disposition of the Municipal
Obligation, unless the Trust's Board of Trustees determines that disposal
of the Municipal Obligation would not be in the best interest of the Fund.
In addition, it is possible that a Municipal Obligation may cease to be
rated or an NRSRO might not timely change its rating of a particular
Municipal Obligation to reflect subsequent events. Although neither event
will require the sale of such Municipal Obligation by the Fund, Dreyfus
will consider such event in determining whether the Fund should continue
to hold the Municipal Obligation. In addition, if an NRSRO changes its
rating system, the Fund will attempt to use comparable ratings as
standards for its investments in accordance with its investment objectives
and policies.
Floating Rate and Variable Rate Obligations
The Fund may purchase floating rate and variable rate obligations,
including participation interests therein. Floating rate or variable rate
obligations provide that the rate of interest is set as a specific
percentage of a designated base rate (such as the prime rate at a major
commercial bank) and that the Fund can demand payment of the obligation at
par plus accrued interest. Variable rate obligations provide for a
specified periodic adjustment in the interest rate, while floating rate
obligations have an interest rate which changes whenever there is a change
in the external interest rate. Frequently such obligations are secured by
letters of credit or other credit support arrangements provided by banks.
The quality of the underlying creditor or of the bank, as the case may be,
must, as determined by Dreyfus under the supervision of the Trustees, be
equivalent to the quality standard prescribed for the Fund. The Fund is
currently permitted to purchase floating rate and variable rate
obligations with demand features in accordance with requirements
established by the SEC, which, among other things, permit such instruments
to be deemed to have remaining maturities of thirteen months or less,
notwithstanding that they may otherwise have a stated maturity in excess
of thirteen months.
The Fund may invest in participation interests purchased from banks
in floating rate or variable rate tax-exempt Municipal Obligations owned
by banks. A participation interest gives the purchaser an undivided
interest in the Municipal Obligation in the proportion that the Fund's
participation interest bears to the total principal amount of the
Municipal Obligation, and provides a demand feature. Each participation
is backed by an irrevocable letter of credit or guarantee of a bank (which
may be the bank issuing the participation interest, a bank issuing a
confirming letter of credit to that of the issuing bank, or a bank serving
as agent of the issuing bank with respect to the possible repurchase of
the participation interest) that Dreyfus, under the supervision of the
Trustees, has determined meets the prescribed quality standards for the
Fund. The Fund has the right to sell the instrument back to the issuing
bank or draw on the letter of credit on demand for all or any part of the
Fund's participation interest in the Municipal Obligation, plus accrued
interest. The Fund is currently permitted to invest in participation
interests when the demand provision complies with conditions established
by the SEC. Banks will retain a service and letter of credit fee and a
fee for issuing repurchase commitments in an amount equal to the excess of
the interest paid on the Municipal Obligations over the negotiated yield
at which the instruments were purchased by the Fund.
When-Issued Securities
The Fund may purchase Municipal Obligations on a when-issued basis
(i.e., for delivery beyond the normal settlement date at the stated price
and yield). The payment obligation and the interest rate that will be
received on the Municipal Obligations purchased on a when-issued basis are
each fixed at the time the buyer enters into the commitment. Although the
Fund will purchase Municipal Obligations on a when-issued basis only with
the intention of actually acquiring the securities, the Fund may sell
these securities before the settlement date if it is deemed advisable as a
matter of investment strategy.
Municipal Obligations purchased on a when-issued basis and the
securities held in the Fund's portfolio are subject to changes in market
value based upon the public's perception of the creditworthiness of the
issuer and changes, real or anticipated, in the level of interest rates
(which will generally result in similar changes in value, i.e., both
experiencing appreciation when interest rates decline and depreciation
when interest rates rise). Therefore, to the extent the Fund remains
substantially fully invested at the same time that it has purchased
securities on a when-issued basis, there will be a greater possibility of
fluctuation in the Fund's net asset value. Purchasing Municipal
Obligations on a when-issued basis can involve a risk that the yields
available in the market when the delivery takes place may actually be
higher than those obtained in the transaction.
The Fund will establish with the Fund's custodian a segregated
account consisting of cash or liquid debt securities in an amount at least
equal to the amount of its when-issued commitments. When the time comes
to pay for when-issued securities, the Fund will meet its obligations from
then-available cash flow, sale of securities held in the segregated
account, sale of other securities or, although it would not normally
expect to do so, from the sale of the when-issued securities themselves
(which may have a value greater or less than the Fund's payment
obligations). Sale of securities to meet such obligations carries with it
a greater potential for the realization of capital gains, which are not
exempt from Federal income tax.
Purchase of Securities with Stand-by Commitments
Pursuant to an exemptive order issued by the SEC under the Act, the
Fund may acquire standby commitments with respect to Municipal Obligations
held in its portfolio. Under a stand-by commitment, a broker-dealer,
dealer or bank would agree to purchase, at the Fund's option, a specified
Municipal Obligation at a specified price. Stand-by commitments acquired
by the Fund may also be referred to as "put options." The amount payable
to the Fund upon its exercise of a stand-by commitment normally would be
(a) the acquisition cost of the Municipal Obligation, less any amortized
market premium or plus any amortized market or original issue discount
during the period the Fund owned the security, plus (b) all interest
accrued on the security since the last interest payment date during the
period. Absent unusual circumstances, in determining net asset value the
Fund would value the underlying Municipal Obligation at amortized cost.
Accordingly, the amount payable by the broker-dealer, dealer or bank upon
exercise of a stand-by commitment will normally be substantially the same
as the portfolio value of the underlying Municipal Obligation.
The Fund's right to exercise a stand-by commitment is unconditional
and unqualified. Although the Fund could not transfer a stand-by
commitment, the Fund could sell the underlying Municipal Obligation to a
third party at any time. It is expected that stand-by commitments
generally will be available to the Fund without the payment of any direct
or indirect consideration. The Fund may, however, pay for stand-by
commitments either separately in cash or by paying a higher price for
portfolio securities which are acquired subject to the commitment (thus
reducing the yield to maturity otherwise available for the same
securities). The total amount paid in either manner for outstanding
stand-by commitments held in the Fund's portfolio will not exceed .5 of 1%
of the value of the Fund's total assets calculated immediately after such
stand-by commitment was acquired.
The Fund intends to enter into stand-by commitments only with broker-
dealers, dealers or banks that Dreyfus believes present minimum credit
risks. The Fund's ability to exercise a stand-by commitment will depend
on the ability of the issuing institution to pay for the underlying
securities at the time the commitment is exercised. The credit of each
institution issuing a stand-by commitment to the Fund will be evaluated on
an ongoing basis by Dreyfus in accordance with procedures established by
the Trustees.
The Fund intends to acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise their rights
thereunder for trading purposes. The acquisition of a stand-by commitment
would not affect the valuation or maturity of the underlying Municipal
Obligation, which will continue to be valued in accordance with the
amortized cost method. Each stand-by commitment will be valued at zero in
determining net asset value. Should the Fund pay directly or indirectly
for a stand-by commitment, its costs will be reflected as an unrealized
loss for the period during which the commitment is held by the Fund and
will be reflected in realized gain or loss when the commitment is
exercised or expires. Stand-by commitments will not affect the dollar-
weighted average maturity of the Fund's portfolio. The Fund understands
that the Internal Revenue Service has issued a revenue ruling to the
effect that a registered investment company will be treated for Federal
income tax purposes as the owner of Municipal Obligations acquired subject
to stand-by commitments and the interest on the Municipal Obligations will
be tax-exempt to the Fund.
Taxable Investments
The Fund anticipates being as fully invested as practicable in
Municipal Obligations. Because the Fund's purpose is to provide income
exempt from Federal and state personal income tax, the Fund will invest in
taxable obligations only if and when the Trustees believe it would be in
the best interests of its shareholders to do so. Situations in which the
Fund may invest up to 20% of its total assets in taxable securities
include: (a) pending investment of proceeds of sales of shares of the Fund
or of portfolio securities, (b) pending settlement of purchases of
portfolio securities, and (c) when the Fund is attempting to maintain
liquidity for the purpose of meeting anticipated redemptions. The Fund
may temporarily invest more than 20% of its total assets in taxable
securities to maintain a "defensive" posture when, in the opinion of
Dreyfus, it is advisable to do so because of adverse market conditions
affecting the market for Municipal Obligations. The Fund may invest in
only the following kinds of taxable securities maturing in one year or
less from the date of purchase: (1) obligations of the United States
Government, its agencies or instrumentalities; (2) commercial paper rated
at the time of purchase at least Prime-1 by Moody's or A-1+ or A-1 by S&P;
(3) certificates of deposit of domestic banks with total assets of $1
billion or more; and (4) repurchase agreements (instruments under which
the seller of a security agrees to repurchase the security at a specific
time and price) with respect to any securities that the Fund is permitted
to hold.
Repurchase Agreements
The Fund may enter into repurchase agreements with member banks of
the Federal Reserve System or certain non-bank dealers. Under each
repurchase agreement the selling institution will be required to maintain
the value of the securities subject to the agreement at not less than
their repurchase price. If a particular bank or non-bank dealer defaults
on its obligation to repurchase the underlying debt instrument as required
by the terms of a repurchase agreement, the Fund will incur a loss to the
extent that the proceeds it realizes on the sale of the collateral are
less than the repurchase price of the instrument. In addition, should the
defaulting bank or non-bank dealer file for bankruptcy, the Fund could
incur certain costs in establishing that it is entitled to dispose of the
collateral and its realization on the collateral may be delayed or
limited. Investments in repurchase agreements are subject to the policy
prohibiting investment of more than 10% of the Fund's assets in restricted
securities, securities without readily available market quotations and
repurchase agreements maturing in more than seven days.
As noted in the Prospectus, the Fund may, on occasion, invest in
securities issued by other investment companies. These securities will be
of investment companies that determine their net asset value per share
based on the amortized cost or penny-rounding method. Such securities
will be acquired by the Fund within the limits prescribed by the Act,
which include, subject to certain exceptions, a prohibition against the
Fund's investing more than 10% of the value of its total assets in such
securities.
Special Factors Affecting the Fund
Some of the significant financial considerations relating to the
Fund's investments in California Municipal Obligations are summarized
below. This summary information is derived principally from official
statements and prospectuses relating to securities offerings of the State
of California and various local agencies in California that were available
prior to the date of this Statement of Additional Information and does not
purport to be a complete description of any of the considerations
mentioned herein. The accuracy and completeness of the information
contained in such official statements has not been verified independently.
Risk Factors
Investing in California Municipal Obligations. Investors should
consider carefully the special risks inherent in the Fund's investment in
California Municipal Obligations. These risks result from certain
amendments to the California Constitution and other statutes that limit
the taxing and spending authority of California governmental entities, as
well as from the general financial condition of the State of California.
From mid-1990 to late 1993, the State suffered a recession with the worst
economic, fiscal and budget conditions since the 1930s. As a result, the
State has experienced recurring budget deficits for four of its five
fiscal years ended June 30, 1992. The State had operating surpluses of
approximately $109 million in 1992-93 and $917 million in 1993-94.
However at June 30, 1994, according to California's Department of Finance,
the State's Special Fund for Economic Uncertainties had an accumulated
deficit, on a budget basis, of approximately $1.8 billion. A further
consequence of the large budget imbalances has been that the State
depleted its available cash resources and has had to use a series of
external borrowings to meet its cash needs. To meet its cash flow needs
in the 1994-95 fiscal year, the State issued, in July and August 1994,
$4.0 billion of revenue anticipation warrants and $3.0 billion of revenue
anticipation notes. The 1994-95 Budget Act contains a plan to retire a
projected $1.025 billion deficit in the 1995-96 fiscal year. The
Department of Finance projects that, after repaying the last of the
carryover budget deficit, there will be a positive balance of $28 million
in the Special Fund for Economic Uncertainties at June 30, 1996. As a
result of the deterioration of the State's budget and cash situation
between October 1991 and July 1994, the rating on the State's general
obligation bonds was reduced by S&P from AAA to A, by Moody's from Aaa to
A1 and by Fitch from AAA to A. These and other factors may have the
effect of impairing the ability of the issuers of California Municipal
Obligations to pay interest on, or repay principal of, such California
Municipal Obligations. Investors should review Appendix A which sets
forth additional information relating to investing in California Municipal
Obligations.
Investment Restrictions
The following are fundamental investment restrictions of the Fund.
The Fund may not:
1. Purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of such purchase to be
invested in the securities of one or more issuers conducting their
principal activities in the same industry. (For purposes of this
limitation, U.S. Government securities and state or municipal governments
and their political subdivisions are not considered members of any
industry. In addition, this limitation does not apply to investments of
domestic banks, including U.S. branches of foreign banks and foreign
branches of U.S. banks).
2. Borrow money or issue senior securities as defined in the Act,
except that (a) the Fund may borrow money in an amount not exceeding one-
third of the Fund's total assets at the time of such borrowing, and (b)
the Fund may issue multiple classes of shares. The purchase or sale of
futures contracts and related options shall not be considered to involve
the borrowing of money or issuance of senior securities.
3. Make loans or lend securities, if as a result thereof more than
one-third of the Fund's total assets would be subject to all such loans.
For purposes of this restriction, debt instruments and repurchase
agreements shall not be treated as loans.
4. Underwrite securities issued by any other person, except to the
extent that the purchase of securities and the later disposition of such
securities in accordance with the Fund's investment program may be deemed
an underwriting.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the Fund from investing in securities or other instruments backed by real
estate, including mortgage loans, or securities of companies that engage
in the real estate business or invest or deal in real estate or interests
therein).
6. Purchase or sell commodities, except that the Fund may enter
into futures contracts and related options, forward currency contracts and
other similar instruments.
The Fund may, notwithstanding any other fundamental investment policy
or restriction, invest all of its investable assets in securities of a
single open-end management investment company with substantially the same
fundamental investment objectives, policies and restrictions as the Fund.
The following are non-fundamental investment restrictions of the
Fund:
1. The Fund will not purchase or retain the securities of any
issuer if the officers, directors or Trustees of the Trust, its advisers,
or managers owning beneficially more than one half of one percent of the
securities of each issuer together own beneficially more than five percent
of such securities.
2. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof the
value of the Fund's investment in securities would exceed 5% of the Fund's
total assets. For purposes of this limitation, sponsors, general
partners, guarantors and originators of underlying assets may be treated
as the issuer of a security.
3. The Fund will not purchase puts, calls, straddles, spreads and
any combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities will exceed 5% of its total
assets, except that: (a) this restriction shall not apply to standby
commitments and (b) this restriction shall not apply to the Fund's
transactions in futures contracts and related options.
4. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be
invested in warrants or (b) more than 2% of the value of the Fund's assets
would be invested in warrants that are not listed on the NYSE or American
Stock Exchange ("AMEX") (for purposes of this limitation, warrants
acquired by the Fund in units or attached to securities will be deemed to
have no value).
5. The Fund will not invest more than 10% of the value of its net
assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, and other securities which
are not readily marketable. For purposes of this restriction, illiquid
securities shall not include commercial paper issued pursuant to Section
4(2) of the Securities Act of 1933 and securities which may be resold
under Rule 144A under the Securities Act of 1933, provided that the Board
of Trustees, or its delegate, determines that such securities are liquid
based upon the trading markets for the specific security.
6. The Fund may not invest in securities of other investment
companies, except as they may be acquired as part of a merger,
consolidation or acquisition of assets and except to the extent otherwise
permitted by the Act.
7. The Fund will not purchase oil, gas or mineral leases (the Fund
may, however, purchase and sell the securities of companies engaged in the
exploration, development, production, refining, transporting and marketing
of oil, gas or minerals).
8. The Fund shall not sell securities short, unless it owns or has
the right to obtain securities equivalent in kind and amounts to the
securities sold short, and provided that transactions in futures contracts
and options are not deemed to constitute selling securities short.
9. The Fund shall not purchase securities on margin, except that
the Fund may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that margin payments in connection
with futures contracts and options on futures contracts shall not
constitute purchasing securities on margin.
10. The Fund shall not purchase any security while borrowings
representing more than 5% of the Fund's total assets are outstanding.
If a percentage restriction is adhered to at the time of an
investment, a later increase or decrease in such percentage resulting from
a change in the values of assets will not constitute a violation of such
restriction.
Under the Act, a fundamental policy may not be changed without the
vote of a majority of the outstanding voting securities of the Fund, as
defined in the Act. "Majority" means the lesser of (1) 67% or more of the
shares present at the Fund's meeting, if the holders of more than 50% of
the outstanding shares of the Fund are present or represented by proxy, or
(2) more than 50% of the outstanding shares of the Fund. Non-fundamental
investment restrictions may be changed, without shareholder approval, by
vote of a majority of the Trust's Board of Trustees at any time.
In order to permit the sale of the Fund's shares in certain states,
the Trust may make commitments more restrictive than the investment
restrictions described above. Accordingly, pursuant to such commitments,
the Fund has undertaken not to invest in oil, gas or other mineral
leases. In addition, the Trust has undertaken not to invest in warrants
(other than warrants acquired by the Fund as part of a unit or attached to
securities at the time of purchase) if, as a result, the investments
(valued at the lower of cost or market) would exceed 5% of the value of
the Fund's net assets or if, as a result, more than 2% of the Fund's net
assets would be invested in warrants not listed on AMEX or NYSE. Further,
the Fund has given a representation that investments will not be made in
real estate limited partnerships. Should the Trust determine that any
such commitment is no longer in the best interests of the Trust and its
shareholders, it will revoke the commitment by terminating sales of its
shares in the state involved.
Portfolio Transactions
Decisions to buy and sell securities for the Fund and effectuation of
securities transactions are made by Dreyfus, subject to the overall
supervision and review of the Trustees. The same personnel are also in
charge of portfolio transactions for other clients of other subsidiaries
and affiliates of Dreyfus.
Purchases and sales of portfolio securities for the Fund will
generally be transacted with the issuer or a primary market maker on a net
basis, without the payment by the Fund of any brokerage commission for
such purchases or sales. Purchases from dealers serving as primary market
makers will reflect the spread between the bid and asked prices. In
selecting dealers and in executing portfolio transactions, Dreyfus seeks,
on behalf of the Fund, the best overall terms available. In doing so,
Dreyfus considers all matters it deems relevant, including the breadth of
the market in the security, the price of the security and the financial
condition and executing capability of the dealer.
Dealers may be selected who provide brokerage and/or research
services to the Trust and/or other accounts over which Dreyfus or its
affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing
in, purchasing or selling securities; the availability of securities or
the purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as
clearance and settlement). The receipt of research from dealers may be
useful to Dreyfus in rendering investment management services to the Trust
and/or its other clients; and, conversely, such information provided by
its brokers or dealers who have executed transaction orders on behalf of
other clients of Dreyfus may be useful to Dreyfus in carrying out its
obligation to the Trust.
The Fund will not purchase Municipal Obligations during the existence
of any underwriting or selling group relating thereto of which an
affiliate is a member, except to the extent permitted by the SEC. Under
certain circumstances, the Fund may be at a disadvantage because of this
limitation in comparison with other investment companies which have a
similar investment objective but are not subject to such limitations.
Dreyfus will make investment decisions for the Fund independently
from those made for its other clients, other funds and clients of other
subsidiaries of Dreyfus. On occasion, however, the same investment
decisions will be made for the Fund as for one or more of Dreyfus' clients
at about the same time. In a case in which the Fund and one of these other
clients are simultaneously engaged in the purchase or sale of the same
security, the transactions will, to the extent feasible and practicable,
be averaged as to price and allocated as to amount among the Fund and/or
the other client or clients pursuant to a formula considered equitable.
In some cases, this system could have a detrimental effect on the price or
volume of the security to be purchased or sold on behalf of the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
For the fiscal years ended June 30, 1995 and June 30, 1994, the Fund
paid no stated broker commissions.
REDEMPTION OF FUND SHARES
Check Redemption Privilege. An investor may indicate on the Account
Application or by later written request that the Fund provide Redemption
Checks ("Checks") drawn on the Fund's account. Checks will be sent only
to the registered owner(s) of the account and only to the address of
record. The Account Application, Shareholder Services Form or later
written request must be manually signed by the registered owner(s).
Checks may be made payable to the order of any person in an amount of $500
or more. When a Check is presented to the Transfer Agent for payment, the
Transfer Agent, as the investor's agent, will cause the Fund to redeem a
sufficient number of shares in the investor's account to cover the amount
of the Check and the $2.00 charge. Dividends are earned until the Check
clears. After clearance, a copy of the Check will be returned to the
investor. Investors generally will be subject to the same rules and
regulations that apply to checking accounts, although election of this
Privilege creates only a shareholder-transfer agent relationship with the
Transfer Agent.
If the amount of the Check, plus any applicable charges, is greater
than the value of the shares in an investor's account, the Check will be
returned marked insufficient funds. Checks should not be used to close an
account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Agent, and reasonably
believed by the Transfer Agent to be genuine. An investor will be charged
a $5.00 fee for each wire redemption, which will be deducted from the
investor's account and paid to the Transfer Agent. Ordinarily, the Fund
will initiate payment for shares redeemed pursuant to this Privilege on
the next business day after receipt if the Transfer Agent receives the
redemption request in proper form. Redemption proceeds will be
transferred by Federal Reserve wire only to the commercial bank account
specified by the investor on the Account Application or Shareholder
Services Form. Redemption proceeds, if wired, must be in the amount of
$5,000 or more and will be wired to the investor's account at the bank of
record designated in the investor's file at the Transfer Agent, if the
investor's bank is a member of the Federal Reserve System, or to a
correspondent bank if the investor's bank is not a member. Fees
ordinarily are imposed by such bank and usually are borne by the investor.
Immediate notification by the correspondent bank to the investor's bank is
necessary to avoid a delay in crediting the funds to the investor's bank
account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-
654-7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing
agencies and savings associations as well as from participants in the NYSE
Medallion Signature Program, the Securities Transfer Agents Medallion
Program ("STAMP") and the Stock Exchanges Medallion Program. Guarantees
must be signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may
request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call one of the telephone numbers listed on the cover.
Dreyfus TeleTransfer Privilege. Investors should be aware that if
they have selected the Dreyfus TeleTransfer Privilege, any request for a
wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the ACH system unless more prompt transmittal specifically is
requested. Redemption proceeds will be on deposit in the investor's
account at an ACH member bank ordinarily two business days after receipt
of the redemption request. An investor will be charged a $5.00 fee for
each redemption effected pursuant to this Privilege, which will be
deducted from the investor's account and paid to the Transfer Agent. See
"Purchase of Fund Shares--Dreyfus TeleTransfer Privilege."
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited
in amount during any 90-day period to the lesser of $250,000 or 1% of the
value of the Fund's net assets at the beginning of such period. Such
commitment is irrevocable without the prior approval of the SEC. In the
case of requests for redemption in excess of such amount, the Trustees and
executive officers of the Trust reserve the right to make payments in
whole or in part in securities or other assets in case of an emergency or
any time a cash distribution would impair the liquidity of the Fund to the
detriment of the existing shareholders. In this event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If
the recipient sold such securities, brokerage charges would be incurred.
Suspension of Redemptions. The right to redeem Fund shares may be
suspended or the date of payment postponed (a) for any period during which
the NYSE is closed (other than for customary weekend or holiday closings);
(b) when trading in the markets the Trust normally uses is restricted or
when an emergency exists as determined by the SEC so that disposal of the
Fund's investments or determination of its net asset value is not
reasonably practicable, or (c) for such other periods as the SEC, by
order, may permit for protection of the Fund's shareholders.
FUND EXCHANGES
Shares of other funds purchased by exchange will be purchased on the
basis of relative net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a
sales load and additional shares acquired through reinvestment
of dividends or other distributions of any such funds
(collectively referred to herein as "Purchased Shares") may be
exchanged for shares of other funds sold with a sales load
(referred to herein as "Offered Shares"), provided that, if the
sales load applicable to the Offered Shares exceeds the maximum
sales load that could have been imposed in connection with the
Purchased Shares (at the time the Purchased Shares were
acquired), without giving effect to any reduced loads, the
difference will be deducted.
To accomplish an exchange under item D above, shareholders must
notify the Transfer Agent of their prior ownership of fund shares and
their account number.
To request an exchange, an investor or the investor's Agent acting on
the investor's behalf must give exchange instructions to the Transfer
Agent in writing, by wire or by telephone. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless the investor checks the applicable "No" box on the Account
Application, indicating that the investor specifically refuses this
Privilege. By using the Telephone Exchange, the investor authorizes the
Transfer Agent to act on telephonic instructions from any person
representing himself or herself to be the investor or a representative of
the investor's Agent, and reasonably believed by the Transfer Agent to be
genuine. Telephone exchanges may be subject to limitations as to the
amount involved or the number of telephone exchanges permitted. Shares
issued in certificate form are not eligible for telephone exchange.
Investors will be charged a $5.00 fee for each exchange made out of the
Fund, which will be deducted from the investor's account and paid to the
Transfer Agent.
This Privilege is available to shareholders resident in any state in
which shares of the fund being acquired may legally be sold. Shares may
be exchanged only between accounts having identical names and other
identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Exchange service may be
modified or terminated at any time upon notice to shareholders.
VALUATION OF SHARES
The Prospectus describes the time at which the net asset value of the
Fund is determined for purposes of sales and redemptions. In addition,
portfolio securities held by the Fund may be actively traded in securities
markets which are open for trading on days when the Fund will not be
determining its net asset value. Accordingly, there may be occasions when
the Fund is not open for business but when the value of the Fund's
portfolio securities will be affected by such trading activity. The
holidays (as observed) on which the NYSE is closed currently are: New
Years Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
It is the Trust's policy to use its best efforts to maintain the
Fund's net asset value per share ("NAV") at a constant value of $1.00.
The Fund's portfolio instruments are valued on the basis of amortized
cost. This involves valuing an instrument at its cost initially and,
thereafter, assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the
market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which the value, as determined
by amortized cost, is higher or lower than the price the Trust would
receive if it sold the instrument.
The valuation of the Fund's portfolio instruments based upon their
amortized cost and simultaneous maintenance of the Fund's NAV at $1.00 are
permitted by a rule adopted by the SEC. Under this rule, the Fund must
maintain a dollar-weighted average portfolio maturity of 90 days or less,
purchase only instruments having remaining maturities of thirteen months
or less, and invest only in securities determined by the Trustees to be
eligible securities with minimal credit risks at the time of their
acquisition by the Fund. In accordance with the rule, the Trustees have
established procedures designed to stabilize, to the extent reasonably
practicable, the Fund's NAV as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of the Fund's
portfolio holdings by the Trustees, at such intervals as they may deem
appropriate, to determine whether the NAV of the Fund calculated by using
available market quotations or market equivalents deviates from $1.00 per
share based on amortized cost. The rule also provides that the extent of
any deviation between the Fund's NAV based upon available market
quotations or market equivalents and $1.00 NAV value based on amortized
cost must be examined by the Trustees. In the event the Trustees determine
that a deviation exists which may result in material dilution or other
unfair results to investors or existing shareholders, pursuant to the rule
they must cause the Fund to take such corrective action as the Trustees
regard as necessary and appropriate, including: selling portfolio
instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity; withholding dividends or paying
distributions from capital or capital gains; redeeming shares in kind; or
establishing a NAV by using available market quotations.
PERFORMANCE DATA
From time to time, the Fund may quote its yield in advertisements,
shareholder reports or other communications to shareholders. The Fund may
compare its performance to that of other mutual funds, relevant indices or
rankings prepared by independent services or other financial or industry
publications that monitor mutual fund performance.
Performance rankings as reported in Changing Times, Business Week,
Institutional Investor, The Wall Street Journal, Mutual Fund Forecaster,
No Load Investor, Money Magazine, Morningstar Mutual Fund Values, U.S.
News and World Report, Forbes, Fortune, Barron's, Financial Planning,
Financial Planning on Wall Street, Certified Financial Planner Today,
Investment Advisor, Kiplinger's, Smart Money and similar publications may
also be used in comparing the Fund's performance.
Yields
The Fund's yield is computed by: (a) determining the net change in
the value of a hypothetical pre-existing account in the Fund having a
balance of one share at the beginning of a seven-calendar-day period for
which yield is to be quoted, (b) dividing the net change by the value of
the account at the beginning of the period to obtain the base period
return, and (c) annualizing the results (i.e., multiplying the base period
return by 365/7). The net change in the value of the account reflects the
value of additional shares purchased with dividends declared on the
original share and any such additional shares, but does not include
realized gains and losses or unrealized appreciation and depreciation. In
addition, the Fund may calculate a compound effective annualized yield by
adding 1 to the base period return (calculated as described above),
raising the sum to a power equal to 365/7 and subtracting 1. The Fund's
equivalent taxable yield is computed by dividing that portion of the
Fund's yield which is tax-exempt by one minus a stated income tax rate and
adding the product to that portion, if any, of the Fund's yield that is
not tax-exempt. For the seven-day period ended June 30, 1995, the Fund's
annualized current yields, compounded effective yields, and equivalent
taxable yields for its then-existing Investor shares and Class R shares
were as follows:
<TABLE>
<CAPTION>
7-Day Yield for Period Ended
June 30, 1995
Annualized Compounded Equivalent
Current Yield Effective Yield Taxable Yield*
------------- --------------- --------------
<S> <C> <C> <C>
Investor shares 3.63% 3.70% 6.30%
Class R shares 3.88% 3.95% 6.74%
</TABLE>
Effective November 20, 1995, the Fund's separate "Investor" and
"Class R" designations were eliminated and the Fund became a single class
Fund. For the seven-day period ended November 30, 1995, the Fund's yield
was 3.47%, effective yield was 3.53% and equivalent taxable yield* was
6.02%. These yields reflect the waiver of a portion of the management fee
by Dreyfus, without which the Fund's seven-day yield, effective yield and
equivalent taxable yield* for the period ended November 30, 1995, would
have been 3.37%, 3.43% and 5.85%, respectively. See "Management of the
Fund" in the Prospectus.
* Example assumes a Federal marginal tax rate of 36% and a California
marginal tax rate of 10% (combined effective rate of 42.40%).
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer
to, or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
TAXES
The Fund intends to satisfy the requirements for qualifying as a
"regulated investment company" under Subchapter M of the Code. Provided
that the Fund distributes at least 90% of its taxable net investment
income, including market discount and net realized short-term capital
gains, and 90% of the tax-exempt interest income (reduced by certain
expenses), the Fund, if it qualifies as a regulated investment company,
will not be liable for Federal income taxes to the extent its taxable net
investment income and capital gain net income are distributed to its
shareholders.
Because the Fund will distribute exempt-interest dividends, interest
on indebtedness incurred by a shareholder to purchase or carry Fund shares
is not deductible for Federal income tax purposes. If a shareholder
receives an exempt-interest dividend with respect to shares of the Fund
and if such shares are held by the shareholder for six months or less,
then any loss on the redemption or exchange of such shares will, to the
extent of such exempt-interest dividends, be disallowed. In addition, the
Code may require a shareholder, if he or she receives exempt-interest
dividends, to treat as taxable income a portion of certain otherwise non-
taxable social security and railroad retirement benefit payments.
Furthermore, that portion of an exempt-interest dividend paid by the Fund
which represents income from private activity bonds may not retain its
tax-exempt status in the hands of a shareholder who is a "substantial
user" of a facility financed by such bonds, or a "related person" thereof.
Moreover, as noted in the Fund's Prospectus, some or all of the Fund's
dividends may be a specific preference item, or a component of an
adjustment item, for purposes of the Federal individual and corporate
alternative minimum taxes. In addition, the receipt of Fund dividends and
distributions may affect a foreign corporate shareholder's Federal "branch
profits" tax liability and a Subchapter S corporation shareholder's
Federal "excess net passive income" tax liability. Shareholders should
consult their own tax advisers as to whether they are (1) substantial
users with respect to a facility or related to such users within the
meaning of the Code or (2) subject to a Federal alternative minimum tax,
any applicable state alternative minimum tax, the Federal branch profits
tax, or the Federal excess net passive income tax.
Dividends derived by the Fund from tax-exempt interest are designated
as tax-exempt in the same percentage of the day's dividend as the actual
tax-exempt income earned that day. Thus, the percentage of the dividend
designated as tax-exempt may vary from day to day. Similarly, dividends
derived by the Fund from interest on California Municipal Obligations will
be designated as exempt from the State of California taxation in the same
percentage of the day's dividend as the actual interest on California
Municipal Obligations earned on that day.
The Fund is required to withhold and remit to the U.S. Treasury 31%
of the taxable dividends paid by the Fund and the distributions paid by
the Fund (in excess of $10 on an annualized basis) with respect to any
non-corporate shareholder who fails to furnish or certify his or her
correct taxpayer identification number, who has been notified that he or
she is to subject to back up withholding due to underreporting of dividend
or interest income or who fails to certify that he or she has provided a
correct taxpayer identification number, and that he or she is not subject
to such withholding. An individual's tax identification number is his or
her social security number. The backup withholding tax is not an
additional tax and may be credited against a shareholder's regular Federal
income tax liability.
The foregoing is only a summary of certain tax considerations
generally affecting the Fund and its shareholders, and is not intended as
a substitute for careful tax planning. Individuals may be exempt from
California state and local personal income taxes on exempt-interest income
derived from obligations of issuers located in California, but are usually
subject to such taxes on such dividends that are derived from obligations
of issuers located in other jurisdictions. Investors are urged to consult
their tax advisers with specific reference to their own tax situations.
DESCRIPTION OF THE TRUST
The Trust is an open-end management investment company organized as
an unincorporated business trust under the laws of the Commonwealth of
Massachusetts by an Agreement and Declaration of Trust dated March 28,
1983, amended and restated December 9, 1992, and subsequently further
amended. On March 31, 1994 the Trust changed its name from "The Boston
Company Tax-Free Municipal Funds" to "The Laurel Tax-Free Municipal
Funds." The Trust's name was then changed from "The Laurel Tax-Free
Municipal Funds" to "The Dreyfus/Laurel Tax-Free Municipal Funds"
effective October 17, 1994. On November 20, 1995, the Fund's name was
changed from Dreyfus/Laurel California Tax-Free Money Fund to Dreyfus
BASIC California Municipal Money Market Fund.
The Trustees have authority to create an unlimited number of shares
of beneficial interest, without par value, in separate series. Each
series will be treated as a separate entity. Currently, seven series have
been authorized (each a "fund"). The Trustees have authority to create
additional series at any time in the future without shareholder approval.
Each share (regardless of class) has one vote. On each matter
submitted to a vote of the shareholders, all shares of each fund or class
shall vote together as a single class, except as to any matter for which a
separate vote of any fund or class is required by the Act and except as to
any matter which affects the interest of a particular fund or class, in
which case only the holders of shares of the one or more affected funds or
classes shall be entitled to vote, each as a separate class.
The assets received by the Trust for the issue or sale of shares of
each fund and all income, earnings, profits and proceeds thereof, subject
only to the rights of creditors, are specifically allocated to such fund,
and constitute the underlying assets of such fund. The underlying assets
of each fund are required to be segregated on the books of account, and
are to be charged with the expenses in respect to such fund and with a
share of the general expenses of the Trust. Any general expenses of the
Trust not readily identifiable as belonging to a particular fund shall be
allocated by or under the direction of the Trustees in such manner as the
Trustees determine to be fair and equitable, taking into consideration,
among other things, the relative sizes of the funds and the relative
difficulty in administering each fund. Each share of each fund represents
an equal proportionate interest in that fund with each other share and is
entitled to such dividends and distributions out of the income belonging
to such fund as are declared by the Trustees. Upon any liquidation of a
fund, shareholders thereof are entitled to share pro rata in the net
assets belonging to that fund available for distribution.
The Trust does not hold annual meetings of shareholders. There will
normally be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders, at which time
the Trustees then in office will call a shareholders' meeting for the
election of Trustees. Under the Act, shareholders of record of no less
than two-thirds of the outstanding shares of the Trust may remove a
Trustee through a declaration in writing or by a vote cast in person or by
proxy at a meeting called for that purpose. The Trustees are required to
call a meeting of shareholders for the purposes of voting upon the
question of removal of any Trustee when requested in writing to do so by
the shareholders of record of not less than 10% of the Trust's outstanding
shares.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Trust and requires that notice of
such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or a Trustee. The Agreement and
Declaration of Trust provides for indemnification from the Trust's
property for all losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability
is limited to circumstances in which the Trust itself would be unable to
meet its obligations, a possibility which Dreyfus believes is remote.
Upon payment of any liability incurred by the Trust, the shareholder
paying such liability will be entitled to reimbursement from the general
assets of the Trust. The Trustees intend to conduct the operations of
each fund in such a way so as to avoid, as far as possible, ultimate
liability of the shareholders for liabilities of such fund.
PRINCIPAL SHAREHOLDERS
As of January 31, 1996, the following companies/individuals owned
beneficially 5% or more of the outstanding shares of the Fund: Boston and
Company, Attention: John Kacinko, Three Mellon Bank Center, Pittsburgh, PA
15259, 41% record.
CUSTODIAN AND TRANSFER AGENT
Mellon Bank, which is located at Mellon Bank Center, Pittsburgh, PA
15219, serves as the Fund's custodian. Dreyfus Transfer, Inc., a wholly-
owned subsidiary of Dreyfus, located at One American Express Plaza,
Providence, Rhode Island 02903, is the Fund's transfer and dividend
disbursing agent. Under a transfer agency agreement with the Fund, the
Transfer Agent arranges for the maintenance of shareholder account records
for the Fund, the handling of certain communications between shareholders
and the Fund and the payment of dividends and distributions payable by the
Fund. For these services, the Transfer Agent receives a monthly fee
computed on the basis of the number of shareholder accounts it maintains
for the Fund during the month, and is reimbursed for certain out-of-pocket
expenses. Dreyfus Transfer, Inc. and Mellon Bank, as custodian, have no
part in determining the investment policies of the Fund or which
securities are to be purchased or sold by the Fund.
COUNSEL AND INDEPENDENT AUDITORS
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C., 20036-1800, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional
Information.
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh,
Pennsylvania 15219, was appointed by the Board of Trustees to serve as the
Fund's independent auditors for the year ending June 30, 1996, providing
audit services including (1) examination of the annual financial
statements, (2) assistance, review and consultation in connection with the
SEC and (3) review of the annual Federal income tax return filed on behalf
of the Fund.
FINANCIAL STATEMENTS
The Fund's Annual Report for the fiscal year ended June 30, 1995
accompanies this Statement of Additional Information, and the financial
statements contained therein, and related notes, are incorporated by
reference herein.
APPENDIX A
RISK FACTORS - INVESTING
IN CALIFORNIA MUNICIPAL OBLIGATIONS
Certain California (the "State") constitutional amendments,
legislative measures, executive orders, civil actions and voter
initiatives, as well as the general financial condition of the State,
could adversely affect the ability of issuers of California Municipal
Obligations to pay interest and principal on such obligations. The
following information constitutes only a brief summary, does not purport
to be a complete description, and is based on information drawn from
official statements relating to securities offerings of the State of
California and various local agencies, available as of the date of this
Statement of Additional Information. While the Fund has not independently
verified such information, it has no reason to believe that such
information is not correct in all material respects.
Recent Developments. From mid-1990 to late 1993, the State suffered
a recession with the worst economic, fiscal and budget conditions since
the 1930s. Construction, manufacturing (especially aerospace), exports
and financial services, among others, were all severely affected. Job
losses have been the worst of any post-war recession. Unemployment
reached 10.1% in January 1994, but fell sharply to 7.7% in October and
November 1994. According to the State's Department of Finance, recovery
from the recession in California began in 1994.
The recession seriously affected State tax revenues, which basically
mirror economic conditions. It also has caused increased expenditures for
health and welfare programs. The State also has been facing a structural
imbalance in its budget with the largest programs supported by the General
Fund (K-12 schools and community colleges, health and welfare, and
corrections) growing at rates higher than the growth rates for the
principal revenue sources of the General Fund. As a result, the State
experienced recurring budget deficits in the late 1980s and early 1990s.
The State Controller reported that expenditures exceeded revenues for four
of the five fiscal years ending with 1991-92. The State had an operating
surplus of approximately $109 million in 1992-93 and $836 million in 1993-
94. However, at June 30, 1994, according to the Department of Finance,
the State's Special Fund for Economic Uncertainties ("SFEU") still had a
deficit, on a budget basis, of approximately $1.8 billion.
The accumulated budget deficits over the past several years, together
with expenditures for school funding which have not been reflected in the
budget, and reduction of available internal borrowable funds, have
combined to significantly deplete the State's cash resources to pay its
ongoing expenses. In order to meet its cash needs, the State has had to
rely for several years on a series of external borrowings, including
borrowings past the end of a fiscal year. Such borrowings are expected to
continue in future fiscal years. To meet its cash flow needs in the 1994-
95 fiscal year the State issued, in July and August 1994, $4.0 billion of
revenue anticipation warrants which mature on April 25, 1996, and $3.0
billion of revenue anticipation notes which matured on June 28, 1995.
As a result of the deterioration in the State's budget and cash
situation, the rating agencies reduced the State's credit ratings.
Between October 1991 and July 1994, the rating on the State's general
obligation bonds was reduced by S&P from "AAA" to "A," by Moody's from
"Aaa" to "A1" and by Fitch from "AAA" to "A."
The 1994-95 Fiscal Year Budget (as updated in the January 10, 1995
Governor's Budget) is projected to have $41.9 billion of General Fund
revenues and transfers and $40.9 billion of budgeted expenditures. In
addition, the 1994-95 Budget Act anticipates deferring retirement of about
$1 billion of the accumulated budget deficit to the 1995-96 fiscal year
when it is intended to be fully retired by June 30, 1996.
The Governor's Budget for 1995-96 proposes General Fund revenues and
transfers of $44.1 billion and expenditures of $43.4 billion, which would
leave a balance of approximately $28 million in the budget reserve, the
SFEU, at June 30, 1996 after repayment of the accumulated budget deficits.
The Budget proposal is based on a number of assumptions, including receipt
of $473 million from the Federal government to offset costs of
undocumented and refugee immigrants.
On December 6, 1994, Orange County, California (the "County"),
together with its pooled investment funds (the "Funds") filed for
protection under Chapter 9 of the Federal Bankruptcy Code, after reports
that the Funds had suffered significant market losses in their
investments, causing a liquidity crisis for the Funds and the County.
More than 180 other public entities, most of which, but not all, are
located in the County, were also depositors in the Funds. As of mid-
January 1995, following a restructuring of most of the Funds' assets to
increase their liquidity and reduce their exposure to interest rate
increases, the County estimated the Funds' loss at about $1.69 billion, or
about 23% of their initial deposits of approximately $7.5 billion. Many
of the entities which deposited monies in the Funds, including the County,
are facing cash flow difficulties because of the bankruptcy filing and may
be required to reduce programs or capital projects. This also may effect
their ability to meet their outstanding obligations.
The State has no existing obligation with respect to any outstanding
obligations or securities of the County or any of the other participating
entities. However, in the event the County is unable to maintain county
administered State programs because of insufficient resources, it may be
necessary for the State to intervene, but the State cannot presently
predict what, if any, action may occur.
On January 17, 1994, an earthquake of the magnitude of an estimated
6.8 on the Richter Scale struck Los Angeles causing significant damage to
public and private structures and facilities. Although some individuals
and businesses suffered losses totaling in the billions of dollars, the
overall effect of the earthquake on the regional and State economy is not
expected to be serious.
State Finances. State moneys are segregated into the General Fund
and approximately 600 Special Funds. The General Fund consists of the
revenues received into the State Treasury and earnings from State
investments, which are not required by law to be credited to any other
fund. The General Fund is the principal operating fund for the majority
of governmental activities and is the depository of most major State
revenue sources.
The SFEU is funded with General Fund revenues and was established to
protect the State from unforeseen reduced levels of revenues and/or
unanticipated expenditure increases. Amounts in the SFEU may be
transferred by the Controller as necessary to meet cash needs of the
General Fund. The Controller is required to return moneys so transferred
without payment of interest as soon as there are sufficient moneys in the
General Fund. For budgeting and accounting purposes, any appropriation
made from the SFEU is deemed an appropriation from the General Fund. For
year-end reporting purposes, the Controller is required to add the balance
in the SFEU to the balance in the General Fund so as to show the total
monies then available for General Fund purposes.
Inter-fund borrowing has been used for many years to meet temporary
imbalances of receipts and disbursements in the General Fund. As of June
30, 1994, the General Fund had outstanding loans in the aggregate
principal amount of $5.2 billion, which consisted of $4.0 billion of
internal loans to the General Fund from the SFEU and other Special Funds
and $1.2 billion of external loans represented by the 1994 revenue
anticipation warrants.
Articles XIIIA and XIIIB to the State Constitution and Other Revenue
Law Changes. Prior to 1977, revenues of the State government experienced
significant growth primarily as a result of inflation and continuous
expansion of the tax base of the State. In 1978, State voters approved an
amendment to the State Constitution known as Proposition 13, which added
Article XIIIA to the State Constitution, reducing ad valorem local
property taxes by more than 50%. In addition, Article XIIIA provides that
additional taxes may be levied by cities, counties and special districts
only upon approval of not less than a two-thirds vote of the "qualified
electors" of such district, and requires not less than a two-thirds vote
of each of the two houses of the State Legislature to enact any changes in
State taxes for the purpose of increasing revenues, whether by increased
rate or changes in methods of computation.
Primarily as a result of the reductions in local property tax
revenues received by local governments following the passage of
Proposition 13, the Legislature undertook to provide assistance to such
governments by substantially increasing expenditures from the General Fund
for that purpose beginning in the 1978-79 fiscal year. In recent years,
in addition to such increased expenditures, the indexing of personal
income tax rates (to adjust such rates for the effects of inflation), the
elimination of certain inheritance and gift taxes and the increase of
exemption levels for certain other such taxes had a moderating impact on
the growth in State revenues. In addition, the State has increased
expenditures by providing a variety of tax credits, including renters' and
senior citizens' credits and energy credits.
The State is subject to an annual "appropriations limit" imposed by
Article XIIIB of the State Constitution adopted in 1979. Article XIIIB
prohibits the State from spending "appropriations subject to limitation"
in excess of the appropriations limit imposed. "Appropriations subject to
limitations" are authorizations to spend "proceeds of taxes," which
consist of tax revenues, and certain other funds, including proceeds from
regulatory licenses, user charges or other fees to the extent that such
proceeds exceed "the cost reasonably borne by such entity in providing the
regulation, product or service." One of the exclusions from these
limitations is "debt service" (defined as "appropriations required to pay
the cost of interest and redemption charges, including the funding of any
reserve or sinking fund required in connection therewith, on indebtedness
existing or legally authorized as of January 1, 1979 or on bonded
indebtedness thereafter approved" by the voters). In addition,
appropriations required to comply with mandates of courts or the Federal
government and, pursuant to Proposition 111 enacted in June 1990,
appropriations for qualified capital outlay projects and appropriations of
revenues derived from any increase in gasoline taxes and motor vehicle
weight fees above January 1, 1990 levels are not included as
appropriations subject to limitation. In addition, a number of recent
initiatives were structured or proposed to create new tax revenues
dedicated to certain specific uses, with such new taxes expressly exempted
from the Article XIIIB limits (e.g., increased cigarette and tobacco taxes
enacted by Proposition 99 in 1988). The appropriations limit also may be
exceeded in cases of emergency. However, unless the emergency arises from
civil disturbance or natural disaster declared by the Governor, and the
appropriations are approved by two-thirds of the Legislature, the
appropriations limit for the next three years must be reduced by the
amount of the excess.
The State's appropriations limit in each year is based on the limit
for the prior year, adjusted annually for changes in California per capita
personal income and changes in population, and adjusted, when applicable,
for any transfer of financial responsibility of providing services to or
from another unit of government. The measurement of change in population
is a blended average of statewide overall population growth, and change in
attendance at local school and community college ("K-14") districts. As
amended by Proposition 111, the appropriations limit is tested over
consecutive two-year periods. Any excess of the aggregate "proceeds of
taxes" received over such two-year periods above the combined
appropriations limits for those two years is divided equally between
transfers to
K-14 districts and refunds to taxpayers.
As originally enacted in 1979, the State's appropriations limit was
based on its 1978-79 fiscal year authorizations to expend proceeds of
taxes and was adjusted annually to reflect changes in cost of living and
population (using different definitions, which were modified by
Proposition 111). Commencing with the 1991-92 fiscal year, the State's
appropriations limit is adjusted annually based on the actual 1986-87
limit, and as if Proposition 111 had been in effect. The State
Legislature has enacted legislation to implement Article XIIIB which
defines certain terms used in Article XIIIB and sets forth the methods for
determining the State's appropriations limit. Government Code Section
7912 requires an estimate of the State's appropriations limit to be
included in the Governor's Budget, and thereafter to be subject to the
budget process and established in the Budget Act.
For the 1990-91 fiscal year, the State appropriations limit was $32.7
billion, and appropriations subject to limitation were $7.51 billion under
the limit. The limit for the 1991-92 fiscal year was $34.2 billion, and
appropriations subject to limitations were $3.8 billion under the limit.
The limit for the 1992-93 fiscal year was $35.01 billion, and the
appropriations subject to limitation were $7.53 billion under the limit.
The limit for the 1993-94 fiscal year was $36.60 billion, and the
appropriations subject to limitation were $6.55 billion under the limit.
The estimated limit for the 1994-95 fiscal year is $37.53 billion, and the
appropriations subject to limitations are estimated to be $5.83 billion
under the limit.
In November 1988, State voters approved Proposition 98, which changed
State funding of public education below the university level and the
operation of the State's appropriations limit, primarily by guaranteeing
K-14 schools a minimum share of General Fund revenues. Under Proposition
98 (as modified by Proposition 111, which was enacted in June 1990), K-14
schools are guaranteed the greater of (a) 40.3% of General Fund revenues
("Test 1"), (b) the amount appropriated to K-14 schools in the prior year,
adjusted for changes in the cost of living (measured as in Article XIIIB
by reference to California per capita personal income) and enrollment
("Test 2"), or (c) a third test, which would replace the second test in
any year when the percentage growth in per capita General Fund revenues
from the prior year plus .5% is less than the percentage growth in
California per capita personal income ("Test 3"). Under "Test 3," schools
would receive the amount appropriated in the prior year adjusted for
changes in enrollment and per capita General Fund revenues, plus an
additional small adjustment factor. If "Test 3" is used in any year, the
difference between "Test 3" and "Test 2" would become a "credit" to
schools which would be the basis of payments in future years when per
capita General Fund revenue growth exceeds per capita personal income
growth.
Proposition 98 permits the Legislature by two-thirds vote of both
houses, with the Governor's concurrence, to suspend the K-14 schools'
minimum funding formula for a one-year period. In the fall of 1989, the
Legislature and the Governor utilized this provision to avoid having 40.3%
of revenues generated by a special supplemental sales tax enacted for
earthquake relief go to K-14 schools. Proposition 98 also contains
provisions transferring certain State tax revenues in excess of the
Article XIIIB limit to K-14 schools.
The 1991-92 Budget Act, applying "Test 2" of Proposition 98,
appropriated approximately $18.4 billion for K-14 schools pursuant to
Proposition 98. During the course of the fiscal year, revenues proved to
be substantially below expectations. By the time the Governor's Budget
was introduced in January 1992, it became clear that per capita growth in
General Fund revenues for 1991-92 would be far smaller than the growth in
California per capita personal income and the Governor's Budget therefore
reflected a reduction in Proposition 98 funding in 1991-92 by applying
"Test 3" rather than "Test 2."
In response to the changing revenue situation and to fully fund the
Proposition 98 guarantee in both the 1991-92 and 1992-93 fiscal years
without exceeding it, the Legislature enacted several bills as part of the
1992-93 budget package which responded to the fiscal crisis in education
funding. Fiscal year 1991-92 Proposition 98 appropriations for K-14
schools were reduced by $1.083 billion. In order to not adversely impact
cash received by school districts, however, a short-term loan was
appropriated from the non-Proposition 98 State General Fund. The
Legislature then appropriated $16.6 billion to K-14 schools for 1992-93
(the minimum guaranteed by Proposition 98), but designated $1.083 billion
of this amount to "repay" the prior year loan, thereby reducing cash
outlays in 1992-93 by that amount. In addition to reducing the 1991-92
fiscal year appropriations for K-14 schools by $1.083 billion and
converting the amount to a loan (the "inter-year adjustment"), Chapter
703, Statutes of 1992 also made an adjustment to "Test 1," based on the
additional $1.2 billion of local property taxes that were shifted to
schools and community colleges. The "Test 1" percentage changed from 40%
to 37%. Additionally, Chapter 703 contained a provision that if an
appellate court should determine that the "Test 1" recalculation or the
inter-year adjustment is unconstitutional, unenforceable or invalid,
Proposition 98 would be suspended for the 1992-93 fiscal year, with the
result that K-14 schools would receive the amount intended by the 1992-93
Budget Act compromise.
The State Controller stated in October 1992 that, because of a
drafting error in Chapter 703, he could not implement the $1.083 billion
reduction of the 1991-92 school funding appropriation, which was part of
the inter-year adjustment. The Legislature untimely enacted corrective
legislation as part of the 1993-94 Budget package to implement the $1.083
billion inter-year adjustment as originally intended.
In the 1992-93 Budget Act, a new loan of $732 million was made to K-
12 schools in order to maintain per-average daily attendance ("ADA")
funding at the same level as 1991-92, at $4,187. An additional loan of
$241 million was made to community college districts. These loans are to
be repaid from future Proposition 98 entitlements. (The teachers'
organization lawsuit discussed above also seeks to declare invalid the
provision making the $732 million a loan "repayable" from future years'
Proposition 98 funds. Including both State and local funds, and adjusting
for the loans and repayments, on a cash basis, total Proposition 98 K-12
funding in 1992-93 increased to $21.5 billion, 2.4% more than the amount
in 1992-93 ($21.0 billion).
Based on revised State tax revenues and estimated decreased reported
pupil enrollment, the 1993-94 Budget Act projected that the 1992-93
Proposition 98 Budget Act appropriations of $16.6 billion exceeded a
revised minimum guarantee by $313 million. As a result, the 1993-94
Budget Act reverted $25 million in 1992-93 appropriations to the General
Fund. Limiting the reversion to this amount ensures that per ADA funding
for general purposes will remain at the prior year level of $4,217 per
pupil. The 1993-94 Governor's Budget subsequently proposed deficiency
funding of $121 million for school apportionments and special education,
increasing funding per pupil in 1992-93 to $4,244. The 1993-94 Budget Act
also designated $98 million in 1992-93 appropriations toward satisfying
prior years' guarantee levels, an obligation that resulted primarily from
updating State tax revenues for 1991-92, and designates $190 million as a
loan repayable from 1993-94 funding.
The 1993-94 Budget Act projected the Proposition 98 minimum funding
level at $13.5 billion based on the "Test 3" calculation where the
guarantee is determined by the change in per capita growth in General Fund
revenues, which are projected to decrease on a year-over-year basis. This
amount also takes into account increased property taxes transferred to
school districts from other local governments.
Legislation accompanying the 1993-94 Budget Act (Chapter 66/93)
provided a new loan of $609 million to K-12 schools in order to maintain
per ADA funding at $4,217 and a loan of $178 million to community
colleges. These loans have been combined with the K-14 1992-93 loans into
one loan totalling $1.760 billion. Repayment of this loan would be from
future years' Proposition 98 entitlements, and would be conditioned on
maintaining current funding levels per pupil for K-12 schools. Chapter 66
also reduced the "Test 1" percentage to 35% to reflect the property tax
shift among local government agencies.
The 1994-95 Budget Act appropriated $14.4 billion of Proposition 98
funds for K14 schools based on Test 2. This exceeds the minimum
Proposition 98 guarantee by $8 million to maintain K-12 funding per pupil
at $4,217. Based upon updated State revenues, growth rates and inflation
factors, the 1994-95 Budget Act appropriated an additional $286 million
within Proposition 98 for the 1993-94 fiscal year, to reflect a need in
appropriations for school districts and county offices of education, as
well as an anticipated deficiency in special education fundings. These
and other minor appropriation adjustments increase the 1993-94 Proposition
98 guarantee to $13.8 billion, which exceeds the minimum guarantee in that
year by $272 million and provides per pupil funding of $4,225.
The 1995-96 Governor's Budget adjusts the 1993-94 minimum guarantee
to reflect changes in enrollment and inflation, and 1993-94 Proposition 98
appropriations were increased to $14.1 billion, primarily to reflect
changes in the statutory continuous appropriation for apportionments. The
revised appropriations now exceed the minimum guarantee by $32 million.
This appropriation level still provides per-pupil funding of $4,225.
The 1994-95 Proposition 98 minimum guarantee also has been adjusted
for changes in factors described above, and is now calculated to be $14.9
billion. Within the minimum guarantee, the dollars per pupil have been
maintained at the prior year's level; consequently, the 1994-95 minimum
guarantee now includes a loan repayment of $135 million, and the per-pupil
funding increases to $4,231.
The 1995-96 Governor's Budget proposes to appropriate $15.9 billion
of Proposition 98 funds to K-14 to meet the guarantee level. Included
within the guarantee is a loan repayment of $379 million for the combined
outstanding loans of $1.76 billion. Funding per pupil is estimated to
increase by $61 over 1994-95 to $4,292.
Sources of Tax Revenue. The California personal income tax, which in
1992-93 contributed about 44% of General Fund revenues, is closely modeled
after the Federal income tax law. It is imposed on net taxable income
(gross income less exclusions and deductions). The tax is progressive
with rates ranging from 1% to 11%. Personal, dependent, and other credits
are allowed against the gross tax liability. In addition, taxpayers may
be subject to an alternative minimum tax ("AMT") which is much like the
Federal AMT. This is designed to ensure that excessive use of tax
preferences does not reduce taxpayers' liabilities below some minimum
level. Legislation enacted in July 1991 added two new marginal tax rates,
at 10% and 11%, effective for tax years 1991 through 1995. After 1995,
the maximum personal income tax rate is scheduled to return to 9.3%, and
the AMT rate is scheduled to drop from 8.5% to 7%.
The personal income tax is adjusted annually by the change in the
consumer price index to prevent taxpayers from being pushed into higher
tax brackets without a real increase in income.
The sales tax is imposed upon retailers for the privilege of selling
tangible personal property in California. Most retail sales and leases
are subject to the tax. However, exemptions have been provided for
certain essentials such as food for home consumption, prescription drugs,
gas, electricity and water. Sales tax accounted for about 35% of General
Fund revenue in 1993-94. Bank and corporation tax revenues comprised
about 12% of General Fund revenue in 1993-94. In 1989, Proposition 99
added a 25 cents per pack excise tax on cigarettes, and a new equivalent
excise tax on other tobacco products. Legislation enacted in 1993 added
an additional 2 cents per pack for the purpose of funding breast cancer
research.
General Financial Condition of the State. In the years following
enactment of the Federal Tax Reform Act of 1986, and conforming changes to
the State's tax laws, taxpayer behavior became more difficult to predict,
and the State experienced a series of fiscal years in which revenue came
in significantly higher or lower than original estimates. The 1989-90
fiscal year ended with revenues below estimates and the SFEU was fully
depleted by June 30, 1990. This date essentially coincided with the date
of the most recent recession, and the State subsequently accumulated a
budget deficit in the SFEU approaching $2.8 billion at its peak. The
State's budget problems in recent years also have been caused by a
structural imbalance which has been identified by the current and previous
Administrations. The largest General Fund programs -- K-14 education,
health, welfare and corrections -- were increasing faster than the revenue
base, driven by the State's rapid population increases.
Starting in the 1990-91 fiscal year, each budget required
multibillion dollar actions to bring projected revenues and expenditures
into balance and to close large "budget gaps" which were identified. The
Legislature and Governor eventually agreed on significant cuts in program
expenditures, some transfers of program responsibilities and funding from
the State to local governments, revenue increases (particularly in the
1991-92 fiscal year budget), and various one-time adjustments and
accounting changes. However, as the recession took hold and deepened
after the summer of 1990, revenues dropped sharply and expenditures for
health and welfare programs increased as job losses mounted, so that the
State ended each of the 1990-91 and 1991-92 fiscal years with an
unanticipated deficit in the budget reserve, the SFEU, as compared to
projected positive balances.
As a result of the revenue shortfalls accumulating for the previous
two fiscal years, the Controller in April 1992 indicated that cash
resources (including borrowing from Special Funds) would not be sufficient
to meet all General Fund obligations due on June 30 and July 1, 1992. On
June 25, 1992, the Controller issued $475 million of 1992 Revenue
Anticipation Warrants (the "1992 Warrants") in order to provide funds to
cover all necessary payments from the General Fund at the end of the 1991-
92 fiscal year and on July 1, 1992. The 1992 Warrants were paid on July
24, 1992. In addition to the 1992 Warrants, the Controller reported that
as of June 30, 1992, the General Fund had borrowed $1.336 billion from the
SFEU and $4.699 billion from other Special Funds, using all but about $183
million of borrowable cash resources.
To balance the 1992-93 Governor's Budget, program reductions
totalling $4.365 billion and a revenue and transfer increase of $872
million were proposed for the 1991-92 and 1992-93 fiscal years. Economic
performance in the State continued to be sluggish after the 1992-93
Governor's Budget was prepared. By the time of the "May Revision," issued
on May 20, 1992, the Administration estimated that the 1992-93 Budget
needed to address a gap of about $7.9 billion, much of which was needed to
repay the accumulated budget deficits of the previous two years.
The severity of the budget actions needed led to a long delay in
adopting the budget. With the failure to enact a budget by July 1, 1992,
the State had no legal authority to pay many of its vendors until the
budget was passed. Starting on July 1, 1992, the Controller was required
to issue "registered warrants" in lieu of normal warrants backed by cash
to pay many State obligations. Available cash was used to pay
constitutionally mandated and priority obligations, such as debt service
on bonds and revenue anticipation warrants. Between July 1 and September
4, 1992, the Controller issued an aggregate of approximately $3.8 billion
of registered warrants payable from the General Fund, all of which were
called for redemption by September 4, 1992 following enactment of the
1992-93 Budget Act and issuance by the State of $3.3 billion of interim
notes.
The Legislature enacted the 1992-93 Budget Bill on August 29, 1992,
and it was signed by the Governor on September 2, 1992. The 1992-93
Budget Act provided for expenditures of $57.4 billion and consisted of
General Fund expenditures of $40.8 billion and Special Fund and Bond Fund
expenditures of $16.6 billion. The Department of Finance estimated a
balance in the SFEU of $28 million on June 30, 1993.
The $7.9 billion budget gap was closed primarily through cuts in the
program expenditures (principally for health and welfare programs, aid to
schools and support for higher education), together with some increases in
revenues from accelerated collections and changes in tax laws to confirm
to Federal law changes, and a variety of on-time inter-fund transfers and
deferrals. The other major component of the budget compromise was a law
requiring local governments to transfer a total of $1.3 billion to K-12
school and community college districts, thereby reducing by that amount
General Fund support for those districts under Proposition 98.
In May 1993, the Department of Finance projected that the General
Fund would end the fiscal year on June 30, 1993 with an accumulated budget
deficit of about $2.8 billion, and a negative fund balance of about $2.2
billion (the difference being certain reserves for encumbrances and school
funding costs). As a result, the State issued $5 billion of revenue
anticipation notes and warrants.
The Governor's 1993-94 Budget, introduced on January 8, 1993,
proposed General Fund expenditures of $37.3 billion, with projected
revenues of $39.9 billion. It also proposed Special Fund expenditures of
$12.4 billion and Special Fund revenues of $12.1 billion. The 1993-94
fiscal year represented the third consecutive year the Governor and the
Legislature were faced with a very difficult budget environment, requiring
revenue actions and expenditure cuts totaling billions of dollars to
produce a balanced budget. To balance the budget in the face of declining
revenues, the Governor proposed a series of revenue shifts from local
government, reliance on increased Federal aid and reductions in state
spending.
The "May Revision" of the Governor's Budget, released on May 20,
1993, indicated that the revenue projections of the January Budget
Proposal were tracking well, with the full year 1992-93 about $80 million
higher than the January projection. Personal income tax revenue was
higher than projected, sales tax was close to target, and bank and
corporation taxes were lagging behind projections. The May Revision
projected the State would have an accumulated deficit of about $2.75
billion by June 30, 1993. The Governor proposed to eliminate this deficit
over an 18-month period. He also agreed to retain the 0.5% sales tax
scheduled to expire June 30 for a six-month period, dedicated to local
public safety purposes, with a November election to determine a permanent
extension. Unlike previous years, the Governor's Budget and May Revision
did not calculate a "gap" to be closed, but rather set forth revenue and
expenditure forecasts and proposals designed to produce a balanced budget.
The 1993-94 Budget Act was signed by the Governor on June 30, 1993,
along with implementing legislation. The Governor vetoed about $71
million in spending. With enactment of the Budget Act, the State carried
out its regular cash flow borrowing program for the fiscal year, which
included the issuance of approximately $2 billion of revenue anticipation
notes that matured on June 28, 1994.
The 1993-94 Budget Act was predicated on General Fund revenues and
transfers estimated at $40.6 billion, about $700 million higher than the
January Governor's Budget, but still about $400 million below 1992-93 (and
the second consecutive year of actual decline). The principal reasons for
declining revenues were the continued weak economy and the expiration (or
repeal) of three fiscal steps taken in 1991--a half cent temporary sales
tax, a deferral of operating loss carry forwards, and repeal by initiative
of a sales tax on candy and snack foods.
The 1993-94 Budget Act also assumed Special Fund revenues of $11.9
billion, an increase of 2.9% over 1992-93.
The 1993-94 Budget Act included General Fund expenditures of $38.5
billion (a 6.3% reduction from projected 1992-93 expenditures of $41.1
billion), in order to keep a balanced budget within the available
revenues. The Budget also included Special Fund expenditures of $12.1
billion, a 4.2% increase.
The 1993-94 Budget Act contained no General Fund tax/revenue
increases other than a two year suspension of the renters' tax credit.
Administration reports during the course of the 1993-94 fiscal year
indicated that while economic recovery appeared to have started in the
second half of the fiscal year, recessionary conditions continued longer
than had been anticipated when the 1993-94 Budget Act was adopted.
Overall, revenues for the 1993-94 fiscal year were about $800 million
lower than original projections, and expenditures were about $780 million
higher, primarily because of higher health and welfare caseloads, lower
property taxes which require greater State support for K-14 education to
make up to shortfall, and lower than anticipated Federal government
payments for immigration-related costs. The reports in May and June 1994,
indicated that revenues in the second half of the 1993-94 fiscal year were
very close to the projections made in the Governor's Budget of January 10,
1994, which was consistent with a slow turn around in the economy.
The Department of Finance's July 1994 Bulletin, which included final
June receipts, reported that June revenues were $114 million (2.5%) above
projection, with final end-of-year results at $377 million (about 1%)
above the May Revision projections. Part of this result was due to the
end-of-year adjustments and reconciliations. Personal income tax and
sales tax continued to track projections. The largest factor in the
higher than anticipated revenues was from bank and corporation taxes,
which were $140 million (18.4%) above projection in June.
During the 1993-94 fiscal year, the State implemented the Deficit
Retirement Plan, which was part of the 1993-94 Budget Act, by issuing $1.2
billion of revenue anticipation warrants in February 1994 that matured
December 21, 1994. This borrowing reduced the cash deficit at the end of
the 1993-94 fiscal year. Nevertheless, because of the $1.5 billion
variance from the original 1993-94 Budget Act assumptions, the General
Fund ended the fiscal year at June 30, 1994 carrying forward an
accumulated deficit of approximately $1.8 billion.
Because of the revenue shortfall and the State's reduced internal
borrowable cash resources, in addition to the $1.2 billion of revenue
anticipation warrants issued as part of the Deficit Retirement Plan, the
State issued an additional $2.0 billion of revenue anticipation warrants
that matured July 26, 1994, which were needed to fund the State's
obligations and expenses through the end of the 1993-94 fiscal year.
The 1994-95 fiscal year represented the fourth consecutive year the
Governor and Legislature were faced with a very difficult budget
environment to produce a balanced budget. Many program cost and budgetary
adjustments had already been made in the last three years. The Governor's
Budget Proposal, as updated in May and June 1994, recognized that the
accumulated deficit could not be repaid in one year, and proposed a two-
year solution. The budget proposal set forth revenue and expenditure
forecasts and revenue and expenditure proposals which estimated operating
surpluses for the budget for both 1994-95 and 1995-96, and lead to the
elimination of the accumulated budget deficit, estimated at about $1.8
billion at June 30, 1994, by June 30, 1996.
The 1994-95 Budget Act, signed by the Governor on July 8, 1994,
projected revenues and transfers of $41.9 billion, $2.1 billion higher
than revenues in 1993-94. This reflected the Administration's forecast of
an improving economy. Also included in this figure was the projected
receipt of about $360 million from the Federal government to reimburse the
State's cost of incarcerating undocumented immigrants, most of which
eventually was not received.
The 1994-95 Budget Act projected Special Fund revenues of $12.1
billion, a decrease of 2.4% from 1993-94 estimated revenues.
The 1994-95 Budget Act projected General Fund expenditures of $40.9
billion, an increase of $1.6 billion over the 1993-94 fiscal year. The
1994-95 Budget Act also projected Special Fund expenditures of $13.7
billion, a 5.4% increase over 1993-94 fiscal year estimated expenditures.
The 1994-95 Budget Act contained no tax increases. Under legislation
enacted for the 1993-94 Budget Act, the renters' tax credit was suspended
for two years (1993 and 1994). A ballot proposition to permanently
restore the renters' tax credit after 1995 failed at the June 1994
election. The Legislature enacted a further one-year suspension of the
renters' tax credit, for 1995, saving about $390 million in the 1995-96
fiscal year.
The 1994-95 Budget Act assumed that the State would use a cash flow
borrowing program in 1994-95 which combines one-year notes and two-year
warrants, which were issued. Issuance of the warrants allows the State to
defer repayment of approximately $1.0 billion of its accumulated budget
deficit into the 1995-96 fiscal year. The Budget Adjustment Law enacted
along with the 1994-95 Budget Act is designed to ensure that the warrants
will be repaid in the 1995-96 fiscal year.
Reports by the Department of Finance in May, 1995 indicate that, with
economic recovery well underway in the State, General Fund revenues for
the entire 1994-95 fiscal year were above projections, and expenditures
were below projections because of slower than anticipated health/welfare
caseload growth and school enrollments. The aggregate effect improved the
budget picture by about $500 million, leaving an estimated budget deficit
of about $630 million at June 30, 1995.
For the first time in four years, the State enters the upcoming 1995-
96 fiscal year with strengthening revenues based on an improving economy.
On January 10, 1995, the Governor presented his 1995-96 Fiscal Year Budget
Proposal (the "Proposed Budget"). The Proposed Budget estimates General
Fund revenues and transfers of $42.5 billion (an increase of 0.2% over
1994-95). This nominal increase from 1994-95 fiscal year reflects the
Governor's realignment proposal and the first year of his tax cut
proposal. Without these two proposals, General Fund revenues would be
projected at approximately $43.8 billion, or an increase of 3.3% over
1994-95. Expenditures are estimated at $41.7 billion (essentially
unchanged from 1994-95). Special Fund revenues are estimated at $13.5
billion (10.7% higher than 1994-95) and Special Fund expenditures are
estimated at $13.8 billion (12.2% higher than 1994-95). The Proposed
Budget projects that the General Fund will end the fiscal year at June 30,
1996 with a budget surplus in SFEU of about $92 million, or less than 1%
of General Fund expenditures, and will have repaid all of the accumulated
budget deficits.
Recent Economic Trends. Revised employment data indicate that
California's recession ended in 1993, and following a period of stability,
a solid recovery is now underway. The State's unemployment rate fell from
9.2% in fiscal 1993 to 8.6% in fiscal 1994. The national unemployment
rate in 1994 was 6.1%. The number of employed Californians increased more
than 250,000 during fiscal 1994.
Other indicators, including retail sales, homebuilding activity,
existing home sales and bank lending volume all confirm the State's
recovery.
Personal income was severely affected by the Northridge Earthquake,
which reduced the first quarter 1994 figure by $22 billion at an annual
rate, reflecting the uninsured damage to residences and unincorporated
businesses. As a result, personal income growth for all of 1994 was about
2.8%. However, excluding the Northridge effects, growth would have been
in excess of 3%.
APPENDIX B
INFORMATION ABOUT SECURITIES RATINGS
The following are excerpts from Description of Moody's Investors'
Service, Inc. ("Moody's) municipal bond ratings. Aaa -- judged to be of
the "best quality" and are referred to as "gilt edge"; interest payments
are protected by a large or by an exceptionally stable margin and
principal is secure; Aa -- judged to be of "high quality by all
standards," but as to which margins of protection or other elements make
long-term risks appear somewhat larger than Aaa-rated Municipal Bonds;
together with Aaa group they comprise what are generally known as "high
grade bonds"; A -- possess many favorable investment attributes and are
considered "upper medium grade obligations." Factors giving security to
principal and interest of A-rated Municipal Bonds are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future; Baa --considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured; interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time.
Moody's applies the numerical modifiers 1, 2 and 3 in each generic
rating classification from Aa through Baa to indicate ranking within a
general rating category; 1 being the highest and 3 the lowest.
Description of Moody's ratings of state and municipal notes. Moody's
ratings for state and municipal notes and other short-term obligations are
designated Moody's Investment Grade ("MIG") and for variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG").
This distinction recognizes the differences between short-term credit risk
and long-term risk. Symbols used will be as follows: MIG 1/VMIG 1 --best
quality, enjoying strong protection for established cash flows of funds
for their servicing or from established and broad-based access to the
market for refinancing, or both; MIG 2/VMIG 2 -- high quality, with
margins of protection ample although not so large as in the preceding
group; MIG 3/VMIG 3 --favorable quality, with all security elements
accounted for but lacking the undeniable strength of the preceding grades.
Description of Moody's commercial paper ratings. PRIME-1 ("P-1") --
judged to be of the best quality. Their short-term debt obligations carry
the smallest degree of investment risk; PRIME-2 -- indicates a strong
capacity for repayment, but to a lesser degree than 1.
Description of Standard & Poors ("S&P") Municipal Bond ratings. AAA -
- - has the highest rating assigned by S&P; extremely strong capacity to pay
principal and interest; AA -- has very strong capacity to pay interest
and repay principal and differs from the higher rated issues only in a
small degree; A -- has a strong capacity to pay principal and interest,
although somewhat more susceptible to adverse changes in circumstances and
economic conditions; BBB -- regarded as having an adequate capacity to pay
principal and interest; normally exhibit adequate protection parameters
but adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity to pay principal and interest than for
bonds in the A category. Ratings may be modified by the addition of a
plus or minus sign to show relative standing within the major rating
categories, except in the AAA category.
Description of S&P's ratings of municipal note issues. SP-1+ -- very
strong capacity to pay principal and interest; SP-1 --strong capacity to
pay principal and interest; SP-2 --satisfactory capacity to pay principal
and interest.
Description of S&P's commercial paper ratings. A-1+ --indicates an
overwhelming degree of safety regarding timely payment; A-1 -- indicates a
very strong degree of safety regarding timely payment; A-2 -- indicates a
strong capacity for timely payment but with a relative degree of safety
not as overwhelming as for issues designated A-1.
Description of IBCA Limited/IBCA Inc. commercial paper ratings.
Short-term obligations, including commercial paper, rated A-1+ by IBCA
Limited or its affiliate IBCA Inc. are obligations supported by the
highest capacity for timely repayment. Obligations rated A-1 have a very
strong capacity for timely repayment. Obligations rated A-2 have a strong
capacity for timely repayment, although such capacity may be susceptible
to adverse changes in business, economic or financial conditions.
Description of Fitch Investors Services, Inc. commercial paper
ratings. Fitch Investors Services, Inc. employs the rating F-1+ to
indicate issues regarded as having the strongest degree of assurance for
timely payment. The rating F-1 reflects an assurance of timely payment
only slightly less in degree than issues rated F-1+, while the rating F-2
indicates a satisfactory degree of assurance for timely payment, although
the margin of safety is not as great as indicated by the F-1+ and F-1
categories.
Description of Duff & Phelps Inc. commercial paper ratings. Duff &
Phelps Inc. employs the designation of Duff 1 with respect to top grade
commercial paper and bank money instruments. Duff 1+ indicates the
highest certainty of timely payment: short-term liquidity is clearly
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations. Duff 1-indicates high certainty of timely payment. Duff 2
indicates good certainty of timely payment: liquidity factors and company
fundamentals are sound.
Various of the nationally recognized statistical rating organizations
("NRSROs") utilize rankings within rating categories indicated by a + or -
. The Fund, in accordance with industry practice, recognizes such
rankings within categories as graduations, viewing for example S&P's
rating of A-1+ and A-1 as being in S&P's highest rating category.
Description of Thomson BankWatch, Inc. ("BankWatch") commercial paper
ratings. BankWatch will assign both short-term debt ratings and issuer
ratings to the issuers it rates. BankWatch will assign a short-term rating
("TBW-1," "TBW-2," "TBW-3," or "TBW-4") to each class of debt (e.g.,
commercial paper or non-convertible debt), having a maturity of one-year
or less, issued by a holding company structure or an entity within the
holding company structure that is rated by BankWatch. Additionally,
BankWatch will assign an issuer rating ("A," "A/B," "B," "B/C," "C,"
"C/D," "D," "D/E," and "E") to each issuer that it rates.
PORTFOLIO OF INVESTMENTS
DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND JUNE 30, 1995
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 97.4%
CALIFORNIA -- 97.4%
$ 900,000 Anaheim, California, Multifamily Housing Reve-
nue,
4.050% due 08/01/20+ $ 900,000
California Educational Facilitiies Authority
Revenue,
200,000 8.625% due 01/01/16++ 208,165
1,200,000 9.125% due 02/01/16++ 1,256,184
100,000 California Housing Finance Authority Revenue,
3.950% due 07/15/13+ 100,000
California Health Facilities Authority Revenue:
400,000 (Granada Medical Project),
4.250% due 01/01/15+ 400,000
200,000 (Pooled Loan Program),
4.050% due 10/01/10+ 200,000
(Saint Joseph):
750,000 4.500% due 08/01/17++ 750,000
95,000 4.100% due 07/01/13+ 95,000
California Pollution Control Financing Author-
ity, Pollution Control Revenue:
1,150,000 (Champlin Petroleum),
4.550% due 06/01/03++ 1,150,000
(South Down, Inc.):
400,000 3.400% due 02/15/98++++ 400,000
300,000 3.400% due 04/15/98++++ 300,000
Series B:
200,000 (Shell Oil Co.),
4.050% due 10/01/11++++ 200,000
300,000 (Rocklin),
4.300% due 06/01/17+ 300,000
200,000 (Delano),
4.250% due 08/01/19+ 200,000
100,000 Series C, (Shell Oil Co.),
4.050% due 11/01/00+ 100,000
1,000,000 Series E, (Pacific Gas and Electricity),
4.200% due 07/13/95++++ 1,000,000
500,000 (Southern California Edison Inc.), Series D,
3.200% due 03/01/08++ 500,000
California Statewide, Community Development
Revenue:
200,000 3.850% due 08/01/19+ 200,000
675,000 3.850% due 06/01/04++ 675,000
100,000 Concord, California, Multifamily Housing Reve-
nue,
3.950% due 07/15/18+ 100,000
800,000 Contra Costa, California, Transportation Au-
thority,
3.900% due 03/01/09++ 800,000
700,000 East Bay, California, Municipal Utillity Dis-
trict,
7.000% due 03/01/08++ 729,461
490,000 Healdsburg, California, Community
Redevelopment Agency,
4.200% due 01/01/98+ 490,000
450,000 Huntington Park, California, Redevelopment
Agency,
5.100% due 08/01/15++ 449,195
300,000 Kern County, California, Certificates of Par-
ticipation, Series D,
3.900% due 08/01/06+ 300,000
1,000,000 Long Beach, California, Harbor Department Reve-
nue, Series A-2,
4.150% due 03/04/23++ 1,000,000
100,000 Los Angeles, California, Community Development
Agency, Multifamily Housing Revenue,
3.95% due 07/01/15++ 100,000
400,000 Los Angeles, California, Transportation Author-
ity, Regional Airports, Series E,
4.350% due 12/01/24+ 400,000
500,000 Los Angeles County, California, Local Tax
and Revenue Anticipation Notes,
4.500% due 07/01/96++ 503,350
1,350,000 Los Angeles, California, Local Transportation
Authority,
4.500% due 07/06/95 1,350,134
100,000 Los Angeles County, California, Multifamily
Housing Authority, (Poinsettia Project),
3.850% due 07/01/19+ 100,000
1,000,000 Metropolitan Water District,
5.000% due 04/25/96++ 1,005,956
400,000 Monterey Peninsula, California,
Water Managment District,
4.350% due 07/01/22+ 400,000
1,500,000 Northern California Power Agency,
9.750% due 07/01/08++ 1,530,001
400,000 Ontario, California, Multifamily Housing Au-
thority, (Vineyard Project),
4.050% due 12/01/05+ 400,000
400,000 Palm Springs, California, Community
Redevelopment Agency,
4.550% due 12/01/14++ 400,000
675,000 Rincon Del Diablo, California, Water District,
4.350% due 02/01/15++ 675,000
500,000 Sacramento County, California, Certificates of
Participation,
3.650% due 06/01/20+ 500,000
200,000 Sacramento County, California, Multifamily
Housing Revenue, Series A,
4.100% due 04/15/07+ 200,000
500,000 Sacramento County, California, Municipal Util-
ity District,
4.050% due 07/17/95 500,000
735,000 San Diego, California, Multifamily Housing Rev-
enue, (Market Street Square Project),
4.350% due 11/01/25+ 735,000
500,000 San Francisco, California,
Bay Area Rapid Transit Authority,
(737 Post Project), Series D
8.750% due 07/01/04++ 515,001
250,000 Santa Cruz County, California, Industrial De-
velopment Authority,
3.850% due 11/01/18+ 250,000
TOTAL INVESTMENTS
(Cost $22,367,447*) 97.4% 22,367,447
OTHER ASSETS AND LIABILITIES (NET) 2.6 600,130
NET ASSETS 100.0% $22,967,577
<FN>
* Aggregate cost for Federal tax purposes.
+ Variable rate demand bonds payable upon not more than seven calendar
days' notice. The interest rate shown reflects the rate currently in
effect.
++ Put bonds and notes have demand features to mature within one year.
+++ Variable daily demand notes are payable upon not more than one busi-
ness day's notice. The interest rate shown reflects the rate cur-
rently in effect.
++++ Variable daily demand notes are payable upon not more than 30 calen-
dar days' notice. The interest rate shown reflects the rate currently
in effect.
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF ASSETS AND LIABILITIES
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS JUNE 30, 1995
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
<S> <C> <C> <C>
ASSETS
Investments, at value
(Cost $22,367,447, $102,632,371 and
$29,815,343, respectively) (Note 1)
See accompanying schedules $22,367,447 $102,632,371 $ 29,815,343
Cash -- 13,488 177,364
Interest receivable 321,211 636,046 264,116
Receivable for Fund shares sold 1,042,363 1,559,769 89,796
TOTAL ASSETS 23,731,021 104,841,674 30,346,619
LIABILITIES
Payable for investment securities purchased 503,350 3,200,000 493,418
Dividends payable 9,772 94,261 20,038
Payable for Fund shares redeemed 216,722 212,589 22,682
Investment management fee payable (Note 2) 20,307 84,998 16,292
Due to custodian 9,353 -- --
Accrued Trustees' fees and expenses (Note 2) 758 3,381 758
Distribution fee payable (Note 3) 3,182 15,405 3,965
TOTAL LIABILITIES 763,444 3,610,634 557,153
NET ASSETS $22,967,577 $101,231,040 $ 29,789,466
NET ASSETS CONSIST OF:
ACCUMULATED NET REALIZED GAIN/
(LOSS) ON INVESTMENTS SOLD $ (233) $ (51,059) $ 339
PAID-IN CAPITAL 22,967,810 101,282,099 29,789,127
TOTAL NET ASSETS $22,967,577 $101,231,040 $ 29,789,466
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS JUNE 30, 1995
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
<S> <C> <C> <C>
NET ASSETS:
Investor Shares $ 15,537,878 $ 75,746,221 $ 21,739,314
Class R Shares $ 7,429,699 $ 25,484,819 $ 8,050,152
SHARES OUTSTANDING:
Investor Shares 15,537,767 75,797,831 21,739,067
Class R Shares 7,429,644 25,501,860 8,050,060
NET ASSET VALUE:
INVESTOR SHARES
Net asset value, offering and redemption price
per share of beneficial interest outstanding $ 1.00 $ 1.00 $ 1.00
CLASS R SHARES
Net asset value, offering and redemption price
per share of beneficial interest outstanding $ 1.00 $ 1.00 $ 1.00
</TABLE>
STATEMENTS OF OPERATIONS
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 973,443 $ 4,113,322 $ 511,298
EXPENSES
Investment management fee (Note 2) 90,816 397,565 48,800
Distribution fee (Note 3) 38,346 222,784 20,798
Trustees' fees and expenses (Note 2) 2,069 9,343 1,308
Total expenses 131,231 629,692 70,906
NET INVESTMENT INCOME 842,212 3,483,630 440,392
NET REALIZED GAIN
ON INVESTMENTS (Note 1)
Net realized gain on investments sold during
the period 6 977 349
NET INCREASE IN NET ASSETS RESULTING FROM OPER-
ATIONS $ 842,218 $ 3,484,607 $ 440,741
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
<S> <C> <C> <C>
Net investment income $ 842,212 $ 3,483,630 $ 440,392
Net realized gain on investments sold during
the year 6 977 349
Net increase in net assets resulting from oper-
ations 842,218 3,484,607 440,741
Distributions to shareholders from net invest-
ment income:
Investor shares (468,028) (2,605,776) (248,024)
Class R shares (374,184) (877,854) (192,368)
Net increase/(decrease) in net assets from Fund
share transactions (Note 4):
Investor shares (1,631,735) (10,764,289) 13,727,989
Class R shares (2,316,810) 5,659,254 2,591,101
Net increase/(decrease) in net assets (3,948,539) (5,104,058) 16,319,439
NET ASSETS:
Beginning of year 26,916,116 106,335,098 13,470,027
End of year $ 22,967,577 $ 101,231,040 $ 29,789,466
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
FOR THE YEAR OR PERIOD ENDED JUNE 30, 1994
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND* MONEY FUND MONEY FUND*
<S> <C> <C> <C>
Net investment income $ 346,378 $ 2,167,350 $ 204,215
Net realized loss on investments sold during
the year -- (1,311) --
Net increase in net assets result from opera-
tions 346,378 2,166,039 204,215
Distributions to shareholders from net invest-
ment income:
Investor Shares (198,324) (1,317,812) (124,785)
Trust Shares (118,164) (371,662) (78,946)
Institutional Shares (29,890) (477,876) (484)
Net increase/(decrease) in net assets from Fund
share transactions (Note 4):
Investor Shares (3,450,010) (21,462,072) (1,409,966)
Trust Shares 3,338,359 186,693 (2,241,040)
Net decrease in net assets (111,651) (21,276,690) (3,651,006)
NET ASSETS:
Beginning of year 27,027,767 127,611,788 17,121,033
End of year (including undistributed net in-
vestment income of $399 for the Dreyfus/Laurel
California Tax-Free Money Fund) $ 26,916,116 $ 106,335,098 $ 13,470,027
<FN>
* The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30.
</TABLE>
See Notes to Financial Statements.
[This Page Intentionally Left Blank]
FINANCIAL HIGHLIGHTS
DREYFUS BASIC CALIFORNIA MUNICIPAL MONEY MARKET FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD*
Reference is made to Page 5 of the Fund's Prospectus dated February 29, 1996.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Dreyfus/Laurel Tax-Free Municipal Funds (the "Trust"), The Dreyfu-
s/Laurel Funds, Inc., The Dreyfus/Laurel Funds Trust and The Dreyfus/Lau-
rel Investment Series (collectively, "The Dreyfus/Laurel Funds") are all
registered open-end investment companies that are part of The Dreyfus Fam-
ily of Funds. The Trust is an investment company which consists of seven
funds: the Dreyfus/Laurel California Tax-Free Money Fund, the Dreyfus/Lau-
rel Massachusetts Tax-Free Money Fund, the Dreyfus/Laurel New York Tax-
Free Money Fund (collectively, the "Money Funds") (individually, the
"Fund"), the Premier Limited Term California Municipal Fund, the Premier
Limited Term Massachusetts Municipal Fund, the Premier Limited Term New
York Municipal Fund and the Premier Limited Term Municipal Fund. This re-
port contains financial statements for the Money Funds. The Trust is a
Massachusetts business trust and is registered with the Securities and Ex-
change Commission under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end management investment company. The Money
Funds currently offer two classes of shares: Investor shares and Class R
shares (effective October 17, 1994, the Trust shares were redesignated
Class R shares). Investor shares are sold primarily to retail investors
and bear a distribution fee. Class R shares are sold primarily to bank
trust departments and other financial service providers (including Mellon
Bank, N.A. ("Mellon Bank") and its affiliates) acting on behalf of custom-
ers having a qualified trust or investment account or relationship at such
institution, and bear no distribution fee. Each class of shares has iden-
tical rights and privileges, except with respect to the distribution fees
and voting rights on matters affecting a single class. The following is a
summary of significant accounting policies consistently followed by each
Fund in the preparation of its financial statements in accordance with
generally accepted accounting principles.
(A) PORTFOLIO VALUATION:
Portfolio securities are valued on the basis of amortized cost in accor-
dance with Rule 2a-7 of the 1940 Act. Amortized cost valuation involves
valuing an instrument at its cost initially and thereafter assuming a con-
stant amortization to maturity of any discount or premium, regardless of
the effect of fluctuating interest rates on the market value of the in-
strument.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded as of the trade date. Realized gains
and losses on investments sold are recorded on the identified cost basis.
Interest income is recorded on the accrual basis. Investment income and
realized and unrealized gains and losses are allocated based upon the rel-
ative average daily net assets of each class of shares.
(C) DISTRIBUTIONS TO SHAREHOLDERS:
Each Fund declares dividends from net investment income on a class level
on each day the Fund is open for business and pays such dividends no later
than the first business day of the next month. Each Fund may distribute
net realized capital gains on a Fund level, if any, annually or more fre-
quently to maintain its net asset value of $1.00 per share. Each Fund may
be subject to a 4.00% nondeductible excise tax for certain undistributed
amounts of net investment income and capital gain. Each Fund expects to
make additional distributions to avoid the application of the excise tax.
Income distributions and capital gain distributions on a Fund level are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatments of income and gains on various investment se-
curities held by the Fund, timing differences and the differing character-
ization of distributions made by the Fund as a whole. Permanent differ-
ences on the Massachusetts Tax-Free Money Fund incurred during the year
ended June 30, 1995, which resulted from an expiration of capital loss
carryforward have been reclassified to paid-in capital at year end.
(D) EXPENSE ALLOCATION
Expenses of each Fund not directly attributable to the operations of any
class of shares are prorated between the classes based upon the relative
average daily net assets of each class. Distribution expense is directly
attributable to a particular class of shares and is charged only to that
class' operations.
(E) FEDERAL INCOME TAXES:
It is policy of each Fund to qualify as a regulated investment company, if
such qualification is in the best interests of its shareholders, by com-
plying with the requirements of the Internal Revenue Code applicable to
regulated investment companies and by distributing all of its earnings to
shareholders. Therefore, no Federal income tax provision is required.
2. INVESTMENT MANAGEMENT FEE, TRUSTEES' FEE AND OTHER PARTY TRANSACTIONS
Effective as of October 17, 1994, the Trust's investment management agree-
ment with Mellon Bank was transferred to The Dreyfus Corporation (the
"Manager"), a wholly-owned subsidiary of Mellon Bank. The Manager pro-
vides, or arranges for one or more third parties to provide, investment
advisory, administrative, custody, fund accounting and transfer agency
services to the Trust. The Manager also directs the investments of each
Fund in accordance with its investment objective, policies and limita-
tions. For these services, each Fund is contractually obligated to pay the
Manager a fee, calculated daily and paid monthly, at the annual rate of
0.35% of the value of that Fund's average daily net assets. Out of its
fee, the Manager pays all of the expenses of each Fund except brokerage
fees, taxes, interest, Rule 12b-1 distribution fees and expenses, fees and
expenses of non-interested Trustees (including counsel fees) and extraor-
dinary expenses. In addition, the Manager is required to reduce its fee in
an amount equal to each Fund's allocable portion of fees and expenses of
the non- interested Trustees (including counsel).
Prior to October 17, 1994, Mellon Bank served as the Trust's investment
manager pursuant to the investment management agreement described above.
Prior to September 23, 1994, Frank Russell Investment Management Company
(the "Administrator") served as each Fund's administrator and provided,
pursuant to an administration agreement, various administrative and corpo-
rate secretarial services to each Fund. Mellon Bank, as investment man-
ager, paid the Administrator's fee out of the management fee described
above.
Prior to October 17, 1994, Funds Distributor, Inc. served as distributor
of the Trust's shares. Effective as of October 17, 1994, Premier Mutual
Fund Services, Inc. ("Premier") serves as the Trust's distributor. Premier
also serves as the Trust's sub-administrator and, pursuant to a sub-
administration agreement with the Manager, provides various administrative
and corporate secretarial services to the Trust.
No officer or employee of Premier (or of any parent, subsidiary or affili-
ate thereof) receives any compensation from The Dreyfus/Laurel Funds for
serving as an officer or Director or Trustee of The Dreyfus/Laurel Funds.
In addition, no officer or employee of the Manager (or of any parent, sub-
sidiary or affiliate thereof) serves as an officer or Director or Trustee
of The Dreyfus/Laurel Funds. The Dreyfus/Laurel Funds pay each Director or
Trustee who is not an officer or employee of Premier (or any parent, sub-
sidiary or affiliate thereof), or of the Manager $27,000 per annum, $1,000
for each Board meeting attended and $750 for each Audit Committee meeting
attended, and reimburse each Director or Trustee for travel and out-of-
pocket expenses.
3. DISTRIBUTION PLAN
Each Fund has adopted a distribution plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act relating to its Investor shares. Under the Plan,
each Fund may pay annually up to 0.25% of the value of the average daily
net assets attributable to its Investor shares to compensate Premier and
Dreyfus Service Corporation, an affiliate of the Manager, for shareholder
servicing activities and Premier for activities and expenses primarily in-
tended to result in the sale of Investor shares. Class R shares bear no
distribution fee.
Under its terms, the Plan shall remain in effect from year to year, pro-
vided such continuance is approved annually by a vote of a majority of the
Trustees and a majority of those Trustees who are not "interested persons"
of the Trust and who have no direct or indirect financial interest in the
operation of the Plan or in any agreement related to the Plan.
4. SHARES OF BENEFICIAL INTEREST
The Trust has the authority to issue an unlimited number of shares of ben-
eficial interest of each class in each separate series, without par value.
The Trust offers two classes of shares of the Money Funds.
The tables below summarize transactions in Fund shares for the years or
periods indicated. Because each of the Money Funds has sold shares, issued
shares as reinvestments of dividends and redeemed shares only at a con-
stant net asset value of $1.00 per share, the number of shares represented
by such sales, reinvestments and redemptions is the same as the amounts
shown below for such transactions.
DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
JUNE 30, 1995 JUNE 30, 1994*+#
<S> <C> <C>
INVESTOR SHARES:
Sold $ 32,912,720 $ 22,619,988
Issued as reinvestment of dividends and
distributions 462,650 225,575
Redeemed (35,007,105) (26,295,573)
Net decrease $ (1,631,735) $ (3,450,010)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
JUNE 30, 1995## JUNE 30, 1994*
<S> <C> <C>
CLASS R SHARES:
Sold $ 32,480,825 $10,968,762
Issued as reinvestment of dividends and
distributions 265,428 65,613
Redeemed (35,063,063) (7,696,016)
Net increase/(decrease) $ (2,316,810) $ 3,338,359
<FN>
* The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30.
+ Amounts include $8,676,000 of subscriptions, $28,427 of reinvestments
and $8,004,712 of redemptions for the Institutional Class up to April
4, 1994.
# Effective April 4, 1994 the Retail and Institutional Classes of shares
were reclassified as a single class of shares known as Investor shares.
## On October 17, 1994, the Trust shares were redesignated Class R shares.
</TABLE>
DREYFUS/LAUREL MASSACHUSETTS TAX-FREE MONEY FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1995 JUNE 30, 1994+#
<S> <C> <C>
INVESTOR SHARES:
Sold $ 130,450,064 $ 139,311,367
Issued as reinvestment of dividends and
distributions 1,980,170 1,217,369
Redeemed (143,194,523) (161,990,808)
Net decrease $ (10,764,289) $ (21,462,072)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1995## JUNE 30, 1994
<S> <C> <C>
CLASS R SHARES:
Sold $ 81,076,293 $ 66,966,216
Issued as reinvestment of dividends and
distributions 513,180 112,247
Redeemed (75,930,219) (66,891,770)
Net increase $ 5,659,254 $ 186,693
<FN>
+ Amounts include $50,504,187 of subscriptions, $63,928 of reinvestments
and $60,326,788 of redemptions for the Institutional Class up to April
4, 1994.
# Effective April 4, 1994 the Retail and Institutional Classes of shares
were reclassified as a single class of shares known as Investor shares.
## On October 17, 1994, the Trust Shares were redesignated Class R shares.
</TABLE>
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
JUNE 30, 1995 JUNE 30, 1994*+#
<S> <C> <C>
INVESTOR SHARES:
Sold $ 23,865,192 $ 4,170,313
Issued as reinvestment of dividends and
distributions 240,333 123,051
Redeemed (10,377,536) (5,703,330)
Net increase/(decrease) $ 13,727,989 $(1,409,966)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
JUNE 30, 1995## JUNE 30, 1994*
<S> <C> <C>
CLASS R SHARES:
Sold $10,336,048 $ 3,604,985
Issued as reinvestment of dividends and
distributions 44,938 3,922
Redeemed (7,789,885) (5,849,947)
Net increase/(decrease) $ 2,591,101 $(2,241,040)
<FN>
* The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30.
+ Amounts include $11,467 of subscriptions, $468 of reinvestments and
$9,120 of redemptions for the Institutional Class up to April 4, 1994.
# Effective April 4, 1994 the Retail and Institutional Classes of shares
were reclassified as a single class of shares known as Investor shares.
## On October 17, 1994, the Trust shares were redesignated Class R shares.
</TABLE>
5. CAPITAL LOSS CARRYFORWARD
As of June 30, 1995, the California Tax-Free Money Fund had available for
Federal tax purposes unused capital loss carryforwards of $233 expiring in
the year 2000, the Massachusetts Tax-Free Money Fund had unused capital
loss carryforwards of $51,059 expiring in the year 2002.
6. CONCENTRATION OF CREDIT
Each Fund invests primarily in debt obligations issued by the Fund's re-
spective state (ie. California, Massachusetts, or New York) and its polit-
ical subdivisions, municipalities, agencies and public authorities who ob-
tain funds for various public purposes. Each Fund is more susceptible to
factors adversely affecting issuers of its respective state municipal se-
curities than is a municipal bond fund that is not concentrated in these
issuers to the same extent.
INDEPENDENT AUDITORS' REPORT
KPMG
The Board of Trustees and Shareholders
The Dreyfus/Laurel Tax-Free Municipal Funds:
We have audited the accompanying statements of assets and liabilities, in-
cluding the portfolio of investments, of the California Tax-Free Money
Fund, Massachusetts Tax-Free Money Fund and New York Tax-Free Money Fund
of The Dreyfus/Laurel Tax-Free Municipal Funds (formerly the Laurel Tax-
Free Municipal Funds) as of June 30, 1995, and the related statement of
operations for the year then ended and statement of changes in net assets
and financial highlights for Investor and Class R shares for each of the
years in the two-year period then ended for the Massachusetts Tax-Free
Money Fund and for the year ended June 30, 1995 and for the period from
December 1, 1993 to June 30, 1994 for the California Tax-Free Money Fund
and New York Tax-Free Money Fund. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsi-
bility is to express an opinion on these financial statements and finan-
cial highlights based on our audits. The financial highlights presented
for each of the years or periods ended June 30, 1993 or prior for the Mas-
sachusetts Tax-Free Money Fund and for each of the years or periods ended
November 30, 1993 or prior for the California Tax-Free Money Fund and New
York Tax-Free Money Fund were audited by other auditors whose reports
thereon, dated August 11, 1993 and January 18, 1994, expressed an unquali-
fied opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and fi-
nancial highlights are free of material misstatement. An audit also in-
cludes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirma-
tion of securities owned as of June 30, 1995, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principals used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of the California Tax-Free Money Fund, Massachusetts Tax-Free Money Fund
and New York Tax-Free Money Fund of The Dreyfus/Laurel Tax-Free Municipal
Funds as of June 30, 1995, the results of their operations for the year
then ended and the change in their net assets and financial highlights for
each of the years or periods in the two-year period ended June 30, 1995 in
conformity with generally accepted accounting Principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
August 18, 1995
- -----------------------------------------------------------------------------
PROSPECTUS FEBRUARY 29, 1996
DREYFUS BASIC NEW YORK MUNICIPAL MONEY MARKET FUND
- -----------------------------------------------------------------------------
THE DREYFUS BASIC NEW YORK MUNICIPAL MONEY MARKET FUND (FORMERLY, THE
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND) (THE "FUND") IS A SEPARATE,
NON-DIVERSIFIED PORTFOLIO OF THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
(FORMERLY, THE LAUREL TAX-FREE MUNICIPAL FUNDS AND PREVIOUSLY, THE BOSTON
COMPANY TAX-FREE MUNICIPAL FUNDS (THE "TRUST")), AN OPEN-END MANAGEMENT
INVESTMENT COMPANY KNOWN AS A MUTUAL FUND. THE FUND SEEKS TO PROVIDE A HIGH
LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAXES AND NEW YORK STATE
AND NEW YORK CITY PERSONAL INCOME TAXES TO THE EXTENT CONSISTENT WITH THE
PRESERVATION OF CAPITAL AND THE MAINTENANCE OF LIQUIDITY BY INVESTING IN HIGH
QUALITY, SHORT-TERM MUNICIPAL SECURITIES.
SHARES OF THE FUNDS ARE SOLD WITHOUT A SALES LOAD.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING THE DREYFUS
TELETRANSFER PRIVILEGE.
THE DREYFUS CORPORATION SERVES AS THE FUND'S INVESTMENT MANAGER. THE
DREYFUS CORPORATION IS REFERRED TO AS "DREYFUS."
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ CAREFULLY BEFORE YOU
INVEST AND RETAINED FOR FUTURE REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION ("SAI") DATED FEBRUARY 29,
1996, WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION
OF CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF
INTEREST TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ("SEC") AND IS INCORPORATED HEREIN BY REFERENCE. FOR A
FREE COPY, WRITE TO THE FUND AT 144 GLENNCURTISS BOULEVARD, UNIONDALE, NEW
YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR
144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
ALL MONEY MARKET FUNDS INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
THE FEES TO WHICH THE FUND IS SUBJECT ARE SUMMARIZED IN THE "EXPENSE
SUMMARY" SECTION OF THE FUND'S PROSPECTUS. THE FUND PAYS AN AFFILIATE OF
MELLON BANK, N.A. ("MELLON BANK") TO BE ITS INVESTMENT MANAGER. MELLON BANK
OR AN AFFILIATE MAY BE PAID FOR PERFORMING OTHER SERVICES FOR THE FUND, SUCH
AS CUSTODIAN, TRANSFER AGENT OR FUND ACCOUNTANT SERVICES. THE FUND IS
DISTRIBUTED BY PREMIER MUTUAL FUND SERVICES, INC.
- -----------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
EXPENSE SUMMARY................................. 4
FINANCIAL HIGHLIGHTS............................ 5
DESCRIPTION OF THE FUND......................... 6
MANAGEMENT OF THE FUND.......................... 9
HOW TO BUY FUND SHARES.......................... 11
FUND EXCHANGES.................................. 13
HOW TO REDEEM FUND SHARES....................... 13
PERFORMANCE INFORMATION......................... 16
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES........ 17
GENERAL INFORMATION............................. 18
Page 2
This Page Intentionally Left Blank
Page 3
<TABLE>
EXPENSE SUMMARY
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C> <C>
Exchange Fee................................................... $5.00
Account Closeout Fee........................................... $5.00
ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(as a percentage of net assets)
Management Fee (after expense reimbursement)..................... .35%
Other Expenses (after expense reimbursement)..................... .00%
------
Total Fund Operating Expenses(after expense reimbursement)....... .35%
EXAMPLE:
You would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual
return and (2) redemption at the end of each
time period:
1 YEAR $9
3 YEARS $16
5 YEARS $25
10 YEARS $49
</TABLE>
- -----------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A
5% ANNUAL RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT
IN AN ACTUAL RETURN GREATER OR LESS THAN 5%.
- -----------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding
the various costs and expenses that investors will bear, directly or
indirectly, the payment of which will reduce investors' return on an annual
basis. Effective December 8, 1995, the Fund's "Investor" and "Class R"
designations were eliminated and the Fund became a single class fund. The
information in the foregoing table has been restated to reflect the
termination of the Fund's distribution plan (the "Distribution Plan") adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act"), effective as of December 8, 1995, which was attributable
only to its then existing Investor shares. Effective December 8, 1995, the
Fund adopted a new Investment Management Agreement pursuant to which it pays
Dreyfus a fee at the annual rate of .45 of 1% of the value of the Fund's
average daily net assets. Dreyfus has agreed until December 7, 1996, to limit
its management fee, or to reimburse the Fund for its expenses, in order to
ensure that the Fund's total operating expenses do not exceed .35 of 1% of
the value of the Fund's average daily net assets. The expenses noted above,
without reimbursement, would be: Management Fees_.45%; Other Expenses_.00%;
and Total Fund Operating Expenses_.45%; and the amount of expenses that an
investor would pay, assuming redemption after one, three, five and ten years,
would be $10, $19, $30 and $62, respectively. In addition, unlike certain
other funds in the Dreyfus Family of Funds, the Fund will charge your account
$2.00 for each redemption check you write; you also will be charged $5.00 for
each wire redemption you make and a $5.00 account closeout fee. These charges
will be paid to the Fund's transfer agent. See "How to Buy Fund Shares" and
"How to Redeem Fund Shares."
Page 4
FINANCIAL HIGHLIGHTS
The following tables are based upon a single share outstanding
throughout each year or period and should be read in conjunction with the
financial statements and related notes that appear in the Fund's Annual
Report dated June 30, 1995, which is incorporated by reference into the SAI.
The financial statements and related notes, as well as the information in the
tables below insofar as it relates to the fiscal year or period ended June
30, 1994 and June 30, 1995, have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon appears in the Fund's Annual
Report. The information in the tables below for the years or periods prior to
the fiscal period ended June 30, 1994, has been audited by other independent
auditors.
DREYFUS BASIC NEW YORK MUNICIPAL MONEY MARKET FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD.*
<TABLE>
PERIOD YEAR
ENDED ENDED
YEAR OR PERIOD ENDED NOVEMBER 30, JUNE 30 JUNE 30,
-----------------------------------------------------
1988 1989 1990 1991 1992 1993 1994# 1995##
----- ----- ---- ---- ----- ----- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ------ ----- ----- ------
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income**** 0.032 0.058 0.054 0.046 0.031 0.021 0.012 0.029
LESS DISTRIBUTIONS:
Dividends from net investment income (0.032) (0.058) (0.054) (0.046) (0.031) (0.021) (0.012) (0.029)
Dividends from net
realized capital gains -_ -_ -_ -_ -_*** -_ -_ --
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====== ====== ====== ====== ===== ====== ====== ======
Total Return++ 3.19% 5.90% 5.53% 4.65% 3.11% 2.15% 1.23% 2.95%
----- ----- ----- ----- ------ ----- ----- ------
RATIO TO AVERAGE NET ASSETS
SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $8,929 $14,129 $16,870 $15,989 $11,183 $9,356 $8,011 $21,739
Ratio of expenses to
average net assets+ 0.65%** 0.32% 0.32% 0.32% 0.32% 0.31% 0.44%** 0.60%
Ratio of net investment income
to average net assets 4.33%** 5.73% 5.38% 4.58% 3.08% 2.13% 2.12%** 2.97%
- --------------------------------
* The Fund commenced operations on March 2, 1988. On February 1,
1993 existing shares of the Fund were designated the
Retail Class and the Fund began offering the Institutional Class and
Investment Class of shares. Effective April 4, 1994, the Retail and
Institutional Classes were reclassified as a single class of shares known
as Investor shares and the Investment Class shares were reclassified as
the Trust shares. Effective October 17, 1994, the Trust shares were
redesignated Class R shares. Effective December 8, 1995, the Fund's
"Investor" and "Class R" designations were eliminated and the Fund became
a single class fund without a class designation. The Financial Highlights
for the year ended June 30, 1995 are based upon an Investor share
outstanding. The amounts shown for the period ended June 30, 1994 were
calculated using the 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. TheFinancial Highlights do not
reflect the effect of the termination of the Fund's Distribution Plan or
the implementation of the new Investment Management Agreement, both
effective December 8, 1995. See "Management of the Fund -- Investment
Manager."
** Annualized
*** Amount represents less than .001 per Investor share for the year
ended November 30, 1992.
**** Net investment income per share before waiver of fees and
reimbursement of expenses by the investment manager and/or custodian
and/or transfer agent for the period ended June 30, 1994 and for the years
ended November 30, 1993, 1992, 1991, 1990, 1989 and for the period ended
November 30, 1988 were $0.009, $0.008, $0.024, $0.040, $0.047, $0.050 and
$0.026, respectively.
+ Annualized expense ratios before voluntary waiver of fees and
reimbursement of expenses by the investment manager and/or custodian
and/or transfer agent for the period ended June 30, 1994, and for the
years ended November 30, 1993, 1992, 1991, 1990, 1989, and for the period
ended November 30, 1988 were 0.97%, 1.29%, 1.03%, 0.93%, 1.03%, 1.10%,
and 1.42%, respectively.
++ Total return represents aggregate total return for the periods
indicated.
# The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30. Prior to April 4, 1994, The
Boston Company Advisors, Inc. served as the Fund's investment manager.
From April 4, 1994 through October 16, 1994, , Mellon Bank, N.A., served
as the Fund's investment manager.
## Effective October 17, 1994, The Dreyfus Corporations began serving
as the Fund's investment manager.
</TABLE>
Page 5
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to provide a high level of current income exempt from
Federal income taxes and New York State and New York City personal income
taxes to the extent consistent with the preservation of capital and the
maintenance of liquidity. The Fund seeks to achieve its objective by
investing in debt obligations issued by the State of New York its political
subdivisions, municipalities and public authorities and in municipal
obligations issued by other governmental entities if, in the opinion of
counsel to the respective issuers, the interest from such obligations is
excluded from gross income for Federal, New York State and New York City
income tax purposes ("New York Municipal Obligations").
Under normal market conditions, the Fund attempts to invest 100%, and
will invest a minimum of 80%, of its total assets in New York Municipal
Obligations. When, in the opinion of Dreyfus, adverse market conditions exist
for New York Municipal Obligations, and a "defensive" investment posture is
warranted, the Fund may temporarily invest more than 20% of its total assets
in money market instruments having maturity and quality characteristics
comparable to those (discussed below) for New York Municipal Obligations, but
which produce income exempt from Federal but not New York State or New York
City personal income taxes for resident shareholders of New York, or more
than 20% of its total assets in taxable obligations (including obligations
the interest on which is included in the calculation of alternative minimum
tax for individuals). Periods when a defensive posture is warranted include
those periods when the Fund's monies available for investment exceed the New
York Municipal Obligations available for purchase to meet the Fund's rating,
maturity and other investment criteria. The Fund does not anticipate that it
will find it necessary to make any investments in securities the interest
from which is not exempt from Federal income and the New York State or New
York City personal income taxes. The Fund's policy of investing a minimum of
80% of its total assets in New York Municipal Obligations is a fundamental
policy of the Fund.
The Fund pursues its objective by investing in a varied portfolio of
high quality, short-term New York Municipal Obligations.
The New York Municipal Obligations purchased by the Fund consist of:
(1) municipal bonds; (2) municipal notes; and (3) municipal commercial paper.
The Fund will limit its portfolio investments to securities that, at the time
of acquisition, (i) are rated in the two highest categories by at least two
nationally recognized statistical rating organizations (or by one
organization if only one organization has rated the security), (ii) if not
rated, are obligations of an issuer whose other outstanding short-term debt
obligations are so rated, or (iii) if not rated, are of comparable quality,
as determined by Dreyfus in accordance with procedures established by the
Board of Trustees. The Fund will limit its investments to securities that
present minimal credit risk, as determined by Dreyfus under procedures
established by the Trust's Board of Trustees.
The Fund invests only in securities that have remaining maturities of
thirteen months or less at the date of purchase. Floating rate or variable
rate obligations (described below) which are payable on demand under
conditions established by the SEC may have a stated maturity in excess of
thirteen months; these securities will be deemed to have remaining maturities
of thirteen months or less. The Fund maintains a dollar-weighted average
portfolio maturity of 90 days or less and seeks to maintain a constant net ass
et value of $1.00 per share, although there is no assurance it can do so on a
continuing basis.
OTHER INVESTMENT POLICIES AND RISK FACTORS.
FLOATING RATE AND VARIABLE RATE OBLIGATIONS. The Fund may purchase
floating rate and variable rate obligations. These obligations bear interest
at rates that are not fixed, but vary with changes in specified market rates
or indices. Some of these obligations may carry a demand feature that permits
the Fund to receive the par value upon demand prior to maturity. The Fund may
invest in floating rate and variable rate obligations carrying stated
maturities in excess of thirteen months at the date of purchase if these
Page 6
obligations carry demand features that comply with conditions established by
the SEC. The Fund will limit its purchases of floating rate and variable
rate. New York Municipal Obligations to those meeting the quality standards
applicable to the Fund. Frequently, such obligations are secured by letters
of credit or other credit support arrangements provided by banks. The quality
of the underlying creditor or the bank, as determined by Dreyfus under the
supervision of the Trustees, must also be equivalent to the quality standards
applicable to the Fund. In addition, Dreyfus monitors the earning power, cash
flow and other liquidity ratios of the issuers of such obligations, as well
as the creditworthiness of the institution responsible for paying the
principal amount of the obligations under the demand feature.
The Fund may invest in participation interests purchased from banks
in floating or variable rate New York Municipal Obligations owned by banks.
Participation interests carry a demand feature permitting the Fund to tender
them back to the bank. Each participation is backed by an irrevocable letter
of credit or guarantee of a bank which Dreyfus under the supervision of the
Trustees has determined meets the prescribed quality standards for the Fund.
Other types of tax-exempt instruments that may become available in
the future may be purchased by the Fund as long as Dreyfus believes the
quality of these instruments meets the Fund's quality standards.
OTHER INVESTMENT COMPANIES. The Fund may invest in securities issued
by other investment companies to the extent that such investments are
consistent with its investment objective and policies and permissible under
the 1940 Act. As a shareholder of another investment company, the Fund would
bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would
be in addition to the advisory and other expenses that the Fund bears
directly in connection with its own operations.
TENDER OPTION BONDS. The Fund may invest up to 10% of the value of
its assets in tender option bonds. A tender option bond is a municipal
obligation (generally held pursuant to a custodial arrangement) having a
relatively long maturity and bearing interest at a fixed-rate substantially
higher than prevailing short-term tax-exempt rates, that has been coupled
with the agreement of a third party, such as a bank, broker-dealer or other
financial institution, pursuant to which such institution grants the security
holders the option, at periodic intervals, to tender their securities to the
institution and receive the face value thereof. As consideration for
providing the option, the financial institution receives periodic fees equal
to the difference between the municipal obligation's fixed coupon rate and
the rate, as determined by a remarketing or similar agent at or near the
commencement of such period, that would cause the securities, coupled with
the tender option, to trade at par on the date of such determination. Thus,
after payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt rate.
Dreyfus, on behalf of the Fund, will consider on an ongoing basis the
creditworthiness of the issuer of the underlying municipal obligation, of any
custodian and the third-party provider of the tender option. In certain
instances and for certain tender option bonds, the option may be terminable
in the event of a default in payment of principal or interest on the
underlying municipal obligation and for other reasons. The Fund will not
invest more than 10% of the value of the Fund's net assets in illiquid
securities, which would include tender option bonds for which the required
notice to exercise the tender feature is more than seven days if there is no
secondary market available for these obligations.
WHEN-ISSUED SECURITIES. The Fund may purchase New York Municipal
Obligations on a "when-issued" basis (i.e., delivery of and payment for the
New York Municipal Obligations normally take place within 45 days after the
date of the purchase commitment). The payment obligation and the interest
rate on such securities are fixed at the time of the purchase commitment.
Although the Fund generally will purchase New York Municipal Obligations on a
when-issued basis with the intention of acquiring the securities, the Fund
may sell such securities before the settlement date. New York Municipal
Obligations purchased on a when-issued basis, like other investments made by
the Fund, may decline or appreciate in value prior to their actual delivery
to the Fund.
Page 7
CERTAIN RISK CONSIDERATIONS REGARDING THE STATE OF NEW YORK AND NEW
YORK CITY. You should consider carefully the special risks inherent in
investing in New York Municipal Obligations. These risks result from the
financial condition of New York State, certain of its public bodies and
municipalities, and New York City. Beginning in early 1975, New York State,
New York City and other State entities faced serious financial difficulties
which jeopardized the credit standing and impaired the borrowing abilities of
such entities and contributed to high interest rates on, and lower market
prices for, debt obligations issued by them. A recurrence of such financial
difficulties or a failure of certain financial recovery programs could result
in defaults or declines in the market values of various New York Municipal
Obligations in which the Fund may invest. If there should be a default or
other financial crisis relating to New York State, New York City, a State or
City agency, or a State municipality, the market value and marketability of
outstanding New York Municipal Obligations in the Fund's portfolio and the
interest income to the Fund could be adversely affected. Moreover, the
national recession and the significant slowdown in the New York and regional
economies in the early 1990s added substantial uncertainty to estimates of
the State's tax revenues, which, in part, caused the State to incur
cash-basis operating deficits in the General Fund and issue deficit notes
during the fiscal periods 1989 through 1992. The State's financial operations
have improved during recent fiscal years, although there can be no assurance
that new York will not face substantial budget gaps in future years. The bond
ratings of various state general obligation and agency debt, state moral
obligations, contractual obligations, lease purchase obligations and state
guarantees have been lowered in the past, reflecting the rating agencies'
concerns about the financial condition of New York State and City, the heavy
debt load of the State and City, and economic uncertainties in the region.
You should obtain and review a copy of the SAI which more fully sets forth
these and other risk factors. Other considerations relating to the Fund's
investments in New York Municipal Obligations are summarized in the SAI.
LIMITING INVESTMENT RISKS AND CERTAIN RISK CONSIDERATIONS. The Fund
is subject to a number of investment limitations. Certain limitations are
matters of fundamental policy and may not be changed without the affirmative
vote of the holders of a majority of the Fund's outstanding shares. As a
fundamental policy, the Fund may not (i) borrow money in an amount exceeding
331/3% of the Fund's total assets at the time of borrowing; (ii) make loans
or lend securities in excess of 331/3% of the Fund's total assets; (iii)
purchase, with respect to 75% of the Fund's total assets, securities of any
one issuer representing more than 5% of the Fund's total assets (other than
securities issued or guaranteed by the U.S. Government, its agencies and
instrumentalities) or more than 10% of that issuer's outstanding voting
securities; and (iv) invest more than 25% of the value of the Fund's total
assets in the securities of one or more issuers conducting their principal
activities in the same industry; provided that there shall be no such
limitation on investments in obligations of the U.S. Government, state and
municipal governments and their political subdivisions or investments in
domestic banks, including U.S. branches of foreign banks and foreign branches
of U.S. banks. The SAI describes all of the Fund's fundamental and
non-fundamental investment restrictions.
The investment objective, policies, restrictions, practices and
procedures of the Fund, unless otherwise specified, may be changed without
shareholder approval. If the Fund's investment objective, policies,
restrictions, practices or procedures change, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current position and needs.
In order to permit the sale of the Fund's shares in certain states,
the Fund may make commitments more restrictive than the investment policies
and restrictions described in this Prospectus and the SAI. Should the Fund
determine that any such commitment is no longer in the best interests of the
Fund, it may consider terminating sales of its shares in the states involved.
The Fund is classified as a "non-diversified" investment company, as
defined under the 1940 Act, and therefore, the Fund could invest all of its
assets in the obligations of a single issuer or relatively few issuers.
Page 8
However, the Fund intends to conduct its operations so that it will qualify
under the Internal Revenue Code of 1986 (the "Code") as a "regulated
investment company." To continue to qualify, among other requirements, the
Fund will be required to limit its investments so that, at the close of each
quarter of the taxable year, with respect to at least 50% of its total
assets, not more than 5% of such assets will be invested in the securities of
a single issuer. In addition, not more than 25% of the value of the Fund's
total assets may be invested in the securities of a single issuer at the
close of each quarter of the taxable year. The provisions of the Code place
limits on the extent to which the Fund's portfolio may be non-diversified.
The ability of the Fund to meet its investment objective is subject
to the ability of municipal issuers to meet their payment obligations. In
addition, Fund's portfolio will be affected by general changes in interest
rates which may result in increases or decreases in the value of Fund
holdings. Investors should recognize that, in periods of declining interest
rates, the Fund's yield will tend to be somewhat higher than prevailing
market rates, and in periods of rising interest rates, the Fund's yield will
tend to be somewhat lower. Also, when interest rates are falling, the influx
of new money to the Fund will likely be invested in portfolio instruments
producing lower yields than the balance of the Fund's portfolio, thereby
reducing the Fund's current yield. In periods of rising interest rates, the
opposite can be expected to occur.
The Fund may invest without limit in New York Municipal Obligations
which are repayable out of revenue streams generated from economically
related projects or facilities or whose issuers are located in New York
State. Sizable investments in these obligations could increase risk to the
Fund should any of the related projects or facilities experience financial
difficulties. To the extent the Fund may invest in private activity bonds,
the Fund may invest only up to 5% of its total assets in bonds where payment
of principal and interest are the responsibility of a company with less than
three years operating history.
MASTER/FEEDER OPTION. The Trust may in the future seek to achieve the
Fund's investment objective by investing all of the Fund's assets in another
investment company having the same investment objectives and substantially
the same investment policies and restrictions as those applicable to the
Fund. Shareholders of the Fund will be given at least 30 days' prior notice
of any such investment. Such investment would be made only if the Trustees
determine it to be in the best interest of the Fund and its shareholders. In
making that determination, the Trustees will consider, among other things,
the benefits to shareholders and/or the opportunity to reduce costs and
achieve operational efficiencies. Although the Fund believes that the
Trustees will not approve an arrangement that is likely to result in higher
costs, no assurance is given that costs will be materially reduced if this
option is implemented.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER. Dreyfus, located at 200 Park Avenue, New York,
New York 10166, was formed in 1947. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). As of January 31, 1996, Dreyfus managed or administered
approximately $82 billion in assets for more than 1.7 million investor
accounts nationwide.
Dreyfus serves as the Fund's investment manager pursuant to an
Investment Management Agreement with the Fund dated December 8, 1995 (the
"Investment Management Agreement"). Prior thereto, Dreyfus provided
investment advisory services to the Fund pursuant to a prior investment
management agreement (the "Prior Management Agreement"). Under the Investment
Management Agreement, Dreyfus, subject to the overall authority of the Board
of Trustees of The Trust in accordance with Massachusetts law, supervises and
assists in the overall management of the Fund's affairs. Pursuant to the
Investment Management Agreement, Dreyfus provides, or arranges for one or
more third parties to provide, investment advisory, administrative, custody,
fund accounting and transfer agency services to the Fund. As the Fund's
investment manager, Dreyfus manages the Fund by making investment decisions
based on the Fund's investment objective, policies and restrictions.
Page 9
Under the terms of the Prior Management Agreement, which was
terminated on December 8, 1995, the Fund agreed to pay Dreyfus a fee,
computed daily and paid monthly, at the annual rate of .35% of the Fund's
average daily net assets. Under the Investment Management Agreement, the Fund
pays a fee, computed daily and paid monthly, at the annual rate of .45% of
the Fund's average daily net assets less certain expenses described below.
Dreyfus has agreed to limits its management fee, or to reimburse the Fund for
its expenses, in order to ensure that the Fund's total operating expenses do
not exceed .35% of the Fund's average daily net assets for the period from
December 8, 1995 through December 7, 1996. In addition, the Investment
Management Agreement provides that certain redemption, exchange and account
closeout charges are payable directly by the Fund's shareholders to the
Fund's transfer agent and that the fee payable by the Fund to Dreyfus is not
reduced by the amount of these charges payable to the transfer agent. Under
the Investment Management Agreement, Dreyfus pays all of the expenses of the
Fund except brokerage fees, taxes, interest, Rule 12b-1 fees (if applicable)
and extraordinary expenses. From time to time, Dreyfus may waive (either
voluntarily or pursuant to applicable state limitations) additional
investment management fees payable by the Fund. From April 4, 1994 to October
17, 1994, the Fund was advised by Mellon Bank under the Prior Management
Agreement.
For the fiscal year ended June 30, 1995, the Fund paid Mellon Bank or
Dreyfus .35% of its average daily net assets in investment management fees,
less fees and expenses of the non-interested Trustees (including counsel
fees) pursuant to the Prior Management Agreement.
For the fiscal year ended June 30, 1995, total operating expenses
(excluding Rule 12b-1 fees) of the Fund were 0.35% of the Fund's average
daily net assets.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Bank Holding Company
Act of 1956, as amended. Mellon provides a comprehensive range of financial
products and services in domestic and selected international markets. Mellon
is among the twenty-five largest bank holding companies in the United States
based on total assets. Mellon's principal wholly-owned subsidiaries are
Mellon Bank, Mellon Bank (DE) National Association, Mellon Bank (MD), The
Boston Company, Inc., AFCO Credit Corporation and a number of companies known
as Mellon Financial Services Corporations. Through its subsidiaries,
including Dreyfus, Mellon managed approximately $233 billion in assets as of
December 31, 1995, including $81 billion in mutual fund assets. As of
December 31, 1995, Mellon, through various subsidiaries, provided
non-investment services, such as custodial or administration services, for
more than $786 billion in assets, including approximately $60 billion in
mutual fund assets.
In allocating brokerage transactions for the Fund, Dreyfus seeks to
obtain the best execution of orders at the most favorable net price. Subject
to this determination, Dreyfus may consider, among other things, the receipt
of research services and/or the sale of shares of the Fund or other funds
managed, advised or administered by Dreyfus as factors in the selection of
broker-dealers to execute portfolio transactions for the Fund. See "Portfolio
Transactions" in the SAI.
Dreyfus may pay the distributor for shareholder services from
Dreyfus' own assets, including past profits but not including the management
fee paid by the Fund. The distributor may use part or all of such payments to
pay securities dealers or others in respect of these services.
Dreyfus is authorized to allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, in the
case of agency transactions, financial institutions that are affiliated with
Dreyfus or Mellon Bank or that have sold shares of the Fund, if Dreyfus
believes that the quality of the transaction and the commission are
comparable to what they would be with other qualified brokerage firms. From
time to time, to the extent consistent with its investment objective, policies
and restrictions, the Fund may invest in securities of companies with which
Mellon Bank has a lending relationship.
Page 10
DISTRIBUTOR. The Fund's distributor is Premier Mutual Fund Services,
Inc. (the "Distributor"). The Distributor is located at One Exchange Place,
Boston, Massachusetts 02109. The Distributor is a wholly-owned subsidiary of
FDI Distribution Services, Inc., a provider of mutual fund administration
services, which in turn is a wholly-owned subsidiary of FDI Holding Inc., the
parent company of which is Boston Institutional Group, Inc.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, AND
SUB-ADMINISTRATOR. Mellon Bank (One Mellon Bank Center, Pittsburgh,
Pennsylvania 15258) is the Funds' custodian. Dreyfus Transfer, Inc., (One
American Express Plaza, Providence, Rhode Island 02903,) a wholly-owned
subsidiary of Dreyfus, serves as the Fund's Transfer and Dividend Disbursing
Agent (the "Transfer Agent"). The Transfer Agent will receive the $5.00
exchange fee, the $5.00 account closeout fee, the $5.00 wire and Dreyfus
TELETRANSFER redemption fees and the $2.00 checkwriting charge, described
below. A sufficient number of your shares will be redeemed automatically to
pay these amounts. These payments will not reduce the management fee payable
by the Fund to Dreyfus. By purchasing Fund shares, you are deemed to have
consented to this procedure. Premier Mutual Fund Services, Inc. is the Fund's
sub-administrator and, pursuant to a Sub-Administration Agreement with
Dreyfus, provides various administrative and corporate secretarial services
to the Fund.
HOW TO BUY FUND SHARES
GENERAL. You can purchase Fund shares without a sales charge if you
purchase them directly from the Distributor; you may be charged a nominal fee
if you effect transactions in Fund shares through a securities dealer or
broker, bank or other financial institution (collectively, "Agents"). Share
certificates are issued only upon your written request. No certificates are
issued for fractional shares. It is not recommended that the Fund be used as
a vehicle for Keogh, IRA or other qualified plans. The Fund reserves the
right to reject any purchase order.
The minimum initial investment is $25,000. The Fund may waive its
minimum initial investment requirement for new Fund accounts opened through
an Agent whenever Dreyfus Institutional Services Division ("DISD") determines
for the initial account opened through such Agent which is below the Fund's
minimum initial investment requirement that the existing accounts in the Fund
opened through that Agent have an average account size, or the Agent has
adequate intent and access to funds to result in maintenance of accounts in
the Fund opened through that Agent with an average account size, in an amount
equal to or in excess of $25,000. DISD will periodically review the average
size of the accounts opened through each Agent and, if necessary, to
reevaluate the Agent's intent and access to funds. DISD will discontinue the
waiver as to new accounts to be opened through an Agent if DISD determines
that the average size of accounts opened through that Agent is less than
$25,000 and the Agent does not have the requisite intent and access to funds.
Subsequent investments must be at least $1,000 (or at least $100 in the case
of persons who have held Fund shares as of December 8, 1995). The initial
investment must be accompanied by the Fund's Account Application.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds." Payments to open new accounts which are mailed
should be sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence,
Rhode Island 02940-9387, together with your Account Application. For
subsequent investments, your Fund account number should appear on the check
and an investment slip should be enclosed and sent to The Dreyfus Family of
Funds, P.O. Box 105, Newark, New Jersey 07101-0105. Neither initial nor subseq
uent investments should be made by third party check. Purchase orders may be
delivered in person only to a Dreyfus Financial Center. THESE ORDERS WILL BE
FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call the
telephone number listed under "General Information."
Page 11
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to Boston Safe Deposit and Trust Company, DDA # 043419
Dreyfus BASIC New York Municipal Money Market Fund, for purchase of Fund
shares in your name.The wire must include your Fund account number (for new
accounts, your Taxpayer Identification Number ("TIN") should be included
instead), account registration and dealer number, if applicable. If your
initial purchase of Fund shares is by wire, you should call 1-800-645-6561
after completing your wire payment in order to obtain your Fund account
number. Please include your Fund account number on the Fund's Account
Application and promptly mail the Account Application to the Fund, as no
redemptions will be permitted until the Account Application is received. You
may obtain further information about remitting funds in this manner from your
bank. All payments should be made in U.S. dollars and, to avoid fees and
delays, should be drawn only on U.S. banks. A charge will be imposed if any
check used for investment in your account does not clear. The Fund makes
available to certain large institutions the ability to issue purchase
instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House ("ACH") member. You must
direct the institution to transmit immediately available funds through the
ACH System to Boston Safe Deposit and Trust Company with instructions to
credit your Fund account. The instructions must specify your Fund account
registration and Fund account number PRECEDED BY THE DIGITS "4780".
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Other Distributions and
Taxes" and the Fund's Account Application for further information concerning
this requirement. Failure to furnish a certified TIN to the Fund could
subject you to a $50 penalty imposed by the Internal Revenue Service (the
"IRS").
NET ASSET VALUE PER SHARE ("NAV"). An investment portfolio's NAV
refers to the worth of one share. The NAV for Fund shares, which are offered
on a continuous basis, is calculated on the basis of amortized cost, which
involves initially valuing a portfolio instrument at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. The Fund intends to maintain a constant NAV of $1.00,
although there is no assurance that this can be done on a continuing basis.
The offering price of Fund shares is their NAV. Investments and
requests to exchange or redeem shares received by the Fund before 4 p.m.,
Eastern time, on each day that the New York Stock Exchange is open (a
"business day") are effective on, and will receive the price next determined,
that business day. The NAV of the Fund is calculated two times each business
day, at 12 noon and 4 p.m., Eastern time. Investment, exchange or redemption
requests received after 4 p.m., Eastern time are effective on, and receive
the first share price determined, the next business day.
DREYFUS TELETRANSFER PRIVILEGE. You may purchase Fund shares (minimum
$1,000 and maximum $150,000 per day) without charge by telephone if you have
checked the appropriate box and supplied the necessary information on the
Fund's Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The proceeds will be transferred between the bank account
designated in one of these documents and your Fund account. Only a bank
account maintained in a domestic financial institution which is an ACH member
may be so designated. The Fund may modify or terminate this Privilege at any
time or charge a service fee upon notice to shareholders. No fee is
contemplated for purchases of Fund shares pursuant to this Privilege.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452.
Page 12
FUND EXCHANGES
You may purchase, in exchange for shares of the Fund, (a) shares
(however the same may be named), of other funds managed or administered by
Dreyfus which you would otherwise be eligible to purchase; (b) shares of
funds managed or administered by Dreyfus which do not have separate share
classes; and (c) shares of other funds specified from time to time, to the
extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-645-6561 to determine if
it is available and whether any conditions are imposed on its use. YOU WILL
BE CHARGED A $5.00 FEE FOR EACH EXCHANGE YOU MAKE OUT OF THE FUND (UNLESS YOU
HAVE HELD FUND SHARES AS OF DECEMBER 8, 1995). This fee will be deducted from
your account and paid to the Transfer Agent.
To request an exchange, you or your Agent acting on your behalf must
give exchange instructions to the Transfer Agent in writing or by telephone.
Before any exchange, you must obtain and should review a copy of the current
prospectus of the fund into which the exchange is being made. Prospectuses
may be obtained by calling 1-800-645-6561. The shares being exchanged must
have a current value of at least $500; furthermore, when establishing a new
account by exchange, the shares being exchanged must have a value of at least
the minimum initial investment required for the fund into which the exchange
is being made. The ability to issue exchange instructions by telephone is
given to all Fund shareholders automatically, unless you check the relevant
"No" box on the Account Application, indicating that you specifically refuse
this Privilege. The Telephone Exchange Privilege may be established for an
existing account by written request, signed by all shareholders on the
account, or by a separate Shareholder Services Form, also available by
calling 1-800-645-6561. If you previously have established the Telephone
Exchange Privilege, you may telephone exchange instructions by calling
1-800-645-6561 or, if calling from overseas, 516-794-5452. See "How to Redeem
Fund Shares_Procedures." Upon an exchange, the following shareholder services
and privileges, as applicable and where available, will be automatically
carried over to the fund into which the exchange is made: Telephone Exchange
Privilege, Check Redemption Privilege, Wire Redemption Privilege, Telephone
Redemption Privilege, Dreyfus TELETRANSFER Privilege and the dividends and
distributions payment option (except for Dividend Sweep) selected by the
investor.
Shares will be exchanged at the next determined NAV; however, a sales
load may be charged with respect to exchanges into funds sold with a sales
load. If you are exchanging into a fund that charges a sales load, you may
qualify for share prices which do not include the sales load or which reflect
a reduced sales load, if the shares of the fund from which you are exchanging
were: (a) purchased with a sales load, (b) acquired by a previous exchange
from shares purchased with a sales load, or (c) acquired through reinvestment
of dividends or other distributions paid with respect to the foregoing
categories of shares. To qualify, at the time of the exchange you must notify
the Transfer Agent or your Agent must notify the Distributor. Any such
qualification is subject to confirmation of your holdings through a check of
appropriate records. See "Fund Exchanges" in the SAI. The Fund reserves the
right to reject any exchange request in whole or in part. The availability of
fund exchanges may be modified or terminated at any time upon notice to
shareholders.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
HOW TO REDEEM FUND SHARES
GENERAL. You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined NAV as described below.
Page 13
YOU WILL BE CHARGED $5.00 WHEN YOU REDEEM ALL SHARES IN YOUR ACCOUNT
OR YOUR ACCOUNT IS OTHERWISE CLOSED OUT (UNLESS YOU HAVE HELD FUND SHARES AS
OF DECEMBER 8, 1995). The fee will be deducted from your redemption proceeds
and paid to the Transfer Agent. The account closeout fee does not apply to
exchanges out of the Fund or to wire or Dreyfus TELETRANSFER redemptions, for
each of which a $5.00 fee applies. Agents may charge a nominal fee for
effecting redemptions of Fund shares. Any certificates representing Fund
shares being redeemed must be submitted with the redemption request. The
value of the shares redeemed may be more or less than their original cost,
depending upon the Fund's then current NAV.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the SEC. HOWEVER, IF YOU HAVE
PURCHASED FUND SHARES BY CHECK OR BY THE DREYFUS TELETRANSFER PRIVILEGE AND
SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE DREYFUS TRANSFER
AGENT, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK
CLEARANCE OF YOUR PURCHASE CHECK OR DREYFUS TELETRANSFER PURCHASE ORDER,
WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL
NOT HONOR REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE, AND WILL
REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE
DREYFUS TELETRANSFER PRIVILEGE FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER
RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK OR THE DREYFUS
TELETRANSFER PURCHASE ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE
PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR
IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER
THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE,
DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED
TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be
redeemed until the Transfer Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if the net asset value of your account
is $10,000 or less ($500 or less in the case of Fund shareholders as of
December 8, 1995) and remains at or below such amount during the notice
period. The $5.00 account closeout fee would be charged in such case.
PROCEDURES. You may redeem Fund shares by using the regular
redemption procedure through the Transfer Agent, the Check Redemption
Privilege, the Wire Redemption Privilege, the Telephone Redemption Privilege
or through the Dreyfus TELETRANSFER Privilege. Other redemption procedures
may be in effect for clients of certain Agents and institutions. The Fund
makes available to certain large institutions the ability to issue redemption
instructions through compatible computer facilities.
You may redeem Fund shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or Telephone Exchange Privilege (which is granted automatically
unless you refuse it), you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you, or a
representative of your Agent, and reasonably believed by the Transfer Agent
to be genuine. The Fund will require the Transfer Agent to employ reasonable
procedures, such as requiring a form of personal identification, to confirm
that instructions are genuine and, if it does not follow such procedures, the
Fund or the Transfer Agent may be liable for any losses due to unauthorized
or fraudulent instructions. Neither the Fund nor the Transfer Agent will be
liable for following telephone instructions reasonably believed to be
genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or an exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used.
Page 14
REGULAR REDEMPTION. Under the regular redemption procedure, you may
redeem your shares by written request mailed to The Dreyfus Family of Funds,
P.O. Box 9671, Providence, Rhode Island 02940-9671. Redemption requests may
be delivered in person only to a Dreyfus Financial Center. THESE REQUESTS
WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT
THEREBY. For the location of the nearest financial center, please call the
telephone number listed under "General Information." Redemption requests must
be signed by each shareholder, including each owner of a joint account, and
each signature must be guaranteed. The Transfer Agent has adopted standards
and procedures pursuant to which signature-guarantees in proper form
generally will be accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations, as well as from participants in
the New York Stock Exchange Medallion Signature Program, the Securities
Transfer Agents Medallion Program ("STAMP"), and the Stock Exchanges
Medallion Program. For more information with respect to signature-guarantees,
please call the telephone number listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE. You may request on the Account
Application, Shareholder Services Form or by later written request that the
Fund provide Redemption Checks drawn on the Fund's account. Redemption Checks
may be made payable to the order of any person in the amount of $500 or more.
Redemption Checks should not be used to close your account. Your account will
be charged $2.00 for each Redemption Check you write (unless you have held
Fund shares as of December 8, 1995). In addition, the Transfer Agent will
impose a fee for stopping payment of a Redemption Check upon your request or
if the Transfer Agent cannot honor the Redemption Check due to insufficient
funds or other valid reason. The Fund may return an unpaid Redemption Check
that would draw your account balance below $5.00 and you may be subject to
extra charges. You should date your Redemption Checks with the current date
when you write them. Please do not postdate your Redemption Checks. If you
do, the Transfer Agent will honor, upon presentment, even if presented before
the date of the check, all postdated Redemption Checks which are dated within
six months of presentment for payment, if they are otherwise in good order.
Shares for which certificates have been issued may not be redeemed by
Redemption Check. This Privilege may be modified or terminated at any time by
the Fund or the Transfer Agent upon notice to shareholders.
WIRE REDEMPTION PRIVILEGE. You may request by wire or telephone that
redemption proceeds (minimum $1,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. You will be charged a $5.00 wire redemption fee for
each wire redemption (unless you have held Fund shares as of December 8,
1995), which will be deducted from your account and paid to the Transfer
Agent. To establish the Wire Redemption Privilege, you must check the
appropriate box and supply the necessary information on the Fund's Account
Application or file a Shareholder Services Form with the Transfer Agent. You
may direct that redemption proceeds be paid by check (maximum $150,000 per
day) made out to the owners of record and mailed to your address. Redemption
proceeds of less than $1,000 will be paid automatically by check. Holders of
jointly registered Fund or bank accounts may have redemption proceeds of only
up to $250,000 wired within any 30-day period. You may telephone redemption
requests by calling 1-800-645-6561 or, if calling from overseas,
516-794-5452. The Fund reserves the right to refuse any redemption request,
including requests made shortly after a change of address, and may limit the
amount involved or the number of such requests. This Privilege may be
modified or terminated at any time by the Transfer Agent or the Fund. The
Fund's SAI sets forth instructions for transmitting redemption requests by
wire. Shares for which certificates have been issued are not eligible for
this Privilege.
Page 15
TELEPHONE REDEMPTION PRIVILEGE. You may redeem Fund shares (maximum
$150,000 per day) by telephone if you checked the appropriate box on the
Fund's Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The redemption proceeds will be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if calling from overseas, 516-794-5452. The Fund reserves
the right to refuse any request made by telephone, including requests made
shortly after a change of address, and may limit the amount involved or the
number of such requests. This Privilege may be modified or terminated at any
time by the Transfer Agent or the Fund. Shares for which certificates have
been issued are not eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE. You may redeem Fund shares (minimum
$1,000 per day) by telephone if you have checked the appropriate box and
supplied the necessary information on the Fund's Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will
be transferred between your Fund account and the bank account designated in
one of these documents. Only such an account maintained in a domestic
financial institution which is an ACH member may be so designated. Redemption
proceeds will be on deposit in your account at an ACH member bank ordinarily
two days after receipt of the redemption request or, at your request, paid by
check (maximum $150,000 per day) and mailed to your address. Holders of
jointly registered Fund or bank accounts may redeem through the Dreyfus
TELETRANSFER Privilege for transfer to their bank account only up to $250,000
within any 30-day period. The Fund reserves the right to refuse any request
made by telephone, including requests made shortly after a change of address,
and may limit the amount involved or the number of such requests. The Fund
may modify or terminate this Privilege at any time. Your account will be
charged $5.00 for each redemption effected pursuant to this Privilege (unless
you have held Fund shares as of December 8, 1995).
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Fund shares by telephoning
1-800-645-6561 or, if calling from overseas, 516-794-5452. Shares issued in
certificate form are not eligible for this Privilege.
PERFORMANCE INFORMATION
From time to time, the Fund may advertise its yield and
tax-equivalent yield. YIELD AND TAX-EQUIVALENT YIELD FIGURES ARE BASED ON
HISTORICAL EARNINGS AND ARE NOT INTENDED TO INDICATE FUTURE PERFORMANCE. It
can be expected that these yield figures will fluctuate substantially.
The Fund's "yield" refers to the income generated by an investment in
the Fund's over a seven-day period identified in the advertisement. This
income is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a
52-week period and is shown as a percentage of the investment. The "effective
yield" is calculated similarly, but, when annualized, the income earned by an
investment in the Fund is assumed to be reinvested. The "effective yield"
will be slightly higher than the "yield" because of the compounding effect of
this assumed reinvestment. The Fund's "yield" and "effective yield" may
reflect absorbed expenses pursuant to any undertaking that may be in effect.
See "Management of the Fund." Since yields fluctuate, yield data cannot
necessarily be used to compare an investment in the Fund with bank deposits,
savings accounts, and similar investment alternatives which often provide an
agreed-upon or guaranteed fixed yield for a stated period of time, or other
investment companies which may use a different method of computing yield. The
Fund's tax-equivalent yield shows the level of taxable yield needed to
produce an after-tax equivalent to the Fund's tax-free yield. This is done by
increasing the Fund's yield by the amount necessary to reflect the payment of
federal income tax (and state income tax, if applicable) at a stated tax
rate.
Any fees charged by an Agent directly to its customers' account in
connection with investments in the Fund will not be included in calculations
of yield.
Page 16
The Fund may compare its performance with various industry standards
of performance including Lipper Analytical Services, Inc. ratings.
Performance rankings as reported in CHANGING TIMES, BUSINESS WEEK,
INSTITUTIONAL INVESTOR, THE WALL STREET JOURNAL, IBC/DONOGHUE'S MONEY FUND
REPORT, MUTUAL FUND FORECASTER, NO LOAD INVESTOR, MONEY MAGAZINE, MORNINGSTAR
MUTUAL FUND VALUES, U.S. NEWS AND WORLD REPORT, FORBES, FORTUNE, BARRON'S and
similar publications may also be used in comparing the Fund's performance.
Furthermore, the Fund may quote its yields in advertisements or in
shareholder reports.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
The Fund declares daily and pays monthly (on the first business day
of the following month) dividends from its net investment income, if any, and
distributes any net long-term capital gains on an annual basis. The Board of
Trustees may elect not to distribute capital gains in whole or in part to
take advantage of capital loss carryovers.
Unless you choose to receive dividend and/or capital gains
distributions in cash, your distributions will be automatically reinvested in
additional Fund Shares at NAV. You may change the method of receiving
distributions at any time by writing to the Fund. Checks which are sent to
shareholders who have requested distributions to be paid in cash and which
are subsequently returned by the United States Postal Service as not
deliverable or which remain uncashed for six months or more will be
reinvested in additional Fund shares in the shareholder's account at the then
current NAV. Subsequent Fund distributions will be automatically reinvested
in additional Fund shares in the shareholder's account.
Shares purchased on a day on which the Fund calculates its NAV will
not begin to accrue dividends until the following business day. Except as
provided below, redemption orders effected on any particular day will receive
all dividends declared through the day of redemption. However, if immediately
available funds are received by the Transfer Agent prior to 12:00 noon,
Eastern time, you may receive the dividend declared on the day of purchase.
You will not receive the dividends declared on the day of redemption if the
redemption order is placed prior to 12:00 noon, Eastern time.
It is expected that the Fund will qualify for treatment as a
regulated investment company under the Code so that it will be relieved of
Federal income tax on that part of its investment company taxable income
(consisting generally of taxable net investment income and net short-term
capital gain) and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) that is distributed to its shareholders. In
addition, the Fund intends to continue to qualify to pay "exempt-interest"
dividends, which requires, among other things, that at the close of each
quarter of its taxable year at least 50% of the value of its total assets
must consist of municipal securities.
Dividends from the Fund's investment company taxable income are
taxable to you as ordinary income, to the extent of the Fund's earnings and
profits. Distributions by the Fund that are designated by it as
"exempt-interest dividends" generally may be excluded by you from your gross
income. Distributions by the Fund of net capital gain, when designated as
such, are taxable to you as long-term capital gains, regardless of the length
of time you have owned your shares.
Interest on indebtedness incurred or continued to purchase or carry
shares of the Fund will not be deductible for Federal income tax purposes to
the extent that the Fund's distributions (other than capital gains
distributions) consist of exempt-interest dividends. The Fund may invest in
"private activity bonds," the interest on which is treated as a tax
preference item for shareholders in determining their liability for the
alternative minimum tax. Proposals may be introduced before Congress for the
purpose of restricting or eliminating the Federal income tax exemption for
interest on municipal securities. If such a proposal were enacted, the
availability of such securities for investment by the Fund and the value of
its portfolio would be affected. In such event, the Fund would reevaluate its
investment objective and policies.
Page 17
Dividends and other distributions, to the extent taxable, are taxable
to you regardless of whether they are received in cash or reinvested in
additional Fund shares, even if the value of your shares is below your cost.
If you purchase shares shortly before a taxable distribution (i.e., any
distribution other than an exempt-interest dividend paid by the Fund), you
must pay income taxes on the distribution, even though the value of your
investment (plus cash received, if any) remains the same. In addition, the
share price at the time you purchase shares may include unrealized gains in
the securities held in the Fund. If these portfolio securities are
subsequently sold and the gains are realized, they will, to the extent not
offset by capital losses, be paid to you as a capital gain distribution and
will be taxable to you.
In January of each year, the Fund will send you a Form 1099-DIV
notifying you of the status for Federal income tax purposes of your
distributions for the preceding year. The Fund also will advise shareholders
of the percentage, if any, of the dividends paid by the Fund that are exempt
from Federal income tax and the portion, if any, of those dividends that is a
tax preference item for purposes of the alternative minimum tax.
You must furnish the Fund with your taxpayer identification number
("TIN") and state whether you are subject to withholding for prior
under-reporting, certified under penalties of perjury as prescribed by the
Code and the regulations thereunder. Unless previously furnished, investments
received without such a certification will be returned. The Fund is required
to withhold a portion of all dividends, capital gains distributions and redemp
tion proceeds payable to any individuals and certain other non-corporate
shareholders who do not provide the Fund with a correct TIN; withholding from
dividends and capital gains distributions also is required for such
shareholders who otherwise are subject to backup withholding.
In addition, in order to avoid the application of a 4% nondeductible
excise tax on certain undistributed amounts of ordinary income and capital
gains, the Fund may make an additional distribution shortly before December
31 in each year of any undistributed ordinary (taxable) income or capital
gains and expects to pay any other dividends and distributions necessary to
avoid the application of this tax.
The foregoing is only a summary of some of the important tax
considerations generally affecting the Fund and its shareholders; see the SAI
for a further discussion. There may be other federal, state or local tax
considerations applicable to a particular investor; for example, the Fund's
dividends may be wholly or partly taxable under state and/or local laws. You
therefore are urged to consult your own tax adviser.
GENERAL INFORMATION
The Trust offers shares of beneficial interest of separate investment
portfolios without par value (each a "fund"). The Trust was organized as a
Massachusetts business trust under the laws of The Commonwealth of
Massachusetts on March 28, 1983 under the name The Boston Company Tax-Free
Municipal Funds, changed its name to The Laurel Tax-Free Municipal Funds on
March 31, 1994, and changed its name again to The Dreyfus/Laurel Tax-Free
Municipal Funds on October 17, 1994. The Trust is registered with the SEC as
an open-end management investment company, commonly known as a mutual fund.
On December 6, 1995, Fund shareholders approved the Investment
Management Agreement which replaced the Prior Management Agreement, effective
December 8, 1995. The Investment Management Agreement provides that certain
transaction charges be imposed directly on Fund shareholders. See "How to Buy
Fund Shares," "Fund Exchanges" and "How to Redeem Fund Shares." Also
effective December 8, 1995, the Fund's "Investor" and "Class R" designations
were eliminated and the Fund became a single class fund and the Fund's name
changed from Dreyfus/Laurel New York Tax-Free Money Fund to Dreyfus BASIC New
York Municipal Money Market Fund.
Page 18
Each share (regardless of class) has one vote. All shares of all
funds (and classes thereof) vote together as a single class, except as to any
matter for which a separate vote of any fund or class is required by the 1940
Act, and except as to any matter which affects the interests of one or more
particular funds or classes, in which case only the shareholders of the
affected funds or classes are entitled to vote, each as a separate class.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Trustees or the
appointment of auditors. However, pursuant to the Trust's By-Laws, the
holders of at least 10% of the shares outstanding and entitled to vote may
require the Trust to hold a special meeting of shareholders for purposes of
removing a Trustee from office and for any other purpose. Trust shareholders
may remove a Trustee by the affirmative vote of two-thirds of the Trust's
outstanding voting shares. In addition, the Board of Trustees will call a
meeting of shareholders for the purpose of electing Trustees if, at any time,
less than a majority of the Trustees then holding office have been elected by
shareholders.
The Transfer Agent maintains a record of your ownership and will send
you confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 19
DREYFUS
BASIC New York Municipal Money Market Fund
Prospectus
(LION LOGO)
Copy Rights 1996 Dreyfus Service Corporation
316/716p022996
Registration Mark
__________________________________________________________________________
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
FEBRUARY 29, 1996
__________________________________________________________________________
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the Prospectus of The
Dreyfus/Laurel Tax-Free Municipal Funds (the "Trust") dated February 29,
1996 (referred to herein as the "Prospectus") describing the Dreyfus BASIC
New York Municipal Money Market Fund (formerly, the Dreyfus/Laurel New
York Tax-Free Money Fund) (the "Fund"). To obtain a copy of the
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call one of the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. and Canada -- Call 516-794-5452
The Dreyfus Corporation ("Dreyfus") serves as the Fund's investment
manager.
Premier Mutual Fund Services, Inc. ("Premier") is the distributor of
the Fund's shares.
TABLE OF CONTENTS
Page
Management of the Trust. . . . . . . . . . . . . . . . . . . . . . . . . . B-2
Purchase of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . . . . B-9
(see also in the Prospectus "How to Buy Fund Shares")
Investment Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-10
(see also in the Prospectus "Investment Objective and Policies")
Redemption of Fund Shares. . . . . . . . . . . . . . . . . . . . . . . . . B-23
(see also in the Prospectus "How to Redeem Fund Shares")
Fund Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-25
Valuation of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-26
Performance Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-27
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-29
(see also in the Prospectus "Dividends, Other
Distributions and Taxes")
Description of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . B-30
(see also in the Prospectus "Investment Objective and Policies")
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . B-31
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . B-31
Counsel and Independent Auditors . . . . . . . . . . . . . . . . . . . . . B-32
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . B-32
Appendix A Risk Factors - Investing in
New York Municipal Obligations . . . . . . . . . . . . . . . . . . . . . B-33
Appendix B - Information about Securities Ratings. . . . . . . . . . . . . B-47
MANAGEMENT OF THE TRUST
The organizations that provide services to the Trust are as follows:
Dreyfus as investment manager ("Investment Manager"), Mellon Bank, N.A.
("Mellon Bank") as custodian, Premier as the distributor ("Distributor")
and sub-administrator ("Sub-Administrator"), and Dreyfus Transfer, Inc.
("Dreyfus Transfer"), a wholly-owned subsidiary of Dreyfus, as transfer
agent ("Transfer Agent"). The functions they perform for the Trust are
discussed in the Prospectus and in this Statement of Additional
Information.
On October 17, 1994, the name of the Trust was changed from "The
Laurel Tax-Free Municipal Funds" to "The Dreyfus/Laurel Tax-Free Municipal
Funds" and the name of the Fund was changed from Laurel New York Tax-Free
Money Fund to Dreyfus/Laurel New York Tax-Free Money Fund. On November
20, 1995, the Fund's name changed from Dreyfus/Laurel New York Tax-Free
Money Fund to Dreyfus BASIC New York Municipal Money Market Fund.
Trustees and Officers
The Trust has a Board composed of twelve Trustees which supervises
the Trust's investment activities and reviews contractual arrangements
with companies that provide the Fund with services. The following lists
the Trustees and officers and their positions with the Trust and their
present and principal occupations during the past five years. Each
Trustee who is an "interested person" of the Trust (as defined in the
Investment Company Act of 1940, as amended (the "Act")) is indicated by an
asterisk. Each of the Trustees also serves as a Director of The
Dreyfus/Laurel Funds, Inc., and as a Trustee of The Dreyfus/Laurel Funds
Trust (collectively, with the Trust, the "Dreyfus/Laurel Funds").
o+RUTH MARIE ADAMS. Trustee of the Trust; Professor of English and Vice
President Emeritus, Dartmouth College; Senator, United Chapters of
Phi Beta Kappa; Trustee, Woods Hole Oceanographic Institution. Age:
80 years old. Address: 1026 Kendal Lyme Road, Hanover, New Hampshire
03755.
o+FRANCIS P. BRENNAN. Chairman of the Board of Trustees and Assistant
Treasurer of the Trust; Director and Chairman, Massachusetts Business
Development Corp.; Director, Boston Mutual Insurance Company;
Director and Vice Chairman of the Board, Home Owners Federal Savings
and Loan (prior to May 1990). Age: 78 years old. Address:
Massachusetts Business Development Corp., One Liberty Square, Boston,
Massachusetts 02109.
o*JOSEPH S. DiMARTINO. Trustee of the Trust since February 1995. Since
January 1995, Mr. DiMartino has served as Chairman of the Board for
various funds in the Dreyfus Family of Funds. For more than five
years prior thereto, he was President and a director of Dreyfus and
Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of Dreyfus. From August 1994
to December 31, 1994, he was a director of Mellon Bank Corporation.
He is Chairman of the Board of Noel Group, Inc., a venture capital
company; a trustee of Bucknell University; and a director of the
Muscular Dystrophy Association, HealthPlan Services Corporation,
Belding Heminway, Inc., Curtis Industries, Inc., Simmons Outdoor
Corporation and Staffing Resources, Inc. Mr. DiMartino is also a
Board member of 93 other funds in the Dreyfus Family of Funds. Age:
52 years old. Address: 200 Park Avenue, New York, New York 10166.
o+JAMES M. FITZGIBBONS. Trustee of the Trust; Chairman, Howes Leather
Company, Inc.; Director, Fiduciary Trust Company; Chairman, CEO and
Director, Fieldcrest-Cannon Inc.; Director, Lumber Mutual Insurance
Company; Director, Barrett Resources, Inc. Age: 60 years old.
Address: 40 Norfolk Road, Brookline, Massachusetts 02167.
o*J. TOMLINSON FORT. Trustee of the Trust; Since 1990, Partner, Reed,
Smith, Shaw & McClay (law firm). Age: 65 years old. Address: 204
Woodcock Drive, Pittsburgh, Pennsylvania 15215.
o+ARTHUR L. GOESCHEL. Trustee of the Trust; Director, Chairman of the
Board and Director, Rexene Corporation; Director, Calgon Carbon
Corporation; Director, Cerex Corporation; Director, National Picture
Frame Corporation; Chairman of the Board and Director, Tetra
Corporation 1991-1993; Director, Medalist Corporation 1992-1993; From
1988-1989 Director, Rexene Corporation. Since May 1991, Mr. Goeschel
has served as a Trustee of Sewickley Valley Hospital. Age: 73 years
old. Address: Way Hollow Road and Woodland Road, Sewickley,
Pennsylvania 15143.
o+KENNETH A. HIMMEL. Trustee of the Trust; Director, The Boston Company,
Inc. ("TBC") and Boston Safe Deposit and Trust Company; President and
Chief Executive Officer, Himmel & Co., Inc.; Vice Chairman, Sutton
Place Gourmet, Inc. Managing Partner, Franklin Federal Partners.
Age: 49 years old. Address: Himmel and Company, Inc., 101 Federal
Street, 22nd Floor, Boston, Massachusetts 02110.
o*ARCH S. JEFFERY. Trustee of the Trust; Financial Consultant. Age: 76
years old. Address: 1817 Foxcroft Lane, Unit 306, Allison Park,
Pennsylvania 15101.
o+STEPHEN J. LOCKWOOD. Trustee of the Trust; President and CEO, LDG
Management Company Inc.; CEO, LDG Reinsurance Underwriters, SRRF
Management Inc. and Medical Reinsurance Underwriters Inc. Age: 48
years old. Address: 401 Edgewater Place, Wakefield, Massachusetts
01880.
o+ROBERT D. MCBRIDE. Trustee of the Trust; Director, Chairman, McLouth
Steel; Director, Salem Corporation. Director, SMS/Concast, Inc.
(1983-1991). Age: 67 years old. Address: 15 Waverly Lane, Grosse
Pointe Farms, Michigan 48236.
o+JOHN J. SCIULLO. Trustee of the Trust; Dean Emeritus and Professor of
Law, Duquesne University Law School; Director, Urban Redevelopment
Authority of Pittsburgh. Age: 63 years old. Address: 321 Gross
Street, Pittsburgh, Pennsylvania 15224.
o+ROSLYN M. WATSON. Trustee of the Trust; Principal, Watson Ventures,
Inc.; Director, American Express Centurion Bank; Director, Harvard
Community Health Plan, Inc.; Director, Massachusetts Electric
Company; Director, The Hymans Foundations, Inc., prior to February,
1993; Real Estate Development Project Manager and Vice President, The
Gunwyn Company. Age: 45 years old. Address: 25 Braddock Park,
Boston, Massachusetts 02116-5816.
# ELIZABETH BACHMAN. Vice President and Assistant Secretary of the Trust,
The Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc.
(since January 1996); Counsel, Premier Mutual Fund Services, Inc.
Prior to September 1995, she was enrolled at the Fordham University
School of Law and received her J.D. in May 1995. Prior to September
1992, she was an Assistant at the National Association for Public
Interest Law. Age: 26 years old. Address: 200 Park Avenue, New
York, New York 10166.
#MARIE E. CONNOLLY. President and Treasurer of the Trust, The
Dreyfus/Laurel Funds and The Dreyfus/Laurel Funds, Inc. (since
September 1994); Vice President of the Trust, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Funds, Inc. (March 1994 to
September 1994); President, Funds Distributor, Inc. (since 1992);
Treasurer, Funds Distributor, Inc. (July 1993 to April 1994); COO,
Funds Distributor, Inc. (since April 1994); Director, Funds
Distributor, Inc. (since July 1992); President, COO and Director,
Premier Mutual Fund Services, Inc. (since April 1994); Senior Vice
President and Director of Financial Administration, The Boston
Company Advisors, Inc. (December 1988 to May 1993). Age: 37 years
old. Address: One Exchange Place, Boston, Massachusetts 02109.
#FREDERICK C. DEY. Vice President of the Trust, The Dreyfus/Laurel Funds
Trust and The Dreyfus/Laurel Funds, Inc. (since September 1994);
Senior Vice President, Premier Mutual Fund Services, Inc. (since
August 1994); Vice President, Funds Distributor, Inc. (since August
1994); Fundraising Manager, Swim Across America (October 1993 to
August 1994); General Manager, Spring Industries (August 1988 to
October 1993). Age: 33 years old. Address: One Exchange Place,
Boston, Massachusetts 02109.
#ERIC B. FISCHMAN. Vice President and Assistant Secretary (since January
1996) of the Trust, The Dreyfus/Laurel Funds Trust and The
Dreyfus/Laurel Funds, Inc.; Vice President and Associate General
Counsel, Premier Mutual Fund Services, Inc. (Since August 1994); Vice
President and Associate General Counsel, Funds Distributor, Inc.
(since August 1994); Staff Attorney, Federal Reserve Board (September
1992 to June 1994); Summer Associate, Venture Economics (May 1991 to
September 1991). Age: 31 years old. Address: 200 Park Avenue, New
York, New York 10166.
RICHARD W. HEALEY. Vice President of the Trust, The Dreyfus/Laurel Funds
Trust and The Dreyfus/Laurel Funds, Inc. (since March 1994); Senior
Vice President, Funds Distributor, Inc. (since March 1993); Vice
President, The Boston Company, Inc., (March 1993 to May 1993); Vice
President of Marketing, Calvert Group (1989 to March 1993). Age: 41
years old. Address: One Exchange Place, Boston, Massachusetts 02109.
# MARGARET PARDO. Assistant Secretary of the Trust, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Funds, Inc. (since January 1996);
Paralegal, Premier Mutual Fund Services, Inc. Prior to April 1995,
she was a Medical Coordination Officer at ORBIS International. Prior
to June 1992, she worked as a Program Coordinator at Physicians World
Communications Group. Age: 27 years old. Address: 200 Park Avenue,
New York, New York 10166.
#JOHN E. PELLETIER. Vice President and Secretary of the Trust, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc. (since
September 1994); Senior Vice President, General Counsel and
Secretary, Funds Distributor, Inc. (since April 1994); Senior Vice
President, General Counsel and Secretary, Premier Mutual Fund
Services, Inc. (since August 1994); Counsel, The Boston Company
Advisors, Inc. (February 1992 to March 1994); Associate, Ropes & Gray
(August 1990 to February 1992). Age: 30 years old. Address: One
Exchange Place, Boston, Massachusetts 02109.
# JOHN J. PYBURN. Assistant Treasurer of the Trust, The Dreyfus/Laurel
Funds Trust and The Dreyfus/Laurel Funds, Inc. (since January 1996);
Vice President of Premier Mutual Fund Services, Inc. and an officer
of other investment companies advised or administered by Dreyfus.
From 1984 to July 1994, he was Assistant Vice President in the Mutual
Fund Accounting Department of Dreyfus. Age: 61 years old. Address:
200 Park Avenue, New York, New York 10166.
JOSEPH F. TOWER, III. Assistant Treasurer of the Trust, The
Dreyfus/Laurel Funds Trust and The Dreyfus/Laurel Funds, Inc. (since
January 1996); Senior Vice President, Treasurer and Chief Financial
Officer of Premier Mutual Fund Services, Inc. and an officer of other
investment companies advised or administered by Dreyfus. From July
1988 to August 1994, he was employed by The Boston Company, Inc.
where he held various management positions in the Corporate Finance
and Treasury areas. Age: 33 years old. Address: 200 Park Avenue,
New York, New York 10166.
_____________________________________
* "Interested person" of the Trust, as defined in the 1940 Act.
o Member of the Audit Committee.
+ Member of the Nominating Committee.
# Officer also serves as an officer for other investment companies
advised by The Dreyfus Corporation.
No officer or employee of Premier (or of any parent, subsidiary or
affiliate thereof) receives any compensation from the Trust for serving as
an officer or Trustee of the Trust. No officer or employee of Dreyfus (or
of any parent, subsidiary, or affiliate thereof) serves as an officer or
Trustee of the Trust. The Dreyfus/Laurel Funds pay each Director/Trustee
who is not an "interested person" (as defined in the Act), $27,000 per
annum (and an additional $75,000 for the Chairman of the Board of
Directors/Trustees of the Dreyfus/Laurel Funds), $1,000 per joint
Dreyfus/Laurel Funds Board meeting attended and $750 per joint
Dreyfus/Laurel Funds Audit Committee meeting attended, and reimburse each
Director/Trustee for travel and out-of-pocket expenses.
The officers and Trustees of the Trust as a group owned beneficially
less than 1% of the total shares of the Fund outstanding as of January 31,
1996.
For the fiscal year ended June 30, 1995, the aggregate amount of fees
and expenses received by each current Trustee from the Trust and all other
funds in the Dreyfus Family of Funds for which such person is a Board
member were as follows:
<TABLE>
<CAPTION>
Total
Pension or Compensation from
Aggregate Retirement Benefits Estimated Annual the Trust and Fund
Name of Board Compensation from Accrued as Part of Benefits Upon Complex Paid to
Member the Trust# Fund's Expenses Retirement Board Member
- ---------------------- --------------------- --------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Ruth Marie Adams $ 2,093 none none $ 34,750
Francis P. Brennan@ 6,642 none none 110,750
Joseph S. DiMartino** none none none 448,618*
James M. Fitzgibbons 2,031 none none 33,750
J. Tomlinson Fort** none none none none
Arthur L. Goeschel 2,093 none none 34,750
Kenneth A. Himmel 1,996 none none 33,000
Arch S. Jeffery** none none none none
Stephen J. Lockwood 1,934 none none 32,000
Robert D. McBride 2,156 none none 35,750
John J. Sciullo 2,093 none none 34,750
Roslyn M. Watson 2,156 none none 35,750
</TABLE>
_____________________________
# Amounts required to be paid by the Trust directly to the non-
interested Trustees that would be applied to offset a portion of the
management fee payable to Dreyfus, are in part paid directly by
Dreyfus to the non-interested Trustees. Amount does not include
reimbursed expenses for attending Board meetings, which amounted to
$1,192 for the Dreyfus/Laurel Funds.
* Estimated amount for fiscal year ended June 30, 1995.
** Joseph S. DiMartino, J. Tomlinson Fort and Arch Jeffery are paid
directly by Dreyfus for serving as Board members of the Trust and the
funds in the Dreyfus/Laurel Funds. For the fiscal year ended June
30, 1995, the aggregate amount of fees and expenses received by
Joseph S. DiMartino, J. Tomlinson Fort and Arch Jeffery from Dreyfus
for serving as a Board member of the Trust were $1,792, $2,156 and
$2,156, respectively and for serving as a Board member of all funds
in the Dreyfus/Laurel Funds (including the Trust) were $14,000,
$35,750 and $35,750, respectively. In addition, Dreyfus reimbursed
Messrs. DiMartino, Fort and Jeffery a total of $136 for expenses
attributable to the Trust's Board meetings ($136 is not included in
$1,192 above).
@ The compensation of Francis P. Brennan includes $75,000 by Dreyfus to
be the Chairman of the Board.
Management Arrangements
Dreyfus serves as the investment manager for the Fund pursuant to an
Investment Management Agreement (the "Management Agreement") with the
Trust dated December 8, 1995. Dreyfus is a wholly-owned subsidiary of
Mellon Bank. Pursuant to the Management Agreement, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to
the Fund. As investment manager, Dreyfus manages the Fund by making
investment decisions based on the Fund's investment objective, policies
and restrictions.
Prior to December 8, 1995, Dreyfus served as investment manager to
the Fund pursuant to the prior investment management agreement (the "Prior
Management Agreement") with the Trust dated April 4, 1994 and transferred
from Mellon Bank to Dreyfus on October 17, 1994.
Prior to May 21, 1993, The Boston Company Advisors, Inc. ("TBC
Advisors") served as investment adviser to the Fund pursuant to a written
agreement, which was last approved by the Trustees, including a majority
of the Trustees who are not "interested persons" of the Trust, on July 22,
1992. From May 21, 1993 through April 3, 1994, Boston Advisors served as
investment adviser to the Fund pursuant to a written agreement ("TBC
Advisors Agreement"), which was last approved by the Trustees, including a
majority of the Trustees who are not "interested persons" of the Trust, on
July 21, 1993 and approved by the shareholders of the Fund on December 31,
1992. The TBC Advisors Agreement became effective on May 21, 1993, upon
the consummation of the sale of Boston Group Holdings, Inc., the parent
company of The Boston Company, Inc. ("TBC"), to Mellon Bank Corporation.
Mellon Bank later served as investment manager to the Fund pursuant to the
Prior Management Agreement, which was last approved by the Trustees,
including a majority of the Trustees who are not "interested persons" of
the Trust or Mellon Bank, on November 22, 1993, (subject to shareholder
approval) and approved by the shareholders of the Fund on March 29, 1994.
The Prior Management Agreement became effective on April 4, 1994. TBC
Advisors is a wholly-owned subsidiary of TBC, a financial services holding
company. TBC is in turn a wholly-owned subsidiary of Mellon Bank
Corporation. As stated above, Dreyfus, a wholly-owned subsidiary of
Mellon Bank, is the current Investment Manager pursuant to the Management
Agreement, which was last approved by the Trustees on July 26, 1995.
The current Management Agreement with Dreyfus provides for a "unitary
fee." Under the unitary fee structure, Dreyfus pays all expenses of the
Fund except: (i) brokerage commissions, (ii) taxes, interest and
extraordinary expenses (which are expected to be minimal), and (iii) Rule
12b-1 fees, as applicable. Under the unitary fee, Dreyfus provides, or
arranges for one or more third parties to provide, investment advisory,
administrative, custody, fund accounting and transfer agency services to
the Fund. For the provision of such services directly, or through one or
more third parties, Dreyfus receives as full compensation for all services
and facilities provided by it, a fee computed daily and paid monthly at
the annual rate of .45 of 1% of the Fund's average daily net assets, less
the accrued fees and expenses (including counsel fees) of the non-
interested Trustees of the Trust. The Management Agreement provides that
certain redemption, exchange and account closeout charges are payable
directly by the Fund's shareholders to the Fund's Transfer Agent and the
fee payable by the Fund to Dreyfus is not reduced by the amount of charges
payable to the Transfer Agent. Under the prior agreement with TBC
Advisors, the payments to the investment manager covered merely the
provision of investment advisory services (and payment for sub-advisory
services) and certain specified administrative services. Under this
previous arrangement, the Fund also paid for additional non-investment
advisory expenses, such as custody and transfer agency services, that were
not paid by the investment adviser.
The Management Agreement will remain in effect through December 7,
1997 and will continue thereafter from year to year provided that a
majority of the Trustees who are not interested persons of the Fund and
either a majority of all Trustees or a majority of the shareholders of the
Fund approve its continuance. The Fund may terminate the Management
Agreement, without prior notice to Dreyfus, upon the vote of a majority of
the Board of Trustees or upon the vote of a majority of the outstanding
voting securities of the Fund on 60 days' written notice to Dreyfus.
Dreyfus may terminate the Management Agreement upon 60 days' written
notice to the Fund. The Management Agreement will terminate immediately
and automatically upon its assignment.
The following persons are officers and/or directors of Dreyfus:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board; Christopher M. Condron, President,
Chief Operating Officer and a director, Stephen E. Canter, Vice Chairman,
Chief Investment Officer and a director; Lawrence S. Kash, Vice Chairman-
Distribution and a director; Philip L. Toia, Vice Chairman-Operations and
Administration and a director; Barbara E. Casey, Vice President-Dreyfus
President-Dreyfus Retirement Services; Diane M. Coffey, Vice President-
Corporate Communications; Elie M. Genadry, Vice President-Institutional
Sales; William T. Sandalls, Jr., Senior Vice President, Chief Financial
Officer and a director; William F. Glavin, Jr., Vice President-Corporate
Development; Andrew S. Wasser, Vice President-Information Services; Mark
N. Jacobs, Vice President-Fund Legal and Compliance and Secretary; Jeffrey
N. Nachman, Vice President-Mutual Fund Accounting; Maurice Bendrihem,
Controller; Elvira Oslapas; Assistant Secretary; Mandell L. Berman, Frank
V. Cahouet, Alvin E. Friedman, Lawrence M. Greene and Julian M. Smerling
directors.
As compensation for Dreyfus' services, the Fund pays a fee, based on
its total average daily net assets, that is computed daily and paid
monthly at the annual rate of .45 of 1%. Dreyfus has agreed to limit its
fee, or to reimburse the Fund for expenses, to ensure that the Fund's
total operating expenses do not exceed .35 of 1% for the period from
December 8, 1995 through December 7, 1996. In addition, Dreyfus may waive
all or a portion of its fees payable by the Fund from time to time.
The following table shows the fees paid by the Fund to TBC Advisors
or Mellon Bank (as the prior investment advisors) and to Dreyfus (the
current investment manager), including any fee waivers or expense
reimbursements by TBC Advisors, Mellon Bank or Dreyfus, pursuant to the
Fund's prior investment advisory agreements, during the Fund's 1993, 1994
and 1995 fiscal years:
<TABLE>
<CAPTION>
1995 * 1994 * (1) 1993 **
- ------ ---------- -------
<S> <C> <C> <C> <C> <C>
Fees Fees Fees Fees Fees Fees
Paid (2) Waived (3) Paid (4) Waived (5) Paid Waived (5)
- -------- ---------- --------- ---------- ----- -----------
$48,800 $12,400 $27,444 $46,447 (6) $73,485 $118,669 (7)
</TABLE>
_______________________________
* For the fiscal year ended June 30. The Fund changed its fiscal year
end from November 30 to June 30.
** For the fiscal years ended November 30.
(1) Effective April 4, 1994, Mellon Bank served as the Fund's investment
manager.
(2) For the fiscal year ended June 30, 1995, there were no fee waivers or
expense reimbursements.
(3) Fees paid to Mellon Bank for investment management services for the
period from April 4, 1994 to the fiscal year ended June 30, 1994.
(4) Fees paid to TBC Advisors for investment advisory services for the
period from December 1, 1993 to April 3, 1993.
(5) TBC Advisors waived all or a portion of its fees and/or reimbursed
expenses of the Fund from time to time in order to increase the
Fund's net income available for distribution to shareholders.
(6) Includes $22,044 reimbursement by TBC Advisors.
(7) Included $45,183 reimbursement by TBC Advisors.
Dreyfus has agreed that if in any fiscal year the aggregate expenses
of the Fund (including fees pursuant to the Management Agreement, but
excluding interest, brokerage expenses, taxes and extraordinary items)
exceed the expense limitation of any state, it will reduce its management
fees by the amount of such excess expense. Such a fee reduction, if any,
will be reconciled on a monthly basis. The most restrictive state expense
limitation applicable to the Fund requires a reduction of fees in any year
that such expenses exceed 2.5% of the first $30 million of average net
assets, 2.0% of the next $70 million of average net assets and 1.5% of the
remaining average net assets. A number of factors, including the size of
the Fund, will determine which of these restrictions will be applicable to
the Fund at any given time. No reimbursement pursuant to state expense
limitations was required for the Fund for the fiscal year ended June 30,
1995.
In addition, under a distribution plan adopted by the Fund pursuant
to Rule 12b-1 under the Act which was terminated effective December 8,
1995, the Fund paid Dreyfus Service Corporation, a subsidiary of Dreyfus,
for shareholder servicing, and the Distributor for shareholder servicing
and expenses previously intended to result in the sale of Investor shares,
at the annual rate of .25% attributable to its Investor shares. For the
year ended June 30, 1995, the Fund paid $20,798 in distribution fees
attributable to its Investor shares.
PURCHASE OF FUND SHARES
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor
also acts as distributor for the other funds in the Dreyfus Family of
Funds and for certain other investment companies.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 P.M., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York
Stock Exchange ("NYSE") are open for business will be credited to the
shareholder's Fund account on the next bank business day following such
purchase order. Purchase orders made after 4:00 P.M., New York time, on
any business day the Transfer Agent and the NYSE are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g. when the NYSE is
not open for business), will be credited to the shareholders's Fund
account on the second bank business day following such purchase order.
Reopening an Account. An investor may reopen an account with a
minimum investment of $100 without filing a new Account Application during
the calendar year the account is closed or during the following calendar
year, provided the information on the old Account Application is still
applicable.
In-Kind Purchases. If the following conditions are satisfied, the
Fund may at its discretion, permit the purchase of shares through an "in-
kind" exchange of securities. Any securities exchanged must meet the
investment objective, policies and limitations of the Fund, must have a
readily ascertainable market value, must be liquid and must not be subject
to restrictions on resale. The market value of any securities exchanged,
plus any cash, must be at least equal to $25,000. Shares purchased in
exchange for securities generally cannot be redeemed for fifteen days
following the exchange in order to allow time for the transfer to settle.
The basis of the exchange will depend upon the relative NAV of the
Shares purchased and securities exchanged. Securities accepted by the
Fund will be valued in the same manner as the Fund values its assets. Any
interest earned on the securities following their delivery to the Fund and
prior to the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the
securities become the property of the Fund, along with the securities.
For further information about "in-kind" purchases, call 1-800-645-6561.
Federal Law Affecting Mellon Bank
The Glass-Steagall Act of 1933 prohibits national banks from engaging
in the business of underwriting, selling or distributing securities and
prohibits a member bank of the Federal Reserve System from having certain
affiliations with an entity engaged principally in that business. The
activities of Mellon Bank in informing its customers of, and performing,
investment and redemption services in connection with the Fund, and in
providing services to the Fund as custodian, as well as investment
advisory activities of Dreyfus, may raise issues under these provisions.
Mellon Bank has been advised by counsel that its activities contemplated
under this arrangement are consistent with its statutory and regulatory
obligations.
Changes in either federal or state statutes and regulations relating
to the permissible activities of banks and their subsidiaries or
affiliates, as well as further judicial or administrative decisions or
interpretations of such future statutes and regulations could prevent
Mellon Bank or Dreyfus from continuing to perform all or a part of the
above services for its customers and/or the Fund. If Mellon Bank or
Dreyfus were prohibited from serving the Fund in any of its present
capacities the Trustees would seek an alternative provider(s) of such
services.
INVESTMENT POLICIES
The Prospectus discusses the investment objective of the Fund and the
policies it employs to achieve that objective. The following discussion
supplements the description of the Fund's investment policies in the
Prospectus.
Description of Municipal Obligations
For purposes of this Statement of Additional Information, the term
"Municipal Obligations" and "New York Municipal Obligations" shall mean
debt obligations issued by the State of New York, its political
subdivisions, municipalities and public authorities and municipal
obligations issued by other government entities if, in the opinion of
counsel to the respective issuers, the interest from such obligations is
exempt from Federal and New York personal income taxes. "Municipal
Obligations" and "New York Municipal Obligations" include the following:
Municipal Bonds
Municipal Bonds, which generally have a maturity of more than one
year when issued, have two principal classifications: General Obligation
Bonds and Revenue Bonds. A Private Activity Bond is a particular kind of
Revenue Bond. The classification of General Obligation Bonds, Revenue
Bonds and Private Activity Bonds are discussed below.
1. General Obligation Bonds. The proceeds of these obligations
are used to finance a wide range of public projects, including construction or
improvement of schools, highways and roads, and water and sewer systems.
General Obligation Bonds are secured by the issuer's pledge of its faith,
credit and taxing power for the payment of principal and interest.
2. Revenue Bonds. Revenue Bonds are issued to finance a wide
variety of capital projects including: electric, gas, water and sewer
systems; highways, bridges and tunnels; port and airport facilities;
colleges and universities; and hospitals. The principal security for a
Revenue Bond is generally the net revenues derived from a particular
facility, group of facilities or, in some cases, the proceeds of a special
excise or other specific revenue source. Although the principal security
behind these bonds may vary, many provide additional security in the form
of a debt service reserve fund whose money may be used to make principal
and interest payments on the issuer's obligations. Some authorities
provide further security in the form of a state's ability (without
obligation) to make up deficiencies in the debt service reserve fund.
3. Private Activity Bonds. Private Activity Bonds, which are
considered Municipal Bonds if the interest paid thereon is exempt from
Federal income tax, are issued by or on behalf of public authorities to
raise money to finance various privately operated facilities for business
and manufacturing, housing, sports and pollution control. These bonds are
also used to finance public facilities such as airports, mass transit
systems, ports and parking. The payment of the principal and interest on
such bonds is dependent solely on the ability of the facility's user to
meet its financial obligations and the pledge, if any, of real and
personal property so financed as security for such payment. As noted in
the Prospectus and discussed below under "Taxes," interest income on
these bonds may be an item of tax preference subject to the Federal
alternative minimum tax for individuals and corporations.
Municipal Notes
Municipal Notes generally are used to provide for short-term capital
needs and generally have maturities of thirteen months or less. Municipal
Notes include:
1. Tax Anticipation Notes. Tax Anticipation Notes are issued to
finance working capital needs of municipalities. Generally, they are
issued in anticipation of various seasonal tax revenue, such as income,
sales, use and business taxes, and are payable from these specific future
taxes.
2. Revenue Anticipation Notes. Revenue Anticipation Notes are
issued in expectation of receipt of other kinds of revenue, such as
Federal revenues available under the Federal Revenue Sharing Programs.
3. Bond Anticipation Notes. Bond Anticipation Notes are issued
to provide interim financing until long-term financing can be arranged. In most
cases, the long-term bonds then provide the money for the repayment of the
Notes.
Municipal Commercial Paper
Issues of Municipal Commercial Paper typically represent short-term,
unsecured, negotiable promissory notes. These obligations are issued by
agencies of state and local governments to finance seasonal working
capital needs of municipalities or to provide interim construction
financing and are paid from general revenues of municipalities or are
refinanced with long-term debt. In most cases, Municipal Commercial Paper
is backed by letters of credit, lending agreements, note repurchase
agreements or other credit facility agreements offered by banks or other
institutions.
Municipal Lease Obligations
Municipal leases may take the form of a lease or a certificate of
participation in a purchase contract issued by state and local government
authorities to obtain funds to acquire a wide variety of equipment and
facilities such as fire and sanitation vehicles, computer equipment and
other capital assets. A lease obligation does not constitute a general
obligation of the municipality for which the municipality's taxing power
is pledged, although the lease obligation is ordinarily backed by the
municipality's covenant to budget for, appropriate and make payments due
under the lease obligation. Municipal leases have special risks not
normally associated with Municipal Bonds. These obligations frequently
contain "non-appropriation" clauses that provide that the governmental
issuer of the obligation has no obligation to make future payments under
the lease or contract unless money is appropriated for such purposes by
the legislative body on a yearly or other periodic basis. In addition to
the non-appropriation risk, municipal leases represent a type of financing
that has not yet developed the depth of marketability associated with
Municipal Bonds; moreover, although the obligations will be secured by the
leased equipment, the disposition of the equipment in the event of
foreclosure might prove difficult. For purposes of the 10% limitation on
the purchase of illiquid securities, the Fund will not consider the
municipal lease obligations or certificates of participation in municipal
lease obligations in which it invests as liquid, unless Dreyfus shall
determine, based upon such factors as the frequency of trades and quotes
for the obligation, the number of dealers willing to purchase or sell the
security and the number of other potential buyers, the willingness of
dealers to undertake to make a market in the security and the nature of
marketplace trades, that a security shall be treated as liquid for
purposes of such limitation.
Obligations of issuers of Municipal Obligations are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights
and remedies of creditors. In addition, the obligations of such issuers
may become subject to laws enacted in the future by Congress, state
legislators, or referenda extending the time for payment of principal
and/or interest, or imposing other constraints upon enforcement of such
obligations or upon municipalities to levy taxes. There is also the
possibility that, as a result of litigation or other conditions, the power
or ability of any issuer to pay, when due, the principal of and interest
on its Municipal Obligations may be materially affected.
Unlike the purchase or sale of a Municipal Bond, no consideration is
paid or received by the Fund upon the purchase or sale of a futures
contract. Initially, the Fund will be required to deposit with the broker
an amount of cash or cash equivalents equal to approximately 10% of the
contract amount (this amount is subject to change by the board of trade on
which the contract is traded and members of such board of trade may charge
a higher amount). This amount is known as initial margin and is in the
nature of a performance bond or good faith deposit on the contract which
is returned to the Fund upon termination of the futures contract, assuming
that all contractual obligations have been satisfied. Subsequent
payments, known as variation margin, to and from the broker, will be made
on a daily basis as the price of the index fluctuates, making the long and
short positions in the futures contract more or less valuable, a process
known as marking-to-market. At any time prior to the expiration of the
contract, the Fund may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing position in
the futures contract.
There are several risks in connection with the use of a municipal
bond index futures contract as a hedging device. Successful use of
municipal bond index futures contracts by the Fund is subject to the
ability of Dreyfus to predict correctly movements in the direction of
interest rates. Such predictions involve skills and techniques which may
be different from those involved in the management of a long-term
municipal bond portfolio. In addition, there can be no assurance that
there will be a correlation between movements in the price of the
municipal bond index and movements in the price of the Municipal Bonds
which are the subject of the hedge. The degree of imperfection of
correlation depends upon various circumstances, such as variations in
speculative market demand for futures contracts and municipal securities,
technical influences on futures trading, and differences between the
municipal securities being hedged and the municipal securities underlying
the municipal bond index futures contracts, in such respects as interest
rate levels, maturities and creditworthiness of issuers. A decision of
whether, when and how to hedge involves the exercise of skill and judgment
and even a well-conceived hedge may be unsuccessful to some degree because
of market behavior or unexpected trends in interest rates.
Although the Fund intends to purchase or sell municipal bond index
futures contracts only if there is an active market for such contracts,
there is no assurance that a liquid market will exist for the contracts at
any particular time. Most domestic futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures contract prices
during a single trading day. The daily limit establishes the maximum
amount the price of a futures contract may vary either up or down from the
previous day's settlement price at the end of a trading session. Once the
daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and, therefore, does not
limit potential losses because the limit may prevent the liquidation of
unfavorable positions. It is possible that futures contract prices could
move to the daily limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions
and subjecting some futures traders to substantial losses. In such event,
it will not be possible to close a futures position and, in the event of
adverse price movements, the Fund would be required to make daily cash
payments of variation margin. In such circumstances, an increase in the
value of the portion of the portfolio being hedged, if any, may partially
or completely offset losses on the futures contract. As described above,
however, there is no guarantee that the price of Municipal Bonds will, in
fact, correlate with the price movements in the municipal bond index
futures contract and thus provide an offset to losses on a futures
contract.
If the Fund has hedged against the possibility of an increase in
interest rates adversely affecting the value of the Municipal Bonds held
in its portfolio and rates decrease instead, the Fund will lose part or
all of the benefit of the increased value of the Municipal Bonds it has
hedged because it will have offsetting losses in its futures positions.
In addition, in such situations, if the Fund has insufficient cash, it may
have to sell securities to meet daily variation margin requirements. Such
sales of securities may, but will not necessarily, be at increased prices
which reflect the decline in interest rates. The Fund may have to sell
securities at a time when it may be disadvantageous to do so.
When the Fund purchases municipal bond index futures contracts, an
amount of cash and U.S. government securities or other high grade debt
securities equal to the market value of the futures contracts will be
deposited in a segregated account with the Fund's custodian (and/or such
other persons as appropriate) to collateralize the positions and thereby
insure that the use of such futures contracts is not leveraged. In
addition, the ability of the Fund to trade in municipal bond index futures
contracts and options on interest rate futures contracts may be materially
limited by the requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), applicable to a regulated investment company. See
"Taxes" below.
Tender Option Bonds
The Fund may invest up to 10% of the value of its assets in tender
option bonds. A tender option bond is a Municipal Obligation (generally
held pursuant to a custodial arrangement) having a relatively long
maturity and bearing interest at a fixed rate substantially higher than
prevailing short-term tax-exempt rates, that has been coupled with the
agreement of a third party, such as a bank, broker-dealer or other
financial institution, pursuant to which such institution grants the
security holders the option, at periodic intervals, to tender their
securities to the institution and receive the face value thereof. As
consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the Municipal Obligation's
fixed coupon rate and the rate, as determined by a remarketing or similar
agent at or near the commencement of such period, that would cause the
securities, coupled with the tender option, to trade at par on the date of
such determination. Thus, after payment of this fee, the security holder
effectively holds a demand obligation that bears interest at the
prevailing short-term tax-exempt rate. Dreyfus, on behalf of the Fund,
will consider on an ongoing basis the creditworthiness of the issuer of
the underlying Municipal Obligation, of any custodian and the third-party
provider of the tender option. In certain instances and for certain
tender option bonds, the option may be terminable in the event of a
default in payment of principal or interest on the underlying Municipal
Obligations and for other reasons. The Fund will not invest more than 10%
of the value of its net assets in illiquid securities, which would include
tender option bonds for which the required notice to exercise the tender
feature is more than seven days if there is no secondary market available
for these obligations.
Use of Ratings as Investment Criteria
The ratings of nationally recognized statistical rating organizations
("NRSROs") such as Standard & Poor's ("S&P") and Moody's Investors
Service, Inc. ("Moody's") represent the opinions of these agencies as to
the quality of Municipal Obligations which they rate. It should be
emphasized, however, that such ratings are relative and subjective and are
not absolute standards of quality. These ratings will be used by the Fund
as initial criteria for the selection of portfolio securities, but the
Fund will also rely upon the independent advice of Dreyfus to evaluate
potential investments. Among the factors which will be considered are the
long-term ability of the issuer to pay principal and interest and general
economic trends. Further information concerning the ratings of the NRSROs
and their significance is contained in the Appendix B to this Statement of
Additional Information.
After being purchased by the Fund, the rating of a Municipal
Obligation may be reduced below the minimum rating required for purchase
by the Fund or the issuer of the Municipal Obligation may default on its
obligations with respect to the Municipal Obligation. In that event, the
Fund will dispose of the Municipal Obligation as soon as practicable,
consistent with achieving an orderly disposition of the Municipal
Obligation, unless the Trust's Board of Trustees determines that disposal
of the Municipal Obligation would not be in the best interest of the Fund.
In addition, it is possible that a Municipal Obligation may cease to be
rated or an NRSRO might not timely change its rating of a particular
Municipal Obligation to reflect subsequent events. Although neither event
will require the sale of such Municipal Obligation by the Fund, Dreyfus
will consider such event in determining whether the Fund should continue
to hold the Municipal Obligation. In addition, if an NRSRO changes its
rating system, the Fund will attempt to use comparable ratings as
standards for its investments in accordance with its investment objective
and policies.
Floating Rate and Variable Rate Obligations
The Fund may purchase floating rate and variable rate obligations,
including participation interests therein. Floating rate or variable rate
obligations provide that the rate of interest is set as a specific
percentage of a designated base rate (such as the prime rate at a major
commercial bank) and that the Fund can demand payment of the obligation at
par plus accrued interest. Variable rate obligations provide for a
specified periodic adjustment in the interest rate, while floating rate
obligations have an interest rate which changes whenever there is a change
in the external interest rate. Frequently such obligations are secured by
letters of credit or other credit support arrangements provided by banks.
The quality of the underlying creditor or of the bank, as the case may be,
must, as determined by Dreyfus under the supervision of the Trustees, be
equivalent to the quality standard prescribed for the Fund. The Fund is
currently permitted to purchase floating rate and variable rate
obligations with demand features in accordance with requirements
established by the SEC, which, among other things, permit such instruments
to be deemed to have remaining maturities of thirteen months or less,
notwithstanding that they may otherwise have a stated maturity in excess
of thirteen months.
The Fund may invest in participation interests purchased from banks
in floating rate or variable rate tax-exempt Municipal Obligations owned
by banks. A participation interest gives the purchaser an undivided
interest in the Municipal Obligation in the proportion that the Fund's
participation interest bears to the total principal amount of the
Municipal Obligation, and provides a demand feature. Each participation
is backed by an irrevocable letter of credit or guarantee of a bank (which
may be the bank issuing the participation interest, a bank issuing a
confirming letter of credit to that of the issuing bank, or a bank serving
as agent of the issuing bank with respect to the possible repurchase of
the participation interest) that Dreyfus, under the supervision of the
Trustees, has determined meets the prescribed quality standards for the
Fund. The Fund has the right to sell the instrument back to the issuing
bank or draw on the letter of credit on demand for all or any part of the
Fund's participation interest in the Municipal Obligation, plus accrued
interest. The Fund is currently permitted to invest in participation
interests when the demand provision complies with conditions established
by the SEC. Banks will retain a service and letter of credit fee and a
fee for issuing repurchase commitments in an amount equal to the excess of
the interest paid on the Municipal Obligations over the negotiated yield
at which the instruments were purchased by the Fund.
When-Issued Securities
The Fund may purchase Municipal Obligations on a when-issued basis
(i.e., for delivery beyond the normal settlement date at the stated price
and yield). The payment obligation and the interest rate that will be
received on the Municipal Obligations purchased on a when-issued basis are
each fixed at the time the buyer enters into the commitment. Although the
Fund will purchase Municipal Obligations on a when-issued basis only with
the intention of actually acquiring the securities, the Fund may sell
these securities before the settlement date if it is deemed advisable as a
matter of investment strategy.
Municipal Obligations purchased on a when-issued basis and the
securities held in the Fund's portfolio are subject to changes in market
value based upon the public's perception of the creditworthiness of the
issuer and changes, real or anticipated, in the level of interest rates
(which will generally result in similar changes in value, i.e., both
experiencing appreciation when interest rates decline and depreciation
when interest rates rise). Therefore, to the extent the Fund remains
substantially fully invested at the same time that it has purchased
securities on a when-issued basis, there will be a greater possibility of
fluctuation in the Fund's net asset value. Purchasing Municipal
Obligations on a when-issued basis can involve a risk that the yields
available in the market when the delivery takes place may actually be
higher than those obtained in the transaction.
The Fund will establish with the Fund's custodian a segregated
account consisting of cash or liquid debt securities in an amount at least
equal to the amount of its when-issued commitments. When the time comes
to pay for when-issued securities, the Fund will meet its obligations from
then-available cash flow, sale of securities held in the separate account,
sale of other securities or, although it would not normally expect to do
so, from the sale of the when-issued securities themselves (which may have
a value greater or lesser than the Fund's payment obligations). Sale of
securities to meet such obligations carries with it a greater potential
for the realization of capital gains, which are not exempt from Federal
income tax.
Purchase of Securities with Stand-by Commitments
Pursuant to an exemptive order issued by the SEC under the Act, the
Fund may acquire standby commitments with respect to Municipal Obligations
held in its portfolio. Under a stand-by commitment, a broker-dealer,
dealer or bank would agree to purchase, at the Fund's option, a specified
Municipal Obligation at a specified price. Stand-by commitments acquired
by the Fund may also be referred to as "put options." The amount payable
to the Fund upon its exercise of a stand-by commitment normally would be
(a) the acquisition cost of the Municipal Obligation, less any amortized
market premium or plus any amortized market or original issue discount
during the period the Fund owned the security, plus (b) all interest
accrued on the security since the last interest payment date during the
period. Absent unusual circumstances, in determining net asset value the
Fund would value the underlying Municipal Obligation at amortized cost.
Accordingly, the amount payable by the broker-dealer, dealer or bank upon
exercise of a stand-by commitment will normally be substantially the same
as the portfolio value of the underlying Municipal Obligation.
The Fund's right to exercise a stand-by commitment is unconditional
and unqualified. Although the Fund could not transfer a stand-by
commitment, the Fund could sell the underlying Municipal Obligation to a
third party at any time. It is expected that stand-by commitments
generally will be available to the Fund without the payment of any direct
or indirect consideration. The Fund may, however, pay for stand-by
commitments either separately in cash or by paying a higher price for
portfolio securities which are acquired subject to the commitment (thus
reducing the yield to maturity otherwise available for the same
securities). The total amount paid in either manner for outstanding
stand-by commitments held in the Fund's portfolio will not exceed .5 of 1%
of the value of the Fund's total assets calculated immediately after such
stand-by commitment was acquired.
The Fund intends to enter into stand-by commitments only with broker-
dealers, dealers or banks that Dreyfus believes present minimum credit
risks. The Fund's ability to exercise a stand-by commitment will depend
on the ability of the issuing institution to pay for the underlying
securities at the time the commitment is exercised. The credit of each
institution issuing a stand-by commitment to the Fund will be evaluated on
an ongoing basis by Dreyfus in accordance with procedures established by
the Trustees.
The Fund intends to acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder
for trading purposes. The acquisition of a stand-by commitment would not
affect the valuation or maturity of the underlying Municipal Obligation,
which will continue to be valued in accordance with the amortized cost
method. Each stand-by commitment will be valued at zero in determining
net asset value. Should the Fund pay directly or indirectly for a stand-
by commitment, its costs will be reflected as an unrealized loss for the
period during which the commitment is held by the Fund and will be
reflected in realized gain or loss when the commitment is exercised or
expires. Stand-by commitments will not affect the dollar-weighted
average maturity of the Fund's portfolio. The Fund understands that the
Internal Revenue Service has issued a revenue ruling to the effect that a
registered investment company will be treated for Federal income tax
purposes as the owner of Municipal Obligations acquired subject to stand-
by commitments and the interest on the Municipal Obligations will be tax-
exempt to the Fund.
Taxable Investments
The Fund anticipates being as fully invested as practicable in
Municipal Obligations. Because the Fund's purpose is to provide income
exempt from Federal and state personal income tax, the Fund will invest in
taxable obligations only if and when the Trustees believe it would be in
the best interests of its shareholders to do so. Situations in which the
Fund may invest up to 20% of its total assets in taxable securities
include: (a) pending investment of proceeds of sales of shares of the Fund
or of portfolio securities, (b) pending settlement of purchases of
portfolio securities, and (c) when the Fund is attempting to maintain
liquidity for the purpose of meeting anticipated redemptions. The Fund
may temporarily invest more than 20% of its total assets in taxable
securities to maintain a "defensive" posture when, in the opinion of
Dreyfus, it is advisable to do so because of adverse market conditions
affecting the market for Municipal Obligations. The Fund may invest in
only the following kinds of taxable securities maturing in one year or
less from the date of purchase: (1) obligations of the United States
Government, its agencies or instrumentalities; (2) commercial paper rated
at the time of purchase at least Prime-1 by Moody's or A-1+ or A-1 by S&P;
(3) certificates of deposit of domestic banks with total assets of $1
billion or more; and (4) repurchase agreements (instruments under which
the seller of a security agrees to repurchase the security at a specific
time and price) with respect to any securities that the Fund is permitted
to hold.
Repurchase Agreements
The Fund may enter into repurchase agreements with member banks of
the Federal Reserve System or certain non-bank dealers. Under each
repurchase agreement the selling institution will be required to maintain
the value of the securities subject to the agreement at not less than
their repurchase price. If a particular bank or non-bank dealer defaults
on its obligation to repurchase the underlying debt instrument as required
by the terms of a repurchase agreement, the Fund will incur a loss to the
extent that the proceeds it realizes on the sale of the collateral are
less than the repurchase price of the instrument. In addition, should the
defaulting bank or non-bank dealer file for bankruptcy, the Fund could
incur certain costs in establishing that it is entitled to dispose of the
collateral and its realization on the collateral may be delayed or
limited. Investments in repurchase agreements are subject to the policy
prohibiting investment of more than 10% of the Fund's assets in restricted
securities, securities without readily available market quotations and
repurchase agreements maturing in more than seven days.
As noted in the Prospectus, the Fund may, on occasion, invest in
securities issued by other investment companies. These securities will be
of investment companies that determine their net asset value per share
based on the amortized cost or penny-rounding method. Such securities
will be acquired by the Fund within the limits prescribed by the Act,
which include, subject to certain exceptions, a prohibition against the
Fund's investing more than 10% of the value of its total assets in such
securities.
Risk Factors
Special Factors Affecting the Fund
Some of the significant financial considerations relating to the
Fund's investment in New York Municipal Obligations are summarized below.
This summary information is not intended to be a complete description and
is principally derived from official statements relating to issues of New
York Municipal Obligations that were available prior to the date of this
Statement of Additional Information. The accuracy and completeness of the
information contained in those official statements have not been
independently verified.
Investing in New York Municipal Obligations. Each investor should
consider carefully the special risks inherent in the investment in New
York Municipal Obligations by the Fund. These risks result from the
financial condition of New York State and certain of its public bodies and
municipalities, including New York City. Beginning in early 1975, New
York State, New York City and other State entities faced serious financial
difficulties which jeopardized the credit standing and impaired the
borrowing abilities of such entities and contributed to high interest
rates on, and lower market prices for, debt obligations issued by them. A
recurrence of such financial difficulties or a failure of certain
financial recovery programs could result in defaults or declines in the
market values of various New York Municipal Obligations in which the Fund
may invest. If there should be a default or other financial crisis
relating to New York State, New York City, a State or City agency, or a
State municipality, the market value and marketability of outstanding New
York Municipal Obligations in the Fund's portfolio and the interest income
to the Fund could be adversely affected. Moreover, the national recession
and the significant slowdown in the New York and regional economies in the
early 1990s added substantial uncertainty to estimates of the State's tax
revenues, which, in part, caused the State to incur cash-basis operating
deficits in the General Fund and issue deficit notes during the fiscal
periods 1989 through 1992. The State's financial operations have
improved, however, during recent fiscal years. During the fiscal periods
1992 through 1995, New York recorded balanced budgets on a cash-basis. On
a GAAP-basis, the State reported a General Fund operating deficit of
$1.426 billion for the 1994-95 fiscal year, as compared to an operating
surplus of $914 million in the prior fiscal year. The 1994-95 fiscal year
deficit was caused by several factors, including the use of $1.026 billion
of the prior year's cash-based surplus to fund fiscal 1995 operating
expenses and the adoption of changes in accounting methodologies by the
State Comptroller. There can be no assurance that New York will not face
substantial potential budget gaps in future years. In January 1992,
Moody's lowered from A to Baa1 the ratings on certain appropriation-backed
debt of New York State and its agencies. The State's general obligation,
state guaranteed and New York State Local Government Assistance
Corporation bonds continue to be rated A by Moody's. In January 1992, S&P
lowered from A to A- the ratings of New York State general obligation
bonds and stated that it continued to assess the ratings outlook as
negative. The ratings of various agency debt, state moral obligations,
contractual obligations, lease purchase obligations and state guarantees
also were lowered. In February 1991, Moody's lowered its rating on New
York City's general obligation bonds from A to Baa1 and in July 1995, S&P
lowered its rating on such bonds from A- to BBB+. The rating changes
reflect the rating agencies' concerns about the financial condition of New
York State and City, the heavy debt load of the State and City, and
economic uncertainties in the region. Investors should review "Appendix
A" which more fully sets forth these and other risk factors.
Investment Restrictions
The following are fundamental investment restrictions of the Fund.
The Fund may not:
1. Purchase any securities which would cause more than 25% of
the value of the Fund's total assets at the time of such purchase to be
invested in the securities of one or more issuers conducting their principal
activities in the same industry. (For purposes of this limitation, U.S.
Government securities and state or municipal governments and their political
subdivisions are not considered members of any industry. In addition, this
limitation does not apply to investments of domestic banks, including U.S.
branches of foreign banks and foreign branches of U.S. banks.)
2. Borrow money or issue senior securities as defined in the
Act, except that (a) the Fund may borrow money in an amount not exceeding one-
third of the Fund's total assets at the time of such borrowing, and (b) the Fund
may issue multiple classes of shares. The purchase or sale of futures contracts
and related options shall not be considered to involve the borrowing of money or
issuance of senior securities.
3. Make loans or lend securities, if as a result thereof more
than one-third of the Fund's total assets would be subject to all such loans.
For purposes of this restriction, debt instruments and repurchase agreements
shall not be treated as loans.
4. Underwrite securities issued by any other person, except to
the extent that the purchase of securities and the later disposition of such
securities in accordance with the Fund's investment program may be deemed an
underwriting.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real estate,
including mortgage loans, or securities of companies that engage in the real
estate business or invest or deal in real estate or interests therein).
6. Purchase or sell commodities, except that the Fund may enter
into futures contracts and related options, forward currency contracts and other
similar instruments.
The Fund may, notwithstanding any other fundamental investment policy
or restriction, invest all of its investable assets in securities of a
single open-end management investment company with substantially the same
fundamental investment objectives, policies, and restrictions as the Fund.
The following are non-fundamental investment restrictions of the
Fund:
1. The Fund will not purchase or retain the securities of any
issuer if the officers, directors or Trustees of the Trust, its advisers,
or managers owning beneficially more than one half of one percent of the
securities of each issuer together own beneficially more than five percent
of such securities.
2. The Fund will not purchase securities of issuers (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof), including their predecessors, that have
been in operation for less than three years, if by reason thereof the
value of the Fund's investment in securities would exceed 5% of the Fund's
total assets. For purposes of this limitation, sponsors, general
partners, guarantors and originators of underlying assets may be treated
as the issuer of a security.
3. The Fund will not purchase puts, calls, straddles, spreads
and any combination thereof if by reason thereof the value of its aggregate
investment in such classes of securities will exceed 5% of its total assets,
except that: (a) this restriction shall not apply to standby commitments, and
(b) this restriction shall not apply to the Fund's transactions in futures
contracts and related options.
4. The Fund will not purchase warrants if at the time of such
purchase: (a) more than 5% of the value of the Fund's assets would be invested
in warrants, or (b) more than 2% of the value of the Fund's assets would be
invested in warrants that are not listed on the NYSE or American Stock Exchange
("AMEX") (for purposes of this limitation, warrants acquired by the Fund in
units or attached to securities will be deemed to have no value).
5. The Fund will not invest more than 10% of the value of its
net assets in illiquid securities, including repurchase agreements with
remaining maturities in excess of seven days, and other securities which are not
readily marketable. For purposes of this restriction, illiquid securities shall
not include commercial paper issued pursuant to Section 4(2) of the Securities
Act of 1933 and securities which may be resold under Rule 144A under the
Securities Act of 1933, provided that the Board of Trustees, or its delegate,
determines that such securities are liquid based upon the trading markets for
the specific security.
6. The Fund may not invest in securities of other investment
companies, except as they may be acquired as part of a merger, consolidation or
acquisition of assets and except to the extent otherwise permitted by the Act.
7. The Fund will not purchase oil, gas or mineral leases (the
Fund may, however, purchase and sell the securities of companies engaged in the
exploration, development, production, refining, transporting and marketing of
oil, gas or minerals).
8. The Fund shall not sell securities short, unless it owns or
has the right to obtain securities equivalent in kind and amounts to the
securities sold short, and provided that transactions in futures contracts and
options are not deemed to constitute selling securities short.
9. The Fund shall not purchase securities on margin, except that
the Fund may obtain such short-term credits as are necessary for the clearance
of transactions, and provided that margin payments in connection with futures
contracts and options on futures contracts shall not constitute purchasing
securities on margin.
10. The Fund shall not purchase any security while borrowings
representing more than 5% of the Fund's total assets are outstanding.
If a percentage restriction is adhered to at the time of an
investment, a later increase or decrease in such percentage resulting from
a change in the values of assets will not constitute a violation of such
restriction.
Under the Act, a fundamental policy may not be changed without the
vote of a majority of the outstanding voting securities of the Fund, as
defined in the Act. "Majority" means the lesser of (1) 67% or more of the
shares present at the Fund's meeting, if the holders of more than 50% of
the outstanding shares of the Fund are present or represented by proxy, or
(2) more than 50% of the outstanding shares of the Fund. Non-fundamental
investments restrictions may be changed, without shareholder approval, by
vote of a majority of the Trust's Board of Trustees at any time.
In order to permit the sale of the Fund's shares in certain states,
the Trust may make commitments more restrictive than the investment
restrictions described above. Accordingly, pursuant to such commitments,
the Fund has undertaken not to invest in oil, gas or other mineral leases.
In addition, the Fund has undertaken not to invest in warrants (other than
warrants acquired by the Fund as part of a unit or attached to securities
at the time of purchase) if, as a result, the investments (valued at the
lower of cost or market) would exceed 5% of the value of the Fund's net
assets or if, as a result, more than 2% of the Fund's net assets would be
invested in warrants not listed on AMEX or NYSE. Further, the Fund has
given a representation that investments will not be made in real estate
limited partnerships. Should the Trust determine that any such commitment
is no longer in the best interests of the Fund and its shareholders, it
will revoke the commitment by terminating sales of the Fund's shares in
the state involved.
Portfolio Transactions
Decisions to buy and sell securities for the Fund and effectuation of
securities transactions are made by Dreyfus, subject to the overall
supervision and review of the Trustees. The same personnel are also in
charge of portfolio transactions for other clients of other subsidiaries
and affiliates of Dreyfus.
Purchases and sales of portfolio securities for the Fund will
generally be transacted with the issuer or a primary market maker on a net
basis, without the payment by the Fund of any brokerage commission for
such purchases or sales. Purchases from dealers serving as primary market
makers will reflect the spread between the bid and asked prices. In
selecting dealers and in executing portfolio transactions, Dreyfus seeks,
on behalf of the Fund, the best overall terms available. In doing so,
Dreyfus considers all matters it deems relevant, including the breadth of
the market in the security, the price of the security and the financial
condition and executing capability of the dealer.
Dealers may be selected who provide brokerage and/or research
services to the Trust and/or other accounts over which Dreyfus or its
affiliates exercise investment discretion. Such services may include
advice concerning the value of securities; the advisability of investing
in, purchasing or selling securities; the availability of securities or
the purchasers or sellers of securities; furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as
clearance and settlement). The receipt of research from dealers may be
useful to Dreyfus in rendering investment management services to the Trust
and/or its other clients; and, conversely, such information provided by
its brokers or dealers who have executed transaction orders on behalf of
other clients of Dreyfus may be useful to Dreyfus in carrying out its
obligation to the Trust.
The Fund will not purchase Municipal Obligations during the existence
of any underwriting or selling group relating thereto of which an
affiliate is a member, except to the extent permitted by the SEC. Under
certain circumstances, the Fund may be at a disadvantage because of this
limitation in comparison with other investment companies which have a
similar investment objective but are not subject to such limitations.
Dreyfus will make investment decisions for the Fund independently
from those made for its other clients, other funds and clients of other
subsidiaries of Dreyfus. On occasion, however, the same investment
decisions will be made for the Fund as for one or more of Dreyfus' clients
at about the same time. In a case in which the Fund and one of these
other clients are simultaneously engaged in the purchase or sale of the
same security, the transactions will, to the extent feasible and
practicable, be averaged as to price and allocated as to amount among the
Fund and/or the other client or clients pursuant to a formula considered
equitable. In some cases, this system could have a detrimental effect on
the price or volume of the security to be purchased or sold on behalf of
the Fund. In other cases, however, it is believed that coordination and
the ability to participate in volume transactions will be to the benefit
of the Fund.
For the fiscal years ended June 30, 1995 and June 30, 1994, the Fund
paid no stated brokerage commissions.
REDEMPTION OF FUND SHARES
Check Redemption Privilege. An investor may indicate on the Account
Application or by later written request that the Fund provide Redemption
Checks ("Checks") drawn on the Fund's account. Checks will be sent only
to the registered owner(s) of the account and only to the address of
record. The Account Application, Shareholder Services Form or later
written request must be manually signed by the registered owner(s).
Checks may be made payable to the order of any person in an amount of $500
or more. When a Check is presented to the Transfer Agent for payment, the
Transfer Agent, as the investor's agent, will cause the Fund to redeem a
sufficient number of shares in the investor's account to cover the amount
of the Check and the $2.00 charge. Dividends are earned until the Check
clears. After clearance, a copy of the Check will be returned to the
investor. Investors generally will be subject to the same rules and
regulations that apply to checking accounts, although election of this
Privilege creates only a shareholder-transfer agent relationship with the
Transfer Agent.
If the amount of the Check, plus any applicable charges, is greater
than the value of the shares in an investor's account, the Check will be
returned marked insufficient funds. Checks should not be used to close an
account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor, or a representative of the investor's Agent, and reasonably
believed by the Transfer Agent to be genuine. An investor will be charged
a $5.00 fee for each wire redemption, which will be deducted from the
investor's account and paid to the Transfer Agent. Ordinarily, the Fund
will initiate payment for shares redeemed pursuant to this Privilege on
the next business day after receipt if the Transfer Agent receives the
redemption request in proper form. Redemption proceeds will be
transferred by Federal Reserve wire only to the commercial bank account
specified by the investor on the Account Application or Shareholder
Services Form. Redemption proceeds, if wired, must be in the amount of
$5,000 or more and will be wired to the investor's account at the bank of
record designated in the investor's file at the Transfer Agent, if the
investor's bank is a member of the Federal Reserve System, or to a
correspondent bank if the investor's bank is not a member. Fees
ordinarily are imposed by such bank and usually are borne by the investor.
Immediate notification by the correspondent bank to the investor's bank is
necessary to avoid a delay in crediting the funds to the investor's bank
account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at 1-800-
654-7171, toll free. Investors should advise the operator that the above
transmittal code must be used and should also inform the operator of the
Transfer Agent's answer back sign.
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing
agencies and savings associations as well as from participants in the NYSE
Medallion Signature Program, the Securities Transfer Agents Medallion
Program ("STAMP") and the Stock Exchanges Medallion Program. Guarantees
must be signed by an authorized signatory of the guarantor and "Signature-
Guaranteed" must appear with the signature. The Transfer Agent may
request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call one of the telephone numbers listed on the cover.
Dreyfus TeleTransfer Privilege. Investors should be aware that if
they have selected the Dreyfus TeleTransfer Privilege, any request for a
wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the ACH system unless more prompt transmittal specifically is
requested. Redemption proceeds will be on deposit in the investor's
account at an ACH member bank ordinarily two business days after receipt
of the redemption request. An investor will be charged a $5.00 fee for
each redemption effected pursuant to this Privilege, which will be
deducted from the investor's account and paid to the Transfer Agent. See
"Purchase of Fund Shares-- Dreyfus TeleTransfer Privilege."
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of the Fund, limited
in amount during any 90-day period to the lesser of $250,000 or 1% of the
value of the Fund's net assets at the beginning of such period. Such
commitment is irrevocable without the prior approval of the SEC. In the
case of requests for redemption in excess of such amount, the Trustees and
executive officers of the Trust reserve the right to make payments in
whole or in part in securities or other assets in case of an emergency or
any time a cash distribution would impair the liquidity of the Fund to the
detriment of the existing shareholders. In this event, the securities
would be valued in the same manner as the Fund's portfolio is valued. If
the recipient sold such securities, brokerage charges would be incurred.
Suspension of Redemptions. The right to redeem Fund shares may be
suspended or the date of payment postponed (a) for any period during which
the NYSE is closed (other than for customary weekend or holiday closings);
(b) when trading in the markets the Trust normally uses is restricted or
when an emergency exists as determined by the SEC so that disposal of the
Fund's investments or determination of its net asset value is not
reasonably practicable, or (c) for such other periods as the SEC, by
order, may permit for protection of the Fund's shareholders.
FUND EXCHANGES
Shares of other funds purchased by exchange will be purchased on the
basis of relative net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load,
and the applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a
sales load and additional shares acquired through
reinvestment of dividends or other distributions of any such
funds (collectively referred to herein as "Purchased Shares")
may be exchanged for shares of other funds sold with a sales
load (referred to herein as "Offered Shares"), provided that,
if the sales load applicable to the Offered Shares exceeds
the maximum sales load that could have been imposed in
connection with the Purchased Shares (at the time the
Purchased Shares were acquired), without giving effect to any
reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must
notify the Transfer Agent of their prior ownership of fund shares and
their account number.
To request an exchange, an investor or the investor's Agent acting on
the investor's behalf must give exchange instructions to the Transfer
Agent in writing, by wire or by telephone. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless the investor checks the applicable "No" box on the Account
Application, indicating that the investor specifically refuses this
Privilege. By using the Telephone Exchange, the investor authorizes the
Transfer Agent to act on telephonic instructions from any person
representing himself or herself to be the investor or a representative of
the investor's Agent, and reasonably believed by the Transfer Agent to be
genuine. Telephone exchanges may be subject to limitations as to the
amount involved or the number of telephone exchanges permitted. Shares
issued in certificate form are not eligible for telephone exchange.
Investors will be charged a $5.00 fee for each exchange made out of the
Fund, which will be deducted from the investor's account and paid to the
Transfer Agent.
This Privilege is available to shareholders resident in any state in
which shares of the fund being acquired may legally be sold. Shares may
be exchanged only between accounts having identical names and other
identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchange service may
be modified or terminated at any time upon notice to shareholders.
VALUATION OF SHARES
The Prospectus describes the time at which the net asset value of the
Fund is determined for purposes of sales and redemptions. In addition,
portfolio securities held by the Fund may be actively traded in securities
markets which are open for trading on days when the Fund will not be
determining its net asset value. Accordingly, there may be occasions when
the Fund is not open for business but when the value of the Fund's
portfolio securities will be affected by such trading activity. The
holidays (as observed) on which the NYSE is closed currently are: New
Years Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
It is the Trust's policy to use its best efforts to maintain the
Fund's net asset value per share ("NAV") at a constant value of $1.00.
The Fund's portfolio instruments are valued on the basis of amortized
cost. This involves valuing an instrument at its cost initially and,
thereafter, assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the
market value of the instrument. While this method provides certainty in
valuation, it may result in periods during which the value, as determined
by amortized cost, is higher or lower than the price the Trust would
receive if it sold the instrument.
The valuation of the Fund's portfolio instruments based upon their
amortized cost and simultaneous maintenance of the Fund's NAV at $1.00 are
permitted by a rule adopted by the SEC. Under this rule, the Fund must
maintain a dollar-weighted average portfolio maturity of 90 days or less,
purchase only instruments having remaining maturities of thirteen months
or less, and invest only in securities determined by the Trustees to be
eligible securities with minimal credit risks at the time of their
acquisition by the Fund. In accordance with the rule, the Trustees have
established procedures designed to stabilize, to the extent reasonably
practicable, the Fund's NAV as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of the Fund's
portfolio holdings by the Trustees, at such intervals as they may deem
appropriate, to determine whether the NAV of the Fund calculated by using
available market quotations or market equivalents deviates from $1.00
based on amortized cost. The rule also provides that the extent of any
deviation between the Fund's NAV based upon available market quotations or
market equivalents and $1.00 NAV based on amortized cost must be examined
by the Trustees. In the event the Trustees determine that a deviation
exists which may result in material dilution or other unfair results to
investors or existing shareholders, pursuant to the rule they must cause
the Fund to take such corrective action as the Trustees regard as
necessary and appropriate, including: selling portfolio instruments prior
to maturity to realize capital gains or losses or to shorten average
portfolio maturity; withholding dividends or paying distributions from
capital or capital gains; redeeming shares in kind; or establishing a NAV
by using available market quotations.
PERFORMANCE DATA
From time to time, the Fund may quote its yield in advertisements,
shareholder reports or other communications to shareholders. The Fund may
compare its performance to that of other mutual funds, relevant indices or
rankings prepared by independent services or other financial or industry
publications that monitor mutual fund performance.
Performance rankings as reported in Changing Times, Business Week,
Institutional Investor, The Wall Street Journal, Mutual Fund Forecaster,
No Load Investor, Money Magazine, Morningstar Mutual Fund Values, U.S.
News and World Report, Forbes, Fortune, Barron's, Financial Planning,
Financial Planning on Wall Street, Certified Financial Planner Today,
Investment Advisor, Kiplinger's, Smart Money and similar publications may
also be used in comparing the Fund's performance.
Yields
The Fund's yield is computed by: (a) determining the net change in
the value of a hypothetical pre-existing account in a Fund having a
balance of one share at the beginning of a seven-calendar-day period for
which yield is to be quoted, (b) dividing the net change by the value of
the account at the beginning of the period to obtain the base period
return, and (c) annualizing the results (i.e., multiplying the base period
return by 365/7). The net change in the value of the account reflects the
value of additional shares purchased with dividends declared on the
original share and any such additional shares, but does not include
realized gains and losses or unrealized appreciation and depreciation. In
addition, the Fund may calculate a compound effective annualized yield by
adding 1 to the base period return (calculated as described above),
raising the sum to a power equal to 365/7 and subtracting 1. The Fund's
equivalent taxable yield is computed by dividing that portion of the
Fund's yield which is tax-exempt by one minus a stated income tax rate and
adding the product to that portion, if any, of the Fund's yield that is
not tax-exempt. For the seven-day period ended June 30, 1995, the Fund's
annualized current yields, compounded effective yields, and equivalent
taxable yields for its then existing Investor shares and Class R shares
were as follows:
<TABLE>
<CAPTION>
7-Day Yield for Period Ended
June 30, 1995
Annualized Compounded Equivalent
Current Yield Effective Yield Taxable Yield*
------------- --------------- --------------
<S> <C> <C> <C>
Investor shares 3.46% 3.52% 6.13%
Class R shares 3.71% 3.78% 6.57%
</TABLE>
Effective December 8, 1995, the Fund's separate "Investor" and "Class
R" designations were eliminated and the Fund became a single class Fund.
For the seven-day period ended December 18, 1995, the Fund's yield was
3.63%, effective yield was 3.70% and equivalent taxable yield* was 6.43%.
These yields reflect the waiver of a portion of the management fee by
Dreyfus, without which the Fund's seven-day yield, effective yield and
equivalent taxable yield* for the period ended December 18, 1995, would
have been 3.53%, 3.59% and 6.25%, respectively. See "Management of the
Fund" in the Prospectus.
* Example assumes a Federal marginal tax rate of 36% and a New York
State and New York City marginal tax rate of 11.785% (combined effective
rate of 43.54%).
From time to time, advertising material for the Fund may include
biographical information relating to its portfolio manager and may refer
to, or include commentary by the portfolio manager relating to investment
strategy, asset growth, current or past business, political, economic or
financial conditions and other matters of general interest to investors.
TAXES
The Fund intends to satisfy the requirements for qualifying as a
"regulated investment company" under Subchapter M of the Code. Provided
that the Fund distributes at least 90% of its taxable net investment
income, including market discount and net realized short-term capital
gains, and 90% of the tax-exempt interest income (reduced by certain
expenses), the Fund, if it qualifies as a regulated investment company,
will not be liable for Federal income taxes to the extent its taxable net
investment income and capital gain net income are distributed to its
shareholders.
Because the Fund will distribute exempt-interest dividends, interest
on indebtedness incurred by a shareholder to purchase or carry Fund shares
is not deductible for Federal income tax purposes. If a shareholder
receives an exempt-interest dividend with respect to shares of the Fund
and if such shares are held by the shareholder for six months or less,
then any loss on the redemption or exchange of such shares will, to the
extent of such exempt-interest dividends, be disallowed. In addition, the
Code may require a shareholder, if he or she receives exempt-interest
dividends, to treat as taxable income a portion of certain otherwise non-
taxable social security and railroad retirement benefit payments.
Furthermore, that portion of an exempt-interest dividend paid by the Fund
which represents income from private activity bonds may not retain its
tax-exempt status in the hands of a shareholder who is a "substantial
user" of a facility financed by such bonds, or a "related person" thereof.
Moreover, as noted in the Fund's Prospectus, some or all of the Fund's
dividends may be a specific preference item, or a component of an
adjustment item, for purposes of the Federal individual and corporate
alternative minimum taxes. In addition, the receipt of Fund dividends and
distributions may affect a foreign corporate shareholder's Federal "branch
profits" tax liability and a Subchapter S corporation shareholder's
Federal "excess net passive income" tax liability. Shareholders should
consult their own tax advisers as to whether they are (1) substantial
users with respect to a facility or related to such users within the
meaning of the Code or (2) subject to a Federal alternative minimum tax,
any applicable state alternative minimum tax, the Federal branch profits
tax, or the Federal excess net passive income tax.
Dividends derived by the Fund from tax-exempt interest are designated
as tax-exempt in the same percentage of the day's dividend as the actual
tax-exempt income earned that day. Thus, the percentage of the dividend
designated as tax-exempt may vary from day to day. Similarly, dividends
derived by the Fund from interest on New York Municipal Obligations will
be designated as exempt from the State of New York taxation in the same
percentage of the day's dividend as the actual interest on New York
Municipal Obligations earned on that day.
The Fund is required to withhold and remit to the U.S. Treasury 31%
of the taxable dividends paid by the Fund and the distributions paid by
the Fund (in excess of $10 on an annualized basis) with respect to any
non-corporate shareholder who fails to furnish or certify his or her
correct taxpayer identification number, who has been notified that he or
she is subject to back up withholding due to underreporting of dividend
or interest income or who fails to certify that he or she has provided a
correct taxpayer identification number, and that he or she is not subject
to such withholding. An individual's tax identification number is his or
her social security number. The backup withholding tax is not an
additional tax and may be credited against a shareholder's regular Federal
income tax liability.
The foregoing is only a summary of certain tax considerations
generally affecting the Fund and its shareholders, and is not intended as
a substitute for careful tax planning. Individuals may be exempt from New
York state and local personal income taxes on exempt-interest income
derived from obligations of issuers located in New York, but are usually
subject to such taxes on such dividends that are derived from obligations
of issuers located in other jurisdictions. Investors are urged to consult
their tax advisers with specific reference to their own tax situations.
DESCRIPTION OF THE TRUST
The Trust is an open-end management investment company organized as
an unincorporated business trust under the laws of the Commonwealth of
Massachusetts by an Agreement and Declaration of Trust dated March 28,
1983, amended and restated December 9, 1992, and subsequently further
amended. On March 31, 1994 the Trust changed its name from "The Boston
Company Tax-Free Municipal Funds" to "The Laurel Tax-Free Municipal
Funds." The Trust's name was then changed from "The Laurel Tax-Free
Municipal Funds" to "The Dreyfus/Laurel Tax-Free Municipal Funds"
effective October 17, 1994. On December 8, 1995, the Fund's name was
changed from Dreyfus/Laurel New York Tax-Free Money Fund to Dreyfus BASIC
New York Municipal Money Market Fund.
The Trustees have authority to create an unlimited number of shares
of beneficial interest, without par value, in separate series. Each
series will be treated as a separate entity. Currently, seven series have
been authorized (each a "fund"). The Trustees have authority to create
additional series at any time in the future without shareholder approval.
Each share (regardless of class) has one vote. On each matter
submitted to a vote of the shareholders, all shares of each fund or class
shall vote together as a single class, except as to any matter for which a
separate vote of any fund or class is required by the Act and except as to
any matter which affects the interest of a particular fund or class, in
which case only the holders of shares of the one or more affected funds or
classes shall be entitled to vote, each as a separate class.
The assets received by the Trust for the issue or sale of shares of
each Fund and all income, earnings, profits and proceeds thereof, subject
only to the rights of creditors, are specifically allocated to such fund,
and constitute the underlying assets of such fund. The underlying assets
of each fund are required to be segregated on the books of account, and
are to be charged with the expenses in respect to such fund and with a
share of the general expenses of the Trust. Any general expenses of the
Trust not readily identifiable as belonging to a particular fund shall be
allocated by or under the direction of the Trustees in such manner as the
Trustees determine to be fair and equitable, taking into consideration,
among other things, the relative sizes of the funds and the relative
difficulty in administering each fund. Each share of each fund represents
an equal proportionate interest in that fund with each other share and is
entitled to such dividends and distributions out of the income belonging
to such fund as are declared by the Trustees. Upon any liquidation of a
fund, shareholders thereof are entitled to share pro rata in the net
assets belonging to that fund available for distribution.
The Trust does not hold annual meetings of shareholders. There will
normally be no meetings of shareholders for the purpose of electing
Trustees unless and until such time as less than a majority of the
Trustees holding office have been elected by shareholders, at which time
the Trustees then in office will call a shareholders' meeting for the
election of Trustees. Under the Act, shareholders of record of no less
than two-thirds of the outstanding shares of the Trust may remove a
Trustee through a declaration in writing or by a vote cast in person or by
proxy at a meeting called for that purpose. The Trustees are required to
call a meeting of shareholders for the purposes of voting upon the
question of removal of any Trustee when requested in writing to do so by
the shareholders of record of not less than 10% of the Trust's outstanding
shares.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Trust and requires that notice of
such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or a Trustee. The Agreement and
Declaration of Trust provides for indemnification from the Trust's
property for all losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability
is limited to circumstances in which the Trust itself would be unable to
meet its obligations, a possibility which Dreyfus believes is remote.
Upon payment of any liability incurred by the Trust, the shareholder
paying such liability will be entitled to reimbursement from the general
assets of the Trust. The Trustees intend to conduct the operations of
each fund in such a way so as to avoid, as far as possible, ultimate
liability of the shareholders for liabilities of such fund.
PRINCIPAL SHAREHOLDERS
As of January 31, 1996, the following companies/individuals owned
beneficially 5% or more of the outstanding shares of the Fund: Robert
and Harriet Heilbrunn, 1050 5th Avenue, New York, New York 10028, 6.7%
record; George A. Niedham, 79 East 79th Street, New York, New York 10021,
5.3% record.
CUSTODIAN AND TRANSFER AGENT
Mellon Bank, which is located at Mellon Bank Center, Pittsburgh, PA
15219, serves as the Fund's custodian. Dreyfus Transfer, Inc., a wholly-
owned subsidiary of Dreyfus, located at One American Express Plaza,
Providence, Rhode Island 02903, is the Fund's transfer and dividend
disbursing agent. Under a transfer agency agreement with the Fund, the
Transfer Agent arranges for the maintenance of shareholder account records
for the Fund, the handling of certain communications between shareholders
and the Fund and the payment of dividends and distributions payable by the
Fund. For these services, the Transfer Agent receives a monthly fee
computed on the basis of the number of shareholder accounts it maintains
for the Fund during the month, and is reimbursed for certain out-of-pocket
expenses. Dreyfus Transfer, Inc. and Mellon Bank, as custodian, have no
part in determining the investment policies of the Fund or which
securities are to be purchased or sold by the Fund.
COUNSEL AND INDEPENDENT AUDITORS
Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., Second
Floor, Washington, D.C., 20036-1800, has passed upon the legality of the
shares offered by the Prospectus and this Statement of Additional
Information.
KPMG Peat Marwick LLP, One Mellon Bank Center, Pittsburgh,
Pennsylvania 15219, was appointed by the Board of Trustees to serve as the
Fund's independent auditors for the year ending June 30, 1996, providing
audit services including (1) examination of the annual financial
statements, (2) assistance, review and consultation in connection with the
SEC and (3) review of the annual Federal income tax return filed on behalf
of the Fund.
FINANCIAL STATEMENTS
The Fund's Annual Report for the fiscal year ended June 30, 1995
accompanies this Statement of Additional Information, and the financial
statements contained therein, and related notes, are incorporated by
reference herein.
APPENDIX A
RISK FACTORS--INVESTING IN NEW YORK MUNICIPAL OBLIGATIONS
The financial condition of New York State (the "State") and certain
of its public bodies (the "Agencies") and municipalities, particularly New
York City (the "City"), could affect the market values and marketability
of New York Municipal Obligations which may be held by the Fund. The
following information constitutes only a brief summary, does not purport
to be a complete description, and is based on information drawn from
official statements relating to securities offerings of the State, the
City and the Municipal Assistance Corporation for the City of New York
("MAC") available as of the date of this Statement of Additional
Information. While the Fund has not independently verified such
information, it has no reason to believe that such information is not
correct in all material respects.
A national recession commenced in mid-1990. The downturn continued
through the remainder of the 1990-91 fiscal year, and was followed by a
period of weak economic growth during the remainder of the 1991 calendar
year. For the calendar year 1992, the national economy continued to
recover, although at a rate below all post-war recoveries. The recession
was more severe in the State than in other parts of the nation, owing to a
significant retrenchment in the financial services industry, cutbacks in
defense spending, and an overbuilt real estate market. The State economy
remained in recession until 1993, when employment growth resumed. Since
early 1993, the State has gained approximately 100,000 jobs. The State's
economy is expected to continue to expand modestly during 1995, but there
will be a pronounced slow-down during the course of the year. Although
industries that export goods and services abroad are expected to benefit
from the lower dollar, growth will be slowed by government cutbacks at all
levels. On an average annual basis, employment growth will be about the
same as 1994. Both personal income and wages are expected to record
moderate gains in 1995.
The State's budget for the 1995-96 fiscal year was enacted by the
Legislature on June 7, 1995, more than two months after the start of the
fiscal year. Prior to adoption of the budget, the Legislature enacted
appropriations for disbursements considered to be necessary for State
operations and other purposes, including all necessary appropriations for
debt service. The State Financial Plan for 1995-96 fiscal year was
formulated on June 20, 1995 and is based on the State's budget as enacted
by the Legislature and signed into law by the Governor.
The 1995-96 budget is the first to be enacted in the administration
of the Governor, who assumed office on January 1. It is the first budget
in over half a century which proposed and, as enacted, projects an
absolute year-over-decline in General Fund disbursements. Spending for
State operations is projected to drop even more sharply, by 4.6%. Nominal
spending from all State funding sources (i.e., excluding Federal aid) is
proposed to increase by only 2.5% from the prior fiscal year, in contrast
to the prior decade when such spending growth averaged more than 6.0%
annually.
In his Executive Budget, the Governor indicated that in the 1995-96
fiscal year, the State Financial Plan, based on then-current law governing
spending and revenues, would be out of balance by almost $4.7 billion, as
a result of the projected structural deficit resulting from the ongoing
disparity between sluggish growth in receipts, the effect of prior-year
tax changes, and the rapid acceleration of spending growth; the impact of
unfunded 1994-95 initiatives, primarily for local aid programs; and the
use of one-time solutions, primarily surplus funds from the prior year, to
fund recurring spending in the 1994-95 budget. The Governor proposed
additional tax cuts, to spur economic growth and provide relief for low
and middle-income tax payers, which were larger than those ultimately
adopted, and which added $240 million to the then projected imbalance or
budget gap, bringing their total to approximately $5 billion.
This gap is projected to be closed in the 1995-96 State Financial
Plan based on the enacted budget, through a series of actions, mainly
spending reductions and cost containment measures and certain reestimates
that are expected to be recurring, but also through the use of one-time
solutions.
The State Financial Plan is based upon forecasts of national and
State economic activity. Economic forecasts have frequently failed to
predict accurately the timing and magnitude of changes in the national and
the State economies. Many uncertainties exist in forecasts of both the
national and State economies, including consumer attitudes toward
spending, Federal financial and monetary policies, the availability of
credit and the condition of the world economy, which could have an adverse
effect on the State. There can be no assurance that the State economy
will not experience worse-than-predicted results in the 1994-95 fiscal
year, with corresponding material and adverse effects on the State's
projections of receipts and disbursements.
The General Fund is projected to be balanced on a cash basis for the
1995-96 fiscal year. Total receipts and transfers from other funds are
projected to be $33.110 billion, a decrease of $48 million from total
receipts in the prior fiscal year. Total General Fund disbursements and
transfers to other funds are projected to be $33.055 billion, a decrease
of $344 million from the total amount disbursed in the prior fiscal year.
There can be no assurance that the State will not face substantial
potential budget gaps in future years resulting from a significant
disparity between tax revenues projected from a lower recurring receipts
base and the spending required to maintain State programs at current
levels. To address any potential budgetary imbalance, the State may need
to take significant actions to align recurring receipts and disbursements
in future fiscal years.
On June 6, 1990, Moody's changed its ratings on all the State's
outstanding general obligation bonds from A1 to A. On March 26, 1990 and
January 13, 1992, S&P changed its ratings on all of the State's
outstanding general obligation bonds from AA- to A and from A to A-,
respectively. In February 1991, Moody's lowered its rating on the City's
general obligation bonds from A to Baa1 and in July 1995, S&P lowered its
rating on such bonds from A- to BBB+. Ratings reflect only the respective
views of such organizations, and their concerns about the financial
condition of New York State and City, the debt load of the State and City
and any economic uncertainties about the region. There is no assurance
that a particular rating will continue for any given period of time or
that any such rating will not be revised downward or withdrawn entirely
if, in the judgment of the agency originally establishing the rating,
circumstances so warrant.
(1) The State, Agencies and Other Municipalities. During the
mid-1970s, some of the Agencies and municipalities (in particular, the City)
faced extraordinary financial difficulties, which affected the State's own
financial condition. These events, including a default on short-term notes
issued by the New York State Urban Development Corporation ("UDC") in February
1975, which default was cured shortly thereafter, and a continuation of the
financial difficulties of the City, created substantial investor resistance to
securities issued by the State and by some of its municipalities and Agencies.
For a time, in late 1975 and early 1976, these difficulties resulted in a
virtual closing of public credit markets for State and many State related
securities.
In response to the financial problems confronting it, the State
developed and implemented programs for its 1977 fiscal year that included
the adoption of a balanced budget on a cash basis (a deficit of $92
million that actually resulted was financed by issuing notes that were
paid during the first quarter of the State's 1978 fiscal year). In
addition, legislation was enacted limiting the occurrence of additional
so-called "moral obligation" and certain other Agency debt, which
legislation does not, however, apply to MAC debt.
State Financial Cash-Basis Results--General Fund. The General Fund
is the principal operating fund of the State and is used to account for
all financial transactions, except those required to be accounted for in
another fund. It is the State's largest fund and receives almost all
State taxes and other resources not dedicated to particular purposes.
General Fund moneys are also transferred to other funds, primarily to
support certain capital projects and debt service payments in other fund
types.
New York State's financial operations have improved during recent
fiscal years. During the period 1989-90 through 1991-92, the State
incurred General Fund operating deficits that were closed with receipts
from the issuance of tax and revenue anticipation notes ("TRANs"). First,
the national recession, and then the lingering economic slowdown in the
New York and regional economy, resulted in repeated shortfalls in receipts
and three budget deficits. For its 1992-93, 1993-94 and 1994-95 fiscal
years, the State recorded balanced budgets on a cash basis, with
substantial fund balances in 1992-93 and 1993-94, and smaller fund balance
in 1994-95, as described below.
New York State ended its 1994-95 fiscal year with the General Fund in
balance. The closing fund balance of $158 million reflects $157 million
in the Tax Stabilization Reserve Fund and $1 million in the Contingency
Reserve Fund ("CRF"). The CRF was established in State Fiscal year 1993-
94, funded partly with surplus moneys, to assist the State in financing
the 1994-95 fiscal year costs of extraordinary ligation known or
anticipated at that time; the opening fund balance in State fiscal year
1994-95 was $265 million. The $241 million change in the fund balance
reflects the use of $264 million in the CRF as planned, as well as the
required deposit of $23 million to the Tax Stabilization Reserve Fund. In
addition, $278 million was on deposit in the tax refund reserve account,
$250 million of which was deposited at the end of the State's 1994-95
fiscal year to continue the process of restructuring the State's cash flow
as part of the New York Local Government Assistance Corporation ("LGAC")
program.
Compared to the State Financial Plan for 1994-1995 as formulated on
June 16, 1994, reported receipts fell short of original projections by
$1.163 billion, primarily in the categories of personal income and
business taxes. Of this amount, the personal income tax accounts for $800
million, reflecting weak estimated tax collections and lower withholding
due to reduced wage and salary growth, more severe reductions in brokerage
industry bonuses than projected earlier, and deferral of capital gains
realizations in anticipation of potential Federal tax changes. Business
taxes fell short by $373 million, primarily reflecting lower payments from
banks as substantial overpayments of 1993 liability depressed net
collections in the 1994-95 fiscal year. These shortfalls were offset by
better performance in the remaining taxes, particularly the user taxes and
fees, which exceeded projections by $210 million. Of this amount, $277
million was attributable to certain restatements for accounting treatment
purposes pertaining to the CRF and LGAC; these restatements had no impact
on balance in the General Fund.
Disbursements were also reduced from original projections by $848
million. After adjusting for the net impact of restatements relating to
the CRF and LGAC which raised disbursements by $38 million, the variance
is $886 million. Well over two-thirds of this variance is in the category
of grants to local governments, primarily reflecting the conservative
nature of the original estimates of projected costs for social services
and other programs. Lower education costs are attributable to the
availability of $110 million in additional lottery proceeds and the use of
LGAC bond proceeds.
The spending reductions also reflect $188 million in actions
initiated in January 1995 by the Governor to reduce spending to avert a
potential gap in the 1994-95 State Financial Plan. These actions included
savings from a hiring freeze, halting the development of certain services,
and the suspension of non-essential capital projects. These actions,
together with $71 million in other measures comprised the Governor's $259
million gap-closing plan, submitted to the Legislature in connection with
the 1995-96 Executive Budget.
The State ended its 1993-94 fiscal year with a balance of $1.140
billion in the tax refund reserve account, $265 million in the CRF and
$134 million in its tax stabilization reserve fund. These fund balances
were primarily the result of an improving national economy, State
employment growth, tax collections that exceeded earlier projections and
disbursements that were below expectations. Deposits to the personal
income tax refund reserve have the effect of reducing reported personal
income tax receipts in the fiscal year when made and withdrawals from such
reserve increase receipts in the fiscal year when made. The balance in
the tax reserve account will be used to pay taxpayer refunds, rather than
drawing from 1994-95 receipts.
Of the $1.140 billion deposited in the tax refund reserve account,
$1.026 billion was available for budgetary planning purposes in the 1994-
95 fiscal year. The remaining $114 million will be redeposited in the tax
refund reserve account at the end of the State's 1994-95 fiscal year to
continue the process of restructuring the State's cash flow as part of the
LGAC program. The balance in the contingency reserve fund was reserved to
meet the cost of litigation facing the State in its 1994-95 fiscal year.
Before the deposit of $1.140 billion in the tax refund reserve
account, General Fund receipts in 1993-94 exceeded those originally
projected when the State Financial Plan for the year was formulated on
April 16, 1993 by $1.002 billion. Greater-than-expected receipts in the
personal income tax, the bank tax, the corporation franchise tax and the
estate tax accounted for most of this variance, and more than offset
weaker-than-projected collections from the sales and use tax and
miscellaneous receipts. Collections from individual taxes were affected
by various factors including changes in Federal business laws, sustained
profitability of banks, strong performance of securities firms, and
higher-than-expected consumption of tobacco products following price cuts.
The higher receipts resulted, in part, because the New York economy
performed better than forecasted. Employment growth started in the first
quarter of the State's 1993-94 year, and although this lagged the national
economic recovery, the growth in New York began earlier than forecasted.
The New York economy exhibited signs of strength in the service sector, in
construction, and in trade. Long Island, and the Mid-Hudson Valley
continued to lag the rest of the State in economic growth. Approximately
100,000 jobs are believed to have been added during the 1993-94 fiscal
year.
Disbursements and transfer from the General Fund were $303 million
below the level projected in April 1993, an amount that would have been
$423 million had the State not accelerated the payment of Medicaid
billings, which in the April 1993 State Financial Plan were planned to be
deferred into the 1994-95 fiscal year. Compared to the estimates included
in the State Financial Plan formulated in April 1993, disbursements were
lower for Medicaid, capital projects, and debt service (due to
refundings). In addition, $114 million was used to restructure the
State's cash flow as part of the LGAC program. Disbursements were higher-
than-expected for general support for public schools. The State also made
the first of six required payments to the State of Delaware related to the
settlement of Delaware's litigation against the State regarding the
disposition of abandoned property receipts.
During the 1993-94 fiscal year, the State also established and funded
the CRF as a way to assist the State in financing the cost of litigation
affecting the State. The CRF was initially funded with a transfer of $100
million attributable to the positive margin recorded in the 1992-93 fiscal
year. In addition, the State augmented this initial deposit with $132
million on debt service savings attributable to the refinancing of State
and public authority bonds during 1993-94. A year-end transfer of $36
million was also made to the CRF, which, after a disbursement for
authorized fund purposes, brought the CRF balance at the end of 1993-94 to
$265 million. This amount was $165 million higher than the amount
originally targeted for this reserve fund.
For its 1992-93 fiscal year the State had a balanced budget on a cash
basis with a positive margin of $671 million in the General Fund that was
deposited in the refund reserve account.
After reflecting a 1992-93 year-end deposit to the refund reserve
account of $671 million, reported 1992-93 General Fund receipts were $45
million higher than originally projected in April 1992. If not for that
year-end transaction, which had the effect of reducing 1992-93 receipts by
$671 million and making those receipts available in 1993-94, General Fund
receipts would have been $716 million higher than originally projected.
The favorable performance was primarily attributable to personal
income tax collections that were more than $700 million higher than
originally projected (before reflecting the refund reserve transaction).
The withholding and estimated payment components of the personal income
tax exceeded original estimates by more than $800 million combined,
reflecting both stronger economic activity, particularly at year's end,
and the tax-induced one-time acceleration of income into 1992. Modest
shortfalls were experienced in other components of the income tax.
There were large, but largely offsetting, variances in other
categories. Significantly higher-than-projected business tax collections
and the receipt of unbudgeted payments from the Medical Malpractice
Insurance Association and the New York Racing Association approximately
offset the loss of an anticipated $200 million Federal reimbursement, the
loss of certain budgeted hospital differential revenue as a result of
unfavorable court decisions, and shortfalls in certain miscellaneous
revenue sources.
Disbursements and transfers to other funds totaled $30.829 billion,
an increase of $45 million above projections in April 1992. After
adjusting for the impact of a $150 million payment from the Medical
Malpractice Insurance Association to health insurers made pursuant to
legislation passed in January 1993, actual disbursements were $105 million
lower than projected. This reduction primarily reflected higher-than-
anticipated costs for educational programs, as offset by lower costs in
virtually all other categories of spending, including Medicaid, local
health programs, agency operations, fringe benefits, capital projects and
debt service.
During its 1989-90, 1990-91 and 1991-92 fiscal years, the State
incurred cash-basis operating deficits in the General Fund of $775
million, $1.081 billion and $575 million, respectively, prior to the
issuance of short-term TRANs, owing to lower-than-projected receipts.
Other Governmental Funds. Activity in the three other governmental
funds has remained relatively stable over the last three fiscal years,
with Federally-funded programs comprising approximately two-thirds of
these funds. The most significant change in the structure of these funds
has been the redirection, beginning in the 1993-94 fiscal year, of a
portion of transportation-related revenues from the General Fund to two
new dedicated funds in the Special Revenue and Capital Projects Fund
types. These revenues totalling $676 million in the 1994-95 fiscal year
were used to support the capital programs of the Department of
Transportation and the Metropolitan Transportation Authority ("MTA").
The Special Revenue Funds account for State receipts from specific
sources that are legally restricted in use to specified purposes and
include all moneys received from the Federal government. Total receipts
in Special Revenue Funds are projected at $25.547 billion in the State's
1995-96 fiscal year. Disbursements from Special Revenue Funds are
projected to be $26.002 billion for the State's 1995-96 fiscal year.
The Capital Projects Funds are used to finance the acquisition and
construction of major capital facilities and to aid local government units
and Agencies in financing capital constructions. Federal grants for
capital projects, largely highway-related, are projected to account for
24% of the $4.170 billion in total projected receipts in Capital Projects
Funds in the State's 1995-96 fiscal year. Total disbursements for capital
projects are projected to be $4.160 billion during the State's 1995-96
fiscal year.
The Debt Service Funds serve to fulfill State debt service on long-
term general obligation State debt and other State lease/purchase and
contractual obligation financing commitments. Total receipts in Debt
Service Funds are projected to reach $2.409 billion in the State's 1995-96
fiscal year. Total disbursements from Debt Service Funds for debt
service, lease/purchase and contractual obligation financing commitments
are projected to be $2.506 billion for the 1994-95 fiscal year.
State Borrowing Plan. The State anticipates that its capital
programs will be financed, in part, through borrowings by the State and
public authorities in the 1995-96 fiscal year. The State expects to issue
$248 million in general obligation bonds (including $70 million for
purposes of redeeming outstanding BANs) and $186 million in general
obligation commercial paper. The Legislature has also authorized the
issuance of up to $33 million in COPs during the State's 1995-96 fiscal
year for equipment purchases and $14 million for capital purposes. The
projection of the State regarding its borrowings for the 1995-96 fiscal
year may change if circumstances require.
In addition, the LGAC is authorized to provide net proceeds of up to
$529 million during the 1995-96 fiscal year to redeem notes sold in June
1995.
State Agencies. The fiscal stability of the State is related, at
least in part, to the fiscal stability of its localities and various of
its Agencies. Various Agencies have issued bonds secured, in part, by
non-binding statutory provisions for State appropriations to maintain
various debt service reserve funds established for such bonds (commonly
referred to as "moral obligation" provisions).
At September 30, 1994, there were 18 Agencies that had outstanding
debt of $100 million or more. The aggregate outstanding debt, including
refunding bonds, of these 18 Agencies was $70.3 billion as of September
30, 1994. As of March 31, 1995, aggregate Agency debt outstanding as
State-supported debt was $27.9 billion and as State-related was $36.1
billion. Debt service on the outstanding Agency obligations normally is
paid out of revenues generated by the Agencies' projects or programs, but
in recent years the State has provided special financial assistance, in
some cases on a recurring basis, to certain Agencies for operating and
other expenses and for debt service pursuant to moral obligation
indebtedness provisions or otherwise. Additional assistance is expected
to continue to be required in future years.
Several Agencies have experienced financial difficulties in the past.
Certain Agencies continue to experience financial difficulties requiring
financial assistance from the State. Failure of the State to appropriate
necessary amounts or to take other action to permit certain Agencies to
meet their obligations could result in a default by one or more of such
Agencies. If a default were to occur, it would likely have a significant
effect on the marketability of obligations of the State and the Agencies.
These Agencies are discussed below.
The New York State Housing Finance Agency ("HFA") provides financing
for multifamily housing, State University construction, hospital and
nursing home development, and other programs. In general, HFA depends
upon mortgagors in the housing programs it finances to generate sufficient
funds from rental income, subsidies and other payments to meet their
respective mortgage repayment obligations to HFA, which provide the
principal source of funds for the payment of debt service on HFA bonds, as
well as to meet operating and maintenance costs of the projects financed.
From January 1, 1976 through March 31, 1987, the State was called upon to
appropriate a total of $162.8 million to make up deficiencies in the debt
service reserve funds of HFA pursuant to moral obligation provisions. The
State has not been called upon to make such payments since the 1986-87
fiscal year and no payments are anticipated during the 1995-96 fiscal
year.
UDC has experienced, and expects to continue to experience, financial
difficulties with the housing programs it had undertaken prior to 1975,
because a substantial number of these housing program mortgagors are
unable to make full payments on their mortgage loans. Through a
subsidiary, UDC is currently attempting to increase its rate of collection
by accelerating its program of foreclosures and by entering into
settlement agreements. UDC has been, and will remain, dependent upon the
State for appropriations to meet its operating expenses. The State also
has appropriated money to assist in the curing of a default by UDC on
notes which did not contain the State's moral obligation provision.
The MTA oversees New York City's subway and bus lines by its
affiliates, the New York City Transit Authority and the Manhattan and
Bronx Surface Transit Operating Authority (collectively, the "TA").
Through MTA's subsidiaries, the Long Island Rail Road Company, the
Metro-North Commuter Railroad Company and the Metropolitan Suburban Bus
Authority, the MTA operates certain commuter rail and bus lines in the New
York metropolitan area. In addition, the Staten Island Rapid Transit
Authority, an MTA subsidiary, operates a rapid transit line on Staten
Island. Through its affiliated agency, the Triborough Bridge and Tunnel
Authority (the "TBTA"), the MTA operates certain toll bridges and tunnels.
Because fare revenues are not sufficient to finance the mass transit
portion of these operations, the MTA has depended and will continue to
depend for operating support upon a system of State, local government and
TBTA support and, to the extent available, Federal operating assistance,
including loans, grants and subsidies. If current revenue projections are
not realized and/or operating expenses exceed current projections, the TA
or commuter railroads may be required to seek additional State assistance,
raise fares or take other actions.
Over the past several years the State has enacted several
taxes--including a surcharge on the profits of banks, insurance
corporations and general business corporations doing business in the
12-county region (the "Metropolitan Transportation Region") served by the
MTA and a special .25% regional sales and use tax--that provide additional
revenues for mass transit purposes, including assistance to the MTA. In
addition, since 1987, State law has required that the proceeds of .25%
mortgage recording tax paid on certain mortgages in the Metropolitan
Transportation Region be deposited in a special MTA fund for operating or
capital expenses. Further, in 1993, the State dedicated a portion of
certain additional State petroleum business tax receipts to fund operating
or capital assistance to the MTA. For the 1994-96 State fiscal year,
total State assistance to the MTA is estimated at approximately $1.1
billion.
A subway fire on December 28, 1990 and a subway derailment on August
28, 1991, each of which caused fatalities and many injuries, have given
rise to substantial claims for damages against both the TA and the City.
In 1981, the State Legislature authorized procedures for the
adoption, approval and amendment of a five-year plan for the capital
program designed to upgrade the performance of the MTA's transportation
systems and to supplement, replace and rehabilitate facilities and
equipment, and also granted certain additional bonding authorization
therefor.
On April 5, 1993, the Legislature approved, and the Governor
subsequently signed into law, legislation authorizing a five-year $9.56
billion capital plan for the MTA for 1992-1996. The MTA has received
approval of the 1992-1996 Capital Program based on this legislation from
the MTA Capital Program Review Board (the "CPRB"), as State law requires.
This is the third five-year plan since the Legislature authorized
procedures for the adoption, approval and amendment of a five-year plan in
1981 for a capital program designed to upgrade the performance of the
MTA's transportation systems and to supplement, replace and rehabilitate
facilities and equipment. The MTA, the TBTA and the TA are collectively
authorized to issue an aggregate of $3.1 billion of bonds (net of certain
statutory exclusions) to finance a portion of the 1992-96 Capital Program.
The 1992-96 Capital Program was expected to be financed in significant
part through dedication of the State petroleum business tax receipts
referred to above. However, in December 1994 the proposed bond resolution
based on such tax receipts was not approved by the MTA Capital Program
Review Board. Further consideration of the resolution was deferred until
1995.
There can be no assurance that such governmental actions will be
taken, that sources currently identified will not be decreased or
eliminated, or that the 1992-1996 Capital Program will not be delayed or
reduced. If the MTA capital program is delayed or reduced because of
funding shortfalls or other factors, ridership and fare revenues may
decline, which could, among other things, impair the MTA's ability to meet
its operating expenses without additional State assistance.
The cities, towns, villages and school districts of the State are
political subdivisions of the State with the powers granted by the State
Constitution and statutes. As the sovereign, the State retains broad
powers and responsibilities with respect to the government, finances and
welfare of these political subdivisions, especially in education and
social services. In recent years the State has been called upon to
provide added financial assistance to certain localities.
Other Localities. Certain localities in addition to the City could
have financial problems leading to requests for additional State
assistance during the State's 1995-96 fiscal year and thereafter. The
potential impact on the State of such actions by localities is not
included in the projections of the State receipts and disbursements in the
State's 1995-96 fiscal year.
Municipalities and school districts have engaged in substantial
short-term and long-term borrowings. In 1993, the total indebtedness of
all localities in the State, other than the City, was approximately $17.7
billion. A small portion (approximately $105 million) of this
indebtedness represented borrowing to finance budgetary deficits and was
issued pursuant to enabling State legislation. State law requires the
Comptroller to review and make recommendations concerning the budgets of
those local government units other than the City authorized by State law
to issue debt to finance deficits during the period that such deficit
financing is outstanding. Fifteen localities had outstanding indebtedness
for deficit financing at the close of their fiscal year ending in 1993.
Certain proposed Federal expenditure reductions would reduce, or in
some cases eliminate, Federal funding of some local programs and
accordingly might impose substantial increased expenditure requirements on
affected localities to increase local revenues to sustain those
expenditures. If the State, the City or any of the Agencies were to
suffer serious financial difficulties jeopardizing their respective access
to the public credit markets, the marketability of notes and bonds issued
by localities within the State could be adversely affected. Localities
also face anticipated and potential problems resulting from certain
pending litigation, judicial decisions and long-range economic trends.
The longer-range, potential problems of declining city population,
increasing expenditures and other economic trends could adversely affect
localities and require increasing State assistance in the future.
Because of significant fiscal difficulties experienced from time to
time by the City of Yonkers, a Financial Control Board was created by the
State in 1984 to oversee Yonkers' fiscal affairs. Future actions taken by
the Governor or the State Legislature to assist Yonkers in this crisis
could result in the allocation of State resources in amounts that cannot
yet be determined.
Certain litigation pending against the State or its officers or
employees could have a substantial or long-term adverse effect on State
finances. Among the more significant of these litigations are those that
involve: (i) the validity and fairness of agreements and treaties by which
various Indian tribes transferred title to the State of approximately six
million acres of land in central New York; (ii) certain aspects of the
State's Medicaid rates and regulations, including reimbursements to
providers of mandatory and optional Medicaid services; (iii) contamination
in the Love Canal area of Niagara Falls; (iv) a challenge to the State's
practice of reimbursing certain Office of Mental Health patient-care
expenses with clients' Social Security benefits; (v) a challenge to the
methods by which the State reimburses localities for the administrative
costs of food stamp programs; (vi) a challenge to the State's possession
of certain funds taken pursuant to the State's Abandoned Property law;
(vii) alleged responsibility of State officials to assist in remedying
racial segregation in the City of Yonkers; (viii) an action, in which the
State is a third party defendant, for injunctive or other appropriate
relief, concerning liability for the maintenance of stone groins
constructed along certain areas of Long Island's shoreline; (ix) actions
challenging the constitutionality of legislation enacted during the 1990
legislative session which changed the actuarial funding methods for
determining contributions to State employee retirement systems; (x) an
action against State and City officials alleging that the present level of
shelter allowance for public assistance recipients is inadequate under
statutory standards to maintain proper housing; (xi) an action challenging
legislation enacted in 1990 which had the effect of deferring certain
employer contributions to the State Teachers' Retirement System and
reducing State aid to school districts by a like amount; (xii) a challenge
to the constitutionality of financing programs of the Thruway Authority
authorized by Chapters 166 and 410 of the Laws of 1991 (described below in
this Part); (xiii) a challenge to the constitutionality of financing
programs of the Metropolitan Transportation Authority and the Thruway
Authority authorized by Chapter 56 of the Laws of 1993 (described below in
this Part); (xiv) challenges to the delay by the State Department of
Social Services in making two one-week Medicaid payments to the service
providers; (xv) challenges by commercial insurers, employee welfare
benefit plans, and health maintenance organizations to provisions of
Section 2807-c of the Public Health Law which impose 13%, 11% and 9%
surcharges on inpatient hospital bills and a bad debt and charity care
allowance on all hospital bills paid by such entities; (xvi) challenges to
the promulgation of the State's proposed procedure to determine the
eligibility for and nature of home care services for Medicaid recipients;
(xvii) a challenge to State implementation of a program which reduces
Medicaid benefits to certain home-relief recipients; and (xviii)
challenges to the rationality and retroactive application of State
regulations recelebrating nursing home Medicaid rates.
Adverse developments or decisions in such cases could affect the
ability of the State to maintain a balanced 1994-95 State Financial Plan.
(2) New York City. In the mid-1970s, the City had large
accumulated past deficits and until recently was not able to generate sufficient
tax and other ongoing revenues to cover expenses in each fiscal year. However,
the City's operating results for the fiscal year ending June 30, 1994 were
balanced in accordance with GAAP, the twelfth consecutive year in which the City
achieved balanced operating results in accordance with GAAP. The City's ability
to maintain balanced operating results in future years is subject to numerous
contingencies and future developments.
The City's economy, whose rate of growth slowed substantially over
the past three years, is currently in recession. During the 1990 and 1991
fiscal years, as a result of the slowing economy, the City has experienced
significant shortfalls in almost all of its major tax sources and
increases in social services costs, and has been required to take actions
to close substantial budget gaps in order to maintain balanced budgets in
accordance with the Financial Plan.
In 1975, the City became unable to market its securities and entered
a period of extraordinary financial difficulties. In response to this
crisis, the State created MAC to provide financing assistance to the City
and also enacted the New York State Financial Emergency Act for the City
of New York (the "Emergency Act") which, among other things, created the
Financial Control Board (the "Control Board") to oversee the City's
financial affairs and facilitate its return to the public credit markets.
The State also established the Office of the State Deputy Comptroller
("OSDC") to assist the Control Board in exercising its powers and
responsibilities. On June 30, 1986, the Control Board's powers of
approval over the City Financial Plan were suspended pursuant to the
Emergency Act. However, the Control Board, MAC and OSDC continue to
exercise various monitoring functions relating to the City's financial
condition. The City prepares and operates under a four-year financial
plan which is submitted annually to the Control Board for review and which
the City periodically updates.
The City's independently audited operating results for each of its
fiscal years from 1981 through 1993 show a General Fund surplus reported
in accordance with GAAP. The City has eliminated the cumulative deficit
in its net General Fund position. In addition, the City's financial
statements for the 1993 fiscal year received an unqualified opinion from
the City's independent auditors, the eleventh consecutive year the City
has received such an opinion.
In August 1993, the City adopted and submitted to the Control Board
for its review a four-year Financial Plan covering fiscal years 1994
through 1997 (the "Financial Plan"). The Financial Plan was based on the
City's fiscal year 1994 expense budget adopted June 14, 1993 as well as
certain changes incorporated subsequent to the budget adoption process.
On November 23, 1993, the City adopted and submitted to the Control Board
for its review a first quarter modification to the Financial Plan (the
"November Modification") incorporating various re-estimates of revenues
and expenditures. For fiscal year 1994, the November Modification
includes additional resources stemming primarily from the City
Comptroller's fiscal year 1993 annual audit, savings from a reduction in
prior years' accrued expenditures, and higher State and Federal aid
resulting from claims by the City for reimbursement of various social
services costs. These resources were used to fund new needs in the
November Modification including higher costs in the uniformed agencies, at
the Board of Education (the "BoE") and for certain social services, the
unlikelihood of the sale of the Off-Track Betting Corporation (the "OTB"),
and lower estimates of miscellaneous and other revenues. After taking
these adjustments into account, the November Modification projects a
balanced budget for fiscal year 1994, based upon revenues of $31,585
billion. For fiscal years 1995, 1996 and 1997, the November Modification
projects budget gaps of $1.730 billion, $2.513 billion and $2.699 billion,
respectively. These gaps are higher by about $450 million in fiscal year
1995 and by about $700 million in each of fiscal years 1996 and 1997 than
in the Financial Plan, primarily on account of the nonrecurring value of
the fiscal year 1994 revenue adjustments, the loss of certain one-time
resources funding BoE fiscal year 1994 spending needs, and the
reclassification of anticipated State aid from the baseline revenue
estimates to the gap-closing program. To offset these larger gaps, the
November Modification relies on additional City, State and other actions.
On December 1, 1993, a three-member panel appointed by the Mayor to
address City structural budget imbalance released a report setting forth
its findings and recommendations. In its report, the panel noted that
budget imbalance is likely to be greater than the City now projects by
$255 million in fiscal year 1995, rising to nearly $1.5 billion in fiscal
year 1997. The report provided a number of options that the City should
consider in addressing the structural balance issue such as severe cuts in
City-funded personnel levels, increases in residential property taxes and
the sales tax, and the imposition of bridge tolls and solid waste
collection fees. The report also noted that additional State actions will
be required in many instances to allow the City to cut its budget without
grave damage to basic services.
On December 21, 1993, OSDC issued a report reviewing the November
Modification. The report noted that while the outlook for fiscal year
1994 has improved since August, it will be necessary for the City to
manage its budget aggressively in order to stay on course for budget
balance this year. For fiscal years 1995 through 1997, the report
expressed concern that the gaps identified by the City in the November
Modification are the largest as a percentage of City-fund revenues that
the City has faced at this point in the fiscal year since budget balance
in accordance with GAAP was first achieved in fiscal year 1981.
On December 21, 1993, the staff of the Control Board issued its
report on the November Modification. The report states that the plan is
now more realistic in terms of the gaps it portrays and the solutions it
offers. However, the solutions are mostly limited to fiscal year 1994
while the gap for fiscal year 1995 has been increased by $450 million.
Beginning in fiscal year 1995, budget gaps average over $1 billion
annually. Therefore, the staff recommends that prompt action to replace
many current-year one-shots with recurring savings is critical.
On February 2, 1994, the Mayor presented to the City Council and the
Control Board a mid-year modification to the Financial Plan (the "February
Modification"). The February Modification projects a balanced budget for
fiscal year 1994, based upon revenues of $31.735 billion, including a
general reserve of $81 million. For fiscal years 1995, 1996 and 1997, the
February Modification projects gaps of $2.261 billion, $3.167 billion and
$3.253 billion, respectively, and assumes no wage and salary increases
beyond the expiration of current labor agreements which expire in fiscal
years 1995 and 1996. These gaps have grown since November by about $530
million in fiscal year 1995, and $650 million and $550 million in fiscal
years 1996 and 1997, respectively, owing in large part to lower estimates
of real property tax revenues. To close the budget gap projected for
fiscal year 1995, the February Modification includes a gap-closing program
that consists of the following major elements: (i) an agency program of
$1.048 billion; (ii) fringe benefit and pension savings of $400 million;
(iii) an intergovernmental aid package of $400 million; (iv) a work force
reduction program of $144 million; and (v) the assumption of a $234
million surplus roll from fiscal year 1994. Implementation of many of the
gap-closing initiatives requires the cooperation of the municipal labor
unions, the City Council and the State and Federal governments. The
February Modification also includes a tax reduction program, with most of
the financial impact affecting the later years of the Plan period.
The City requires certain amounts of financing for seasonal and
capital spending purposes. The City has issued $1.75 billion of notes for
seasonal financing purposes during the 1994 fiscal year. The City's
capital financing program projects long-term financing requirements of
approximately $17 billion for the City's fiscal years 1995 through 1998
for the construction and rehabilitation of the City's infrastructure and
other fixed assets. The major capital requirement include expenditures
for the City's water supply system, and waste disposal systems, roads,
bridges, mass transit, schools and housing. In addition, the City and the
Municipal Water Finance Authority have issued about $1.8 billion in
refunding bonds in the 1994 fiscal year.
State Economic Trends. The State historically has been one of the
wealthiest states in the nation. For decades, however, the State has
grown more slowly than the nation as a whole, gradually eroding its
relative economic position. Statewide, urban centers have experienced
significant changes involving migration of the more affluent to the
suburbs and an influx of generally less affluent residents. Regionally,
the older Northeast cities have suffered because of the relative success
that the South and the West have had in attracting people and business.
The City has also had to face greater competition as other major cities
have developed financial and business capabilities which make them less
dependent on the specialized services traditionally available almost
exclusively in the City.
During the 1982-83 recession, overall economic activity in the State
declined less than that of the nation as a whole. However, in the
calendar years 1984 through 1991, the State's rate of economic expansion
was somewhat slower than that of the nation. In the 1990-91 recession,
the economy of the State, and that of the rest of the Northeast, was more
heavily damaged than that of the nation as a whole and has been slower to
recover. The total employment growth rate in the State has been below the
national average since 1984. The unemployment rate in the State dipped
below the national rate in the second half of 1981 and remained lower
until 1991; since then, it has been higher. According to data published
by the U.S. Bureau of Economic Analysis, during the past ten years, total
personal income in the State rose slightly faster than the national
average only from 1986 through 1988.
APPENDIX B
INFORMATION ABOUT SECURITIES RATINGS
The following are excerpts from Description of Moody's Investors'
Service, Inc. ("Moody's) municipal bond ratings. Aaa -- judged to be of
the "best quality" and are referred to as "gilt edge"; interest payments
are protected by a large or by an exceptionally stable margin and
principal is secure; Aa -- judged to be of "high quality by all
standards," but as to which margins of protection or other elements make
long-term risks appear somewhat larger than Aaa-rated Municipal Bonds;
together with Aaa group they comprise what are generally known as "high
grade bonds"; A -- possess many favorable investment attributes and are
considered "upper medium grade obligations." Factors giving security to
principal and interest of A-rated Municipal Bonds are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future; Baa --considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured; interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time.
Moody's applies the numerical modifiers 1, 2 and 3 in each generic
rating classification from Aa through Baa to indicate ranking within a
general rating category; 1 being the highest and 3 the lowest.
Description of Moody's ratings of state and municipal notes. Moody's
ratings for state and municipal notes and other short-term obligations are
designated Moody's Investment Grade ("MIG") and for variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG").
This distinction recognizes the differences between short-term credit risk
and long-term risk. Symbols used will be as follows: MIG 1/VMIG 1 --best
quality, enjoying strong protection for established cash flows of funds
for their servicing or from established and broad-based access to the
market for refinancing, or both; MIG 2/VMIG 2 -- high quality, with
margins of protection ample although not so large as in the preceding
group; MIG 3/VMIG 3 --favorable quality, with all security elements
accounted for but lacking the undeniable strength of the preceding grades.
Description of Moody's commercial paper ratings. PRIME-1 ("P-1") --
judged to be of the best quality. Their short-term debt obligations carry
the smallest degree of investment risk; PRIME-2 -- indicates a strong
capacity for repayment, but to a lesser degree than 1.
Description of Standard & Poors ("S&P") Municipal Bond ratings. AAA -
- - has the highest rating assigned by S&P; extremely strong capacity to pay
principal and interest; AA -- has very strong capacity to pay interest
and repay principal and differs from the higher rated issues only in a
small degree; A -- has a strong capacity to pay principal and interest,
although somewhat more susceptible to adverse changes in circumstances and
economic conditions; BBB -- regarded as having an adequate capacity to pay
principal and interest; normally exhibit adequate protection parameters
but adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity to pay principal and interest than for
bonds in the A category. Ratings may be modified by the addition of a
plus or minus sign to show relative standing within the major rating
categories, except in the AAA category.
Description of S&P's ratings of municipal note issues. SP-1+ -- very
strong capacity to pay principal and interest; SP-1 --strong capacity to
pay principal and interest; SP-2 --satisfactory capacity to pay principal
and interest.
Description of S&P's commercial paper ratings. A-1+ --indicates an
overwhelming degree of safety regarding timely payment; A-1 -- indicates a
very strong degree of safety regarding timely payment; A-2 -- indicates a
strong capacity for timely payment but with a relative degree of safety
not as overwhelming as for issues designated A-1.
Description of IBCA Limited/IBCA Inc. commercial paper ratings.
Short-term obligations, including commercial paper, rated A-1+ by IBCA
Limited or its affiliate IBCA Inc. are obligations supported by the
highest capacity for timely repayment. Obligations rated A-1 have a very
strong capacity for timely repayment. Obligations rated A-2 have a strong
capacity for timely repayment, although such capacity may be susceptible
to adverse changes in business, economic or financial conditions.
Description of Fitch Investors Services, Inc. commercial paper
ratings. Fitch Investors Services, Inc. employs the rating F-1+ to
indicate issues regarded as having the strongest degree of assurance for
timely payment. The rating F-1 reflects an assurance of timely payment
only slightly less in degree than issues rated F-1+, while the rating F-2
indicates a satisfactory degree of assurance for timely payment, although
the margin of safety is not as great as indicated by the F-1+ and F-1
categories.
Description of Duff & Phelps Inc. commercial paper ratings. Duff &
Phelps Inc. employs the designation of Duff 1 with respect to top grade
commercial paper and bank money instruments. Duff 1+ indicates the
highest certainty of timely payment: short-term liquidity is clearly
outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations. Duff 1-indicates high certainty of timely payment. Duff 2
indicates good certainty of timely payment: liquidity factors and company
fundamentals are sound.
Various of the nationally recognized statistical rating organizations
("NRSROs") utilize rankings within rating categories indicated by a + or -
. The Fund, in accordance with industry practice, recognizes such
rankings within categories as graduations, viewing for example S&P's
rating of A-1+ and A-1 as being in S&P's highest rating category.
Description of Thomson BankWatch, Inc. ("BankWatch") commercial paper
ratings. BankWatch will assign both short-term debt ratings and issuer
ratings to the issuers it rates. BankWatch will assign a short-term rating
("TBW-1," "TBW-2," "TBW-3," or "TBW-4") to each class of debt (e.g.,
commercial paper or non-convertible debt), having a maturity of one-year
or less, issued by a holding company structure or an entity within the
holding company structure that is rated by BankWatch. Additionally,
BankWatch will assign an issuer rating ("A," "A/B," "B," "B/C," "C,"
"C/D," "D," "D/E," and "E") to each issuer that it rates.
PORTFOLIO OF INVESTMENTS
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND JUNE 30, 1995
<TABLE>
<CAPTION>
FACE VALUE
VALUE (NOTE 1)
<S> <C> <C>
MUNICIPAL BONDS AND NOTES -- 100.1%
NEW YORK -- 91.1%
Babylon, New York, Industrial Development
Revenue:
$ 300,000 3.700% due 04/01/00+ $ 300,000
300,000 4.400% due 12/01/24+ 300,000
250,000 Broome County, New York, Industrial Development
Revenue,
4.000% due 12/15/03+ 250,000
500,000 Franklin County, New York, Industrial Develop-
ment Agency, Series A,
4.050% due 07/01/21+ 500,000
400,000 Hemstead Town, New York, Series A,
5.250% due 03/01/96 401,784
100,000 Jefferson County, New York, Industrial
Development Revenue,
4.060% due 12/01/12+++ 100,000
200,000 Metropolitan Transportation Authority,
New York,
3.750% due 07/01/21+ 200,000
300,000 Monroe County, New York, Industrial
Development Agency,
3.700% due 10/01/00+ 300,000
200,000 Montgomery, New York, Industrial Development
Agency, (Service Merchandise),
4.000% due 12/31/24+++ 200,000
700,000 New York City Municipal Water, Finance Author-
ity,
4.500% due 06/15/25+ 700,000
New York City, New York, General Obligation
Bonds:
100,000 Series A,
4.250% due 08/15/23+ 100,000
800,000 Series A-6,
4.000% due 08/01/18+ 800,000
500,000 Series A-9,
4.200% due 08/01/18+ 500,000
Series B:
200,000 4.550% due 08/15/21+ 200,000
200,000 4.500% due 10/01/21+ 200,000
200,000 Series F-3,
4.250% due 02/15/13+ 200,000
New York City, New York, Housing Development
Corporation:
500,000 3.850% due 07/01/05+ 500,000
300,000 4.000% due 02/01/07+ 300,000
500,000 3.900% due 12/15/24+ 500,000
600,000 3.8000% due 03/15/25+ 600,000
1,000,000 Special Obligation-96-A,
3.750% due 08/01/15+ 1,000,000
New York State Dormitory Authority Revenue:
1,200,000 3.900% due 07/01/15+ 1,200,000
300,000 8.750% due 07/01/15++ 306,072
New York State Energy Research & Development
Authority, Pollution Control Revenue:
700,000 3.800% due 10/01/14+++ 700,000
100,000 4.550% due 07/01/15+ 100,000
250,000 4.100% due 10/15/15++ 250,000
300,000 4.600% due 12/01/15++ 300,000
500,000 4.100% due 11/01/23+ 500,000
700,000 4.650% due 12/01/23++ 700,000
New York State Housing Finance Agency:
500,000 (Liberty),
4.000% due 11/01/05+ 500,000
500,000 (Sanai School),
4.000% due 11/01/14+ 500,000
100,000 Series PJ,
3.900% due 05/15/15+ 100,000
New York State Job Development Authority:
225,000 3.600% due 03/01/99+++ 225,000
400,000 3.650% due 03/01/00+++ 400,000
200,000 4.200% due 03/01/07+ 200,000
1,300,000 New York State Local Assistance Corporation,
Series B,
3.700% due 04/01/23+ 1,300,000
New York State Medical Care Facility:
1,050,000 Series C,
8.625% due 01/15/06++ 1,099,062
1,000,000 King Hospital Project,
8.500% due 01/15/22++ 1,046,061
New York State Power Authority, Utility Reve-
nue:
500,000 7.400% due 01/01/06++ 517,453
400,000 7.375% due 01/01/18++ 413,802
500,000 New York State, Series P, General Obligation,
4.100% due 07/18/95++ 500,000
Niagara County, New York:
400,000 General Obligation,
Series A,
4.200% due 11/15/24+ 400,000
500,000 Series 94B,
4.350% due 08/11/95 500,000
700,000 Niagara Falls, New York, Transportation Author-
ity,
4.000% due 10/01/19++ 700,000
300,000 Onondaga County, New York, Industrial
Development Agency,
Seymor Project,
3.300% due 06/15/97+++ 300,000
900,000 Saint Charles County, New York, Industrial De-
velopment Authority,
4.150% due 10/01/07+ 900,000
300,000 Saint Lawrence County, New York, Industrial De-
velopment Center,
4.000% due 05/01/25+ 300,000
700,000 Suffolk County, New York, Industrial Develop-
ment Center,
3.850% due 01/01/14+ 700,000
500,000 Suffolk County, New York, Tax Anticipation
Notes,
5.250% due 08/15/95 500,428
575,000 Tonawanda, New York,
4.210% due 12/21/95 575,369
Triborough Bridge & Tunnel Authority:
600,000 7.625% due 01/01/14++ 624,101
200,000 3.750% due 01/01/24+ 200,000
1,000,000 Wappingers, New York, Central School District,
4.125% due 06/14/96 1,004,370
306,000 West Genesee, New York, Central
School District,
4.700% due 06/01/96 307,766
600,000 Westchester County, New York,
5.000% due 12/14/95 601,321
490,000 White Plains, New York, City School District,
4.500% due 06/15/96 492,492
27,115,081
ALASKA -- 1.0%
300,000 Anchorage, Alaska, Higher Education for Pac
University,
4.500% due 07/01/17+ 300,000
PUERTO RICO -- 8.0%
Puerto Rico Commonwealth, Government
Development Bank:
600,000 3.800% due 12/01/15+ 600,000
Commercial Paper:
700,000 2.800% due 07/17/95++ 700,000
500,000 3.900% due 07/20/95++ 500,000
100,000 Puerto Rico Commonwealth, Highway and Transpor-
tation Authority,
3.800% due 07/01/99+ 100,000
200,000 Puerto Rico Commonwealth, Industrial Develop-
ment: Industrial Control,
4.050% due 12/01/15+ 200,000
300,000 Pollution Control,
4.350% due 12/01/13++ 300,262
2,400,262
TOTAL INVESTMENTS
(Cost $29,815,343*) 100.1% 29,815,343
OTHER ASSETS AND LIABILITIES (NET) (0.1) (25,877)
NET ASSETS 100.0% $29,789,466
<FN>
* Aggregate cost for Federal tax purposes.
+ Variable rate demand bonds are payable upon not more than seven calen-
dar days' notice. The interest rate shown reflects the rate currently
in effect.
++ Put bonds and notes have demand features to mature within one year.
The interest rate shown reflects the rate currently in effect.
+++ Variable rate demand notes are payable upon not more than 30 calendar
days' notice. The interest rate shown reflects the rate currently in
effect.
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF ASSETS AND LIABILITIES
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS JUNE 30, 1995
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
<S> <C> <C> <C>
ASSETS
Investments, at value
(Cost $22,367,447, $102,632,371 and
$29,815,343, respectively) (Note 1)
See accompanying schedules $22,367,447 $102,632,371 $ 29,815,343
Cash -- 13,488 177,364
Interest receivable 321,211 636,046 264,116
Receivable for Fund shares sold 1,042,363 1,559,769 89,796
TOTAL ASSETS 23,731,021 104,841,674 30,346,619
LIABILITIES
Payable for investment securities purchased 503,350 3,200,000 493,418
Dividends payable 9,772 94,261 20,038
Payable for Fund shares redeemed 216,722 212,589 22,682
Investment management fee payable (Note 2) 20,307 84,998 16,292
Due to custodian 9,353 -- --
Accrued Trustees' fees and expenses (Note 2) 758 3,381 758
Distribution fee payable (Note 3) 3,182 15,405 3,965
TOTAL LIABILITIES 763,444 3,610,634 557,153
NET ASSETS $22,967,577 $101,231,040 $ 29,789,466
NET ASSETS CONSIST OF:
ACCUMULATED NET REALIZED GAIN/
(LOSS) ON INVESTMENTS SOLD $ (233) $ (51,059) $ 339
PAID-IN CAPITAL 22,967,810 101,282,099 29,789,127
TOTAL NET ASSETS $22,967,577 $101,231,040 $ 29,789,466
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS JUNE 30, 1995
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
<S> <C> <C> <C>
NET ASSETS:
Investor Shares $ 15,537,878 $ 75,746,221 $ 21,739,314
Class R Shares $ 7,429,699 $ 25,484,819 $ 8,050,152
SHARES OUTSTANDING:
Investor Shares 15,537,767 75,797,831 21,739,067
Class R Shares 7,429,644 25,501,860 8,050,060
NET ASSET VALUE:
INVESTOR SHARES
Net asset value, offering and redemption price
per share of beneficial interest outstanding $ 1.00 $ 1.00 $ 1.00
CLASS R SHARES
Net asset value, offering and redemption price
per share of beneficial interest outstanding $ 1.00 $ 1.00 $ 1.00
</TABLE>
STATEMENTS OF OPERATIONS
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 973,443 $ 4,113,322 $ 511,298
EXPENSES
Investment management fee (Note 2) 90,816 397,565 48,800
Distribution fee (Note 3) 38,346 222,784 20,798
Trustees' fees and expenses (Note 2) 2,069 9,343 1,308
Total expenses 131,231 629,692 70,906
NET INVESTMENT INCOME 842,212 3,483,630 440,392
NET REALIZED GAIN
ON INVESTMENTS (Note 1)
Net realized gain on investments sold during
the period 6 977 349
NET INCREASE IN NET ASSETS RESULTING FROM OPER-
ATIONS $ 842,218 $ 3,484,607 $ 440,741
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND MONEY FUND MONEY FUND
<S> <C> <C> <C>
Net investment income $ 842,212 $ 3,483,630 $ 440,392
Net realized gain on investments sold during
the year 6 977 349
Net increase in net assets resulting from oper-
ations 842,218 3,484,607 440,741
Distributions to shareholders from net invest-
ment income:
Investor shares (468,028) (2,605,776) (248,024)
Class R shares (374,184) (877,854) (192,368)
Net increase/(decrease) in net assets from Fund
share transactions (Note 4):
Investor shares (1,631,735) (10,764,289) 13,727,989
Class R shares (2,316,810) 5,659,254 2,591,101
Net increase/(decrease) in net assets (3,948,539) (5,104,058) 16,319,439
NET ASSETS:
Beginning of year 26,916,116 106,335,098 13,470,027
End of year $ 22,967,577 $ 101,231,040 $ 29,789,466
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
FOR THE YEAR OR PERIOD ENDED JUNE 30, 1994
<TABLE>
<CAPTION>
DREYFUS/ DREYFUS/ DREYFUS/
LAUREL LAUREL LAUREL
CALIFORNIA MASSACHUSETTS NEW YORK
TAX-FREE TAX-FREE TAX-FREE
MONEY FUND* MONEY FUND MONEY FUND*
<S> <C> <C> <C>
Net investment income $ 346,378 $ 2,167,350 $ 204,215
Net realized loss on investments sold during
the year -- (1,311) --
Net increase in net assets result from opera-
tions 346,378 2,166,039 204,215
Distributions to shareholders from net invest-
ment income:
Investor Shares (198,324) (1,317,812) (124,785)
Trust Shares (118,164) (371,662) (78,946)
Institutional Shares (29,890) (477,876) (484)
Net increase/(decrease) in net assets from Fund
share transactions (Note 4):
Investor Shares (3,450,010) (21,462,072) (1,409,966)
Trust Shares 3,338,359 186,693 (2,241,040)
Net decrease in net assets (111,651) (21,276,690) (3,651,006)
NET ASSETS:
Beginning of year 27,027,767 127,611,788 17,121,033
End of year (including undistributed net in-
vestment income of $399 for the Dreyfus/Laurel
California Tax-Free Money Fund) $ 26,916,116 $ 106,335,098 $ 13,470,027
<FN>
* The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30.
</TABLE>
See Notes to Financial Statements.
[This Page Intentionally Left Blank]
FINANCIAL HIGHLIGHTS
DREYFUS BASIC NEW YORK MUNICIPAL MONEY MARKET FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD*
Reference is made to Page 5 of the Fund's Prospectus dated February 29, 1996.
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Dreyfus/Laurel Tax-Free Municipal Funds (the "Trust"), The Dreyfu-
s/Laurel Funds, Inc., The Dreyfus/Laurel Funds Trust and The Dreyfus/Lau-
rel Investment Series (collectively, "The Dreyfus/Laurel Funds") are all
registered open-end investment companies that are part of The Dreyfus Fam-
ily of Funds. The Trust is an investment company which consists of seven
funds: the Dreyfus/Laurel California Tax-Free Money Fund, the Dreyfus/Lau-
rel Massachusetts Tax-Free Money Fund, the Dreyfus/Laurel New York Tax-
Free Money Fund (collectively, the "Money Funds") (individually, the
"Fund"), the Premier Limited Term California Municipal Fund, the Premier
Limited Term Massachusetts Municipal Fund, the Premier Limited Term New
York Municipal Fund and the Premier Limited Term Municipal Fund. This re-
port contains financial statements for the Money Funds. The Trust is a
Massachusetts business trust and is registered with the Securities and Ex-
change Commission under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end management investment company. The Money
Funds currently offer two classes of shares: Investor shares and Class R
shares (effective October 17, 1994, the Trust shares were redesignated
Class R shares). Investor shares are sold primarily to retail investors
and bear a distribution fee. Class R shares are sold primarily to bank
trust departments and other financial service providers (including Mellon
Bank, N.A. ("Mellon Bank") and its affiliates) acting on behalf of custom-
ers having a qualified trust or investment account or relationship at such
institution, and bear no distribution fee. Each class of shares has iden-
tical rights and privileges, except with respect to the distribution fees
and voting rights on matters affecting a single class. The following is a
summary of significant accounting policies consistently followed by each
Fund in the preparation of its financial statements in accordance with
generally accepted accounting principles.
(A) PORTFOLIO VALUATION:
Portfolio securities are valued on the basis of amortized cost in accor-
dance with Rule 2a-7 of the 1940 Act. Amortized cost valuation involves
valuing an instrument at its cost initially and thereafter assuming a con-
stant amortization to maturity of any discount or premium, regardless of
the effect of fluctuating interest rates on the market value of the in-
strument.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME:
Securities transactions are recorded as of the trade date. Realized gains
and losses on investments sold are recorded on the identified cost basis.
Interest income is recorded on the accrual basis. Investment income and
realized and unrealized gains and losses are allocated based upon the rel-
ative average daily net assets of each class of shares.
(C) DISTRIBUTIONS TO SHAREHOLDERS:
Each Fund declares dividends from net investment income on a class level
on each day the Fund is open for business and pays such dividends no later
than the first business day of the next month. Each Fund may distribute
net realized capital gains on a Fund level, if any, annually or more fre-
quently to maintain its net asset value of $1.00 per share. Each Fund may
be subject to a 4.00% nondeductible excise tax for certain undistributed
amounts of net investment income and capital gain. Each Fund expects to
make additional distributions to avoid the application of the excise tax.
Income distributions and capital gain distributions on a Fund level are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatments of income and gains on various investment se-
curities held by the Fund, timing differences and the differing character-
ization of distributions made by the Fund as a whole. Permanent differ-
ences on the Massachusetts Tax-Free Money Fund incurred during the year
ended June 30, 1995, which resulted from an expiration of capital loss
carryforward have been reclassified to paid-in capital at year end.
(D) EXPENSE ALLOCATION
Expenses of each Fund not directly attributable to the operations of any
class of shares are prorated between the classes based upon the relative
average daily net assets of each class. Distribution expense is directly
attributable to a particular class of shares and is charged only to that
class' operations.
(E) FEDERAL INCOME TAXES:
It is policy of each Fund to qualify as a regulated investment company, if
such qualification is in the best interests of its shareholders, by com-
plying with the requirements of the Internal Revenue Code applicable to
regulated investment companies and by distributing all of its earnings to
shareholders. Therefore, no Federal income tax provision is required.
2. INVESTMENT MANAGEMENT FEE, TRUSTEES' FEE AND OTHER PARTY TRANSACTIONS
Effective as of October 17, 1994, the Trust's investment management agree-
ment with Mellon Bank was transferred to The Dreyfus Corporation (the
"Manager"), a wholly-owned subsidiary of Mellon Bank. The Manager pro-
vides, or arranges for one or more third parties to provide, investment
advisory, administrative, custody, fund accounting and transfer agency
services to the Trust. The Manager also directs the investments of each
Fund in accordance with its investment objective, policies and limita-
tions. For these services, each Fund is contractually obligated to pay the
Manager a fee, calculated daily and paid monthly, at the annual rate of
0.35% of the value of that Fund's average daily net assets. Out of its
fee, the Manager pays all of the expenses of each Fund except brokerage
fees, taxes, interest, Rule 12b-1 distribution fees and expenses, fees and
expenses of non-interested Trustees (including counsel fees) and extraor-
dinary expenses. In addition, the Manager is required to reduce its fee in
an amount equal to each Fund's allocable portion of fees and expenses of
the non- interested Trustees (including counsel).
Prior to October 17, 1994, Mellon Bank served as the Trust's investment
manager pursuant to the investment management agreement described above.
Prior to September 23, 1994, Frank Russell Investment Management Company
(the "Administrator") served as each Fund's administrator and provided,
pursuant to an administration agreement, various administrative and corpo-
rate secretarial services to each Fund. Mellon Bank, as investment man-
ager, paid the Administrator's fee out of the management fee described
above.
Prior to October 17, 1994, Funds Distributor, Inc. served as distributor
of the Trust's shares. Effective as of October 17, 1994, Premier Mutual
Fund Services, Inc. ("Premier") serves as the Trust's distributor. Premier
also serves as the Trust's sub-administrator and, pursuant to a sub-
administration agreement with the Manager, provides various administrative
and corporate secretarial services to the Trust.
No officer or employee of Premier (or of any parent, subsidiary or affili-
ate thereof) receives any compensation from The Dreyfus/Laurel Funds for
serving as an officer or Director or Trustee of The Dreyfus/Laurel Funds.
In addition, no officer or employee of the Manager (or of any parent, sub-
sidiary or affiliate thereof) serves as an officer or Director or Trustee
of The Dreyfus/Laurel Funds. The Dreyfus/Laurel Funds pay each Director or
Trustee who is not an officer or employee of Premier (or any parent, sub-
sidiary or affiliate thereof), or of the Manager $27,000 per annum, $1,000
for each Board meeting attended and $750 for each Audit Committee meeting
attended, and reimburse each Director or Trustee for travel and out-of-
pocket expenses.
3. DISTRIBUTION PLAN
Each Fund has adopted a distribution plan (the "Plan") pursuant to Rule
12b-1 under the 1940 Act relating to its Investor shares. Under the Plan,
each Fund may pay annually up to 0.25% of the value of the average daily
net assets attributable to its Investor shares to compensate Premier and
Dreyfus Service Corporation, an affiliate of the Manager, for shareholder
servicing activities and Premier for activities and expenses primarily in-
tended to result in the sale of Investor shares. Class R shares bear no
distribution fee.
Under its terms, the Plan shall remain in effect from year to year, pro-
vided such continuance is approved annually by a vote of a majority of the
Trustees and a majority of those Trustees who are not "interested persons"
of the Trust and who have no direct or indirect financial interest in the
operation of the Plan or in any agreement related to the Plan.
4. SHARES OF BENEFICIAL INTEREST
The Trust has the authority to issue an unlimited number of shares of ben-
eficial interest of each class in each separate series, without par value.
The Trust offers two classes of shares of the Money Funds.
The tables below summarize transactions in Fund shares for the years or
periods indicated. Because each of the Money Funds has sold shares, issued
shares as reinvestments of dividends and redeemed shares only at a con-
stant net asset value of $1.00 per share, the number of shares represented
by such sales, reinvestments and redemptions is the same as the amounts
shown below for such transactions.
DREYFUS/LAUREL CALIFORNIA TAX-FREE MONEY FUND
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
JUNE 30, 1995 JUNE 30, 1994*+#
<S> <C> <C>
INVESTOR SHARES:
Sold $ 32,912,720 $ 22,619,988
Issued as reinvestment of dividends and
distributions 462,650 225,575
Redeemed (35,007,105) (26,295,573)
Net decrease $ (1,631,735) $ (3,450,010)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
JUNE 30, 1995## JUNE 30, 1994*
<S> <C> <C>
CLASS R SHARES:
Sold $ 32,480,825 $10,968,762
Issued as reinvestment of dividends and
distributions 265,428 65,613
Redeemed (35,063,063) (7,696,016)
Net increase/(decrease) $ (2,316,810) $ 3,338,359
<FN>
* The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30.
+ Amounts include $8,676,000 of subscriptions, $28,427 of reinvestments
and $8,004,712 of redemptions for the Institutional Class up to April
4, 1994.
# Effective April 4, 1994 the Retail and Institutional Classes of shares
were reclassified as a single class of shares known as Investor shares.
## On October 17, 1994, the Trust shares were redesignated Class R shares.
</TABLE>
DREYFUS/LAUREL MASSACHUSETTS TAX-FREE MONEY FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1995 JUNE 30, 1994+#
<S> <C> <C>
INVESTOR SHARES:
Sold $ 130,450,064 $ 139,311,367
Issued as reinvestment of dividends and
distributions 1,980,170 1,217,369
Redeemed (143,194,523) (161,990,808)
Net decrease $ (10,764,289) $ (21,462,072)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, 1995## JUNE 30, 1994
<S> <C> <C>
CLASS R SHARES:
Sold $ 81,076,293 $ 66,966,216
Issued as reinvestment of dividends and
distributions 513,180 112,247
Redeemed (75,930,219) (66,891,770)
Net increase $ 5,659,254 $ 186,693
<FN>
+ Amounts include $50,504,187 of subscriptions, $63,928 of reinvestments
and $60,326,788 of redemptions for the Institutional Class up to April
4, 1994.
# Effective April 4, 1994 the Retail and Institutional Classes of shares
were reclassified as a single class of shares known as Investor shares.
## On October 17, 1994, the Trust Shares were redesignated Class R shares.
</TABLE>
DREYFUS/LAUREL NEW YORK TAX-FREE MONEY FUND
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
JUNE 30, 1995 JUNE 30, 1994*+#
<S> <C> <C>
INVESTOR SHARES:
Sold $ 23,865,192 $ 4,170,313
Issued as reinvestment of dividends and
distributions 240,333 123,051
Redeemed (10,377,536) (5,703,330)
Net increase/(decrease) $ 13,727,989 $(1,409,966)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
JUNE 30, 1995## JUNE 30, 1994*
<S> <C> <C>
CLASS R SHARES:
Sold $10,336,048 $ 3,604,985
Issued as reinvestment of dividends and
distributions 44,938 3,922
Redeemed (7,789,885) (5,849,947)
Net increase/(decrease) $ 2,591,101 $(2,241,040)
<FN>
* The Fund changed its fiscal year end to June 30. Prior to this, the
Fund's fiscal year end was November 30.
+ Amounts include $11,467 of subscriptions, $468 of reinvestments and
$9,120 of redemptions for the Institutional Class up to April 4, 1994.
# Effective April 4, 1994 the Retail and Institutional Classes of shares
were reclassified as a single class of shares known as Investor shares.
## On October 17, 1994, the Trust shares were redesignated Class R shares.
</TABLE>
5. CAPITAL LOSS CARRYFORWARD
As of June 30, 1995, the California Tax-Free Money Fund had available for
Federal tax purposes unused capital loss carryforwards of $233 expiring in
the year 2000, the Massachusetts Tax-Free Money Fund had unused capital
loss carryforwards of $51,059 expiring in the year 2002.
6. CONCENTRATION OF CREDIT
Each Fund invests primarily in debt obligations issued by the Fund's re-
spective state (ie. California, Massachusetts, or New York) and its polit-
ical subdivisions, municipalities, agencies and public authorities who ob-
tain funds for various public purposes. Each Fund is more susceptible to
factors adversely affecting issuers of its respective state municipal se-
curities than is a municipal bond fund that is not concentrated in these
issuers to the same extent.
INDEPENDENT AUDITORS' REPORT
KPMG
The Board of Trustees and Shareholders
The Dreyfus/Laurel Tax-Free Municipal Funds:
We have audited the accompanying statements of assets and liabilities, in-
cluding the portfolio of investments, of the California Tax-Free Money
Fund, Massachusetts Tax-Free Money Fund and New York Tax-Free Money Fund
of The Dreyfus/Laurel Tax-Free Municipal Funds (formerly the Laurel Tax-
Free Municipal Funds) as of June 30, 1995, and the related statement of
operations for the year then ended and statement of changes in net assets
and financial highlights for Investor and Class R shares for each of the
years in the two-year period then ended for the Massachusetts Tax-Free
Money Fund and for the year ended June 30, 1995 and for the period from
December 1, 1993 to June 30, 1994 for the California Tax-Free Money Fund
and New York Tax-Free Money Fund. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsi-
bility is to express an opinion on these financial statements and finan-
cial highlights based on our audits. The financial highlights presented
for each of the years or periods ended June 30, 1993 or prior for the Mas-
sachusetts Tax-Free Money Fund and for each of the years or periods ended
November 30, 1993 or prior for the California Tax-Free Money Fund and New
York Tax-Free Money Fund were audited by other auditors whose reports
thereon, dated August 11, 1993 and January 18, 1994, expressed an unquali-
fied opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and fi-
nancial highlights are free of material misstatement. An audit also in-
cludes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirma-
tion of securities owned as of June 30, 1995, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principals used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of the California Tax-Free Money Fund, Massachusetts Tax-Free Money Fund
and New York Tax-Free Money Fund of The Dreyfus/Laurel Tax-Free Municipal
Funds as of June 30, 1995, the results of their operations for the year
then ended and the change in their net assets and financial highlights for
each of the years or periods in the two-year period ended June 30, 1995 in
conformity with generally accepted accounting Principles.
KPMG Peat Marwick LLP
Boston, Massachusetts
August 18, 1995
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
(formerly The Laurel Tax-Free Municipal Funds)
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
Included in Part A:
Financial Highlights for each of the periods indicated therein.
Included in Part B:
The following are incorporated by reference to the Registrant's
Annual Report to Shareholders (filed September 8, 1994) and the
Registrant's Semi Annual Report for the fiscal year ending
June 30, 1995:
- Reports of Independent Auditors
- Portfolios of Investments
- Statements of Assets and Liabilities
- Statements of Operations
- Statements of Changes in Net Assets
- Notes to Financial Statements
(b) Exhibits:
1(a) Third Amended and Restated Master Trust Agreement filed
January 8, 1993, incorporated by reference to Post-Effective
Amendment No. 22, filed on January 29, 1993.
1(b) Amendment No. 1 to the Third Amended and Restated Master
Trust Agreement filed on May 21, 1993, incorporated by
reference to Post-Effective Amendment No. 24, filed on
June 29, 1993.
1(c) Amendment No. 2 to the Third Amended and Restated Master
Trust Agreement filed on February 7, 1994, incorporated by
reference to Post-Effective Amendment No. 29, filed on
April 1, 1994.
1(d) Amendment No. 3 to the Third Amended and Restated Master
Trust Agreement filed on March 31, 1994, incorporated by
reference to Post-Effective Amendment No. 29, filed on
April 1, 1994.
1(e) Amendment No. 4 to the Third Amended and Restated Master
Trust Agreement. Incorporated by reference to
Post-Effective Amendment No. 32, filed on December 13, 1994.
1(f) Amendment No. 5 to the Third Amended and Restated Master
Trust. Incorporated by reference to Post-Effective Amendment
No. 32, filed on December 13, 1994.
2 By-Laws of the Trust, incorporated by reference to the
Registrant's Registration Statement (No. 33-43845), filed on
July 3, 1985 (the "Registration Statement").
3 Not Applicable.
4 Specimen security. To be filed by amendment.
5(a) Investment Management Agreement between the Registrant and
Mellon Bank, N.A., dated April 4, 1994, incorporated by
reference to Post-Effective Amendment No. 29, filed on
April 1, 1994.
5(b) Assignment Agreement among the Registrant, Mellon Bank, N.A.
and The Dreyfus Corporation, dated as of October 17, 1994,
(relating to Investment Management Agreement dated
April 4, 1994). Incorporated by reference to
Post-Effective Amendment No. 33 filed on December 19, 1994.
6 Distribution Agreement between the Registrant and Premier
Mutual Fund Services, Inc., dated as of October 17, 1994.
Incorporated by reference to Post-Effective Amendment No. 33
filed on December 19, 1994.
7 Not Applicable.
8(a) Custody and Fund Accounting Agreement between the Registrant
and Mellon Bank, N.A., dated April 4, 1994, incorporated by
reference to Post-Effective Amendment No. 29, filed on
April 1, 1994.
8(b) Sub-Custodian Agreement between Mellon Bank, N.A. and Boston
Safe Deposit and Trust Company, dated April 4, 1994,
incorporated by reference to Post-Effective Amendment
No. 30, filed on October 11, 1994.
8(c) Amendment to Custody and Fund Accounting Agreement, dated
August 1, 1994,incorporated by reference to Post-Effective
Amendment No. 30, filed on October 11, 1994.
9(a) Transfer Agent Agreement between the Registrant and Boston
Safe Deposit and Trust Company (currently known as The
Shareholder Services Group, Inc.), incorporated by reference
to Post-Effective Amendment No. 10, filed on February 24,
1984.
9(b) Supplement to Transfer Agent Agreement relating to the
Tax-Free Bond Fund and the Massachusetts Tax-Free Bond Fund,
dated September 3, 1985, incorporated by reference to
Post-Effective Amendment No. 9, filed on November 23, 1987.
9(c) Supplement to Transfer Agent Agreement relating to the
California Tax-Free Money Fund, the California Tax-Free Bond
Fund, the New York Tax-Free Money Fund and the New York
Tax-Free Bond Fund, dated January 28, 1988, incorporated by
reference to Post-Effective Amendment No. 10, filed on
January 28, 1988.
9(d) Supplement to Transfer Agent Agreement for the Registrant,
dated June 1, 1989, incorporated by reference to
Post-Effective Amendment No. 14, filed on September 5, 1989.
9(e) Supplement to Transfer Agent Agreement for the Registrant,
dated April 4, 1994, incorporated by reference to
Post-Effective Amendment No. 30, filed on October 11, 1994.
10 Opinion of counsel is incorporated by reference to the
Registration Statement and to Post-Effective Amendment
Number 34 filed on December 28, 1994. Consent of Counsel is
Filed herewith.
11(a) Consent of Coopers & Lybrand L.L.P. is incorporated by
reference to Post-Effective Amendment No 36.
11(b) Consent of KPMG Peat Marwick LLP.
12 Not Applicable.
13 Not Applicable.
14 Not Applicable.
15(a) Restated Distribution Plan (relating to Investor Shares
and Class A Shares). Incorporated by reference to
Post-Effective Amendment No. 33 filed on December 19,
1994.
15(b) Distribution and Service Plans (relating to Class B
Shares and Class C Shares). Incorporated by reference
to Post-Effective Amendment No. 33 filed on December
19, 1994.
16 Performance Information, incorporated by reference to
Post-Effective Amendment No. 12, filed on September 1, 1988.
18 Rule 18f-3 Plans dated April 26, 1995, incorporated by
reference to Post-Effect Amendment No. 36, filed on May 16,
1995.
Other Exhibits
______________
(a) Powers of Attorney of the Trustees and Officers dated April
5, 1995 are incorporated by reference to Post-Effective
Amendment No. 36.
Item 25. Persons Controlled by or under Common Control with
Registrant
--------------------------------------------------
Not applicable.
Item 26. Number of Holders of Securities
-------------------------------
Set forth below are the number of recordholders of
securities of each series of the Registrant as of
January 31, 1996:
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class Investor Class
- -------------- --------------
<S> <C>
Dreyfus BASIC New York 316
Municipal Money Market Fund
Dreyfus BASIC California 240
Municipal Money Market Fund
</TABLE>
Item 27. Indemnification
---------------
Under a provision of the Registrant's Third Amended and Restated
Master Trust Agreement ("Master Trust Agreement"), any past or present
Trustee or officer of the Registrant is indemnified to the fullest extent
permitted by law against liability and all expenses reasonably incurred by
him/her in connection with any action, suit or proceeding to which he/she
may be a party or otherwise involved by reason of his/her being or having
been a Trustee or officer of the Registrant. This provision does not
authorize indemnification when it is determined, in the manner specified in
the Master Trust Agreement, that such Trustee or officer did not act in
good faith in the reasonable belief that his/her actions were in or not
opposed to the best interests of the Registrant or acted with willful
misfeasance, bad faith, gross negligence or reckless disregard of his/her
duties. Expenses may be paid by the Registrant in advance of the final
disposition of any action, suit or proceeding upon receipt of an
undertaking by such Trustee or officer to repay such expenses to the
Registrant if it is ultimately determined that indemnification of such
expenses is not authorized under the Master Trust Agreement.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Investment Adviser -- The Dreyfus Corporation
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business consists primarily
of providing investment management services as the investment adviser,
manager and distributor for sponsored investment companies registered under
the Investment Company Act of 1940 and as an investment adviser to
institutional and individual accounts. Dreyfus also serves as
sub-investment adviser to and/or administrator of other investment
companies. Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus, serves primarily as a registered broker-dealer of shares of
investment companies sponsored by Dreyfus and of other investment companies
for which Dreyfus acts as investment adviser, sub-investment adviser or
administrator. Dreyfus Management, Inc., another wholly-owned subsidiary,
provides investment management services to various pension plans,
institutions and individuals.
Item 28. Business and Other Connections of Investment Adviser (continued)
________ ________________________________________________________________
Officers and Directors of Investment Adviser
____________________________________________
Name and Position
with Dreyfus Other Businesses
_________________ ________________
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees of
Skillman Foundation.
Member of The Board of Vintners Intl.
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation****
Mellon Bank, N.A.****
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
ALVIN E. FRIEDMAN Senior Adviser to Dillon, Read & Co. Inc.
Director 535 Madison Avenue
New York, New York 10022;
Director and member of the Executive
Committee of Avnet, Inc.**
LAWRENCE M. GREENE Director:
Director Dreyfus America Fund
JULIAN M. SMERLING None
Director
HOWARD STEIN Chairman of the Board:
Chairman of the Board and Dreyfus Acquisition Corporation*;
Chief Executive Officer The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Service Corporation*;
Chairman of the Board and Chief Executive
Officer:
Major Trading Corporation*;
Director:
Avnet, Inc.**;
Dreyfus America Fund++++;
The Dreyfus Fund International
Limited+++++;
World Balanced Fund+++;
Dreyfus Partnership Management,
Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Organization, Inc.***;
Seven Six Seven Agency, Inc.*;
Trustee:
Corporate Property Investors
New York, New York
W. KEITH SMITH Chairman and Chief Executive Officer:
Vice Chairman of the Board The Boston Company*****
Vice Chairman of the Board:
Mellon Bank Corporation****
Mellon Bank, N.A.****
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Mellon Bank Corporation****
Operating Officer The Boston Company*****
and Director Deputy Director:
Mellon Trust****
Chief Executive Officer:
The Boston Company Asset Management,
Inc.*****
President:
Boston Safe Deposit and Trust Company*****
STEPHEN E. CANTER Director:
Vice Chairman and The Dreyfus Trust Company++
Chief Investment Officer, Formerly, Chairman and Chief Executive Officer:
and a Director Kleinwort Benson Investment Management
Americas Inc.*
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
Executive Vice President and Director:
Dreyfus Service Organization, Inc.***;
Director:
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
President:
The Boston Company*****
Laurel Capital Advisors****
Boston Group Holdings, Inc.
Executive Vice President:
Mellon Bank, N.A.****
Boston Safe Deposit & Trust*****
PHILIP L. TOIA Chairman of the Board and Trust Investment
Vice Chairman-Operations Officer:
and Administration The Dreyfus Trust Company++;
and a Director Chairman of the Board and Chief Operating
Officer:
Major Trading Corporation*;
Director:
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Corporation*;
Seven Six Seven Agency, Inc.*;
President and Director:
Dreyfus Acquisition Corporation*;
The Dreyfus Consumer Credit Corporation*;
Dreyfus-Lincoln, Inc.*;
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Partnership Management, Inc.+;
Dreyfus Service Organization, Inc.***;
The Truepenny Corporation*;
Formerly, Senior Vice President:
The Chase Manhattan Bank, N.A. and
The Chase Manhattan Capital Markets
Corporation
One Chase Manhattan Plaza
New York, New York 10081
WILLIAM T. SANDALLS, JR. Director:
Senior Vice President and Dreyfus Partnership Management, Inc.*;
Chief Financial Officer Seven Six Seven Agency, Inc.*;
President and Director:
Lion Management, Inc.*;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Vice President, Chief Financial Officer and
Director:
Dreyfus Acquisition Corporation*;
Vice President and Director:
The Dreyfus Consumer Credit Corporation*;
The Truepenny Corporation*;
Treasurer, Financial Officer and Director:
The Dreyfus Trust Company++;
Treasurer and Director:
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Service Corporation*;
Major Trading Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.
BARBARA E. CASEY President:
Vice President- Dreyfus Retirement Services Division;
Dreyfus Retirement Executive Vice President:
Services Boston Safe Deposit & Trust Co.*****
Dreyfus Service Corporation*
DIANE M. COFFEY None
Vice President-
Corporate Communications
ELIE M. GENADRY President:
Vice President- Institutional Services Division of Dreyfus
Institutional Sales Service Corporation*;
Broker-Dealer Division of Dreyfus Service
Corporation*;
Group Retirement Plans Division of Dreyfus
Service Corporation;
Executive Vice President:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.***;
Vice President:
The Dreyfus Trust Company++
DANIEL C. MACLEAN Director, Vice President and Secretary:
Vice President and General Dreyfus Precious Metals, Inc.*;
Counsel Director and Vice President:
The Dreyfus Consumer Credit Corporation*;
Director and Secretary:
Dreyfus Acquisition Corporation*;
Dreyfus Partnership Management, Inc.*;
Major Trading Corporation*;
The Truepenny Corporation+;
Director, Vice President and Treasurer:
Lion Management, Inc.*;
Director:
The Dreyfus Trust Company++;
Secretary:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.***;
Seven Six Seven Agency, Inc.*
JEFFREY N. NACHMAN None
Vice President-Mutual Fund
Accounting
WILLIAM F. GLAVIN, JR. Executive Vice President:
Vice President-Corporate Dreyfus Service Corporation*;
Development Senior Vice President:
The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
MARK N. JACOBS Vice President, Secretary and Director:
Vice President- Lion Management, Inc.*;
Legal and Secretary Secretary:
The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.***;
Major Trading Corporation*;
The Truepenny Corporation*
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation****
Services
MAURICE BENDRIHEM Treasurer:
Controller Dreyfus Partnership Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Organization, Inc.***;
Seven Six Seven Agency, Inc.*;
The Truepenny Corporation*;
Controller:
Dreyfus Acquisition Corporation*;
Dreyfus Service Corporation*;
The Dreyfus Trust Company++;
The Dreyfus Consumer Credit Corporation*;
Formerly, Vice President-Financial Planning,
Administration and Tax:
Showtime/The Movie Channel, Inc.
1633 Broadway
New York, New York 10019
ELVIRA OSLAPAS Assistant Secretary:
Assistant Secretary Dreyfus Service Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Acquisition Corporation, Inc.*;
The Truepenny Corporation+
______________________________________
* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 80 Cutter Mill Road,
Great Neck, New York 11021.
*** The address of the business so indicated is 131 Second Street, Lewes,
Delaware 19958.
**** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
***** The address of the business so indicated is One Boston Place, Boston,
Massachusetts 02108.
+ The address of the business so indicated is Atrium Building, 80 Route
4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
+++ The address of the business so indicated is One Rockefeller Plaza,
New York, New York 10020.
++++ The address of the business so indicated is 2 Boulevard Royal,
Luxembourg.
+++++ The address of the business so indicated is Nassau, Bahama Islands.
Item 29. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) Comstock Partners Strategy Fund, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Capital Value Fund, Inc.
14) Dreyfus Cash Management
15) Dreyfus Cash Management Plus, Inc.
16) Dreyfus Connecticut Intermediate Municipal Bond Fund
17) Dreyfus Connecticut Municipal Money Market Fund, Inc.
18) Dreyfus Edison Electric Index Fund, Inc.
19) Dreyfus Florida Intermediate Municipal Bond Fund
20) Dreyfus Florida Municipal Money Market Fund
21) The Dreyfus Fund Incorporated
22) Dreyfus Global Bond Fund, Inc.
23) Dreyfus Global Growth Fund
24) Dreyfus GNMA Fund, Inc.
25) Dreyfus Government Cash Management
26) Dreyfus Growth and Income Fund, Inc.
27) Dreyfus Growth and Value Funds, Inc.
28) Dreyfus Growth Opportunity Fund, Inc.
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Short Term Treasury Fund
31) Dreyfus Insured Municipal Bond Fund, Inc.
32) Dreyfus Intermediate Municipal Bond Fund, Inc.
33) Dreyfus International Equity Fund, Inc.
34) The Dreyfus/Laurel Funds, Inc.
35) The Dreyfus/Laurel Funds Trust
36) The Dreyfus/Laurel Tax-Free Municipal Funds
37) The Dreyfus/Laurel Investment Series
38) Dreyfus Life and Annuity Index Fund, Inc.
39) Dreyfus LifeTime Portfolios, Inc.
40) Dreyfus Liquid Assets, Inc.
41) Dreyfus Massachusetts Intermediate Municipal Bond Fund
42) Dreyfus Massachusetts Municipal Money Market Fund
43) Dreyfus Massachusetts Tax Exempt Bond Fund
44) Dreyfus Michigan Municipal Money Market Fund, Inc.
45) Dreyfus Money Market Instruments, Inc.
46) Dreyfus Municipal Bond Fund, Inc.
47) Dreyfus Municipal Cash Management Plus
48) Dreyfus Municipal Money Market Fund, Inc.
49) Dreyfus New Jersey Intermediate Municipal Bond Fund
50) Dreyfus New Jersey Municipal Bond Fund, Inc.
51) Dreyfus New Jersey Municipal Money Market Fund, Inc.
52) Dreyfus New Leaders Fund, Inc.
53) Dreyfus New York Insured Tax Exempt Bond Fund
54) Dreyfus New York Municipal Cash Management
55) Dreyfus New York Tax Exempt Bond Fund, Inc.
56) Dreyfus New York Tax Exempt Intermediate Bond Fund
57) Dreyfus New York Tax Exempt Money Market Fund
58) Dreyfus Ohio Municipal Money Market Fund, Inc.
59) Dreyfus 100% U.S. Treasury Intermediate Term Fund
60) Dreyfus 100% U.S. Treasury Long Term Fund
61) Dreyfus 100% U.S. Treasury Money Market Fund
62) Dreyfus 100% U.S. Treasury Short Term Fund
63) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
64) Dreyfus Pennsylvania Municipal Money Market Fund
65) Dreyfus Short-Intermediate Government Fund
66) Dreyfus Short-Intermediate Municipal Bond Fund
67) Dreyfus Short-Term Income Fund, Inc.
68) The Dreyfus Socially Responsible Growth Fund, Inc.
69) Dreyfus Strategic Income
70) Dreyfus Strategic Investing
71) Dreyfus Tax Exempt Cash Management
72) The Dreyfus Third Century Fund, Inc.
73) Dreyfus Treasury Cash Management
74) Dreyfus Treasury Prime Cash Management
75) Dreyfus Variable Investment Fund
76) Dreyfus-Wilshire Target Funds, Inc.
77) Dreyfus Worldwide Dollar Money Market Fund, Inc.
78) General California Municipal Bond Fund, Inc.
79) General California Municipal Money Market Fund
80) General Government Securities Money Market Fund, Inc.
81) General Money Market Fund, Inc.
82) General Municipal Bond Fund, Inc.
83) General Municipal Money Market Fund, Inc.
84) General New York Municipal Bond Fund, Inc.
85) General New York Municipal Money Market Fund
86) Pacifica Funds Trust -
Pacifica Prime Money Market Fund
Pacifica Treasury Money Market Fund
87) Peoples Index Fund, Inc.
88) Peoples S&P MidCap Index Fund, Inc.
89) Premier Insured Municipal Bond Fund
90) Premier California Municipal Bond Fund
91) Premier Capital Growth Fund, Inc.
92) Premier Global Investing, Inc.
93) Premier GNMA Fund
94) Premier Growth Fund, Inc.
95) Premier Municipal Bond Fund
96) Premier New York Municipal Bond Fund
97) Premier State Municipal Bond Fund
98) Premier Strategic Growth Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Compliance Treasurer
Officer
Joseph F. Tower, III+ Senior Vice President, Treasurer Assistant
and Chief Financial Officer Treasurer
John E. Pelletier+ Senior Vice President, General Vice President
Counsel, Secretary and Clerk and Secretary
Frederick C. Dey++ Senior Vice President Vice President
and Assistant
Treasurer
Eric B. Fischman++ Vice President and Associate Vice President
General Counsel and Assistant
Secretary
Paul Prescott+ Vice President None
Elizabeth Bachman++ Assistant Vice President Vice President
and Assistant
Secretary
Margaret Pardo++ Legal Assistant Assistant
Secretary
Mary Nelson+ Assistant Treasurer None
John J. Pyburn++ Assistant Treasurer Assistant
Treasurer
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
________________________________
+ Principal business address is One Exchange Place, Boston, Massachusetts
02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 30. Location of Accounts and Records
________________________________
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. The Bank of New York
90 Washington Street
New York, New York 10286
3. Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
_______ ___________________
Not Applicable
Item 32. Undertakings
________ ____________
(1) To call a meeting of shareholders for the purpose of voting upon
the question of removal of a director or directors when
requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares of common stock and in
connection with such meeting to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940 relating to
shareholder communications.
(2) To furnish each person to whom a prospectus is delivered with a
copy of the Fund's latest Annual Report to Shareholders, upon
request and without charge.
SIGNATURES
__________
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, the Registrant, The Dreyfus/Laurel
Tax-Free Municipal Funds (formerly, The Laurel Tax-Free Municipal Funds) has
duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
and State of New York on the 29th day of February, 1996.
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
BY: /s/Marie E. Connolly*
Marie E. Connolly, President
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Amendment to the Registration
Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
________________________ ______________________________ __________
/s/Marie E. Connolly* President, Treasurer 02/29/96
Marie E. Connolly
/s/Francis P. Brennan* Trustee, 02/29/96
Francis P. Brennan Chairman of the Board
/s/Ruth Marie Adams* Trustee 02/29/96
Ruth Marie Adams
/s/Joseph S. DiMartino* Trustee 02/29/96
Joseph S. DiMartino
/s/James M. Fitzgibbons* Trustee 02/29/96
James M. Fitzgibbons
/s/Kenneth A. Himmel* Trustee 02/29/96
Kenneth A. Himmel
/s/Stephen J. Lockwood* Trustee 02/29/96
Stephen J. Lockwood
/s/Roslyn M. Watson* Trustee 02/29/96
Roslyn M. Watson
/s/J. Tomlinson Fort* Trustee 02/29/96
J. Tomlinson Fort
/s/Arthur L. Goeschel* Trustee 02/29/96
Arthur L. Goeschel
/s/Arch S. Jeffery* Trustee 02/29/96
Arch S. Jeffery
/s/Robert D. McBride* Trustee 02/29/96
Robert D. McBride
/s/John Sciullo* Trustee 02/29/96
John Sciullo
*By: /s/Eric B. Fischman
Attorney-in-Fact
Independent Auditors' Consent
The Board of Trustees and Shareholders
The Dreyfus/Laurel Tax-Free Municipal Funds:
We consent to the use of our reports dated August 18, 1995 with respect to
the Dreyfus BASIC California Municipal Money Market Fund and the Dreyfus
BASIC New York Municipal Money Market Fund (two of the funds comprising "The
Dreyfus/Laurel Tax-Free Municipal Funds") incorporated by reference in the
Prospectuses and Statements of Additional Information under the heading
"Financial Statements" and to the reference to our Firm under the heading
"Financial Highlights" in the Prospectus and "Counsel and Independent
Auditors" in the Statement of Additional Information dated February 29,
1996.
New York, New York
February 29, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000717341
<NAME> DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
<SERIES>
<NUMBER> 13
<NAME> DREYFUS BASIC CA MUNI MONEY MARKET-INVESTOR
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 22,367,447
<INVESTMENTS-AT-VALUE> 22,367,447
<RECEIVABLES> 1,363,574
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23,731,021
<PAYABLE-FOR-SECURITIES> 503,350
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 260,094
<TOTAL-LIABILITIES> 763,444
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,967,810
<SHARES-COMMON-STOCK> 15,537,767
<SHARES-COMMON-PRIOR> 17,169,502
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 233
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 22,967,577
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 973,443
<OTHER-INCOME> 0
<EXPENSES-NET> 131,231
<NET-INVESTMENT-INCOME> 842,212
<REALIZED-GAINS-CURRENT> 6
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 842,218
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 468,028
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 32,912,720
<NUMBER-OF-SHARES-REDEEMED> 35,007,105
<SHARES-REINVESTED> 462,650
<NET-CHANGE-IN-ASSETS> (3,948,539)
<ACCUMULATED-NII-PRIOR> 399
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 239
<GROSS-ADVISORY-FEES> 90,816
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 131,231
<AVERAGE-NET-ASSETS> 26,538,764
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000717341
<NAME> DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
<SERIES>
<NUMBER> 14
<NAME> DREYFUS BASIC CA MUNI MONEY MARKET-CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 22,367,447
<INVESTMENTS-AT-VALUE> 22,367,447
<RECEIVABLES> 1,363,574
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23,731,021
<PAYABLE-FOR-SECURITIES> 503,350
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 260,094
<TOTAL-LIABILITIES> 763,444
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,967,810
<SHARES-COMMON-STOCK> 7,429,644
<SHARES-COMMON-PRIOR> 9,746,454
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 233
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 22,967,577
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 973,443
<OTHER-INCOME> 0
<EXPENSES-NET> 131,231
<NET-INVESTMENT-INCOME> 842,212
<REALIZED-GAINS-CURRENT> 6
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 842,218
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 374,184
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 32,480,825
<NUMBER-OF-SHARES-REDEEMED> 35,063,063
<SHARES-REINVESTED> 265,428
<NET-CHANGE-IN-ASSETS> (3,948,539)
<ACCUMULATED-NII-PRIOR> 399
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 239
<GROSS-ADVISORY-FEES> 90,816
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 131,231
<AVERAGE-NET-ASSETS> 26,538,764
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000717341
<NAME> DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
<SERIES>
<NUMBER> 11
<NAME> DREYFUS BASIC NY MUNI MONEY MARKET-INVESTOR
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 29,815,343
<INVESTMENTS-AT-VALUE> 29,815,343
<RECEIVABLES> 353,912
<ASSETS-OTHER> 177,364
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 30,346,619
<PAYABLE-FOR-SECURITIES> 493,418
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 63,735
<TOTAL-LIABILITIES> 557,153
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,789,127
<SHARES-COMMON-STOCK> 21,739,067
<SHARES-COMMON-PRIOR> 8,011,078
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 339
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 29,789,466
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 511,298
<OTHER-INCOME> 0
<EXPENSES-NET> 70,906
<NET-INVESTMENT-INCOME> 440,392
<REALIZED-GAINS-CURRENT> 349
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 440,741
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 248,024
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23,865,192
<NUMBER-OF-SHARES-REDEEMED> 10,377,536
<SHARES-REINVESTED> 240,333
<NET-CHANGE-IN-ASSETS> 16,319,439
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 10
<GROSS-ADVISORY-FEES> 48,800
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 70,906
<AVERAGE-NET-ASSETS> 14,316,508
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000717341
<NAME> DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
<SERIES>
<NUMBER> 12
<NAME> DREYFUS BASIC NY MUNI MONEY MARKET-CLASS R
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 29,815,343
<INVESTMENTS-AT-VALUE> 29,815,343
<RECEIVABLES> 353,912
<ASSETS-OTHER> 177,364
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 30,346,619
<PAYABLE-FOR-SECURITIES> 493,418
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 63,735
<TOTAL-LIABILITIES> 557,153
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,789,127
<SHARES-COMMON-STOCK> 8,050,060
<SHARES-COMMON-PRIOR> 5,458,959
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 339
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 29,789,466
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 511,298
<OTHER-INCOME> 0
<EXPENSES-NET> 70,906
<NET-INVESTMENT-INCOME> 440,392
<REALIZED-GAINS-CURRENT> 349
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 440,741
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 192,368
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,336,048
<NUMBER-OF-SHARES-REDEEMED> 7,789,885
<SHARES-REINVESTED> 44,938
<NET-CHANGE-IN-ASSETS> 16,319,439
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 10
<GROSS-ADVISORY-FEES> 48,800
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 70,906
<AVERAGE-NET-ASSETS> 14,316,508
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
